We met with Geopolitical Strategist Peter Zeihan for a quarterly update right before the French presidential elections. In addition to calling Macron’s win, Peter outlined the three most important geopolitical shifts for US financial advisors to watch in the coming months. In order of priority:

  • What’s next for Brexit? This is important because the UK’s moves are the most public and also the most likely to nudge talks on the European Union one way or another.
  • This fall, China will choose its future leaders. It’s time to really start watching the leadership transition in China because this will be the main driver of Xi’s policy: everything else is a subset.
  • The U.S. and President Trump: We’re all guessing at this point, and the president is involved in both of the above topics.

We’ve split the interview into two parts. Last week, we shared part 1, our Q&A with Peter on recent developments in Europe and what’s next for Brexit and the European Union. Today we share part 2, covering China, North Korea and the United States. Recent moves by President Trump on each of these topics appear in both. We hope you enjoy the discussion. Please send questions you would like us to ask Peter next time to [email protected]

KLC:What’s the US plan in North Korea, is President Trump trying to do another Syria?

Peter Zeihan: Theintelligence community’s best guess on North Korea goes back to 1993. Kim Il-sung, the grandfather, fought the Japanese and founded North Korea. Kim Il-sung slipped in the shower and fell on some bullets. Our best guess is that he was killed by his own people, because three days later, he was supposed to be in Seoul working out the practical mechanics of the reunification of Korea. Because Tiananmen Square had come and gone, and the Soviet Union had just collapsed a year earlier, they realized that their system was not going to work. Kim Il-sung was trying to figure out the replacement system, so his generals killed him, because they knew that would mean the end of their position. Because you don’t need an extra million man army in a reunified Korea. So, Kim Jong-Il took over. He was nuts. He was raised in North Korea, grew up drinking the Kool-Aid and ran the country into the ground. His whole generation did, and created the famine that killed three million people. So the generals decided to take the third generation –that whole cadre –and send them abroad to study, so they can find out how the world really works. Kim Jong-un, the current leader, went to school in Switzerland with a friend of mine. The problem was Kim Jong-ildied too soon, and Kim Jong-un was brought back to lead the country. He was only 23, and he wasn’t finished, none of the third generation was prepared to take over. But the first generation couldn’t take the second generation anymore, so they ejected the second generation from power and put the third generation in to run the place. Now if you’re Kim Jong-un, you’re in the worst job ever. The first generation will kill you if you move too fast, and the second generation wants you dead now. So you purge members of the second generation whenever you have the opportunity. Then at some point, you have to have a Night of the Long Knives, when you kill everybody who’s left in the first and second generation on the same day. And if you miss one, you’re dead. So what to do? You appear erratic. You bomb a South Korean town, you sink a South Korean ship, you make everybody think that you’re crazy. The only way he can stay alive is to be unpredictable. This is internal crisis management. This is what dynastic secession looks like. Because everybody’s spies have been killed, nobody really knows for sure what goes on in North Korea, but this is the best guess. It fits the facts, but that doesn’t mean it’s true. So now, the best guess is Kim Jong-un is willing to throw things abroad in order to keep his internal situation manageable.

KLC: So then why does President Trump want to insert himself as the enemy with that internal dynamic is going on?

Peter Zeihan: There’s the strategic argument. This has been simmering since the 70s. There are 70,000 artillery pieces filled with incendiary weapons pointed at Seoul. And by the time the first shell lands, there would be a million shells in the air. That’s 10 million people dead in 24 hours, and the US has just been kicking the situation down the road. So finally finding some way to actually close this down, there’s a real strategic justification for the US to end this somehow. Second, as Kim Jong-un has made his regime seem more and more erratic, the Chinese feel like they’ve lost control. The last major diplomat to be killed in North Korea was Chinese. Until then the Chinese were convinced that they knew what was going on, but then Kim Jong-un killed him. Now the Chinese don’t even have one hand on the wheel any more, but they are the primary outside power that is supporting North Korea. Trump has figured out that the Chinese are as upset with North Korea as the United States is, and that’s an opportunity. So, when Xi was in Florida, he said, if you help us with this, we can talk trade. Not a bad plan.

KLC: What would be markers of progress in North Korea?

Peter Zeihan: The Chinese have done more in the last two weeks than they’ve done in the last 30 years. They shut off the coal exports from North Korea, for one, and the Chinese actually use that coal, in their steel industry. So they’re actually bringing levers to bear. Whether it’s going change the view in Pyongyang is another topic. They sent their top nuclear negotiator when we had the rumors of the USS Carl Vinson already being there. He went there to basically convince the North Koreans that it’s for real this time. How much impact any of that has had, I don’t know. As far as how the US responds, it all comes down to what the Chinese are doing, and how the Trump administration views it. Everything comes down to that, and I just don’t know. It’s all behind the scenes.

The dream scenario for me, as a modern American nationalist that would actually like to see world peace one day, is that the Chinese and the Americans threaten North Korea at the same time. My guess on what will actually happen is the Chinese will sufficiently talk down the North Koreans to make real moves that the IAEA (International Atomic Energy Agency) can confirm on the nuclear program, because the Chinese have already committed to eliminating the nuclear deterrent in Korea. That’s not something that I think that the Trump administration will let them go back on. If you can do that, and if you can just move them away from weaponization, I think that’ll put this back in the box for now. That allows everybody to declare a win. North Korea still exists, the Chinese were the honest broker, and Trump got

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