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Trump 2.0 – China

Great Hall of the People, Rendahuitang West Road, 前门 Xicheng District, China

In this video, Peter mentioned a total fertility rate (TFR) of 0.5. While this may be the case for certain urban cores, China’s national TFR is closer to 1.0. Still abysmal, though slightly less catastrophic. —ZoG

Everyone knows where I stand on China, but how will Trump’s second term play into that?

Let’s run through China’s situation. The Chinese economic model is dependent upon continuous capital flows. Should that be interrupted, China’s industrial economy could collapse. The demographic picture is bleak too, as birth rates continue to decline and the population ages. And Xi Jinping’s master plan to fix all this is to push workers harder, tighten state controls and micromanage reproduction.

Trump is fixated on reducing trade deficits, but China has been able to sidestep previous deals due to lack of enforcement. Trump needs to work with our other Asian allies to counter China’s influence, and some more faith in defense institutions wouldn’t hurt either.

Overall, the Chinese view Trump as a disruptor and relatively easy to manipulate. While there is some historical truth to that, Trump has shifted US sentiment to be broadly anti-China, so tariffs and supply chain diversification get bipartisan support. The question remains, what will Trump actually accomplish? Tariffs are one thing but planning and developing an alliance network and alternative industrial capacity are a completely different beast.

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Hey, everybody. Peter Zeihan here. Coming to you from Blenheim, New Zealand, where I am walking through a vineyard, because that’s just what I like to do. Anyway, today we’re gonna do the second part of our open edit series on the issues that’s going to be facing President-Elect Trump on his first day of office, not the ones that he wants to face, the ones that are going to face him.

And today we’re going to talk about China. First things first, let’s review what it is that the Chinese are dealing with. Before we talk about how Trump plugs into that, China has an economic model that is based on central state control, and that means the state controls the financial system and uses the financial system to shove money into whatever economic sector they feel that they need to.

Now, they use this to achieve technological control of certain areas where they feel they can master the tech. They use it to subsidize development of technologies that they don’t master in the hopes that they will be able to. And they do it to build out the supply chains locally so they can drive competitors internationally out of business. But all of that pales to the primary goal, which is to make sure that everybody has a job so that nobody goes out in protest and gets together in a large group and goes on a long walk together, because that’s how the government got its job in the first place, and they don’t want that to happen to them.

So you get this system that is over capitalized or capital is remarkably cheap. And as long as the capital keeps flowing, everything’s happy and for those of you who have ever been part of an economic sector that has busted, whether it’s, say, energy during a bust period or a boom bust period, or Enron or real estate back in the 2007, the 2009 crisis, you know this very well.

As long as the capital keeps flowing, as long as the capital is cheap, then the system keeps running. But if for whatever reason, capital access dries up, then this artificially inflated sector basically withers away to nothing in a very short period of time. And the Chinese have been doing it. So long in so many subsectors that if that capital stopped flowing at any time, you’d basically see the end of China’s industrialized state at this point.

That’s problem one. Problem two demographics. When you tell everyone that what you’re supposed to do as a Chinese is just work 12 hours a day, six days a week, well, there’s not a lot of room for anything else. When you pull people off of the farm and put them into the city so they can work 12 hours a day, there’s not a lot of time in their lives or physically in their apartment for kids.

And so the birth rate drops and drops and drops and drops. And according to the most recent data, from December of 2024, the average woman in China is now having less than a half a child. So in most of China, we have a repopulation rate that is one quarter what is necessary just to sustain the population? We probably almost certainly have a lot more people in China over age 50 than under.

And the place is looking at demographic collapse. And if you remember back to my earlier demographic work, most of the consumption that is done in the society is done by people who are under age 45, who are raising their kids and building homes. And that population is basically becoming an endangered species in China. And now that birth rate has been so low for so long, it’s been lower than the United States since the 1990s that we are looking at the dissolution of the heart of city around the end of the century.

And there’s no way that the Chinese state will last very long. I’d say a decade or less at this point. So that’s their starting point. In order to make their system last as long as possible. Sherman Ji believes three things. Number one, everyone just has to work harder, which is only compounding the demographic situation because no one really sees a hope that this is going to change.

Number two, he believes that the Chinese Communist Party, which let’s be specific here, it’s not the parties interested, it’s him, should face no challenge to its authority, and it should be able to micromanage every aspect of everyone’s lives. In fact, we now have the agency that used to enforce the one child policy making unannounced house calls to see if couples are having sex without contraception to make sure the birthrate goes back up, because that’s what the state wants now.

You can imagine how well that goes over. And third, he has to keep export markets open because all of this production, all of this forced production, all of this over subsidized production can’t be consumed by the population because most of them are now over 45, which means it has to be exported. So they have to be able to shove the products they produce down everyone else’s throats just to keep their country alive.

Enter Donald Trump. Donald Trump is singularly obsessed with the trade deficit, which is probably not the best way to look at the issue. But that’s how he sees it. So it doesn’t matter what I think. And as a result, he likes to think that he can make deals that will force things in the United States, his direction.

For the most part, the Chinese, especially at the top, are not worried about this because they’ve dealt with him before. They see him as an eminently lateral person. And so they basically give way in negotiations, knowing that the day after the negotiations close, that there will be no enforcement and they never have to worry about him again.

Why do they feel this way? They’ve already done it before. The phase one trade deal that was negotiated by the Trump team back in. Who was it seven, six years ago, committed the Chinese to buying X number of dollars of various products and by the end of the Trump term, he hadn’t met any of the criteria at all.

In fact, they never intended to. All they did was make sure that whenever there was a product like what they needed available anywhere else in the country, they went to that first. So actually, we saw the trade deficit in a structural sense, go up because of trade talks with the Trump administration. The other reason that the Chinese are really not concerned about Trump is that they don’t take him seriously as a strategic thinker.

The Chinese understand, as everyone in Asia understands, that if you want to him in China, you can’t do it alone. It can’t be just a trade. You can’t just be a strategic issue. It has to be holistic. You have to bring in all the other countries, from Indonesia to Malaysia to Singapore to the Philippines, to Taiwan, to Korea, to Japan.

And if you don’t do that, the Chinese will easily find a weak link in the chain and be able to push out. And they see Donald Trump as being more danger to the alliance than they are now, whether or not that is accurate enough of that. That’s how they see things. And again, they’ve done this before with Trump the first time around.

They don’t see anything different in round two except the Donald Trump is trying to wreck, law enforcement and the Defense Department and, the intelligence agencies with his appointees, which are the things that generally keep China in check as well as, if you’re going to have any sort of meaningful policy against China that deals with security and culture and technology and theft and trade, you need everyone working together.

And they see Donald Trump as the best possible candidate for wrecking that capacity within the American system. So they’re actually broadly looking forward to Trump two, because they think they’re going to be able to get even more out of the United States than they did under Trump. One, much like the Russians are feeling and like the Russians, I think they’re miscalculating.

This is not 2017. We are in a very different world now. And the single biggest difference on the Chinese front is that Donald Trump did succeed in changing the conversation in the United States, and there is now a competition among all factions in Congress about who can be the most anti-Chinese. Now, translating that sentiment and policy, that’s a lot easier said than done.

But there’s no longer this core disagreement within the parties because the business community has been ejected from the Republican coalition. So the faction that used to be the most organized and calling the shots in the Republican Party on economic policy is no longer even part of the conversation, which leaves everybody else to fill the gap. And no one else is as concerned with economic stability as the business community was.

So we’ve already seen in the last five years a significant outflow of investment from China, foreign firms and even of Chinese firms as everyone tries to get away from this country. That is facing economic implosion because of its demographic issues. And while Donald Trump certainly isn’t the guy to build a broad coalition within his own government, much less across multiple governments, to have any sort of coherent policy towards China, dude knows how to do tariffs.

And that is certainly something that’s going to hit the Chinese on the headline. Now, as a rule, I would say tariffs are a really bad tool for shaping policy. So for example, the terror that Trump has threatened, not that I think are going to happen, against China and Mexico would be the fastest way to trigger an inflation induced recession in the United States, because most of the trade among the NAFTA partners goes back and forth across the border every time.

And if you do a flat tariff, because doing anything about a flat tariff would require administration, Trump is not very good at that. You’re going to basically tax every product multiple times and drive each industry out of business and allow Chinese products to fill the gap. That’s not how things work in China. China, they have as much of the supply chain system in one country as possible.

So if you do a big flat tariff on it, it actually does hurt the question is whether Trump can realize that if the goal is to actually break the trade relationship with China, you have to do more than tariff them. You have to actually take that income and build alternate industrial plant within North America. So there’s actually another option.

Otherwise you get an inflation pulse, you get a consumer crisis, and you don’t actually change anything on the back end. You just make everything more expensive. Now, whether or not his ultimate appointees are people who can convince him of that. I don’t know. But what I do know for sure is that if we do get into a situation where Trump basically waltzes into East Asia with a sledgehammer, yes, the U.S. is going to take a lot of hits.

Yes, it’s going to hurt. Yes, he will go down in history as triggering the highest inflation the United States has ever had. Yes, it will be ugly, but there won’t be a China on the other side of that. There are easy ways to do this. There are smart ways to do this. But that doesn’t mean that there are only 1 or 2 ways to do this.

If the goal is simply to smash China and move on, I have no doubt that Trump can do that. If the goal is to smash China, move on, and have America in a much better place domestically. That requires a skill set that I have not seen Donald Trump wield just yet. All right, I’m done. See you tomorrow.

Trump 2.0 – NATO

Next on our list of things Trump 2.0 will have to deal with is NATO. Trump’s second term could reshape NATO dynamics, with a significant focus on defense spending, China, and European alliances.

Trump will try to push NATO members to significantly increase defense spending, up to 4-5% of GDP. Trump will also attempt to align NATO against Chinese trade practices. These efforts will be occurring as European dynamics undergo a shift of their own.

European security concerns are on the rise due to the Ukraine war. Eastern Europe is being led by Poland with strong defense spending and alignment with the US. In Scandinavia, these countries exhibit stable demographics and effective militaries, which make them reliable US allies. France and Germany will struggle with Trump 2.0’s demands for increased spending, since they are facing industrial shifts, energy crises, and demographic decline. An ally closer to home who might get some heat from Trump is Canada, who has been relying on US trade and spending very little on defense.

As geopolitical shifts take place across the globe, Trump 2.0 will be looking to squeeze NATO members for a bit more. This will likely strengthen ties with some countries, and strain it with others…

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Hey everybody. Peter Zeihan here. Coming to you from New Zealand, specifically the Queen Charlotte walkway in marble Sounds. Today we’re going to do the next step of our Open-Ended series on Trump 2.0. The things that are waiting for him or that he’s going to choose to tackle in the early days of his administration. Today we’re gonna talk about the NATO alliance.

Now, with the Europeans, there’s any number of things going on with trade, with demographics, with energy, with Russia, with Ukraine, with China. It’s a long list, but Trump only cares about two things on it. Number one, will they assist the United States in cracking down on Chinese trade on a global basis? And number two, will they up their defense spending to whatever target the Donald Trump administration establishes?

Now, if this sounds kind of reminiscent of Trump one, it is. And the difference this time around is that there’s been a change of mindset in Europe itself. The Ukraine war has really sharpened a lot of minds and made people think differently about security. And so most of the European countries that were dragging their feet when it came to meeting defense expenditures and the Trump one term have done so voluntarily during the Biden administration because of the Ukraine war, that’s going to make hitting 2.0% very, very simple.

That’s supposedly what everyone’s supposed to be doing anyway. But the world has changed. The situation is different, and Donald Trump is almost certainly going to insist on a 3%, maybe even a 4%, with some countries even openly talking about 5% when I say some countries, some countries in NATO. The bottom line is, is if Ukraine falls, then this war comes to Europe’s doorstep and there is no way that the Europeans can launch a meaningful defense without a significant build out of their defense capacity.

And so say what you will about Donald Trump. He got the ball rolling on this conversation even before the Ukraine war started. The second thing to keep in mind, of course, is the China angle. The Europeans have always been more circumspect when it comes to putting tech restrictions or trade restrictions on the Chinese than the Americans have.

But again, the situation has changed now that the Chinese are basically bankrolling and equipping the Russian military in Ukraine. Most of the Central Europeans have flipped completely. And now that the Chinese have gotten to a level of technological acumen that they don’t need nearly as much German equipment. The Germans are starting to look at this from a different angle as well.

The French, for their part, were always for it. In fact, the biggest free trader in Europe, Britain, left with Brexit. So that quite a voice in the back that was whispering in America’s ears to dial it back. That’s gone. So we actually have a situation where the Europeans might, might, might, might, might be a little bit more willing to consider things.

There’s also been a change of diplomatic positions. The Europeans always had this view that they were friends and allies and family of the United States. And you don’t lie to your friends and your family and your allies. Well, Donald Trump really doesn’t care what you say as long as it makes him look good. The Russians figured that out.

The Chinese figured that out, but the Europeans tried to be good actors. Not this time around. It’s going to be a very different situation with the Europeans blowing a lot of smoke to cover their asses and whatever the topic happens to be. But at the end of the day, cooperation is going to be a lot more doable because the situation has changed.

Now, of course, you look at this country by country, you get a very different view.

So let’s break this into three groups. At the top of the list, the countries they’re going to be doing really well. Either they get along with Trump or they’re going to have a problem meeting those thresholds. Or they’re nervous about the Chinese already. Poland at the very top of that list. Poland actually takes over the European Union’s executive arm.

Robert chairs the meetings. I overstated that, this January, and will hold it for the six first six months of the year. So coinciding with the honeymoon period for Donald Trump. The poles are on the front line with the Russians. They are already well over the 2% threshold. They have plans to reach 4% within a few years.

And, on everything from trade to illegal immigration, the poles are actually on a similar page with most of the things that Trump believes in. Also, we have this weird thing going on where Polish politics are starting to mirror US politics as they used to be. So the two main forces in Poland are, Civic Platform, which is a centrist group, kind of leans right on economic issues.

Which currently runs the government and a group called Law and Justice, which is far more populist, right. More populist, in conservative than Donald Trump. And the two of them disagree on everything, American style. But on the big stuff, most notably Russia and relations with the United States, they’re almost in lockstep. So you get this scream fest and Polish politics.

But when it comes to the big stuff, it means very, very little. Sound familiar? Anyway, a good time to be Polish. Scandinavia is going to do pretty well, too. Here you’ve got countries that are more demographically stable, have very capable expedition based militaries. They work together extraordinarily well, and they share the poles general view of all things Russian and all things American.

So, Trump will, of course, try to with the fact that he’s got a Swedish descent and the Swedes will not and smile and try to push their agenda through, for all of these countries, the key issue is that we are cooperating. We’re doing everything that you say we should do on defense. And, China, let’s talk Russia and make sure we’re on the same page on Ukraine.

That will be their goal. And of course, they have to make it look like it was Trump’s idea. Second group of countries, France and Germany, the old core, both of them are utterly screwed at the moment.

The German problem is not simply political. It’s also demographic and economic. The economic system is in the early stages of demographic collapse. As they simply run out of workforce. They’ll basically be a nonfunctional economic system within a decade. And so increasing defense spending at a time when they have to rapidly adapt their entire society heavy carry, second, their industrial base is linked in with a lot of countries in central Europe who are a little bit behind them in terms of the demographic decay, but it is very real.

I got a friend here and try to keep up with, and the energy situation is a disaster because I used to get a lot of cheap energy from the Russians. And now that’s gone, and the Chinese are now starting to compete them in some of the sectors that they consider themselves good at it. Increasing defense spending in that environment is really, really tough.

But if they don’t do it, and the Americans do lose interest in Europe, then they’re gonna have to increase defense spending by a lot more just to keep the country coherent. So there’s a lot of ways that that can go wrong. But, as bad as it is, for the Germans, it’s a known problem. The new problem, the worst problem is actually going to be, by a non-European country that is in NATO.

Keep in mind that the United States is not the only North American country in the NATO alliance. The other one is Canada. And under Justin Trudeau, the Canadian government has basically slimmed defense spending to almost a rounding error to zero.

Let me give you the Canadian point of view than everybody else’s.

So, the Kenyan point of view is, they’ve got more at the coast, a Pacific coast, an Arctic coast, one ninth, the population of the United States, but actually more frontage. So if Canada was to try to build a military, those right size so it can project power, it would break the country. And so they don’t try they’ve basically focused on a couple things like Special forces and everything else is kind of wasted.

That doesn’t fly for the rest of the Alliance. The Canadians have been freeloading, on the global order, ever since the wall came down and the joke in diplomatic services is after the Cold War ended, Canada basically became an NGO and was more part of the problem. And part of the solution might be a little bit cruel, but not by a whole lot, because if Canada were to expand its defense spending and try to excel in 3 or 4 things and then plug those into the NATO alliance, it would basically be under the command of the United States in all meaningful ways.

And it would lose its sovereignty even as meaning what Donald Trump says he wants them to do. That is a really ugly political career in Canada. And so they’ve just kind of looked forward. And while we or are likely to have, elections this year, and that way we will have elections this year, we will probably have a change in government that doesn’t change the underlying structure.

If the Canadians just spend money to spend money that really doesn’t do anything for anyone, including Canada. And so Donald Trump is going to be angry no matter what. And unlike Germany or France, there’s a lot that the Trump administration can do to Canada if it wants to because of the trade relationship. Canada is utterly dependent on the United States for its trade, well-being and trade.

Trump loves to use trade as a cudgel. So it’s difficult for me to see a way that this can be managed, under the current government of Justin Trudeau. Trump broadly likes Justin Trudeau because Justin Trudeau is the only world leader the global media is ever considered to be dumber than Donald Trump.

And that, you know, rings a couple of bells here and there. The new guy, if it is one, is unexperienced in the United States on this scale. We just don’t know. So, one way or another, we’re looking at Scandinavian Polish relations with the Americans, probably improving significantly. Germany in a pickle where there’s no easy fix and maybe not even a fix at all.

And Canada, basically desperate to change the topic whenever the Americans are in the room. What the Canadians are gonna discover real soon is that, during the cold War, and they were, like, the 45th most important country on America’s list. That was a comfortable place to be. And now, because trade is becoming more regionalized and because defense is a little bit higher up the agenda for this incoming administration, Canada’s like third or fourth on the list.

And whenever the Americans are paying attention to you, it gets uncomfortable both real fast.

Trump 2.0 – Russia

Photo of St Basil cathedral in Red Square, Russia

As Trump enters his second term, there are going to be numerous challenges facing his administration. So, we’re launching a series touching on several of these issues and what to expect from President Trump. Our first video in the series covers Ukraine and Russia.

The Russians are running out of people (and time) to reach out and secure defensible boundaries, so the Ukraine War always had to happen now. How does President Trump factor into all of this?

Trump has suggested freezing the conflict along current lines and delaying Ukraine’s NATO membership for 20 years. Spoiler alert: that’s not going to work for the Russians. While the Russians knew how to manipulate Trump during his first term, it seems they’ve forgotten that winning strategy. On the other hand, the Ukrainians (and plenty of other countries) have already begun with the flattery and brown-nosing to get on Trump’s good side.

Regardless of who is in the US office, this war is just a step in Russia’s broader strategy to regain former Soviet territories. It’s likely that Trump’s proposals will fail since they go against Russian objectives.

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Hey everybody. Peter Zeihan here comes to you from Cora Glen, New Zealand, about to relocate. We’re going to launch off a bit of an open ended series today, talking about the challenges that are going to be facing the incoming administration of president elect Trump. He’s actually President Trump, president elect. He’s both. Anyway, specifically today, we’re going to talk about what’s going on in Ukraine and Russia.

And before we go into the impact that Trump can or cannot have, I think it’s best to, revisit why the Russians are doing what they’re doing. They don’t feel they have a choice in this war. I would argue that they’re broadly correct with that, which doesn’t mean that there is a solution where everyone can just get along.

It’s part of the problem. You see the the core territories that the Russians are from Moscow and the territories to the north, south and southwest are open and they’re vulnerable, and there’s no natural barriers that prevent invasion. And so what the Russians have always done since the time of the early is ours, is to expand as much as they can, absorb culture after culture, people after people, conquer nation after nation, until they reach a series of geographical barriers that do block tanks and troops.

And those barriers are the Arctic Ocean, the Baltic Sea, the Carpathian Mountains, the Caucasus and the deserts and high mountains of Central Asia. Anyway, under the time of Stalin and during most of the Cold War, the Russians controlled all of these territories, and they were the most secure they’ve ever felt.

That is one of the many reasons why, during the Cold War, the primary concern was about a nuclear catastrophe rather than a conventional invasion. We are now in a different system. However, though, post-Soviet Russia lost control over almost all of those access points. And in the time since, the wall fell in 1989, the Russians have launched or participated in nine different military operations, of which the Ukraine war is only the most recent.

So if there’s anything that we know about the Russians, it’s that this war was always going to happen and it was never going to be the last one. And any sort of peace deal or armistice simply buys the Russians time to recoup so that they can then go for the next thing. And if they do succeed in absorbing all of Ukraine, as soon as they are capable, they’ll go after the next line of countries in the west, which are Estonia, Latvia, Lithuania, Poland, Romania and Moldova, all of which Moldova are members of NATO.

So, we are not at the end of the story here. We’re in the middle of the story. That’s the why, the why now is even more simple. It’s demographics. The bottom fell out of the Russian birthrate back in the 1980s. We had something called a Death cross in the 1990s where the birthrate fell below the death rate at one point, twice as many people were dying every day in Russia as were being born.

There since been a bit of a recovery, but it’s since turned again. And that’s before you consider the war. So this was always going to be the final decade that the Russians could attempt to use their superior numbers to force a military solution to their what they see as their frontier problem. And if they had waited until 2030, there simply wouldn’t be enough men in their teens and 20s to even make a meaningful attempt.

So it was always going to happen, and it was always going to happen about right now and what happens in the rest of the world, from the Russian point of view, is a rounding error in considering how they prosecute conflict. And to Trump, Trump says he can stop the war in 24 hours. Trump says a lot of things that a lot of people don’t take seriously.

But let’s assume for the moment that there was a deal to be had. What has been floated from the Trump camp is an armistice along the current division line, with European troops coming in to monitor the cease fire and the, Ukrainians facing a 20 year pause before they can even consider applying for NATO membership. Now, from the Ukrainian point of view, this is obviously not a deal because it takes roughly a quarter of their population, excuse me, a quarter of their territory, and locks it more or less permanently under Russian control.

But moreover, this is a deal that the Russians would never accept because they don’t have 20 years and they don’t need just get Ukraine, they need to get the rest of the entire Western periphery. They need to get Georgia and Azerbaijan and Armenia and the bulk of Central Asia. If they wait 20 years, the demographic bomb will fully gone off.

And so the Russians have rejected this proposal posthaste. Now, let’s talk about a couple of the minor things going on. There are a lot of conspiracy theories going around right now. Oh, my God, there’s so many conspiracy theories going on right now. But let’s deal with the one that deals with the Ukraine war that the Russians only attack because they thought the Biden administration was weak.

Anything? No. The specific timing for the launching of Ukraine war was very straightforward.

Trump made it very clear four years ago that if he was reelected, he was going to withdraw from NATO fairly early in his second term.

This was something that was communicated to Putin. And so Putin was very clear that should that happen, Ukraine would basically be handed to him on a plate. And when that’s not how things unfolded, he felt that the only way to get what he needed was to launch a military attack, which was correct. So there is nothing there that is Trump related that caused or deferred the war in any meaningful sense.

Like I said, this was always going to happen. Now, that doesn’t mean that the Russians don’t have some opinions on Donald Trump. They find him to be an eminently, manipulable person. They were able to hire him off from all of his security personnel, including the Secret Service, in the first term, and to get him into a room alone with Putin and Putin’s senior staff.

That’s never happened throughout American history, at any summit anywhere, and where you’d have a president completely separated from anything. And what the Russians found out was that, Donald Trump really didn’t know a whole lot about what was going on. Unlike most presidents who rely on their cabinet members to keep them informed,

Donald Trump relies on his cabinet ministers, to keep him feeling good about himself. And so whenever somebody would tell him something that he didn’t know and make it very clear that he wasn’t the smartest person in the room and each and every topic, he generally fired them. And so the Putin government really liked the first Trump term, because nothing could really get done on the American side.

That wasn’t being done on Twitter. And they have high hopes for the second term, because a number of the people that are being appointed to, cabinet level positions, for example, the Trudeau defense secretary, has limited military experience. He’s a culture warrior. And it’s very clear that doesn’t actually have any plans in mind for the military aside from Woking.

It, as he says, and from the Russian point of view, this is brilliant, because if you can hobble the ability of the American military to function, the American intelligence community function because the coordinator of that is basically somebody who’s been working for the Russians for years. Then all of a sudden you have a free hand, or at least that’s what they think.

I think, as is typical with the Russians, they may have overthought this out and come to the wrong conclusion. If you go back through modern American Russian history, the Russians do this from time to time. They think they have an upper hand. They think they can play the American president, whether it’s in jet, whether it’s JFK, or Bill Clinton or someone else, and then they discover, no, that’s not really how it works.

This is still the most powerful country in the world. And regardless of what you think of the individual leader, there’s a lot of institutional heft there. Even if the individual leader has a problem with the institutions. In this specific case, though, it’s much more personal. They have already told Donald Trump flatly, no. And if you are a world leader in the current age and you want something out of the United States, we all learned in Trump term one that the way to do it is to flatter Donald Trump.

And for whatever reason, the Russians have forgotten that. And so,while Zelensky of Ukraine has already been on the phone with Donald Trump to talk, while the Canadian prime minister has already flown down to Mar and Allegro, while Sheinbaum of Mexico has already been on the phone, while several European leaders have already arranged for talks basically to kiss up to get what they want, the Russians seem to have forgotten that and they just said no.

And so if you take Donald Trump’s temperament and apply it to the situation, I think it’s pretty safe to say that the Russians are not going to get what they’re hoping to get. At the same time that Donald Trump has come up with this brilliant, the best, the awesome plan, of freezing the conflict for 20 years, which was something would be, anathema to Russian strategic plans in the short, medium and long term.

So regardless of what Trump said during the campaign, regardless of what JD Vance, who is a Russian apologist, said during the campaign, he really comes down to the emotions of one person right now on this issue. And the Russians have really gotten off to the wrong foot and put that foot directly in their mouths.

My Dream Alliance for the US – Part 2

Today, we’re looking at the countries that didn’t quite make the first team, but still have something to offer as a strategic partner to the US. Let’s break these places down.

In the Western Hemisphere, Argentina and Chile come to mind. They are resource-rich nations, have minimal strategic complications and offer a low-risk, high-reward partnership. In Southeast Asia, there are several countries that are in the conversation: Singapore, Malaysia, Myanmar, and Indonesia. These are rising economic powers with strong demographics that will likely benefit from the collapse of the Chinese system. Thailand might not have the demographics of these other countries, but it will continue to be a big player in the region (if they can sort that people problem out within three decades). In the Middle East, Oman represents a trusted mediator in the region that would help maintain influence and access to the Persian Gulf.

There are some real outliers on this list too; countries that have critical resources, but also bring a lot of baggage to the table. We’re talking about Saudi Arabia and Congo (Kinshasa). Each of these has materials critical to maintaining global supply chains, but governance and stability issues keep these places shrouded in complications.

While some of these options might seem dubious, they’re better than depending on somewhere like Russia. Obviously, we should prioritize countries with minimal security concerns, strong economic potential, or essential resources, but think of these “second round picks” as diversification to our alliance portfolio.

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Hey everybody. Peter Zeihan here coming to you from New Zealand, the Brit track. We’re doing the second part of the Dream Alliance of the future. Last time we talked about the countries, you kind of have to have, countries where the lift is low, the payout is high, and the cultural connections are strong. So France, Japan, Mexico, Canada, Australia, New Zealand, in the United Kingdom, today we’re going to talk about the ones are a little bit more of an effort or a little bit more of a reach.

Let’s start in the Western Hemisphere. It’s two countries that are border one another, Argentina and Chile. Both of them have a lot of resources, are going to be in scarce supply in the world to come, especially food out of Argentina. But neither of them really have significant strategic complications. So these are kind of like friends. Plus, if you will.

Let’s see next, let’s move over to Southeast Asia. Those are the countries that are going to be like the really economic powerhouses in the future. Vietnam kind of made the first list, but the rest of Southeast Asia, most notably Singapore, Malaysia, Myanmar and Indonesia are definitely, high up on the country. You’re going to want to be with all of them a pretty good demographics, all of them have an existing industrial plant.

None of them have a recent history of going to war with one another. And as the Chinese system falls apart, this is the part of the world that is probably going to be most likely to pick up a lot of those pieces, so they won’t have an economic miracle in the way that China did. It won’t be that unhealthy, but it’ll last longer.

It will be more durable to be higher value added and unlike China, these are consumption led economies. All, the only complication in there is Thailand. Thailand is already significantly aging demographically, so probably only has about 30 years left before it’s in a German style demographic decline. Now, a lot can happen in 30 years, so I don’t want to write them off yet.

But if things don’t change, they will definitely be eclipsed by countries like Vietnam. But these countries, low security heartburn, high economic payout, beyond that, a couple that are really problematic. The first is Oman in the Middle East. And really, that is the only country in the Middle East that I think is really worth having a long term relationship with.

It’s not nearly as crazy, crazy places like Saudi Arabia. And it commands the opening to the Persian Gulf. So no matter what American foreign policy ends up being or not being in the Persian Gulf, having the ability to project power into it from the outside through Oman is brilliant. Also, if there’s one thing that everyone in the Persian Gulf agrees on, whether it’s Kuwait, Saudi Arabia or Iran, it said the Omanis are okay.

They are a great interlocutor. They’re a great mediator for anything that’s happening in the region, no matter how blam it gets. So it’d be lovely to have them in the outer circle of allies. And then the final one, it’s one I almost didn’t consider. But in the world are moving to a lot of the places where raw materials come from are going to be really unstable.

And there are a few places in the world that are just have so much of it in incredible concentration that we’re going to need them one way or the other. And the two countries in question are Saudi Arabia and the Congo. These are countries that are massive producers of raw materials that do very little with refining, very little with value out of their basically mines with people.

And we’re going to have to figure out some way to continue to access the copper, the cobalt, the platinum, the palladium, the diamonds and all that other good stuff that these two countries just have in spades. Because if we can’t figure that out, the only other real player in the world that is going to be able to produce the volumes of material we need now, it’s Russia.

And the whole point of going away from globalization is that you lose those strategic complications. So Congo, South Africa, despite all of their problems, and there’s a list so much better than dealing with Moscow.

Trump Goes A-Conquerin’

Trump just kicked around invading and coercing some allies. Oh boy….

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

My Dream Alliance for the US – Part 1

When I picture my ideal US alliance system, I focus on stable, secure, and economically complementary countries. Part one of this two-part series focuses on the “safe” bets.

The inner circle will consist of Canada, the UK, Australia, and New Zealand. Sure, we’re all English-speaking and naval-oriented, but we’ve also got a long history of cooperation. And each of these places is economically resilient, consumption-driven, and relatively insulated from global demographic challenges.

Next on the list, we have Mexico and Vietnam. Mexico is our largest trading partner and developing a more holistic relationship with them would serve the US well. Vietnam is a rapidly growing trading partner that has secured its position in the global economy and maintains natural geographic defenses, making them a good friend to have in the region.

Focusing on this list of countries should be the main priority for the US, but there are plenty of other options out there. So, tomorrow we’ll discuss the countries that are sitting in the minor leagues waiting for the call up.

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Hey, everyone. Peter Zeihan here coming to you from the Brett’s track in New Zealand. Almost done like 4k left. Anyway, question from the Patreon crowd. If you were to craft the perfect U.S. alliance system for the future, what would it be? Well, I would always start with the family. So what I like to call the Grand Hongqi Alliance, all the all the Anglo states.

So that’s the United States, Canada, the United Kingdom, Australia and New Zealand. These are countries that share more than the common bond of English culture and history. They’re all naval powers, what they can do, which is kind of regard, and so they have the ability to defend themselves in a degree that’s much simpler than it is for a land power.

So security complications are quite limited. The economic growth is largely consumption driven. So it’s going to be something that’s really interesting and positive to have in a globalizing world where populations are aging out everywhere. It’s less true for those countries. And we have a long track record with the Anglos, called the Five Eyes Alliance, which is basically intelligence sharing.

Throughout history, whatever we find that isn’t a complete individual national state secret is shared among the five, that makes the most powerful, strategic decision making apparatus that you can possibly have. So start there. Number two, you look for countries that are up and comers, that have the potential to do very well in the world to come at the very top of that list, are two countries, Mexico and Vietnam.

These are states that are already in the United States as top seven trading partners. Mexico is number one. Vietnam’s number seven. And they have the demographic to, continue doing this for a very, very, very long time. The security issues, in the classical sense, worrying about other countries are quite limited. Vietnam is backed up by mountains and jungles on all sides.

And Vietnam’s, most insecure border is one the heads of the United States. So if I was to give any advice to presidents now or in the future, let’s find a way to make relations with Mexico as wholesome and as well-rounded as possible. If you’re only talking trade, if you’re only talking drugs, you’re only talking immigration. You’re not really doing anyone a favor.

This needs to be a broad border conversation that involves not just security. And, in the way that we’ve defined it on the border, but in the broader sense, it needs to involve culture and finance and transport and logistics and infrastructure and everything, that is benefiting, what has been the strongest bilateral economic relationship in human history already?

Can you imagine if we actually put some effort into that? Okay. Next, countries where the security issues are relatively limited and they could bring a lot to the table? France and Japan are at the very top of that list. Japan, obviously, an archipelago has two, super carriers, which are the only two outside of the five ice agreement.

The others that are not American or British. Second strongest navy in human history. The Brits are third, and an economy that has already relatively globalized proofed it. It’s still a massive importer of energy and raw materials. But this is not the Japan of the 1980s that was completely dependent on trade, only trades for GDP, about 15% of the total, which is very similar to the American number.

And so this is a country that while its demographics are bad, it is developing a series of technologies to cope with it, which is something that we will learn in yourselves in the future. France on the far western side of Europe, there’s sometimes our, our estranged sibling, but that simply underlines that they are family.

The French and the Americans have always gotten along when it really matters. Although we’d like to do things our own way, they also have a positive demographic future. They have a huge fleet of atomic power stations, so they’re not nearly as dependent on petroleum or natural gas imports as anyone else in Europe. And they have a military that’s roughly right sized to their needs.

So you kind of group those together and you kind of get the dream team. Once you have that in place, I would look around for the low hanging fruit places where there’s technologies that are kind of concentrated, think Taiwan, that would be very useful, or places that don’t have security concerns because they’re isolated from everybody else. Spain and Portugal might fall into that category.

But overall, this is the cluster. These are the countries and do really well in the future. And then once you’ve got that, you can start thinking things that a little bit more ambitious based on whatever your goals are, however, you define them. I’m a little hesitant to put my stamp on anything beyond that list, because the technologies in 1015 years may look significantly different.

And the, the goal posts will shift with that. But for now, these are the countries that I see as being relatively stable, relatively wealthy, with a good growth trajectory, and very little chance of anything knocking them off.

Is Federal Regulation Coming to the Texas Power Grid?

That innate sense of independence that every Texan comes out of the womb with has also made its way into the energy sector. With an isolated grid managed by ERCOT, Texas has found itself in an energy pickle of its own.

Since the Texas grid stands alone and the capacity market disincentivizes peaker plants from being built, it’s more vulnerable to certain things like natural disasters that cause prolonged outages or fluctuating weather patterns and high temps which intensify energy demands.

The big concern is that energy demands in Texas are expanding…rapidly. To sustain the industrial expansion and population growth, the Texans might have to do something that goes against every fiber in their being: accepting federal regulation to help connect their grid to neighboring states’ grids.

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Hey everybody. Peter Zeihan here. Coming to you from the Austin airport. Yesterday we talked about how California has found the new in a unique way to increase their energy insecurity, along with increasing prices. And today, it’s time to talk about the same topic in Texas. We’re going to go with an electricity story today. There are three kind of mega grids in the United States.

One that kind of roughly, cuts down in front of the rocky line separating east from west. And then something called Ercot, which is Texas’s electricity reliability, group, which is basically just Texas. And Texas has its own grid because it has a different, philosophy when it comes to regulation from most others, which is a fancy way of saying they like as little as possible.

But that doesn’t necessarily mean that they have no regulation, and that doesn’t necessarily mean their approach is working. One of the big things we’ve seen in Texas in recent months and years was there’s not a lot of depth or durability to the system, because unless there’s a very clear economic rationale for doing something on a day by day basis, it typically isn’t done because there aren’t going to be regulations about how long power can be off line for maintenance or redundancy in case of a storm.

And Texas is a Gulf Coast country. And so when a hurricane comes through like one did earlier this year and hit Houston, power is out for 2 to 3 weeks over much of the city. They have a much bigger problem coming up just around the corner now. There’s something called a capacity market in Texas and regulations have been around for a while.

Basically dissuade people from adding power to the grid unless that power is going to be used all the time. So there’s a little bit of an ideological slant here. The idea being that solar never works at night. So if you can’t pass on the cost to the end user because it can only be used half the time, can only pass on part of the cost, then maybe won’t.

We won’t get as much solar. Solar is doing just fine in Texas, especially out west where it’s just a brilliant economic model. But this capacity market restriction has also restricted the Texans from building what are called peaker plants. Every day there’s a certain pattern where power is in higher or lower demand. And the smart people in the electricity market have figured out a way to ramp up production for those times.

As a rule. And it’s going to vary location by location, season to season. Peak demand tends to be between 6 and 9 p.m. at night, when people are coming home and getting dinner and watching TV, and then it tends to drop off a cliff around 10:00 am and doesn’t pick back up until people are waking up around 6 a.m. the next day.

Well, in Texas, because of this capacity market thing, they don’t get a lot of plants to generate power specifically for those windows. And I don’t know if you’ve been to Texas, but it’s a hot place. And so when you have peak demand from 6 to 9 p.m., everyone’s running their AC full bore and the peak is much stronger.

You add in the erratic nature of weather in Texas, whether it’s the great Plains or the Gulf Coast or the interaction in between, and they have the most extreme variations between low and high. So if anyone needs a lot of speakers, it’s going to be Texas. But the capacity market actually dissuades people from building those. So we are now in a situation where Texas has had 35 years of incredible industrial and population growth, and considering what needs to be done over the next few years, the industrial growth really needs to continue.

But there’s not enough electricity to power it, and the capacity market is now getting in the way. So we’re probably going to get a Texas two step of outcomes here. Number one, the Texans are going to have a series of rolling brown and blackouts as the power system fails. It’s just not stable. And then second, the Texans will probably be asking the federal government to dissolve the seam that separates Ercot from the rest of the country in order to import huge amounts of power from neighboring states.

And in doing so, they’re going to have to subject themselves to at least some degree of regulation from the federal government. The alternative is rolling brown and blackouts and the failure of the Texas industrial expansion model. So basically, the Texans are going to do something they really don’t want to do. They’re going to have to ask for help from… Oklahoma.

Why Is Gas So Expensive in California?

Picture this: you’re driving down the PCH in a sports car with the top down, hair is blowing in the wind, and then the gas light comes on. You pull into the first gas station you see and a gallon of gas costs $14.99. Okay, maybe I’m exaggerating a little, but California is heading towards a massive energy crisis.

California has been living in its own energy world for quite a while. As if its distinct gas formulation designed to reduce air pollution, high gas taxes, and dependency on foreign oil weren’t enough, the state now requires refiners to keep reserve supplies (raising costs further and creating more logistical issues).

Since California isn’t a beneficiary of the shale revolution, they still import crude from the Persian Gulf and use outdated methods of collection. This makes them vulnerable to global energy shocks and could lead to extreme gas prices throughout CA. So, if you were planning to head to the west coast, let your hair down, and take a cruise along CA State Route 1, you may want to grab a few extra gas cans before you cross the state line.

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Hey, everybody. Peter Zeihan here. Coming to you from Huntington Beach, California. Behind me is the old Huntington Beach refinery. This used to be a major oil producing zone. In fact, there’s still a handful of producing wells across the L.A. area, with one of the most prolific ones being inside of a mall in Wilshire Boulevard. Never say that the Californians aren’t capable of a bit of, double dealing.

Anyway, the reason I wanted to talk about this, and this is what, you know, made me think of it, is we’ve got a bit of a crisis going on in California. I’m going to rotate around a little, not only is the view better, but you can even see some of the old, oil platforms out in the ocean.

Hey. They’re okay. Anyway, short version is that California has a very high tax regime for, a lot of things, but none more so than gasoline, where it has the highest gasoline taxes in the country. And as a result, gasoline in California is ridiculously expensive, often goes over $5 a gallon. I think it’s where it is right now, actually.

Anyway, there’s some other reasons for this, but, we’ll get to those in time. Bottom line is the Californians have become a nerd, but angered by very, very high gasoline prices and very, very volatile gasoline prices and more so than everyone else, you know, everyone else is, you know, used to the up and down of crude prices of how that affects things.

There’s more going on in California for you that was worth exploring. The governor of California, Gavin Newsom, has recently signed into law a project that will force refiners to maintain storage of gasoline grades for the California market as a cost of doing business in the state. The intent is so that when maintenance happens, especially unscheduled maintenance, that there’s always a reserve that the state can fall back on to keep energy prices out of control.

Unfortunately, it’s going to do the absolute opposite. And the cost of, complying with this new regulation combined with all the other regulations in California and at the energy sector, which are already, the stiffest in the country, means that a lot of refineries are evaluating whether they even want to stay. And, shortly after the new law was signed, Phillips 66, which maintains a refinery near here in Los Angeles, announced that, next year will be the final year that there are refineries operating and they plan to shut down and redirect their efforts to other places, most notably other states.

A couple things here. Let’s talk about the technical of why what Newsom and the Democrats here are doing is just purple idea. First and foremost, California, in order to control air pollution, has a different formulation from the rest of the country. So any refinery that is producing, gasoline or unleaded or whatever else for the California market has to produce a very specific type of fuel that doesn’t have a demand anywhere else in the world.

And so no refineries outside of the state produce for the state because there’s no margin added for them. So it’s just the locals. Second, not every urban center in California has the same regulations. And in the summer, a lot of them had different regulations. So not only do you have to produce a strain that is different for the state as a whole, but when you get to the summer months, you have to produce several different ones.

And all of this drives up costs because it reduces scale. The idea of the regulation that you have to have storage makes sense. But gasoline, once it’s refined into a fuel, if it’s stored for any appreciable amount of time, you know, more than days to a few weeks starts to degrade. So the cost of keeping this up is really high, and the waste that comes out of it is not minor.

And so from a carbon point of view, this isn’t a great idea anyway. There’s any number of reasons why this isn’t a great plan, but the Californians are doing it anyway. And that means that California is setting itself up for a bit of a problem down the road, more than just high prices. You see, California is the only one of the lower 48 that is not participating in the shale revolution in some way.

They have a significant oil field here in the Monterey Shale that’s out in Kern County in in the valley. But the techniques that are used for fracking have specifically been banned. But oil production has not. So, the locals are using technologies that are older and arguably dirtier than shale tech in order to produce crude for this local market.

This new regulation further separates California from the rest of the country. Also, keep in mind that the United States is now far and away the world’s largest exporter of refined oil products. By the end of this calendar year, we’re looking about 5 million barrels a day of exports of things like gasoline and jet fuel. Obviously, none of that’s coming from California.

But for the rest of the country, we’re awash in an embarrassment of energy production and fuel production, whereas California is in huge deficit. And now California is the state that is most dependent, not just on energy imports, but energy imports from another hemisphere. Yes, all the refineries in Louisiana and Texas like to use imported crude. They mostly use, Venezuelan, Mexican and Canadian and to a lesser degree, crude grades from the Eastern Hemisphere.

But everything, almost everything that California gets comes from the Eastern Hemisphere. And almost all of that comes from the Persian Gulf. So the next time we have an energy shock, for example, because I don’t know, Israel bombs Iranian oil production and export facilities and that Iran returns the favor by hitting Saudi Arabia. We get to know what are you prices?

Most of the United States is like, whatever. But here in California, they have made themselves uniquely exposed to international shocks while also being uniquely exposed to their own. So one way or the other, we are looking at a significantly darker chapter in California economic history. Just around the corner. And that’s before you consider things going on in Silicon Valley or the capital market or the general aging of the millennials, all of which are already hitting California pretty hard.

So stay tuned. When it gets bad, I’ll be back because it’ll be cheap.

A New American Imperialism?

American imperialism is not the same as European imperialism. The Europeans wanted power, prestige and economic gain, while the US was in it for security. So, what will this look like for the Americans moving forward?

With current strategic holdings in places like Guam, the Northern Mariana Islands, and American Samoa, further expansion in Asia is more of a nice-to-have, than a need-to-do. Should the US want to make some moves, here are some of the places and considerations that would be involved.

Places like Sao Tomé and Principe, the Azores, and Canaries have some nice positioning for Africa, and Socotra could be valuable for Middle Eastern operations. Then there are some places that bring in another layer of risk, but offer some big incentives – Panama for the canal, Greenland for strategic positioning, or Iceland for importance in the North Atlantic. Cuba and Singapore are interesting, but more complicated. There’s some obvious history with Cuba that makes involvement spooky, but having a foothold would make national defense downright breezy. Tampering with the very solid security partnership with Singapore seems too risky, but having a firmer foot in Southeast Asia could be important in a deglobalizing world.

Yet to existing cooperative security arrangements, the US already enjoys the benefits of influence in almost all of these places without the need for boots on the ground, much less the grinding migraines that come from actual occupations. Expanding into new territories would require managing populations and infrastructure, which could weaken US strategic stability and risk turning allies hostile. What I’m getting at here is if it ain’t broke, don’t fix it.

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Hey everyone, Peter Zeihan coming to you from the Bay of Islands and everyone is talking about conquering countries all of a sudden. So I figured it’d be a good point to review American imperialism. And if there were to be a new chapter of the United States going at and grabbing territories, what sort of territories would we be interested in?

Key thing to keep in mind. Imperialism. American style is not like imperialism. European style. The Europeans are relatively small countries compared to the United States, whereas the United States has a continental landmass that has some of the best lands in the world. So for the Brits and the French and the Germans and everybody else going out to grab a chunk of territory in order to Improve their own economic prospects. That makes a certain amount of logical sense. For the United States, it never really has. When we were going through reconstruction industrialization, we were still processing the best parts of one of the largest continents in the world. And now that we have a heavily driven services economy that is the most productive on the planet, it’s really hard to imagine the United States going out and occupying a piece of land in order to get X, resource or a trade route.

Instead, when the United States thinks about imperialism, it’s about not about the money. It’s about security. So we’re not French. We’re not after just to get a big chunk of land that looks good on the globe map. And we are not British, where we’re looking to go out and grab economic nodes that we can then profit from.

We’re looking for small chunks of very easily defendable land with low populations that don’t generate security heartburn, but instead provide strategic opportunities or limit the strategic opportunities of our foes. And that is a very short list of countries, especially when you consider places that the U.S. already controls. So, for example, if you’re in the Pacific, you look at places like the Northern Mariana Islands, which are not too far from Japan or Guam, which is not too far from the first island chain or American Samoa in the South Pacific.

These are chunks of territory that the United States gained from the last round of expansion in World War Two, and before that, in the age of imperialism, the 1800s. And there’s really nothing else in that area that we need. We already have what we need. If you’re going to look at, further west, there are a few chunks of territory that I would find strategically interesting.

The most complicated of them would be a place called Sao Tomé and Principe, which is a small African island nation in the Gulf of Guinea off the south. You know. Well, you know, you know, how Africa just kind of does that thing. It’s it’s in that part in the middle or that’s West or Southwest. I don’t know.

Anyway, you’re talking about a country with a population of 200,000 or, you know, if you go for, just for principle, a country with just a population of about 10,000, that is something that kind of fits the bill, would allow you to project power in the entire belt of territory from South Africa to Nigeria, to Senegal, with having a very small defense platform.

Even better would be territories like the Canaries or the Azores, which allow the United States to block potential foes from coming in from the eastern hemisphere of the Western Hemisphere and project power to Europe as well. Now, if those last to the Azores and the Canary sound familiar, it’s because we’ve already seized us at one point during World War Two, and we gave them back because the countries who control those are Portugal and Spain, who are NATO allies.

One of the things that the United States, excels at is convincing someone that we’re an ally and we take care of all the naval power issues, so you don’t have to worry about it because it’s expensive. If in exchange, you give us security, supremacy and specific footprints of land, that is absolutely our deal with the British when it comes to Diego Garcia, which is our preferred platform in the western Indian Ocean.

So American imperialism isn’t like classic imperialism in many ways. We don’t even change the nameplate on the chunk of territory, so long as we can have physical access to it. So these are all the things that the United States, for the most part, already has, whatever access it needs. And so there’s no need to go out and physically grab the territory.

The exception would be Sao Tome and Principe. Only reason you would do that is if you decide you really want to be a major power in Africa on a day in, day out basis. No American administration has made that decision yet. So, you know, we haven’t really gone for it. Let’s say you wanted to step it up and loosen your definition of what’s a good idea, and go after territory that, still has good security parameters for projection, but it’s going to be a lot heavier.

Carry, in terms of running it, because it either has a larger population or it has land borders. You’ll notice that everything that I’ve laid out so far is an island. And you’re really willing to put your back into a security based empire in a semi-classical sense. This is where Donald Trump has plucked Panama and Greenland.

Panama has a country, has a population of over 4 million. And one of the biggest drug problems and human smuggling problems in the world. So if we were to go into Panama just for the canal, we would very rapidly get caught up administrating a place. It’s kind of a basket case. And you would only do that if you felt that the canal was that important.

Keep in mind, the United States already has unrestricted access to canal, and while we do have to pay for transit because we are not paying for upkeep, that also means that whenever the US military wants to go through, everyone else gets shoved to the back of the line. I’d argue got a pretty good deal there already.

Second one, Greenland is, of course, all in the news these days. Trump is wanting to buy Greenland for quite some time. And yes, while you can project power from Greenland, no argument there. And we use it for space tracking. And yes, it has a population under 100,000 people.

It’s a huge chunk of territory, and the people who live there are extremely poor. And if the United States were to take it over, we would then be responsible for the entire territory. One of the beautiful things we have about the make up right now is that Denmark is one of our fastest allies when it comes to doing things in Greenland, they have never once said no. And when it comes to doing things in the Baltic Sea, in the North Sea, which are an order of magnitude more important, they have never said no.

So if we were to go in and snag Greenland, obviously we could do it if we wanted to. It might cost us, one of our strongest and most loyal allies in one of the most sensitive parts in the world. Moving forward. I would say that that’s not the best plan. Iceland kind of falls into the same category.

Population of under million dominates the North Atlantic. It’s an independent country. But if you wanted to project power into the Russian sphere, it is a fantastic platform, especially in collaboration with the United Kingdom. But we already do that. And the Icelanders take care of their own business, and they have decided publicly to never field a military.

They will just let the United States do it. But the cost for that is the United States is allowed to do whatever it wants, whenever it wants. So we get all the benefits of occupying the territory without actually having to pay for occupying the territory.

The final two that might meet this criteria are a pair of countries Singapore and Cuba. Singapore dominates the Strait of Malacca, and any American military presence there would allow us to empower or destroy any country, depending on that route for trade. And that could be Russia. That could be Iran, that could be Saudi Arabia, that could be China.

So, you know, that could be handy. And, Cuba, because it dominates the interest of the Gulf of Mexico, is a very, near and dear issue to American strategic thinkers because without it, it’s very difficult to do any sort of maritime shipping between the Gulf Coast and the East Coast. And as we found out during the Cuban Missile Crisis, if the Cubans were to host some, intermediate range weapons systems, that would be a real problem for us as well.

But but in both of these cases, you know, these are big countries. Cuba has this many people. Where Singapore is about 5 million. Singapore is one of the most advanced countries on the planet. And Singapore has kind of made a deal with us, very similar to, say, Denmark. So the United States actually has a dedicated aircraft carrier berth in Singapore that the Singaporeans built. And whenever we’ve had a security issue going back to the time of the Vietnam War. The Singaporeans have always been extraordinarily helpful.

So you get all the benefits of having the military footprint, but none of the costs of running or administering or occupying a country. Cuba. More problematic, of course, because of politics. If we were actually going to invade a country and occupy it with the intent of making it ours, I would say Cuba would be at the very top of that list.

But we’ve tried that before in the 60s. It wasn’t a lot of fun. We controlled this territory through most of the time between the Spanish-American War and then, we’re basically ran it as a colony, generated gobs of bad will. And we discovered it’s just easier to base things out of the continental, the United States or Puerto Rico, rather than deal with a population that is pathologically hostile to you.

So as long as in strategic issues, Cuba is neutered, we really don’t have a problem with it. And ever since, Castro died a few years ago, the Cuban government, while they’ve been prickly, has gone out of the way to make sure that we don’t think that they’re getting in bed with anyone we really don’t like in any ways we really don’t like.

So they don’t provoke an invasion. So where do we go? You know, I would argue that the United States right now, from a security point of view, has all the benefits of a globe spanning empire, but without actually having to pay for it. If we actually go and start taking over territories, that changes. You have to occupy populations.

You have to build infrastructure. The way we have it right now is most of these countries want to preserve their independence, and they feel that the best way to do that is to have a differential relationship with the United States security establishment going out there and taking the territory. Turns that on its head. You don’t just lose allies, the places that you are already projecting power from suddenly turn hostile on the inside.

And that is how empires ultimately fall apart.

Oh one more off Africa. And again, we would only do this if we felt that we really need to project power into Africa. There was an island called Socotra. It’s Yemenis. It’s off the Horn of Africa. A small little place. Easy enough to build the infrastructure if you wanted to project power into the Persian Gulf. As well as the Red sea in the entire east coast of the African continent.

Artificial Intelligence Isn’t Ready for Mass Application

Today’s AI technology, while promising, isn’t quite ready for widespread application. I’m not talking so much about AI’s capabilities, but rather the hardware limitations and supply chain challenges that are getting in the way.

For AI to manage vast amounts of data, it’s going to need specialized chips which are still in development. So, give R&D a couple years to figure that out, and then another decade+ for production and supply chains to get sorted out. Without these new chips, power demands are going to skyrocket (because the current, inefficient chips suck up power like nobody’s business). Until those new chips arrive, the US will have to decide which industries will be getting the limited chips that are available, like agriculture, defense, or finance.

While a delay might seem like a bad thing, especially for those who are ready to let AI do their job while they’re sipping Mai Tais on a beach somewhere…it gives us time to figure out how to address all the problems with AI and what its actual impact will look like.

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Hey everybody. Peter Zeihan here. Coming to you from Revere Beach, just north of Boston. A lot of you have written in asking for my opinions on AI. So here we go. Pick it apart, however you will. It’s tantalizing. So GPT and the large language models are taking us forward. They’re nowhere near conscious thought. Oftentimes, they can’t even associate their own work from previously in a conversation, with itself.

It’s basically targeted randomness, if you will. That said, it is still providing insights and the ability to search vast databases in a much more organized and coherent matter than anything we have seen from, search engines before. So promising tech. We had a taste. It’s definitely not ready for what I would consider mass application, but, the possibilities are there, especially when it comes to data management, which, when it comes to things like research and genetics, is very important.

However, I think it’s important to understand what the physical limitations are of AI, and that is a manufacturing issue. So the high end chips that we’re using, the GPUs, graphics processing units, we’re not designed to run AI models. They were designed to run multiple things simultaneously for graphics, primarily for gaming consoles. And the gamers among us who have logged lots of time playing Doom and Fortnite and all the rest have been the primary economic engine for pushing these technologies forward until very recently.

It’s only with things like autonomous driving and electric vehicles that we’ve had a larger market for high end chips. But the GPUs, specifically because they run multiple scenarios and computations simultaneously, that is what makes a large language model work. Wow. Got windy all of a sudden. Let me make sure this works.

Okay. So, GPUs, they generate a lot of heat because they’re doing multiple things at the same time. And so normally you have a gaming console and you have a GPU at the heart of it, and multiple cooling systems typically fans blowing on them to keep laptop from catching on fire.

So if you take these and put 10 or 20,000 of them in the same room in the server farm, you have a massive heat problem. And that’s why most forecasts indicate that, the amount of electricity we’re using for data centers is going to double in the next few years, to compensate. That’s why they’re so power intensive.

Now, if you want to design a chip that is for large language models and AI systems as opposed to, that’s just being an incidental use. You can that those designs are being built now, and we’re hoping to have a functional prototype by the end of calendar year 2025. If that is successful, then you can have your first mass run of the chips enough to generate enough chips for a single server farm by the end of 2027.

And then you can talk about mass manufacture getting into the system by 2029, 2030. So, you know, even in the best case scenario, we’re not going to have custom designed chips for this anytime soon. Remember that a GPU is about the size of a postage stamp because it’s designed to be put in a laptop. Or if you’re going to design a chip specifically, to run AI, you’re talking about something that is bigger than a dinner plate because it’s going to have a cooling system built in.

Not to mention being able to run a lot more things in parallel. So even in the best case scenario, we’re looking at something that’s quite a ways out. So then you have to consider the supply chain just to make what we’re making. Now. The high end chip world, especially sub10 nanometer, and we’re talking here about things that are in the four nanometer and smaller range, closer to two, really, is the most sophisticated and complicated and, proprietary supply chain in human history.

There are over 9000 companies that are involved in making the stuff that goes into the stuff that goes into the stuff that ultimately allows TSMC to make these chips in Taiwan. And then, of course, 99% of these very high end chips are all made in one town in Taiwan that faces the People’s Republic of China. So it doesn’t take a particularly egregious scenario to remove some of those 9000 pieces from, the supply chain system.

And since roughly half of those supply chain steps are only made by small companies that produce one product for one end user and have no competition globally, you lose a handful of them, and you can’t do this at all until you rebuild the ecosystem based on what goes wrong. That rebuilding can take upwards of 10 to 15 years.

So in the best case scenario, we need new hardware that we’re not going to have for a half a decade and are more likely scenario. We’re not going to have the supply chain system in order to build the hardware, for a decade or more. However, we’ve already gotten that taste of what I might be able to do.

And since with the baby boomer retirement, we’re entering into a world of both labor and capital shortages. The idea of having AI or something like it to improve our efficiency is something we can’t ignore. The question is whether we’re going to have enough chips to do everything we want to do. And the answer is a hard no. So we’re going to have to choose do we want the AI chips running to say, crack the genome so that we can put out a new type of GMO in the world that’ll save a billion people from starving to death.

In a world where agricultural supply chains fail. Do we use it to improve worker productivity in a world in which there just aren’t enough workers? And in the case of the United States, we need to double the, industrial plant in order to compensate for a failing China? Or do we use it to stretch the investment dollar further now that the baby boomer money’s no longer available and allow our financial system to be more efficient?

Or do we use it for national defense and cryptography? You know, these these are top level issues, and we’re probably only going to have enough chips to do one of the four. So I would argue that the most consequential decision that the next American president is going to have to make is about where to focus, what few chips we can produce and where do you put them?

There’s no right answer. There’s no wrong answer. There’s just less than satisfactory answers. And that leaves us with the power question. Assuming that we could make GPUs at a scale that will allow mass adoption of AI, which we probably can’t anyway. You’re talking about doubling the power requirements, of what is used in the data space. Here’s the thing, though.

If we can’t make the GPUs and we’re not going to be able to make the more advanced chips anytime soon, we’re still going to want to get some of the benefits from AI. So we’re going to use older, dumber chips that generate a lot more heat per computation in order to compensate, which means we’re probably going to be seeing these estimates for power demand, not simply double, but triple or more.

At the same time, we get less computations, fewer computations, and generate an AI system that’s actually less effective because we’re not going to be able to make the chips at scale. So is it coming? Yeah. But in the short term, it’s not going to be nearly as fast. It’s going to cost a lot more. It’s going to require a lot more electricity.

And we’re probably going to have to wait until about 2040 before we can design and build in mass and apply the chips that we actually want to be able to do this for real. So, believe it or not, actually see this as a borderline good thing because it’s so rare in the United States that we discuss the outcome of a technological evolution before it’s completely overwhelmed us here.

I’d argue we’ve got another 15 years to figure out the fine print.

The End of the World is Just The Beginning

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The Absent Superpower

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The End of the World is Just The Beginning

Disunited Nations

The Absent Superpower

The Absent Superpower

The End of the World is Just The Beginning

Disunited NAtions

The Absent Superpower

The accidental superpower

The End of the World is Just The Beginning

Disunited Nations

The Absent Superpower

The Absent Superpower

The End of the World is Just The Beginning

Disunited NAtions

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The accidental superpower

The End of the World is Just The Beginning

Disunited Nations

The Absent Superpower

The Absent Superpower

The End of the World is Just The Beginning

Disunited NAtions

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Disunited Nations

The Absent Superpower

The Absent Superpower

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