United States Archives - Page 3 of 32

Venezuelan Crude Is Off the Menu… But You Can Still Get It Around Back

Venezuelan oil is getting the boot from the US. Well, kinda, sorta, not really. Let me walk you through what’s going on.

Biden allowed Chevron to import Venezuelan crude to help lower gasoline prices, but Venezuela couldn’t meet their election-related obligations and the deal failed. Regardless, Biden’s motives were misguided as Venezuelan crude is such a small portion of US imports.

Trump came along and revoked that Chevron deal and is now focusing on deporting Venezuelan migrants (many of whom are highly skilled).

Regardless of the policy shift, global oil markets won’t be impacted. Venezuelan crude will likely continue to flow to the US, even if it takes a pit stop somewhere else for a “rebrand” – a page out of the Iranians’ playbook.

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 Colorado. And today we’re going to talk about Venezuela specifically. The Trump administration has recently revoked an operating contract that allows, U.S super major Chevron to import about a quarter million barrels a day of Venezuelan crude. This is unwinding some of the things that I think was one of the dumber things that the Biden administration did.

To explain that I need to go back and explain why the Biden administration did what it did. Okay. So step one, if you go back to the transition from Trump one to Biden, both leaders were basically competing for our affections. And in doing so, they decided to do the Great American political thing and bribe everybody. So in his last month in office, Donald Trump pushed through a or two months in office.

He pushed through a stimulus program that put $1 trillion into Americans pockets. And the first thing that Biden did in his first three weeks is do the same thing. So with $2 trillion of stimulus spending, cash put in everyone’s pockets, even though Covid was already and fully in the rearview mirror, and there was no sign that we needed the stimulus at all, that $2 trillion generated inflation over the next two years, which eventually caused Joe Biden some political headaches.

And then he started to obsess about bringing inflation down. But, the Biden team, like the Trump team, has no one on it that can really do math. So they kind of did their best guess based on ideology and past history, of which Joe Biden has a lot, in order to decide what needed to be done. And Joe Biden settled on gasoline prices.

He specifically believed that as long as OPEC was producing large volumes of crude that could then flow throughout the world, or OPEC and other producers, that gasoline prices in the United States would stay under control, and he wouldn’t have to deal with that political headache. It’s it’s not that the math is completely bad. The U.S does have a semi-open energy market, specifically the shale oil that is the vast, vast, vast majority of American energy production is super light and super sweet.

It’s not really hard to refine, but the American Refining Complex was designed for something else back in the 1980s and 1990s when we knew knew that the global crude stream was getting uglier and more sour and more polluted. We retooled our refineries to be the best in the world, which would allow them to take any crude, no matter how crappy, and turn it to any product, no matter how nice.

Most notably gasoline, diesel, jet fuel. Well, shale Revolution came along, turned that math on its head. And so now the United States exports a lot of light, sweet crude and imports a fair amount of heavy sour crude and then makes bonkers money on the difference, taking in cheap crude and turn it into a high end product. Anyway, that was kind of lost for him.

And so he just thought more was better. So he looked at Russian crude and was like, you know what? I don’t like the Russians. And I want them to suffer for the Ukraine war, but I we need their crude to keep gasoline prices in the United States under control. So let’s work out a regime where they can still export their crude, but they don’t get all the cash.

And it was, you know, squirrely, in the case of Iran, something similar. Let’s bring him in partially from the cold so they can officially export more crude in order to keep crude prices under control. And then, of course, the same with Venezuela and now with Venezuela. It was a little bit more of a match up because Venezuelan crude is that heavy sour that U.S. refiners really crave.

But we’re only talking about total production here of under a million barrels a day, with the exemption that was granted to Chevron only for less than a quarter of that. Most of the heavy crude that the United States imports comes from Alberta, our Canadian neighbors. So that’s like 3 million barrels a day. So apples and oranges. Well, not opposite oranges, but like apples and trees full of apples.

In addition, 250,000 barrels a day in a good month, compared to a total market in the U.S. of 20 million barrels a day, didn’t really move the needle very much. Joe Biden got some crap deserved it for, cutting the deal because it basically said that, in exchange for this oil access, the Venezuelan government has to have real elections.

And they didn’t. So basically, Maduro, who is the dictator down in Venezuela, got all the benefits without having to pay anything. And now the Trump administration is, in my opinion, rightly unwinding this. But of course, we have to talk about what’s happening now with the American Venezuelan relationship, because while Biden was all about gasoline prices and probably did it wrong, Donald Trump is all about illegal migration and is probably doing it wrong, because most of what he has been hammering on the Venezuelan government with is about taking back, Venezuelan migrants.

Now, the Venezuelans have a special dispensation from the US government. So while they may have started a flow that was originally illegal, most of these guys are now registered. Now, part of it is really real political asylum, unlike folks who are applying from, say, a Central America. And as a rule, Venezuelan migrants tend to be much higher skilled than what everybody else is crossing the southern border.

Keep in mind that until Hugo Chavez, who was Maduro’s, predecessor, an idol, until Chavez took over, Venezuela in the early 2000. This is one of the most skilled labor markets in the Western Hemisphere, probably third or fourth behind the United States, Argentina and Canada.

So they’re the kind of migrants that we say that we want. Most of them were in some sort of legal system. And now, the Trump administration is sending them home. Maduro agreed to take them. He has no problem butting heads together for people who might be, his opponents. And that’s going to be a little bit of a drama down the line now that the people who tried to get away are now back.

And at the end of the day, the energy thing probably isn’t going to matter too much anyway. One of the things that people forget about crude refining is because the US complex is so good.

Not a lot of places can process Venezuelan crude. So what will probably happen next is what happened before in that, Venezuelan crude will probably be purchased by some Chinese state major, which will be then sold to a middleman and then sold back to the United States and marketed as something that’s not Venezuelan crude. Will be a little bit of a markup because of the middlemen, but the flows will continue.

We’ve seen something very similar, with Iran in the past as well. Anyway, that’s what’s going on. See you next time.

The Russian Reach: Series Introduction

There’s been a slew of US policy changes that the Trump administration has laid out. I’ve done my best to explain away as many as I could with conventional political reasoning, but I’m not sure I can anymore. Today, I’m going to be laying the foundation for a multi-part series on what is happening in Washington.

The list of policy changes is far too long to mention every single one, but some of the heavy hitters are: Ukraine aid suspension, trade tariffs, government firings and bureaucratic disruptions, and major foreign policy shifts. Again, I’ve tried my best to justify these moves using all the frameworks at my disposal, but when the things I’m seeing can’t even be rationalized away with MAGA ideology or incompetence…something more concerning could be shifting in US governance.

This series will explore the departure from traditional American policy that we’re currently seeing, what that means for the future trajectory of the US, and what the actual f*** is going on.

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 Colorado. This one is going to be awkward. I am absolutely not a conspiracy theorist. In fact, I last five years, spent a substantial amount of my time, talking people down from theirs. But, so much has gone down in the last just couple of weeks that I am having a hard time ascribing changes in American policy, both at home and abroad, to a more conventional theory.

This isn’t MAGA policy. This isn’t policy incompetence on the part of the administration. This is something else. And bear with me as I kind of lay it all out. And, we’re going to see where it goes. I’m recording this on the 4th of March, and the two big pieces of news for the day are.

Let’s start with, Ukraine. The Trump administration immediately suspended or suspended, effective immediately. All military aid of all types to Ukraine, including anything that was in transit and had already been, budgeted, paid for and piloted and moved, with the equipment that the Ukrainians would have receive for the United States, they probably could have kept fighting until mid-summer, without help.

Now, a lot of things are up in the air. Geez. Let’s start with explain why this isn’t a Maga thing. Well, people say that all this money has been given, and like, there’s a big truckloads of cash go is like. No, I mean, the total value of the stuff is somewhere between 100 and 50, 285 billion.

But think of it this way. When you clean out your closet at home, to make room for your new stuff after Christmas, and you take it to goodwill. How much do you say it’s worth when you fill out that little form at goodwill? What it’s worth when you bought it. And, what the military has done is basically gone through their old stores of things they haven’t used literally in decades.

Reported them for the cost that it took to to build them and then adjusted for inflation and for about 70% of the total number that is the donation. And so you’re talking about old equipment we weren’t using that was marked at a value that’s probably higher than it ever was worth. Of the rest, 10 to 15% is ammo and more legitimate equipment legitimate is and current.

And then the rest is cash. So really you’re talking about a total value given that’s well under 40 billion, chump change. In addition, the Russians have been pointing, nuclear weapons at me, not just my entire life, but since the 1960s. And they have abrogated every arms agreement that the United States has ever signed with them in every conventional arms agreement they have ever signed with any country, ever.

In the modern era, if there is going to be a war between the United States and anyone over the next three decades or so, it’ll probably be with the Russians. So for having the Ukrainians basically take our hand-me-downs and fight the Russians to a standstill, that’s a national security win and an economic win by any possible measure.

And so I’ve seen that just twisted around and dropped is a problem. And that’s before you consider that we now have, the Trump administration, not casually, but actively, deliberately breaking relations with all of our closest allies up to including the United Kingdom. And now regular calls throughout Congress, not just for this or that, NATO leader to resign or Zelensky of Ukraine, of course, but actually withdraw the United States from day to all completely.

Now, you might be able to say that there’s a strategic argument to be made here, or at least a discussion we had, and that’s fine. But this is just like one of like 20 things I want to talk with you about today. This you know, all by itself this is a problem. The second big one that happened today is the imposition of a 25% tariff on everything coming from Mexico and Canada, Mexico and Canada.

Our number one and number two, trading partners and, everything, every everything that we do in the world of manufacturing is integrated with them across borders. And so by doing a blanket tariff, lots a lot warmer out here than I thought it was by doing a blanket tariff. What that’s basically done is made most American manufacturing, non-viable almost overnight.

No, there are certain types of manufacturing that may in time prove to be exceptions to this. There’s some very high end stuff, like in medicines, maybe. But if it involves anything that you think of as manufacturing, you know, an assembly line, a production floor that basically doesn’t stop, but it’s now no longer viable versus important stuff that comes from beyond North America.

So the biggest winners of this by far are the Chinese, where they already have competing industrial plants from running. And if you look forward to the world that we’re moving to, where the Chinese are disintegrating because of the demographic situation, we have a limited amount of time to prepare for a world where Chinese industrial plant just isn’t there.

And what Trump did by threatening the tariffs a couple of months ago and now implementing them today, is even before today, new investment into the United States in North America had frozen completely because no one knew what the situation was going to be. He introduced what we like to call regulatory uncertainty into the situation. And now that the tariffs are in place and people know what the math is, no one’s going to come here because the economic case is now been destroyed, and that will set us up for a situation years from now when the Chinese system finally fails, where we don’t have an industrial front in place and we’re going to have significantly higher inflation. Trump, of course, loves tariffs. And also today he said he’s going to put a 40% tariffs on all agricultural imports. Now, the United States is a large country that grows a lot of its own food. We’re the world’s largest agricultural exporter. We have a very wide variety of climate zones, but we don’t have all of them.

And so if you go into any supermarket, especially if you’re looking at things like fish, fruits or vegetables, a huge proportion of those in any given season is coming from a different country. We already have a food inflation problem here. And, now we’re going to have a significantly larger one. Those tariffs are supposed to kick in in April.

And Trump has said farmers start producing, but the farmers can’t produce most of the stuff that we import. Because swims in a different sea comes from a different climate zone or relevant to this moment in March looking around me at the snow. You’re not going to grow a lot of food in Colorado right now, so it has to be brought in from somewhere else. Same is true throughout the United States. In winter, we’re particularly vulnerable to Mexico in that. So we’re gonna have a 40% tariff on top of the 25% tariff that’s already there.

That is enough to push all by itself, probably 10% of the American population. Beneath the poverty line. And we’re just getting started.

Let’s talk about those that Department of Government efficiency that Musk is after. Trump is a great marketer. I will give him that. But, you know, the total value of everything that Musk has routed out of the federal bureaucracy that supposedly was all that, you know, really like $30 billion for all the disruption out of a $7 trillion budget that’s so small as to just not be worth my time to even look at.

Or if you look at the employees that he’s fired, right now it’s only about 1% of the federal workforce, and you would have to purge about 20 to 25% of the federal workforce just to knock 1% off of the budget. Most of what’s going on in the budget is entitlements, Social Security, Medicare, Medicaid. It’s not discretionary spending.

And of those workers, you know, there’s been a lot of splash. But you got to understand how organizations work. There’s basically three categories of workers. At the top, you have your political appointees, which are themselves tiered between the folks that are always political appointees that are let go at at the end of every ministration, you have the ones a step down who, it’s their job to make the trains run on time.

And they may be politicized, but they have a lot of back experience in the topic. And then the next level down. While technically political appointees, they’re typically never let go at the end of the administration because they’re apolitical technocrats who make operations function. Now the president has the authority to get rid of all three layers, and he’s gotten rid of Trump, has gotten rid of all three layers throughout every individual agency in the government, even those that are not political at all and have nothing to do with foreign affairs. So, for example, the Department of Agriculture, those firings, if it has to do with provisional employees or permanent employees, are generally have already been rolled back by the courts because the Congress has not given the president the power to fire most of these people.

And so every time one of those cases has come up, they’ve basically the courts have ruled in favor of, the employees. Now that goes for the second class, categories as well, which are the comp patrollers and the internal auditors. You know, these are the people who make sure that fraud doesn’t go into the system and that foreign interests can’t penetrate the system.

Trump fired all of them. Doesn’t have the authority to try any of them. It doesn’t achieve anything from a policy point of view. It doesn’t achieve anything for savings point of view. They will all in time be reinstated, undoubtedly, unless Congress intervenes and says, yeah, they need to go. But what it’s done is, is it stripped out the internal system that the U.S. government used to prevent foreign influence from penetrating?

There’s nothing about that that matches with MAGA goals. And then the third category are not your provisional employees. Those are the ones that are new and don’t have full civil service protections. Those might be able to get fired a little bit. But the temporary ones, the government does a lot in a lot of places. And you hire people temporarily to do things that don’t need to be done all the time.

So for something that’s near and dear to my heart, the Forest Service, you know, staffing all the national parks that surges in the summer, firefighters, those people have all been let go. So when we get to summer driving season this time, in a couple of months, a lot of the national parks probably aren’t going to be able to open.

And if we have forest fires years, fuck, that’s going to be awful for fighting forest fires without forest fires. Oh, anyway, well, that’s inconvenient. There’s a lot of things that these provisionals do that it’s a little bit more important, like maintaining the nuclear arsenal. Trump just fired them all. That’s doesn’t serve a mark, a goal, or in the food supply system.

You know, people who are in USDA, Department of Agriculture, you know, they don’t tolerate a lot of bullshit because they know if they screw up, people die, like by the tens of thousands. We’re no longer testing food safety because those are temporary jobs. And so we no longer have an eye on the bird flu epidemic because we’re not able to collect the information that we need.

Now, the midterm solution to all this is to just hire a bunch of contractors to do it all. But that means you’re paying for the old bureaucracy that they’re not using, and you’re paying extra cash to create a new private bureaucracy. It’s it’s expanding the budget, not tracking it. And we’ve seen that in the headline figures, with all the firings, with everything that Deutsche has done, the U.S. budget expenditures have gone up compared to the Biden administration.

Has to dodge. We basically have a lot of people without congressional authority and without security clearances that have gone into very sensitive databases, sort of posting things on social media. We’ve got lists of government assets around the world, some open, some covert that have just been released to the public. Stuff like this is if it gets in the hands of other states, that’s like the five year effort of espionage.

And it was just handed out. That doesn’t serve anyone’s agenda in the United States. What else? I got to look at my list. I’ve got a long one.

All right. The Federal Bureau of Investigation has stopped investigating terrorism in order to focus on illegal migrants. What? Department of Health and Human Services isn’t even holding the meetings that are necessary to start the process for selecting the next flu vaccine, which has the medical community freaking out because they rely on these private groups to, at no compensation to themselves, advise the government as to what type of vaccine is going to be needed based on the flu strains that are circulating.

And since HHS also cut connections with the World Health Organization, we’re just kind of guessing at what is out there and literally relying upon the kindness of strangers to tell us what we need to get ready for.

All right, USAID, that’s the agency for International Development. That’s got a lot of crap for doing some strange things. That’s fair. But if you’re not going to invade or occupy a country, USAID is the primary method that the United States uses to influence countries around the world. You can call it whatever you want. The bottom line is, when it’s not present, the Iranians, the Chinese and the Russians absolutely dominate the space because they will step in with relief support that is loaded with intelligence operations.

And all of a sudden they’ve gone from meeting USAID head to head to having a completely open operating environment. And so, of course, the Iranians and the Russians sent a joint letter to the Trump administration thanking them for making life so much easier for them. Or in the Defense Department, we canceled all operations against Russian cyber activity.

That includes, defensive operations on our part, as well as offensive operations to disrupt their ability to hack the United States. The Russians maintain a very active cyber presence. They’re not just hacking our elections and our media and our power grid and our water and our food supply and the stock market. They’re going after you specifically because part of the Putin alliance that rules Russia includes organized crime out of Saint Petersburg.

And so most of those cyber things are linked to Russia in one way or another. And we have basically decided just to lay back, open our legs and let whatever happens happens. This isn’t MAGA policy. This isn’t toddler syndrome. This isn’t this isn’t even incompetence. This is too much, too soon, too holistic. This isn’t an abdication of American power.

This isn’t mismanagement. This is a deliberate disassembly of the building blocks of American power and security and safety. This isn’t anything that I would think that any American would ever want, much less orchestrate, which has pushed me into the realm of some computer, some conspiracy theories. I think we now need to consider that the Russians really have penetrated the white House.

And while I think it’s a stretch to say this is like a manchurian candidate sort of situation, there are too many things happening that seem too tailored to hobble American capacity, long run, and everything that was on this list is something that the Russians have tried before. NATO is something they’ve been trying to destroy since the 50s, and now we have a possibility of the US just walking away.

The military has been the bulwark of global security, and so gutting it from the inside is something they would love to see. Our Intel system has been the canary in the coal mine, and it appears that Trump is either not receiving or not reading the daily briefs at the agency produces for him every day. The food supply situation in the United States has long been the world’s safest.

And now we’re not even testing to maintain it. The demographic of Russia is one of the main reasons why the Russians are facing such a bleak, long term future. But if you interfere with the vaccine schedule in the United States, you can start increasing the death rate in Americans not just under 20 but under five, and start to equalize that situation.

This is some heavy stuff. And what we’re going to be doing in the next few videos are exploring all of this from the Russian point of view, how they see the world, how they influence the world and given the chance, how they would redirect American policy to serve their interests. I would love to say this is hypothetical, but I’ve already got a dozen examples in addition to the ones I just shared with you about how that is already happening.

So buckle up, because for the first time since I started doing this 25 years ago, I’m actually worried for the United States. We’ll talk about that too.

Will Trump Pump the Brakes on Greentech?

Both in the US and globally, the green energy transition has been all the rage for the past few years. With President Trump’s second term kicking off, how will it impact the green transition domestically and beyond?

For the green folks outside of the US, the impact should be minimal. Since the US doesn’t manufacture most Greentech components or provide much financial support, Trump’s influence is (mostly) contained to the US. But the story isn’t so pretty for those in the US.

The main challenges for the green transition in the US are transmission infrastructure and financing. Federal support is crucial for developing the infrastructure to get the energy from where it is generated to where it will be used. Trump could make this development and coordination process much harder. Wind and solar projects require more robust financing than a traditional fossil fuel plant, so cuts to federal incentives or subsidies could make these projects unviable.

Without federal backing, many of these green projects would stall. Private investors might try to step in, but they can’t match federal funding levels. Trump has the ability to significantly slow down the green transition, but at least that doesn’t extend beyond the US.

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, all Peter Zeihan here coming to you from Colorado today. We’re taking a question from the Patreon page. And that’s specifically what sort of impact can Donald Trump have on the green transition, both in the United States and wider abroad? Abroad, very, very little. The solar panels aren’t made here. The wind turbines are not made here. And U.S. financial support for anyone else’s transition is well below $1 billion a year.

So, you know, you know, whatever. It’s all about what would happen here and here. The the federal government has a lot of, means for changing the way the green transition works. A couple things to keep in mind. Number one, green technologies, as a rule, require a great deal more transmission infrastructure because where most people live is where it rains.

And so you can grow your own food. We don’t have a lot of desert cities. So in most cases we generate power with coal, nuclear, and natural gas relatively close to where we live. And so transmission for most power plants is well under 50 miles. But most of the places that are very sunny or very windy are not within 50 miles of where we live.

It’s in the Great Plains, it’s in the desert southwest. And so you have to build these pieces of infrastructure to generate power well away from where people are. And then you have to wire that power to somewhere else. And that often means crossing jurisdictions. And if you cross a economic or political jurisdiction, the regulatory burden becomes more robust.

And it’s up to the federal government to try to smooth that out. So if all Donald Trump does is not smooth things out, becomes a little bit more onerous to build green tech anywhere because you can’t hook it up to a source of demand, then that’s problem one. Problem two is much bigger. You see, if you’re doing a conventional, facility, whether it’s coal, natural gas or a nuke, only about one quarter of the cost of the facility is in the upfront construction.

And then linking that up to the grid, most of the rest is fuel, especially for coal and natural gas. So as a rule, it varies based on where you are and how close you are to the fuel source. As a rule, about 80% of the cost of the lifetime cost of a coal or natural gas facility is the fuel. You basically buy it and burn it as you go. And so with that sort of model, you only have to finance the initial 20% that it’s required for the construction of the facility and looking it up to the grid and everything else.

You have an income stream to defray and ultimately overpower the cost of the fuel moving forward. It’s not how green tech works. The whole point of solar and wind is that you don’t have fuel. The fuel is free. Well, that means that most of the costs, almost all the costs are upfront. Over two thirds go to the construction and linking it up to the grid.

So the degree of financing you need megawatt for megawatt is more than triple what you need for a more conventional fuel system. Now, one of the things to keep in mind in the United States is that capital costs have roughly increased by a factor of four since 2019, as the baby boomers have retired, and the money that they used to have in stocks and bonds, that fueled the sort of capital environment that we had ten years ago just no longer exists.

They’ve all been liquidated and they’ve gone into T-bills in cash, which is driven up the cost of financing for almost everything, including power plant expansion. Well, if you’ve seen the cost of capital increase by a factor of 4 or 5, and you have to finance three times as much for wind and solar as you do for core natural gas, you can see where the problem is.

This is normally where the government would step in with concessionary deals on whether it’s on taxes or directly on financing in order to help bridge that gap. And so all Donald Trump has to do is say, I’m not going to finance this stuff anymore, and a lot of it is going to go away, even if, as isn’t the case in the desert southwest or in the Great Plains, solar or wind are already cheaper on an all in cost basis over the entire life of the project.

But that’s not the number that matters. Part of the problem that I’ve always had with the green communities, they keep using this thing called levelized cost of power, which shows how over the life of a project, the cost of solar and wind has gone down and gone down and gone down. And it has. But they assume that there’s no problem with intermittency.

So like when the sun sets, solar doesn’t work anymore. If you pair a more realistic cost structure because you know you want electricity after the sun goes down. Hello. With financing the issue, then the federal presence in the financing world really is critical. And even in projects that make a huge amount of sense, not just environmentally but economically.

If you can’t get that financing right, you can’t have the project. Private industry can step in, but it’s going to be a hard sell to do financing for something on concessionary terms, for something that it’s going to take longer to pay out as compared to a colder natural gas plant. And you might get local and state governments kicking in some for political and environmental reasons.

But there’s no way that they can compete with the sheer volume that the federal government can come up with. So we should expect a lot of these projects to slow down quite a bit. Even if Donald Trump doesn’t call them out by name is something that he doesn’t like. You interrupt the financing and you simply don’t get much new construction.

Will the US and Canada Actually Merge?

Listen, I didn’t want to make this video, but too many people asked for it…so here we go. What would a potential merger of the US and Canada look like?

The US won’t be invading Canada and there won’t be a nationwide Canadian petition for US membership, but how would it happen? It’s more likely that individual Canadian provinces – like Alberta and Saskatchewan- would secede and apply for US statehood.

These two provinces are young and wealthy, meaning they’re going to have to put the rest of Canada on their backs (financially speaking). They already have strong economic ties to the US, so a merger isn’t as far-fetched for them. The rest of Canada would likely destabilize if those provinces left, due to aging demographics and financial struggles.

For the US, incorporating Canadian provinces would mean a significant reshaping of American politics. However, that doesn’t mean it would be all that difficult to add them in; it’s a much easier process adding states than amending the constitution.

Regardless, I don’t see this happening anytime soon. There’s too many financial, political, and demographic factors at play. But if it did happen, both countries’ political and economic landscapes would dramatically shift.

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.

All right. I didn’t want to do this video, but too many people on both sides of the border have asked so what would a merger of the United States and Canada look like? All right. Let’s start with the simple thing. The United States is not going to invade Canada. There is no serious talk about Trump. He hasn’t even really joked about it.

So let’s just put that to the side. Canada has just shy of 40 million people. So if it was to join in a single piece, it would be right up with California as our first or second most populous States. But it has a demographic picture that’s kind of a mix. And so what would be far more likely to happen?

Because the idea that a majority of Canadians are going to petition for U.S. membership is a stretch. We’ll be far more likely to happen. Is individual provinces of Canada would secede from the Canadian nation, and then apply for statehood for the United States.

The first two states to watch are the two that are youngest demographically, that are the richest in per capita terms, that export the most commodities per capita, and are already fairly culturally linked in with the United States.

And those are Alberta and Saskatchewan. And if you’re looking at a map of Canada, keep in mind that everyone lives in a thin strip along the southern border. So you’ve got British Columbia on the Pacific. You’ve got some mountains, big mountains, and then Alberta and Saskatchewan, Manitoba, the third of the prairie provinces. And then you crossed something called the Canadian Shield, which is about 1000km of very rugged terrain, heavily forested, where there’s only one road and one rail line.

Before you get to eastern Canada and in eastern Canada, you’ve got the population bloc of Ontario and Quebec, which are the bulk of the country’s population. And then fringed around them are something they call the maritime territories, which are provinces, but lightly populated. And, basically, I’m overstating this, so apologies. Heavily populated by retirees. So from from a financial point of view, there’s not a lot there.

Where the money is, is Ontario and Quebec, the two most populous provinces? British Columbia, which has a big population around Vancouver and serves as the Pacific Gateway and then Alberta, which is the energy hub. Saskatchewan is kind of a little bit of the energy hub. And then a lot of agriculture, just like Alberta. What would happen is Alberta and Saskatchewan or Alberta or Saskatchewan would leave, the Canadian nation, which is legal in Canada.

You just have to have a plebiscite that was affirmed by A90 ruling by the Canadian Supreme Court quite some time ago. With regard to tobacco separatism. Anyway, the reason that these two provinces, Saskatchewan and Alberta, would leave is largely financial. When Quebec was having all of its fits in the 70s and 80s and early 90s about secession.

The the what? The deal that was struck was that Ontario, which at the time was the richest and the most populous province, would basically pay Quebec to just stop it. So, Quebec has basically been paid for the last few decades to remain part of Canada and not have secession votes. It’s gotten more and more expensive because Quebec’s birthrate, is among the lowest of the major.

It is the lowest of the major provinces. And so the whole province has already functionally slid into obsolescence. The problem is, in Ontario. The birth rate has been very low for a long time. And if it wasn’t for the huge surges of immigration, which have had other complications.

Ontario has now aged to the point that if it wasn’t for huge surges in immigration which generate their own problems, Ontario wouldn’t be able to pay to keep, Quebec in the country anyway, but it is still aging very rapidly.

And of late, Canadians have pushed back against this open door immigration policy, which hasn’t been necessary for economic reasons. But now, culturally, it’s kind of hit a breaking point and everything has slowed significantly, which means that Ontario is now rapidly aging again. And within five years, Alberta will be the province that is expected to pay for, Quebec to remain in the country with a little bit of help from Saskatchewan.

The maritime provinces have already aged out, and if the two most populous provinces age out, there is no way that Saskatchewan and Alberta, which collectively have less than 7 million people, can pay for the rest of Canada to continue to exist unless they just become destitute. That’s the financial argument for why you might see secession in the prairie provinces.

And that’s before you consider that every individual Canadian province, trades more with the United States, and it does with the rest of Canada. And that is true for none of them more than it is for Alberta. So you’d actually solve a fair number of problems if Alberta applied and Saskatchewan applied for American, statehood. Now, the question then is what happens next?

Because these are the two richest bits of the country. And if you split British Columbia off from the rest of the country, because now the prairies have gone a different way, it basically devolves into fourth world status very quickly. It’s industry is already wildly noncompetitive, and basically what has kept B.C. afloat for the last several years is capital flight coming in, most notably from China to be processed in BC and then spread throughout the Canadian economy?

That would stop if there was no land connection. The only other business that you really have in BC is it serves as the entrepot for Asian exports coming into Canada. If you use the super port in Vancouver, repackage everything on the rail and send it east. If you can’t get through Alberta and Saskatchewan. That’s not going to work either.

So BC looks really awful in that circumstances, and the rest of Canada out east doesn’t look great too, because basically it’s a retired country that looks worse than most European demographics. So. If all of these other provinces, either in combination or independently, were to ask for statehood in the United States, we’d have to do some really hard math as to whether it would be worth it.

Picking up a half a dozen states that economically are almost destitute. Basically, you’d be adding a half a dozen mississippis. I’m not sure we would be willing to do that. And that’s before you consider the politics of it. By the way, the United States does political math. Saskatchewan and Alberta would probably be considered 1990s style Texas Republicans a little bit more libertarian, socially moderate, economically conservative.

They wouldn’t get along with today’s MAGA all that well. But the rest of Canada, especially BC and Ontario and Quebec, would be of the Elizabeth Warren branch of the Democratic Party. And getting that through Congress might be kind of interesting. Now, that said, adding states is not as complicated as amending the Constitution. You want to amend the Constitution, you need two thirds vote from both houses of Congress.

And then in three quarters of the states, legislators legislatures have to ratify it. You want to add a state, you just need a simple majority. So you just need a simple majority of Congress. You don’t ask the states at all. And then the president signs off just like a normal bill. So if if if if if if we get to that point, Canada will very quickly become a political flashpoint regardless of what politics looks like in the United States, because you’re talking about potentially adding ten provinces or ten states to the United States, a system that’s 20 senators and about the same number of representatives as California has, which I believe is around 50 right now. So a significant shift in the balance of power, that would completely re fabricate how we have our politics. Now, if that happened in a year, wow. That would be all kinds of explosive, because the United States is in the midst of a pretty deep political reorientation, by itself. But at any time that, you have that sort of disruption, you’re going to change the political math by how the country works.

And then and then you get to talk about how things like Medicare, Social Security, and Medicaid, which are the three of the four biggest line items in the U.S. budget, get re fabricated when you add so many people who are already retired. It would be a hoot. Don’t think it’s going to happen anytime soon, but if it was going to happen, that’s how it would go down.

Are Rare Earths Really That Rare?

Rare earths are back in the headlines, but is all the hype worth it? Let’s breakdown what these are and how “rare” they actually are.

Rare earths are byproducts of mining for other metals like nickel, copper, and uranium. While not rare on Earth, they are rarely found in sufficient abundance in a single location for their mining to be economically viable. The only real challenging aspect lies in the refining process, which is just dirty, time-consuming, and expensive…but not all that difficult to do.

China dominates rare earths because they have subsidized production (artificially lowering the price) and they’ve been doing it for decades. So, other countries haven’t had any incentive to turn on their refining capacity, yet. Once the Chinese overplay their hand or the system crumbles, other nations will just ramp up production.

This isn’t really something to fear, other than a few months of issues. However, the US should be more concerned with other critical supply chains like aluminum, steel, and lithium, where the US has yet to build out sufficient infrastructure.

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, all, Peter Zeihan, coming to you from a very, very chilly Colorado. Today we’re taking a question from the Patreon page that’s been popping up a lot in the news about rare earths. There’s a lot of angles to this, but basically, it seems that the Trump administration is really interested in getting some production of the stuff. And the question is, how does it work?

What do we need? Where do we go? You may recall recently Trump, falling to Russian propaganda again said that, Ukraine owes the United States $500 billion and it should pay for it with rare earths and not get a security guarantee in exchange. By the way, total USA to Ukraine at this point, according to US government sources, is less than $100 billion, of which two thirds is weapons that were just sitting in warehouses that we were going to blow off anyway.

Anyway, rare earths, unlike the name rare earths are not rare. They are produced as a byproduct of mining. When you’re doing nickel or copper or platinum? Uranium? Palladium. That’s a platinum group. Coal ash, phosphates, sometimes lead.

I said iron ore already. Aluminum. Bauxite. Anyway, there’s like 20 different, macro metals that you mined for, plus coal ash, that produce Rees as a small soda product.

And so what usually happens is you produce the primary thing that you’re after. And then with the waste from your refining process, you maybe do another run of that in order to concentrate the earths a little bit more. But then that next stage of taking that kind of slag that’s been partially refined and turn it into useful rare earth metals, is very dirty.

It’s very polluted, and it takes a lot of time. So usually what happens is you take that slag and you to ship it off to China. Because back in the 1980s and 90s, the Chinese were looking for industries that they could corner and their technology was not very good. And they settled on rare earths because it was expensive and it was dirty.

But they have a very capital flush system where they basically print currency and confiscate everybody’s bank deposits to pay for whatever development plan they want. So what they do is they you build a couple hundred vats of acid and you dissolve everything in the first bout, and then you get the remnants. You put that in a second batch, and then the remnants from that third, that remnants of the fourth that intruded.

And over the course of months, starting with tons of slag material, you might end up with an ounce of a rare earth metal. Anyway, the Chinese cornered this market because it was something that no one else was like, oh, I want to do that. And so they ended up super saturating the market because Chinese economics are about throughput rather than efficiency.

And they continue to subsidize the industry today, which is why, based on the Earth, somewhere between 50% and 95% of it comes out of China, the refined metal. And then, of course, in the last 10 or 15 years, they tried to go, downstream, into processing and building product out of those things. Be even less successful in that.

Anyway, this technology is based on the 1920s. So there’s nothing that’s difficult about this, and it doesn’t really take a lot of time to set up. It’s just that once you actually start putting your slag into the acid, it’s going to be months before you get any material. So the problem is not rare earths per se. The problem isn’t even production.

Rare earths are a byproduct of any number of industrial, mining and purification processes. The problem is building out that processing capacity. Now, how long does that take? I would argue that in Australia, Malaysia, France and the United States, most of that work has already been done. But nobody wants to turn it on because you’ve got several months where you’re not getting any product.

And the Chinese continue to super saturate the market and provide the world with below cost rare earths. So at some point, a switch is going to be flipped, and everyone’s mind when they realize either that the Chinese are overplaying their hand with their control of the processing capacity or trying to just brakes. And everyone realizes that if they still want the stuff, they’re going to have to make it themselves.

Once that happens, all of this spare refining capacity around the world will spring up. And the problem we solved in six months to a year. Until then, we are in the unfortunate position that the US government seems to be beholden to Chinese and Russian propaganda on the rareness of rare earths, and that, unfortunately, is shaping policy in a number of places.

It’s like if you want to be paranoid about things that the Chinese dominate. This isn’t where you go. You should be concerned of other types of processing, such as turning bauxite into aluminum, turning iron ore into steel, turning lithium concentrate into lithium metal because those are places we’re setting up the, replacement infrastructure. The United hasn’t really started at scale yet.

And if the Chinese break before that’s done, we will then have to build out that infrastructure in an environment when we can’t get the intermediate product. And that will generate the mother of all inflation pulses. So, you know, one miracle at a time, I’d argue that this specific problem, rare earths, is not all that much of a problem.

There’s plenty of streams coming from plenty of places. We just have to turn on a few things to solve it.

Trump Takes on Washington

Second-time freshman President Donald J Trump is taking the axe to the federal workforce. Or at least he is attempting to. Like presidents before him Trump is discovering that America’s separation of powers does not enable a president to bypass the will of Congress or the role of the courts. Instead, he is burning through large volumes of his political capital to achieve fairly paltry results.

Does this mean the old/new president is down and out? Hardly. It just means he will have a bigger impact on people who are not protected by American laws and the American Constitution. It’s in the wider world where there is little to stop him.

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.

Hello, Peter Zeihan here, coming to you from Colorado. Today we’re going to launch a series on how the Trump administration is remaking the world. Whether or not you love this or hate this may, of course, come down to how you voted. But things are afoot, and I can’t ignore them. First, first, the caveat. Donald Trump is, in a word, erratic.

So I’m doing my best here, but I am working with some information. We had four years of the firehose of chaos. That was the first Trump term, followed by his four years out of power, where he made no secrets about what he planned to do. And now we’ve got about a month of information in his second term that has been, frenetic.

I think we can all agree at this point that Donald Trump is not a long game kind of guy. What you see is what you get. So with that said, here we go. Mass firings of the federal workforce and mass disruption to the federal budget is, legally dubious at minimum.

There are legal protections built into the system established by Congress for federal workers, and there’s a process to go through to get rid of them.

And you really can’t get rid of them if you just don’t like them. It has to be something that’s more than a personal preference, or has to be some sort of cause for firing. Same goes for the budget that’s established by Congress.

The Constitution is very clear where the power of the purse is. And once Congress has established the budget and it’s been approved and then signed by the president, nonetheless, there’s some wiggle room that the executive can have and how the money is spent and distributed, but it can’t do a wholesale reshuffling.

Same goes for things like citizenship. Birthright citizenship is established by the Constitution itself. So Donald Trump’s, executive orders on all of these topics, are at best on legally questionable ground and sometimes constitutionally, questionable ground. And so we have seen any number of court cases come up already challenging the orders, most of which, at least temporarily, have been ruled against, Trump, which gives us kind of the worst of all worlds here, all the things that Trump doesn’t like aren’t functioning, but we’re still paying for them.

And for those of you that find this sounds familiar, you’re just thinking back to the first Trump term where we had four years of this. So whatever Trump did this four years when he was out of power, it did not involve, studying American legal code very much.

If your goal is to remake the federal government, especially Barry Ocracy. This is ultimately a prerogative of Congress. And so the president would need to go to the Congress re structure the laws that, created the institutions, and gave them power and, of course, budget in the first place, which means that Congress would have to cede authority over budget and, action and guidelines, to the presidency.

Now, not only is this flying directly in the face of a lot of recent court cases launched by red states against the Biden administration, but we take about a dozen acts of Congress to do this on the scale that Donald Trump indicates that he wants to, keep in mind that passing things like this through Congress don’t just require a simple majority.

You gotta get that whole 60% sure thing. And, Trump is attempting to bypass this, by using some interesting rules in the House and the Senate. But we just haven’t seen Trump go to Congress with this request yet. And until that happens, it’s in the hands of the courts. And since the courts have already started to prove that, they hold the power here, Trump is now starting to challenge the legitimacy of the courts.

And, again, case law. For over a century, congressional law for over a century. It’s very strongly against the president on this one. If you want to go back to a time when the president had more authority, you have to go back to the end of the gilded Age, which was the last time that, the population got really set up with oligarchic politics, back in the Gilded Age and before we had a race to the winner go the spoils, which basically meant that every time a new president and his new team came in, regardless of who his backers were, the president had the ability to completely remake the federal bureaucracy in whatever image he wanted. And so basically, the government started over every 4 to 8 years, and we collectively, as a country, decided that, the federal government exists to serve the people rather than the proclivities of a specific individual. And we professionalized things like the Foreign Service and the bureaucracy and all that good stuff. What Trump is seems to be trying to do is dial the clock back 130 years to what was arguably the least economically unequal time in American history in the aftermath of reconstruction.

You can do that if you want to, but that requires Congress.

Trying to go head to head with the bureaucracy without using Congress is kind of like, I don’t know, riding off against thieves without getting your posse together first. And it’s not probably going to work. Well, well, and he’s burning through a massive amount of political capital. Only one month into the job, incidentally, the last American president to take this general approach, for the same reason, trying to rein in the bureaucracy.

It was Jimmy Carter, and he failed at it. And that failure is one of the reasons that Jimmy Carter is not thought of as one of the great presidents of American history. Now, does this mean that Donald Trump has no power? No. Don’t be dumb. The US president is still the most powerful person in the country and in the world.

He has just chosen a field of combat in the specific instances where the deck is stacked against him. When you’re going up against American citizens in America, there are American laws on the American constitution that give them a leg up. But when you look at the wider world where there are not American citizens and American laws do not protect them, the American Constitution is not relevant.

Then all of a sudden, the power of the American president has is robust. And we’ll start looking at that specific situation, beginning with Russia.

Trump’s Political Capital Bonfire

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Trump has used up a lot of paper in his first 10 days in office, but he hasn’t spent much time working with Congress to make his executive orders stick.

Since President Trump doesn’t have the power to raise or reallocate funds, his executive orders are mostly symbolic. He’s also using his available resources on things that might not be the best place to put them, but without an inner circle that would warn him of these mistakes…it will continue to happen.

Many of these executive orders are questionable anyway; like an “Iron Dome” system that doesn’t make sense or freezing federal grants without clear guidelines. Oh, and these aren’t just impacting us domestically, a freeze on foreign aid has disrupted diplomatic and strategic influence abroad.

The main point of all this is that Trump is burning through his political capital at an alarming rate, and it risks the long-term effectiveness of his administration. But hey, no one said that this presidency wasn’t going to be chaotic.

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.

Hi it’s Michael. I’m in for Peter, who unfortunately, is feeling a little under the weather and has lost the use of his voice. You all were about to watch a video of that Peter recorded earlier today about the executive orders that the Trump administration is issuing. The order in question that is the main focus of this video has in those two hours since been rescinded.

But we are going to continue to share this video because we think that the analysis and conclusions in it ultimately stirring. True. And, the the potential for chaos and confusion that Peter highlights obviously was shared by enough stakeholders, both inside and outside of the government, that the white House, has decided to reevaluate their approach. So if that feel better, Peter, and, we hope you enjoyed the video.

Hey, everybody. Peter zine here, coming to you from Colorado, where I am rapidly losing my voice. We’re about ten days into the new Trump administration, and, well, it’s been. Shall we? But it’s not clear to me that anything has really changed. Donald Trump has issued, dozens are we have to hundreds. Now, I’ve kind of lost track of short executive orders, claiming a lot of stuff, asserting a lot of stuff.

But not once. He’s actually asked for anything from Congress. And keep in mind that the US presidency cannot raise funds or really even transfer funds, from one agency to another so he can squeeze the blob a little bit. But without congressional action, not a lot can happen. But in doing so, Donald Trump has picked a lot of fights that didn’t need to be picked.

And he’s really gone after the core of what a lot of people to consider to their political identity, to be, without a lot of immediate payback. So let me give you an example of this. Donald Trump’s made a very big deal about going after illegal migrants, especially those with criminal records, which I don’t think, especially in the criminal records thing anyone has a real problem with.

But from talking with agents that are within, Immigration and Customs Enforcement, there’s no one who money that comes with these directives. What has happened is other law enforcement branches of the federal government have been to redirect to assist, Ice in whatever they’re doing and going after these people. So you get folks from, like the Bureau of Tobacco and Firearms or the FBI or whatever.

Now collaborating, cooperating with Ice in their roundup operations. And that’s all well and good, but keep in mind that anyone who’s helping Immigration and Customs Enforcement is going after illegals is not doing what they were doing before. So they’re not investigating financial fraud. They’re not investigating smuggling. So the blob has been squeezed and we have more resources going to a specific task, and it has generated a few thousand requests, but it’s come at the cost of everything else just kind of flying by the wayside.

Now, any any middle school adviser to Donald Trump would have been able to warn him that this is exactly what was going to happen. But over the last four years, rather than build up a legislative block that he wants to push through in order to generate a real durable change in the American system, he has since instead purged himself of anyone who might not just tell him no, but yes, but, and as a result, he’s got this shell of dense incompetence around him now where no one will tell him anything other than exactly what he wants to hear.

And so we get these scads of just very, very brief, executive orders that really don’t move anything. Another example is recently Donald Trump signed another brief executive order, to establish an iron Dome system around the United States. Now, Iron Dome is the missile defense system that the Israelis used to protect themselves from mortars and rockets.

Keep in mind that, Israel’s about the size of new Jersey, and the weapon systems that are being launched at them are very, very, very short range ballistic, nothing like what the United States has to deal with in the mainland. So if we were to spend the approximately $40 trillion that it would take to build up a nation wide Iron Dome system, all it would do is protect Detroit from Hamilton, Canada, and San Diego from, Tijuana.

Everything else is too far away. It’s the wrong weapon system. But of course, there’s no money behind this because it’s an executive order, so it just looks really silly to anyone who knows anything about missile defense at the border.

And Trump’s picking a lot of fights with a lot of people that don’t need to be picked. We had a we had a two page executive order from Trump a few days ago that shut down the distribution of all grants, about $3 trillion of funds, most of which are distributed through the states or through private organization or nonprofit organizations.

And this is everything from the small small Business Administration to Meals on Wheels. And according to the directive, until such time as everyone can indicate that they’re complying with the new regulations and attitude, was the right word.

Orientation, I think, is the word, that Donald Trump is trying to establish. The money can’t be distributed. But it’s a temporary hold of three months. Well, there was no guidance in that. Two pages to basically regulate $3 trillion of distribution. And so it’s all been shut down, which means in the not too distant future, you’re looking at like, you know, dead old people because Meals on Wheels isn’t working. I mean, these are unpicked fights.

These are unforced errors. But Donald Trump is making a lot of them and burning a lot of capital to do it very, very quickly. There could also be damage on an international scale because he’s done basically the same thing with an executive order. Very short, very brief, very few details, shutting down any foreign aid that requires dollar transfers, which is, with the exception of some military assistance, almost all of it.

So we’ve seen the US global position diplomatically and strategically basically frozen. And we’ve seen the U.S. domestic position when it comes to the interface between the population and the government in anything except for entitlements basically frozen, with no clear guidelines as to what’s next or what the parameters might be. And Congress has yet to be involved at all.

These are not the sort of mistakes that a second term president should be making, but they are being made by the dozens. And it’s unclear on the other side of this how much Donald Trump’s political capital will remain, because he’s going through it at a pace that I have never seen by any leader in any country in modern history.

But I got to admit, there’s a show and it’s entertaining.

What’s the US Housing Market Doing?

The US housing market has been through a lot, so what does this current chapter look like? We’re going to be looking at several factors impacting the trajectory of the US housing market.

The road to recovery from the subprime crisis, coupled with limited new housing construction during the pandemic, led to record-high housing prices. People shuffled about during COVID, driving down available stock.

Years later there’s a surplus of homes on the market, but sales have tanked. Mortgage rates are through the roof, thanks to massive federal deficits under recent administrations. The capital shriveling from the Baby Boomers retiring has begun, and more and more homes are being put back on the market as this older generation passes away.

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 coming to you from Wanganui Inlet in the northwest coast of the South Island. I am on a big low tide beach that has dramatic walls. It needs a name and we call it Peter Beach because you never know it’s going to be here the next day. Anyway, folks at Patreon have been asking me about the housing market of late, so let me give you the quick rundown.

We have emerged from Covid, we have emerged for the subprime crisis. And so for several years, we had record low numbers of new builds, both because we were recovering from oversupply and because, Covid, we thought was going to last longer than it did. So nobody built anything because they thought nobody was going to move. And that drove prices through the roof.

And turns out with Covid, people wanted to move someplace where they could have quality of life outside of a city. So we saw actually record housing sales and a huge drop in available housing units. You put those together, prices go through the roof, people get a little egg road. And if you’re in your 20s, it’s really hard to get started because you can’t afford anything that is now behind us.

We’ve seen, well, new house builds hasn’t actually changed really at all in the last several years, but the amount of stock on the market has increased almost by a, a factor of two. At the same time, that house sales have dropped by about 40%. So we’ve kind of got two things going on here. One political, one economic.

Let’s deal with the political first, because there’s something for everyone to hate on this one. The mortgage rate in the United States, the 30 year mortgage rate is largely subsidiary of the cost that it takes the government to borrow money, specifically the ten year Treasury note. So the tighter the fiscal control that the federal government shows, the more money there is available for other things like housing.

Conversely, if the government spends money like it’s going out of style, spends money it doesn’t have, the opposite happens in borrowing costs for everybody. Rise. What we’ve seen is we had Barack Obama, who ran the most prolific good fiscal situation we have had in peacetime in modern American history, Donald Trump, refusing to be outdone, doubled the fiscal deficit under his first term.

Joe Biden did it again. And if Trump 2.0 decides he’s going to follow through with his campaign promises, we will once again have the biggest federal deficit in American history. We’re talking Argentinean, Venezuelan, Greek style budget deficits here. Just absolutely massive amounts of red ink that will drive up the costs of everything for everyone. And so we have seen mortgage rates since the first day of the first Trump term already, roughly double.

You should expect, based on the fiscal situation the federal government that to increased. Again, if Trump does what he says he’s going to do. Second issue has nothing to do at all with politics. It’s all about demographics. You see, when you are roughly age 20 to 45 and you’re raising your kids and you’re building your home, you’re a net absorber on a customer of credit because you’re borrowing to do all these things.

Your income isn’t very high. And then later on, as you get older and your kids move out, you pay down your house from 45 to say, 65. You become a net contributor to the credit market because you’re not borrowing anymore. Your income is high and actually you’re saving for retirement and some of the money that you save eventually works back into out into the system through investments to be left.

Let other people. Well, the baby boomers have gone through both of those phases. So when they were all young adults back in the 60s through the early 80s, we saw credit rise, credit costs rise because they were gobbling it all up. And when they were mature adults, late 80s through roughly 2010, 2020, you saw the opposite happen.

And all of a sudden they’re providing credit to the system. And so credit costs collapse. You put all that together and it shapes how we have seen the credit market, especially for housing. Well, once again, the baby boomers are the primary culprit for the changes in the market. Two things. Number one, two thirds of Marty retired. So they’re liquidating their savings.

And that capital is no longer available to the degree that it was. So the entire capital market, regardless of what the sector is housing including, is getting a little starved. Second, while two thirds of them are retired, the leading edge of Boomer, the oldest boomers, the ones who were born in the late 1940s, have already started to die, which means that their houses are becoming available to the boomers did something that no one else in American history had done is they retired.

They didn’t move out. They didn’t move in with her family. They didn’t, consolidate. They didn’t go into nursing homes if they could help it. They just stayed in place. And in doing so, they shrank the volume of housing that was available for the rest of us. Well, that is finally, finally, finally starting to loosen up a little bit.

And that housing is now coming back into the market, but it’s coming back into the market at a time when credit is getting progressively more expensive. So we have seen, as you would expect, credit costs go up, mortgage rates go up at the same time that available housing stock has gone up as well. So it’s more expensive to get a house because of the credit costs.

But there’s also more houses available which are pushing down the cost of housing writ large, including purchase prices. So a lot of crosscurrents and never, never, never, never, never, never forget that. What I’m saying here is true on average, more than all other markets out there, real estate is a local industry. So what is true in Las Vegas is not true in Nebraska.

In the rural zones. It’s certainly not true in Boston. So this is kind of a broad guide. What’s going on in your own backyard is probably just as relevant, because if there isn’t housing in the zip code that you’re interested in, you’re going to follow a different set of market guides. Okay. That’s it. Until next time, everyone.

The End of Bipartisan Foreign Policy

After four consecutive presidents adopting a neo-isolationist mentality, the era of bipartisan globalization is coming to an end. So, what will the future of US foreign policy look like?

US foreign policy once sought to prevent any Eastern Hemisphere power from becoming too strong, but all semblance of strategic coherence has gone out the window. This is reminiscent of the pre-WWII era, where each administration adopted a new foreign policy. This is likely leading us down a path where a dollar diplomacy-esque system will return.

Along with all these changes, the US military’s global influence is declining, and foreign policy is in a state of flux. I suspect we’ll see more erratic and reactive policies in the coming years, as the US military is used to play checkers instead of chess. Hopefully all those alliances and infrastructure that have been developed will stick around for future iterations of US foreign policy.

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.

Peter Zeihan here coming to you from the urns. Lord Glacier. Today we are taking a question from the Patreon page. Specifically, what do I think is going to happen with U.S. foreign policy as this age of bipartisan policy comes to an end? The bipartisan policy is loosely referred to as globalization. The alliance structure, the Bretton Woods system.

However you want to put the specifics on it. The idea is the United States has some very core national interests that are involved in the wider world, specifically, if unsaid, making sure that no single power in the Eastern Hemisphere ever becomes powerful enough and united enough across the territory to then float a navy that can challenge the United States.

In the Western Hemisphere, it’s seen as an interventionist system in order to prevent an attack in the long term. And to that end, the U.S. tries to dominate security arrangements in the Eastern Hemisphere and prevent singular large countries from ever forming. This was the basis of the entire Cold War structure, and in bits and pieces. We’ve been moving away from it ever since the Berlin Wall fell.

Now, with the election of four neo isolationist presidents in a row Obama, Trump, Biden, Trump. Again, we’ve largely moved away from that system. And the argument now is what pieces of this should we bring with us into the future and why? And since the Democratic Party basically imploded in the last election, and since Trump kicked the entire national security conservative group out of the Republican Party, the discussions are happening that what I would call a preschool level on both sides.

So have we been here before? Oh my God, yes. If you look at the entirety of American foreign policy from the end of the War of 1812, right up until the Second World War, every time we got a new president, we had a new foreign policy. And because of that, the interests of the coalition that surrounded each incoming president basically made up stuff on the fly.

There was very little institutional knowledge, and what was there tended to be denigrated by the other side. Sound familiar? And so we moved into a system where we had roving military and interventions that matched the political and economic ideologies of the ruling clique at that time, and then four years later, or eight years later, it would change more or less completely.

It generated a foreign policy that was far more interventionist than anything that we had during the Cold War, because there was no agreement across the country as to what the overall broad, reaching strategic goals for the country happened to be. I think the most aggressive period that I can point to, and the one that I think is going to be most accurately reflected in this next phase of the United States is something called dollar diplomacy.

In the aftermath of reconstruction, the United States had finally pulled itself together, but it was an ongoing process to achieve full economic and political integration. During that time, the U.S. largely decommissioned its military, and its foreign policy became a subset of powerful individuals, whether they were driven by ideology, religion, economics, corporate greed, you name it, they would go out and interface with the world.

And when they saw an opportunity or when they got into trouble, they would call their friends in Washington who would then deploy troops or maybe naval forces. And we saw any number of interventions throughout the world, most aggressively in Latin America, but also throughout the entire East Asian rim, participating, for example, in some of the civil wars before the formation of modern China.

That version of events is likely to be where we go now. I wrote about this in The Absolute Superpower to give you a lot of specifics. If you want to dive into it. What has changed in the ten years since I wrote Absent is that the view in the United States of the military has evolved. During the war on terror, the military was generally portrayed as the most positively received arm of government by the citizenry.

But with the rise of Donald Trump, we have seen the new conservative coalition that is the Republican Party pushed that entire wing out of power. And so now, as a rule, the further to the right you are on the American political spectrum, the more hostile you are to the US military, which is one of the reasons that the Donald Trump administration is in the process of nominating a guy to run the Defense Department who has minimal defense experience, and he’s just designed to go in there and rip up woke policies, which is not a great national security strategy.

But it doesn’t mean that the Democrats are much better. Yes, Joe Biden used the military as an arm of the US government. He’s much more trusting of government power than Donald Trump is. But there was no recalibration of strategy from the Biden administration, aside from supporting Ukraine in the broader conflict with the Russians, which I happen to think is a great idea, because it’s definitely the cheap way to fight someone who points nuclear weapons at you.

But that’s not a normal alliance structure. That’s not a grand strategy. And it is difficult for me to see, with the evolution on both sides of the American political aisle, us coming up with anyone anytime soon, because the people who have the skills and the knowledge in this, the folks who are in the military, the national security community, the intelligence community, they are now completely on the outside.

And we’re probably going to have to start this over from scratch. I just hope that unlike the last eight times we did this, we don’t decommission the military before we then start the work. Hopefully some of the work we’ve done in the past 80 years will still be relevant, along with the personnel, the equipment, the alliances and the bases that are necessary to implement whatever we come up with next.

But between now and then, expect a lot more erratic and kinetic American foreign policy as the military becomes the tool of the moment rather than the tool of strategy.

The Next Recession Isn’t Here Quite Yet

A potential US recession or depression is always in the back of our minds, but how close are we really?

A major downturn is unlikely to happen in the next 5-10 years for a number of reasons. Consumer spending is still strong, since the millennials are in their prime spending years, so demand is staying high. But when they age out of these years by 2032-2033, it will be a different picture. With the need for a major industrial buildout, construction will support economic activity and reduce the risk of a recession further. And of course, higher capital costs and less speculative behavior has kept the risk of a bubble low and ensured financial stability.

Like all good things, this too shall end…but when? After 2032, things will get a bit hectic. Consumption will crash as a smaller Gen Z will try to replace the millennials in the “big spender” category. And around that same time, we’ll get to see if all those investments into the industrial buildout paid off. And the cherry on top is if the US fails to expand industrial capacity before China collapses, inflation will skyrocket, and supply shortages will be the norm.

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. I am green rooming it before presentation and I am going through some of the questions from the Ask Peter Forum, and I’m picking out a couple, specifically this one is do I think there’s going to be a recession or depression in the next 5 to 10 years? Economic forecasting like that is easy.

Of course, there’s going to be, but I don’t think it’s going to be soon, and I don’t think it’s going to be bad. So let me kind of run through my logic here. Roughly 70% of the US economy is based on consumption. So if nothing happens to the consumer, it really doesn’t matter what happens everywhere else.

And the United States doesn’t have to worry about a food crisis or an energy crisis, or at least not in the traditional sense. So it really comes down to whether or not you’ve got enough people in the young age groups that are doing the consumption 20 to 45, roughly, to generate an ongoing pulse of consumption that will drive away the doldrums.

And the group that is in that block are the millennials. Now, the oldest of them are 45. So over this time period, 5 to 10 years, we are looking at them start to kind of ease back as the kids start to leave home. They’ve reached that point in their lives. Keep in mind, though, that a lot of the millennials did everything that every generation has ever done before have kids, buy cars, built homes.

But they did it with a bit of a delay. So it’s probably not going to be until the older millennials are turning 55 years from now, where we start to see that slow down a little bit, which means that probably for the next eight years, going into 2032, 2033, that this consumption should be fine. In fact, if you look back in the last decade, we’ve had three periods in that period where we would have had an industrial recession.

But consumption, primarily from the millennials, was more than enough to keep the US system chugging along. And today we have record low unemployment because we’re trying to do an industrial build out without the baby boomers labor. That would suggest the millennial labor is going to be very well compensated and the consumption picture should be fine. The second question is industry.

We need to prepare for the fall of the Chinese system, which means we need to roughly double the industrial plan to the United States in just the process of building that is going to be highly stimulatory. So on the industrial scale, we will obviously have rises and falls. That’s just the nature of the business.

It’s a little bit cyclical, but against a backdrop of massive amounts of construction. And we have seen industrial construction spending, increase by a factor of ten over the last five years in the United States. There’s nothing about that that suggests a recession to me in the next 5 to 10 years, because this is a pace we have to keep up for quite some time, even in the most aggressive period where we frontload all of it.

You’re talking about a six year process, probably going to be more. And third is finance. When finance is too cheap for too long, people start making bets on things that maybe in their retrospect, weren’t the best idea or they overplay their hand in certain sectors. So think of the dot.com bust or the subprime bust. That’s not the environment we have today.

We don’t have 0% interest rates. We have the most expensive capital we’ve seen in about 15 years. We’ve seen capital cost because of the retiring boomers, roughly triple over the course of the last five years. And it’s just a demographic issue. When you move into retirement, you liquidate a lot of your high velocity investments and things like stocks and bonds, and you move into low velocity stuff like T-bills and cash, because if you don’t and there’s a currency correction or a market crash, you no longer have the income to recover.

Which means capital costs are more expensive. And so we’re not seeing bubble activity really anywhere. And even though capital costs have increased, they were so low for so long that most folks are in a pretty good credit condition. One of the things we’ve noticed is that, while delinquency rates on loans are up, they’re up from multi-decade lows.

We have yet to get anywhere near the average delinquency rate. For the post-Cold War environment, and now the capital costs are higher. You see a lot of slowdown in things like housing, because people who are locked in a mortgage at 2%. Hello? Have no reason to move, but it also means that the debts are very, very serviceable, especially against the, very positive employment environment.

So we’re not looking at a consumption led recession. We’re not looking at an industry recession, and we’re not looking at a bubble, financial led recession. These are all really good things.

So if there is a risk, it’s certainly not in the short term. And it would probably fall into one of two general buckets. And I’m talking here like 20, 32, 2033. And on number one, we get on the back side of all of this. And the millennials start to edge out of that consumption year.

And so we see a drop off of consumption because the next generation down Gen Z is the smallest ever. And they’re just not going to be able to buy as much as the millennials have. They’re also a little bit more anti-social. But that’s a different topic. So if you get that far, then you can start talking about some sort of consumption led recession, possibly.

The second one is an industrial bust. There’s no way that you double the size of the industrial plant in a country and get it all right. And so when you fast forward to the other side of this, we will have a shakeout where things that we may be built the wrong thing in the wrong places don’t look all so hot, especially with higher financing costs. And correcting that is the I mean, basically that’s what a recession can be in the industrial space. So again, when we get to the other side of this, we will have to rationalize some of the things that we have done over the last several years. And that won’t be a lot of fun for anyone who’s in the space.

But I think the biggest concern, and I really don’t think it’s all that big of a one, is that we, we fail to rise to the occasion. The primary reason we need to double the industrial plant is because the Chinese are literally dying out. Now, let’s assume for the moment that we fail to do that, we don’t build out our capacity in electronics and material processing and electricity and everything else.

If we fail to do that and the Chinese go away during this time frame, which is highly likely. Then we have a goods shortage and then we will be trying to double the size of the industrial plants. So we will have a massive inflation story as well. One of the advantages of moving early on this is you can use the Chinese industrial plant to build the stuff that we need to build our own industrial plant.

That’s the cheapest, fastest, easiest way to do it. If we fail to take advantage of this moment in time, we will then have to do it without the Chinese. And everything will cost more and labor will be under more pressure and finance will be under pressure, and we will have shortages of manufactured goods. It will be a wildly inflationary story.

It’s still technically a growth story, but it would be an environment where inflation would probably be faster than growth. And that might not technically be a recession. But oh boy howdy, it would feel like one. So I would say that that is the biggest risk, but that would be a risk if we just decide that we don’t want to do anything that we’ve said, we’ve wanted to do for the last 20 years, and I have a hard time thinking that that’s the path the Americans are going to take.

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

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

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

The Absent Superpower

The accidental superpower

The End of the World is Just The Beginning

Disunited Nations

The Absent Superpower

The Absent Superpower

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