A Dark Future for American Agriculture

Large white barn in imploding stage with white concrete silo

Next up on Trump’s chopping block, we have US agriculture. Staring down a broad list of restrictive tariffs, US agriculture is entering a crisis of its own.

Many countries, including China, are now avoiding American farm products. Since a significant portion of farm output is sold abroad, this threatens farm incomes across the board. This is happening at a time where US population growth is stalling, so that lost income can’t be made up through domestic demand.

And as you could imagine, federal relief is unlikely. The USDA and other agencies remain understaffed and unable to navigate this trying time and Trump’s erratic policymaking adds another layer of complexity to the mix. Ironically, Argentina (one of America’s largest competitors in the farm industry) is getting a $20 billion bailout from the US…

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Transcript

Hey all, Peter Zeihan here. Coming to you from a sunny Colorado day. And today we’re going to talk about the American agricultural sector, which is facing some very, very dark times, as a result of the Trump tariffs on everyone. Most countries in the world have decided that they will never purchase American agricultural products ever again unless they have no other choice. 

Now, there are a lot of countries that have no other choice. Mexico is by far at the top of that list, but Mexico is only one of a number of countries that are of concern for the American farmers. China is obviously the country that they’re most obsessed about right now, because it’s been the number one consumer of most of our agricultural exports, minus Mexico, of course. 

For several years now. And new purchases of American beef and soy have basically stopped. Beef purchases have gone down by over 90%, this year, and soy purchases have gone to zero. And it looks like production cycles in places like Brazil and Argentina are going to be solid enough this year that the Chinese won’t need to purchase any product. 

In those sectors from the United States at all this calendar year. so three things here. Number one, something I’ve been telling American producers for years is you need to prepare for the world where China doesn’t buy any of your stuff. Not because of politics, not because of trade policy, but because they’re dying out. And their demographics are beyond terminal. 

And over the course of the next decade, we’re looking at state collapse. So any business plan that is based on sales to China is one that is going to make you lose the farm. Literally. The Trump tariffs have simply moved that forward. We’re now having to deal with it. Number two is the scope of what’s happening here. 

The American population has not grown very much over the last 30 years. It’s been a very slow creep up. And because of Donald Trump’s, policies that have increased the cost of living drastically this year across the country, as well as driven migration to zero and even into negative territory. Calendar year 2025 will be the first year in American history that the American population will actually shrink. 

Shrinking means no increases in food consumption. So about 95% of the increase in farm income since 1992, when hyper globalization became a thing, has been from selling, not to Americans, but to selling to foreigners, which means that today, roughly one third of all agricultural produce in the United States is exported. And with exports now flatlining, going sharply negative. 

That suggests that we are looking at a massive decrease in the take home for any American agriculture producer. That’s going to be a lot more than one third, because you only eat so much food. And if food becomes cheaper, if all food becomes cheaper because people are dumping it on the local market, you don’t only lose your premium from exporting, you lose income at home. 

So a one third reduction in demand for American product is actually more like a two thirds reduction in income for farms, and we’re not going to see anything quite that drastic, but it is going to be horrific and probably over the course of the next two years, or one quarter of American producers are going to go out of business and the remainder will be under extreme financial stress. 

Which brings us to the third issue. There’s not a lot that the federal government can do about this. There are now conversations going on about using some of the tariff income to bail the farmers. But one of the American bureaus that was hit most strongly by Dodge in the early days of the Trump administration was the Department of Agriculture, and USDA cannot implement the policies it has now, much less design and implement a new one. 

So the ability of the federal government to do meaningful bailouts is almost nil at this point, even if the cash was appropriated by Congress, which is unclear whether or not that would even happen. Even if the money flowed, we don’t have the ability to administrate it anymore. 

And against this backdrop, we are continuing to see policy incompetence out of the Trump administration because of a lack of personnel. Trump’s tell is he doesn’t like anyone in the room to think that they’re smarter than him. And he certainly doesn’t want to think that he’s not the smartest person in the room is very Obama esque in that regard. 

And so the way he dealt with this when he was out of power was instead of turning the Republican Party into a policy arm that could implement his policies, he took over the institution and basically got rid of any policy expert so that he would always be the smartest person in the room from his point of view, which means when he came in, instead of having this cadre of thousands of people that he could use to staff the government to make his vision possible, he came in with almost no one. 

Certainly the fewest number of skilled hands of any president in modern history. And most of the people who he did bring in were like Pete Hegseth, who were just absolutely incompetent in their portfolios. What that means for places like USDA is it’s still not staffed up. Well, neither is commerce. And here is USTR. Neither is energy. 

None of them are, So the president is not getting good policy recommendations. And as we’ve seen recently with his decision to, basically discourage everyone to use Tylenol because it apparently causes autism now because that’s what he feels. We’re getting some of his feels in foreign policy, and one of his feels is that he likes Argentina. 

Because the government there is led by a guy by the name of Malay that who he thinks of as an ideological ally. Now, nothing could be further from the truth. Malay is a libertarian, and Malay personally is just horrified by some of the economic policies that are going on in the United States, where Trump and it’s moving us very rapidly to some form of Argentinian style socialism. 

But that’s a topic for another day. Anyway, since this is what Trump feels, Trump is doing a 20 billion odd bailout for Argentina. Now, I am one of those people who thinks that Argentina is a country that’s going to be with us long haul, and having decent relationships is a solid idea. But, but, but Argentina has defaulted on every debt it has ever had over the course of the last 120 years, and in the last 30 years, the pace of those defaults has accelerated. 

So any bailout for Argentina is money that you simply won’t get back on top of that, Argentina is one of the world’s leading producers of soy and beef, along with any number of other agricultural products. And in the world to come, the single largest long term competitor for American agriculture will be Argentina Freakin Tina. And now the Trump administration is bailing it out. 

And Argentina is preferencing sales to American competitors. Like China, that’s basically shutting American producers out of the market. So farmers are getting hit from a foreign policy angle. They’re getting hit from a policy incompetence angle, their getting hit from a financial angle and demographic angle and a market angle. And really, the only possible way that we exit this next five year period with all of our producers is if somehow the Trump administration works out a French style support system that basically pays the farmers to exist not very American, not very capitalistic, and something that arguably the Trump administration can’t even staff up right now.

America’s Generals Gathered for…That?

Official government photo of Pete Hegseth

It appears Trump and Hegseth have been getting the Led out, because the song ‘Ramble On’ pretty much summarizes how their speeches went the other day.

With America’s generals gathered, I was worried that Defense Secretary Hegseth and President Trump would make some dangerous comments or announcements. While they both managed to make everyone seriously uneasy, it was more mush than alarming.

Hegseth focused on culture-war themes. Trump rambled about God-knows-what, with a few coherent sentences that the teleprompter fed him. But both speeches highlighted the lack of strategy and alarming drift of US military leadership.

Don’t believe me? We are including the text of the speeches so you can enjoy the fun yourself.

Link to Hegseth’s speech

Link to Trump’s speech

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Transcript

Hey, all Peter Zeihan here. Coming to you from Colorado. This is a topic I was hoping to avoid, but so many people have written in on the Patreon page, and I feel like I kind of have to. Today’s the 1st of October. Yesterday was the 30th September. And, yesterday was the day that Secretary of Defense Pete Hegseth and the US president, Donald Trump, addressed the entire coterie of American generals who were flown in for the speeches. 

Honestly, it reminded me of, Gaddafi of Libya or Fidel Castro of Cuba in their later decades when they would stand in front of an audience, says blah, blah, blah about nothing for hours. There didn’t seem to be a point to the speech at all. And the day before, two days before, when Trump was talking about putting himself on the agenda, he said something along those lines. 

Isn’t it nice that so many people are coming from so far away? But Secretary of Defense ordered them to come. This wasn’t a social call. 

I was originally very much dreading the speech. I was expecting perhaps a really dark turn in American form and strategic policy. Luckily, we did not see that, which is not mean that there was anything that happened to the speech that makes me feel good. I just that sense of dread I was feeling is no longer there. So, let’s start with Haig stuff, because that was the more substantive context. 

And then we’ll move on to, Donald Trump, because of, least qualified defense secretary in American history. His words, not mine. I just happened to agree with them. He said them during his, confirmation hearing. He actually said somebody who doesn’t know anything about the sector whatsoever, if they were to go in, could actually do better, than any of the secretaries of defense that we’ve had since World War two. 

He has proven that to be lovely, inaccurate. At this point, most of his speech was spent on the culture war. Basically, it was like he was giving a long monologue back from when he was on Fox News as a correspondent. Very, very short version. He made it very clear that any sort of protections that existed for any sort of group, whether it’s women or blacks or whatever, they were all going away, the physical requirements for anyone who is in a combat role will be based on men, which basically will exclude, 80 to 90% of women who are already serving from continuing if these policies are instituted. 

Keep in mind that the United States is going through demographic decline and the single largest growth unit in terms of recruitment for the military for the last half decade has been women, especially as we move to a more technical military. So by establishing these criteria, we’re basically guaranteeing that we’re not going to be able to hit our, recruitment numbers, and it’s going make hitting the technical numbers very, very difficult. 

Probably what this will mean is the United States will have to take a page from what it did during the war on terror, specifically in Iraq, and start playing, six figure salaries to contractors because we can’t generate the staff that is necessary. So from a strategic technical, recruiting, equity and especially warfighting capability, these pieces are just a series of horrible ideas. 

He also made it very clear that all of these generals who have decades of experience, if they don’t like it, they can quit, which is, you know, how it’s supposed to go with policy. But he was kind of rude about it. Anyway, I spoke to a number of people who were in the room, and, let’s just say that Secretary Hegseth is not exactly well respected because there’s a lack of credentials. 

And, well, some secretaries, like, say, Secretary Rollins in agriculture came in not knowing much, but really put her nose to the grindstone in order to school herself up on the issues in play. Hegseth has done nothing like that. He hasn’t even built a senior staff yet. So he does a lot of proclamations like this speech today or yesterday. 

And then he goes and does some social media or maybe pumps iron with the troops, because that’s what a secretary of defense is apparently supposed to be. My favorite line from someone in the room was that, if Secretary Hegseth just wanted to remind us all that he was incompetent and not worthy of the position. He could have just done that in an email. So harsh. Then Donald Trump. Oh, okay. So we’re going to append the full text of both speeches, Hegseth and Trump’s to you. So you can read this for yourselves. But oh my God. 

If I were to sum it up in one word, it would be bumbling. There were really only about three full sentences and an hour of him yammering on about loves lost and fights one, and how wife is one of his favorite words. And it was obvious when those three sentences came up because he was reading directly from the teleprompter. 

In his opening paragraph, he said, you guys can do whatever you want. You can laugh, you can cry, whatever. Of course, if you leave the room, then there goes your career. Super inspiring. Dude. There were no policy announcements. There was no strategic guidance. There was really no reason to be there. aside from the fact that he had a captive audience, and from what I heard from the people who were in the room, everyone was just sitting there. 

Stone faced the whole time because it wasn’t even a political speech. It was just rambling and the line of somebody who shared it with me that really got me was like, if the president wanted to highlight to us that he was no longer capable. Mission accomplished. I’ll let you read the speech yourself. I’ll let you decide for yourself. 

The one item that did perk people’s ears up is when the president said that he was considering using American cities as proving grounds for the US military. There is not a successful country in human history that has done that. Because once you turn the defenders of the nation on the citizens and the social contract is broken, and you need something new that is based on fear, that is the downfall of the Roman Empire and the Hittites and the Byzantines and any number of things since you keep your internal security forces and your external security forces separate at all costs and yes, yes, yes, Portland annoys me too. 

But the idea that you’re going to use Chicago or Nashville or anything else as a training ground, no, it was almost as if the president was daring the assembled generals to carry out their oath to defend the constitution of the country from all foes, foreign and domestic. And I am not comfortable with where this might lead. About the only thing I can say about it is that this was one of those bumbling passages that was made in passing, that was not the centerpiece of the speech. 

It was one line amongst a lot of mush. 

I don’t think anyone walked out of that room encouraged by their leadership or the current state of military policy. But considering some of the things that we have seen in military and strategic policy in the last few months, I still count this as a win.

And You Thought the Jones Act Was Dumb…

A mack truck on the highway

If you tasked me with creating a list of the greatest threats to America, I’m not sure cabinets, name-brand drugs, and semi-trucks would be on there…but the President disagrees.

So, get ready for a massive economic bulldozer to hit the US due to these new tariffs. With 90% of all US cargo moving by truck, these higher costs will create a ripple effect through every sector. This all started back with the Jones Act, which made domestic shipping prohibitively expensive, causing a shift in freight from ships to rail to (almost entirely) trucks.

Since those trucks are made across an integrated North American supply chain, dipping into Canada, the US, and Mexico, tariffs are hitting hard. That means everything Americans consume, from your food to your clothes, will cost a whole lot more.

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Transcript

Hey all, Peter Zeihan here coming to you from Colorado today. We’re talking about the newest hit to the American economy. We now have tariffs on cabinetry, semi-trucks. And what was the third one? Name brand drugs, all of which have been classified as national security threats. Cabinetry. That’s an interesting one. Anyway, we could pick apart this all day, but I’m going to focus on the trucks because that’s the one we’re all going to feel soon. 

And most deeply, right now about 90% of all cargo, all ten miles of cargo that are transported to the United States are transported on the roads by semi-trucks. Now, it didn’t used to be this way. If you go back to, the depression, we had something called the Jones Act, the Interstate Commerce Act, which said that any to any cargo transported between any two American ports, regardless of where they were, had to be on a ship that was American built, American captain, American crude and American owned. 

As a result, we saw the cost of transport on the waterways increase in terms of, cost per ten mile by a factor of five. And we went from transporting most of our goods and especially most of our intermediate manufactured goods, especially in places like, the Great Lakes in the upper Midwest. We went from that being the dominant mode of transport to basically at whittling away to today in terms of ton miles, we only use our waterways for about 1% of our total cargo. 

It has been, in my opinion, the stupidest law that the United States has ever adopted. And it’s now been in place for a century. As a result, things went places where those restrictions were not in place. first with train and now with truck. Now with the Trump administration policy, there’s 100% tax on those trucks, of which about 80% of the imports come from Mexico. 

Another 10% from Canada. And As with anything that involves NAFTA, nothing that just made in one of the three countries. It’s an integrated supply chain that uses all three. So basically what we’re doing with this new tariff is saying this multi-step supply chain that we have, where parts of the trucks go back and forth among the three countries, if the finished product is actually done in Mexico, which is the relatively low cost work we will then tariff the cost of the entire truck when it comes back. 

So, in essence, retrofitting American workers and American companies who are making American products, who just happen to have the bumper stamped on in Mexico, and since 90% of our cargo is transported by heavy truck, you’re going to feel this in every sector. It doesn’t matter if you’re a hog farmer in Iowa sending your hogs to market, or if you are just ordering something on Amazon, it’s getting shipped across the country. 

The only people who will not feel this are the people who are in a physical position where supply chains for imported goods do not use the trucks, and that means you would have to be in one of the major port cities that has a mega port. So those are New York, new Jersey, Miami, Houston, Savannah, to Colma and LA Long Beach. 

Anyone else? This is going to hit everything that you consume. So I have long said that the Jones act is the dumbest law we’ve ever had, but it’s got some competition.

What Does a Post US NATO Look Like?

A NATO flag with buttons of other countries flags on it

As the US steps back from NATO, which country is best suited to take the seat at the head of the table?

While the Germans have been the backbone of the EU’s financial model, they no longer have the people to keep up. So, who will step up? The French scratch this itch best, both militarily and as the future anchor of Europe. They have the most solid mix of everything necessary: population growth, nuclear arsenal, wine, etc.

There are some support players rising in the background as well. Poland and the Scandinavian countries have economies, militaries, and enough resilience to weather the storm that is headed for the EU. Together, these countries will define the future of Europe.

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Transcript

Hey everybody. Peter Zeihan here coming from, where am I? Bottom of the Tilden Canyon in northwest Yosemite. Taking another question from the Patreon crowd, specifically with the United States stepping back from NATO, do you think anyone will step up, most notably France? Yes, but probably not for the reasons you’re thinking. 

Europe has two institutions that define it NATO, the North Atlantic Treaty Organization, of which the United States and Canada are members. 

Everyone else is in Europe and the European Union, of which 27. I think it’s like people keep coming and going. 27 countries are members. NATO is a military alliance. The EU is a economic and financial grouping. The problem is, is the economic and financial grouping is failing for demographic reasons. The country that is paid for everything to this point has been Germany primarily. 

And Germany over the next ten years will basically age into an old folks home and convalescence can’t pay a lot of income. So, you’re going to have to see the entire European Union structure renegotiated away from the financial and economic union that we have right now. Because if there’s one thing the French are sure of, they’re not going to pay everyone to be part of the group. 

But if you make it a political and a military grouping, perhaps affiliated with NATO, perhaps not, then you’re talking about something that plays to French proclivities and their strengths. Remember, this is a country that has an aircraft carrier. This is a country that has an independent nuclear arsenal, and this is the only major country in Europe that has seen population growth. So whatever future Europe has ten, 20, 30, 40 years from now, France is going to be by far the most important piece of it. 

Second, there are a few other countries to look at. The number one is Poland. Poland is having a demographic moment. If they can’t get their birth rate up, they’re going to have some problems in 30 years. 

But that’s a problem for 30 years from now. For now, they’re a robust economy. They’re getting to the manufacturer in every possible way. They’re getting to defense industries courtesy of the South Koreans and since they have the Ukraine war going on right on the doorstep, they’re getting very big into drone technology as well. So whatever the future of warfare looks like, the poles are about as prepared as you can be. 

Everyone else is playing catch up. And then finally there’s a third group, the Scandinavians, mostly centered on Sweden. These are countries with better demographics, better financial situations. They’re not as dependent upon the European Union and the euro. In fact, some countries in the Scandinavian bloc aren’t even in the euro. So it could go away and they’ll probably be more or less okay. 

I mean, it’ll be a it’ll be a hard couple of years, but, it doesn’t define them in the way that it defines countries like the Netherlands or Italy. These are also countries that have always maintained an independent defense posture. Sweden and Finland, most notably. So whatever future defense issues in Europe bubble up. Sweden, Poland and France are by far the ones to watch the most. 

They’re also the ones to watch the most in terms of, economics, because their demographics are pretty good. And so if there is a post EU economic grouping in the region, these three are going to be part of it.

The Federal Reserve’s Dilemma

Photo of the building of the US Federal Reserve

The Fed is facing a catch-22. While they would typically lower rates when consumption and growth begin to slow, there are also competing policies that are shrinking the labor force and driving up costs via tariffs. Other countries have faced similar dilemmas due to demographic issues, but the US is in this pickle largely due to policy decisions.

With record deficits and no political will to cut entitlements, cooperation between Trump and the Fed isn’t going to happen. So, the Fed is stuck between a rock and a hard place…

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Transcript

Hey all, Peter Zeihan here. Coming to you from a breezy Colorado. This week we have a Federal Reserve meeting in D.C. where they’re going to decide what to do with interest rates. The idea is, if you lower interest rates, you reduce the cost of capital, which spurs economic growth, whereas if you raise interest rates, you dampen demand, which tends to get inflation under control and balancing growth versus inflation. 

That is basically why the Federal Reserve exists and why we have monetary policy in the first place. The real problem the Federal Reserve is facing right now is policy out of the white House. The combination of high and rising tariffs are increasing the cost of operation for American businesses and increasing purchasing costs for American consumers, which is reducing economic growth. 

At the same time, anti migration policies the Trump administration has implemented is shrinking the labor pool to the point that the American population is actually expected to shrink this year for the first time in American history. And that is triggering inflationary pressures throughout the supply chain that are complemented by the tariffs. So tariffs like 50% tariffs on steel, aluminum, copper drastically increase the cost of building for, among other things. 

And so the fed is kind of in a catch 22. The slower growth caused by the tariffs on the consumption side would seem to indicate that it wants to lower interest rates to spark growth, but the higher inflation, because of the tariffs and the immigration policies are raising the cost of everything or raising inflation, suggesting that the Federal Reserve should, if anything, raise rates in order to keep inflation under control. 

And there is no way to win this, there’s no way to make everybody happy and there is no balance to be found. So the Federal Reserve is in a catch 22. Now, this is not a unique situation. If you go back to the last 20 years in Europe and Japan, we’ve had somewhat similar situation, but largely caused by demographic issues as populations age out of the 2030s and 40s and into their 50s, 60s and 70s, consumption naturally goes down and eventually you lose people from the workforce on the tax base altogether. 

And when that happens, monetary policy is not nearly as useful tool. And you’re dealing with exactly these same issues, chronically lower demand and consumption because the population is getting poorer and older and ongoing inflationary pressures as the labor force shrinks. The difference between the European and the Japanese experience and the American experience is in the European. In the Japanese experience, it was primarily a demographic issue, whereas in the American experience, at least so far this year, it’s primarily a policy issue. 

Now, what has happened in the United States in the past is the Federal Reserve chair has sat down with the American president to discuss priorities and what it takes to get what you want. This was most famously done by Federal Reserve chair, former Federal Reserve Chair Alan Greenspan and former American President Bill Clinton back in the 90s, where the discussion was, if you can keep the budget under control, if you don’t do a lot of deficit spending, then I, the Federal Reserve chair, can keep interest rates low and generate a boom which lasted for the better part of a decade. 

Unfortunately, that is not possible this time around, and not just because the president doesn’t like the Federal Reserve chair. The other problem is simply that the fiscal deficit we have today is bigger than we have had at any time in American history, with the exception of a couple of hiccups during war time and getting that deficit under control would require basically eliminating Medicaid and cutting Medicare and Social Security by half. 

That’s how overextended we are. So it leaves the fed in a no win situation. Governance is hard, especially when you’re a quasi independent institution like the Federal Reserve.

While I Was Gone, Part 4: US Security

Shield of the Federal Bureau of Investigation

To wrap up this short series on things that went down while I was away, we’ll be looking at some alarming developments in US security.

The FBI raided former National Security Adviser John Bolton’s home and office, under accusations of mishandling classified documents; that’s a bit rich coming from the current administration, but I digress. The bigger issue is that using federal law enforcement as a political weapon mirrors authoritarian states like Russia and China. This relates to the other big news, where Trump has ordered the US military to form specialized units for patrolling American cities; this is just all-around bad policy.

If there was a time for Congress to assert itself as the adults in the room, it would be now.

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Transcript

Hey all. Peter Zeihan here coming to you from the Lake of the Ozarks. This is the last in our series of. What the hell were you thinking while I was gone? Was I backpacking for two weeks? And the world kind of fell apart. This time we’re going to talk about security in the United States borders. There are two big things that went down when I was gone, both of which concern me greatly. 

The first involves a gentleman by the name of John Bolton. John Bolton was a national security adviser, which is kind of America’s top foreign policy coordinator during the first Trump administration. But after seeing how the sausage was made inside, he left the administration and basically became a critic and has now been one of the more reliable voices for saying when Donald Trump is doing something that perhaps isn’t the brightest. 

Well, while I was gone, the FBI was ordered to raid his business and raid his personal residence. And he has now been accused of improperly handling classified materials. The hypocrisy of this is pretty rich. Anyone who is, like, independently minded will be able to tell in a second that the Trump administration is the least information secure administration we’ve ever had. 

We’ve already had a number of cabinet ministers, up to including the vice president, included in signal checks, which is a Russian penetrated not particularly secure platform in which they shared operational data. We’ve had situations most recently in the, the Alaska summit where informations and the personal information of security and diplomatic personnel, including their contact information, was just left on a printer. 

And we’re seeing a general disregard for all the counselor generals, assuming they haven’t been fired already, which are the people who are supposed to maintain information security within the administration. So this administration is leaking classified information massively. We even have our DNI who’s in charge of the intelligence system. Outing covert covert agents around the world on Twitter. 

And so to accuse Bolton of doing something inappropriate with documents is is really rich, especially since he has been in government service in this sort of role for over 20 years and has never even had a hint of that concern brought up, ever. I mean, there’s a lot of reasons to not like John Bolton. Mostly political or personal. 

He’s not a particularly nice gentleman, but no one has ever accused him of not being competent. So that’s number one. Using the FBI as a hit squad for political opponents, is something the United States has never done. This is right out of modern China or 2000s. Russia, or maybe a Latin American democracy. This is not a great thing. 

The second thing which actually concerns me even more is what’s being done with the military. The US military is designed to do military operations overseas. They’re designed to kill people and detect threats. But Trump has given the order for the military to form specialized units designed to specifically patrol and pacify American urban centers. Now, the US military is not good at law enforcement, and it has never been trained to be good at law enforcement. 

Third thing is to get in a tank or getting a jet and go overseas and do things there. When you put them into a law enforcement role, like we saw, say, in the Iraq occupation, things go to hell really quickly. Their equipment’s not right for the training is not right for it. It’s a mismatch. And so a lot of people died that probably didn’t need to. 

You take those same people and you put them on American soil and tell them to do law enforcement. And we’re in a very different situation. The only governments in modern history that use their military for urban pacification are those countries where occupying their own people is a national security issue. This is Iran. This is, to a degree, Russia. 

This is to a degree, North Korea. This is not something we want to see. Not only would it be violent, not only will there be a lot of political degradation because of it, not only will this erode the US military’s capacity to function. It is by far the most expensive way that you could possibly do it, because you’re taking people that you’d like to say trained to work on an Abrams tank. 

It’s people that you probably cost at least a quarter of $1 million just to do their training and then beaten them. Beat cops? No. So we have this cascading list of economic and social and political and health and national security military issues that just in the last two weeks have taken an absolute nosedive. 

I’m not a call to action guy, but we’re nearing the point pretty quickly where if Congress cannot find a backbone to re inject some sanity into American policy, we’re going to be having some severe degradations in our economic, social, and military models that are literally going to take us decades to unfuck. This is getting very real.

While I Was Gone, Part 3: Economic Status

Person using Forex trading on a laptop and phone

Today, we’ll be turning our attention towards the economic moves that the Trump admin made while I was away.

Intel was partially nationalized (10% government stake); this move supports semiconductor security but could also turn the company into a defense contractor rather than an innovator driven by profit. The Block Island wind farm project was completely halted…despite being nearly completed; this undermines US energy reliability, trust in government contracts, and the need for rapid energy expansion. And of course, Trump had to throw in an out-of-pocket personal attack with a Fed board member (Lisa Cook) over mortgage discrepancies, which is just another step towards making the Fed a political tool.

All these economic actions nudge the US further away from free-market capitalism, and closer to something where the government dominates industry, contracts, and monetary policy. However, experimenting with new economic models is inevitable, it would just be nice to let some other countries be the guinea pigs.

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Transcript

Hey all Peter Zeihan here. Coming to you from a rainy lake of the Ozarks. We’re continuing our series on. What the hell were you guys thinking while I was gone backpacking? Today we’re going to talk about some economic issues in the United States. We’ve got three things that you guys decided were good idea to do. A certain green. Got three ideas that you guys decided were good ones while I was gone. 

The first one was that Donald Trump partially nationalize Intel. Intel is, of course, America’s premier semiconductor manufacturing firm, taking a 10% stake for the government. This does not give the United States a seat on the board, but it does obligate the United States to pay for a lot of R&D. And if your goal is to near-shore semiconductor fabrication, there’s some serious logic here. 

And if your goal is to deepen the government’s involvement in design and control the technology, there’s some logic there as well. But it does come at a pretty significant cost. When you start to nationalize companies, they treat the government as one of their stakeholders, and they start to optimize their operations to do whatever the government wants that might achieve a national security goal, perhaps, but it comes at the cost of the company basically letting everything else fly, and reducing the profit motive to actually make the company better. 

They become more of a defense contractor. So pros and cons, Second big item is that the Trump administration issued a cease order for the Block Island windfarm off the coast of Rhode Island, and it’s really hard to spin this as a positive. The money had already been allotted. Things have been paid for. Remember, you have to pay for green tech projects pretty much upfront. And so the financing was all in place. 

The project was already 80% completed and was about to start wiring power next year. And now it’s just completely stopped. So number one, this is an investment issue. Number two, this is a foreign investment issue because the Danish companies were involved. And number three, it’s a power issue for the eastern seaboard. But most importantly, the federal government has now decided to kill the project specifically because Donald Trump doesn’t like wind turbines. 

He doesn’t like the way that they look now. Wind turbines in the right spots are among the most efficient ways of generating power. This isn’t like solar, where the it’s dark half the year. Wind, especially offshore wind, is a very strong, reliable source of energy. But Donald Trump doesn’t like the look of them. So from the point of view of contract law, the federal government has now established itself as a relatively unreliable partner in the power sector. 

And no matter what your interpretation of America’s near term future, whether you’re like me and you see, we need to double size of the industrial space with your tech guy and you want to massively expand AI. Whether all you want to do is replace the old infrastructure with new infrastructure. The United States needs to expand its power grid by at least 50% over the next several years, and all of a sudden, the federal government is no longer a positive contributing partner to that. 

And everyone who is involved in government contracting in the power sector is now going to be wondering if there’s any reliability at all. That’s really bad. If you’re trying to do something quickly, because the federal government will always be the single largest economic entity in the United States. And now it’s got people wondering if they can be trusted of all, because there’s no scientific reason, there’s no economic reason, there’s no financial reason. 

There’s no national security reason for this contract to be canceled. It’s just been canceled because Trump doesn’t like the look of windmills. That is very, very Latin American. The third issue is that Donald Trump has tried to fire or has fired a woman by the name of Lisa Cook, who is a member of the Federal Reserve Board. Now, the US Federal Reserve is basically the central bank of the United States. 

They say interest rates and manage monetary policies in order to manage the American economy. And under existing law, you cannot fire a board member unless there’s cause. The cause that Donald Trump cited was that Lisa Cook now stands accused of falsifying some data, on free home purchases she’s made over the last 10 to 15 years. I believe. 

In total, the three mortgages in question have a total finance value of about $1 million. Have all since been paid off. And he’s saying that she lied about it being her primary residence in order to get a slightly better interest rates. And we’re talking here about less than a half a percent. This is kind of rich because no charges have been brought. 

It’s simply an accusation. No data has been presented. But Donald Trump has been convicted in a court of law of over a half $1 billion of real estate fraud. So you know, there’s a little bit of a ocracy here. Whether or not if she were charged and found guilty, is qualifies her as a being fired for cause is a really open question. It’s really questionable whether the Supreme Court would rule that way. And this is a court that will absolutely go all the way it up. But the core issue here is Donald Trump has found a way to remake the Federal Reserve in his own image. 

One of the problems that Trump is facing is a lot of the tariff policies that are in place at the moment are highly inflationary and are driving economic activity out of the United States by making the United States a less reliable partner in things like manufacturing supply chains in addition, things like steel and aluminum, copper tariffs to make it much more difficult to construct anything, whether it’s in the power grid or your house. 

And so we are set up for higher inflationary, lower growth environment moving forward. So Trump’s idea is if we can reduce capital costs significantly, then we will have more economic activity. And faster growth that people will get credit for. The Federal Reserve would never go for that because that would be wildly inflationary. Think about what happened under the Biden administration when we had a series of federal spending projects, none of which Donald Trump has really trimmed down. 

That dumped a lot of money into the economy post Covid and generated faster economic growth, but faster inflation because we saw demand go up and up and up and up without an underlying increase in supply. What Trump is doing is constructing supply and now trying to goosed demand with interest rate policies, achieving something that’s at least as bad, for political reasons, demand scarcity or a directed demand, something like that. It’s a lot like, like wartime mobilization, where the government takes a larger role in the system controlling the production, but it’s not driven by a crisis, is driven by a change in macroeconomic fundamentals, and it’s is focused on demand as it is on supply. 

And if that sounds not particularly capitalistic, that’s because it’s not even remotely capitalistic. But as we’ve seen from the Donald Trump administration so far, that is really not a major concern. Nationalizing companies, he sees as a plus, taking over direct control, personal control of the monetary authority he sees as a plus. And the sacrosanct nature of contracts is not something he seems even remotely bothered by. 

These are characteristics that have a lot more in common with, like the Latin American flavor of socialism or even modern day China. And one thing that they do not generate is efficiency, or private ownership or private decision making. But kind of that’s the point. 

So none of these steps are good. They all basically make the federal government part of the problem, in a way that five years ago we would have said something that the liberals prefer to do, but now Donald Trump is there. The reason that this bothers me so much, but the reason why I’m trying to maintain an open mind is that the models that we use to manage our economy and by our, I mean humans are changing and need to change. 

For the last century, we’ve basically had four overarching economic models. We’ve had free market capitalism, which is something the United States tends to champion. Not anymore. We’ve had a European social model that is more based on social placidity and equality, but doesn’t generate as fast of economic growth and as much economic dynamism. Europe, of course, is known for that. 

You get command communism, where you have a central authority that makes most of the economic decisions. That’s Maoist China, that is the Soviet Union. And then you have something called fascist corporatism, where there’s a fusion of corporate interests and government interests. And that’s classically Nazi Germany, but also like 1970s and 1980s Korea, maybe a little bit of, Japan and certainly China today. 

All four of these models are based on the relationship between supply and demand and capital and labor. And with the world going not just through a globalization phase, but a massive population phase, we are losing access to labor and capital in the volumes and in the ratios that we’re used to, because when people retire, they take their money with them and they are no longer working. 

So we’re seeing a change in the fundamentals that define our four economic models. And we need to try something new. What that something will be is very much in play. But what the Trump administration seems to be pushing us towards, whether it’s consciously or not, is something that’s kind of like a constrained, managed demand model where the government is the single largest player in determining who gets what, and because of problems with supply and consumption. 

They’re actively ratcheting down demand because there won’t be enough stuff to go around. But Trump is also constraining artificially the supply of product within the American market. So whether this, constrained demand model is something that is going to be a thing in the future, I don’t know, it’ll probably need to be a lot more cohered than what we’re seeing out of Washington right now. 

But it is something we shouldn’t reject out of hand because we know the old models aren’t going to work. The primary concern that I have at the moment is that the United States has the healthiest democracy of any major country in the world, which means we don’t need to make the adjustments first. We can wait to see what everybody else does first and then sort of pick and choose. 

The idea that we are needs to be the ones at the vanguard of this next phase of economic theory, I think, is a bit of a stretch. And if we are going to do it, I would like to see it be a system that is a lot more coherent and a lot more geared to American strengths and weaknesses than what we’ve seen out of the administration these last couple of weeks. 

Soooo…. 

While I Was Gone, Part 2: US Health

Doctor with a stethoscope

RFK Jr. was busy while I was away. He downgraded several vaccines to only at-risk groups and tied licensing and insurance access to compliance. He fired the CDC director, prompting an exodus of credentialed medical staff. And he triggered a clash between Health and Human Services, the CDC, and the broader medical community.

When vaccines (aka one of the greatest contributors to modern health) get undermined, it sets off some alarm bells. This has surpassed health and politics, and it’s now a national security concern. mRNA vaccines enabled rapid COVID response, but they could also revolutionize biodefense.

Should this technology remained sidelined, the US will be unnecessarily vulnerable to biothreats. And I don’t see RFK Jr. being ousted from Trump’s political base anytime soon, so get ready for a fun ride…

Prefer to read the transcript? Click here

Transcript

Hey all, Peter Zeihan here. Coming from the Lake of the Ozarks, we’re continuing our. What the hell did you guys do over the last two weeks while I was gone? And today we had to talk about the intersection of health policy and national defense. While I was gone, RFK junior, who is the secretary of Health and Human Services, has basically downgraded most vaccines, specifically with the Covid vaccine, saying that they are no longer recommended for use for most Americans. 

Really, just for people who are at risk. And any doctors who decide to buck HHS recommendations, will no longer have state certification for things like insurance. Basically saying that I have made up some new rules. I have fired all of the doctors. And if you don’t follow my rules, then you can’t get insurance. 

Topping it off. He fired the director of the center for Disease Control. A woman by the name of, Miranda’s. And when she was let go, basically all the senior staff that have medical credentials left with her, which has left RFK to basically staff the world’s premier disease prevention and to deal with people who have basically no medical experience and are basically driven by conspiracy theories. 

So we are now setting up for a direct clash between HHS and the CDC and the medical community writ large. The health implications of this are, to say, dire by making doctors choose between being politically correct and actually providing medical care, and by denigrating vaccines which have been the single largest cause of the increase in the American health system for the last century. 

And basically pushing that down to the bottom is going to have some catastrophic outcomes moving forward. This is no longer purely an issue of health or politics. This has now graduated into the area of national security. And let me just give you one reason why we should all be very, very worried. Let’s look at MRNA vaccines. That’s the relatively new technology, less than a decade old, that was the backbone of what happened with Covid, which saved at least a million American lives, probably significantly more than just in the first year. 

MRNA vaccines are what you might call a digital vaccine. So with a traditional vaccine, you’re growing the virus in something like an egg yolk medium, and then you grow enough of it and kill the virus to make a weakened or a dead virus vaccine that you inject in order to trigger an immune response. 

That’s not how it works with mRNA. You identify a specific part of the virus that you think is going to be vulnerable, and then you digitally manufacture a molecule that interferes with that specific site. So the amount of organic material in an MRI vaccine is minimal, but also because it’s basically designed and manufactured, you can produce it very, very quickly. 

You can design your molecule in a matter of days. You can bring it in for a large scale production in a matter of weeks, rather than having to just inject egg after egg after egg after egg, and it will eventually produce enough of whatever it is for 300 million people. Because of that, any bio weapons defense system that the United States might have has always been next to impossible. 

Because once you identify what the enemy pathogen is going to be, you then have to go through this months long process of producing enough vaccine to combat it. With mRNA, you can do that in a month. So we’re now in a situation where all of our bio weapons defense systems have basically stopped because we have a freak show running the HHS and now that the CDC has basically been purged of doctors at the top levels, we no longer even have a voice in the federal government that is looking out for the health of American people at the moment. 

Robert Kennedy Jr continues to be wildly popular with the MAGA base, so I see no reason that Donald Trump is going to fire him. But it also means that the federal health authorities in the United States have basically become nonfunctional and now are contributing to America’s health care problems, rather than trying to mitigate them. Remember that earlier in this administration, all cooperation with international medical communities was basically severed. 

So the United States is now basically sitting in a box and digging itself into a hole and not even looking out for future threats, much less setting up the infrastructure to deal with them. Not good.

While I Was Gone, Part 1: Trade Policy Updates

Photo of trade containers stacked

A US federal appeals court has ruled that most of Trump’s tariffs are illegal since the president needs congressional authority to declare trade emergencies or impose tariffs.

So, it’s off to the Supreme Court to decide if Trump’s entire trade policy will get scratched. And if you’re thinking, “Did Trump’s trade team ever get staffed?” The answer is still a resounding “yeah right!”

This deep uncertainty is wreaking havoc on businesses that operate across borders; many of which are now shifting production out of the US. These policies are inadvertently accelerating American deindustrialization and whatever the Supreme Court decides, it’s going to be rough on the United States for at least the remainder of the year.

Prefer to read the transcript? Click here

Transcript

Hey all, Peter Zeihan here. Come to you from the Lake of the Ozarks. I just got back from backpacking in Yosemite for a couple of weeks and holy crap, you guys have lost your mind. So I’m doing a series of videos this week, basically on, what’s happened while I was gone and what it means. This has a very, frog and a boiling pot sort of situation. 

The water has been heating up, and I don’t know how many people ever actually notice what’s been going on, but a lot of things are breaking pretty quickly. So let’s start with trade. Just before I got back, an appeals court and the U.S. federal level ruled that most of the tariffs that Donald Trump has been executing over the last few months are illegal under current law. 

Specifically, the Trump doesn’t have the ability to declare a trade deficit as a emergency. He can’t use fentanyl as a justification for a trade war. And he can’t just establish tariffs however he wants, wherever, once and for as long as he wants. Which, you know, honestly, it’s not a particularly strict reading of the law. According to the Constitution, Congress has the authority to set tariffs, and Congress has in bits and pieces over the last several decades, given some of that power to the president, but never to the degree of expansiveness that Donald Trump has asserted. 

This is a second court ruling on this issue against Trump. It will now go to the Supreme Court, probably before the end of the year. And it throws everything about the Trump tariff policy, which is the core of Trump’s economic and foreign policy into doubt. Part of the problem that Trump is going to experience here is that once you get past the tariffs, there really isn’t anything else under the hood. 

The federal government is still not staffed out. The US Trade Representative Office, which is supposed to negotiate and trade deals, still hasn’t been stopped out. The Commerce Department still hasn’t been staffed out. It’s so bad that the Treasury Secretary has been involved in some of these trade talks, and none of the trade talks, none of them, none of the deals we’ve seen so far deal with any of the traditional irritants in economic relations between the United States and the rest of the world, or just about a tariff number. 

So if this number goes away, Trump is not simply starting from scratch. He has yet to build the team that is necessary to start a new policy. And we basically need to go all the way back to January 20th and start over. So big defeat for the president. As for corporate America and the American experience. 

Everything is in flux. We still don’t have a meaningful deal with Canada, Mexico or China, three of our four largest trading partners. And the deals we have with places like South Korea, Japan and the United Kingdom are wishy washy at best. And we’re almost designed to allow the other countries to avoid the tariffs in many ways. So these are sloppy deals that are very light on details that have yet to really be determined. 

And now we’re looking at probably having to start the entire thing over, which means if you are in the business of working in the United States, you still have no clarity. And the closest clarity you might get is on the other side of the Supreme Court ruling, which is at the moment unscheduled. So what we’re seeing is the beginnings of a deindustrialization of the American complex, because companies are now moving their facilities and their production capacity outside of the United States, knowing that they’ll have to pay tariffs when they bring stuff back in. 

But there’s no advantage to participating in a multi-state supply chain. Normally, with manufacturing, especially more advanced manufacturing. Different countries, different companies produce different pieces of whatever the final product is. And those pieces fly back and forth or ship back and forth across international boundaries as value add is added at every step with the United States with this tariff policy. 

You get taxed every time something comes in, even if it’s not a finished product. And so the solution is just to avoid the United States completely, make it entirely an international system, ship the final product to the United States consumer and pay the tariff once. So in its current form, we’re seeing a significant breakdown of American manufacturing. And that will continue until we have some clarity on what trade policy will produce. 

If the Supreme Court decides to reinstate the tariffs that will accelerate the industrialization of America. It’s the Supreme Court decides to ban the tariffs. Then we have to start over and we have all the uncertainty all over again from the beginning. So no matter how you look at this, this is not a great situation for the United States for at least the remainder of this calendar year.

Smokey Bear’s Best Friend: fire.airnow.gov

Wildfires with smoke and a car in the background

We’re talking about every hiker’s worst nightmare. No, not the feeling of slipping into wet boots that didn’t dry out overnight. We’re talking about smoke!

There’s a growing wildfire smoke problem across North America and there are three main drivers. The Western Rockies had an unusually dry year, causing large fires that could smolder well into the winter. Canada’s muskeg region is vast and swampy, but long-lasting and hard-to-control fires break out as the region dries out, sending waves of smoke across the US. And of course, Pineapple Express (no, not that kind of smoke); the atmospheric rivers that leave the PNW parched and fire prone. Surprisingly, the West Coast has fared much better than most years thanks to heavier rains.

The smoke situation is a recurring and hard-to-predict, but using FIRE.AIRNOW.GOV can help you track air quality and plan ahead.

Prefer to read the transcript? Click here

Transcript

Hello, Peter Zeihan here coming from Colorado. And today we’re going to talk about smoke. This is a topic that is very near and dear to my heart as a backpacker. As you may have noticed, whether you’re living in Minneapolis or Chicago or Des Moines or Kansas City, we’ve had some crazy smoke outbreaks already this year. So I thought it’d be worth showing a tool to you, as well as talking through the three biggest things that shape the smoke forecast for the United States. 

First of all, the tool fire.airnow.gov tracks a several thousand air quality sensors scattered across the country and maps out the smoke plume. So you know what to anticipate. Also gives you an idea of the danger level based on the particulate matter in the air, so you can judge your day accordingly. A tool that I use every day, all summer long. Use it to plan my trips, because I don’t want to be in the middle of that smoke choke, when I’m backpacking. Anyway, that’s the tool. Let’s talk about the three big things. Number one, moisture conditions in the Rockies, specifically the Western Rockies. As you move up elevation, the land becomes more arid because the air density is lower, so it can hold less moisture. 

What that tends to mean is that as you move up, you get into a more and more arid environment where conditions can change very, very quickly from maybe adequate moisture to completely inadequate. And you introduce a spark weather through, some asshole with a cigarette or a lightning strike, and you can get a big forest fire very, very quickly. 

Now, this year, the Western Rockies did not get as much moisture as they normally do. So they started out the season pretty dry. And already in western Colorado, we have a series of fires that collectively are about 200,000 acres and going. And most of the air quality issues we’ve had in the Denver area so far this year are because of those fires. 

About the only good point I can say about these fires is because of the nature of the topography. Mountainous. Sometimes it’s difficult for the fires to jump from one valley to another, and they tend kind of, sort of to be somewhat self-contained. However, these are rugged areas. There’s low population density. It’s very difficult to fight fires in these areas. 

And so if a fire does start up, they tend to burn until winter. And sometimes they’re not completely out until after Christmas. So these are kind of a chronic issue that kind of needles air quality throughout the Rockies. That’s number one. Number two Canada. Okay. So Canada is a very weird place, topographically speaking, is a huge country with lots and lots of climate zones. 

But the one to watch the most is an area called the muskeg, which is a zone in northern Saskatchewan, in Manitoba, going over into the Canadian Shield, into western Ontario. These are areas that are almost completely unpopulated. And in the wet months they’re basically swamps. But if you have several months of low rainfall, the swamps start to dry out. 

And as soon as that happens, all it takes is a spark and you can basically get some sort of surface peat fire almost that can burn, burn, burn and burn. At the time that I’m recording this in the middle of what is this August, there are over 200 fires burning in this section of Canada. In many ways, it’s more dangerous and more problematic than what we have in the Rockies, because these zones are not mountainous. 

And so if you have an area that has become parched, it can just burn and burn and burning, burning, burn. And if you remember back in July when we had really poor air quality as far south as Kansas City and as far east as New York, almost all of that was because of these Canadian fires and because it’s swamp part of the year, and because it’s basically frozen tundra part of the year. 

These are not things where any sort of mitigation can really help. In the Rockies, you can go through foot by foot, acre by acre, clear out the Deadwood cut down the dead trees, haul it all off, put it into piles or whatever. That’s something I’ve done on my property for sure, because I live in a fire zone. You can’t do that. 

And the great untouched barrens of northern Canada, you just have to suffer through the fires and it’s going to be a bad fire. You’re up there. So for those of you in the Upper Midwest and the northeast part of the United States, expect more and more waves of smoke. All right. What’s the third one? Pineapple express? There are things called atmospheric rivers where you basically get channels of high altitude winds that suck moisture out of the oceans, and they just push them across the planet. 

And when these channels hit a mountain range, they rise and they drop a lot of moisture. So what we see in California, Oregon, Washington and British Columbia is the atmospheric river whips around like a fire hose at the firemen has lost control of, and it will spray the area with massive amounts of rain in some years or in other years, it’ll miss you completely and you’ll just kind of get the suction effect. 

And as the wind goes down the other side of the mountains, you get a compression effect, which actually increases air density and temperatures and makes you more prone to fires. So you get these two extremes. You get sprayed down by the atmospheric river hose, or it avoids you completely and just sucks the moisture along in its wake. Drying you out this year is absolutely a hose year, and so we’ve seen almost no fires up and down the Pacific Northwest. 

But if you remember back to say, the year 2000, when it seemed the world was going to end, that time we actually saw the Amos River avoid this region completely desiccated. And we had some of the worst forest fires in recorded history. So for me personally, going to Yosemite and a couple of days, this is perfect because while there are fires in Canada, I’m not going that direction. 

There are fires in western Colorado. I’m leaving that area. I’m going to California, which has now experienced some of its best moisture conditions in several years. The chances of fire are minimal for the rest of you, fire air now.gov and keep ahead of it.