A Geopolitical Phase Transition
The Sands of Change Are Shifting
*With developments over the past few months, I honestly should have put something down on paper sooner — just for the sake of, if I am wrong, I can go back and see where I failed.
Events in Russia are on the forefront of thought for many, and understandably so. A world leader has accurately assessed an environment where he is strategically well positioned to weather the storm of an aggressive military assault on another country — formerly part of Soviet Russia. While also dealing with violations of agreements by international powers to not advance NATO involvement closer to Russia’s doorstep, and maintaining a general demilitarized buffer around Russia’s western border.
Now, the really interesting part(s) of the geopolitical environment — as it stands currently — are the 2nd+ order effects coming out of this.
Russia’s actions have been met with reactions of sanctions, impacting financial & commodity markets globally. Of the output from the top 10 oil producers in the world, Russia produces roughly 18.5 percent (~54 million bbl/day divided by Russia’s ~10 million gives us the ~18.5%).
Oil is used in nearly everything today. Whether it’s in producing the “clean” products of gasoline/diesel/jet fuel, or in the production of plastics, or the fertilizers/herbicides/pesticides/fungicides that are heavily relied upon in industrialized monocropping, or in the development of munitions for militaries. Oil is quite literally everywhere, surrounding ourselves in any conceivable manner. Whether it’s in the acquisition, production, and refinement of raw materials or in the transportation of resources and goods, oil plays a key role in every corner of our economies. Which means it is also playing a key role in the facilitation of activities that produce very important goods (as well as nearly every product out there), such as food.
Which brings us to the Middle East (population: 371 million), Southern Asia (1.94 billion) and China (1.4 billion). Three regions that are largely reliant upon imported foods for their populations (with some nuance thanks to India). Which only adds to my belief that the withdrawal of the United States from the Middle East will cause a power vacuum to commence, with the coming food shortages likely to exacerbate the situation — of which we have already been witnessing commence. My reasoning for this is echoed by points presented by Peter Zeihan as of late; the United States’ presence in the ME, thanks to the Petrodollar system agreement with Saudi Arabia, was allowing for the entire world to benefit from America’s exporting of security and allowing for globalization to commence and much of the world prospered for it. With one country in particular being a massive beneficiary of the globalization agenda for the planet; China.
Once China was admitted to the World Trade Organization in the 90’s with assistance from President Clinton, the scales tipped aggressively in favor of the Eastern Power. China has an abundance of labor thanks to their massive population, allowing them to benefit by making themselves the manufacturer of the world [essentially] for the past 30 years. However, globalization also incentivized extremely efficient systems of “just-in-time shipping.” Which opened up a massive amount of weakness in trade systems on a global scale; as seeking greater efficiency typically requires sacrificing resilience in an exchange system. And that is precisely the trade-off that occurred. What started as a perceived minor bruise upon the global economic order with the attempted pausing of economies globally in response to the Coronavirus Pandemic has started to become what I would identify more aptly as a lesion.
The reasons this situation has swollen so badly is extremely complicated for a plethora of reasons, ranging from the farce that are our financial systems, to the parasitic relationship that has ballooned between opposing central bank systems of The Federal Reserve Bank of the US (in concert with the Department of the Treasury) and the LIBOR system of the European Union, and also of course with added complications thanks to the globalized trade relationships [including food in trade] — to name a few. Now, for this conversation I would like to briefly shift our sight picture back to China.
China has been masquerading as a geopolitical tough guy, and there’s many reasons for this, much of which is in attempts to support the authoritarian rule of the Chinese Communist Party, led by Xi Jinping.
The reason I say “masquerading” is because once even a small amount of effort and time is dedicated to looking closely at China’s inner workings — there are weaknesses abound. First, there’s the population demographics of the nation; they’re not good, and relatively comparable to metrics in both Japan and the United States, and with the birthrate being negative, serious economic implications follow shortly after.
Secondly, China relies quite heavily on importing food. And with global trade networks being disrupted in so many manners, this provides daunting complications to the nation (and is why they’ve also been aggressively hoarding foodstuffs consistently over recent years).
My third reasoning is the energy crisis that China has been consistently under, and what is rumored to be a major motivation in their banning of bitcoin mining during the summer of 2021 — as China relies heavily on hydropower as well as coal plants to supply their demand. Their goal would likely have been to prevent energy from being used to mine BTC, instead of supporting commercial & residential demand.
Fourth, is their water shortage, which seems to have been rapidly progressing into a crisis, that is not only making matters of both the food & demographics situation worse, but is also playing a role in the energy crisis; as coal power requires significant inputs of hydrogen dioxide.
My fifth point would be how their demographic situation is also likely going to cause the demand for labor on the global scale to begin to distribute, likely shifting towards India, and probably even some of Central & South America as well as Africa.
My sixth justification would be the shifting of chip foundries also distributing away from China’s reach as the international community grows wary of their desires to swallow up Hong Kong and Taiwan back under the control of the CCP. With emphasis on multiple chip foundries moving to the United States; while not providing immediate relief, will be very interesting in a decade (and some change).
It is for these reasons that I believe that China is set on a path to some sort of dramatic upheaval. I’m not saying that this explicitly means revolution, but I do believe that a dramatic “growing up” is about to occur in the Eastern Power. To add one more point of support would be their most recent attempts at lockdowns in a few regions pertaining to coronavirus. There have been provocative reports leaking out of the country suggesting that the population is growing antagonistic amid deteriorating conditions coupled with bleak economic outlooks. If the people ultimately aren’t happy, they’ll find a way to get what they want.
America’s Got Her Own Problems
The US has been dealing with a lot. And by a lot, I mean a lot. Since the days of George W. the US has grown more and more politically divided, with the trend rapidly deteriorating in the election that resulted with President Donald Trump. And in recent years the divide between those who trust the Federal Government, and those who do not, has grown even wider — for many, many reasons. With lots of controversy around the lack of science and transparency put forth by pharmaceutical conglomerates, with the dealings of a particular laptop of a particular President, insider trading by politicians and governors of the Federal Reserve, and mandates… just to name a few. The US is a bit of a powder keg of its own.
With these developments serving as justification, many are believing that a civil war is around the corner — I aggressively disagree. I disagree that the US is ripe for such a violent conflict as a civil war would entail. Unlike much of the world, the US has maintained a consistent presence in combat internationally, albeit largely avoided (or silenced) within mainstream media outlets. Meaning that much of our armed forces understand what something as monumental as civil war would mean, not to mention the well-known reality that much of the population is individually armed (three cheers for the 2nd Amendment). Plus there’s the consideration of how technology has allowed so many of us to remain comfortable and peaceful, it will take serious developments to push the general population of the US to the point of desiring hot conflict with their neighbors.
The Birthing of a New Trade Federation
What I do believe the US is ripe for, however, is for the States themselves to regain power from the Federal Government. I believe that the Federal Government has done a stellar job of demonstrating how completely incompetent the system has become, and how radically ineffective their decision-making has devolved over the past 60 years. In doing so I believe that regions of the US will splinter into regional trade federations which will pull resources and jurisdictional power away from the federal government.
I believe that these regions will generally be split into 3 overarching sectors: The West, the Midwest, and the East. Largely due to East & West having similarly aligned, potent liberal ideologies around ESG narratives and being quite aggressively antagonistic towards fossil fuel production — seemingly ignorant to how important they are at current — and also being against nuclear as a form of energy generation. While also being extremely stubborn to the words of doctors, scientists, and virologists in the latest handling of a particular virus. I believe that the state of Texas is likely to lead this initiative, and will likely gain support from Florida, Wyoming, North Dakota, and Oklahoma (with other states of the Midwest likely following). With this, I also believe that the Gulf of Mexico is likely to become a massive hub for trade and technological innovation, as much of Silicon Valley has redistributed to the lands of Texas and Florida — with this only becoming even more likely as the Samsung and TSMC chip foundries get closer to coming online.
It is the regions of the West and East that I am not so certain of, I believe there will likely be lots of in-fighting and confusion between these groupings of states as the majority of food & energy are generated in the Midwest states. This is also why I believe that the Midwest will be largely aligned in direction, and quite synergistic. Which will also mean that these states will stand to benefit most from such a relationship, as a team that understands the mission and the goal is much more effective than a team that is confused on leadership and what victory may look like.
I also believe that these developments could open up the opportunity for a Greater American Trade Federation to be born; which would be based on international trade between Mexico, assorted provinces of Canada, as well as countries in Central & South America.
To wrap up, I believe that China and the US are in for some interesting years ahead. And I am betting on that — thanks to the advent of technology, education, and innovation in communications — hot revolutions are much less likely in these areas, although not impossible. I did not touch on Europe here because I do not understand much of the European Union, and even less on the operations of LIBOR or the World Economic Forum. In general I do expect for the European Union to dissolve by 2030, as the greater EU alliance seems very conflicted about how to handle their reliance on Russian fossil fuels, as well as the situation around food sourcing with conflict engulfing their bread basket (Ukraine). On top of that, the alliance is also heavily reliant on China for their manufacturing.
I think in general, South America and Africa stand to gain leaps and bounds over the coming decades. Through trade they will be allowed to leap-frog technological advancements, as they will be able to circumvent having to tear down existing infrastructure to make upgrades since they lack much of it to begin with. I also believe that these two regions will stand to make massive gains in agricultural techniques and practices, likely producing a hybridization between industrialized monocropping and regenerative farming that will produce radically improved efficiencies as far as crop input requirements, as well as quality and yield amounts.
**It should also be noted that I did not touch on the machinations of the government debt markets on all of this, which add an even greater debt of complication to everything stated here. The world in which we occupy is beautifully complex.