Nancy Pelosi Goes to Taiwan

The Speaker of the US House of Representatives, Nancy Pelosi, has arrived in Taiwan. As such, she is the highest-ranking US official to make a visit to the island since her predecessor, Speaker Newt Gingrich, visited in 1997. While there is likely little both would agree on, the former Speaker has been quite supportive of Speaker Pelosi’s decision to visit Taiwan. China has been huffing and puffing about the visit since it was announced, but there’s very little Beijing could do short of shooting down Pelosi’s plane. Which isn’t likely to happen.

Beijing has viewed Taiwan as a breakaway province since the time of Mao, and has worked diligently to erode international recognition of Taipei under its One China Principle. The US since Nixon has held off formally recognizing Taiwan as an independent country, but since the end of the Cold War Washington has moved steadily toward an economic and security relationship with Taiwan that falls just short of official recognition, to Beijing’s dismay.

The US Settles a Score

The United States announced August 1 that it had killed the ideological head of al Qaeda, Ayman al Zawahiri, in a drone strike, over the previous weekend. Reportedly battling a long-time illness, al Zawahiri’s actual level of control over al Qaeda (and its regional affiliates) is debatable. His role in the September 11 attacks against the United States in 2001 and in inspiring campaigns of militancy that killed thousands is decidedly less so.

I do take note of al Zawahiri’s presence in a home inside Kabul. The US–primarily its intelligence agencies–still maintain considerable capabilities in a country with no formal military presence. And they are more than happy to remind any number of bad actors of the fact.

No Deal with the Devils Just Yet

In light of recent moves by the US to lift some targeted energy sanctions on Venezuela to help bolster energy sanctions against Russia, we are sharing an earlier video on the difficulty the Biden administration would face in trying to rely on “partners” like Venezuela, Iran and Saudi Arabia to limit the pain of sanctioning a major global oil and gas supplier. The challenges facing the global energy market are also a central theme in my upcoming book, The End of the World is just the Beginning, out June 14. Pre-order info here.

In an effort to ease Europe’s transition from Russian energy, the Biden administration has given the green light to two European oil companies—Italy’s Eni and Spain’s Repsol—to ship Venezuelan oil to Europe (and nowhere else) to cover debts.

This resumes a practice that was halted in 2019 by US-imposed sanctions. While this move will not drastically improve Europe’s situation, or affect global oil prices at all, it will boost Venezuelan President Nicolás Maduro’s image in his country. For several years, the US has recognized Juan Guaidó as Venezuela’s “Interim President,” despite his inability to oust President Maduro, even with ample US support.

Now the US is in the awkward position of returning to the negotiation table with Mr. Maduro, officially not the president of Venezuela, and relying on his government to ease global energy shortages. Interestingly, the Biden administration also granted permission to Chevron to partially resume operations in Venezuela, meaning the US supermajor can perform basic upkeep of its wells that it operates jointly with state-run oil giant PDVSA. Perhaps this is a hint at more to come, but at the moment Venezuelan crude will not be making its way to the US–nor will the Russian supplies of heavy crude Washington had been buying to replace it.

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.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

The End of the (Developing) World?

In case you haven’t heard, my upcoming book The End of the World is Just the Beginning gets released this Tuesday, June 14. You can pre-order it here.

A lot of my work, and my books up to this point, have been about the rise of powerful nations and the global framework that got them there. This new book is a bit of a different creature. 

This book is about the end of that system–namely, globalization–and what that means for our collective future. Whether its agriculture or manufacturing or finance or energy, there’s a chapter for everyone on how the pillars of the developed economy will look on the backend of one of the largest upheavals of the global economy since the end of World War II.

Here’s a video paraphrasing several of the book’s themes, applying them to the raft countries that we today collectively know as “the developing world.”

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.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

Immigration at the End of the World

My fourth book, The End of the World Is Just the Beginning: Mapping the Collapse of Globalization is scheduled for release NEXT WEEK (!) on June 14. Immigrants and in-migration are always touchy topics. Allow me to present an excerpt from my upcoming book that is certain to make all Americans – and Mexicans – wince at least once.

In-migration to the United States hit a relative historical low in the 1970s—the decade in which America’s Boomers came of age. For Boomers—an overwhelmingly white demographic—their primary experience with interracial politics was the civil rights movement, a movement that involved people who were already here at a time when the Boomers were young and politically liberal.

In-migration then rose steadily until reaching a near-historical high (again, in relative terms) in the 2010s, at which point the Boomers were nearing retirement and in doing so becoming politically . . . stodgy. In each and every decade as the Boomers aged, the largest single immigrant group was always Mexican. In the minds of many Boomers, Mexicans have long been not simply the “other,” but the “other” that has arrived in ever-larger numbers. A big reason why so many Boomers have been so supportive of nativist politicians such as Donald Trump is that their feelings of shock at the pace of change in American society is not a collective hallucination. It is firmly backed up by reality. This is one piece of the kaleidoscope of why American politics has turned so sharply insular in the 2010s and early 2020s.

But regardless of what you think about Boomers or Mexicans or race or trade or assimilation or borders, there are a couple of thoughts to keep in mind:

First, Mexicans are already in the United States. Whether you’re concerned with what American culture feels like or what the labor market looks like, the great Mexican wave has not only come, it is over. Net migration of Mexicans to the United States peaked in the early 2000s and it has been negative for twelve of the thirteen years since 2008. Just as industrialization and urbanization pushed down birth rates in the developed world, the same process has begun in Mexico, just a few decades later. Today’s Mexican demographic structure suggests it will never again be a net large-scale contributor to American migration. Most of the big migrant flows into the United States since 2014 have instead been from the near-failed Central American states of Honduras, El Salvador, and Guatemala.

Second, even among the most nativist strains of American political thinking, room has been found for Mexicans. In just two years, none other than Donald Trump went from openly condemning Mexican migrants as rapists and “bad hombres” to embracing Mexico in trade and security deals that took bilateral relations to their friendliest and most productive in the history of both republics. Part and parcel of Trump’s renegotiation of the NAFTA accords were clauses that expressly aim to bring manufacturing back to North America. Not to the United States specifically, but to any signatory of the accords. Team Trump added those clauses with Mexico expressly in mind.

On the other side of the equation, Mexican-Americans are turning nativist. The demographic in the United States that consistently polls the most anti-migration is not white Americans, but instead (non-first-generation) Mexican-Americans. They want family reunification, but only for their own families. Never forget that anti-migrant, build-the-wall Donald Trump carried nearly every county on the southern border when running for reelection in 2020.

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.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

Inflation and Global Food Prices

Americans are currently struggling with inflation and certain categories, like fuel prices, get an outsized amount of attention. It makes sense. There are few products people buy as frequently that have as volatile a pricing scheme. It’s also universal. In a car-driven society, the pain at the pump is a metric most people are aware of.

But inflation certainly doesn’t stop there. Everything gets more expensive. But for many items, like cars and kitchen cabinets, purchases are typically few and far between. In terms of social and political stability globally, food prices are something that I find much more concerning.

The United Nation’s Food and Agriculture Organization does amazing work tracking global food prices and agricultural trends. They do work on par with the USDA, and I consider both to be preeminent sources of information in their field on the topic of American/global agriculture. And they publish their information for free. 

The FAO publishes monthly updates to global food prices. The picture is…not good. We’ve seen global food inflation drop a couple ticks in April and May of 2022 due to some softening in global oilseed markets (Indonesia has relaxed their palm oil export ban a bit, and we’ve seen some declining demand for oil seeds due to price) but the overall picture is still one of a stark increase in food costs. It’s a product of both an overall global inflationary environment, and a series of shortages due to conflict and poor weather (like the challenges facing Ukraine’s grain exports).

Let’s look at a couple of charts pulled from the latest FAO report (seen here):

2021, shown as the orange line, saw a pretty steady and straightforward increase in food prices between January and December, well over 2020 (in pink). 2022 is the aggressive, near-vertical line in red. The flattening out we see is again in large part due to some relaxation in food oil prices, but the news is certainly not good for global consumers. (And all of us in that bucket!)

If you want to break costs down into primary commodity groups, the FAO has you covered there as well. Peek at the second chart. Vegetable oils, the top line in green, is showing the greatest year-on-year increase. But prices have risen steadily across all globally traded commodity groups like cereals (including wheat) and dairy. We’ll have to see how the sugar harvest plays out in Brazil this year, but meat prices are also slowly but steadily inching upwards–as much a product of rising feed import costs as it is growing demand for poultry and fears over a widening avian flu epidemic.

If you prefer numbers, we can see that we’re already at or near historic high prices for almost all major commodity groups going back close to 20 years:

All of which represent a more expensive global food price environment. Large importers of food like Egypt are already scrambling and, according to some, purchasing Russian cargoes of stolen Ukrainian wheat. This is an issue that the US is starting to take seriously. And for countries dependent on food aid, like Syria and Yemen? Challenges abound, to say the least. While this is only one part of the global inflation story, it is one that most people globally will feel most acutely.

We invite those of you who are interested to join us today, June 8th, for our webinar, Inflation: Navigating the New Normal. More information at the sign up link below. Unable to attend the webinar live? No problem. All paid registrants and attendees will be able to access a recording of the presentation as well as a PDF of presentation materials.

Can’t register for the live event? Not to worry. We’ll be sharing how you can still buy access to the recording and presentation materials in the future.

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.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

A Mea Culpa, and a Correction

Nobody’s perfect. 

And in this industry, I feel strongly that it’s as important to own up to your mistakes as to highlight your successful forecasts and analyses. In a previous mail out this week, we included a graphic that included a significant bungling of numbers. (The corrected text is highlighted below.)

I would like to thank the readers and followers kind enough to point out the error. The how and why of it aren’t that important, but if you’re curious: as some of you pointed out–and as it stated on the original graphic–the data we used was annualized, and in a rush to publication we misplaced a decimal. Approximately $1.3 trillion/year became $13 trillion. Perhaps this is too much pressure to place upon the narrow shoulders of a humble decimal point. Perhaps I should have better understood the risks in letting an English major do the math while my primary researcher was in Ireland. But here we are, and due to your close readership we’ve been able to amend the graphic. 

Jokes aside, a strong sense of honesty and integrity is vital to our work. We strive to deliver our clients and readers as honest, direct and non-partisan a viewpoint as possible. I am thankful for the continued trust, and the attention you all pay to help keep us honest and accurate.

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.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

Inflation: the Savings Angle

Between the Ukraine war, supply chain shortages, energy shocks, and government policy that probably spent too much money for too long a period of time, Americans are feeling the pinch of ever-higher inflation on an ever-broadening array of goods. The question is whether Americans can’t afford it.
 
The chart below shows what percentage of their income Americans are socking away – that all-important “savings rate”. During COVID it hit record highs. But now? It has already plunged to pre-COVID lows.

It looks a bit spooky, right? Maybe even a little recessionary? After all, if Americans don’t have a savings buffer, any curveballs – and we seem to be living in world of nothing but curveballs – could cause immense damage.
 
But the chart needs context.
 
It’s one thing for Americans to no longer be saving, it’s quite another when you consider just how much they have already saved. Take a look at this second graphic (below) which stretches back to before the 2007-2009 financial crisis. Whereas the first graphic showed the savings rate (the percentage of income saved), this second one shows savings volume (the actual amount of cash).

Between the Trump and Biden Covid stimulus checks, Americans amassed an extra $13 trillion in savings.
 
So are Americans burning through their savings purchasing goods whose prices keep going up and up and up? Absolutely.
 
But $13 trillion is roughly how much all consumers in the United States spend in ten months. Even in an inflated environment, it will take most Americans two years to burn through the surplus.
 
It doesn’t quite make Americans price insensitive, but it certainly suggests that the current levels of consumption – and by extension current levels of demand-driven inflation – can be with us a lot longer than the headline “savings rate” would suggest.
 
How long? Well, that’s part of what we’ll be going through in our next seminar. We invite those of you who are interested to join us for our upcoming webinar, Inflation: Navigating the New Normal, on June 8th. More information at this link. Unable to attend the webinar live? No problem. All paid registrants and attendees will be able to access a recording of the presentation as well as a PDF of presentation materials.

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.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

The Bond Market and Inflation

The U.S. Federal Reserve is in the midst of raising interest rates. By raising the cost of borrowing and making debt (money) more expensive, you control spending thereby controlling inflation. 

The United States is currently experiencing the worst inflation crisis in some 40 years. The Federal Reserve’s interest rate hikes are the traditional tool in combatting such a problem. 

The challenge of inflation is not America’s alone. Across Europe and Asia, global currencies are seeing inflation drive up the cost of food, fuel, consumer goods, and housing. Unlike the United States, however, most countries’ central banks do not have as direct a course to combat inflation as the Federal Reserve.

A combination of demographic and Russian sanction-related inflationary pressures limit most European nations’ abilities to aggressively raise rates. A population as old and quickly aging as Germany or Italy’s is unlikely to see a bounce back in consumer spending once rates return to zero–where they have been for over a decade. This is a move the Europeans copied out of Japan’s playbook, whose nearly 20 years of near-or-at-zero interest rates are likely to be their foreseeable future.

So what does this mean for bond markets? The U.S. has the demographic strength and economic resilience to keep raising its interest rates, while the rest of the world will be forced to continue issuing bonds at or near zero. Which means their bonds, and ability to borrow, will soon become strongly uncompetitive vis-a-vis the United States.

What does this mean for inflation and the US economy writ large? We invite those of you interested to join us on a webinar that will cover these topics and more in depth on June 8th. More information at the sign up link below. Unable to attend the webinar live? No problem. All paid registrants and attendees will be able to access a recording of the presentation as well as a PDF of presentation materials.

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.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

Sharing Food at the End of the World

My fourth book, The End of the World Is Just the Beginning: Mapping the Collapse of Globalization is scheduled for release on June 14. In coming weeks we will be sharing graphics and excerpts, along with info on how to preorder.

COVID-19 and the logistical issues that arose from lockdowns illustrated the importance of domestic supply chains. From semiconductors to fertilizer, countries that rely most heavily on imports faced the highest price increases. In a globalized system this means every country suffered at least to some extent. Although unhappily, the US should be able to withstand long backorders of new cars, appliances, and the like. What no country can do without is food; and no country can grow sufficient food without fertilizer. This graphic visualizes food stability around the world and is from my upcoming book, The End of the World is Just the Beginning.
 
From an agricultural point of view, the US is in a comfortable position. Domestic grain and soy production is strong enough that the US is the second largest exporter of wheat and soybeans and the single largest exporter of corn. Where I worry is not the US or Argentina or France, but countries whose agricultural system relies on imports—this includes grain and soy to feed livestock. Many countries in Africa and the Middle East cannot source their grain domestically, but instead rely on imports, largely from Russia. Additionally, American farmers, although unhappily, should be able to adjust to fertilizer price increases, but farmers in poorer, less-industrialized countries will simply have to do with less, and that means smaller yields.
 
Countries that fall into this category will be eager to join strategic trade partnerships with grain-producing countries. A country like Colombia can feel relatively safe relying on US imports, but elsewhere the logistics are not quite as simple. Egypt, the world’s largest wheat importer, sources 85 percent of its wheat imports from Russia and Ukraine. Sourcing its grain from a more stable region will be a top priority, especially as the Ukraine War drags on.
 
There is nothing more important than a country’s access to food. For this reason, I consider the agriculture chapter of The End of the World to be of particular importance. The globalized economic system has been largely responsible for lower hunger and poverty rates in developing countries. The question is how many of these gains can be preserved as the system disintegrates?

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.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY