Street Talk | Episode 149: Dr. George Friedman on Russia, Ukraine, and the Next Global Order

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Nathan Stovall

Welcome to Street talk, S&P Global Market Intelligence podcast that offers listeners a deep dive into issues facing financial institutions and the investment community.

 

I'm Nathan Stovall, and I've just returned from S&P Global Market Intelligence Annual Community Bankers Conference, where we covered a wide range of issues focused on what it will take for community banks to remain relevant over the next decade. We kicked off the event with a completely different issue, though, and one that is on the minds of many Americans today, the changing geopolitical landscape, the war with Iran and upcoming negotiations with China. At the event on the morning of May 6, I had the pleasure of interviewing geopolitical strategist and renowned author, Dr. George Freeman. Here's the conversation.

 

I'm Nathan Stovall. I lead the financial institutions research team at S&P Global Market Intelligence. And I'm thrilled to kick off our first panel discussion really about geopolitical issues impacting markets, U.S. policy and ultimately the economy. I've got lots of questions. I have lots of views considering that I'm a U.S. bank analyst. So obviously, I'm an expert on this. No, I'm not. But thankfully, I have one next to me. And George Freeman, not only has he been a forecaster and an author of many works the storm before the calm and one of my favorites, the next 100 years, I've been a follower of his work since then and was thrilled to have him here. And -- we talked some last night and had appreciation again for this morning of you getting up in the middle of the night waiting for the developments as they're coming. And of course, we had another one. But we're going to try to go through a bunch. And as I said, we will look to the audience for questions. So please raise your hand, and we'll recognize you then. But Dr. Freeman, let's start off talking about something we had talked about in advance of the spin, and I know you've written about it as well. You've talked about how the current moment is really the end of the Bretton Woods model that came out of post World War II and a shift towards bilateral U.S.-China relationships, really replacing the traditional U.S., EU framework. Why is this such a big deal? What does it mean for the global economy? And why is this Trump Z Summit in May, such a pivotal moment in this shift.

 

George Friedman

In 2 minutes.

Nathan Stovall

Yes, in 2 minutes.

George Friedman   00:02:38

Well, we'll start with 1945. In 1945, the European era ended. The first global system, geopolitical system was the European Imperial system. It dominated Asia, dominated Africa, created North America, dominated Latin America. 1945, it collapsed. It collapsed because of the internal wars of the European countries and in part because of the emergence of the United States and the Soviet Union on both their sides, and they were much weaker. The Bretton Woods agreement and all the other things around it were based on geopolitics. We did not want the Soviet Union to occupy Europe. Why? One was ideology. The other was the U.S. national security is unique. We cannot -- we're the only nation that cannot be invaded on land unless the Canadians get really antsy. It's not going to happen. The only way we can be invaded is in the oceans, the Atlantic, the Pacific and Japan, tried that. Now if that's the case, and we're dealing with the Soviets, the one thing we don't want them to have are ports on the Atlantic. Number one, -- if they get ports on the Atlantic, they may be able to challenge us on the Atlantic. And therefore, we created a system NATO to create a buffer to keep them away from the Atlantic ports that's called Western Europe, okay? Now that system also had an economic dimension. We had to rebuild Europe. And the Bretton Wood's agreements and all the things around it, the entire system was based on stopping the Soviet Union, thus strengthening the Europeans, creating trading systems that were favorable to the Europeans, having foreign aid to block the Soviet penetration of the third world countries that we used to call them. So this was what was going on at that point. That became obsolete, not with the collapse of the Soviet Union, became obsolete in Ukraine.

In Ukraine, we discovered the Russians could not, in a few months, conquer a much smaller country, a much weaker country, Ukraine. Well, if they can't take Ukraine, and look at the map, they've got a small sliver that they're holding on to. They're not going to invade Europe. Thus, the relationship we built with the Europeans based on massing troops in NATO, covering the costs frequently, having trade relations that were beneficial to these other countries, both in Europe and around the world. These became obsolete. It didn't make sense any longer.

Now it's hard to reach a point where everything that you grew up with, live with is no longer relevant. It seems like a moral outrage that you should change your thoughts. And the Europeans certainly are outraged that we are taking this position, but it was inevitable. So the entire economic system that was built around the cold war became obsolete in the mid-20s, 2000, 2020s. It became obsolete because there was no cold war anymore. Russia was not a major power. It was not a threat to the world in any serious way. And therefore, the economic system had to evolve as well. What we created in 1945 and later with the Bretton Woods agreements became obsolete. Now in a world that's a striking thing because this was the eternal structure of the global system, how in the world can you end it? The answer is quite easy, it's going forward. And so there's a state of shock in the world at how the United States changed. At the same time, reality, geopolitical reality decided that. Geopolitics drove the economics of the last cycle from 1945. Geopolitics is driving it now as well.

Nathan Stovall   00:07:12

So why do you think this summit in May is so pivotal with Xi. You set up the framework of okay, we don't need NATO anymore, and that put us closer to Europe in that prior setting in a world where we no longer fear Russia is a real threat or no longer is tied to Europe is the Summit upcoming really saying, okay, this is about realignment because China is the person we need or is the country we need to be most aligned with.

 

George Friedman   00:07:46

Well, the United States is the largest economy in the world. Chinese is the second largest. Not really, the third because the EU ever got together, the EU's GDP is larger than the Chinese. But China has a fundamental problem. which is it's a very large country. It ranks #2 in GDP. But in per capita income, it ranks #71. In other words, its GDP relative to its population is difficult. So the Chinese have a great difficulty. They don't have a massive domestic market to absorb the production of the world's second largest economy. They must have trade. Their #1 trading partner, their exporting partner is the United States even to this point, okay? So they are dependent on access to foreign markets to build their economy while they try at home very difficultly to build up a domestic demand. Now with the tariffs that Trump placed on them, that reduced the amount they could export to the United States, still #1, but it reduced it. And this created great economic crisis in the United States, things you wouldn't like like bank failures, particularly in the rural areas. collapse of the real estate market. In China, the real estate is kind of a banking system. It's what you put your money into some real estate and that fell. So the Chinese have come under tremendous economic pressure, including unemployment, particularly among the youth and so on and so forth.

 

Nathan Stovall   00:09:34

It's 15% or something like that young.

George Friedman   00:09:38

And you can't get around dealing drugs very well in China. So other so many problems. So basically, the Chinese are in a very difficult position. Okay. Now the United States cannot have intimate economic ties in the country to which it has hostile military ties. As we learned during the Arab oil embargo and recently in Straits of Hormuz, that really depending on someone you're going to go to war with -- might go to war with is really a bad idea from an economic point of view. And therefore, the Chinese badly need an accommodation with the United States. And the United States is in a position that it wants to have their relationship because the affordability problem. Low-cost Chinese goods brought down the price of consumer products in the United States. They have a bigger problem, we have a real problem, okay? So at this point, they're about as communist as I am. So that issue, the ideological issue is not there, okay? So at this point, Xi, who, by the way, fired all of his Army officers, all the senior Army officers, including Chief of Staff, all the admirals just a couple of months before after a talk with T. And Trump is saying, we're not going to make a deal with you until we reach an understanding that we're not going to go to war with each other, okay, number one. And they say, no problem. Okay. Now what's the deal? Well, the deal is left to Taiwan, and we can talk about how that ends. But there is a negotiation going on between the 2 largest economies to reach an understanding because they don't have any fundamental geopolitical issues involved, they're not going to invade us and we're not going to invade them. And we don't really care what they do with Saigon at this point. There has to be an accommodation. That has to be negotiated is clear. but that it would have happened with something that could be predicted because of the Ukraine war. Once the Ukraine war was gone, there are only 2 major players on the street, each with fundamental problems, the Chinese with the bigger ones. Thus, May 14 is a big date. That is when they're going to get together. And remember that even though there's been a war going on in Iran, the Chinese have done very little to support them. Plus, while the war was going out, there were meetings between the Chinese Vice Minister and Vicente, the Secretary of Treasury in preparation for the summit. The American said, it was going to be in March, American said, look, we're going to have a war this week, give us a break and let us postpone. She said, fine. How does the 14th sound? Done. Now one of the reasons Trump really wants to end this war -- he would like to go to Beijing and not have to ask for favors about ending this war for the Chinese. He doesn't want to have that on his page. So he really wants to stop this war fast. How we got to his other story. But if the U.S. and China reach combination, which both must, that changes the entire global economic system in a fundamental way. Joint ventures between U.S. and Chinese companies become possible, all these things start to happen. So we're living in a different world because geopolitics shifted.

 

Nathan Stovall   00:13:20

Let's talk about how the war started. We were having that conversation last night and ahead of this. And I think that was fascinating because you hear all different kinds of things about what was really driving it. And one of the takeaways I have from talking with you is that the President very much viewed Iran as a threat and a real credible threat and perhaps has long looked at it as a threat. Can you talk about what led us to war and how it actually played out from an execution standpoint?

 

George Friedman   00:13:51

Before the war started several months before, the United States carried out air strikes on nuclear facilities of the Iranians. Why are we worried about these facilities? First, the Iranians are sophisticated enough to develop nuclear wells. Second, and more importantly, Al Qaeda, which was behind 9/11, now is given sanctuary by the Iranian government. It's not the organization was before. We knocked on much of it. But Al Qaeda is there. And one of the nightmares after 9/11, and I was participating in talks at Oakeridge, Tennessee 3 days later, what are we afraid of, a nuclear 9/11. Imagine a nuclear weapon placed on a ship with a foreign flag, maybe French or Bulgarian or whatever, sailing to New York Harbor and detonating. You've got the group that staged 9/11 under the protection of this government, and that makes us a little uneasy, okay? Now nobody wanted, I think, in the government to say we're afraid of a nuclear 9/11 because there would be enormous panic in the United States. So from my point of view, war was rational. I'll say something radically wholesome, Trump is rational. Okay, live with that. And you'll start to see why he did it. Now there are 2 levels of geopolitics. One level is the geopolitical reality, the other is engineering, how you carry out the things. Trump has an interesting engineering style. I won't get into that. But he went in there to take out the nuclear capability. The Iranians refused to take that out. He decided to destroy the leadership of the country. Problem was either the CIA, respect them greatly, got it wrong or he didn't listen to them because these civilians, Khomeini did not run the country. The country was run by the IRGC, the Islamic State Revolutionary yard. And these were the people who were ideologically and rationally in their minds, going to oppose anything that happens. So the attack happened. We took out the leadership, and we were stun to find out that, my God, we took out the wrong guys. The RGC is in charge. Now how that engineering failure happened, I really can't tell you, but it did. And what's -- the reality is the ROGC is a very powerful military capability. There's no center of gravity to it that if you killed one leader, take out this command post, they're going cash. They have a system of defense called the Mosaic system where all regional powers -- regional officers have to command over that area. They can operate autonomously. Invading it would be a very bad idea and would take a very long time. This is very strong for us. And so it has to end in negotiations. The Iranians are holding out for a position that they're going to have a dominant position in the Middle East. Now the only people who don't want that to happen is all the other countries in the Middle East, Saudi Arabia, in particular, which we have a relationship with. So it gets to be a complex issue. On the one hand, the United States can invade Iran, but boy, it's going to be a bloody mess. On the other hand, the Iranians can't take the level of pressure the United States is putting on them. So there's a negotiation going on. One negotiation said, we're closing the straits of Hermes and driving oil prices straight up the wall. The other said, don't do that. Guys said, we did. Now what? And that's the discussion being held right now. They've got a hand on the global economy to choke it with. And they've got everything to lose if they get in. The United States has an election coming up. It has internal problems that the RGC doesn't have, and here we are. And both sides have to reach an agreement and both sides in a way desperate. It's very hard to reach an agreement when both sides are desperate because they don't have room to maneuver. But I think we're coming to the point where we will get a settlement with Trump giving in a lot of things that he wanted from them that he's not going to get and the uranium is giving up the one thing that he wanted deduce. And if I'm wrong on that, so it was a very good speech I gave here.

 

Nathan Stovall   00:19:00

One of the ironies of what you just said and how it maybe hasn't gone about as the President thought is that the closure has oil prices way higher. The rumors of -- rumors reports of negotiations today, you see how sensitive they are, oil prices are down $10 just on that report. But it has hurt other countries more than us and perhaps China most because they get so much of their oil there. Do you think that some of the decision to attack Iran is related to put pressure on China, get leverage on China ahead of this negotiation? How does that play into...

 

George Friedman   00:19:45

Leading up to the war, which was, to some extent, predictable. No one bought up the Chinese issue. And Washington leaks like a s. So that never came out in it. We have enough leverage on the Chinese. We didn't need more, okay? The Chinese have to be convinced that we don't have hostile military attentions toward them. So this war raging in Iran, they start to think what is the United States. It actually made, I think, settlement a little harder, not much harder. But I don't think -- although it put tremendous pressure on China, I don't think the United States anticipated the closure of the Strait. I don't think that was in the playbook. I could be wrong, but I don't think that was. So it was not directed against the Chinese in my mind, although it's a very nice thing to have for May 14.

 

Nathan Stovall   00:20:43

Sure, sure. And that's very logical to me when you think about the U.S. policy objectives of this White House, closure of the straight and what that means for gas prices is not what you want heading into a midterm, I would not think.

 

George Friedman   00:20:59

I would like to say that one of the things that's pointed out is that forgetting global warming, oil is a very dangerous thing to be serving as the primary fuel of the global economic system. I have never had an opinion on global warming because I don't know enough about it. But I can tell you now from a military standpoint, we've got to diversify energy, not because of global warming perhaps, but certainly because we've just experienced what happens when a critical choke point for oil is closed and how it can disrupt the American economy. So this is the best argument for alternative fuels quite apart from global warming, which is we've got a dependency that has a military vulnerability that is substantial, and we have to think it's true.

 

Nathan Stovall   00:21:57

That says up sort of a national transition. I mean there's another dependency we have in another region in Taiwan, not related to energy, but chips. And if you think about it, you've got companies like Nvidia depends so heavily on Taiwan for manufacturing. What do you -- do you think that -- you said this earlier that Chinese and American tensions over Taiwan will ease and what are the trade-offs look like there?

 

George Friedman   00:22:28

Well, first of all, understand the Chinese fear about Taiwan. There's a string of islands, Japan being an island, South Korea, Taiwan, Philippines, so on and so forth. They block the Chinese fleet from access to the Pacific. the wide straits, if you will. But with current weaponry drones and stuff like that, we can keep the Chinese out of there. If Taiwan goes into China's hands, they're much more secure. They get a block of sea from Japan all the way to Philippines, clear access. This is what the military dimension of this negotiation is. The settlement is the Chinese say, look, you've got a basic stranglehold on our military. Let it go. We say we've got to have an understanding on the military, something conceivable. And we do. And this is why I mentioned before that he fired all the admirals and all generals, did, okay? These people were trained for war with the United States. Their entire careers was built around planning for this war. They, I think, tried to stage a coup because a few days before these firings, on social media in China, there were reports that Xi was dead, Xi had a heart attack. We had -- now on social media in the United States, we have all sorts of fun things. These don't usually show up in China, but they're all over the place. My read, not sure if it was the military is going to do a coup. He heard that they were going to reach an understanding with the United States. Well, first, he fired all the Army generals, discovered they were corrupted, put them in jail, terrible corruption. He then met with Trump in South Korea. A week after that, he fired all the admirals. They were also corrupt, but not as corrupt as the military as the Army. So there's been things going on that you could see that China evolved dramatically. Now on the question of Taiwan, things are happening. Taiwan has a multiparty system. The KMT, the Kong party, which descended from the right wing party in China is now pro-Chinese. The leader that party, a woman wants to become officially part of China, okay? And in the polls, she's ahead in Taiwan. Why? Because officially, if they can be part of China officially, but an autonomous zone, kind of like Hong Kong, but a lot more than that, really autonomous. Well, the Chinese get their symbolic thing. They're part of China. The Taiwanese still have the right for the Americans to have guarantees with them because they're in Taiwan zone. And the Chinese get access to the U.S. economy, which they really need. From the American point of view, okay. So we gave them Taiwan. What does that mean? The Chinese are businessmen. They do not want to take down the Taiwanese economy. I mean that is something they really want. Having access to that economy would be wonderful. So there's a whole bunch of things here that can be solved. And the Chinese right now are the need to solve them. And we're seeing because the President of the United States was going to invite the Prime Minister of Taiwan to the United States. He's anti-Chinese. He canceled that visit, but the head of the KMT party has visited the United States. Okay. So that's just prior to the negotiations in May, and we've let them know we can deal on Taiwan. Just don't humiliate us by invading because then we'll have to do something bad. So that's where we stand on that. Taiwan is not going to be the blocking point -- and so what you really need to start thinking about is what happens to the global economy. If the U.S. and Chinese companies have the ability to form joint ventures in AI and all sorts of other things, becomes a different global system. And so we were wondering what happens after the collapse of the Sovi Union. This is what comes out of that. And the Russians really are in trouble because the Chinese don't like the Russians. There are plenty of conflicts, even military conflicts during communism. And Russia has lost the Eastern part, Central Asia. It lost the southern part, South Caucus, Armenia and so on and so forth. And now the Chinese Russian border is a question. So there's things going on in Russia that are pretty bad for them. So one thing leads to another leads to another leads to another. It's an integrated system. It's like the U.S. economy. One part withers, many other parts change. That's the integration of geopolitics.

 

Nathan Stovall  00:28:10

You talked about this some earlier, but what does a weaker Russia mean for Europe and also the idea of a stronger U.S.-China relationship mean for Europe. I mean it seems like that's -- both those things are very bad news for Europe in terms of their standing on the geopolitical.

 

George Friedman  00:28:31

Well the good news is that the Russians couldn't take Ukraine. They're not going to take Poland. Poland has emerged as a major military power and is part of the G20. So when you look at Europe, you always look at Britain, France, Germany. Look at Poland. It is the most dynamic. I visited Serbia recently. They're on fire with the U.S. investment going in all over the place, okay? Eastern Europe is really benefiting from all this. The Europeans face a fundamental problem. That's going to be the next question that has to be answered. Europe has spent the past 500 years killing each other. The Germans invaded Russia, Russia it's mad house. The United States imposed a reality on Europe, okay? And incidentally, landed about 200,000 troops to kind of help them. or shut them up, whichever runway you want to look at it. Now Europe has to decide what it is. It is potentially as a region, larger than China economically, but it's not a region. It's an area of very different languages, different cultures, long bad memories of each other. So the question really is, what does Europe become? The bitterness of the Europeans and the Americans are pulling out is they now have to answer this question. They didn't have to answer it since 1945. -- because the United States defined what they were. Now they have to do it. And that is the next most important thing happening. Reality of the world is this. The United States is the only global military power and a global economic power. China is a regional military power. It does not have access to the Atlantic Ocean. It cannot operate all over the place, but it's a powerful regional economic military power and a global economic power. What is Europe? It's a continent. Next story. So the point that one of the things that held Europe together was fear the Soviet Union. Now inside the Soviet Union, interesting things are happening. For example, they canceled the Mayday parade. Every year, they celebrate May, the day they -- that Germany surrendered to them in World War II. It is a holy day. They've never canceled it, but they did cancel it. There are things happening inside of Russia that we're seeing that are very strange. The Internet went down in Moscow. When it came back up, there was what was called a white list that you go and everything else was off the Internet. This was a serious thing that Putin condemned that it happened. Well, who could take down the Internet, the FSB, the successor to KGB, the intelligence service. This is rumor, but it's a strong rumor based on this, which is that the FSB does not like Putin, does not like the fact that he's carrying out the war that he will not end the war because it's going to be obliterated, okay? And then we have Putin calling last week, Trump, Usually, Trump's calling Putin and puts on the table the idea of an economic relationship with the United States. Now that's what Trump first offered. Stop the war, you'll have an economic relationship with the United States. He comes back last week with a phone call that publicly states that this is what he wants. Now Trump is saying, I'm going to do a deal with China. The Europeans are running around in circles. Yes, we're going to bleed you. And whether Putin survives, how we survive this long having mishandled this war catastrophically has to do with internal politics. But the indicator that the FSB itself, which is not like our CIA, they really can't over throw the government, fantasy stories aside, the FSB can.

 

Nathan Stovall  00:32:58

Came from it.

 

George Friedman  00:33:01

Well, he came from KGB. B KGB was like the CIA. It was a really good intelligent service. FSB likekestone factories, little things like that. So it's a very different form of organization. It's an internal one. It's less of a global operational system. So at this point, Russia is in deep crisis. We're going to have these talks with the Chinese. This is the last thing that the Russians want. They're losing Ukraine, continuely claiming to go. But take a look at a map, they hardly have anything, okay? And they don't have a system for reelecting present. You go one way or the other. And so that's an internal crisis. So from that point of view, and you also Russians really have not lifted a finger on Iran. They talk about it, but...

 

Nathan Stovall  00:34:02

Venezuela really or Cuba, right? I mean...

 

George Friedman  00:34:06

Well, they made very strong statements. And for much of the diplomacy, that's all they did. So we're seeing a really changing world. All the things that were the norm before the Ukraine war. All those things are shifting around. And nothing is shifting more rapidly than the economic reality, okay? That's the most important thing to take out of this, which is people are saying Trump is violating the norms. Yes, he's a pretty strange guy. But at this point, you have to shatter the norms. The norms are obsolete. And he's doing a very good job. I don't think he can rebuild it, but has any clue on it, but he's sure shattering it. So the United States has one fundamental cultural reality. It's an invented country. It didn't exist. It was invented at a meeting, the Continental Congress. And we are a culture of reinvention. We welcome obsolescence -- we engage in various struggles and a new reality emerges. So in a world that's undergoing massive change, the United States is a massive cultural advantage. Now necessarily, we hate each other these times. It's part of American culture. But we reinvent. So novelty, new ways of doing things are part of our culture. That makes us stronger. This is a dimension of geopolitics, the nature of the nations.

 

Nathan Stovall   00:35:48

Questions from the audience.

Audience member

You said that the one thing the Iranians want, and then I missed what that was.

 

George Friedman  00:35:57

It wants to be nonpower in the Middle East. The one thing the Iranians would like to arrive at is an ideological one, the spread of radical Islam. It's a religious principle, like spread democracy, why not? But what they really want to be is what they try to be under the old regime before it was overthrown by these, the dominant Middle East in power. They're a huge country, 2.5x the size of Texas is the way I put it. And they're a large country and they're united country in many ways because if you're not with us, you're dead. It's a good way to unify a country. This country wants to be that. We look at the Middle East, we look at Saudi Arabia, Israel and Turkey, okay? And this is another -- it's not a coalition yet, but it's a reality. And we look at it and say, we really don't want the Iranians to be in control. and we don't for various reasons. But this is part of the destabilization of the global system. We have to redefine what the Middle East is, and Israel is undergrowing crisis here because the system that existed since they were invented in 1940s is gone, and they're going to have to change too. So all over the world, you're seeing changing realities. And the one thing that people are frequently -- they're insulted by the failure of the norm. and that's the way it goes.

 

Audience member   00:37:42

One of the things we're living through right now is a series of disruptive elections here at home that are complicating our ability to project continuity on the world stage, if you will. And I know you've thought a lot about the socio and political economic cycles that America has gone through over the years since its founding. And can you help us kind of put some of that in context in terms of where we're living through this decade?

 

George Friedman  00:38:05

Sure. Every 50 years, the United States goes through a fundamental socioeconomic crisis. The last one was 1970s. 1970s is where I came of age. -- and everything was going apart. Riots in Detroit with the 82nd airborne called out to put it down, shootings at Kent State over the anti-world movement, total economic breakdown, Nixon going off the gold standard, Arab oil embargo, all these things, freezing wages and prices, too. So it was a time of basic instability. 50 years before that, it was 1920s. And we had basic instability. It's called Great Depression. And so why we have these every 50 years? I have no idea, okay? I'll tell you how I discovered this. I was sitting -- I was teaching them at the Army War College, U.S. Army War College. And I was sitting on a bunch of couple of colonels, who are, I will say, moaning and the next word you can put to it, about everything they saw. And I was wondering, I started -- have I ever sat with so many people who are so unhappy and they were slated to be generals because they were the Army War College. What in the world was wrong. So after this discussion I had, I decided to go home and think about this. I did that because there was a waitress I really wanted to date and she, of course, turned me down. My outcomes are 22% at best. Okay. So she didn't date me, okay. But I went home and I went down and took a look, do we ever do this before? And I found every 50 years. And every 80 years, we have an institutional crisis. So 80 years after the founding, we had the civil war. 80 years after that, we had the construction of the federal government during World War II. That's when the federal government really emerged as what it is. Guess what, we're 80 years away. The federal government is obsolete.

One of the things I wrote in that book that was mentioned was that 2 institutions were going to come under heavy attack, the federal government and universities because of that. So in other words, just as economists can with methodologies do a degree of prediction on what's going to happen. And there's modeling that goes on. The same thing happens in politics and geopolitics. There are cycles. We are in the first cycle where the social and economic crisis merged with the 80-year institutional crisis. And that produced Donald Trump. So Donald Trump is a man under these crisis, first creative destruction. He's probably not the man to have creative construction, but destruction he knew. But every really doesn't matter. It's not personalities. This was going to happen. I predicted in the book called next 100 years I published in 2009, I think it was published, I wrote around 2000 that this was going to be happening here. Why? Because it kept happening the same way before. I'm too stupid to understand why the cycle is so precise. I'm not dumb enough not to notice it. So you take a look at it, and we're in what was a predictable thing. And we're restructuring virtually every social institution — tremendous crisis. When Roosevelt was President, he was accused of being a dictator. He violated the constitution continually, tried to stuff the Supreme Court full of more people so get votes, and he was despised. He was seen as a completely reckless man, but he managed to convince the whole world that he was the friend of the poor. Now I don't think Roosevelt ever met a poor man who wasn't a servant, but he was a friend of the poor. He conditioned himself for that time in place, and he's respected by everybody now. Who knows what will think about Trump? I can't imagine worshipping him, but there he is. He is just doing the same thing that Roosevelt did, destroying the old system. Remember, Roosevelt started his presidency by doing something completely illegal, closing down the banks. He had no power to close down the banks. But there was such a run on the banks, they were going to run out of money. He shut down the banks, stopped that and so on and so forth. So at these transitional points, you get presidents who, in retrospect may be deeply respected. Abraham Lincoln, we love, but it was considered an alliterate fool at the time he was elected, some Kentucky Redneck coming forward. So American memory is very interesting. We don't remember. But we do it again and again. It's a funny thing to watch unless you're living through it.

Nathan Stovall  00:43:46

Chris?

Audience member   00:43:47

22% is pretty good, too, by the way, for the record. Yes, but you didn't have the big. Venezuela, Iran, also part of the strategy to put pressure on China than Russia? And if so, does Cuba fall into that? Or is Cuba Rubio show?

 

George Friedman  00:44:10

No. To me, it was predictable that the United States wanted to disentangle itself in the Eastern Hemisphere. Why? We had a series of wars in South Korea, to Vietnam to Afghanistan to Iraq and so on. In all these wars in the Eastern Hemisphere, most of them had something to do with communism, the Soviet Union and all that. Soviet Union having collapsed, it is rational for the United States to reduce its exposure to the Eastern Hemisphere, okay? And so it was predictable that the United States was right a document saying we are lessening our interest in the Eastern Hemisphere, focusing on the Western Hemisphere, okay? This is where we really did. This the Canadians didn't like, tough. At the same time, when you take a look at what the issues were, the thing in Venezuela, well, that was a real thing. I don't think we had to invade, but at the same time, they were running drug cartels and also owning American businesses and operating in various ways. But it's not about that. It's about Cuba. The thing about Cuba is not Cuba itself; it’s the Florida straits. The most important ports in the United States are on the Gulf Coast. It's not New York, it's not San Francisco. It's Houston, it's all the other ports. Over 50% of exports and imports flow through those ports. The straits between Key West Florida and Cuba is 90 miles wide. Anybody with half a brain would have mined that motorway. And the Cuban missile crisis had to do with nuclear weapons. It also had to do with fear that the Russians are going to mine that 90 miles. That is a critical 90 miles for the United States. And so there's always been back to Teddy Roosevelt, wars in Cuba. And that was about this issue. And I think Trump's intention was to settle this issue once and for all. But I won't call them a subtle man, but he sometimes acts subtlety. He decided to hit Venezuela first. We knew that as soon as we realized that the force that was blockading Venezuela included 2 aircraft carriers, 13 submarines and everything else. You need 3 ships to block Venezuela. So what were all these war ships doing here? They were actually far away from Venezuela. They're on the Cuban coast. So I think one of the things when the administration assumed that we now had to focus on the Western Hemisphere as the National Strategy papers showed, the Cuban question had to be answered. But Trump seems not to prefer open warfare to incredible threats and choking. And it's not a bad strategy if you're in the Army, you don't have to do the kind of things. So our view was immediately that this is not about Venezuela. That's a side show. This is about Cuba. And we see those negotiations proceeding. Cuba is a disaster. There's miserable. It's not Rubio. We have half the Cubans living in Florida at this point, good Americans. So we have this fundamental problem, and I think that the intention is to solve it this way, to reduce our presence. At the same time, he violated the principle to reduce our presence in the Eastern Hemisphere by attacking Iran. So it's not a clear path for engineering. So the -- I can easily explain the geopolitical here is we do everything else. And then somebody has to do it. And the people who do it face difficulties. So it's not as neat as I put it here is going forward. And so he's dealing with the Iranians, too.

Nathan Stovall  00:48:40

And Cuba itself is not really a surprise. I mean, I don't know if you'd agree with this, but probably every President since '61, '62 would have liked to change Cuba, no matter who is in power.

George Friedman  00:48:51

Go back to Teddy Roosevelt. We didn't want the Spanish there. And we also stole the Philippines in Spanish. But the point is that I have a theory, first, the deep personalization of politics. Politicians are people who understand reality. and know how to adjust themselves to it, okay? Now the people who dislike the presidents think he's the one behind this reality. But effective leaders are those who understand the reality. Trump is either the personality he is or he shaped this personality to fit the times. And that's how he became President. Now, he is completely unpopular because the American public expected him to act in very different ways than he's acting, which was kind of silly having seen Trump act. So when you look at the leadership, it's very hard to make out what's happening, except the fact that like the invisible hand in economics, there's a visible hand in geopolitics. You're going to do what you got to do, okay? And politicians like good businessmen, understand what they got to do. So we take a look at the political system, and it can be highly predictable. And to that extent, it has some value as a methodology. But at the same time, living through it is painful because it seems that everything that I counted on is gone. And the greatest power of the United States is to render things obsolete and go a new way. At the same time, living through it could be hell.

Nathan Stovall  00:50:49

Please join me in thanking Dr. Freeman for a great discussion.

George Friedman   00:50:53

Thank you very much.