The current global semiconductor supply chain. Distinct capabilities exist in separate supply chains and manufacturing bases—lower end supply from China, higher-end chips from places like Taiwan and South Korea. And a critical middle-ground from Southeast Asian suppliers like Thailand and Malaysia.
Shortages in the supply chain—whether related to COVID-19, drought, or shifting consumption patterns—can take months to resolve. This is due as much to the actual process of silicon wafer and chip manufacturing as it is the nature of the supply chain itself. Northeast and Southeast Asian suppliers do not compete in the same arena or possess analogous skill sets. China cannot step in to produce the mid-tier chips Malaysia and China supply to global automakers (with many auto factories currently idling due to a lack of supply) and even if the Koreans and Taiwanese wanted to retool their entire factories to supply the automotive industry there is a dearth of global capacity to step in to offset the drop in high-end chip manufacturing. And this doesn’t even begin to consider the fact that regardless of where the chips are made, most are designed in the US.
The global semi-conductor industry is one of the biggest success stories, and thereby one of the most dependent, of the Global Order. If my forecast about a collapse of the global trade order is correct, it will realistically take years for countries like the US to recreate a multi-layered semiconductor manufacturing base domestically. The rest of the world will struggle to maintain any output on their own.
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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.
The team at Zeihan on Geopolitics thanks you and hopes you continue to enjoy our work.
Concerns are rising over Chinese dominance in the realm of rare earths metals processing. This is a problem that I spend a lot of time never worrying about.
Despite their name, rare earths aren’t all that rare. The byproducts of other metals refining and production (such as lead) and if anything, the production process takes a lot of time and effort. Chinese state policy of subsidizing industry (and caring absolutely not one whit about environmental impacts) allowed the Chinese to become leaders in rare earths metals processing at a truly global scale. And the rest of the world has largely been happy to outsource their needs to subsidized Chinese production.
This isn’t to say that the Chinese couldn’t–and haven’t–attempted some shenanigans. But manufacturing states dependent on Chinese production have been steadily building up strategic reserves, and countries like the United States, Australia, and Malaysia have been increasing investments into processing capacity. There will be a ramp up process, six to twelve months at most. Some supply tightness, but nothing insurmountable. Definitely not something worth keeping you up at night.
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.
Speculation over Afghanistan’s potential mineral wealth is just that–speculation. What we do know about the hard reality of the country’s geography, infrastructure and development profile readily explains why we’re still talking about Afghan mineral wealth in the realm of potential trillions–it might certainly be there, but no one’s done the hard, serious work to find out for sure.
And China is certainly not going to be the one to do it. Chinese involvement in Afghanistan isn’t going to be fueled by a desire to do serious survey and exploration work, building out roads and rail lines, developing a meaningful power grid, and then getting into the serious work of mining. In a land-locked country. Is China then going to truck ores and minerals into Pakistan and/or Iran for shipment? Or up and over the Hindu Kush to its sparsely-inhabited Western frontier? While battling militants and tribal war lords all along the way? Very likely not.
America did not leave behind a golden goose in the mountains of Afghanistan for the Chinese–or anyone–to come along and scoop up. Instead, China’s interests in Afghanistan lie in the same bucket of all of the neighboring states’: security, limiting cross-border militancy, and working toward some hope of containing refugee and militant flows.
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.
The seven-day moving average for new COVID deaths in the United States is back up above 1,000 – a figure the Americans have not suffered since before COVID vaccines became widely available back in April. To that end, a series of new government and private sector policies addressing COVID have popped up in the past few days. Collectively, they suggest the United States finally can see an end to the COVID tunnel.
From least important to most:
First, Biden has directed OSHA to force all firms employing at least 100 people to get their entire staff fully vaccinated. This is on top of his pre-existing orders for all federal workers, all military personnel, and all federal contractors. In all, it potentially impacts two-thirds of the American work force.
The law is firmly on the government’s side here. A 1905 Supreme Court ruling – which has been reaffirmed multiple times in the decades since – makes it exceedingly clear that any U.S. legal jurisdiction can force mass vaccinations. The precedent has already been cited by multiple federal judges in flatly denying petitions filed by those challenging COVID vaccine mandates. Chief Justice John Roberts actually has a portrait of the judge who penned the 1905 decision on his office wall. None other than Trump Supreme Court appointee Amy Coney Barrett has brushed off similar challenges from even reaching her bench. Legally, challenging this (successfully) is a dead letter.
But this is OSHA and OSHA isn’t quick. Between the standard rule-making process, the fact that this is not an act of Congress, and the inevitable legal challenges, this will take months. The biggest impact for the remainder of the year is that firms who were afraid of their own vaccine holdouts now have all the political and legal cover that they could want to implement their own mandates. This does move the needle. This is going to impact millions of workers. But not the 100ish million workers the headlines would suggest.
Second, the new Biden announcement forces the staff of any firm which who provides any services that use any funding from Medicare or Medicaid to get vaccinated. This covers all employees of any relevant medical facility from the surgeons to the janitors.
This directly impacts several million health care and support workers, and is far from small, but the real impact isn’t direct. What’s truly at stake is the health insurance industry now has the full federal cover they need to cut the cord connecting them to 2020’s emergency measures. The collective decision made last year – both in health care and government – was that COVID was not a “preventable disease” and so sufferers should not be responsible for COVID-related medical bills. Not simply the big tickets themselves, but even “normal” things like health insurance deductibles.
This norm has been loosening since June, when it became obvious there was going to be a substantial vaccine hold-out population. With Biden’s Medicare decision, the cord will now be cut. Private insurance will now consider COVID a “preventable disease” which means unless there’s a mitigating factor, unvaccinated COVID patients will largely be responsible for their own medical expenses. The average COVID-related hospital stay runs $17,000 – that goes up to $50,000 if you end up needing ventilator time.
Delta Airlines has proven that such financial disincentives work. Less than a month ago Delta told its employees that if they could not prove they were vaccinated, they would have to pay insurance premium surcharges of $200 a month. Just one paycheck later, some one-fifth of the holdouts had already joined the ranks of the vaccinated.
Third and most importantly, this week the Los Angeles school board adopted plans to force all students eligible for the vaccine – that’s everyone 12 and over – to get vaccinated if they are to remain in school in-person for the spring 2022 semester. The rationale isn’t difficult to justify. Children are now the single largest block of unvaccinated, and while young COVID sufferers tend to have less severe symptoms than adults, the Delta variant hits them far harder than the initial China strain. Fully one-quarter of all cases are now in children.
The chief reason why the United States is not a disease-infested dystopia is that all children under 18 are subject to a rolling series of vaccinations as a precondition for attending school. Think tetanus, chicken pox, and mumps. This system not only vaccinates a large chunk of the population directly, but establishes lasting immunity to a host of diseases that regularly plague less advanced countries.
With COVID, this standard process has not been an option. Initial vaccine trials focus on healthy adults, and only over time move into younger population cohorts. In addition, we’ve been vaccinating the population in reverse, starting with populations with the highest mortality rates (the elderly) and working our way backwards. This was done to prevent deaths, but it also means the normal bulwark against long-term disease spread hasn’t been built. Hasn’t even begun to be built.
There will be legal challenges to the LA board’s decision. (Honestly, I’m sure that in the time it took me to write this, the first ones have already been filed.) All of consequence will fail. Not only because the legal precedent is with the board, but because all the board did was add one more vaccination to the existing list – a list that the board has full legal authority to expand as it sees fit. Others will follow LA and its six hundred thousand students.
To be direct, this sort of mandate is how the United States beats COVID.
Why do I care? Why am I considering a health issue to be part of my geopolitical bailiwick?
Two reasons:
First, demographics. The healthier the population, the more economically productive a population, the less dependent upon foreign factors a country is. COVID has already resulted in the single-greatest reversal in the average American’s lifespan since the country’s last major health crisis: the Spanish flu epidemic of 1918-1919.
Second, the world is in the midst of the greatest geopolitical transition of our lives, and arguably the largest one since the onset of the deepwater navigation era in the late 15th century. Globalization is in a state of collapse. Ten years from now, the countries that have proven able to secure their means of production, their manufacturing supply chains, their internal consumption, and their labor force from the vicissitudes of global disorder will be the ones who rule the future. America’s unvaccinated population is now the single biggest threat to each and every step of that process.
Mass vaccinations are how the United States retains its population and its position and its potential and its freedom for action – for decades to come.
So get the damn shot already.
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.
Hurricane Ida made landfall in southern Louisiana as a Category 4 storm on August 29. In its wake it left a trail of damage that Americans living on the Gulf and Atlantic coasts have found depressingly familiar. Total recovery costs will not be known for weeks, but $80 billion is being floated by some insurance firms as a likely figure.
For those not living along Ida’s path, there are still impacts. Ida was the first major tropical storm system to hit the Gulf of Mexico energy space dead-on in quite some time. Oil and natural gas production throughout the entire Gulf have gone offline. Natural gas prices have already bumped up by some 15% to roughly $4.60 per 1000 cubic feet, the highest in years.
I’m not worried. Not even a little. If anything, this is great!
Some backstory about how the American energy complex has evolved in the past decade or so:
Out in the Gulf of Mexico, hurricane-driven waves regularly top 50 feet high. Storms force production shutdowns and staff evacuations. The result? Entire swathes of the Gulf go from being among the world’s most productive oil and natural production zones, to a flat zero.
And not just for the duration of the storm.
The bigger and broader the storm, the greater the chance that some little thing, somewhere, breaks. Once the storm passes, staff return. They began a never-ending list of safety checks to make sure things can be turned back on without causing leaks, spills or explosions. Repairs are necessary both above the water on the platforms, and down below on the seabed where the tangle of pipes interfaces with the actual well casings. The worse the storm, the longer this takes. Sometimes it is over a year before full production is restored. And the whole time Americans keep using oil and natural gas, so we get supply and demand mismatches that manifest as higher prices for months at a time.
Back in my Stratfor days it was my job to track every such storm to evaluate such impacts. I hated it. So very very much. (BTW if you want to bookmark the gold standard for hurricane tracking, that’d be Weather Underground).
And then suddenly, it all stopped.
Around 2004 the Americans cracked the code on how to extract natural gas from shale rock formations. Instead of drilling down vertically and tapping deposits of the stuff, we’d drill laterally, inject a mix of water and sand into the formation and crack it apart from the inside. Trillions of tiny pockets of natural gas would then have access to the pipe, and natural pressure would force the gas up to the surface for collection. By 2009, this American shale gas output exceeded all other sources of natural gas in the United States. Every speck of shale gas is produced on shore. Shale doesn’t give a wit what happens with hurricanes.
Take a look at this graphic from my previous book, The Absent Superpower. You can clearly see how pre-2009 U.S. natural gas prices fairly reasonably tracked prices in other markets. But in 2009, the United States diverged and never went back. The United States has been in chronic natural gas oversupply for years.
Hurricane Ida isn’t going to change that. Yes, prices are higher, but a few thoughts.
First, prices aren’t that much higher. In the pre-shale days we considered sub-$5 natural gas to be criminally cheap. The Europeans even went so far to sue the Russians for having prices in that range. (Russia at the time was the world’s largest natural gas exporter and so kept its domestic prices at rock bottom.) From time to time we even breached $10.
Second, American natural gas prices today are higher primarily not because of disruptions to supply, but instead because of structural changes to demand.
Prices in the U.S. have been so low for so long that our entire industrial space has been retooled to match. Natural gas is now the country’s primary electricity fuel, displacing coal throughout most of the country. When fed into combined-cycle power plants, natural gas use can be ramped up and down in minutes, making it the perfect complement to solar and wind power – fuel sources that are literally as erratic as the weather. We’ve also used natural gas components to replace oil throughout our petrochemical systems. We now use the stuff to make everything from lipstick to diapers to safety glass to insulation to pesticides to paint to gum to furniture to bowling balls. Higher demand means higher prices.
Third, there’s more to shale than just natural gas. Around 2008 the tech of shale started being applied en masse to oil, and in the years since America has figured out how to get not simply the vast majority of its natural gas from shale, but also the vast majority of its oil. Natural gas is often a byproduct of such shale oil plays. Oftentimes such byproduct drove natural gas prices below $3. Aside from the Gulf of Mexico and the giant Marcellus field in the Northeast, there just aren’t many places left in the United States where folks are drilling for natural gas on purpose. It simply isn’t cost effective.
Or it wasn’t until now.
While $5 natural gas is cheap by historical standards, its very high by shale-era standards. It has been roughly eight years since we’ve seen this sort of price environment where it makes sense to go after natural gas just for the gas. In those eight years, shale operators have learned a lot – they’ll now be applying new shale techs to the places where shale was first birthed, specifically in Texas’ Barnett, Arkansas’ Fayetteville, and the Texas-Louisiana-shared Haynesville.
I expect to see explosive growth in on-shore production, and I expect to see it soon. After all, unlike an off-shore Gulf of Mexico well that takes years to bring on-line, an on-shore shale well reaches full output in a mere six weeks.
This matters hugely. In the longer term, every speck of U.S. oil&gas production that moves into on-shore shale space is a speck that is more sustainable, at lower cost, cleaner and at lower risk than anything that’s international or offshore. (I broadly like solar and especially wind as well, but those are topics for another day.)
In the shorter term, the advantage isn’t simply that rising shale production suggests current prices are not long for this world. There’s a more immediate concern:
Between COVID-driven resourcings, industries moving out of China, increased integration with Mexico, and increasingly Trumpesque economic policies out of the Biden administration, the United States is in the midst of its biggest ever industrial build-out. That all takes a lot of natural gas, both to burn to generate electricity and as a feedstock to create physical products. Ida has provided the impetus to generate the necessary supply before a general shortage would have. We’ve all seen what similar shortages in labor markets have done to the economic recovery. It’s great to know we won’t need to worry about them in the world of energy.
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.
Some questions I’ve been asked about as of late have been on the topic of what technologies do I see that could move the needle on some of the more… dire forecasts that I’ve made.
Some of the most impactful are going to be in the field of agriculture. The industrial revolution sparked massive changes in how humans grow and distribute food. Chemical fertilizers, pesticides, tractors, combines, storage, refrigeration, global transport—the things that give us tomatoes in winter (no matter the quality) are also what has allowed fewer people to feed a global population that has ballooned over the last century.
But what industrialization has brought, deglobalization can take away. Concentration of production of farm equipment, fertilizers, pesticides, and capital means that in the absence of the safe and secure transport modes of The Order most of the world’s current mega producers (Brazil, China, India) face precipitous declines in caloric output.
One answer to avoiding a catastrophic decline in food output? Technology. The same science behind increasingly powerful facial recognition has promising potential utility in conjunction with automated field equipment, more efficiently administering water, fertilizers, pesticides, and herbicides to crops in the field. The attentiveness and nurturing care of pre-industrial gardening, but on a much more massive scale.
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.
The challenges of the United States’ Afghan withdrawal have caused many to question Washington’s commitments to its allies and others who have found themselves under the American security blanket. The issue of US commitment to Taiwan in particular is one I have been asked in recent weeks.
Putting aside the issue that disentangling from Afghanistan and the Middle East means that the US can focus even more on China, Taiwan itself is no slouch. Chinese ambitions must be evaluated against Chinese and Taiwanese and Japanese capabilities. In short, the idea that the US is the only power interested in a free and democratic Taiwan is laughable, as is the assumption that the Chinese would have an easy time in sailing a fleet across the strait absorbing Taiwan.
Even if China did manage to successfully invade Taiwan, there’s little reason to assume Beijing would be able to effectively take control and replicate Taipei’s success in managing the world’s most advanced chip manufacturing. Most of the design process for the chips happens outside Taiwan (such as in the US), and Taiwan’s workers are highly skilled individuals. Not the sort of people who perform at their best at the other end of a gun (or the type that stick around and wait to get captured).
In short, of all the possible unintended consequences of the US withdrawal from Afghanistan, a successful Chinese invasion of Taiwan is not very high on my list.
[And please forgive the wind; the side of a volcano is an exciting, albeit noisy, backdrop.]
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.
I’ve been asked several times since my last dispatch whether or not I think FDA approval of the Pfizer vaccine is going to move the needle for the anti-vax crowd. Unlikely. If you thought the COVID-19 vaccines were part of a government conspiracy, full government approval for them is unlikely to be the tipping point when it comes to changing your mind.
What is likely to change behaviors, if not attitudes, is the swathe of vaccines mandates that are quickly rolling out across the country. Nearly 1,000 institutions of higher learning and a growing list of companies–including Goldman Sachs, Ford, Facebook, Delta Airlines, and Tyson Foods–are mandating their students and workforce get vaccinated. It will be a slower (and therefore, deadlier) path toward higher vaccination rates but unlike a direct government mandate or vaccine passports it will be an economic, rather than political, issue.
And never did I think I would have to say this explicitly but if you’re reading this: you are not a horse. Stop taking ivermectin. Please.
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.
News arrives a little more slowly here in northern Iceland. But as the details of the horrific attack against US service members and Afghan nationals came in across my phone, so too did many arguments that these are exactly the same sorts of individuals the US should remain in Afghanistan to combat.
Perhaps.
And perhaps not. Groups like the Khorasan Province offshoot of ISIL are going to attack when and wherever they find that they have operational capacity. The real question is, do they pose a direct threat to the Americans’ homeland and core strategic interests or a bigger one to the Taliban and its regional neighbors? Expect the US to pursue retribution against any and all groups and individuals that target US citizens and strategic interests, but don’t expect these attacks to trigger a shift in US policy that will see Washington cleaning up a group that places the Taliban and Iran near the top of its most-hated list.
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.
Greetings from Iceland! With the FDA giving Pfizer’s Comirnaty (the two-shot regimen formerly known as the Pfizer-BioNTech COVID-19 Vaccine), it’s important to note what this does and does not mean for the average American.
Most important: it does not mean that the Pfizer vaccine is not an experimental drug. That ended largely a year ago following the largest human trials in human history. What we should expect is a rise in vaccine mandates across federal agencies, schools, and private businesses.
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.
