Part III: The Face of Inflation

I look at a lot of charts, so you don’t have to. But here’s one I need to share. It’s a partial breakdown of product prices by the U.S. Bureau of Labor Statistics, that’s the group of wonks who tell us (formally) what inflation is doing. Check out the more recent data on the far right. I’ve peeled out the various energy-related trends so you can see just out of control they’ve gotten of late.

Not nerdy enough for you? You can mix and match your own factors here.  #DataIsCool

Current supply chain woes aren’t just about goods getting to Southern California, or how efficiently Southern Californian dockworkers can get those goods in I’ve got two bits of good news and one bit of bad news.
 
Good1: The good news is that as high as energy prices have recently become in the United States, relief is on the way. Oil and natural gas prices have now been high enough for long enough that America’s shale operators have steadily expanded operations and fresh production is already feeding into the system. We might not feel that relief in the form of lower prices until March, but relief is still on the way.
 
Good2: As bad as prices seem, it is way worse everywhere else. Natural gas prices in Europe are now ten times what they are in the United States, and the Europeans have zero reasons to expect their situation to improve one whit this year. Or next year. Or the year after. Europe has next to no local oil or natural gas production, and no shale sector to speak of. Instead, the Europeans have chosen to rely on solar and wind power (on the world’s cloudiest and calmest continent, no less), with a bit of bridge assistance from…the Kremlin.
 
Bad1: Good1 might make you exclaim a sigh of relief. Whew! This too shall pass. Weeeeell, not really. Just because I don’t see energy inflation holding up in the United States does not mean that I don’t see us entering one of the weirdest periods of economic transition in American history. You name the sector — finance, manufacturing, housing, agriculture, transport, commodities — we are in for at least the strongest inflation we’ve seen in this country since the 1970s.
 
Breaking down that is going to require a great deal more than a newsletter.
 
Join us for the final installment of our series on the future of the global and American economies in an age of deglobalization.

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Part II: Supply Chains No More

Join us Friday, November 19th at 1p Eastern for our webinar about the challenges facing global supply chains: 

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Supply Chains No More: The Question of California

You’d be forgiven if you though the biggest challenges facing the US supply chain was its overreliance on the state of California. While some 40% of US containerized imports come through the ports of Los Angeles and Long Beach, the ports are not the problem. 

And while the cities of Los Angeles and Long Beach certainly haven’t been quick to come to the aid of their beleaguered–and admittedly quite advanced–port terminals, the problem is so much bigger than the administration of any one port complex, or city, or state. Even one as tremendously and tremendously afflicted as California.

Current supply chain woes aren’t just about goods getting to Southern California, or how efficiently Southern Californian dockworkers can get those goods in containers off of ships. It’s all ports, it’s all transport, and it’s about a cascading series of crises impacting not just how goods get to the US from China, but how we move goods from Savannah and Long Beach and Tacoma and Houston to Topeka and Louisville and Phoenix and Duluth.

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Please join us for our upcoming seminar tackling these issues and more. 

Scheduling concerns? No problem. Webinars will be recorded and shared along with presentation materials to all registrants to watch at their convenience. 

Part II: Supply Chains No More
Friday, November 19

And coming soon, 
Part III: The Face of Inflation
Wednesday, December 1

REGISTER FOR PART III: THE FACE OF INFLATION

Supply Chains No More: Semiconductors

The American economy faces shortages of every conceivable product, but few widgets have captured the public imagination as much as semiconductors. Ubiquitous and powerful, these little silicon bits are what separates the modern digital world from the rest of human history. We need them. Lots of them. In everything.

Unfortunately, manufacturing semiconductors isn’t nearly as easy as flipping a few switches. Each facility costs about $10 billion in funds, at least two years in time, and necessitates a small army of specially trained labor. Even worse, as our needs change, fab facilities must be retooled. Even if that could be done overnight — and it cannot — there’s a lengthy lead time between a fab beginning work and the first new chips coming out. Months. And that’s just to get the chips our the door. You still need to get them delivered to manufacturers who will put them into the components where we’ll use them: into flash drives, wiring harnesses, phones, microwaves, household appliances, televisions, computers, and so on. The months necessary to make the chips is just the beginning–they are only a part of completely separate, complex, and global supply and assembly chains.
 
And therein lies the rub. The long delay for getting a semiconductor supply system tuned just right is just the first thing that has gone wrong in our world of globalized manufacturing.
 
Join Peter Zeihan November 19 for Supply Chains No More, the second of a three-part series of seminar exploring the challenges facing the American and global economies.

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Also in this series:
 
Part I: Wither the Workforce
November 17

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And Part III: The Face of Inflation
December 1

Please Join Us: Wither the Workforce

Peter’s back from chatting with dozens of firms across the manufacturing, finance and agricultural space and one topic kept popping up: what’s up with COVID vaccine mandates? The answer — from the business community — might surprise you!

The impact of vaccine mandates is only one of a plethora of issues impacting the American workforce. Join us Wednesday, November 17 for Wither the Workforce, a wide-ranging discussion of everything from COVID to manufacturing trends to technology to security to demographics, all from the point of view of the labor markets — with a heavy emphasis on the workforce of the United States and those of America’s partners and competitors.

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Part I: Wither the Workforce is only the first of a three-part series on the life and times of current major economic trends. Also in this series,

Part II: Supply Chains No More
Friday, November 19

REGISTER FOR SUPPLY CHAINS NO MORE
 
And coming soon, 
Part III: The Face of Inflation
Wednesday, December 1

Part II: Supply Chains No More

Anyone try to buy anything recently? Like, anything?

Throughout northern Mexico, parking lots full of finished automobiles (that are just waiting for a few semiconductors) have become common. Year-on-year prices for used cars are up 25 percent — a hands-down record. New models of televisions and consumer electronics are simply not happening this year. If you haven’t finished your Christmas shopping already, then ha! It is probably too late.

Let’s make this about me for a moment:

  • Last May a jihadist dove attacked one of my windows. I immediately ordered a replacement pane, which still hasn’t arrived.
  • I installed a heating system over the summer, but the control module that enables me to turn the heat on has now been on backorder for four months.
  • The publication of my next book, The End of the World is Just the Beginning: Mapping the Collapse of Globalization, might be delayed because of difficulty importing the materials needed to produce paper.

There are any number of factors feeding into these problems: COVID complications, labor shortages, changing regulations, whipsawing demand patterns, container shortages. One that is a bit louder are port bottlenecks.

The issue is that most of America’s product imports come via container, and ports’ abilities to handle containers simply cannot ramp up to meet demand. Not that they can’t ramp up fast enough, they cannot ramp up at all. Every port specializes in specific sort of cargo, and when they are at 100% capacity, they are at 100% capacity. California’s regulatory and efficiency issues notwithstanding, if you don’t have the infrastructure in place, you don’t have the infrastructure in place.
 
The results are not simply bottlenecks at the ports, but backlogged shipments going back onto the ships as well as snaking through the entire road-and-rail system. Each problem has generated more which have merged together into an interlocking mess of meh. Crazy thing is, even if all of this could be magically fixed, we would still be facing supply shortages until at least mid-2023.
 
Join Peter Zeihan Wednesday, November 19 for the second in a three-part series on the here, now, and soon-to-be of the American and global economies. Part II: Supply Chains No More will focus exclusively on the products shortages plaguing us all.

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Also in this series:
 
Part I: Wither the Workforce
Wednesday, November 17

REGISTER FOR WITHER THE WORKFORCE
 
And coming soon, 
Part III: The Face of Inflation
Wednesday, December 1

A Bungle of Boomers

If in recent weeks you’ve gone to a restaurant or boarded a plane of shopped in a store or remodeled your house or been in a hospital or done anything that Today, the United States faces its tightest-ever labor force. It is about to get substantially worse.
 
Every country has its own demographic profile, a balance across its entire population structure from children all the way up to retirees. Learn to read that profile and you can parse out lessons about a country’s economic present and future.
 
The group that matters most are America’s Baby Boomers, a group born between 1946 and 1964.
 
There are no end of stories to tell about America’s Boomer generation. They are the ones who came of age during 1970s, creating what passes for American culture. Disco? Their fault. They are the ones who crafted the American welfare state, and from it their in-progress retirement has broken the federal budget. They are the ones who grew up in the shadow of the new manufacturing complexes that sprouted up after World War II when the rest of the world was wrecked, and then watched bitterly as those same facilities relocated as the rest of the world recovered under the American-led, global Order. From Vietnam to Afghanistan, from Johnson to Trump, from civil rights to long commutes, from the sexual revolution to technological invalidity, their collective decisions and foibles have determined precisely what America is.

The world — the entire world — is literally running out of workers. In most sectors in most places, the workforce which exists today is the most robust it will be And now? Now they are leaving us. The majority of the American Boomers will have retired by the end of 2023. Unlike any other group that might leave the work force only to someday return, Boomers are leaving because of age. They will never return. The American system will never recover from that.
 
Join Peter Zeihan Wednesday, November 17 for the first in a three-part series on the here, now, and soon-to-be of the American and global economies. Part I: Wither the Workforce will focus exclusively on labor markets, providing insight as to just how deep and how long these shortages will last, and identifying which sectors will have no choice but to fundamentally restructure in the months and years to come.

REGISTER FOR WITHER THE WORKFORCE

Stay tuned to this list for upcoming information on Parts II and III.
 
Part II: Supply Chains No More
Friday, November 19
 
Part III: The Face of Inflation
Wednesday, December 1

Part I: Wither the Workforce

If in recent weeks you’ve gone to a restaurant or boarded a plane of shopped in a store or remodeled your house or been in a hospital or done anything that requires a degree of assistance from a warm body, you’ve noticed it. Where are the workers??

As the economy haltingly recovers from the COVID lockdown days, every industry under the sun faces protracted staffing shortages. Part of it is indeed COVID. Part of it is America’s ongoing reindustrialization. Part of it is internal population movements. But the biggest piece is demographic.

A baby bust started saturating the world in the late 1960s. In many cases countries never recovered. And now, decades later, that baby bust is generating a worker bust. Italy is the poster child for this phenomenon.

The world — the entire world — is literally running out of workers. In most sectors in most places, the workforce which exists today is the most robust it will be in our lives.
 
Join Peter Zeihan Wednesday, November 17 for the first in a three-part series on the here, now, and soon-to-be of the American and global economies. Part I: Wither the Workforce will focus exclusively on labor markets, providing insight as to just how deep and how long these shortages will last, and identifying which sectors will have no choice but to fundamentally restructure in the months and years to come.

REGISTER FOR WITHER THE WORKFORCE

Stay tuned to this list for upcoming information on Parts II and III.
 
Part II: Supply Chains No More
Friday, November 19
 
Part III: The Face of Inflation
Wednesday, December 1

Where in the World: Lower Burro, and Water Wars

There are perennial discussions about water being the only resource that truly matters, and many questions that come my way about water wars of the future. 

There’s something to this, after all. We need drinking water to live, we need water to irrigate our crops and much of the world needs several dozen gallons of water a day to live a modern industrial life. Ergo, water is one of the most geopolitical significant commodities in the world.

Yes and no. 

Most of the world’s major cultures developed along, and subsequently retained control over, major internal waterways. Most major national boundaries for successful countries today fully encompass rivers and lakes sufficient to provide for fresh water. 

Which is not to say that water access or disputes do not exist in specific localities. But these tend to be more localized security and political, rather than globally significant geopolitical concerns. 

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The economic lockdowns in the wake of COVID-19 left many without jobs and additional tens of millions of people, including children, without reliable food. Feeding America works with food manufacturers and suppliers to provide meals for those in need and provides direct support to America’s food banks.

Food pantries are facing declining donations from grocery stores with stretched supply chains. At the same time, they are doing what they can to quickly scale their operations to meet demand. But they need donations – they need cash – to do so now.

Feeding America is a great way to help in difficult times.

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Where in the World: The Hogsback, et Les Français

The French are continuing to make their outrage over last week’s AUKUS submarine deal—and the subsequent cancellation of a pending Franco-Australian submarine supply deal—plain for all to see. IIn addition to withdrawing ambassadors from the United States and Australia (news outlets before the weekend suggested that French were also planning to recall their ambassador from the UK as well), Paris is now threatening to scuttle an EU-Australia free trade agreement. If it seems like the French are lashing out against their closest allies, it’s because they are. And it’s not hard to understand why.

Unlike most other European countries, the French foreign service’s approach to democracy still retains a healthy amount of influence from both its monarchial and pre-World War roots. For La France economic and physical security are intertwined with maintaining prestige and the idea that Paris is a serious global player; if France was a private company, we’d be discussing this in terms of protecting brand reputation. That French concerns were so ignominiously swept aside by the US and UK, with Australia happily going along, was too great an assault on French perceptions of their global standing to let slide.

But for all the current grandstanding, France’s primary interests are still tied to Europe. It’s a simple matter of geography. French and American interests in Europe remain broadly aligned. The relationship will endure. French and Australian national security interests are literally a world apart. I do not expect a significant shift in global relations between any of these players, but France will continue to shame everyone involved for as long as it needs to soothe the loss of several tens of billions of dollars to its defense industry.

If you enjoy our free newsletters, the team at Zeihan on Geopolitics asks you to consider donating to Feeding America.

The economic lockdowns in the wake of COVID-19 left many without jobs and additional tens of millions of people, including children, without reliable food. Feeding America works with food manufacturers and suppliers to provide meals for those in need and provides direct support to America’s food banks.

Food pantries are facing declining donations from grocery stores with stretched supply chains. At the same time, they are doing what they can to quickly scale their operations to meet demand. But they need donations – they need cash – to do so now.

Feeding America is a great way to help in difficult times.

The team at Zeihan on Geopolitics thanks you and hopes you continue to enjoy our work.

DONATE TO FEEDING AMERICA

Where in the World: Home, and Cruise Missiles

The United States and United Kingdom have shouldered out the French in a deal to supply submarines to Australia. And not just any submarines, potentially nuclear–powered submarines.  France was poised to ink a deal worth more than $65 billion for sale of its diesel-electric subs. The deal comes as part of a new alliance among the three anglophone states—AUKUS—and will see either US or British-supplied subs to boost Australia’s role in upholding maritime security in the Indo-Pacific.

China, the unstated but obvious target of such a movie, has responded with the expected frustration and condemnation of “outdated Cold War” thinking. But it is France who has provided the most popcorn-worth apoplexy. Which makes sense. A new global order is underfoot, and the French are not front and center. Also, it’s several tens of billions of dollars their industries lost out on. Also, they were supposedly only given a day or so of advance notice. The French have even recalled their ambassadors from the US and UK for consultations. It’s all a delicious soap opera.

As fun as it is to be on the outside looking in, the submarine deal and the destruction of the deal that preceded it are not the real story here. The bigger story here is that the Australia broader exchange in military technology and expertise between the Australians, the US, and the UK. I’m thinking particularly of the fact that Australia is slated to receive some pretty capable ship-and-submarine launched cruise missiles. Some with a range exceeding 1500 miles. Australia having the ability to strike Malacca from its own territories, and giving it some nuclear-powered teeth against Chinese maritime ambitions is a huge geopolitical development, and not just in the broader Indo-Pacific basin.

If you enjoy our free newsletters, the team at Zeihan on Geopolitics asks you to consider donating to Feeding America.

The economic lockdowns in the wake of COVID-19 left many without jobs and additional tens of millions of people, including children, without reliable food. Feeding America works with food manufacturers and suppliers to provide meals for those in need and provides direct support to America’s food banks.

Food pantries are facing declining donations from grocery stores with stretched supply chains. At the same time, they are doing what they can to quickly scale their operations to meet demand. But they need donations – they need cash – to do so now.

Feeding America is a great way to help in difficult times.

The team at Zeihan on Geopolitics thanks you and hopes you continue to enjoy our work.

DONATE TO FEEDING AMERICA