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arcticdementor · 6 years ago

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In "The Accidental Superpower," Peter Zeihan treats geopolitics as the great augur of future events. Zeihan does not reference Asimov's "Foundation" series or the idea of "psychohistory," but the resemblance is striking. Geopolitics like psychohistory allows us to anticipate broad historical forces. Zeihan like Seldon advocates harnessing historical trends to change the future. And, funnily enough, Zeihan like Seldon predicts a coming age of turmoil and conflict. Zeihan believes the whole global system we've known since the end of WWII is going to change. And so, as in Asimov's "Foundation," Zeihan believes that leaders that harness geopolitics will make better decisions than leaders that don't.

Except America. America is so blessed by geography and history that we are immune to the world's troubles. We will dominate the 21st Century without even trying. We are, Zeihan says, "The Accidental Superpower". But to explain this difference between America and the world, it is necessary to first treat geopolitics.

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For instance, two populations of equal size, one in the mountains, one in the river valleys, will develop in some predictable ways. The population in the river valley will farm fertile lands and build money on trade; the population in the mountain valley is likely to stay poor and fragment into fractious ethnic enclaves. But the river nation may be more vulnerable to invasion, the mountain people likelier to hide away and thwart foreign oppression. The same geopolitical realities can be good or bad, depending on the currents of the day.

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"Balance of transport" is the fruit of the agricultural revolution. Sedentary people can store up wealth and accumulate resources. So a strong nation needs to be bound together by trade.

As a positive example, Zeihan cites Egypt, where geography binds the people together. The Nile forms a stable channel of trade, while the desert segregates Egypt from the outside world. In a world where the Pharaoh can inspect his entire country from river barge, it's only natural that a stable and centralized government would rule for millennia on end. But when new technologies like the chariot emerged and made the desert a highway for armies, it was only natural that Egypt would cease to be independent, and be governed by a succession of Persians and Romans and Byzantines and Arabs.

As a negative example of "balance of transport," Zeihan cites, interestingly, Canada. Although Canada is a wealthy nation, its geography actually pulls its provinces apart. Zeihan notes that the barren Canadian Shield, the high passes of the Rockies, and the great gulf of the St. Lawrence River naturally divide Canada into several distinct regions. It is thus easier for each region to trade with the United States than with each other. This explains, in some degree, why Quebec never fully integrated with the rest of Canada, and why Quebecois secession in the 90's would have effectively ended Canada's existence. In a later chapter, Zeihan speculates that Alberta could pose such a risk in the future, as its oil and mineral wealth give it a very different economy from the rest of Canada. At the same time, union with Canada is almost entirely a burden on Alberta, because it is the only province that pays more to Toronto than it receives, and it is heavily restricted by environmental policies imposed on the whole country. It might be going too far to imagine Albertan secession, as Zeihan does, but this kind of analysis might provide a wealth of insights into the future of Canadian politics.

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America's waterways bless us with a tremendous "balance of transport". They are at the center of America's identity and history. They allow us to accumulate wealth effortlessly. Our waterways help explain the historical mystery of how 13 colonies joined in common purpose against the British: America's East is one economic unit. Our waterways help explain the historical mystery of why the American government has been so small: America is naturally so easy to traverse that government roads were never needed. (Zeihan notes that when Germany was building its railroad network in the 1840's, America's federal government had built one road, the "National" Road.) With our tremendous water network, things that would be impossible to any other country are casual accomplishments in America.

This is only the beginning of America's geopolitical blessings. The majority of the Lower 48 is in a temperate zone, a perfect climate for growing crops. We are separated from the rest of the world by the Pacific and Atlantic Oceans, which makes us almost impervious to invasion. We dominate the North American continent, vastly overpowering the two countries we have to share it with. Of the Rocky Mountains running through the North American continent, we control most of the major passable valleys. We have so many perfect world-class deepwater ports that we aren't even using all of it. ("The United States has more port potential than the rest of the world combined. [...] Chesapeake Bay alone boasts longer stretches of prime port property than the entire continental coast of Asia from Vladivostok to Lahore.") We are the only major power with access to both the Pacific and the Atlantic Oceans, and can sell our goods in either direction. We are blessed with fertile valleys and croplands, rocky rivers for mills for industry, oil and natural gas and minerals and raw materials of every variety. Our balance of transport is effortless; industrialization came naturally; we easily maintain the greatest navy in the world; and not once but twice our economy has built the greatest military force ever known. We have, here, in America, everything we could ever want.

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The crux of our current world order is rooted in the resolution to World War II. After the war, America had the world's only major industrial economy which had not been destroyed by that war. Russia was the world's only other power. By any historical standard, Zeihan argues, the expected next move was for America to occupy Europe, establish military hegemony, and then impose peace or war on the world and loot Europe of what remained. Instead, at the Bretton Woods conference, America laid the basis for a new world order based on free trade

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America didn't conquer the world; it "bribed" it through its economic strength. As the Cold War progressed, more and more countries joined the free trade system America established. The "Bretton Woods" system established global near-peace and prosperity, mostly free trade the world over, almost an end to wars over access to markets and raw materials, everything we today call "capitalism" and "globalism". But all this is just a byproduct of American foreign policy, and is highly unusual

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It is a point that cannot be understated: the whole order of global politics depends on America's international free trade system. We have changed the normal course of politics for every country that is part of that system. Germany is an industrial power today on the base of their exports, which they can only maintain because America keeps safe the flow of raw materials on which Germany relies. China is an industrial power today because America keeps safe the flow of manufactured goods from China to its customer nations. Japan and Britain have access to oil because America safeguards the global market on which the tankers travel. The global economic system is safe because America pays for it to be safe. We subsidize the wealth and prosperity of the entire world.

And this is the problem: America's free trade system benefits everyone in the world except America.

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America pays for the global free trade system. America hardly uses the global free trade system. America bears most of the burdens of the global free trade system. America reaps few of the rewards. With the implosion of the Soviet Union, there are not even ideological motivations for us to maintain the Bretton Woods system. Thus, it is not only logical but inevitable that the free trade system the world currently enjoys will come to an end.

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The second global crisis will be growing competition over oil. Global oil supplies are not unlimited, and industrial economies will be competing more for natural resources in order to maintain their standards of living. This is not a new struggle, and the competition in oil has been mediated in large part by America's leadership. But now America has shale. With the development of shale, America has gone from being an oil importer to an oil exporter. We are no longer dependent on the Middle East for our needs, and are only involved for the sake of our allies. So it's only natural that our interest in oil will wane at the exact moment that the rest of the world's interest grows. (And what do our allies do for us, anyways?) So Zeihan predicts that American mediation will fall apart. Conflicts over oil will escalate to wars, and whole nations will have to act very quickly if they don't want the lights to go out.

The third major crisis is a global demographic shift. The world's major economies are all ageing. The baby boomer phenomenon was not contained to America; all over the world the elderly are going to retire en masse. The next generation will be much smaller. This implies, of course, crises over pensions and other social security systems. But it implies something much greater about the availability of capital. Workingmen are generally net producers, as they save money in anticipation of retirement. Retirees are net consumers -- they make little income and draw from their savings. So as the global baby boomer generation retires, there will be a massive withdrawal from savings accounts the world over. People who have been investing money will start saving money. And overnight the supply global capital will dry up. There will no longer be as much money to invest in roads, new businesses, hospitals in Afghanistan, factories in Bangladesh. A lot of the "progress" we have come to expect in world affairs will suddenly come to a stop.

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So this is "The Coming International Disorder". America, through its blessings and God's "special providence," is powerful without even trying. We are "The Accidental Superpower". We built a new world order based on global capitalism and free trade, one that suspended the normal everyday conflicts over markets and materials. That suspension of global conflicts is coming to an end. America is going to retreat from the affairs of the world, and will exercise such dominance that the 21st Century will be the American Century. The rest of the world will come to blows.

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• China. China is geographically unstable. Its mountains and river valleys have always worked to congregate its wealth and capital on the coasts, away from the core of the country. This will cause great internal divisions as China seeks to navigate the 21st Century. Because China's wealth is totally dependent on the Bretton Woods system America has so graciously provided. China would still be a poor country today if America had not subsidized China's industrialization and shipping all over the world. Without Bretton Woods and with the coming demographic crisis, China will no longer have the capital it has used to develop and pacify its population. And if China wants to break out, it is surrounded at sea by hostile island nations, and on land by hostile conquered minority peoples. Zeihan predicts that China poses no threat to America whatsoever, we could win a trade war with two hands tied behind our backs. If China poses a threat for anyone it's more likely Japan over oil.

• Russia. Russia faces one of the worst demographic crises of any major power. Its birthrates collapsed after the fall of the Soviet Union and have never really recovered. This is especially concerning because Russia is so geographically unstable that it needs a healthy population to guard its borders. Russia has no real frontier, there are no natural barriers like a great mountain range or desert that protect it from other nations. This is why it has usually protected itself by expanding and invading other nations. But today Russia cannot maintain its current borders if its population is going to shrink. So its only logical that Russia will act now, before the demographic crisis, to push forward into Europe where its borders will be smaller. (Russia's moves in Crimea and Ukraine fit this pattern.) Zeihan predicts, though, that the odds against Russia are probably too great, and it is not unlikely that Russia may collapse entirely as a country before the century is out. (And still the main threat Russia poses it to our allies, not America itself.)

• Mexico. Mexico may be America's real rival and threat. Mexico is troubled in every way that America is blessed. But proximity to America means that, for all its troubles, Mexico's markets will always be safe. Even as a drug war rages over a country practically consumed by anarchy, Mexico is one of the world's 20 largest economies. So Mexico can only go up from here. Its relationship with the US will then become more contentious. The key issue is the border -- the US-Mexican border is a vast stretch of desert and mountain, it exists only on a map. It is a perfect hideout for cartels, criminals, and illegal immigrants. The same geography that brought Americans into Mexico in the 1840's will now work in reverse (has already worked in reverse), at America's expense. Conflict will only grow. It is a deep irony that the country that really portends the greatest trouble for America going forward may not be Russia or China but Mexico.

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If I had to criticize Zeihan's model, I would say that history does not always move in aggregates. Geopolitics can predict large events, but not small ones. This is something Asimov discusses at length in his treatment of "psychohistory" in the Foundation series. There, for thousands of years, events unfold exactly as psychohistorian Hari Seldon predicted them. And then, without forewarning, one man leaps off the pages of history, gathers together a new empire, and thwarts all expectations of history. That man, "The Mule," makes an ass of all our assumptions. Psychohistory can predict broad trends but not small variances.

So I would level this criticism at the lens of geopolitics. It considers nations, not individuals, not how single leaders or real people diverge from expected trends.

Zeihan, for instance, considers immigration only in positive terms, noting how it renews America's demographic pyramid. But it's clear that immigration causes great conflict within America, conflict that does not appear in traditional geopolitical models. Likewise, it is not obvious to me that America remaining powerful on the world stage means America staying stable at home. America and Americans often have different interests. I can certainly think of one global power which, in the Third Century, turned to violence and civil war, even as it continued to dominate the world around it.

#reddit #book review #geopolitics #peter zeihan #read the whole thing

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factorinvestor · 6 years ago

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Where is the Value?

Investors always want to know what’s cheap—cheap relative to the opportunity set and relative to history. Cheapness could refer to any number of things—price relative to trailing twelve months earnings, to trailing earnings over multiple years, to analyst earnings estimates, to long-run projections, or a dozen other variations based on sales, cash flows, book value, etc.

Because analyst estimates tend to be tainted for a number of different reasons (see this discussion on why), we tend to focus on price relative to trailing twelve month sales, cash flows, and earnings to measure cheapness. This gives a more holistic and objective view of valuation.

Using this simple construct, we’ll give every investable stock across the globe a percentile valuation score from 1-100. Scores are then rolled up to countries and regions to get value scores for each relative to the entire global stock market. Our universe will be all stocks with a market cap greater than an inflation adjusted $1 billion (USD) and with reasonable daily liquidity from 1990-2018.*

Because developed and emerging markets are often treated differently, we’ll separate the two within each region. Some countries are such large portions of the overall global stock market that they warrant their own “region”, i.e. the U.S. and Japan.

The chart below summarizes the results. Each green column represents a region/country. The vertical axis are the average percentile scores for each region/country discussed above. The top of each region column is the highest (most expensive) valuation since 1990, and the bottom is the lowest (cheapest). The red triangle represents the average valuation over the period, and the blue triangle represents current valuations.

As value investors, the most intriguing regions/countries are those with current valuations (blue triangle) below the historical average (red triangle) and low relative to the rest of the global market. Based on this chart, Japan and Emerging Europe, Middle East, Africa (EMEA) fall into this group. On the flip side, the U.S. stands out as being one of the most expensive markets relative to other regions and its own history. Given the massive run in the U.S. market over the last decade, this is no surprise.

Over the last several decades, it is common for there to be long cyclical trends of U.S. outperformance. Since the 1970’s at least, it has always reverted to form with non-U.S. markets outperforming for long stretches. Below is a chart of rolling 3 year returns for U.S. vs Foreign markets. At some point, the tide will change and foreign markets will have their day in the sun. Timing uncertain.

Regions give a decent overview but drilling down by countries within each region reveals some interesting stuff. Let’s turn first to the broadest region—EMEA. Obviously, Europe has been afflicted by several political events in the post Global Financial Crisis (GFC) era. Grexit, Brexit, questions on solvency in Italy, Spain, Portugal, etc. Setting all that aside, there are three countries that are trading reasonably below their historical averages and relative to others in the region—Portugal, Greece, and Turkey. These countries are not for the faint of heart, but then again, opportunities tend to require a contrarian bent form investors that can see through the noise.

Turning to the Asia Pacific region, there are a few standouts. For developed markets, Japan and Singapore are both trading well below their historical average and with discounted valuation relative to other countries. On the EM side, Russia is the clear winner—cheap relative to history and within the region. With high economic reliance on the Energy sector, a volatile currency, and a few political concerns, the valuation seems to make sense, but certainly worthy of a closer look.

Turning to the Americas, as mentioned above the U.S. appears expensive relative to history and other countries/regions, but that has been the case for some time and could persist. Of interest on this side of the Atlantic is Mexico. A little ways into The Absent Superpower, author Peter Zeihan makes a succinct case for an industrial revolution in Mexico based on the U.S. shale revolution.

Long story short, there seem to be more opportunities, based on valuation, in Emerging Markets. Among Developed Markets, Japan seems the most attractive. The U.S. remains expensive.

We could stop there, but there is always more to the story. Value investing is great, but there exist lots of value traps the world over. An interesting corollary to value investing is that of growth. Peter Lynch famously quantified this concept in the PE to Growth ratio. Basically, what are you paying for a dollar of earnings growth. We extend this concept below by using the same Value score framework and adding to it some growth metrics. We will measure Earnings Growth using a combination of 1-year EPS change, Return on Invested Capital, the trend of earnings over the last several quarters. The chart below shows the percentile ranks for value on the horizontal axis and Earnings Growth on the vertical axis. A country with the highest growth and cheapest valuation would fall int eh lower left corner. Expensive and low growth countries would fall in the upper right corner.

I’ve highlighted a few countries on the chart that I found interesting. The countries noted above as being deeply discounted relative to peers and history are also showing up as having favorable Earnings Growth relative to peers—Portugal, Greece, and Russia.

For the most part, if you can find discounted stocks with strengthening fundamentals, you usually have a solid cocktail for a good investment. For enterprising investors willing to bear the currency and geopolitical risks, there may just be some diamonds in the rough in some of these unloved and beaten down markets.

* If you don’t see a country, its likely because there weren’t enough tradeable stocks to warrant inclusion. China being a prime example here. Lots of stocks that aren’t tradeable to foreign investors.

#valuation #global stocks

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whatisonthemoonarchive · 5 years ago

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The Beginning of the End of China

Hang folks, this could get messy:

A Failure of Leadership, Part III: The Beginning of the End of China

By Peter Zeihan on May 15, 2020

The Chinese are intentionally torching their diplomatic relationships with the wider world. The question is why? The short version is that China’s spasming belligerency is a sign not of confidence and strength, but instead insecurity and weakness. It is an exceedingly appropriate response to the pickle the Chinese find themselves in. Some of these problems arose because of coronavirus, of course. Chinese trade has collapsed from both the supply and demand sides. In the first quarter of 2020 China experienced its first recession since the reinvention of the Chinese economy under Deng Xiaoping in 1979. Blame for this recession can be fully (and accurately) laid at the feet of China’s coronavirus epidemic. But in Q2 China’s recession is certain to continue because the virus’ spread worldwide means China’s export-led economy doesn’t have anyone to export to. Nor are China’s recent economic problems limited to coronavirus. One of the first things someone living in a rapidly industrializing economy does once their standard of living increases is purchase a car, but car purchases in China started turning negative nearly two years before coronavirus reared its head. Why the collapse even in what “should” be happening with the economy? It really comes down to China’s financial model. In the United States (and to a lesser degree, in most of the advanced world) money is an economic good. Something that has value in and of itself, and so it should be applied with a degree of forethought for how efficiently it can be mobilized. This is why banks require collateral and/or business plans before they’ll fund loans. That’s totally not how it works in China. In China, money – capital, to be more technical – is considered a political good, and it only has value if it can be used to achieve political goals. Common concepts in the advanced world such as rates of return or profit margins simply don’t exist in China, especially for the state owned enterprises (of which there are many) and other favored corporate giants that act as pillars of the economy. Does this generate growth? Sure. Explosive growth? Absolutely. Provide anyone with a bottomless supply of zero (or even subzero) percent loans and of course they’ll be able to employ scads of people and produce tsunamis of products and wash away any and all competition. This is why China’s economy didn’t slow despite sky-high commodity prices in the 2000s – bottomless lending means Chinese businesses are not price sensitive. This is why Chinese exporters were able to out-compete firms the world over in manufactured goods – bottomless lending enabled them to subsidize their sales. This is why Chinese firms have been able to take over entire industries such as cement and steel fabrication – bottomless lending means the Chinese don’t care about the costs of the inputs or the market conditions for the outputs. This is why the One Belt One Road program has been so far reaching – bottomless lending means the Chinese produce without regard for market, and so don’t get tweaky about dumping product globally, even in locales no one has ever felt the need to build road or rail links to. (I mean, come on, a rail line through a bunch of poor, nearly-marketless post-Soviet ‘Stans’ to dust-poor, absolutely-marketless Afghanistan? Seriously, what does the winner get?) Investment decisions not driven by the concept of returns tend to add up. Conservatively, corporate debt in China is about 150% of GDP. That doesn’t count federal government debt, or provincial government debt, or local government debt. Nor does it involve the bond market, or non-standard borrowing such as LendingTree-like person-to-person programs, or shadow financing designed to evade even China’s hyper-lax financial regulatory authorities. It doesn’t even include US dollar-denominated debt that cropped up in those rare moments when Beijing took a few baby steps to address the debt issue and so firms sought funds from outside of China. With that sort of attitude towards capital, it shouldn’t come as much of a surprise that China’s stock markets are in essence gambling dens utterly disconnected from issues of supply and labor and markets and logistics and cashflow (and legality). Simply put, in China, debt levels simply are not perceived as an issue. Until suddenly, catastrophically, they are. As every country or sector or firm that has followed a similar growth-over-productivity model has discovered, throwing more and more money into the system generates less and less activity. China has undoubtedly past that point where the model generates reasonable outcomes. China’s economy roughly quadrupled in size since 2000, but its debt load has increased by a factor of twenty-four. Since the 2007-2009 financial crisis China has added something like 100% of GDP of new debt, for increasingly middling results. But more important than high debt levels is that eventually, inevitably, economic reality forces a correction. If this correction happens soon enough, it only takes down a small sliver of the system (think Enron’s death). If the inefficiencies are allowed to fester and expand, they might take down a whole sector (think America’s dot.com bust in 2000). If the distortions get too large, they can spread to other sectors and trigger a broader recession (think America’s 2007 subprime-initiated financial crisis). If they become systemic they can bring down not only the economy, but the political system (think Indonesia’s 1998 government collapse). It is worse than it sounds. The CCP has long presented the Chinese citizenry with a strict social contract: the CCP enjoys an absolute political monopoly in exchange for providing steadily increasing standards of living. That means no elections. That means no unsanctioned protests. That means never establishing an independent legal or court system which might challenge CCP whim. It means firmly and permanently defining “China’s” interests as those of the CCP. It makes the system firm, but so very, very brittle. And it means that the CCP fears – reasonably and accurately – that when the piper arrives it will mean the fall of the Party. Knowing full well both that the model is unsustainable and that China’s incarnation of the model is already past the use-by date, the CCP has chosen not to reform the Chinese economy for fear of being consumed by its own population. The only short-term patch is to quadruple down on the long-term debt-debt-debt strategy that the CCP already knows no longer works, a strategy it has already followed more aggressively and for longer than any country previous, both in absolute and relative terms. The top tier of the Chinese Communist Party (CCP) – and most certainly Xi himself – realize that means China’s inevitable “correction” will be far worse than anything that has happened in any recessionary period anywhere in the world in the past several decades. And of course that’s not all. China faces plenty of other of issues that range from the strategically hobbling to the truly system-killing.

China suffers from both poor soils and a drought-and-floodprone climatic geography. Its farmers can only keep China fed by applying five times the inputs of the global norm. This only works with, you guessed it, bottomless financing. So when China’s financial model inevitably fails, the country won’t simply suffer a subprime-style collapse in ever subsector simultaneously, it will face famine.

The archipelagic nature of the East Asian geography fences China off from the wider world, making economic access to it impossible without the very specific American-maintained global security environment of the past few decades.

China’s navy is largely designed around capturing a very specific bit of this First Island Chain, the island of Formosa (aka the country of Taiwan, aka the “rebellious Chinese province”). Problem is, China’s cruise-missile-heavy, short-range navy is utterly incapable of protecting China’s global supply chains, making China’s export-led economic model questionable at best.

Nor is home consumption an option. Pushing four decades of the One Child Policy means China has not only gutted its population growth and made the transition to a consumption-led economy technically impossible, but has now gone so far to bring the entire concept of “China” into question in the long-term.

Honestly, this – all of this – only scratches the surface. For the long and the short of just how weak and, to be blunt, doomed China is, I refer you my new book, Disunited Nations. Chapters 2 through 4 break down what makes for successful powers, global and otherwise…and how China fails on a historically unprecedented scale on each and every measure. But on with the story of the day: These are the broader strategic and economic dislocations and fractures embedded in the Chinese system. That explains the “why” as to why the Chinese leadership is terrified of their future. But what about the “why now?” Why has Xi chosen this moment to institute a political lockdown? After all, none of these problems are new. There are two explanations. First, exports in specific: The One Child Policy means that China can never be a true consumption-led system, but China is hardly the only country facing that particular problem. The bulk of the world – ranging from Canada to Germany to Brazil to Japan to Korea to Iran to Italy – have experienced catastrophic baby busts at various times during the past half century. In nearly all cases, populations are no longer young, with many not even being middle-aged. For most of the developed world, mass retirement and complete consumption collapses aren’t simply inevitable, they’ll arrive within the next 48 months. And that was before coronavirus gutted consumption on a global scale, presenting every export-oriented system with an existential crisis. Which means China, a country whose political functioning and social stability is predicated upon export-led growth, needs to find a new reason for the population to support the CCP’s very existence. The second explanation for the “why now?” is the status of Chinese trade in general: Remember way back when to the glossy time before coronavirus when the world was all tense about the Americans and Chinese launching off into a knock-down, drag-out trade war? Back on January 15 everyone decided to take a breather. The Chinese committed to a rough doubling of imports of American products, plus efforts to tamp down rampant intellectual property theft and counterfeiting, in exchange for a mix of tariff suspensions and reductions. Announced with much fanfare, this “Phase I” deal was supposed to set the stage for a subsequent, far larger “Phase II” deal in which the Americans planned to convince the Chinese to fundamentally rework their regulatory, finance, legal and subsidy structures. These are all things the Chinese never had any intention of carrying out. All the concessions the Americans imagined are wound up in China’s debt-binge model. Granting them would unleash such massive economic, financial and political instability that the survival of the CCP itself would be called into question. Any deal between any American administration and Beijing is only possible if the American administration first forces the issue. Pre-Trump, the last American administration to so force the issue was the W Bush administration at the height of the EP3 spy plane incident in mid-2001. Despite his faults, Donald Trump deserves credit for being the first president in the years since to expend political capital to compel the Chinese to the table. But there’s more to a deal than its negotiation. There is also enforcement. In the utter absence of rule of law, enforcement requires even, unrelenting pressure akin to what the Americans did to the Soviets with Cold War era nuclear disarmament policy. No US administration has ever had the sort of bandwidth required to police a trade deal with a large, non-market economy. There are simply too many constantly moving pieces. The current American administration is particularly ill-suited to the task. The Trump administration’s tendency to tweet out a big announcement and then move on to the next shiny object means the Chinese discarded their “commitments” with confidence on the day they were made. Which means the Sino-American trade relationship was always going to collapse, and the United States and China were always going to fall into acrimony. Coronavirus did the world a favor (or disfavor based upon where you stand) in delaying the degradation. In February and March the Chinese were under COVID’s heel and it was perfectly reasonable to give Beijing extra time. In April it was the Americans’ turn to be distracted. Now, four months later, with the Americans emerging from their first coronavirus wave and edging back towards something that might at least rhyme with a shadow of normal, the bilateral relationship is coming back into focus – and it is obvious the Chinese deliberately and systematically lied to Trump. Such deception was pretty much baked in from the get-go. In part it is because the CCP has never been what I’d call an honest negotiating partner. In part it is because the CCP honestly doesn’t think the Chinese system can be reformed, particularly on issues such as rule of law. In part it is because the CCP honestly doesn’t think it could survive what the Americans want it to attempt. But in the current environment it all ends at the same place: I think we can all recall an example or three of how Trump responds when he feels personally aggrieved. Which brings us to perhaps China’s most immediate problem. Nothing about the Chinese system – its political unity, its relative immunity from foreign threats, its ability import energy from a continent away, its ability to tap global markets to supply it with raw materials and markets to dump its products in, its ability to access the world beyond the First Island Chain – is possible without the global Order. And the global Order is not possible without America. No other country – no other coalition of countries – has the naval power to guarantee commercial shipments on the high seas. No commercial shipments, no trade. No trade, no export-led economies. No export-led economies…no China. It isn’t so much that the Americans have always had the ability to destroy China in a day (although they have), but instead that it is only the Americans that could create the economic and strategic environment that has enabled China to survive as long as it has. Whether or not the proximate cause for the Chinese collapse is homegrown or imported from Washington is largely irrelevant to the uncaring winds of history, the point is that Xi believes the day is almost here. Global consumption patterns have turned. China’s trade relations have turned. America’s politics have turned. And now, with the American-Chinese breach galloping into full view, Xi feels he has little choice but to prepare for the day everyone in the top ranks of the CCP always knew was coming: The day that China’s entire economic structure and strategic position crumbles. A full political lockdown is the only possible survival mechanism. So the “solution” is as dramatic as it is impactful: Spawn so much international outcry that China experiences a nationalist reaction against everyone who is angry at China. Convince the Chinese population that nationalism is a suitable substitute for economic growth and security. And then use that nationalism to combat the inevitable domestic political firestorm when China doesn’t simply tank, but implodes.

With the world under COVID-related lockdowns, I’m pretty much as home-bound as everyone else. That’s nudged me to launch video conferences for interested parties on topics ranging from food safety to energy markets to the nature of the epidemic in the developing world. On May 19 I’ll be doing a once around the world, laying out where we stand in the current crisis. Which countries are suffering most critically? Which are pulling ahead? What the shape of the pandemic will be in the weeks and months to come? What will the world look like once coronavirus is in our collective rear-view mirror? As with all the videoconferences, attendees will have the opportunity to submit questions during the event. While most of these events are for a set fee, the May 19 event will be free of charge…which means it booked solid in less than a day. Fear not! We’ll be recording and posting it upon completion. First release will be via this newsletter list. If this was forwarded to you and you’d like to sign up yourself, you may do so here.

Newsletters from Zeihan on Geopolitics have always been and always will be free of charge. However, if you enjoy them or find them useful, please consider showing your appreciation via a donation to Feeding America. One of the biggest problems the United States faces at present is food dislocation: pre-COVID, nearly 40% of all foods were not consumed at home. Instead they were destined for places like restaurants and college dorms. Shifting the supply chain to grocery stores takes time and money, but people need food now. Some 23 million students used to be on school lunches, for example. That servicing has evaporated. Feeding America helps bridge the gap between America’s food supply (which remains robust) and its demand (which coronavirus has shifted faster than the supply chains can keep up). A little goes a very long way. For a single dollar, FA can feed one person for three days

Robert Maynard

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tjwbooks · 8 years ago

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The Absent Superpower: The Shale Revolution and a World Without America

Peter Zeihan

The world is changing in ways most of us find incomprehensible. Terrorism spills out of the Middle East into Europe. Russia, Iran, Saudi Arabia, China and Japan vie to see who can be most aggressive. Financial breakdown in Asia and Europe guts growth, challenging hard-won political stability.

Yet for the Americans, these changes are fantastic. Alone among the world's powers, only the United States is geographically wealthy, demographically robust, and energy secure. That last piece -- American energy security -- is rapidly emerging as the most critical piece of the global picture.

The American shale revolution does more than sever the largest of the remaining ties that bind America's fate to the wider world. It re-industrializes the United States, accelerates the global order's breakdown, and triggers a series of wide ranging military conflicts that will shape the next two decades. The common theme? Just as the global economy tips into chaos, just as global energy becomes dangerous, just as the world really needs the Americans to be engaged, the United States will be...absent.

In 2014's The Accidental Superpower, geopolitical strategist Peter Zeihan made the case that geographic, demographic and energy trends were unravelling the global system. Zeihan takes the story a step further in The Absent Superpower, mapping out the threats and opportunities as the world descends into Disorder.

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bremont · 3 months ago

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(via (28) Trump Takes on the Middle East || Peter Zeihan - YouTube)

Trump Takes on the Middle East || Peter Zeihan 🤔1.9 billion Muslims 🤔🌎🧐🌏🥠🌍🤔🧐

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whatisonthemoonarchive · 6 years ago

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A 21st Century Classical Liber Order

Previously, I posted an article by Peter Zeihan on the future of Korea. I would like to follow up on that posst by examining his overall worldview and the premises that it rest on. Peter is a professional forcaster of geopolitical and economic trends and I have been following his work for a while. His main theme is that the post WWII order is unraveling and much of his speculation is over what will replace that order. That order depended on a global trad.e system protected by the might of the U.S. military. We created that order during cold war to contain the Soviet Union and its allies. In exchange for their co-operation in the global security network, we defended that trading network so oher countries could rise peacefully. Since we had little dependency on the global trade system, it really was not meant to benefit us economically, but was a security guaranty. With the end of the cold war, that security rational no longer exists and it really was never about our economic interests. The result is that the U.S. pulls back its military and no longer plays the role of the "World's Policeman." Up to that point, I pretty much agree with his analysis. Where I think he has a blind spot, is in predicting what replaces the distentigrating post WWII order.

He sees that order being replaced by an imperial system similar to the one that took place in the run up to WWII. In the time it takes for this new imperial order to take shape, he sees disorder and chaos. Certainly, that dark scenario, is a possibility, but there is another, brighter scenario. That would be the 19th Century "Classical Liberal Order", in which we had a moral and ideologal leadership role, but not much of a military role. In recognition of that role, France gave us the Statue of Liberty as a gift. Here is a little more on that order: https://www.cato.org/cato.../home-study-course/module10Interestingingly, Japan became the first non-Western nation to become an industrial power and had joined the raks of free and democratic nations before the sfilt towards militarism in the run up to WWII. Back in 2000, the Japanese Governemnt comminsioned a committee to write a report entilted "The Frontier Within: Individual Empowerment and Better Governance in the New Millennium." https://www.kantei.go.jp/jp/21century/report/pdfs/index.html More recently, Japan sent a military force to the Midldle East, but it was not sent to be part of U.S. led coalition. https://www.yahoo.com/.../japan-send-own-force-wont... They sent is as a separate force under Japanese control. Here was their ratioanal for doing so:

Japan's government said Friday it has decided not to join a U.S. coalition to protect commercial vessels in the Middle East but is preparing to send its own force to ensure the safe shipment of oil to Japan.

Chief Cabinet Secretary Yoshihide Suga said that Japan will keep cooperating closely with Washington even if it won't join the initiative the U.S. says is aimed at protecting commercial tankers from alleged Iranian attacks.

"Peace and stability in the Middle East is extremely important for the international society, including Japan," Suga said at a news conference. "After we studied comprehensively what measures can be most effective, we have decided to pursue our own measures separately."

I would like to suggest that a 21st Century version of the Classical Liberal order should replace the post WWII order. The glue holding it together should be ideological and whatever military defense of the order may be needed, could be placed on an ad-hoc basis by regional powers. Japan has already shown that it is willing to shoulder some of that burden.

A UM with a reformed DP could help to provide ideological and moral support for such an order for peace and prosperity. It is time that we moved on from obsessing over the Moon family and started to work towards this goal. They are yesterday's news and are tearing the UM apart. Can we rescue what is left of the movement and make it a vehicle to realize this ideal, or will we continue to be as obsessed over them as thier most dedicated supporters? Can we be a source of hope and present a positive alternative to Moonism?

Robert Maynard

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