Who Turned Out The Lights Gracie?!
As the world economy is going through rapid changes, the West is getting left behind by the BRICS nations.
The global economy is evolving into a bipolar division between the BRICS and the West. The BRICS nations will have more consumers, and are coming from behind when it comes to modernization. So a dominant amount of global economic growth will be in the BRICS nations.
The modern world needs a lot of commodities to build and make things run. The BRICS nations are way ahead when it comes to understanding this reality. China is lapping the West when it comes to understanding how important commodities are for the modern world.
Copper is extremely crucial to make everything run, yet the supply chain is poorly prepared to meet the demands. The West can ignore this reality, but I doubt the BRICS nations will because they build a lot of stuff the world consumes and they see the order flows.
China was a mile ahead when it came to the surge in demand for copper to meet the needs of the AI bubble. Plenty of pundits were questioning why China was buying so much copper when their housing market was struggling. They saw how much copper was going to be needed for AI, so they went on a buying spree.
The world needs a lot more copper mines, yet the West suffers from the expensive attitude of the not in my backyard movement against mining. They will end up paying in the long run.
For investors that want to be ahead of the curve when it comes to commodities, watch the actions of China and the BRICS nations.
Nuclear energy is crucial for the energy demands of the future, the West doesn't want it in their backyard, while the BRICS nations are and will continue to embrace it. Ask Germany how it feels after shutting down their nuclear plants and now are paying much higher prices for energy.
The price of solar panels have dropped dramatically, in places where the sun shines a lot, solar energy can ramp up quickly and is a good option to meet the growth in demand for energy. They need a lot of silver and there is a looming silver supply crunch coming very quickly.
Possibly one of the most significant trends when it comes to the global economy is the ramifications of the Death Spiral of Debt. Countries in the BRICS organization are buying all the physical gold they can get their hands on from the West, while they are moving to the Gold Standard.
The Chinese and the other BRICS nations are way ahead of the West when it comes to understanding the economic importance of gold. They can see their domestic consumer demand growing, plus they see the world in a Death Spiral of Debt and the move coming to return to the Gold Standard.
There is so much debt sloshing around the world that there are huge problems coming. With the interest rates where they are, just servicing the debt is a massive problem that could become the largest expense of many countries. Plus, there is the problem of who is going to keep buying the debt when many countries are insolvent and pay interest in currencies that are devaluing.
Defaults on the debt are a real possibility as the central bankers will not only be the buyers of last resort, they may be the only buyers with plenty of holders wanting to sell their IOUs.
Not nearly enough of the global debt is backed by gold. As the world moves back to the Gold Standard, the trend to backing up the debt with gold will continue, but currently it only represents a small fraction of the debt.
Plenty of currencies are in big trouble. Which brings up the issue of their ability to be sound means of using for global trade. Gold is the oldest currency, and is going up against practically every fiat currency, so it will return to favour as the currency of choice for international trade.
One of the biggest shortcomings of the West is its understanding of how crucial mining is to making everything we have in our modern world. Dramatic changes are required. The not in my backyard movement needs to change, and it will because domestic production of metals will force it to as everything gets more expensive.
Government regulations that cause permitting to take forever in many countries also need to change. When they can't get the raw materials they need for a functioning domestic economy, as the costs of the commodities go up, they will learn the economic realities of how crucial mining is to the modern world.
Investors' allocations of where they put their money also need to change. Take the AI bubble for example. Investors will throw money hand over fist to AI companies, without asking the key question of where are they going to get the commodities needed to build out and power up this energy hungry business.
Just in time manufacturing may work for making stuff, but it won’t work for mining. It takes years to find new mines, economically evaluate if they are feasible, permit and then build them.
With the overregulation of mining and not in my backyard sentiment to mining, what used to take around 5 years, now takes 10 to 20 years. This all comes with a cost.
Higher costs to build mines, when many more are needed, plus higher costs for commodities that affect all consumers.
It has gotten so bad that there is the real potential for supply crunches of many metals.
Mines aren’t something that can be turned on by a magical switch.
These problems are coming to a theatre near you soon. Look at Texas and California, how is it possible in 2024 that they go through rolling blackouts when consumption of energy is high?
When it gets hot, people turn on their air conditioners, which are made with metals and need copper to bring the energy to them. Meanwhile the American power grid is ancient and in need of rebuilding, yesterday. The power grids can’t handle the demand, so rolling blackouts happen and the cost of energy goes up.
Plenty of people want the world to switch from vehicles with internal combustion engines, to electric vehicles. Could you imagine if everybody in California had an EV and came home from work at the same time and plugged in their EVs to charge them up. It would cause the power grid to shut down. It is strained when houses have to crank up their air conditioners, it would be devastated if everybody also had an EV.
AI and other technologies are energy pigs, so are EVs. In the West, they are powered up by ancient power grids and energy sources poorly prepared to meet the demand. To change these issues will require a lot of copper and other metals.
The West needs to have visionary politicians that clearly understand mining. I know putting visionary and politicians in the same sentence is an oxymoron, but that doesn’t change the reality of what is needed.
The West also needs business leaders that can look beyond the next quarter to come to terms with their needs for commodities.
Investors in the West also need to understand that pumping money into the latest stock market bubble will cost them in the long run. When there isn’t the supply of commodities those companies need to make their products and provide their services.
Consumers need to look around at all their modern amenities and realize how important commodities are to build those products and make them work.
Nothing, and I mean nothing, is built or works without commodities. I am certain the world is not going to stop moving forward, but it will slow down and get more expensive unless investors, politicians, business leaders and consumers wake up to the reality that without mining, we go back to the dark ages.
End of rant,
Allan Barry Laboucan
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