Main Idea

US Treasury Receipts

September 13, 2023/

According to Wall Street and repo market legend Zoltan Posar, this recession will be different from previous ones.

Metric: Yield Curve

September 7, 2023/

According to Wall Street and repo market legend Zoltan Posar, this recession will be different from previous ones.

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John Doe

Above all, the Colorado Compact has to be renegotiated for a more realistic environment... this is going to be an ugly political issue for the next few years that is absolutely unavoidable but is absolutely critical if the United States, in general, in this region in specific, is going to take advantage of the demographic and geopolitical shifts that are racking our world right now. This region should be one of the biggest beneficiaries of the changes going on, but they have to be able to get the water situation right."


Question: What is the current water rights situation among the Colorado River Basin states?

Answer: Following the court ruling, California has refused to engage in negotiations with the other states of the Colorado River Basin. There was an attempt last year where all the other states agreed to reduce their demand if California would make a moderate decline, but California refused. Currently, the debate among the other states, particularly the ‘upstream states,’ is about leaving the compact completely. However, this could lead to California suing them in a case that California would likely win, but it could take years to resolve and would potentially result in California going dry.

Question: What is the Colorado River Compact, and how does it impact the water rights among the states in the Southwest?

Answer: The Colorado River Compact is a legal structure established in 1922 by the American Southwest states to share water resources. However, this agreement has two main issues. Firstly, the evaluation year for how much water they had to share was an unusually wet year, which led to overestimated water quantities. Secondly, the agreement favors “senior water rights”, which means urban centers existing at the time of the treaty have priority over newer infrastructure. Thus, regions that have developed their water systems more recently, like the 1970s, are at a severe disadvantage.

Question: What is the water rights dispute between California and Arizona?

Answer: As the last state to build out its infrastructure to tap into the waterway network, Arizona has the least priority in the compact, putting it at the bottom of the stack of “junior water rights”. When a dispute over water occurred a few years back, Arizona and California ended up in court. The Supreme Court ruled that California has senior water rights, which means that Arizona’s water demand can go to zero before California has to cut at all.

Question 3: What is the situation between California and Colorado regarding water rights?

Answer 3: After securing a favorable court ruling, California has abstained from negotiations with other states of the Colorado River Basin, including Colorado. In a recent attempt, all states, except California, agreed to reduce their water demand if California would also make a moderate decline. California refused, insisting on its senior water rights.

Question 4: What are the climatic and geographic factors leading to these water disputes in the Southwest?

Answer 4: The American Southwest is characterized by arid conditions and high elevations. The main source of water is orographic precipitation, where moisture rises upon hitting an elevation, condenses, and falls as rain. However, this process is unpredictable, often dependent on specific temperature and humidity conditions, leading to irregular water supply and periods of intense drought. These uncertainties have aggravated the water disputes in the region.

Question 5: How is the agricultural sector in the Southwest affected by these water rights issues?

Answer 5: Agriculture in the Southwest, while located in desert regions, provides a significant portion of the nation’s fresh vegetables. This sector heavily relies on the water courses governed by the Compact. If states begin to abandon the Compact, it could severely disrupt food production, posing a risk to national food security.

Question 6: Are there other factors contributing to the water rights issue in the Southwest?

Answer 6: Yes, there are several factors contributing to the water rights issue. The region is experiencing significant population growth due to internal migration, which is increasing demand for water. At the same time, there is a push to increase industrial activity in the region, particularly in sectors like electronics manufacturing that require substantial water resources.

Question 7: What are potential solutions to the water rights issue in the Southwest?

Answer 7: One of the primary solutions is to renegotiate the Colorado Compact to better reflect current water availability and regional needs. However, this might require a triggering crisis or legislative action from Congress to impose a new agreement. Other measures could include improved water management practices, reducing water-intensive activities like certain types of agriculture, and incorporating water conservation technologies.

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Watch the complete analysis to capture a deeper understanding of the historical, geographical, and climatological context. Peter Zeihan delves into more of the specifics of water rights and potential solutions, while utilizing anecdotes and metaphors that help simplify this complex issue.