Things I (Don’t) Worry About: The US Power Grid

WEBINAR – Peter Zeihan’s Risk List: What Keeps a Geopolitical Strategist Up at Night

Please join Peter Zeihan for a webinar on June 5th at 12:00 PM EST on a topic that is near and dear to the hearts of the Zeihan on Geopolitics team: geopolitical risk. This webinar will feature Peter’s reasonable-fear list, focused on issues that in his opinion have the most potential to impact market outcomes.

CLICK HERE TO REGISTER FOR THE WEBINAR

I’ve started hearing rumblings about the American power grid and vulnerability to cyber attacks. Sure there’s been hiccups throughout the years, but this one isn’t keeping me up at night.

Those hiccups I mentioned, such as the post-9/11 power surge, have laid the groundwork for improving the American power grid’s resilience. Through technological advancements, decentralizing power generation, and network segmentation, the American power grid is reasonably equipped to handle most potential hacks. That’s a major pain for the green transition, but shockingly positive for security.

Thanks to the segmented nature of our grid and the quick response plans in place, hacks just don’t pose that big of risk. So no, the stability and safety of the American power grid does not keep me from catching some ZZZs.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Support medshare's ukraine fund
Support medshare's global efforts

The US Places Huge Tariffs on Chinese Imports

An AI generated image of connex boxes with American and Chinese flags on them

Some hefty tariffs have just been placed on many Chinese imports, including electric vehicles, semiconductors, solar panels, and more. This is an attempt to prevent China from dominating industries that the US wants to develop.

China will probably slap some more subsidies on these goods, which will lead to more tariffs and so on and so forth. These Chinese goods might also be hit with some European tariffs, but they’ll likely be smaller and easier to offset with subsidies. The developing world might be in the crosshairs as the next Chinese import market, but some infrastructure buildout will have to happen first.

As China continues along its downward spiral, impacts like these tariffs will have more outsized effects on the Chinese economy.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Support medshare's ukraine fund
Support medshare's global efforts

TranscripT

Hello from Poznan. Peter Zeihan here. Still in Poland. Today is the 14th of May. You’ll see this on the 15th. And the news is that the American administration under Joe Biden has just announced a series of very robust tariffs on Chinese imports, roughly 100% on electric vehicles, about 50% on semiconductors and solar panels on similar levels on a raft of other things. 

the goal, very simply, is to prevent the Chinese from swamping industries that the Biden administration is attempting to develop. this is something that has extraordinarily high bipartisan support. In fact, Donald Trump has already come out in favor because of his style, saying, I would have done even more. and that’s actually kind of on the point. 

the Chinese will respond to this by increasing their subsidies even more, which will force this administration or the next one to again up the tariff levels. Basically, the Chinese government will not be allowed to swamp products of these types and an increasingly wider variety of types into the American market at all. Now, that will, of course, trigger its own counter effects, because the Chinese will then try to put it into any market they can. 

Here in Europe, the question like in the United States isn’t will there be tariffs on Chinese products? But how high? Now, under policies currently under consideration by the European Commission, who kind of the executive arm of the European Union. tariffs are coming, but they’re going to be somewhere between 10 and 40% most likely. And that’s just not enough. 

the Chinese subsidizing of these industries is so extreme that anything less than 100% that the Biden administration has done is really not going to do more than slow things. And if you think Ford and GM have a lot of political pull in the United States, that’s nothing compared to Mercedes and Fiat. And, and Volkswagen. So high, high, high tariffs are coming to Europe on these topics as well. 

The only other place these products can then go is the developing world. But the developing world for the most part, doesn’t have the electrical system that’s necessary to use light electric vehicles. So the Chinese will be able to swamp some of these markets, but not enough to move the needle on where the Europeans versus the American versus the Chinese feel they need to be. 

Now, keep in mind that part of the reason why the Chinese are doing this is in the five years since the Covid started, the Chinese are now realizing that their population has shrunk a lot more than they originally thought. So they no longer have enough people under age 45 to mount any sort of consumption led economic recovery. And with the exception of industrial demand in China the last two years, we’ve really seen no increase in consumption at all. 

the population is simply aged out. So export led growth is all they have, and they’re no longer being allowed access to the American market. And very soon they won’t be allowed sufficient access to the European market as well. 

Much Higher Interest Rates for Much, Much Longer

THIS IS YOUR LAST CHANCE TO REGISTER FOR TODAY’S WEBINAR ON THE STATE OF GLOBAL ENERGY!

TODAY at 12:00 PM EST  Peter will deliver his analysis and forecasts for regional energy production and his assessment of geopolitical risk—everything from war, to instability and regulatory risk—with an eye on challenges and opportunities facing global production and supply.

Click the link below to register!

CLICK HERE TO REGISTER FOR THE WEBINAR

Who doesn’t love spending their morning trying to understand what the Federal Reserve is doing? Oh, no takers? Well, let’s at least look at inflation trends and where I expect interest rates to go.

Thanks to COVID-related supply chain disruptions, inflation has stabilized around 3% (instead of the Fed’s magic 2%). Those baby boomers are also part of the problem. As they age into retirement, capital availability is going to decline and the Fed’s going to have rethink their strategy.

I doubt we’ll see interest rates drop for the next few years, so if you’re planning on borrowing some money…you might want to get on that ASAP.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Support medshare's ukraine fund
Support medshare's global efforts

TranscripT

Hey everybody, Peter Zeihan here coming to you from Colorado. And today we’re going to talk about the Federal Reserve and monetary policy, specifically on the 26th of April, the personal Consumption Expenditures Index, which is the Fed’s preferred measure of inflation, ticked up to 2.7% when everyone’s been hoping that’s going to tick down. the folks on Wall Street are starting to get very thoughtful because they had all bet in the fourth quarter of last year.

In the first quarter of this year, that by now we would have had a half a dozen rate cuts to stimulate the economy. And the Federal Reserve does not seem interested at all. And playing to their preferred narrative. So I thought it was worth going back to understand why we are where we are, and why you should not expect rate cuts probably at all.

If anything, rate increases for the remainder of the next 2 to 5 years. So step one, most of the inflation story that we’ve been experience of late has been Covid related. Every time that we saw a shift in consumption because of an opening or closing or new variant or new vaccine, whatever it was, we changed what we consume in terms of goods.

And every time we changed our consumption patterns, we had to, retool the supply chains to match the new demand. And it’s going to vary wildly by product and by region. But on average, you’re looking at an 18 to 24 month adjustment period before supply chains can catch up to what we want. Well, most of us reopened more than two years ago in California, the last American state to reopen for good, did so just under two years ago.

So for the last two years, we’ve been seeing inflation steadily tick down as supply chains catch up and the goods mismatch and the supply chain mismatch becomes a smaller and smaller feature in the system. unfortunately for the people who want lower rates, well, this has brought inflation down from 9%. We’re roughly ahead of the peak to something closer to three.

we’ve leveled off at three. And while we might have a little bit more to shake out as California fully comes back into the the system, I doubt we’re going to get down to the 2%, which is the ceiling that the Federal Reserve prefers. So we’re probably at what is our new normal, for inflation low. So not new, not our new average.

And unless we have a change in the Fed’s mandate, you shouldn’t expect interest rates to go down below where they are. If anything, you should expect them to go up. now, that requires understanding a couple other things that are in play. one of them is a little petty, and one of them is definitely not. First, the petty one.

The Federal Reserve looks at Wall Street and it says you have been dealing with capital inflows, of a huge volume, and you’ve been fairly irresponsible with them. you’re responsible for the.com crash. You’re responsible for the subprime crash. and we needed ten years to rebuild the financial sector after each of those catastrophes. So if there’s something that people in Wall Street in the financial community think, oh, well, this has to happen.

Well, it has to happen for their business plans. It doesn’t have to happen for the United States. Economy certainly doesn’t have to happen for the real economy. And it certainly doesn’t have to happen from the Fed’s point of view. So there’s probably a certain amount of wry revenge in play when the Federal Reserve looks at what Wall Street wants and then chooses to do something completely different for independent reasons.

The second issue is that there there really are independent reasons. And for that we have to look at demographics. So when you’re 45 to 65, that is when you’re the most capital rich that you will ever be in your life because your kids are moving out, your house is being paid down and you are saving your money for retirement

Also, if you’ve been at your job for decades, you’re pretty good at it. You’re income’s the highest it will ever be. So from 45 to 65 and especially 55 to 65. That is where all private capital comes from. The savings, all of that capital rich group. Well, the largest generation we’ve had in human history are the baby boomers, not just here in the United States, around the world.

The oldest baby boomers hit 45 in 1990, and the youngest baby boomers will hit 65 and retire and liquidate all their money or all their savings at the low velocity investments they’ll retire in 2030. So from Roth early 2000 to 2020, almost all of the baby boomers were in that capital rich portion of their lives. And as a result, capital availability on a on an American basis, on a global basis was the highest had ever been.

Capital costs were the lowest it was ever been. And in that environment, the fed will be the first to tell you that that made American finance really matter, because there is no way the United States could metabolize all of the baby boomer capital. So an entire financial class rose up to take advantage of the trough and to come up with new financial products, to metabolize it and send a great amount of it abroad.

At the same time, the Chinese were going through something similar from 2000 to 2. 2020 is roughly when their economy was firing on all cylinders. And while it’s not based on private savings to the same degree that ours is, they do a lot more monetization, which is a fancy way of saying printing currency, all the gold bugs in the crypto guys, to a certain degree are right that that’s not great, that it puts everything on a sugar high.

But the Chinese central bank is the one that’s guilty of that, not the US Federal Reserve. Anyway, for 20 years we had all this capital just spamming out of the United States and out of China. And Wall Street was necessary. The financial sector was necessary. A wave above bottomless wave of financial professionals was necessary to use all that capital.

And did they get it all right? No, none of us do. Anyway. That wave’s gone. The vast majority of baby boomers are now retired, and the rest of them will leak out of the system over the next five six years, which means their capital is gone. It’s been turned into low velocity investments like T-bills and cash. The next generation down Gen X is small and the next large generation, the millennials won’t be entering that capital rich period for another 10 to 12 years.

And that assumes they do everything on time. And to this point, whether it’s having a kid buying a house or getting married, the millennials have been doing everything about six years late anyway. Bottom line is there’s not nearly as much free capital available, which means we don’t need nearly as large of a financial sector. And so the Federal Reserve is looking at all this.

And they like there’s less capital demand is falling. Our tools are designed to regulate capital on demand. That means we need to find a new model. And in this new model, the financial sector is no longer all knowing, all seen and omnipresent. So the Federal Reserve rightly is concerned about inflation. And now that we’re in a period of deja globalization, we’re seeing demand for American employment.

And American capital in American materials skyrocket as the U.S. steadily and with increasing speed, disentangle itself from global supply chains. And that means building a lot more industrial plant. And it absorbs all of the things that the private sector has always absorbed. But now, to build a fundamentally new infrastructure that’s expensive, that’s a lot of demand, that’s a lot of inflation.

Now, I’d argue that it’s productive inflation because it’s building the industrial plant that we’ll need for the next generation or two. But until and unless the Federal Reserve mandates changes, they’re not going to be able to get to a world of 2% inflation. Certainly not if they lower interest rates. So when people say higher for a longer, they may be thinking about another quarter or two before interest rates drop.

But I say that until this industrial plant is built out and until we have another large capital generating class in their 50s, why higher for longer means another decade before we see any appreciable relief in capital costs. So bottom line, if you’re going to borrow, do it now. Because even today, with capital costs that have increased by a factor of four in the last five years, this is still the cheapest capital you’re going to be able to access until the mid 2030s.

US Birth Rates Plummet To 40-Year Low

The Webinar – The State of Global Energy – is TOMORROW!

Peter will deliver his analysis and forecasts for regional energy production and his assessment of geopolitical risk—everything from war, to instability and regulatory risk—with an eye on challenges and opportunities facing global production and supply.

Please join us on Friday, May 10th at 12:00 PM EST.

CLICK HERE TO REGISTER FOR THE WEBINAR

Well, it looks like there’s something in the water in the US and it ain’t little blue pills. The recent US Census data shows a 40-year low in the birth rate – about 1.6 per woman.

With the birth rate well below the replacement level, there could be huge economic implications that follow. There are plenty of other countries facing similar demographic issues, so the US has plenty of case studies to read up on.

This isn’t the kiss of death quite yet, but it won’t be easy path forward. Between meaningful immigration reform and policies supporting young families to have more children, the US has to make some big changes if they want to stop that demographic timebomb.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Support medshare's ukraine fund
Support medshare's global efforts

TranscripT

Hey everybody. Peter Zeihan here. Coming to you from Colorado in between the snows. it is April 25th. And the news. You’re not gonna get this for, like, a week. I know, I’m sorry. the news today is that, the United States Census has come out with the most recent information on population structure for the United States, and it indicates that our birth rate has dropped to a 40 year low of about 1.6 per woman. 

2.1 is generally considered to be replacement level. And if you add in increases in the death rate in the United States from things like Covid, which killed about a million, 4 million, 3,000,004 people, as well as the rapidly aging and therefore passing the baby boomers. And then on top of that, the opiate opioid epidemic. We really need to be closer to 2.3 or 2.4. 

It’s just too cold. The population where it is. the only other way that you can plug that gap was with immigration. Let’s just say that that is a topic that is somewhat hot at the moment. what does this mean? Well, in the short term, from a demographic point of view, short term is 20 years. From a short term point of view, this is actually pause div for economic growth, because if you have a lot of people aged roughly 20 to 45, which is where the millennials are right now and they don’t have a lot of kids, then the money that they would spend on schooling and buying a bigger house, they can use 

for more furnishings and more travel and more restaurants, and more high octane growth that feeds through the system and has a multiplier effect. this is something that we saw in China in the 2000. This is something we saw in Europe in the 1990s. and you can get some really high quality growth out of it. The problem is that you only do that once. 

And if your birth rate never recovers, then after 20 years, you start eating into your working age population, and after 50 years, you start eating into your skilled worker population as well as your tax base. Then eventually you’ll get to a place like where the Germans and the Koreans are now, where this has now been going on for 60 years. 

And so this is the last ten year period that we basically have a modern Korean or German economy, unless something radical shifts more traditionally, having a low birth rate just means that you’re going to have fewer people available to work in the future and fewer people to maintain the system in the future. Now, for the United States, we have a very atypical demographic history compared to really everyone else in the rest of the world. 

compared to the rest of the industrialized world, most of the other industrialized countries are far more urbanized than we are. So they started this collapse below replacement levels not just 20 years ago, but 30, 40, 50, 60, 70, in some cases 80. And so it has a lot of steam built up for us. The decline really below, replacement is only about a 10 to 15 year process, and it’s been very slow even then. 

In addition, because the United States was part of the second cadre of countries to industrialize, we have seen our birth rates go down. But because the United States is such a big place with so many small towns and such huge options for suburbs, it’s declined a lot more slowly than everywhere else. So if you look at the data and we’ll throw a chart up here, you’ll see that the United States has been kind of hugging around that two, 2.1, area for the last 40 years, whereas a lot of other countries that are kind of in are pure class, plunged below it long ago. 

that doesn’t mean that we are doomed to follow them if Americans keep aging at their current rate. If the birth rate keeps dropping at its current rate, we’re not going to be facing a Korean or a German style problem within the next 40 years, and probably closer to 50. so while this isn’t a great sign, it’s not like we’re about to jump off a cliff. 

the other group of countries, the developing countries, are very different. these are the countries that, for the most part, did not develop the technologies of industrialization. It was thrust upon them. So you took a century, a century, a half of technical development in the West and in Japan, and in the course of under 30 years implemented it throughout most of what we now think of as the developing world. 

And so they went directly from the farms to condos and in, in doing so saw their birth rates just plunge horrendously. And you can see that on the chart. China, of course, is the country that industrialized the most quickly got the growth boom from that, from not having a young generation. and now is well past the point of no return and is very close to having one of the lowest birth rates in the world. 

So is there anything we can do about this? Well, there’s two things. The first is you can have meaningful immigration reform in order to bring in more people, but to bring in the scale of people that were required to tilt this, it would be pretty extreme. the second thing you can do is encourage policies that make it easier for younger families to have more kids. 

Part of the economic growth story of places like Texas the last 30 years is that the land is cheap, the electricity is cheap, the food is cheap, and taxes are low. So if you’re a young family starting out, it’s easier to have a house with a yard and raise children. If you’re going to do that in San Francisco, whoo hoo hoo! 

Or New York. Yeah, that’s not going to happen. Raising kids in a condo is no fun at all. one other little thing that I just kind of throw in there so that people understand that everything has a consequence over the same time that US birth rates have dropped since 1990. We’ve also seen the teen pregnancy rate drop by roughly half, and there is a direct correlation between those two things. 

So saying you need more kids makes a lot of sense how you get more kids. That’s what really matters. 

Why Japan Needs a US Alliance

The Webinar – The State of Global Energy – is this Friday!

Peter will deliver his analysis and forecasts for regional energy production and his assessment of geopolitical risk—everything from war, to instability and regulatory risk—with an eye on challenges and opportunities facing global production and supply.

Please join us on Friday, May 10th at 12:00 PM EST.

CLICK HERE TO REGISTER FOR THE WEBINAR

The Japanese have looked into their crystal ball and figured out that a close relationship with the Americans is the only way forward. Before Japan is welcomed in with open arms, they’ll have to prove their worth…

Between trade issues, economic challenges, and demographic crisis, it makes sense that Japan wants to join the AUKUS group (a defense focused coalition made up of the US, the UK, and Australia).

Japan has some big changes to make. While their naval capabilities are solid, they have to make the cultural and political shift toward taking a more active role for themselves and their region. They also lack real world combat experience and have plenty of cybersecurity concerns to overcome. I wouldn’t expect to see the green light anytime soon, but eventual collaboration looks to be in the cards.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Support medshare's ukraine fund
Support medshare's global efforts

TranscripT

Hey everybody. Peter zeihan here coming to you from Colorado. Today we’re going to talk about the recent batch of up to up meetings between the Japanese and the Americans. In mid-April, we had a very large number of contacts up to and including Japanese Prime Minister Kushida, as well as, US President Biden. at issue is the Japanese are angling for a much closer relationship. 

So the back story Japan in the 80s up until the 80s was a huge trade country, but then they had a demographic bomb and a debt crisis at the same time. And over the next 30 years, their competitiveness basically tanked. And so they spent the next 30 years. I don’t want to say gutting, but changing the way their industrial processes worked with as much of the manufacturing as possible. 

Closer to the end, consumers in countries that didn’t face a demographic bomb. And in doing so, they went from one of the most trade weighted heavy countries in the world to one of the least involved with today, only about 10 to 15% of GDP based on where you draw the line. comes from international trade in any meaningful way. 

Toyota says, you know, we build where we sell, and that has basically become the national motto. Now, that requires a degree of openness in the country that you’re trying to sell it. And so when the Japanese over the last 20 years saw the United States becoming more and more isolationist when it came to its economic issues, they’re like, wow, we need to we need to get ahead of this. 

So they reached out to none other than Donald Trump and cut a trade deal from the Japanese point of view, was borderline humiliating. But they knew that that was the price to pay for a long term strategic and economic relationship. And in the aftermath of Trump’s fall, the leadership of Japan has been to the United States to make it clear to Joe Biden that unlike a lot of the other countries that signed trade deals with the Trump administration, Japan wasn’t looking for any changes. 

Something that the Biden administration greatly appreciated anyway. So with that in your back pocket, we can now talk about the relationship moving forward. specifically, the Japanese are angling for membership in a group called Aukus, which is Australia, the United Kingdom and the United States, countries that are now pooling parts of the defense budget. And a lot of the defense technology to build a new generation of weapons. 

the Australian specifically will get out of this nuclear attack subs and medium range air launch cruise missiles, which are, you know, very blimey. And it will tighten what is basically already one of the the tightest security relationships among any three countries in the world. the Japanese would like to get into that. and if you look at what the primary concerns of the anchor steel is China, you can see how that would be a really, really nice fit. 

  

but it’s not going to happen in the near term. Three problems. Number one, culture after World War two, when the Japanese were recovering from those twin atomic blasts. The Japanese made the very serious and probably very correct decision that we never want to be in a position again where we might even theoretically, be on the wrong side of the United States. 

So we have to have a Navy. We’re an island country. We don’t have a good land network because it’s so mountainous. We have to have a navy just for, normal commerce, maritime for us anyway. And so we’re going to have a naval force. And even today, the Japanese are the second most powerful navy in the world. 

But we have to make sure that that’s cast in a way that will never make the Americans ever blink, that we might be anything other than an ally that does as it’s told. that worked during the Cold War, that worked in the post-Cold War era. But it’s not going to work now, because if the Japanese are going to be part of an alliance with the Australians, the Brits and the Americans, then they need to take some initiative on themselves. 

They need to patrol their own zones. They need to contribute to the greater whole. And that requires a lot more aggressiveness, and especially a culture of having a military that is not looked down on. Basically, in Japan until recently, if you went into the military because people thought that you couldn’t do anything else. that needs to change, because the Japanese do have one of the most technologically advanced systems in the world. 

So, number one, culture cringe. number two. Experience. Part of being a pacifist. No matter what your equipment looks load looks like means that you don’t shoot. And so, since 1945, the Japanese functionally have had no combat experience. And this is going to sound really weird. The war on terror for a lot of countries was an opportunity to get experience interfacing with the United States and get limited combat experience on an issue that, for them was not really top tier. 

So, you know, if something went disastrous, there might be some political fallout, especially with the Americans. But it’s not like Japan would face a threat to the home islands from Al-Qaeda. Well, now that the Americans have wrapped up the war on terror, that opportunity, if that’s the right word, is gone. And the Japanese, if they want to look around and get some practice, you know, you got the Russians and the Chinese, but if there’s a fight with them that is not small scale, that does not have a low risk. 

so it’s not clear how. Aside from drilling, drilling, drilling, drilling with your own forces, with the Americans, with Australia, it’s not clear how they can get that experience before they get to a real fight. The third problem, luckily, is something that is a little bit more short term and a little easier to fix, and that’s cybersecurity. If you are a pacifist and if you believe that military activity is passé. 

Well, you don’t really worry about your information control. And I would argue that aside from the Chinese, where a lot of cryptography is functionally illegal, so the government can hack its own population. The Japanese people are probably the most hacked people on the planet. That’s got to change if they’re going to be part of any sort of deep information and technical sharing, because nobody wants to develop a new nuclear submarine. 

Share the plans with the Japanese and you see it on TikTok the next day. Luckily, there’s plenty of ways to get experience combating that, and I have no doubt that the Japanese are already working on multiple cylinders in order to get that experience built up. But still, that’s not something you do in three months or six months, or nine months or 12 months. 

It’s also your process. So will this happen in some version? I think almost guaranteed. But the question is how fast can the Japanese make? The changes are going to be necessary so that the rest of their would be allies are willing to trust them? That’s not the case here. 

America’s Nuclear Supply Chain

The Webinar – The State of Global Energy – is this Friday!

Peter will deliver his analysis and forecasts for regional energy production and his assessment of geopolitical risk—everything from war, to instability and regulatory risk—with an eye on challenges and opportunities facing global production and supply.

Please join us on Friday, May 10th at 12:00 PM EST.

CLICK HERE TO REGISTER FOR THE WEBINAR

We’re finally seeing signs of life in Congress with the recent progress made on the establishment of a domestic uranium supply chain. This move aims to cut dependence on the Russians – who dominate global uranium processing.

This will be easier said than done though. Much of the nuclear infrastructure in the US is outdated and will need to be modernized in order to ensure a steady fuel supply. We’ll likely have to call in some favors from others who are already in the process of developing their own domestic supply system, like Canada and Australia.

This new development coming out of Congress is a step in the right direction and begins to address two major concerns facing the US: energy and national security.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Support medshare's ukraine fund
Support medshare's global efforts

TranscripT

Hey, everybody. Peter Zeihan coming to you from Colorado. the news at the moment is that late last week, we finally got the first functional laws through committee. and actually getting action on the congressional floors for building out a domestic uranium supply chain system. the idea is that if we can refine enough fuel to enrich enough fuel, being the technical term, we will be able to cut the Russians out of the mix. 

It’s all together. the Russians are the world’s single largest producer of enriched uranium. and they are responsible for nearly half of the global market in about one quarter of ours. the process is you take raw uranium from somewhere with Kazakhstan being the single biggest player and the Australians being the biggest up and comers. You then spin it up so that the fissile component makes up somewhere between 3 and 5.5% of the mix. 

You take that enriched uranium and build it into a fuel rod that eventually ends up in a nuclear power reactor. the issue that we have is peace. Ironically, at the end of the Cold War, the Americans and the Russians were left with literally tens of thousands of nuclear weapons. And we collectively decided that we were going to get rid of them. 

So the question was, what do you do with all the enriched uranium that is in a bomb? Now, the enriched uranium that’s at a bomb is at 3 to 6% enriched. It’s like 90 to 95% enriched because you want it to go kaboom. And so we basically spend that stuff down instead of up and used it to make fuel rods going from the other direction. 

Well, you do that for 25 years, which is what it took to get rid of all those weapons. And there really wasn’t much of an economic impetus for any company in the United States to do the more normal type of and other enrichment, up from uranium ore. So we basically stopped doing it altogether in the United States. It was only in places like Russia or China where was a national security issue. 

to build the stuff up, where they kept producing it. And so now we have to rebuild an enrichment system, at the civilian level. And that’s what these new laws are about now. right now, nuclear power provides about 20% of the American electricity mix. I think we’ve got 95 reactors out right there right now. the issue is we there’s only so much flexibility in that system because with a couple of exceptions, all of this reactors are more than 40 years old. 

Most of them are 50 years old. Actually, Three Mile Island was that 1973 or 1970 that I can’t remember anyway. They all predate Three Mile Island, except with two exceptions. so the idea that you can really update these things to more modern technology, and there’s not a lot of modern technology to do. So we have to go back to the old system to keep these online. 

  

on the upside. everyone has seen this coming, and they’ve been stockpiling for some time, so we probably have about two years of fuel supply here in the United States for a reactor system. And that should be plenty of time to basically replicate technology that dates back to the 50s. in order to build a domestic supply system. 

And we’ll also be getting some help from the Canadians and the Australians who are in the process of building out their own system for very similar reasons. So this Congress, while it has been difficult for it to do anything, has seemingly found an issue that is both energy related and national security related and seems to be actually progressing forward. 

So, you know, one miracle at a time. But I take my good news where I can’t these days take care. 

The TikTok Ban Is (Almost) Here…One Year Later

Please join us on Friday, May 10th at 12:00 PM EST for the Webinar – The State of Global Energy

CLICK HERE TO REGISTER FOR THE WEBINAR

A little over a year ago, we discussed a potential ban on TikTok in the US. Well, President Biden finally signed the “Protecting Americans from Foreign Adversary Controlled Applications Act”, which would ban TikTok or force its parent company, ByteDance, to sell it.

You can bet that TikTok won’t go down without a fight, so we’ll probably still be talking about this a year from now…but the video below is a little reminder about why I’m not torn about this ban.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Support medshare's ukraine fund
Support medshare's global efforts

Secretary Yellen Dumps Cold Water on Chinese Dumping

US Treasury Secretary Janet Yellen is fresh from a trip to China, and she is fired up. Well, perhaps as fired up as one can surmise the Secretary gets.

But first: China.

As long-time subscribers and readers well know, China’s demographic situation is in shambles. The Chinese Communist Party even admits it, which should be an indicator of how bad things are given the CCP’s creative and liberal license with reality. One of the several negative impacts of a shrinking population is a correlated decline in consumption. For an economy as dependent on industrial overproduction to fuel growth as China’s, this presents a stark and simple reality: the Chinese population will never, ever be able to fully consume Chinese industrial output.

China’s only option is to start dumping more product overseas, as slowing down output causes myriad headaches at home: shrinking economic growth, higher unemployment, exposure of the CCP’s rising ineptitude, etc. Chinese overproduction has already dramatically restructured the world of manufactured goods since China signed onto globalization in the 1990s. The US, its European and Asian allies have simply had enough.

This is beyond simple trade protectionism and market competition. From Boston to Brussels to Busan, there is a rising awareness and unwillingness to endure the various economic, national security and environmental costs of allowing Beijing’s economic imperatives to run roughshod over the world’s industrialized and emerging economies.

Enter Big, Bad Janet Yellen.

Whatever policy disputes one might have with the Secretary notwithstanding, she has a well-documented support of limiting barriers to international trade and the flow of goods. Simply put: Secretary Yellen is a fan of free trade and the general global economic lift associated with globalization.

But Secretary Yellen is not a fan of Chinese economic bullying and product dumping. Even before she left China, there were reports of threats of US trade tariffs and other barriers. The Europeans are at work with several policies of their own, and the Chinese Communist Party? Well…

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Support medshare's ukraine fund
Support medshare's global efforts

Things I (Do) Worry About: Higher Education in the US

If mommy and daddy told you to go college and then you’d be set for life…you’re not alone. With traditional models pushing everyone towards white-collar jobs and university degrees, we’ve created a massive oversupply of finance bros and marketers, but left those blue-collar industries begging for some fresh meat.

As the US faces a demographic shift and shrinking population, the educational system is struggling to adapt to the changing demands. With a need for more blue-collar workers, higher education in the US is dropping the ball.

Employers are already seeing these worker shortages play out and are struggling to find a solution. As more and more graduates enter the workforce and struggle to land that ‘dream job’, those lucrative and accessible blue-collar fields might start poking holes in the higher education system in America.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Support medshare's ukraine fund
Support medshare's global efforts

TranscripT

Hey everybody. Peter Zeihan here. Coming to you from a beach. A love, a good beach. Today we’re going to dip into one of the ask Peter questions and I’m going to drop that into our open ended series on things that I worry or don’t worry about. This is definitely something I do worry about. The question is, in this demographic shift that we’re experiencing as populations age and shrink, what do I think is the future of higher education in the United States? 

And the short version is it doesn’t look very good and things are going to have to change. So let me give you a little bit of backdrop and then we’ll talk about the concerns. When the baby boomers started entering the workforce in the late sixties. They discovered that their numbers were so many that they pushed down the cost of labor. 

This is one of the reasons why the baby boomers have a reputation for being very mobile, because they would move wherever there’s a job, they could get better pay. This is also one of the reasons why women tend to enter the workforce in this period, because they had to do so to make ends meet. But that only put more pressure on the labor market, which is why the baby boomers have the record for the highest divorce rate in our country’s history. 

Anyway, point is that from a financial point of view, life was kind of rough. So the belief back in the sixties, seventies, and especially early eighties was that if you wanted to get ahead, you didn’t want a blue collar job because that’s where all the baby boomers were. You wanted a white collar job where you didn’t have to be in a factory, you didn’t have to be in construction or farming where you could work in an office, being a doctor, be a lawyer or whatnot. 

And so the baby boomers ruthlessly pushed their children, the millennials, to go to university, get a four year degree, get a white collar job. And so now we have the opposite problem. We have an oversupply of white collar workers and not enough blue collar workers. So that’s the baseline. Now, we’ve got three things going on in the labor market, in the educational system right now, with China approaching its end, we need to massively expand the size of the industrial plant in this country, even if you ignore all the national security concerns. 

That means we need to expand industrial construction spending and do a lot more manufacturing. And almost all of those jobs are blue collar and we haven’t been training up enough people to fill them. So we’re already in a situation where you can get a six week welding or excuse me, electrical degree and earn more money in your first month than a white collar worker can after four years of college and five years in the workforce. 

That’s just where we are. Until such time as the educational system transforms to adjust to this new reality, and it’s only going to get more intense as we go. And so if you’re looking at a four year university that’s doing traditional things, especially in the liberal arts, we already have an oversupply of labor in that space. We are just desperate for blue collar workers. 

So that’s number one. Your traditional liberal arts colleges, especially the smaller ones, are not going to have nearly the level of demand that they used to. Two year universities that focus on white collar jobs, same thing to your universities that work on more technical skills. They’re going to be in very high demand. And in between you’ve got the legacy universities. 

You know, your Harvard’s, your University of Texas is who either have a very large endowment or a lot of notoriety or both and will always be able to attract folks. So that’s number one. Number two is numbers. The incoming generation is no longer the millennials. The older millennials turned 45 this year. They’re way out of college age now. 

The new kids on the BLOCK are Generation Z or the ZOOMERS, and they are the smallest generation we’ve ever had. So the number of potential students that university systems can attract is simply lower than it’s been at any time in recent American history. And that means we probably have about 15% fewer students that can potentially enroll than we had before. 

So the competition among universities is going to be fierce for them. And a lot of universities are simply not geared for the jobs of the next 15 years. That’s number two. Number three is candidate quality. The Zoomers are loners. They don’t like to be around other people. The idea of the social experience of university is not something like, Ooh, I can’t wait to do that. 

They want to code in a closet. And that’s a different sort of job experience and a different sort of educational experience. Now, it usually takes about five years for universities to meaningfully change their curriculum because, you know, students are going through a four year process right there. And if you’re talking about a state school, it can be as much as ten years because you first have to get it through a review. 

And oftentimes the state legislature likes to weigh in. And certainly tenured faculty does. So by the time we have retooled our educational system to deal with the influx of blue collar job demand that we’re now already seeing, we’re are going to be most of the way through this transition. And it’ll be time to switch again. So if you are an employer, you’re basically going to have to raise your own, bring in kids who are younger than you normally would train that up within the system in order to convince them that there is a job with a good paycheck doing interesting things that they want to do. 

And the more successful companies that I have seen have been engaging in that process aren’t starting in college or even high school, but middle school, to make sure that their community is part of their success story. 

Russian Tech Transfers and Propaganda in the US

It should come as no surprise that the Russians love meddling around, so let’s see what they’ve been up to lately. We’ll be looking at tech transfers with Iran, North Korea, and China and Russian propaganda in the US.

Russia has promised satellite launches to the Iranians and North Koreans in exchange for Iranian Shahed drones and North Korean artillery rounds. In fact, the Iranian satellite was launched about a week ago. The Chinese are getting in on the action too, with naval technology and weapons systems changing hands.

Now with all that going on, you would think America could agree that the Russians are NOT our friends…sadly that’s not the case. The MAGA movement has fallen victim to Russian propaganda, which reaffirms Russia’s ability to disrupt American politics and sow discord (especially during election season).

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Support medshare's ukraine fund
Support medshare's global efforts

TranscripT

Hey everyone. Peter Zeihan here coming to you from Colorado, where we are recovering from Snowmageddon 2024. We’ve gotten about 40 inches of snow in the last 36 hours. pretty though. Anyway, the news today is that the Russians are making some adjustments to things. Number one, they’re starting to pay back countries that have helped them in the war with Ukraine.

So, for example, they’ve promised a satellite launch to both North Koreans and the Iranians. And the Iranian one launched in the last few days. So if you think of all of the operations where Iran has activities in Iraq and Syria and Lebanon, in Jordan, in Gaza, they now have the ability, at least in a limited way, to have a bird’s eye view of what’s going on, which is going to cause significantly more problems for anyone who happens to be on the other side of the ledger.

The Russians are doing this in exchange for the Shaheed drones that the Iranians have been providing. Those are the ones that are basically flying mopeds. They have a £10 warhead. The Russians have been using those targets in power centers. The North Koreans will be getting one soon as well. Of course, North Korea has been providing the Russians with about a million artillery rounds.

And for those of you who have forgotten, North Korea has intercontinental ballistic missiles. So getting satellite recon for any reason is something that vastly increases that threat. And then, of course, there are weapons systems being traded to the Chinese, things like naval technology, where the Chinese could use them to hurt the United States and any number of ways.

That’s kind of half of what’s going on. The other half is the Russians are in a celebratory mood because they’re discovering that they can widen, that the sort of propaganda that they spread in the United States and certain factions of the American political system, specifically the MAGA. Right. Because, I mean, here we’ve got the Russians providing aid and comfort to three countries, North Korea, Iran and China that even Mogga agrees are all bad.

But that doesn’t seem to be registering. They’re still thinking of Russia as a friend. Let’s see. The background of this, of course, happened during COVID, when the Russians were the most active peddler of anti-vaccine disinformation in the world, which resulted in the death of over a million American. You know, the kind of death toll that the Russians could have never achieved during the Cold War without some sort of horrible response.

But now they have enablers across this branch of the Republican Party. And so the Russians have started to diversify what they’ve been saying just to see how far they can push it. And last week, they were able to actually get Donald Trump to stop campaigning against the ban of Tik Tok, which is something that is broadly popular even among the American right.

So it’s going to be interesting to see how Donald Trump’s shift on this is going to now translate into Moscow’s opposition to Chinese issues. I don’t know how far this is going to go. The general breakdown in civics education in the United States is definitely having a very deep impact on our political system at home, but it’s providing a lot of opportunities for the Russians to drive wedges between the various aspects of American society.

So far, with minimal blowback. So this is something that is definitely on my worry list and not something that I have a very clear idea of how it’s going to go. There’s just too many pieces in play. I can tell you that because it’s an election season and because Donald Trump is defending himself from 90, I think, indictments, that there’s going to be ample fodder for the Russians to work with over the next several months.

This is definitely one of those things that’s going to get far worse before it even begins. Do you get a hint of better?