Getting Ready for a Post-American World

FOR MORE ON THE POST-AMERICAN WORLD, SEE DISUNITED NATIONS

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The Accidental Superpower: Ten Years On

With a new “10 years later” epilogue for every chapter, comes an eye-opening assessment of American power and deglobalization in the bestselling tradition of The World is Flat and The Next 100 Years.

PRE-ORDER MY NEW BOOK HERE

The end of 2023 is approaching, and that means I owe you all a gift. Sorry to disappoint, but it’s not an all-expenses-paid vacation to BoraBora. Instead, I’ve thrown together a ‘Post-America’ series that breaks down what the world looks like as the US steps back as global protector.

Over the last 70 years, we’ve all reaped the benefits of a globalized world – but what’s been going on in the background? Fast forward to the present, and the demographics of most countries are critical, if not already terminal.

This series will explore these trends and how they impact countries and regions across the globe. If nothing else, I hope these unique dynamics of the post-American world will keep your holiday conversations interesting…

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TranscripT

Hey everybody. Peter Zeihan here. Coming to you from beautifully chilly Colorado. And I have a holiday present for you. We’re going to be taking some time off here at the company and as a result, we have pre-loaded over the course of the last year a couple of dozen videos on the future of the world. We’re calling it the Post American Series.

Now, for those of you who are relatively new to my work, we’ve got two big things going on in the world. Number one, the United States is backing away from maintaining the structures of the global order, which allow for globalization and free trade to occur. And whether you’re China, Germany, Korea or somebody who has fabricated your entire system to take advantage of global access, this is obviously a problem.

Second, globalization over the last 70 years has encouraged not just industrialization, but urbanization everywhere. And when you move from the farm to the city, you have fewer kids. You play that for a few decades. And it’s not that countries are running out of kids. In many cases, that happened 30 or 40 years ago. They’re now running out of working aged adults.

And both of these trends combined this decade to end the old system and create something fundamentally new. And that will play out differently based on what country you are. And that is the entire point of this series. So in a post-American world, what are things like in Canada? What does it look like in Japan, in China, in Western Europe?

What does it look like in Africa or Egypt or Turkey? We’re going to go through a full bunch of places one at a time, one day over the course of the next three weeks. And hopefully you guys enjoy your Christmas present or your Hanukkah present for you for the present, or you’re happy Monday present, whatever happens to be.

So everybody have a great holiday season. Even though I’ll be taking off for a while, will still be content coming in. And I wish the best to you and yours. Take care.

Inflation: What’s Causing It and Why?

The Accidental Superpower: Ten Years On

With a new “10 years later” epilogue for every chapter, comes an eye-opening assessment of American power and deglobalization in the bestselling tradition of The World is Flat and The Next 100 Years.

PRE-ORDER MY NEW BOOK HERE

I’ve got some good news and some bad news on inflation in the US…one has to do with COVID, and the other is about the labor market. Which do you want first?

Let’s start with the good news. The US is finally emerging from its COVID mask of changing consumer behavior and crazy supply chain dynamics. That means we’ve settled into more stable consumption patterns, and supply chains have finally caught up…so headline inflation is decreasing. Yay!

Now, onto the bad news. We’re entering a (two-decade-long) period of labor shortages. As baby boomers retire, the Zoomers won’t be able to keep up with labor demands. And that shortage is only going to get worse until the mid-2030s.

While it’s nice to finally see COVID in the rearview mirror, we’re coming up on something much stickier that will plague our inflation rates for a while.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TranscripT

Hey everybody. Peter Zeihan here. I am coming to you from Millennium Park in Chicago. And today we’re in to talk about inflation. So annual inflation rate right now is below 4%, coming down from nearly 10% to a little over a year ago. And we’ve got two things that are going on. One that is small, that is getting bigger by the day and one that is big, that is getting smaller by the day.

So first, the one that is big and getting smaller, that’s COVID. If you remember back to the days of the WHO, we were dealing with lots and lots of changes. Every time we had a closing, we’d stop buying services and start buying goods. Every time we had an opening, we’d flip. And, you know, if we were closed down, the goods that we would buy would be like home improvement items and computers.

And if we opened, we’d go to restaurants and go on vacation and have revenge travel. Every time something changed and opening and closing a new variant, a new vaccine, anti-vaxxers threw a fit hypochondria, got a hold of policy. Whatever it was, we would change what we do. We change how we act. And that would change the profile of the industry space because every time we change what we say, we want.

It takes about an 18 month period for industrial supply chains to catch up to what we say we need. Well, if you think back to about two years ago, Texas, Florida and Arizona reopened for the last time over the next few months. Every other American state except for California plus Ontario joined in as well. And then we got to a point where finally the rest of kid in California joined as well.

And we got back to some degree of normal. So it has been roughly 18 months. And so what we’ve seen in the last year is basically industrial supply chains catch up. We have gotten to a situation where most of the industry is now matching what has been a more stable consumption portfolio. And you should expect that headline inflation to continue ticking down bit by bit by bit.

You want to put the political terms. Inflation going down had absolutely nothing to do with the Biden administration. But it’s converse is also true. Inflation going up had nothing to do with the Biden administration. It was us. It was just us changing our minds about what we wanted and when that is going away.

What is coming up is labor inflation. The baby boomers are the largest generation we’ve ever had. Over half of them have already retired. And as they step back from the labor force, we’re discovering that the younger generation, the Zoomers, just don’t have it in them. They’re the smallest generation we’ve ever had, and they’re now the new force in the workforce.

And if you look at the difference between the exiting boomers and the entering zoomers this calendar year, we had a shortage of about 450,000 workers. That number is going to increase every year for the next 11 before peaking in 2034, had an annual shortage of about 900,000. How do we know they’ve already been born? We know what the inflow to the labor market looks like for the next 20 years, and we’re going to have to wait until another large generation enters the workforce.

Those will be the kids of the millennials. But that can’t happen until those kids grow up and get trained. And that won’t happen until the 2014. So a lot of the inflation that we’re seeing right now is going away, but it’s going to be replaced with something that is far more sticky and something that isn’t going to go away for quite literally decades.

So, you know, buckle up.

 

Naval Power in the Pacific: China vs. The United States

Photo of a US aircraft carrier on the water

There’s been much discussion lately surrounding the changing power balances in the Pacific – specifically the dynamics between the US and China. Sure, China has numbers, but would you rather have 25 kayaks equipped with BB guns or five speedboats mounted with mini-guns?

That’s pretty much the whole story between these two powers – quality over quantity. That’s before we look at the fun new toys that the US is introducing, which will only bolster their strategic advantage in places like Midway and Guam.

With the Biden administration taking a firmer stance on security measures, I expect the United States’ strategic advantage over China to grow. However, that doesn’t mean we should completely disregard the Chinese navy just yet.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Support medshare's ukraine fund
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TranscripT

Hey everybody. Peter Zeihan here coming to you from Colorado where we’re about to get a big dump of snow. So I figured I’d get out and hike while I could. Today we’re going to talk about some of the changing power balances in the Pacific Ocean, specifically as it relates to the United States versus the Chinese. Now, everyone seems to be all paranoid, almost a little defeatist about the concept that the Chinese have more ships in the water than the United States has.

Based on how you count those ships have got between 370 and 620. And on the American side, again, based on how you count the ships, somewhere between 250 and 300. So, you know, obviously there’s more there. But the bigger concern from my point of view, isn’t so much the number of ships, it’s the range of the weapon systems.

So most Chinese vessels are very small. In fact, just a couple thousand tons. Things that the United States, as a rule, doesn’t even bother fielding because they’re too vulnerable in their ranges to limited. So only about 10% of China’s ships can actually go more than a thousand miles. And very few of them have a strike capability that’s more than a couple thousand miles.

Obviously, America’s super carriers are fully blue water capable and with their aircraft can strike things considerable distance away, especially if they’re using standoff missiles. So I’ve never considered this a fair conversation or a fair fight in the first place. But let’s say that I was concerned that say that with the Chinese expansion of intermediate range missiles, kind of in the 500 kilometer or 5000 range, that they could really hold back US naval forces.

Well, if that is your concern, never really was mine. But look, if that is your concern, you can have whoa, slick. All of a sudden you can rest easy because there have been a couple of new developments in the Pacific that are going to be fully manifested by the end of next calendar year. The United States is going to be deploying two new types of weapon systems.

The first is a land based intermediate range missile, something that until recently was illegal in the United States during the late Cold War. The first big arms control treaty was called the Intermediate Range Forces or INF Treaty, and it barred any sort of land based missile with a range between 500 kilometers and 5500 kilometers. The idea is that if you remove those from the equation, then Europe is relatively immune from a blitzkrieg nuclear strike from the Soviet Union and vice versa.

The land based systems in Europe wouldn’t be able to hit the western parts of the former Soviet Union, where the bulk of the Soviet population lived. Well, two things led to that treaty’s demise in 2019. First, the Russians just started ignoring it and deploying their own weapons systems. And second, the Chinese, who were never a signatory, started implementing these things in mass.

So rather than work with the United States to expand the arms control regimen to give themselves greater security, they just decided that everybody else sucked and they do it anyway. And apparently they believed that everyone else was just too dumb to follow suit. Well, so if you think about how fast this has happened, the treaty was abrogated in 2019.

First discussions on these new weapons systems would have happened within the next year. It’s only 2023 and they’re to be implemented by 2024. So he notes, that’s pretty quick for weapons development system. The Pentagon’s been pretty tight lipped about the range of the new systems, but they’re making it very clear that at the moment they’re not going to Japan or the Philippines.

They’re only going to U.S. territories like Midway and Guam. And of course, the Australians are there and they’re going to pick me, pick me. So they’ll probably be some in Darwin as well. And that basically allows the United States, with the flick of a few buttons to launch cruise missiles with ranges in the thousands of kilometers to basically intersect any shipping route and any naval patrol that the Chinese are currently putting out, although these are mostly land based.

So it’s going to be more about wind tech for the most part. Which brings us to the second piece. There’s another new weapon system that is going out primarily to the subs, and that is a version of the Tomahawk cruise missile, which will now be able to target maritime targets. So for those of you who remember back to the Gulf War in 1992, we’re going to break here for a minute.

Sorry about that fire mitigation crew. Kind of noisy anyway. Sea launched Tomahawks, which will be able to target maritime targets. Now, for those of you who remember back to 1992 in the Gulf War, you’ll recall that they were the first of our smart weapons basically systems. They could follow a GPS map and target things from over a thousand miles away with a warhead that has about a half a ton.

Now, you throw something like that against a vessel. There aren’t a lot of vessels that can take more than one hit from something like that. The problem, of course, has been targeting remotely. Now you can use reason GPS information to target your missiles. The Chinese do some version of that with their ballistic missiles, which are designed to take out U.S. naval targets.

The problem with that strategy and one of the reasons why I’ve never been overly impressed with Chinese weaponry is unless you have active eyes on your missiles blind, it can’t adjust on its own. So you can program in a path kind of like what the Shaheed drones are being used for in the Ukraine, where the Russians, they basically program in a specific point in space.

So when they hit a school or apartment complex, they’re specifically aiming for it. They’re kind of dumb weapons, even if they do have some degree of guidance. But ships move and that doesn’t work. So the Chinese rely on satellite recon in order to provide placement. But the Chinese don’t have a satellite warfare system like the United States has had for 30 years.

So if you remember back to our Chinese, it’s been a while, 15 years ago, maybe there’s an eight. I think there was all this hubbub blue when the Chinese destroyed their first satellite and created that debris field that took out a lot of stuff. Well, very quietly over the course of the next day, the United States, just to underline to the Chinese, how far behind they were, took out a half a dozen of our old satellites using a half a dozen different weapons programs to show to the Chinese that, like, look, you may think you’ve got a gun that can target our Navy, but if we ever get into a hot war, the first thing

that’s going down is your entire satellite network. So stop it. Of course, China only became more narcissistic nationalists after that, but they haven’t fixed the underlying problem the U.S., however, has. We all talk about artificial intelligence and how the Chinese have 1.5 billion people and all the coders they want and all the data they want. That’s true. But they very tightly control the type of A.I. that can be developed because they don’t want independent decision making, and they certainly don’t want anything that’s going to give people an independent means of existence independent of the state.

So a lot of the things we’re seeing here are things like church liberty. They’re just not allowed there because they could be used for political purposes. And that means the United States has a much more well-rounded approach to A.I., including in its weapons systems, whereas the Chinese are precisely focused on social monitoring to keep their population under control.

Well, that technology is undoubtedly in play with this new version of the Tomahawk that can target surface ships because ships move. So you now have the quite a subs in the world with the greatest range in the world and in addition to their normal weapons outlay. By the end of next year they’ll also be packing tomahawk hawks that can target naval vessels.

So in the case of a hot war, you put two or three American missile submarines out there and you know, the Chinese don’t have a long reach navy because you use those systems to hit the ships that do have range and nothing else can leave far beyond sight of the coast. So, you know, done and done. Now, there is unfortunately a political component to this, because if you’re looking at these technologies, I mean, medium range cruise missiles are things we stopped working on back in the late eighties because of the INF Treaty.

And the Tomahawk is a weapon that was first debuted in 1992. So none of these are new. So the question is, with the Chinese becoming more jerk like and the Russians becoming more jerk like day by day, why haven’t these things happened faster? Well, some of this is explainable, so go all the way back to the Clinton administration.

It was the early post-Cold War days. We were all trying to be friends. Why would you develop a weapons system to specifically target your hopefully, friends? That makes sense. Second, the W Bush administration was when relations with the Russians and the Chinese started to turn. But the W Bush administration was more than a little occupied with things in the Islamic world, and especially when it came to the operations in Afghanistan, The more reliable partner for us in getting equipment to our troops in Afghanistan was Russia, much more so than Pakistan.

So I can understand why it was backburner then. But by the time you got to the Obama administration, the Russians had started invading people again. The Chinese were just shamelessly stealing everything that they could and starting to hack into government databases. But President Obama couldn’t be bothered to have a meeting with anyone. So nothing happened for eight years.

He also kind of unofficially thought of the U.S. military as an enemy and didn’t want to imbue it with any more power than he had to. Well, let me get to the Trump administration. Will, you know, updates to the strategic doctrine, a new weapon, systems that doesn’t work by tweet. And so we basically got some strategic incompetence, two administrations in a row lasting 12 years during the period while the Russians and the Chinese were starting to feel out how they could expand their influence.

So it wasn’t until Joe Biden that we actually got firm decision making on the development and deployment of these things. So there’s a lot of reasons I don’t like Joe Biden, but one of the advantages of having a president that’s been around for 170 kajillion years is back in the eighties when he was a full grown great grandpa, he remembered these systems.

He remembered the dawn of the tomahawk, He remembered the weapons we were working on when the IAF treaty was adopted. For him, the context that was necessary to develop in order to make the political decisions to order these developments was already there. And so as long as he’s not a drooling mess, we’re getting a lot more robust security decision making, especially forward looking decision making than we have had since at least George Herbert Walker Bush in 1991.

Is it enough? We’ll see. But if you were the the Chinese or the Russians and you were counting on the general incompetence of Obama and Trump to be the new norm for American politics, I can happily report to you that you were flat out fucking wrong and now you have to deal with.

 

What Role Do the Cartels Play in US – Mexico Trade?

As industries like manufacturing ramp up between Mexico and the US, how will the Sinaloa and Jalisco New Generation cartels factor into that equation?

These two cartels operate very differently. The Sinaloa treat their operation like a business, and violence is a means to an end. Jalisco New Generation treats violence and fear as an essential part of their operation.

Despite their violent tendencies, the cartels (1) are uninterested in the complexities of manufacturing, (2) lack the necessary skills to disrupt that sector (from the participant side of things, anyway), and (3) would rather target “easy to manipulate” businesses.

So far, issues caused by the cartels have been relatively manageable. The real risk lies in the power struggle between these two cartels and how that could reshape perspectives on US-Mexico trade.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TranscripT

Hey everybody. Good morning from a chilly colorado. A lot of you have written in with some questions about what’s going on with the cartels. And that’s something we haven’t talked about a little bit. The big issues are that there’s two cartels to really follow. The first is the Sinaloa. That’s the the one that thinks of drug smuggling as a business.

And so, as a general rule, is not willing to shoot people who are among its consumers. And so they don’t think there should be violence in places where their businesses are critical. So they don’t want to shoot people in Mexican cities or certainly not on the north side of the border if they can help it. It’s not that they’re nice.

It’s not that they’re kind of it’s not that they’re murderous thugs. They are all of those evil. They just see violence as a tool rather than an end. And on the other end of the spectrum, you’ve got political new generation who has the opposite view. When they move into a town, the first thing they do is shoot the police chief and anyone who looks interesting because their whole idea is if everyone’s scared of you, then they’ll either work for you or get out of your way.

Two different theories, both very violent. One is more applied in that violence. So that’s kind of the background I’ve been going on and on and on and on and on about how Mexico is going to be an integral part of the American manufacturing and trading system moving forward for decades, if not over a century. That hasn’t changed. The question is, to what degree do the cartels complicate that picture?

Not as much as you might think. The cartels are into things that fit one of two categories. One are small, have high value, are easy to fit into a backpack and smuggle. Obviously, narcotics fall into that category. Methamphetamines falls into that category or they want industries that they can push a lot of cash through in order to launder it.

And that takes something into things like real estate or avocados, where there’s a very clear business on the other end that is integrated into the broader system. So those are kind of the two types of businesses they go for. Anything else gets a little complicated for them because it’s not their skill set. And when it comes to interfering with trade, it doesn’t really work.

So if they were to go into, say, a manufacturing facility in Nogales and try to take over, it’s not like they would know how to operate it. They would be just a protection racket, and that would mean they’d have to be there presently all the time. Assuming that Mexican law enforcement couldn’t deal with it, I think they could.

Then the American investors in that factory would probably lose interest in the whole thing would shut down. So there’s no profit center there. They could raid things that were going in and out of the facility. But manufacturing in Mexico, as a rule, deals with intermediate manufacturers. So you’re not dealing with a lot of finished cars or even finished carburetors.

You’re dealing with things like spark plugs and casings and seat linings. And, you know, if you get a semi full of seat lines and bolts, you know, that’s not exactly something that’s easy to dispose of. You then have to find the next step in the manufacturing chain that wants it, and that requires a degree of logistics that they don’t have a degree of understanding of the industry, that they don’t command and contacts that are completely unrelated to what they do currently.

The biggest risk that I see to the trading relationship is the fight between these two big cartels. Sinaloa is the number one organized crime group in the United States. How that’s going to generation is rapidly growing to be the number one within Mexico. And at the moment, Sinaloa and some other smaller cartels control all the plazas going into the United States for the smuggling of the drugs.

Politico is challenging those other cartels, especially Sinaloa, for control of each and every one of them. And if they do succeed in commanding a plaza and they do pour into our side of North America and bring their business model with them, then Americans are going to be thinking about Mexico and trade in a very different way. Now, that hasn’t happened yet.

They’ve been trying to get into this country for three years now, and organizationally they’re just not nearly as competent as the Sinaloa. Even after their leader, El Chapo, was arrested, extradited and says it’s a prison forever, it’s just a very different mindset. But if you’re going to worry about something in the trade relationship, I think that’s the number one concern.

So far, it’s proven manageable. So far, the culture clash, if you will, is working for us, but that would still be the dangerous spot. All right. I mean, go inside. It’s cold out here, but.

 

Why the Port of Savannah Is Poised for Success

Savannah is awesome!

Not only is it home to my favorite bar and one of my favorite food scenes, but it is also the site of the largest containerport in North America. For the people of Savannah, a lot of the hard work has already been done. They are well positioned to thrive no matter what happens with the global environment or how Americans do or do not take advantage of the changes.

Also, the best shrimp and grits on the planet.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Support medshare's ukraine fund
Support medshare's global efforts

TranscripT

Hey everybody. Peter Zeihan here coming to you from Savannah, one of my favorite cities in North America. And one of the reasons is the bars, and one of the reasons are the restaurants and the other one, it is home to the largest container port in the continental United States, been operating for a few years now. They keep expanding it.

You’re looking at here one of the Merce medium size ships. The supers do come through here. They just have a problem getting through that bridge there. All right, It’s raining. We’re gonna do the rest of this inside. All right. Got some shelter. The Savannah super container port is definitely the newest in North America, and it’s the only one that was really designed for the the post-June TechEd world that we’ve got.

So the Jones Act restricts shipping within the United States, saying that no foreign vessel, no matter what kind, can dock at two consecutive ports. If they come in, then they have to leave the country to come back. And that’s made it really hard to have a domestic waterborne manufacturing system in the country. But it wasn’t until the Savannah port came on operation in the last decade that we actually had a place in the United States could really handle the very, very large container ships.

I mean, yes, you got Long Beach, California, such a special case in so many ways. Usually what happens is they dock in a place like Kingston, Jamaica, and then the cargo is broken up into smaller vessels who can just do a single run because the idea of doing a circuit where you go to New York and Boston and more Fulgham and Savannah and Miami, a foreign ship can’t do that.

It can come in, dump its cargo and leave, has it in the country before it comes back. So those shuttle tankers take most of the traffic except for, again, at the mega port of Long Beach. Oh, the question is, moving forward as the United States re industrialized is because we have to of which sorts of ports are actually going to be able to continue operation.

Now, in the case of Savannah, it probably is looks pretty good because you’re not going to build a huge amount of manufacturing in Atlanta or in Miami. And so you can still have the super container ships coming in and docking and disgorging to serve a huge area because Savannah has excellent rail connections, which is how most of this stuff is shipped about.

But when you’re talking about areas where manufacturing can move back, eastern Virginia, for example, or Texas, then all of a sudden the ability to take really, really large cargo ships really doesn’t matter. And so it’s only going to be the small stuff that can continue to go. I’m particularly concerned about places like Long Beach because despite all of the negative things that everyone always says about California, most of that stuff is coming from China.

If the Chinese face stability issues, they’re going to have to find a different business model. Other ports, like say Tacoma, are a little bit different because they handle so many commodities exports, but places that specialize in containers really haven’t put in the infrastructure to adapt to the changing world. And I really don’t see it happening on the time scale that is necessary for this transformation the U.S. is going to be going through in the next 5 to 7 years.

Savannah seems to be in the sweet spot. It’s all keepers. I think.

China-US Relations: What Did Xi and Biden Discuss

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This week at the APEC summit in San Francisco, President Joe Biden and Chairman Xi Jinping sat down for a long overdue meeting.

One unexpected twist is that Xi expressed a desire for peace and cooperation between the two countries. There are only three scenarios for why I can see this happening: Xi has lost his edge, his cult of personality has cut off the flow of information, detaching Xi from reality, or he’s trying to play puppet master with the US.

Again, let’s not dive too far down that rabbit hole because Xi was more concerned about the flowers at the hotel than any of the APEC discussions. However, we won’t have to wait long before the truth reveals itself…

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First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Transcript

Hey everybody. Peter Zeihan here comes to you from Colorado. Great news. Our sponsorship of Medicare has done very well and we’ve had a number of you call in with matching donations. So our original match was for $40,000 for the month of November. Dollar for dollar for whatever anyone sends in. So even if just a buck or two, it makes a big difference.

But we’ve now had sponsors come in for to increase of 40000 to 100000. And to give you an idea of specifically what this sort of donation is going to go for. In modern warfare, explosions are, you know, part of the process. So there have been a huge number of cranial and spinal injuries in Ukraine and people might be able to get away from the front and survive, but then they’re not going to be able to function unless they can get additional medical assistance.

And so other donors have provided Medicare with implants and spinal surgery kits that are worth $20 million on the open market that were just given to them for free. And the question is, how do we get this to Ukraine where it can do the good? And that’s where our campaign comes in. So, again, the first $100,000 is matched.

No donation is too small. Thank you for everyone who has buzzed in so far, over 2000 of you have already donated. Thank you. Thank you. Thank you. Thank you. It’s really humbling to be part of this process and I look forward to seeing what the final number is at the end of the month. But until then, back to our regularly scheduled program.

Hey everybody, Peter Zeihan here coming to you from Colorado. It is the 16th of November and yesterday in San Francisco at the Asia-Pacific Economic Cooperation summit, Chairman Xi Jinping and U.S. President Joe Biden finally had that long awaited summit. It’s the first time that a real leader has met with Xi in something like four years, and it was really our first read on how he personally is doing, whether he’s lost his mind to senility or he’s just so drowned in his own propaganda that he can’t function.

The result was, by many measures, fairly surprising. She was basically all friendly talking about how he didn’t want competition. You want to be a of the United States if you want to challenge the United States. I mean, it was basically peace, love and recycle. He sounded like a teenage camp counselor. Three theories that come from this which are going to shake out real quick into the fact, number one, he really has lost his mojo, in which case we’re going to see increasing breakdowns in decision making across the Chinese system as he basically goes bipolar, which could be entertaining but a little bit dangerous.

The other two scenarios had to do with the cult personnel that has formed. Has destroyed all challengers to the throne. There’s no local leaders or regional leaders that have stuff anymore. He’s gone through the bureaucracy in academia and business, and he’s purged the bureaucracy as well. So part of the problem the Chinese have been having of late is that no one will bring him new.

So he really is broadly unaware of what’s going on in his own country and across the world. And so when he is thrust into something like the APEC summit, things get a little weird. All of his staff apparently focused on the location of the table savings and the types of silverware and what flowers would be in the hotel.

And, you know, of course, I didn’t get to see any protesters, but it was all on the atmospherics and the design as opposed to the substance. There was very little prep on the Chinese side as far as we’ve been able to tell for what the actual topics of the day happened to be in. You know, there’s a few things going on right now.

So that kind of puts us into one of two categories. Number one. G Exposed to the world via San Francisco for the first time in years is like, Oh my God, what have I done? My country’s in demographic collapse. Our trade situation is dangerous. We are looking at national de dissolution over the next decade of stuff unless something just dramatically changes.

And every theoretical solution involves the United States in some way. We have to have their market. We have to have the security of our Navy grants, our maritime shipments. We have to have access to their finance markets, U.S., U.S., U.S., U.S. It has to be the U.S. And if he’s come to that realization, then a complete 180, from what we’ve seen over the last five years, makes a lot of sense.

The question is whether the cult came. They’ll push that down into the bureaucracy in the Chinese system when there are very few competent people left in that system. We will know the answer to that in a matter of weeks because the Chinese will stop being a bag of dicks like they have been for the last five years or things will change.

There’s it’s really pretty binary. The second issue is that it’s all lies, that this is all just part of Jesus internal play in order to wall the Americans in the false sense of security. Considering that the Biden administration has taken many more anti-China actions than the Trump administration has and has, unlike the Trump administration, codified them into law so they’ll outlast him.

That is a bit of a stretch to think that the Chinese could be that stupid. But considering the Chinese inability to function in most international forums of late and the destruction of the information transfer system within the Chinese system by Xi, it’s entirely possible that they are really that dumb and we will know the answer to that real soon too.

So one way or another, here we come.

Biden and Xi Meet at the APEC Summit

President Biden and Chairman Xi Jinping will have a private meeting at the APEC Summit in San Francisco. I’m not overly optimistic about getting any meaningful information out of this hospice meetup, but it’s better than nothing.

Thanks to the cult of personality established by Xi, getting a message to him is damn near impossible. At the very least, we’re going straight to the source this time, and we’ll get an opportunity to assess the current state of the Chinese leader.

So keep an eye out for some updates after this meeting concludes, but I wouldn’t get your hopes up for anything too exciting…

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First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TranscripT

Hey, everybody. Peter Zeihan here coming to you from Chicago. I am recording this on the 14th November. You’ll see it tomorrow, the 15th. The news today is that the APEC Forum, that’s Asia Pacific Economic Cooperation. It’s a forum that was set up decades ago to help with economic integration among the Asia-Pacific region is having their annual heads of state summit in San Francisco.

And everyone who’s everyone will be there but is important, that is. And, you know, whatever. The real issue is that there’s going to be a bailout, a real standalone meeting between China’s chairman, as you’ve been paying, and America’s president, Joe Biden. Now, there are any number of reasons why it would be a good idea to have a summit right now.

There’s big issues going on in trade and security. There’s the Ukraine war, there’s Gaza, there’s energy, this green transition. It goes on and on and on and on. Not I’d be very surprised if they actually meaningfully discuss any of those issues because there’s a much more basic problem, and that is China. China’s cult of personality that has gathered around Xi Jinping has now become so strict that information is not being exchanged in the country.

And XI is basically shot the messenger so many times that he has very little idea of what’s going on in his own country or the wider world, whether it’s power outages or remember that spy balloon. We now know that it wasn’t even aware of it until after the entire issue was over. So we have we the United States has tried on multiple occasions to meet with some of the uppity ups high up within the Chinese bureaucracy, city and state authority systems, and have discovered that really no one has reliable access to the chairman at all.

So, for example, Secretary of State Blinken and Secretary of Defense Austin have both been to China to speak with their counterparts, only to discover that their foreign minister and their defense minister don’t actually have access to the chairman. It hadn’t for some time. And by the way, they both got fired shortly thereafter. So we’re sending in the only gun that’s bigger than SecDef and SEC State, and that is the president himself. So Xi and Biden will be meeting the day you see this, the 15th. And I’m not expecting meaningful policy addressing. So we’re just trying to find out if the guy has lost his mind at this point. Once you turn 60, you know, things start to go a little sideways and she is now 70.

And since no one except for, say, Vladimir Putin has had a meaningful access to Xi in years, this will be the first chance for the United States to judge whether the guy on the other side of the table still has his faculties about him. And luckily, the person who’s going to be judging whether or not the Chinese leader has failed because of age is Joe Biden.

So, you know, he knows what to look for.

Reviving Water Transport in the United States

The US is blessed with one of the most prolific water networks in the world, yet it operates at sub-optimal levels. You’ve all heard my thoughts on the Jones Act, so you can probably guess where the blame falls once again.

Something will have to change as the US reshores its industry and attempts to build out its manufacturing footprint. Thankfully, reviving water transport in the US is a low-hanging fruit. All it requires is some amendments to the Jones Act and its regulations on waterborne commerce.

If we can manage that, we’ll all enjoy some nice economic growth thanks to reduced product transport costs and a boost to US manufacturing.

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Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Transcript

Hey everybody. Peter Zeihan here. Coming to you from Milwaukee, where I’m doing a little street hiking along the Kinnickinnic river, which is, you know, say that five times fast. This used to be one of the great industrial heartlands of the United States. Big into steel. Big into heavy manufacturing. And the reason was because of what’s right here next to me.

Moving things on water is about 1/12. The cost of moving them by land and courtesy of in the Air and the nearby Lake Michigan. Milwaukee, just like Chicago, just like Oshkosh and Green Bay, were part of a broader transport network that included the entirety of the Upper Midwest, of the United States and the New England States and the Mid Atlantic states.

Basically from here in Chicago. You can take your local rivers and canals out to the Great Lakes, go through the Great Lakes until you get to Erie, and then you’ve got two choices. You can either take the Mohawk River, Erie Canal and Hudson to New York direct, or you can go the long way, which goes through Quebec and Ontario in order to reach the Atlantic Ocean.

That’ll loop back around. From New York, you go south through the barrier islands system all the way to Miami from Miami. You can go through the barrier island systems all the way to Matamoros or you can hit New Orleans and go up the Mississippi River and go all the way back up to Chicago via canal that links into the Illinois River.

It’s the great circle of North America and it has long been one of the great manufacturing zones of the world until about 1920. And then in 1920 as part of it, discretionary, protectionist system, the United States put in place a law called the Jones Act, which says that any cargo transported on any vessel that goes between any two American ports has to be on a vessel that is American owned, captain, crewed and built.

And over the course of the next century, we saw cargo transport on America’s waterways drop by 97, 98%, something like that. Anyway, so we basically taken what has been the world’s most beneficial old natural geographic feature from an economic point of view and crushed it into irrelevance. Now that we are entering an environment where the United States wants to double the size of its industrial plant in the aftermath or the soon to be aftermath of the European and especially Chinese failures, we need to start thinking a little bit differently, and that means we need to start looking for things that are very, very, very low hanging fruit.

In this case, that means getting the waterways back up and running again. Because when you think about the sort of manufacturing that the United States traditionally is not good at things like electronics, it’s largely because you have different price points for different types of work. The person who does injection molding is not the same as the person who does the coding for the wires and not the same who does the software work.

You need multiple skill sets in different places, and if you can drop the transport costs for getting those intermediate products among those places, well then you’re looking at something pretty special. And we actually have that built into the American heartland itself just requires changing one law, not abolishing change. Part of the Jones Act, the Interstate Commerce Act, if you will, is about regulating commerce among the states on the water.

And some of that we still need we clearly need a national regulator. But the rest of it really, honestly can go away. And if you think that this is a nationalist issue, that, you know, we should have this all in American hands, consider that we don’t do that for truck and we don’t do that for rail and we don’t do that for air only for water, only for the thing where we have a massive geographic advantage.

So if you’re looking for a quick and easy way to stimulate economic growth in Wisconsin, in Illinois, in New York, anywhere in New England, anywhere in the South, anywhere in the Midwest, this is the low hanging fruit. All we have to do is get out of our own way.

Venezuelan Oil Sector: Biden Lifts Sanctions

The Biden administration has suspended some sanctions on the Venezuelan oil industry thanks to Maduro’s (ever-so) slight easing of political restrictions. While this may pump some air back into the lungs of the oil sector, it will take a lot more to get Venezuela back to significant levels.

The history of Venezuelan crude is about as thick and complex as its dino juice. Back in the day, the US built infrastructure to accommodate the viscous crude coming from the south. Once that crude became unreliable (in more than one way), the US closed the door on those imports.

Now that some sanctions have been lifted, we’ll likely see some more steady flows of Venezuelan crude into the system…but it will take much more foreign investment and reestablishing of trust and reliability to revive the Venezuelan oil sector.

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Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Transcript

Hey everybody. Peter Zeihan here coming to you from Seattle, Washington. It is the 20th of October, although you’re probably not going to see this one for a while because there’s a lot going on. We have a bit of a stack in front of us. Today, the Biden administration in Washington announced the suspension of some of the sanctions that are in place on the Venezuelan oil industry, which will allow a number of companies in the United States to increase their investments legally, as well as a number of refineries in the United States to increase their imports of crude from the country. 

Things have been yo-yoing, but in general going down over the course of the last decade. Venezuela today is exporting significantly less than a million barrels a day. In fact, there have been some times where it’s almost dropped to zero, and American imports of that crude have also been dropping proportionately. And in fact, at some point, there have been several months where we didn’t import any at all.

I don’t think it’s ever gotten above a half a million the last two years anyway. It’s not a lot anymore for an economy that uses or processes over 20 million barrels a day. Okay. What’s going on? Okay. Number one, the Venezuelan system is run by a guy by the name of Nicolas Maduro, who is a former bus driver with no executive experience until he took over from Hugo Chavez, who was a kleptomaniac who basically stole the country into the ground.

And so under Chavez and especially under Maduro, the mismanagement has been extreme. And they and their allies have basically stolen everything that wasn’t nailed down, including the lot of stuff that was nailed down. A lot of this stuff was really dumb. So like, you know, you’d have a a power plant, so they’d steal the generators. I mean, it’s like the degree to which we had a kleptocracy here is pretty extreme.

This is not socialism. Let’s be clear. Socialism is where the government plays a directing role in the government. This was just flat out theft, a very different sort of system. We should be afraid of this sort of system. Anyway, what Maduro has done, he’s loosened up some of his restrictions when it comes to political pluralism in the country and basically allowing the opposition to participate in a series of elections.

And the United States, as sanctions are related to those elections. So by basically being a little bit less of a prick, the United States has decided to lessen some of the sanctions. We’ve got three things going on here. First of all, the one that’s closest to home and probably the least significant is the Biden administration’s official mantra is that high gasoline prices in the United States are largely a product of decisions that are made in the various OPEC producing countries rather than his own policies at home.

Which is a little weird because the United States is the world’s largest producer of crude and arguably now the second largest exporter in gross terms. So, I mean, the solution to our gasoline issue is to build up refining capacity in the United States. So we’re not dependent on crudes that come from abroad. Which brings us to the second issue, which is the crude that comes from abroad.

American refiners knew, knew, and they were right back in the seventies and eighties that the global supply of crude, the chemistry of that crude was changing. And we had used up most of the conventional crude that was light and sweet, which is another way of saying that it has very few impurities, whether it’s sulfur and mercury. And that light sweet stuff tends to be very, very easy to refine.

So what we did is we invested hundreds of billions of dollars in retooling our entire industrial base in the refining sector so that we could take heavy, sour crudes which were thick, maybe even solid at room temperature, and may have been like three, even 4% sulfur by weight and process that into finished fuels. The idea is we can use our technical acumen and our better capital position to take the world’s crappiest crudes and refine them into the world’s highest value add products.

And so the margin buy low, sell high. You know how that works has worked very, very well for them over the last 30 years. And Venezuela is one of the sources of the heaviest crude in the world. And there are very, very, very few refineries in the world that can process this stuff except for the United States. And so when Chavez basically led his country on to a anti-American jihad and Maduro moved R0 excuse me, stuck with the ideology, American refiners became less and less interested because the Venezuelans were simultaneously driving their own industry to the ground.

So the crude quality became very erratic and the delivery volumes became erratic, and then delivery reliability became very erratic. So even though they liked the chemistry of the crude, it became too wily for them to depend upon it. So they’ve shifted primarily to other sources. With Canadian oil sands now being the preferred input. This raises the possibility in the midterm that we might be seeing some more Venezuelan crude come in because honestly, there aren’t a lot of other places for it to go.

There are a couple of refineries in India, in China that can take it in limited volumes. But then you have to ship it either around the Americas or through Panama and recombine into a larger tanker on the other side of Panama and send it across the Pacific. It’s literally more than halfway around the world, if you want to do by supertanker, because you have to go all the way around the southern tip of South America and then cross the Pacific the long way in order to get it to a destination.

So the economics of that are questionable at best. And the only reason shipments have gone that direction is because the Venezuelans have taken huge hits. So what usually happens now is Indian or Chinese or Russian traders buy the crude in Venezuela and then ships ship to the north and to the United States and pocket the difference, leaving it to the Venezuelan government to hold the bag.

It’s a delightful little trade that is only possible because of really stupid ideologies, but it happens. Okay. The third the future of the industry. Venezuelan crude is thick, it’s viscous. And some of the stuff in Orinoco, you have to basically inject steam that several hundred degrees into the formation just to make it liquid in the first place. That means it has very high development costs, basically for every barrel of production you’re going to get, you’re going to have to sink 4 to $8000 into the well, giving up one of the world’s higher development costs.

It’s not clear that the foreigners are going to be that interested in investing when you’ve got political issues, you’ve got technical issues, you’ve got infrastructure issues. And that’s even before you consider that the United States could always slap sanctions on again. So a small to moderate increase out of Venezuela, I think makes a certain amount of sense. But I would be really shocked if over the next year that amounts to more than maybe 300,000 barrels a day.

I mean, that’s that’s not nothing. And considering what’s starting to bubble up in the Middle East with Iran, that might be really necessary. But if there is going to be a game changer in the industry, it’s not going to be Venezuela. That makes the difference. Now, I understand there’s a lot of people that thinking it might and because it has in the past, if you remember back to the oil shocks of 73 to 79, it was Venezuela that broke with OPEC and turned open the taps and expanded their production footprint in order to break the Arab oil embargo.

And that had very long lasting implications for the market and for geopolitics. But you had a very different political system in Venezuela at the time. Back then, it was the most advanced of the Latin American countries with a very technical government, with high education standards and pretty good infrastructure. Now, after 25 years of slide, it’s at the bottom of most of those measures, and it just can’t do hardly any of the work itself.

It has to come from abroad. And the Venezuelans are going have to rebuild a degree of trust and reliability before the investment will flow in in the billions. And that is exactly what it would require. Okay. I’m.

The US Credit Rating, Budget Deficits and Debt

We’ve all heard about the drop in the US credit rating, but what does it mean? Given the United States’ size and global standing, the resulting impact on financing costs is nominal. Think of this like your personal credit rating – sure, life’s easier with an 850 credit score, but a 700 isn’t the end of the world.

The bigger concern lies in the worsening fiscal conditions caused by growing budget deficits. With successive administrations exacerbating this issue and the Boomers transitioning from taxpayers to tax beneficiaries, the US has its hands full. And that’s before you mix in threats of the US not fulfilling its debt obligations…

The mounting uncertainty around this issue could impact credit costs and everyday financial transactions. So, unless there’s a massive shift in political responsibility and involvement, this budget deficit issue will remain hardwired into our system.

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Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Transcript

Hey everybody. Peter Zeihan here coming to you from Austin, Texas, at the 360 Bridge. A lot of you have written in with the same question. U.S. is credit rating has been dropped. What does it mean? Is this something we should be worried about? The very short version is ish. Whenever your credit rating gets dropped, it generally means that you get put into a different category in terms of reliability, of repayment, and that means you might have to pay a different amount to service your debt.

So imagine if you will, that you’re trying to buy a house and on your last house you just walked away and left the keys in the mailbox. That’s a hit to your credit rating. The next time you try to get a loan or that loan is going to cost you more. And since the United States government is issuing bonds, debt every single day, there’s an incremental increase in what we have to pay because of reliability.

Now, in the case of something like a country, the wobble, especially for a country the size of the United States, tends to be pretty minor. In addition, the United States is the global superpower. It is the sole global currency that is not going to change in my lifetime. And as long as that is the case, the United States kind of is the is the marker of 100% on what you can get.

And anyone who is above that kind of gets extra credit and even below that has to compare themselves to the United States. So we’re talking at most a couple tenths of a percent in the difference in what financing costs are now in a country the size the United States that comes out to something in the tens of billions of dollars a year.

So it’s not insignificant. The bigger impact is what you’re going to be feeling if you happen to be downstream of that, where your debt is indexed to what the U.S. government does. And in that sort of environment, you’re talking about your mortgage, your credit card, everything is going to get a little bit more expensive again from a very low base, but still adds up to tens, if not hundreds of billions of dollars.

A year in additional credit costs. That’s not what I see is the big concern. So let me give you two one relatively minor one that’s really big. First, a minor one. This is only going to get worse. When George W Bush was president, he issued the most debt did the most deficit spending of any president in modern history.

And then Obama came in, was like, hold my beer. And he doubled it. And then Trump was like, well, I’m the best. I’m going to make the deficit huge. And he did so. And now Biden’s and he’s trying to top Trump. So this isn’t a Democrat thing. This isn’t a Republican thing. This is just a bad math thing.

All the fiscal people who have voted based on what the federal government will do with budgets have basically been purged from the political system on both sides. And so we should expect a budget deficit to get larger and larger and larger and larger, especially as the baby boomers go from being the largest tax payers in American history to the largest tax takers as they go from people earning income and paying taxes, to people who are drawing on social Security, Medicare and Medicaid and the like.

So this is going to get a lot worse before it might start to get better in, say, the late 2013, when the boomers are mostly all gone. So bad news, but we’ll live with it. The worse thing, the concern that most folks in the markets have today isn’t that the U.S. can’t pay. After all, the U.S. Federal Reserve has the ability to control the money supply with the click of a button and can basically print enough currency to buy all the government debt.

And that’s exactly what we’ve done in the last four presidents. However, the concern now is that the U.S. won’t pay. Donald Trump said we could renegotiate or abrogate some of the debt, which is the sort of thing you hear out of Greece or Argentina or Cuba. And in the current environment, we’ve had a number of people across the political spectrum heavier on the right, but not exclusively, who have tried to use the ability in Congress to shut things down.

Maybe it’s a program. Maybe it’s debt repayment. Maybe it’s the government itself. But basically saying that we abrogate responsibility for taking care of any of this anyway. And if the U.S. were to just walk away from any of its debt, whether it’s because we apply something like Monod, monetary theory or we just simply shut down the Treasury Department, then all of a sudden you’re talking about the biggest financial asset class on the planet being thrown into question.

And in that sort of environment, if just the fact that this is even a minor risk, just the point that this is a point of discussion, is sending up American credit costs of ECB, the rest of the world, and that very rapidly turns into $1,000,000,000,000 question. Now, if for an economy the size the United States military, the size of the United States, the reach of the United States, the U.S. dollars, complete domination of the financial space, $1,000,000,000,000 question is almost a rounding error.

But you will feel it each and every time you make your credit card payment. Get a mortgage, get a car loan. This is now hardwired into the system until such time that we have a twist in our political system that injects a little bit more responsibility. That’s not going to be this presidential cycle.