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.
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
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.
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.
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.
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.
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.
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.
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.
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.
