The One Road Propping Up US-Mexico Trade

image of Interstate 35 running through Austin, Texas at night

Everyone grab your favorite road trip snack and pick out some good tunes, because today we’re talking about the increasingly important I-35 corridor.

Since mountainous terrain restricts rail transport through Mexico and the Jones Act makes water transport expensive and complicated, I-35 acts as a key US-Mexico trade route. This runs from Mexico City, through Texas (hitting lots of the big cities along the way), then up through Kansas City, and even connecting to other regions from there.

With Mexico’s growing role in North American trade, the I-35 corridor has become one of the most significant trade arteries in the US. While investments in rail infrastructure and reforms to the Jones Act would make transport between the US and Mexico more efficient, the I-35 and its trucks will continue to play a major role until that happens.

Prefer to read the transcript? Click here

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.

Learn about medshare here

Transcript

Hey everybody. Peter Zeihan here, coming to you from Austin’s hiking bike trail around Ladybird Lake, or Town Lake for those of you who haven’t been here in a while. Today, we’re going to talk about the Interstate 35 corridor, which I would argue is the most important transport corridor in the United States. The issue is one of geography.

It’s not so much that the U.S. and Mexico are each other’s largest trading partners; it’s how you connect the two. Mexico is a very, very rugged area, so doing large-scale rail transport isn’t really economically viable. If you have a one-quarter of one degree increase in the slope of your rail line, you can only handle about half the cargo, and the spine of Mexico, basically the northern middle half, is all mountainous. Most of the population, within Mexico City for instance, lives over a mile and a half above sea level. So, getting the sort of rail capacity you’d find in the American Great Plains or Midwest just isn’t possible in Mexico. That leaves us with truck transport.

In the United States, we have a similar constraint, but it’s due to policy rather than geography. The U.S. has the largest natural navigable waterway system in the world, but because of the Jones Act, we don’t fully use it. We’ve basically made it nearly impossible, quadrupling or more the cost of water transport by saying that anything connecting two American ports has to be on a vessel that’s American-owned, -built, -captained, and -crewed. This policy again pushes us toward using trucks.

And that’s where I-35 comes in. I-35 is basically the transport artery that begins in Mexico City, runs up to the Texas border, hits three cities in the Texas Triangle—San Antonio, Austin, and Fort Worth—and then goes up to Kansas City, with offshoots along the way toward the east and west coasts. Eventually, once you get up to Kansas City, there are also routes going north to places like Des Moines, Duluth on the Great Lakes, and further west toward the Canadian prairie provinces.

So, everything is essentially shipped by 20-foot container units, rather than by rail or water, which would be far more efficient. Until we figure out a solution for a road system that, in most places, is six lanes or less, we’re constrained on how much we can do within the North American system. The smart play would be to invest $1 trillion in rail infrastructure in Mexico and to amend the Jones Act so that the Mexicans could ship stuff to Veracruz and then up through the American waterway system. But until then, we’re stuck with this system—ergo, traffic at all hours.

Oh, and one more thing: I-35 is just around the bend of the river here. The second biggest, most important trade artery in North America is on the opposite side of the country, where Ontario meets Michigan. The Ambassador Bridge between Windsor, Ontario, and Detroit, Michigan, was until very recently the most important trade way, primarily because of the automotive trade, and it remains incredibly important today.

I’m not suggesting that it’s gotten any smaller—it hasn’t. But Mexico has overtaken it by a significant margin in the last ten years.

Counting (Lithium) Chickens Before They Hatch

Photo showing trucks at a lithium mine

Some new advancements in AI and geology have revealed a massive lithium deposit in Arkansas’s Smackover Formation (great name by the way). While this is good news, we still have a lot of work to do before this lithium sees the light of day.

Traditional methods of lithium extraction aren’t going to work in Arkansas, so Exxon is pioneering a chemical extraction process, which is showing promise. Again, we’re early stages in what this will look like, but it has solid potential.

This deposit might not solve the demand EV’s are bringing about, but there is huge potential to improve grid storage. This would allow excess renewable energy to be stored, addressing rising energy demands in the US. Again, this is still early on, but energy storage could be transformed by 2030.

Prefer to read the transcript? Click here

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.

Learn about medshare here

Transcript

Hey everybody. Peter Zeihan here, coming to you from Portsmouth, New Hampshire, which is not only disturbingly pleasant—I mean, it’s kind of surreal—but there are more good food options within a two-block radius than in the entire Denver metro, which kind of pisses me off anywho. I’m here near Market Square, and today we’re going to talk about the new…

Well, it’s not all that new, but the popularization of the lithium deposit that was found in Arkansas. Now, like I said, it’s not new. This is called the Smackover formation, which is a great name. I want to buy a drink for whoever named it. Anyway, it’s been producing bromide for the better part of a century, so the geology is reasonably well known.

What has happened is one of the breakthroughs with AI is being able to look at the geology from new angles, and correlate it with updates in understanding for mining and geology that have come in the decades since. And they think that there’s more than enough lithium there to supply global supplies for like a factor of nine or something. Ridiculous.

Now, I don’t want to overstate this, because just because the lithium is there doesn’t mean it can be harvested. For example, 90% of the oil in the world that we are aware of will never be able to produce. It’s too deep, it’s too technically challenging, the bits are too small—whatever it happens to be. But in the case of the Smackover, in specifically the Arkansas part of it, there’s already production in this zone, and it has been for decades.

Just not for lithium. Quick review of lithium production. There are two types: you’ve got rock formations and rock mining, which is what dominates in Australia. It’s a little bit more expensive than the other method, because you actually have to pull the ore out of the ground and grind it up and process it to extract the lithium from everything else.

But it is a relatively quick way of doing it, even if it is involved. It’s rock mining, so, you know, you’re going to have all the tailings, you’re going to have all the processing issues, and all the at-long costs. It’s energy-intensive—all that good stuff. Second, you have brine mining, which is what they have in Chile.

There, there’s a subsurface water source that is rich in dissolved lithium. You pull the liquid out, you pour it into an evaporation pond, and over the next 18 months, you, you know, basically wait for it to concentrate. So it’s cheaper than rock mining in Australia, but there’s a really long lag time, and you need a specific sort of surface.

Up on top, in order to do the extraction.

So the Atacama Desert in Chile is one of the driest parts of the world, and the mines are about 7,500 ft. So you have a lot of sun, you’ve got a desert, you’ve got low vapor pressure, and it still takes 18 months to concentrate the brine down to something that can actually use. In the case of all, in case of Arkansas, it is a brine formation.

The Smackover. But you’re talking about a state where the highest point in the entire state is like 2,500 ft, and where the mines would be, they’re significantly lower. And you don’t have the large, flat, dry areas. Arkansas is pretty humid, so doing traditional evaporation is just completely a no-go. And if that was the only technology in play, this wouldn’t work at all.

But it’s not the only technology in play. There is a relatively new method for lithium extraction from brine, which is basically a direct extraction that uses chemical catalysts and similar things to extract the lithium from the water. Now, the concentration in Arkansas is about 300 mg/L versus 400 mg/L in Chile.

So the Arkansas deposit isn’t as good in terms of quality as a Chilean one, but there’s a lot of infrastructure in place already, and Exxon is the primary company that is involved. And, you know, Exxon doesn’t pull things out of the ground unless it thinks it can make money. And so it has pioneered this direct extraction technology in a number of test wells already on site in Arkansas.

So the only thing that has really changed is that we’ve had this new AI model saying that there’s a lot, a lot, a lot, lot more than we originally thought. And in the next three years, Exxon expects to have first commercial volumes. Now, they’re not telling us what “commercial volumes” are, so we’re going to have to wait and see.

But, one of the things that has been a limiting factor on a lot of the green transition is batteries, and I have not made any secret of my general opposition to lithium use in transport, because it’s a horrible battery chemistry. It charges too slowly. It discharges too slowly. It heats up and swells. It’s just a bad idea to put on something that moves.

But if you were to make a lot of small- to medium-sized batteries, put them in series, and just put them in a building where the heat and the swelling could be maintained or even harvested, you could use it for grid storage very, very, very easily. So this isn’t going to revolutionize the world of EVs, but it might, if it works, revolutionize the world of electricity.

One of the problems we’re going to have in the United States over the next ten years is as the Chinese system vanishes from the world, we’re going to have to expand our industrial plant. That means we need at least 50% more electricity generation than we currently have. And until and unless we can build the infrastructure to link the entire country together so that anyone can generate power anywhere and send it anywhere else—which is a tall order.

The easier patch is to put a lot of batteries in a lot of places, so that during periods of high supply and low demand—for example, solar shining during the day—you capture the extra and then use it at night. Everyone’s asleep at night. You burn your natural gas at night, when normally you would cycle. Now you just pour that energy into a power, into a battery pack, and then you use it during the day.

You know, you could use this in any possible grid if we can produce enough lithium at a low enough cost. And I have to say, between the engineering, the technology, and the geology, this does look promising. Just keep in mind: first commercial production, 2027, which means first large-scale batteries, 2030. This isn’t going to solve everything overnight, but it’s a very promising step in the right direction.

My Favorite US President of All Time Is…

Many of you have asked who my favorite US President is, so I figured I would do a video covering that. And we don’t have to go too far back, just to number 41 – George H.W. Bush.

He had the right skills for the job (thanks to experience as a congressman, ambassador, CIA director, and VP) and he navigated a changing (and globalizing) world in a way that sustained American dominance, improved the human condition, and helped manage the dissolution of the Soviet Union.

Since “Poppy” lost his re-election, we’ve seen a series of narcissistic presidents, leading the US down a more isolationist and protectionist path. The window to reshape the global order is closing for now, and it will be a few decades before the US and the wider world is ready to try it again.

Prefer to read the transcript? Click here

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.

Learn about medshare here

Transcript

Hey, everybody. Peter Zeihan here. Coming to you from D.C. That’s obviously the Washington Monument behind me, one of the handful of things not covered in scaffolding at the moment. Considering that the election is almost upon us, I decided to take a question from the Ask Peter forum on the Patreon page and answer: who is my favorite president and why?

And that’s a no-brainer. That’s George Herbert Walker Bush. If you consider he was president at the end of the Cold War and helped manage the decline of the Soviet Union without a shot being fired in our direction, isn’t that enough to make him a great president? But think about what it was he tried to get us to do.

He wanted us to have a conversation with ourselves about how we take the Cold War alliance, the globalized system, and play it forward for another generation of American preeminence, while also aiming to improve the human condition. And if you think about what he inherited, that was pretty bold, because the whole idea of globalization was that we needed a world full of allies to be on our side against the Soviet Union. To do that, we created the global structure and used our Navy to patrol the global ocean so anyone could trade with anyone else without even a military escort.

Basically, it would be like every single country won World War II all by themselves and could dictate the terms. Free commerce, and the U.S. allowed everyone to do that. Having those assets in play when the Soviet Union finally fell presented the ability to create a new human condition on a global basis, and he was the right person to do it. Not only had he just come from the White House—not just for two years as president, but eight years as vice president—he had served in Congress as an elected representative.

He’d been an ambassador to China, run the CIA, and was on a first-name basis with everyone in the world who mattered. He was the right person in the right place at the right time with the right Rolodex, asking the right question. So, of course, we voted against him, threw him out of office, and started down a parade of relatively or increasingly narcissistic leaders.

The six we’ve had since then include definitely four of the worst presidents we’ve ever had in American history. I’ll let you guys debate among yourselves who the two exceptions are. But it was a missed opportunity. And now, today, that opportunity has probably expired. The United States has not just simply turned sharply isolationist and protectionist on both sides of the political aisle, but the nature of the world has now changed to the point that doing any sort of broad reboot is not possible.

Thirty years on, we’re all 30 years older. Most countries have terminal demographics, and the moment we had to reshape everything has passed. So we’re going to have to wait another 20 or 30 years for all of this to shake out. Hopefully, at the end of that period, we will have another president similar to Herbert Walker Bush who is willing to ask us that question again.

And maybe this next time, we’ll choose to answer. 

Undocumented Immigrants’ Impact on US Labor and Economy

Photo of an immigrant in a strawberry field

As of late, the topic of illegal immigration is getting as much airtime as Brittney Spears did in the early 2000s. And I hate to burst your bubble, but all those undocumented immigrants are probably doing more good than harm.

Without the influx of ~2 million undocumented immigrants in 2023, labor shortages would have likely caused higher inflation. As the baby boomers retire and the US needs to re-industrialize, labor needs are skyrocketing; this will be putting a heavy strain on industries like healthcare, construction and agriculture, areas where these undocumented workers are heavily employed. Simply put, without these workers, the US economy would be hurting.

Policymakers have obstructed and neglected meaningful immigration reform since the 80s. However, if we could modernize this system (which would take some political creativity currently lacking in DC), we could realize the full benefits of these immigrants minus the constant political bickering.

Prefer to read the transcript? Click here

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.

Learn about medshare here

Transcript

Hey, everybody. Peter Zeihan here. Coming to you from Austin, Texas. And today we’re going to talk about everyone’s favorite topic this election season: illegal migration. I’ve no doubt on record saying that if the United States hadn’t had the wave of illegal migration that it had in calendar year 2023—about 2 million people—we’d probably be dealing with inflation north of 8% by now.

So I figured that’s worth a bit of an explanation. In most labor markets, you’ve got a degree of liquidity where workers can move from one subsector to another based on the economic moves and remuneration of the day. But for that to work, you can’t be headed states. You see, here in the United States, the baby boomers are in the process of retiring.

Two-thirds of them have already gone. So we have a labor shortage. In addition, the United States is in the midst of a massive re-industrialization wave as we prepare for the end of the Chinese system. Basically, if we want manufactured products, we have to build it ourselves. So demand has never been higher, and supply has been curtailed. We no longer have that pool of labor that can shift from one thing to the other or be tapped and tracked in terms of building booms.

And so anyone who is removed from the system immediately generates a pulse that goes through the entire network, driving prices higher. So yes, there are 2 million people who crossed illegally last year. Most of them are in the workforce, most here in Texas. As for the folks that are residing here illegally, which, based on whose numbers you’re using, are somewhere between 7 and 14 million.

That’s another huge chunk of the labor force that actually outnumbers the number of folks the United States has who might theoretically be looking for jobs. Unemployment in the United States is below 4%; we’re at historic lows right now. So if you were to remove some of the people who are working, we’d feel it immediately. Now, not all jobs are equal.

These illegal migrants do tend to cluster in three general categories. The first one is health care, particularly when you’re talking about something that’s on the edge of a janitorial job, you know, moving people, clearing bedpans, that sort of thing. The second is in construction, especially industrial construction, because, remember, the United States needs to double the industrial plant.

That doesn’t happen without building a lot of stuff. And third, and finally, agriculture, particularly in fresh foods, whether it’s vegetables or tree fruit. These last two are jobs that Americans just don’t want to do, won’t do, or can’t do. They’re hot. They’re heavy, outdoorsy work—certainly not the sort of stuff that today’s youth, especially Gen Z, is really interested in.

And so that just leaves us with the illegal labor pool. If you were to remove that labor pool, we wouldn’t be able to harvest any of our fruits and vegetables. So say goodbye to most of the produce in grocery stores. We certainly wouldn’t be able to build new homes or new industrial plants, so say hello to dependence on China until China is gone—and then you just don’t have stuff.

And if you don’t want to clean your own bedpan when you go into the hospital or retire, well, then, by all means, be against migration. The question, of course, is whether we can amend our legal structure so that we actually have an updated immigration system to process these people in a way that we find a.

At the moment, we haven’t had meaningful immigration reform in this country since the 1980s, and folks on both sides of the political aisle have taken steps at multiple points to prevent that from happening. So if

you were to wave a magic wand to make this all work better, you’d find a way to induce the would-be illegal migrants to actually collaborate with the system.

And that’s a very different sort of legal structure and enforcement and would require a degree of policy creativity we just have not seen in the White House or in Congress for quite some time

Can a BRICS Currency Replace the US Dollar?

A photo of US one dollar bill

I’ve said it before and I’ll say it again, the US dollar ain’t going nowhere. There’s simply no other currency with the volume or liquidity to fill the shoes of the dollar.

Everyone seems to be obsessed with a BRICS currency takeover, but even at the BRICS summit they shot that down. A euro replacement was possible at some point, but the financial crises and close sanctions coordination between the US and EU shot that option down as well.

Even the country who would love to see the US dollar fall more than anyone – Russia – can’t function without the US dollar. So, if anyone is telling you to get rid of your USD, you can politely tell them to kick rocks.

Prefer to read the transcript? Click here

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.

Learn about medshare here

Transcript

Hey all, Peter Zeihan here coming to you from Palm Springs, California, one of the less natural places on the planet. It’s only just happened to just. Hilarious. Okay. It’s no surprise that I am kind of a, I don’t know, bulls. The wrong term. That makes it sound like a financial play. I don’t think the U.S. dollar is going anywhere.

And I think the debt situation in the United States, while not my ideal, is not the thing that’s going to tear down the U.S. dollar at all. In fact, there is no currency out there in the world, that can replace the United States in terms of volume or liquidity, no matter what the country or theory happens to be.

And something that really drives that home is now happened within the BRICs alliance. BRICs Alliance, wrong word BRICs organization. It’s not even that BRICs association. There we go. Anyway, there are some folks who think that BRICs is going to ultimately displace the U.S. dollar system in the global trading system and usher in a new world where the United States doesn’t exist, or some other.

Not since. But let’s talk about what happened in the last two summits. So 1st November of 2023, the summit in Johannesburg. In their opening statements, the South African, Indian and Chinese delegations all said they have no interest in the US dollar being supplanted. They have no interest in a BRICs currency. And will everyone please stop asking them? The concept that the US dollar is going away is largely one that is constrained to the the fringes of the US financial world with people looking for some new bizarre investment play.

It really hasn’t gone beyond that. Certainly countries haven’t signed on to alternatives, largely because they really aren’t any. The biggest one would have been the European euro. But when they started using insured banks deposits to pay for bailouts 15 years ago, everyone got out of the euro. So now it’s a regional currency. And in the aftermath of the Ukraine war, when the Japanese, the Europeans and the Americans started to basically coordinate all sanctions, European policy and Japanese policy on most big currency issues became a subset of whatever the US Federal Reserve and Treasury Department were doing, so that even that small window has passed.

But the really hilarious thing happened in Russia this past week, at the most recent BRICs summit that the Russians were hosting. And remember that the Russians are the most anti-American country in the world. And if there ever was going to be somebody who would actually be willing to pay through the nose to create something that bypasses the dollar, even if it doesn’t do them any financial good, it would be the Russians.

So they’re going to have everybody coming to Kazan in central Russia for this summit to talk about all the ways that the Russians want to move away from anything that the United States touches. But on the topic of currency and the prep materials that were sent out to all the delegates were reminders that Russia is under sanctions. So don’t bring your visa or Mastercard.

They won’t work. There may be a handful, like single digit number of places in town that will use a Chinese charge card, but we really don’t like that system either. So you really shouldn’t count on that. You’re gonna have to use cash. However, it’s really hard to get rubles outside of Russia these days. Again, sanctions. So what you need to do is come with hard currency.

And the only two hard currencies that Russian banks will now accept are the U.S. dollar and the euro, because we desperately need their own country in order to maintain any sort relations with absolutely anyone. So bring your euros, bring your dollars, and when you can change them for rubles when you get here. So you can actually spend money, but you won’t be able to change them because we need the dollars.

Oh.

Oh, good. The fact that people still think that the dollar’s going away. I just, Anyway, there may have been more to that, but honestly, I’m just laughing too much inside. We’re just going to call that a day.

US Regions of the Future: Texas & North Carolina

We’re busting out the trusty ole crystal ball today, and looking at the two US regions most poised to succeed in the coming decades. I’m guessing it has something to do with the BBQ they’re eating, so yes, we’re talking about Texas and North Carolina.

The Texas Triangle is the region to watch in Texas; this is made up of DFW, Houston, San Antonio, and Austin. This places have already seen huge growth in the past 30 years – partially thanks to integration with Mexico – and that growth is set to continue. With Houston covering energy, Austin managing tech, San Antonio on top of manufacturing, and DFW financing everything (and don’t forget no income tax), all the bases are covered. They just have to worry about the high temps and urban sprawl.

North Carolina is one that you don’t see in the headlines often, but don’t let this sleeper state fool you. Given the ample space for new industrial plants and its already developed corridor of Charlotte-Greensboro, North Carolina has all the bones to be a production haven. They’ll have to figure out the money side of things, but I’m sure New York and Boston will have no problem tossing them a few bucks to help meet their production needs.

Prefer to read the transcript? Click here

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.

Learn about medshare here

Transcript

Hey everybody. Peter Zeihan here coming to you from the Trinity River Greenbelt in the heart of Dallas, Texas. Today we’re gonna do a little bit of a compare and contrast of the two parts of the United States that economically, I think are going to do the best. The first one, of course, is Texas, specifically an area called the Texas Triangle, which includes the four great Texas cities of Dallas, Fort Worth, Houston, San Antonio, and Austin.

Now, this is a part of the country that has done exceedingly well for the last 30 years. It has taken advantage of the fusion with Mexico to basically generate like one third of the total economic growth the U.S. has experienced. Mostly, that’s just the integration of Texas and northern Mexico. Houston is, of course, the energy town and the Permian Basin and the Eagle further right here.

So they will never have, a problem with energy supply. Austin is a tech center, which is where Silicon Valley sends all their new designs. And Austin figures out how to make it work. Those, once they make it work, it they go to San Antonio and Dallas for the mass manufacture in Dallas is in addition to being a manufacturing center, it’s also arguably the second or third biggest financial center in the United States.

It’s also in terms of spatial land and population growth and the fastest growing city in the United States. These are all trends that are likely to continue for at least the next 30 years. And as the United States needs to restore jobs and gobs and gobs of manufacturing, this is definitely the region that will benefit from these changes the most in absolute terms, with it basically being a Duke out between Dallas-Fort Worth and Houston, I’ve seen who’s the top city and who’s number two and number two still a pretty good position.

The only downside of it, as you may have guessed, is that, you know, this is not a walk friendly city. Dallas, all of the Texas cities have expanded hugely over the last 30 years, and they’re having all the growing pains that come from this. And just getting to this green belt was a bit of a chore. Also, it is October 2nd.

As I recording this, it’s already 85 degrees at nine in the morning. We’re hit 95 today. So these in many ways are becoming indoor cities, especially Houston, where for large portions of the year you just don’t want to be outside. So there’s definitely a quality of living issue. But they make up for it by having no income tax.

So you know you got to choose, the other state, which I had hoped to record, the other half of this video from is North Carolina. Unfortunately, it was raining the entire time I was there because of Hurricane Helene. And when we finally got a break and I went outside, I got stung by a bee before I got more than a 10th of a mile from my hotel.

So I took the Q and A recording. The North Carolina function from here. North Carolina is not a state that a lot of people think of when they think of industry. I mean, you know, it’s got more than 10 million people. It’s got a reasonable chunk of population. But the coast of North Carolina isn’t that great for ports.

And so it’s never been thought of as kind of an inroad X road ingress egress sort of trade hub. Also, you’ve got the much more dynamic economies and larger economies further to the north of the south. Atlanta obviously is a bigger city than anything that the North Carolinians have. And if you go north, you don’t just hit, the greater DC area, you hit Megalopolis.

So we always kind of forget about North Carolina in the middle, but in the world we’re moving into, the United States needs to double the size of the industrial plate. We are seeing that in Texas on a very daily basis. But in the case of North Carolina, the advantage is that the northeast can’t do it. Like I said, 100 million people, they don’t have much brown space.

They don’t really have green space at all. And they’re still going to need product. So they are going to be looking around for places to invest in physical plants in order to build the stuff that they need. The first stop is Virginia, and I’m not suggesting Virginia is going to punch well above her weight, but Northern Virginia is incorporated into the DC sprawl.

There’s no room there for a lot of industry. Richmond is great. Love Richmond, but it’s on its own. And until the Jones Act is repealed, the Chesapeake is a body of water that should be an industrial powerhouse, but isn’t because we’ve made it impossible for shipping among the Chesapeake communities. And so it’s basically a near rural region, which means your next chunk of population centers, if you go west, you hit, Pennsylvania.

And, you know, you’re probably going to see some build out there of the former, Rust Belt. But really it comes down to North Carolina and the, options kind of come in three phases. The first phase is a corridor that already exists, and that’s the kind of northeast or southwest corridor between Charlotte at the south end and the triad cities of Greensboro, High Point and Winston-Salem at the north.

This is an area that is very well developed, has a lot of infrastructure that’s in very good shape and basically there’s endless room for industrial parks up and down the entire corridor. In the second phase, you can link this first quarter up with another quarter that’s further east. The Fayetteville, Raleigh, Durham corridor. And basically you get this parallelogram that looks a lot to me in shape and structure, like the Texas triangle.

And the space in between is pretty much easy to develop. And even if that’s not enough and that’s a lot a little bit further east, you’ve got some areas that are kind of cut through with rivers and the North Carolina. So try not to think about that because it’s the poorer part of the state. But the potential industrial space there, the worst of it is better than the best in the northeast.

The only problem that the North Carolina is going to have with this is the capital, build out the industrial plant, but that’s where New York and Boston and DC and Connecticut and the rest of them come in because their choice is to not have product or to help the North Carolinians help there. So in absolute terms, Texas definitely far and away the winner here in relative terms look to North Carolina.

My Recent Interview On Borderlands + Patreon Info

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From the video description:

In this episode of Borderland, Vince sits down with renowned geopolitical strategist Peter Zeihan to dive into the complex realities of immigration, U.S. policy, and Mexico’s uncertain future.

Peter breaks down what both the left and right get wrong about America’s immigration debate, and offer his perspective on the models that could reshape U.S. policy. He also takes a hard look at Mexico’s new president and the growing threat driven by cartels.

He is also the New York Times bestselling author of The Accidental Superpower, The Absent Superpower, Disunited Nations, and The End of the World Is Just the Beginning.

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Patreon Live Q&A + President Biden Is Making a Trip to Angola

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President Biden is making a trip out to Africa (since recording, this trip has been postponed due to national weather issues). No, he’s not going on safari; he’s looking to shake some babies and kiss some hands over in Angola.

During the Cold War, Angola buddied up with the Soviets. Despite the conflict of interest, American oil companies still helped Angola make oil for Europe. Play that forward to the present, and Angola is producing around 2 million barrels of crude per day. And while that’s something, the US has its oil needs covered, but the Angolans still have something the Americans need.

Angola provides a gateway to the mines in Africa rich with minerals and natural resources, and the US would love to get a key to that “gate”. So, the US is investing in things like railway infrastructure, in order to help these resources funnel directly to the US or Europe.

The US isn’t the only interested party though. Angola is encouraging foreign investment and benefiting from the competition. Biden’s visit highlights how committed the US is in developing these ties with Angola and securing a supply chain for these resources.

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Transcript

Hey, everybody. Peter Zeihan coming to you from Washington, D.C. That smell of auditorium behind me. Today we’re going to talk about an upcoming trip that Joe Biden has to Angola. Now, during the Cold War, the United States and Angola were definitely on opposite sides. There was a civil war there that the Soviets and the Cubans and later the Chinese were supporting.

On one side, we were supposedly on the—oh, hello, that’s a big-ass squirrel that seems to think I have food for it. Anyway, during that time, the Americans were on one side, the Soviets were on the other side, and American oil companies were helping the Soviet-backed government generate oil that was then sold to Europe.

And, you know, Cold War, weird stuff. Anyway, bottom line is that the Cold War is long since over. Americans are saying bygones, and the Angolans are a little curious as to the details, but they’re open to some sort of a deal. It’s not that Angola is all that important to the United States for its own sake.

I mean, yes, they produce one and a half to two million barrels of crude a day, but the U.S. is the world’s largest refined product exporter now and the world’s largest crude producer. So it’s not like we need it for us or even for our allies anymore. The issue has to do with mining. Africa is kind of the great frontier for large-scale mining, particularly on a belt of countries going from Congo south.

This is the old Cecil Rhodes group. Cecil Rhodes is the guy who basically founded modern South Africa. And from the copper belt in southern Congo, there’s a series of collection railroads that link together and form a spine going down Zambia, Zimbabwe, Botswana, and ultimately reaching the better ports in South Africa. Well, there’s something called the Benguela roadway or the Liberta corridor that cuts across Angola to the Atlantic that intersects this line.

And ever since apartheid ended in South Africa, the government has become increasingly dysfunctional, and the maintenance on the main spine railway has steadily degraded to the point that it’s pretty rough in a lot of places. So the idea the United States has is if we can rehabilitate the Liberta corridor and rebuild the Benguela Railway, which dates back to the Portuguese occupation a century ago…

Oh. Then there’s another route for this stuff to get out, and it would be going to the Atlantic instead of the Indian Ocean basin. And that’s closer to the United States and Europe, as opposed to China. So it’s become a bit of a tug-of-war that the Angolans are encouraging, because everybody’s spending infrastructure money in their country.

And the people who won the civil war, the pro-Soviets, are a minority. So now we have the group that the United States used to support, which is closer to the majority. That’s kind of an oppressed population. So once again, there’s all kinds of weird geopolitics going on in this southwest African nation. At this point, building a railway is pretty straightforward.

The United States is basically invested in this project as one of its bigger overseas aid projects, and it’s probably going to be completed and operational within a couple of years. Too little, too late? Time will tell. But the country is very much in play. And so, of course, Uncle Joe’s going there.

How a Small Town in NC Could Disrupt Global Semiconductor Production

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We’re hitting the backroads today and chatting about the small town of Spruce Pine, North Carolina. What this town lacks in population, it makes up in its (extremely important) quartz mines.

These mines in Spruce Pine play a critical role in semiconductor manufacturing, thanks to the very pure quartz found here. This pure quartz is used to make the crucibles in which silicon is melted down without contamination. And no this isn’t just one of the many places that has this stuff…Spruce Pine accounts for an estimated 70-90% of the world’s crucible-grade quartz.

Hurricane Helene has put these mines in jeopardy with the heavy rains and flooding that hit the area. This has shut down the roads and the mines, and recovery efforts will be stalled until the larger towns are taken care of. This means the mines could be out of commission for a while, impacting the supply chains for the semiconductor fabrication plants.

We’re not in the red-zone yet, since most facilities keep a decent reserve on hand. However, if the production of this high-quality silicon is affected, we could be looking at major disruptions down the road.

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Transcript

Hey everybody. Peter Zeihan here, coming to you from DC in the National Mall. And today we’re going to talk about a little bit of hurricane damage that you probably were unaware of. Specifically, the town of Spruce Pine, the town of like 2300 people in western North Carolina. And the issue is that this is a town that produces sand. So roughly 150 million years ago, as Southerners tell time, there was a series of non-volcanic intrusions into the area that is now part of the Appalachians.

And we got all of these feldspar, quartz, and mica deposits. Until recently, the feldspar is what everybody was after. So you’ve heard of Pyrex? Feldspar is used in the high-quality glass that they produce, but the rest of it, especially the quartz, was basically used as concrete aggregate in construction and local road production. Nothing special. Then the semiconductor sector took off.

Well, it’s getting really weird and moving behind some of the construction equipment that is everywhere in DC right now. Anyway, then the semiconductor industry got started, and semiconductor is made primarily of silicon, and silicon is basically just processed quartz. What they discovered was that the type of quartz that exists in the Spruce Pine mines was so pure that it could be melted into something called a crucible, which is basically a little bowl.

The crucibles then could be used to melt other, lesser-quality silicon. You have to do the melting in a very, very, very, very high-quality crucible, otherwise the crucible will introduce flaws and other materials into your silicon, and then you don’t get the electrical properties you are after. The sand that comes out of these Spruce Pine mines is so pure that it is used for 70 to 90% of global crucibles to make the semiconductors.

They also use the other silicon they have there as well. And it’s also very good for that. But it’s the crucible-quality silicon that you’re really after. Anyhow, the two companies control the space. They’re not very chatty when it comes to the details. About 70% of the labor force in Spruce Pine—population 2300—works in the mines.

And the miners are—well, they got two feet of rain dropped on them, which did a significant amount of damage to the mines, although the miners are not telling us what. They’re focusing on helping the people recover, and the people can’t recover because the city is cut off. There is one road out of the mine. It’s been largely destroyed, and it’s going to be at least a month, probably closer to two, before we have some idea of whether or not it can be repaired to a level that allows equipment to come in to, say, pump the water out of the mines.

And this is not a priority for things like FEMA, because Asheville, population 100,000, is also cut off, and it’s on the interstate. So everyone’s going to focus on that first. We’ve got quite a while before we know whether or not the mine has been damaged sufficiently to imperil long-term production of this very specific type of quartz silicon.

As to everybody else, most of the folks that make these things, most of the semiconductor fabs who use this stuff, and most of the purification facilities, probably have about three months of reserves to use. So there’s no immediate disruption from supply, but we’re going to have to wait one to two months before we find out if this temporary interruption is something more significant. And if it is, then all bets are off, because this is where we get almost all of it.

Again, while you can make a crucible out of lesser silicon, that lesser silicon will then contaminate whatever it is you’re trying to smelt, which means that high-grade semiconductor-quality silicon will not be available in sufficient quantities to do more than a third of what we currently expect our semiconductor industry to create. That could be a very big deal. We won’t know for a couple of months.

Longshoreman on Strike: US Ports Get Shut Down

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Back to the picket lines we go…this time with the longshoreman. Ports across the East and Gulf Coasts of the US will impacted by the strike, disrupting nearly two-thirds of the imports and exports by water.

European manufacturers are going to take a hit on this one, along with the US agricultural industry. We’re not just talking a couple days sitting in limbo either, even if the strike ends today, we’re still looking at weeks to clear the backlogs.

The unions’ demands on this one are pretty hefty; we’re talking about a 70% pay increase and a ban on automation at ports. In an industry that’s already plagued by slow advancement and limited automation, this ban would set the US way back. On top of that, the Jones Act has exacerbated the inferences of shipping in the US. So, we’re not talking about a duct tape solution here, its going to be a complex one.

There’s always a way forward, so what does that look like? Manufacturers can brush up on their Spanish and become friends with our neighbors to the South and/or they can build some more warehouses and stop relying on just-in-time supply chains. But that’s costly and inefficient, so expect some economic hurdles along the way.

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Transcript

Hey everybody. Peter Zeihan here. Coming to you from Dallas. Oh, humid even in October. Anyway, today we’re going to talk about the longshoremen strike on the East and Gulf Coast of the United States. They’ve been in place for a couple of days already by the time you’ve seen this, and we’re looking at roughly half of America’s ability to import and export.

Close to two thirds by water has been shut down. Basically, every port from Maine to the Texas border with Mexico is in effect, and all the ports are closed. This is going to have an impact far more than the actual time of the strike, which is so far to be determined, because for every day that the strike has shut down the ports, it takes about four days for once they reopen to clear the backlog.

So, if you hear that the port has been cleared while you’re watching this video, it’s still going to be upwards of two weeks before they actually get back to normal. And so, if this lasts through the entire month of October, that will obviously impact the holidays and going into the new year. Now, who gets hurt most by this?

Europe is the short version of all this — Europe and agriculture. So, first Europe. The Asians obviously import and export via the West Coast of the United States, which has a different union structure. Talk about them later. But the European model is different from the Asian model when it comes to interfacing with the United States.

In Asia, they either import finished products. Well, no, that’s the bottom line. They import finished products for the most part. The Europeans bring in all kinds of parts and have them assembled within the United States as much as possible so that they then can get around tariff walls. That means that the parts have to have access.

So most of the automotive industry that is in the East or the West Coast regions that has a European component is doing things that way. And it’s not just automotive. It’s pretty much any sort of manufacturing that the Europeans are looking to source closer to the demographic strike that is the United States. And so without that constant flow of parts, the whole thing gets disrupted.

And that’s going to have a very big impact on employment and economic growth throughout the entire eastern seaboard for the foreseeable future. The second group that gets hit is the United States agricultural system because moving things by water is really the only way you can ship things to the wider world, with the exception of Mexico. And so, everything that comes off of rail, everything that goes down the Mississippi to New Orleans, has to get repackaged onto another vessel — oceangoing vessel — at the port and then sent out, and that has basically stopped.

Now, we are kind of in a lull of seasons, agriculturally speaking, so if this only lasts a couple of weeks, no big deal. But if it lasts a month and we’re talking about all of the grains that are coming out of the Midwest suddenly having very few places to go. All right. How is this able to happen?

Well, the United States has an incredibly stupid law called the Jones Act. And you’ve probably heard me talk about it before because it prevents any cargo being transported by any ship between any two American ports by being transported by anything but a system that is 100% American-owned, captain-crewed, and built. We don’t do this for any other modes of transport.

And if we did, we’d be in a significantly worse economic position than the United States is. But since this law was passed in 1920, we’ve seen the amount of cargo in terms of value per mile that has shipped on our waterways drop by over 99%. There’s also a couple of clauses in the Jones Act regarding port management, which basically makes them all local monopolies.

And unions have taken advantage of this by forming a network of unions. It takes in all of the ports so that when one of them strikes, they can all strike. If this was done in the corporate world, this would obviously be easily illegal. And what the unions are demanding is a 70% pay increase. But the real kicker is they want a guarantee in their contracts that no automation will ever be added.

They want to go with like 1970s, 1980s levels of automation. And already, America’s East Coast ports are among the world’s least functional. There are a number of ports on the African continent that actually are more advanced than ours now. Now, under normal circumstances, what we would do — we, the United States, whatever — is give them everything that they say they want.

And then behind the scenes, work, work, work, work, work to add automation so that this can never happen again. That’s more or less what happened with the Teamsters union on the West Coast. And now, the port of LA has gone from one of the worst in the world in just the last few years to one of, you know, let’s call it above average. Repeating that on the East Coast would be wonderful.

That’s probably not going to happen for political reasons. Not only is this an election year, we are going through our once-every-generation-or-two political realignment in the United States, and the factions that make up our parties are moving around. And one of those factions is organized labor. One of Donald Trump’s political successes was teasing them out of the Democratic coalition, but he has not yet succeeded in folding them into the Republican coalition.

So they’re kind of out there in the wind right now, free agents. And as the Chinese system fails and as the euro system falters, if Americans still want manufactured goods, we have to build them ourselves. Well, that means we need to double the size of the industrial plant. How many of those jobs do you think are going to be?

Blue-collar? Probably 80% or more of them. So we are at the dawn of the golden age of organized labor in the United States, and the Longshoremen’s Union is part of that process. So it’s difficult to see the Biden administration using its executive power — which it does have — to forcibly end the strike before the election. You can’t say it won’t happen, but it’s politically more complicated now than it would have been the last time this went down.

In the 1980s. And so we’ve got a very different situation here, and it’s going to be complicated because neither side really wants to piss off organized labor right now. Now, if you’re a manufacturer, you’ve got two possible solutions here. The first one is the easiest one, and the one that will probably be followed most aggressively: Mexico.

Mexico. Mexico. Mexico. Mexico. Mexico. Mexico. Over 90% of our trade with Mexico is done by truck and rail. It doesn’t touch the ports at all. One of the advantages of having a land border. And so, the Mexican integration with especially Texas, but the United States in general, isn’t being affected by this really much at all. And that’s certainly going to increase the argument that Mexico not only is our number one trade partner but is going to maintain that position for the rest of our lives.

And by “our,” I mean anyone who’s alive today. The second piece is a little uglier, and it’s not ideal. And that’s inventory. We’ve spent the last 40 years in manufacturing going to something called Just in Time. The idea that as you get better with logistics, you can partner with all of your suppliers so every piece arrives at the moment you need it in order to assemble a product.

And by doing it that way, you don’t have to buy rafts of warehouses to keep parts for emergencies. You can just focus on the supply chain. Well, if the supply chain is not reliable because of strikes at ports, you have to go back to something called just in case. And that means stockpiling parts — maybe not at your primary facilities, but along the supply chain route for everything.

And that means probably having four, maybe five times as many parts in circulation at a time. That is expensive. You need to buy the land, you need to maintain the inventory, you need to staff that. You need to have basically twice as much industrial plant dedicated simply to holding things in a box. It is wildly inefficient.

And in the world the United States is finding itself in, it’s very, very expensive because we need to expand our productive capacity, expand our storage capacity. And if just-in-case techniques need to be done, then we have less capital and less labor and less land and less industrial plant available for the things we actually need to build.

But until this is resolved, if you’re a European manufacturer, that’s really your only option.