Why The United States Always Reinvents Itself

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This Week’s Guest: George Friedman
George Friedman is one of the most respected voices in geopolitical strategy today. As the founder of both Stratfor and Geopolitical Futures, his work has shaped how analysts and leaders understand the long-term forces driving global events. With decades of experience forecasting international conflicts, economic trends, and national realignments, Friedman brings deep historical insight to the current moment.

About His Book – The Storm Before the Calm
In The Storm Before the Calm, Friedman lays out a compelling case that America’s current turmoil is part of a larger, predictable pattern. He identifies two ongoing cycles in U.S. history—an 80-year institutional cycle and a 50-year socio-economic cycle—that are converging in the 2020s. According to Friedman, periods of instability like this one are not signs of collapse, but of renewal. The book explores how these internal shifts, while painful, ultimately lead to reinvention and long-term resilience.

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In This Episode:

• Why the United States Always Reinvents Itself

• George Friedman on the core ideas behind The Storm Before the Calm

• How to understand the current crisis through the lens of historical cycles

• What a “new model” of the world might look like

• Where George sees the U.S. headed after this period of upheaval

This conversation offers rare clarity in a noisy time. If you're looking for perspective that goes deeper than headlines and polling data, don't miss this one.

Also, Click Here to register for the Tactical Short 1st Quarter 2025 Recap call, this Thursday - “Decades of Inflationism Home to Roost” 

“The United States realized that the foundation of its previous era, the Cold War, and its relationship with the world was over, and it proceeded inevitably. And whoever was president--it's an impersonal process--would reconsider his relationship with Europe, would reconsider his relationship with China, would reconsider all relationships, plus attack the social crisis that foreign country and the imminent but not yet ready economic crisis. This becomes a problem of engineering, not of geopolitics, so to speak. How do you engineer this?” --George Friedman

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Kevin: Welcome to the McAlvany Weekly Commentary. I'm Kevin Orrick, along with David McAlvany. 

Well, David, I really look forward to these talks when you talk to George Friedman. I'll never forget, it probably was 10, 11 years ago that to George Friedman, he said Russia is going to have to go into Ukraine. And he said that's probably going to happen in the next five years. And I remember thinking, gosh, that's a pretty bold statement. Boy, it struck me when it happened.

David: Well, we have a lot to talk about in terms of the financial markets, and we have to put that on hold for a moment. Bringing into focus some of the geopolitical issues that are in play, I think is worth doing. And so today George Friedman will be with us to do that. 

Later this week, Doug Noland and I will hold our quarterly conference call for our Tactical Short product, the events of recent weeks and the pressures which have emerged since the beginning of the year make this call a requirement for anyone seeking insight and understanding. Doug and I will not agree on all matters relating to the current administration, which in no way detracts from the insights we'll be discussing on Thursday in the financial markets. In fact, today's conversation with George Friedman may bring an important overlay to that analysis.

Seen through the lens of a credit cycle, this one's over. We're in the early innings of a financial and economic shift, which you can't afford to minimize or ignore. Disruption and change are rampant. Suffice it to say you need the deepest understanding in these changes. And Doug's insights and the framework of the Credit Bubble Bulletin are essential. So join us, Thursday, 2:00 PM Mountain. 

Today we have the pleasure of returning guests on the commentary. We've discussed his New York Times bestselling books The Next Decade and The Next Hundred Years on previous shows. And we have on other occasions had him on to discuss the real-time analysis and forecasting he does in his weekly writings in Geopolitical Futures. Both his books and his real-time analysis are indispensable to us. We have a special offer for you if you'd like to receive Geopolitical Futures, as we do, on a routine basis. If you think these are intriguing and challenging times, you should not be without George's routine insights.

I read another of his books four years ago, The Storm Before the Calm. If you're unfamiliar it, I would say order it today. Begin reading it this week. As we often discuss, models and frameworks are critical to understanding events in a broader context, and in this case within the flow of history. If you don't own it and if you haven't read it, you may inadvertently be lost in a trap of hyperbolic doom. You may not appreciate the flow of history, and to look back at what Dr. Friedman wrote four years ago I think will shock you. Current disruptions were predictable regardless of the cast of characters in the Oval Office. We'll cover a lot of ground today, so buckle up. 

George, welcome back. I'll start with a quote from you. And again, this is nearly five years ago” “Because Americans obsessed with the present and future have difficulty remembering the past, they will all believe that there has never been a time as uncivil and tense as this one. They'll wait for the collapse of all things, and loath all those who produced it, which will be those with whom they disagree. It'll be a time of self-righteous self certainty, hatred, sometimes murderous for those they despise. And then the patterns of history work their way through using the raw material available.” A bit later you conclude “the current storm is nothing more than what is normal for this time in Americans’ history and our lives.” 

I think a great place to start is drawing from your forecast in The Storm Before the Calm. If you can explain the 80-year institutional cycle and the 50-year socioeconomic cycle that you see recurring through US history relating ultimately to this period, 2025 to 2032.

George: Well, basically there's a 50-year social and economic cycle every 50 years. Last time was Ronald Reagan. The time before that was Franklin Roosevelt's time. There occurs a time when the old model of American structure wears out and we have to reinvent ourselves. Remember, we're an invented country. It didn't exist until we crafted a constitution and created an immigrant population. We created ourselves and we have the ability to restructure ourselves. And every 50 years, for reasons I don't know, but every 50 years we come to a moment when there's a storm where the old system wears out, it can no longer structure. Now the institutional cycle is there too. It's where we change the institutions the way we did in the Civil War when we decided that the federal government governed the country, when we did during the Roosevelt administration, when we restructured the entire banking system in a hundred days.

And during all those times, civil war, the restructuring of the banking system, it was times of chaos. But the old system had expired. It had run its course. And one of the things you saw in it usually was a social crisis, the social crisis between slavery and civil rights, the crisis between rich and poor. And now it was an ethnic crisis with ethnic groups being invented such as homosexuals, such as bisexuals, such as all sorts of ethnic groups that had to be honored. And there was a culture war underway, as happens all the time. And that culture war is between the culture of the United States and the exhausted culture that had really begun with a very legitimate issue. The issue of black rights in America, a reasonable issue for a press class, and was extended then to all sorts of other rights for other classes.

So there was the inevitable social problem and deep economic problems, not just the American economy, the global economy was no longer rational, no longer related to reality. And institutionally there was also a crisis that revealed itself in Covid. The governance by experts, which had worked very well in World War II, wasn't working anymore. Fauci was not a criminal. He was a doctor, and he was asked to revise society to conform to medical needs. In this, he forgot that children that don’t go to school at the age of four or five have very strange lives later--they don't socialize--or that the economy might collapse. So we are in a time where we are going to reinvent ourselves. First comes a storm, and we're in that storm. And I predicted in a book that the 2024 election was about the time it would start.

And we had been declining over the past years, and now we're in a storm where everything that was normal is overturned and a new norm emerges. The next four years we're going to be in that storm. But after that, we will reconstruct ourselves as we did after Roosevelt and Lincoln and so on, and become an extraordinary nation. But our advantage is that we have these crises. European countries don't have them periodically. They don't reinvent themselves. They still can’t get over World War II, world War I. They have malices that go way back. We reinvent ourselves, but living through it can be hell. And we are in there right now.

David: So maybe we can restate succinctly the problem of the previous cycles, the institutional and socioeconomic cycles. Is it too early to venture a guess as to what the solutions look like?

George: Well, the social crisis is one where what I call hyper-egalitarianism could control the country. Hyper-egalitarianism is not just egalitarianism, but inventing inequalities that have to be rectified. And this ran counter to much of American life and values. The economic problem essentially was that we had created an economic system based on the Cold War that had as its goal stabilizing countries against the Soviet Union. So one thing we did was stabilize Europe. The other thing we did was, in the Cold War in the third world, what we call that--these are the former European empires that they lost World War II, we fought a proxy battle with the Russians who dominated the region. And we used economic power for that purpose, favorable trading terms, loans and so on, foreign aid. So that period ended. It ended with the Ukrainian war because the Ukrainian war was lost by Russia.

Now, we don't say Moscow was occupied, but Russia demonstrated that it was incapable of occupying a country much smaller and weaker than its own--Ukraine. In three years, in a pathetic performance by the Russian army, they barely got in there--later claiming this is all we had ever wanted, which was nonsense, of course. 

So once that happened, the United States realized that the foundation of its previous era, the Cold War and its relationship with the world, was over. And it proceeded inevitably. And whoever was president, it's an impersonal process, would reconsider his relationship with Europe, would reconsider its relationship with China, would reconsider all relationships, plus attack the social crisis that were in the country and the imminent but not yet ready economic crisis. So what is happening is, and this becomes a problem of engineering, not of geopolitics, so to speak. How do you engineer this?

Different presidents would likely engineer it differently than Trump does, but it doesn't matter. The outcome is the same. We are going to transform the way we are now in radical ways. One group of people cling to the past, the way they should be, and hate Trump. Another group of people love Trump because he's violated the norms that were set, and the result is we hate each other. This is a very human and American phenomenon. What will emerge is a very different, more peaceful area. And we can talk about that, but it will be very different, as different as post-Roosevelt era was from the pre-Roosevelt era, and so on. So this is how we reinvent ourselves.

David: Well, so we've already turned a bit from the broad brushstrokes of forecasting to current events. You're focusing it on Russia and Ukraine. On our program many years ago, you told us that Russia would invade Ukraine. How have the Russians succeeded? How have they failed?

George: Well, mostly they failed. I mean, they invaded a country that they should have overrun in two weeks, and they couldn't get past the border. But the question is, why did that happen? First, in my view, and I had said a long time ago, I didn't think the Russian army was very good. I think the nuclear weapons were very good, their soldiers were very brave. But I didn't think command structure was up to a war, and the Russians didn't invade Europe because they couldn't. 

So the essential problem was that in that war, the United States was present, just not troops. Two things were invented by the United States, satellites that could see very small movements of people on earth. We could spot Russian movements. The Russians moved in fairly large groups, we could see them, and that meant we could ask Ukrainian troops to move to blocking positions. So whereas the Russian army is much larger, Ukrainians always happened to be the place they're coming. And that was one thing. 

The other thing is we introduced a weapon called HIMARS. HIMARS is a rocket launching system that's targeted by satellite at Russian targets. We had an American in the control room. The trigger couldn't be pulled by Ukrainians without the American inserting a card, but the Russians really could not get by because they could not somehow figure out how to get around it. Remember, they threw in the Wagner group, a civilian group of mercenaries, because the Russian army was doing so poorly. They didn't throw the Wagner group in there because the Russians were really doing well. And then the Wagner group tried a coup d’état against Putin. They sadly died in the airplane crash. But when we look back on this, there is a vision in Europe, in the United States, many countries, that somehow Russia is a superpower. It's a nuclear power, but it's never really done very well in land war [unclear]. Even in World War II, it went very badly until the Americans supplied them with weapons, trucks, and everything else.

David: So part of the change you're describing from an institutional standpoint is that we've organized ourselves around these Cold War relations, and now we're in a new era. In one of your missives, you unpacked a New York Times article from Adam Entous. What was that article about? What was being communicated to whom, and for what purpose?

George: Well, what was being communicated was to the American public that we had more capabilities--and they were put in place by Biden, not Trump, and it was released anyway--that made a successful attack on Ukraine unlikely. Second, we demonstrated that Russian intelligence is much poorer than we used to know it was. It didn't detect it, and attacked anyway. And third, it was letting the Russians know that invading Ukraine is not an option for them. On the other hand, while same time Trump was coming forward and making overtures through Russians that perhaps it's time for us not to think of ourselves as enemies, but there's a lot of investments we can do in Russia, as they put it, and Russian oil and Saudi Arabian oil and American oil, that's quite an oil cartel. So he went to the Russians very open handedly, and the Russians hesitated.

Well, they’re good negotiators, they're going to do what they want. So they released through the New York Times the story of how the Russians were defeated. And the real defeat of the Russians was they could not grasp what was happening. They couldn't break into small units, they couldn't operate the way they had to in the face of this. And that's one of the problems of the Russian high command. They are very conservative, not very imaginative. And what he was really saying to the Russians is, look, we beat you. We don't want to humiliate you. We want to do business with you. And I think that was what the New York Times article was about.

David: Now we have the possibility of the Russia/Ukraine conflict coming to an end after three years. What does the US want from a settlement, and what does Russia need from a settlement?

George: Well, Russia is worried about Ukraine because there's 136 miles from the Ukrainian border with Russia to Moscow. And they had Napoleon, they had Hitler, all fight from Moscow, and they beat them back. And when Ukraine, when we had the demonstrations of Maidan Square, if you remember in Ukraine and Kiev, there was a sense in Russia, and I've been to Russia visiting at the time, that the Americans intended to bring down the Russian regime, to perhaps invade Russia or something because Ukraine was a critical buffer zone. They couldn't live with a Ukrainian border in NATO, 136 miles from Moscow. So they had to attack. On the American side, if they attacked to the Polish border, they were now in the border of NATO. Poland is a NATO member, and we'd suddenly be in a position where we had to accommodate them or somehow perhaps face an attack.

And this happened during the Biden administration. The decision was made to, without US troops, resist the Russians--Ukrainians were heroic fighters and resisted the Russians--and teach the Russians that they just can't do this. And so where we are right now is that we're engineering in a way that we don't humiliate Putin. We'd like him to survive, but I think he has many troubles within Russia for leading this war. 

As for Trump, he also wants to keep his own reputation and be seen as a very strong bargainer and not giving in. So, one, the Ukrainian war is effectively over. There's still some dying, but there's not going to be a change of power there. Secondly, the question is how do we engineer a settlement? And what we're doing right now is basically, in the case of Russia, giving Putin some time to recover face because he destroyed the oligarchs and they're furious at him. He had close to a million Russians killed, and he got nothing for it. So an American president probably wouldn't be reelected. Elections are not critical in Russia, but Putin has political problems, and I don't think we want him fall. We want to deal with a weak Russian president, even one who portrays himself strong, and Trump is willing to make it appear that he's accommodating. He won't rush him. But in the end, the outcome is clear.

David: I mean the Communist Party is not what it once was. Putin is not Stalin. So how does Russia manage its domestic politics in the most conflict, hopefully peaceful environment?

George: Well, how we handle it now, the Russians handle it, is they have an internal problem. There's unrest in Siberia, for example, and they have to deal with it. And they've got the Chinese on their border. And remember China and Russia, historic enemies, even under communism there was fighting on the borders. Mao hated Khrushchev and vice versa. From our point of view, the question is how much further do we have to be exposed economically for an economic system that was useful as a weapon during the Cold War? And the Cold War is essentially over. So let's re-engineer the economic structure. That structure is built to benefit other countries, to benefit Europeans. Benefit countries in Vietnam--didn't work there. But it worked elsewhere. It was a proxy war for power in the third world and it cost us a great deal of money, but it avoided a third world war, which probably was worth the price.

But at this point it's irrelevant. It's a meaningless thing. I mean, why are we caring about what happens in Angola? The United States is the only country that cannot be invaded by land unless the Canadians and the Mexicans get antsy. We can only be invaded by a sea, sea lane control. A man called Admiral Mahan, who's the greatest strategist in the United States, said, look, the foundation of American national security are the oceans. And we only got in World War II when the [Germans’] U-boats started threatening ships and we were afraid the British would fall and they would get the Royal Navy. And of course they got in a war in the Pacific over Pearl Harbor. Our security is our oceans. If you look at it that way, our economic exposure has to be reexamined in terms of the geopolitical realities. So the end of the geopolitical era ushers in a radical new position.

And the question is, we're abandoning old friends. And the answer is, there are no friends in international relations, there are interests, and the Europeans are quite capable of taking care of themselves. And if by now they're not capable of it, tough. We are a country, as the Mexican president said recently, we should have a North American fortress. Now if an American president said that, there'd be hell to pay, but this is the Mexicans saying that. So we have a very different world, and what is going to happen is, the Americans will become what used to be a dirty word--isolationist--or more precisely, we don't want to be more exposed to the world than we absolutely have to be. For a long time we went out of character, but now we're going to move back into a more limited role in the world, and a more important and more self-interested role.

David: So when I think about Russia and its weakened state after this conflict, what's the best way to imagine their national strategy? How do they move forward and redefine their national strategy?

George: Well, in many ways, they're a third world country. With the first world military--nearly. It's a very poor country. When you go to Siberia, which is a vast area, the status of living are nothing like you'd expect it to be. You go to Moscow, it looks like a very fine city. But the Russians have really missed out on the evolution of things--far more than the Chinese did. The Chinese took advantage of technology. The Russians not so much, particularly for consumers. They lived off of national resources, the ability to sell oil and other things of that sort. So what Russia needs more than anything else is foreign investment. Remember US foreign investment built China. So you have to be very careful, but they really want foreign investment. The United States sees tremendous opportunities, cheap land, vast natural resources, all sorts of things. A trained labor force, can read and write, has been working.

This is a tremendous opportunity for industry, as China once was. So from the Russian point of view, what they really are, their future strategy is accepting that Russia is a vast country. They don't have to become vaster, but they have to become more modern. And the American penchant is to go to places like that and make a lot of money, and the Russian will also make a lot of money. So I suspect that that's one of the best investment environments you can find in the world at this point. And I think the Americans want to take advantage of that. At least it appears that they do. And because there are many hedge funds organizing themselves to be able to invest in Russia at this point. 

So when we take a look at what the future holds for Russia, it's a restructuring. It has been a dictatorship all its history. The communists are gone--this old communist party, effectively working-- It used to be how they suppressed dissent, by communists reporting on people, turning 'em in. But the communists were no different than tsars. The tsars ruled absolutely and violently, and that was it. Russia now has an opportunity to become something it never was before. I'm not sure it can do that. I'm not sure it can leave its natural political position, but it must evolve economically.

David: Shifting to the Middle East, shifting to Israel and Gaza, can you explain why Hamas, what their October 7th operations in motion and what did that do to undermine Israeli negotiations in the Middle East?

George: Remember, Israel is a very small country. It has a powerful military, but it can't change its size very well, and other countries can get powerful militaries. It's a highly vulnerable country, even though it has done very well in recent years. Remember the 1973 war, it was almost overrun by Syrian and Egyptian attacks. Only American aid and brilliant operations by the Israelis prevented that. 

So Israel understands that it has a great vulnerability. So did the Palestinians, who were deprived of their homes and so on. That definitely happened. They want it back. So reading the situation, they understand that they can shake Israeli morale, possibly, by doing the things they did on October 7th and so on and so forth. They're conducting essentially guerrilla operations, not frontal assaults, to demonstrate to Israelis how vulnerable they are. The Israeli view is, we can't make peace with them because to the extent we make peace with them we'll be more vulnerable to these sorts of attacks. The Palestinians don't simply want a Palestinian homeland, they want to drive Israel out.

So when they attacked, their intention was to demonstrate to the Israeli public that the Israeli army can't defend them. And there was massive Israeli intelligence failure that they finally admitted, which is that as in 1973, their intelligence service, Mossad, the army military intelligence, failed to see that an engineering project was taking place on the [unclear], and failed to perceive, penetrate Hamas with intelligence operatives and telephone taps and so on and so forth. 

So one of the things that they attacked was to demonstrate just this thing to the Israeli public. Now at this point, the Israeli public is terrified and enraged, which we would expect. They're able to defeat this particular threat. But the hope I think of Hamas was that in the long run, the Israelis will realize that their position is untenable, that only one mistake can be allowed to Israel, for Israel and every country makes a mistake. And so I think this was partly psychological warfare. It worked. The Israelis acted, or overreacted as you want to call it, and they're now looking all over their borders trying to clear them, like clearing out of the Gaza to get more strategic depth. But in the end, covert operations is a very good way to destabilize the country, and this is their problem. Their intelligence service must always be perfect, and no intelligence service can do that.

David: Well, I think back to the weeks before October 7th and the normalized relations that Israel was seeking with Saudi Arabia and the UAE, and it seemed like a pretty clear glide path towards regional peace and stability, and then all of a sudden the mood shifts dramatically. Now everyone in the Arab world is thinking not-so-happy or friendly thoughts about Israel. What role do you think, in that sense, who was the intended audience beyond Israel to create, as you described, psychological operations and uncertainty? Who else was the audience?

George: Well, the audience was supposed to show the Arab world how capable they were of beating Israel, but in fact, they alienated much of the Islamic world. One of the things to notice about the negotiations between the United States and Russia is where they're taking place. I thought it would be in Budapest, where Victor Orban, the prime minister, is friends with both Trump and Putin, but they chose Riyadh. Now, Saudi Arabia is a very powerful country in the region, and it does not like Islamic fundamentalists and the pressure that it can do. For example, Saudi Arabia decided that it was going to now buy out all of Syria’s debt. So in other words, this was going to pay it off for the Syrians who now have lost Assad, the former militant prime minister, and now is fishing for where they're going to go. If you want to pacify the Middle East, you have to have a country that has interests other than destroy Israel.

Saudi Arabia never participated in a war against Israel. It does business with Israel, it does business with the United States. And there are other countries like that, like the Gulf States, the United Arab Emirates and so on. But one of the things that people don't understand is the degree to which the Arab world was not united against Israel. So certainly the Palestinians were, and particularly while the Soviets were operating the region, they were supporting many groups that were anti-Israeli, such as during 1973 war because we were fighting a kind of proxy war against the Russians in the region. But when you take a look at the decision by the Russians and the Americans, both, to meet in Riyadh, you see an interesting entente forming, a coalition of three massive oil producers that can easily set prices in the world. But more importantly, the United States does not want to be responsible for the Middle East, does not want to be responsible for Europe, doesn't want to be responsible for China, and Saudi Arabia is in a position to do that.

Now, there's another player in it, Turkey, who also wants to play this role, and also is not friends with Islamics radicals. So we have to look at the region of what Hamas set off is as much fear by what we'll call conservative governments in the region of what they'll do to them as they did hatred of Israel. Saudi Arabia is much more concerned about Iran than it is about Israel. And so it has to be understood that the Islamic world is not a single edifice, and that there are ways in which the United States can play it to bring Saudi Arabia into a stronger position and influence other countries who happen to like money as well. The Islamic world, like the United States, likes money, is profoundly-- and finds Israel unjust. But pay me. I'll manage it.

David: Shifting focus a little bit more to our shores and as a springboard to talking about China, we see a change in the global order under the Trump administration, an overthrow of the old financial and social order. What are the risks to this? What are the opportunities?

George: Well, remember the old social order is built on geopolitical interest, not economic interest. We built it because we needed to stabilize Europe in order to keep it from the Russians.--we feared them--but also in the third world to keep the Russians from dominating it. We used foreign aid, investment, all these things. We did that in China as well. You have to remember that the Chinese economic boom began with the ability to export to the United States. That was a tremendous boost to the Chinese. The second phase of it was massive American investment in China. Now, the Chinese economy has not melted down, but weakened sizably. But the American view of the international system during the Cold War is very different than the view now. At that point, every move the Russians made, that communism made, had to be countered. If they were operating in Columbia, we had to send covert forces to Columbia to deal with them.

Now, he'd look at the world differently. The Russians are looking at the world very differently, and so are the Chinese. We tend to think of the Chinese as stronger than they are. They are ringed by a line of American bases on islands from the Aleutians to Australia. The Chinese Navy would have great difficulty not just getting into the Pacific, but maintaining a line of supply into Pacific. The reason it's never invaded Taiwan, although it's always talking about it, is it can't. It may be able to land troops there, but American missiles from Guam readily could cut the line of supply--that is, the ships coming to supply them. And if you can't supply your troops, what good is it? 

So when we look at China, we look at a country that is historically been at odds with Russia. They fought any number of wars along their shores. And in fact when Henry Kissinger went to Beijing to speak with Mao about opening relations with them, the Russians attacked on the Uri River, the boundary between China and Russia, to give the Chinese a warning not to do it. They did it anyway. 

So China is a much more complex question, and as with Trump, it's very good not to pay attention to what Xi says. In fact, not paying attention to politicians or even caring about them is very important because just as you don't much care who's on the board of the company--you might care a little bit--you're looking at what they can do and can't do in this current environment. In the current environment, the Chinese are facing a blockade by the Americans, the possibility of their coasts being closed by mines, and now an uncertain Russia to their north. One of the things we see today is that it turns out that there's major opposition in North Korea within the government to the president's moves on nuclear weapons and so on and so forth.

They went to overthrow Kim. Kim is supported by the Russians. They brought troops in, but at this point the Russians aren't going to do anything. Then I suspect strongly that the Chinese are behind this. The Chinese have reached out to Japan and South Korea to form an economic trading union and perhaps the security force, union, something like that. It's very vague in the early phases, both South Korea and Japan said, we can't do anything with you until you handle North Korea. North Korea is a danger to us. It's a nuclear power. It's your doing. Deal with it. 

We now see suddenly unrest in North Korea, and I suspect the Chinese hand is behind it because the Chinese realize far better than American public does that they're in a bad spot. They depended on American exports to the United States, they depended on American investment. They depended on the Americans allowing them to appear as powerful as they wanted to be. It didn't really matter. Now, Trump has said to them, your investment day, your exporting days are over. But it's not simply an economic issue. The financial crisis is not an economic issue per se, it's a geopolitical one. Our relationships with all these countries are changing. Our relationship with China is changing. And Trump is using tariffs as a weapon to force nations to change their positions, and they're trying to force the Chinese into that too.

David: I think about the economic union you described between China, Japan, and Korea. What's at odds there with the security interest that Japan and South Korea share with the United States?

George: Well, that, the United States wants to continue. That's something that matters. Both of them are quite capable of defending themselves. Japan has a significant military now. South Korea is pretty tough, too. I think this was a Chinese opening to the United States. They knew that Japan and South Korea would not even talk to them about this if Washington hadn't given an approval. The United States doesn't want to have trouble with China. I mean, for goodness sakes, why would-- We don't want to invade them, and we really don't mind the trade, but we want China to stop. So I think the view was, in these negotiations between the three countries--South Korea, Japan and China, is that this is a way in intermediate stage that the Chinese can come into the kind of trading system the Japanese and the South Koreans have, and which is what they'd really like. They're not going to quite get that, but they really don't want a war.

The one thing that China has not been is aggressive toward the United States militarily, or even bluffing it. So I think these are talks that, in the view of China, facing Trump instead of Biden--not because they're human, their personalities or anything like that, because Trump recognized that the old order was gone. Biden was trying to hold onto the old order. And so when Trump singled China out for massive mistreatment, the Chinese understood what it meant. And before that, they were already reaching out to Japan and South Korea. So I think this is how Trump engineers things, or what I call negotiating. When you're selling your house, you don't get the price you think is worth by some valuation. You don't get it lower, get a big high price, and then you can bargain it down and the buyer feels really good that he got you down and everything's fine.

But Trump is a businessman. He knows how to buy and sell things, and I think he threw the world a hand grenade--I think too much of a hand grenade. He was too stunning. But he told the whole world something very important. We're no longer your sugar daddy; we're no longer your great friend. We have interests, too, and you're going to have to consider them. And we no longer, after the Cold War, have to simply make sure that you're not pro-Russian, and pay for that. As for the Chinese, we've shown what we could do, and I'm sure there'll be talks. There are talks going on now. I'm certain of that, between the Chinese and the Americans. Those tariffs are not going to stand because we need Chinese goods. There's a need in the United States for that. So it'll be settled. But sometimes the best way to make a deal is to leave the room in a rage.

David: So we have US and Chinese relations strained over trade tariffs. Maybe you can give us a broader context to think about these things. You talked a little bit about the US military bases ring fencing the region, and then of course we've got the pushing out of various island projects and development projects in the South China Sea. Could you start with the naval tensions which have long preceded the current trade concerns?

George: Well, I have a friend of the US Navy and have many friends serving in it, but every service overstates the threat they face at budget time. The Chinese navy had a land problem. It had narrow straits to move forward with. So if you take a look at a map of China, it's ringed by islands all the way down to the southern coast, Indonesia, all the way to the north, Japan, and the Aleutian Islands. These are very narrow places to move a naval force through, hoping they can come back. It's also hard to supply them. So the Chinese threat of a naval operation against the United States--so it's from a military standpoint--unlikely. One, the passages could be mined. Second, the ports could be blasted. All these things could be done. But getting into the Pacific to the extent that they could threaten the United States is an option.

Now remember that nuclear war is always another case, but mutual assured destruction has prevented that war for a long time, and I think that'll continue. So I look at China as a country that has a very deep internal problem. The peasants, the peasants were the ones that Mao Zedong went to on the long march to raise a peasant army to overtake the coast. The coastal region has been much wealthier, always, than the interior. And jealousy of this led to communism. 

The same reality is there now. The coastal region is sophisticated, integrated with the world, wealthy. The peasants are still living in abject poverty, and there are a lot more peasants than there are people on the coast. They don't have the resources to raise the peasants up, and the coastal region isn't prepared to send resources to them. So there's unrest among the peasantry. Xi knows that very well, and at various times makes gestures, but they have an internal problem of enormous scope. It was the one that created communism in the first place. 

And so its internal situation is problematic. The extent to which the industries of China are going to function over the coming months is also a problem because they can have a depression. We can have a recession if they can no longer export. They're an exporting country. And this is how Trump deals with Russia, too. After he blasts them in Ukraine--and we did do that, but not personally. After blasting the Chinese at their weak point--exports to the United States--it’ll come down. 

What he's trying to do is distance himself from the problems of the world at the same time that he diminishes the conflicts. So the conflict between the US and China is being worked that way, between the US and Russia. And as for the Europeans, God knows what they’ll do. But the point is that the key strategy of Trump is the key necessity of the United States--limiting our exposure to global instability and global economics. Remember, the exporter has a massive advantage over the importer if the importer is totally dependent on its exports,

David: And you realize a company like Apple, 95% of their product is coming from China.

George: China has the high hand. So it's not just a financial issue, although in the United States it's been treated as that. It's how dependent are we going to become on third world countries that may have coups d’etat, revolutions, earthquakes, what have you. So when Trump talks about reindustrializing the United States in certain ways, he's also talking about a security issue, not just an economic issue. We are very exposed in global trade to dependency on countries that we may not be able to depend on.

David: So let's go back to forecast mode. And 2032 being a date on the horizon, fill in the blank here. The US is ________ by 2032.

George: The US is suffering a massive demographic problem. We are living longer and have a falling birth rate. That means that as we get older, we require more medical care, more costly, and so on and so forth. And the workforce shrinks. Two things are happening in the United States. One, compensation for the workforce with artificial intelligence, which we will see if it works or not. But secondly, a desperate attempt to solve things like Alzheimer's disease because the only other alternative is shooting old people, which is something I personally oppose. I don't want to see that happening. So that being the case, the problem we're going to face there--and every era of US history has a problem. The problem of the previous area was suburban housing--moving out of apartments and cities for immigrant classes and living very different life, and having the roads and everything to do that.

The automobile dominated that period. Now the critical question is what do we do with this demographic crisis? We can't order more babies. Sex is certainly an issue, but you can't order people to reproduce. So we have to find industries. There are two industries that are critical: AI--unless it's a complete bust, and it could still be that. The second is medicine. The critical industry for the future is medical. If you have an aging population and you have a low birth rate, something needs to be done to make old people more productive. It's a simple economic reality. So when we look at the coming age, look at two things. One is what AI is going to finally turn out to be. It'll turn out to be something that supplements the workforce. The second question would be, how do we deal with the biological medical realities that are emerging? And that will make medical care--and I think supplement to AI where you don't need nurses, that you don't have to hire them because they are there--I think that's going to be the center of gravity. 

But as in every period, we’ll after the storm have a period of calm in which these new technologies, these industries, evolve and create wealth. We did that after World War II, after the Roosevelt, the depression, and everything else. We had a period of prosperity. But first we had the storm, and now we're in the storm and it's going to be a storm that's extremely unpleasant, as all the other storms were. Out of that storm will come a new United States, a reinvented United States, because unlike China, we could really reinvent ourselves well. 

And when I look at what the basic problems are--and technology is a response to problems, not something invented out of thin air--we see the need for an enhanced workforce, enhanced medical care, and that I think is going to be the major industries. But I expect that after the storm comes the calm. And just as after Ronald Reagan shifted the tax code radically to favor investment instead of consumption, and that led to the tech boom--because without that investment money there wouldn't have been a tech boom. The same way, Trump will engineer something, and like Reagan will be loathed by half the people, loved by the other half, and families will be torn apart. That's the American way.

David: Similar exercise. Looking forward to 2032, China is _______--fill in the blank--by 2032.

George: Well, there are two paths China can take. The most likely is civil war. China has historically been torn by civil war. The civil wars have been based on the coastal region, which trades with the world or other Asian countries and is wealthy, and the peasants who are poor. That reality of China was suppressed by Mao at the point of a gun. He also staged a great proletarian cultural revolution to give the peasants a chance to let go of themselves. But the problem of China is that. 

The second possibility is China going back to fragmentation. We speak of China as a single kingdom. It is, but it was regions. They're very different, and they operate differently. But one thing I'm sure of is that China, as it historically was, is going to have a prosperous coastal region, which is the area of the southern and the eastern coast where all the goods and services we buy come from, and that will be the same.

But the question of whether a centralized government could run a country that large and so differentiated, which Mao tried to solve by staging of revolution--before that there was civil war going on--and a reign of terror. So China's future, and they're very nervous about it, I think, is how do we build a united China when one half of China is dirt poor and the other half is partying all the time? So when we look at China, I think we should look at it not as a superpower, but as a great power--but not a great power able to necessarily invade. For example, they fought border wars with India, but they lost. So we have to keep China in context. Because we got so many goods from China, we saw it as an enormously different state than it is. It's very inventive. The coastal region invents marvelous things.

But the coastal region doesn’t want to be taxed to help the peasants. So I look at tension inside of China. A return to dictatorship? I doubt that that's possible. You need a Mao to do that. But I think that China is going to be much more open to investment--can't be more open than it was five, 10 years ago, before Covid, but it's going to be looking to integrate with the international system at the same time as the United States wants to limit its peculiar position. So look at China as developing in ways you don't understand, that you don't expect, simply because of the expectation that China is a united entity under the control of the central government, with the central government making the decisions. It's not quite that way, and I think that'll evolve.

David: Let's circle back to the 50- and 80-year cycles we discussed earlier. You had the FDR through Carter, you had Reagan to the present. You see these leaders emerging in a context, addressing problems and remaking the order they inherit. What do you make of the institutional cycle and socioeconomic cycle falling so close together this time within just a few years? Does that more radically impact social sentiment?

George: Well, since we've never seen it, I can't predict it. But it seems to me that this storm is going to be much more vicious. So you see at one and the same time the institutional crisis, which essentially originated with Roosevelt. He created a federal government that intrudes into the financial system in order to solve an extreme case of poverty and avoid revolution after depression. That federal government has grown to the [unclear] ad absurdum, where one hand doesn't [know what the other is doing]. As I mentioned with Covid, the Department of Education didn't tell Fauci, the head of the medical program, you can't keep kids out of school for two years. The Department of Commerce didn't mention that you can't keep the workforce at home. So the federal government has become a highly inefficient thing. 

It has done something else. It has become something that you cannot petition the government. The constitution guarantees each citizen the right to petition the government. But who do you petition? I once tried to figure out from Medicare, do I have to go on Medicare? I have a nice medical program here. I'd like my insureds, and I couldn't get a coherent answer. I later found out I had to join, and now I was going to be penalized because I didn't join. But you can't petition your government. You can't say, Hey guys, let's do something a little reasonable here. When you had local politicians with clout, when the federal government was so powerful there was a degree of corruption. That degree of corruption was kind of a solvent. You went to the federal government through your political leader and he said, Hey, cut this guy a break. They cut the guy a break. 

I'm not a fan of major corruption. I like local corruption. It’s helpful in oiling the skids, if you will. So I think we have-- Along with the economic problems we have, we have massive social problems, plus the federal government has to be re-engineered. Now, whether blowing it up first is the best way to re-engineer it, something we'll see later, I don't know. But certainly Trump has indicated that the federal government as it exists cannot continue, which anybody who's dealt with it can see. But on the same hand, you can’t just do cold Turkey. 

So I suspect what he's going to do is what he did with the sanctions. He announced the tariffs, then he said 90 days to negotiate. I think he's done all these wrecking ball things. He'll blame it on Elon Musk, as he didn't know what he was doing or something, and I couldn't stop him because of something. And then re-engineered into something that functions. The federal government is critical, but has to be re-engineered. But it's not surprising that the same time you have an assault on da voke, as they say--on the woke--a social event, a transformation of the global economic system, and an assault on the federal government. That I think is the outcome of the two cycles coinciding for the first time,

David: You talked about Trump exploiting the 2016 and 2024 elections focusing on those that have suffered the most in the previous socioeconomic cycles. I pulled up one statistic that was intriguing. CEO compensation compared to worker pay as a ratio in the 1980s, it was 30 to one. In the 1990s, it was 100 to 200 to one. In the last period, 2000 to 2020s, commonly between 300 and 400 to one. And even if you look at growth in compensation, the CEO has had their pay grow by 1209%, the typical pay for a worker at 15% from 1978 to 2022. How do you see the next cycle addressing the concentrated accrual of benefits to a select few in society?

George: In the terms you stated, that's extreme. But in terms of lifestyle, the pressure is less there. So I'm certainly in the amount that's not super rich. I'm not an executive of a major corporation or anything like that, but I'm still able to lead a decent life. So revolutions occur, as in the 1920s, almost, when the lower class is an impoverished class. That's not the case in this way. What you're really seeing there is not high degrees of consumption and starvation. We're seeing there is a small group of people managing the investments of that money. They're not eating it, they're investing. And the question is, is that sort of investment the most efficient way to work? Now, one of the things you should also note is that we have the subprime crisis. The student loans that are outstanding and that the Biden administration wanted to forgive is as large as the subprime crisis in terms of the wealth.

So there's a massive imbalance there, too. So throughout the system, over time, the systems that were created, well back, many years ago, 40, 50 years ago, have evolved into what I call the reductio ad absurdum. So the wealth of the upper class--probably less because the lower class is not impoverished--but the more pressure they have pushed on them, the more they want to change. And favored classes like students, well, that's really a problem. So remember when you talk about favorite classes, you're not talking about just ethnic groups and gender. You're talking about people like students who almost got a free ride on their tuition. So there are many imbalances, but I don't see the gap between wealthy and poor, as they say, because the poor are in trouble, but they're a smaller class. And lower middle class, middle class, which are in hard times compared to past, but are hardly a revolutionary class.

David: Not once in your book or in your recent writings was I under the impression that we are facing the beginning of the end for our country. I'm just curious, what is your optimism based on?

George: History. We have gone through Andrew Jackson and Louisiana Purchase and trying to settle it afterwards, the Civil War. And after that, the decision to go back to the gold standard, which was radical and different, the Great Depression. This ain't nothing. So my point is, we start talking together. I mentioned that we're a reinventing country. We were invented, and we reinvent ourselves, and we go to the extreme with our previous inventions, but then we reinvent ourselves because nothing is sacred in the United States. No institution, no class, nothing is sacred. 

And so what I have to go on is we've gotten through the Civil War, two World Wars, the Great Depression, what do you want? This is a normal process. At the time it looks insoluble. Through the 1970s the president froze crisis at one point. We had the oil embargo. We had stagflation coming out of our ears. Reagan came in, changed the tax code--really minor shift. Major in one way, minor another way, and we had a period of wellbeing. He re-engineered the system. 

So if you look back at the 1970s when the 82nd Airborne was trying to calm down Detroit, they had to deploy the 82nd airborne, and you saw that, and then you saw all the other economic imbalances and pains, not to mention fear of the Russians. We're just going through a normal period. Then historically, the inventiveness of the Americans in political and social and economic ways is built in. Every one of us descends from people who came from somewhere else, and they wouldn't have come if they weren't needing to go somewhere else, and they invented a life together. And so my confidence in it is that the construction of the American system is such that it weathers these storms and emerges more powerful. We've had it before.

David: Well, the New York Times Magazine says that there's a temptation when you're around George Friedman to treat him like a magic eight ball. I don't know that we're falling to that temptation, but we do benefit every week from Geopolitical Futures. And I would suggest for any of our listeners, if you've not gotten a copy of The Storm Before the Calm: America's Discord, the Coming Crisis of the 2020s, and the Triumph Beyond, get it, read it. And by all means, subscribe to Geopolitical Futures. We will have, in the show notes, an opportunity there for you, extended exclusively to you, the listener. 

And appreciate your time today, George. Always appreciate your insights. Even if you're not getting regular feedback from us, we are reading, taking note, and paying attention to everything that you write, and we're appreciative of it.

George: There will be tests.

David: I look forward to them. 

George: Take care. 

David: Thank you. 

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You've been listening to the McAlvany Weekly commentary. I'm Kevin Orrick, along with David McAlvany and our guest today, George Friedman. You can find us at mcalvany.com and you can call us at (800) 525-9556.

This has been the McAlvany Weekly Commentary. The views expressed should not be considered to be a solicitation or a recommendation for your investment portfolio. You should consult a professional financial advisor to assess your suitability for risk and investment. Join us again next week for a new edition of the McAlvany Weekly Commentary.