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

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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

The Way Out – and Forward

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.

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Where in the World: Drangajökull, and Horse Meds

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.

DONATE TO FEEDING AMERICA

Where in the World: Skútustaðahreppur, Pfizer

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.

DONATE TO FEEDING AMERICA

Video Dispatch: Economic Update

The United States is likely to experience economic growth even as the Delta variant of the coronavirus continues its spread through unvaccinated populations. We should not overlook that qualifier; the vast majority of serious illness, hospitalizations and deaths from COVID-19 in the US are among unvaccinated populations. 

Expect the US Federal response to continue to focus on encouraging Americans to get vaccinated, while local governments and businesses work through an awkward and hotly contested series of local mask mandates, vaccine requirements and political posturing as the majority of US students get ready to head back to school.


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

Video Dispatch: COVID Strikes Back

The United States is seeing a second summer of rising COVID cases, though this year’s surge–and accompanying COVID-related deaths and hospitalizations–are largely avoidable. The US is in a near unheard of position compared to its global peers. Americans have an abundance of safe and highly effective vaccines available on an on-demand basis (and free of cost!). But there remains a significantly large, entrenched portion of the population that is refusing to get vaccinated. 

As I laid out in early June, the result is resurgence of disease across the country. COVID’s Delta variant is ripping through America’s unvaccinated population, albeit unequally. America’s larger cities and West and East coasts–the country’s most economically dynamic regions–boast higher vaccination rates. The more rural, conservative portions of the country (vaccination refusal bears a strong correlation with political identification) face a more uphill slog this summer. The result? America is likely to experience a parallel COVID crisis and economic recovery.


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

Video Dispatch: Mexico’s Midterm Elections

Mexicans went to the polls over the weekend. Preliminary results indicate that while incumbent president Andres Manuel Lopez Obrador’s (better known as AMLO) MORENA coalition will maintain a majority in Congress, AMLO did not score a two-thirds majority necessary to amend the constitution. 

AMLO’s mix of economic wishful thinking and populist tendencies has resulted in a mix of policies ranging from increasing government control over the energy industry while simultaneously ignoring Mexico’s rising drug violence problems and leaving most local authorities to handle COVID on their own. All this, with a healthy amount of disrespect for any government institutions seeking to place limits on what he views as his vast presidential powers.

However onerous his attempts to install himself as grand-poohbah-god-king of Mexico may be, what his populist measures will ultimately do is impede Mexico’s ability to compete for investment in the coming deglobalization and shift away from China. Mexico’s proximity to the United States and already strong economic integration with its northern neighbor means that this investment and development will still likely come Mexico’s way, but with a lot of unnecessarily delays and extra costs for all involved.


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