War By Other Means

The “Geoeconomics” of Modern Conflict [The Daily Reckoning] February 22, 2023 [WEBSITE]( | [UNSUBSCRIBE]( [Ed. note: Important housekeeping note: Your emails are coming from a new email address: dr@mb.paradigmpressgroup.com. Ensure delivery of every email in your subscription by following [these simple whitelisting instructions.]( War By Other Means - “Geopolitics is now geoeconomics impacting markets…” - The Achilles’ heel of globalism… - Then Jim Rickards shows you the “geoeconomics” of modern conflict… [The Deep State attacks! **Biden’s New War Against Investors]( The D.C. elites and their establishment cronies are set to pass new regulations that are designed to destroy capitalism and the 144 million Americans now invested in the markets. If you have a 401k, IRA or stock portfolio, or are a student of finance, you need to know what’s about to happen. This will affect ALL OF US. Jim Rickards just explained everything in his recent Counterstrike Summit… [Click Here To See Everything He Said]( Annapolis, Maryland [Brian Maher] BRIAN MAHER Dear Reader, “Geopolitics is now geoeconomics impacting markets… and the rest is commentary.” Here you have the measured and discernful conclusion of Rabobank’s Mr. Michael Every. More from whom: Japan’s Kyocera already says China is no longer viable as the world’s factory due to U.S. technology restrictions, and that production there only makes sense to sell in China rather than to export from it. Bloomberg reports the Pentagon isn’t sure how to start stripping Chinese suppliers out of its production lines – but political pressure means it will try; Turkey denies exporting electronic equipment used by the Russian military as well… Meanwhile, the Netherlands is warning of Russian attempts to sabotage its energy infrastructure. Again, geopolitics meets geoeconomics meets markets, implying higher structural inflation as a tail risk, unless you “assume” it away. In conclusion: The common thread is an ongoing bifurcation of global supply chains which means higher structural inflation. Nobody is as cheap as China once was – including China. We believe there is justice here. We put to one side the inflationary implications for the moment. We center instead upon the more elemental dimensions — the very structures of economic organization. The gothic complexity and “just in time” efficiency of international trade gobsmacks and staggers a man. Mr. Leonard Read once bossed the Foundation for Economic Education. In this capacity he authored a bewildering account of the birth of one lowly pencil. From the harvesting of raw materials to the refinement phase to the manufacturing phase, the entire process is a delirium of complexity and human cooperation very nearly inconceivable. And that is to produce one mere pencil. Imagine then the miracle of producing, for example, an electric vehicle. Elements such as cobalt and lithium must be shoveled out of the earth in Africa, South America and elsewhere. They must be shipped off to be refined into serviceable components. Production generally occurs in Asia. from there the finished product — the vehicle — is often loaded onto an oceangoing vessel to be hauled overseas. The entire process is something else. It would overmatch the greatest planner living or dead. Yet here is the central dilemma of the globally harmonized operation: It depends on an international system of relatively free trade. It does not function under an international trade regime riddled through with restrictive sanctions, warfare and other impediments. Consider… The nations of Russia, Belarus and Ukraine — combined — lead the world in the production of: Natural gas. Uranium. Neon. Processed nickel. Semi-finished iron. Wheat. Fertilizer. Potash. These three nations, combined, are the world’s second-largest producers of: Crude oil. Refined oil products. Platinum group metals. Refined copper. Steel. Seed oils. Ammonia. Sawn wood. These three nations, combined, are the world’s third-largest producers of: Coal. Aluminum. Gas turbines. And titanium. That is: This eastern European troika ranks first, second or third in producing the world’s 20 most critical resources. From these resources spring the automobiles, semiconductors, “smart” phones, electronic gadgets of every model and make, appliances, foods and nearly every item upon which we rely. These three nations are either under severe sanction or in one case… invasion. Where then will the world acquire these products in adequate quantities? And how will the world produce adequate quantities of automobiles, semiconductors, “smart” phones, electronic gadgets of every model and make, appliances — and foods? Examples multiply and multiply. Under peaceful conditions, the entire business functions as a finely tuned clock functions. We employ the word “finely” with conscious deliberation. While extremely efficient under optimal conditions, the current international trade regime is deeply fragile and delicate. It is extremely vulnerable to disruption. It is the spider’s intricate web. And like the spider’s web, it is as thin as gossamer. It can be very easily undone… and wrecked beyond hope of repair. What will replace it? And how long will it take to spin a fresh web? We are not in possession of the precise answers. Yet we hazard the world may not especially cherish the answers. Below, Jim Rickards shows you all about the “geoeconomics” of modern conflict, with particular focus on Russia and China. Read on. Regards, [Brian Maher] Brian Maher Managing Editor, The Daily Reckoning [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) Editor’s note: Have you seen Jim Rickards’ explosive [Counterstrike Summit?]( In it, Jim described how the Biden administration has launched its [first strike]( against U.S. investors. What did he mean by that? And how exactly can you fight back? Jim revealed the answers in this urgent presentation. [Go here now to watch it while you still can.]( [Secret Gold Back currency RUINING Biden’s plans for a digital dollar?]( [Click here for more...]( What I’m holding in my hand is a completely new form of money… As we speak, it's being used as an alternative currency across the U.S. minting in places like Utah, New Hampshire and Nevada… And since it’s made out of a thinly printed sheet of REAL gold... It may be the single best way to protect your wealth from Biden’s plan for a government controlled digital dollar. That’s why, I want to offer to send one to you today. But since I have a limited number I need you to respond to this message by Wednesday at midnight. I’ve recorded a short 2 minute message that explains everything here… [Click Here To Watch Now]( The Daily Reckoning Presents: Geoeconomics: War by other means… ****************************** The Geoeconomics of Modern Conflict By Jim Rickards [Jim Rickards] JIM RICKARDS Geopolitics play a major role in the outlook for global economies. But more importantly, today, we must look at the world through the prism of geoeconomics. What is “geoeconomics”? Obviously, it’s a portmanteau from the words geopolitics and economics. There’s nothing new about considering those disciplines in the same context. Wars are geopolitical and are often won through industrial capacity, which is primarily economic. Economics and global strategy have always been entwined. What is new is the idea that economics are not just an adjunct of geopolitics, but are now the main event. This does not mean that warfare is over or that military prowess no longer matters... It means that the major powers in a globalized age will base their calculations on economic gain and loss, and will use economic weapons not as ancillaries, but as primary weapons. This change was described at the beginning of the new age of globalization by strategic thinker Edward N. Luttwak in a 1990 article titled “From Geopolitics to Geo-Economics: Logic of Conflict, Grammar of Commerce.” Luttwak wrote that the end of the Cold War and the start of globalization meant that armed conflict was too costly and uncertain for great powers. Economic interests would now be the arena for great power conflict. Luttwak wrote, “Everyone, it appears, now agrees that the methods of commerce are displacing military methods – with disposable capital in lieu of firepower, civilian innovation in lieu of military-technical advance and market penetration in lieu of garrisons and bases.” Luttwak concluded, “While the methods of mercantilism could always be dominated by the methods of war, in the new ‘geoeconomic’ era not only the causes but also the instruments of conflict must be economic.” To be clear, Luttwak’s analysis principally applied to great powers including the U.S., China, Russia, Japan, members of the EU and Commonwealth nations including Canada and Australia. Luttwak recognized that middle powers such as Israel, Iran, Iraq, Pakistan, North Korea and some others might still find warfare beneficial. He did not rule out the fact that great powers might intervene in wars involving these middle powers, such as the U.S. interventions in Iraq and Afghanistan and Russia’s involvement in Ukraine. His point was not that war was obsolete, but only that it would not involve direct confrontation between great powers. Interventions and wars involving lesser states would still be on the table. Geoeconomics – great power competition using economics as a goal and a weapon – is an excellent tool for analyzing the two critical hotspots in the world today. These are Russia’s role in Ukraine and China’s threat to Taiwan. The Western narrative that Putin is the bad guy bent on conquering Ukraine is false. Putin had warned the West about not pushing its advantage in Ukraine for over 20 years. While Putin was amenable to NATO expansion, he always drew the line at Lithuania, Ukraine and Georgia. In 2004, NATO crossed Russia’s red line by admitting Lithuania to membership, but there was little Putin could do to stop it. The 2008 nomination of Ukraine to NATO was an unforced error. Putin had been content to leave Ukraine as a neutral buffer state. The West was not and pushed Putin too hard. Now Putin has pushed back. Why is Ukraine so important to Russia? A quick glance at a map shows that Ukraine in NATO or even a pro-Western Ukraine is an existential threat to Moscow. The line from Estonia in the north to Ukraine in the south forms the letter “C” that encircles Moscow from the north, west and south. Parts of Ukraine actually lie east of Moscow, opening that region to attack from the west, something that has not happened since the Mongol Empire of Genghis Khan in the 13th century. If Ukraine will not become neutral, then Putin must control it, at least the eastern half, by force if necessary. This has obviously happened. [Biden’s “Hush-Hush” Plot Uncovered]( [Click here for more...]( Right now, Joe Biden – along with 9 of the world’s largest banks – have initiated a disturbing new experiment with YOUR cash. It’s called “Project Cedar” – and up to now it’s been kept fairly “hush-hush”… But in this urgent new exposé, you’ll discover critical details behind Project Cedar and what Biden’s master plan really is. Learn the critical details before it impacts your money… [Click Here Now]( But conquering Ukraine was not and is not Putin’s main goal. What he wanted the whole time was a Ukraine that would not join NATO, neutrality in the Ukrainian government and full operation of the Nord Stream 2 natural gas pipeline from Russia to Germany under the Baltic Sea (too bad the U.S. blew it up!). If Putin could have gotten all or most of that through negotiations, there was no reason to invade Ukraine. The threat to do so will have served its purpose. That outcome would have been a perfect illustration of Luttwak’s geoeconomics definition. The goals were commercial (dependence of Western Europe on Russian natural gas), and the tools were commercial (pipelines) even though the players were sovereign states (Russia and the U.S.). The U.S. has imposed severe economic sanctions on Russia for invading Ukraine. But these sanctions have had little impact on Russia, as I predicted before the war. Sanctions were imposed on Russia after the 2014 annexation of Crimea and have had no material impact on Russian behavior. Before the war, Russia already moved over 20% of its reserves into physical gold bullion stored in Moscow. This gold is worth about $140 billion at current market prices. Because the gold is physical, not digital, it cannot be hacked, frozen or seized. Importantly, U.S. sanctions have not affected exports of Russian oil or natural gas. Russia provides about 10% of all the oil produced in the world. It’s simply impossible to sanction Russian oil sales. We still hope that Russia and the U.S. avoid direct armed conflict in Ukraine, although they keep climbing the escalation ladder.. Energy prices will probably go higher, which helps Russia. The losers are Ukraine and global energy users. The second critical hotspot today is the potential for a Chinese invasion of Taiwan. Will it happen? The case against such a war is basically in the scenarios described above. Events would likely escalate and spin out of control, resulting in a large-scale conflict. Gains are possible for China, especially if the U.S. does not come to the aid of Taiwan. Still, the risks are too high, and the costs are too great. Instead of an invasion, China could continue its rhetoric and its military readiness, but otherwise bide its time. This is where Luttwak’s definition of geoeconomics casts a new light. In a pre-globalized world, China might well attack. In the post-globalized world, China might refrain militarily while continuing its progress in technology, natural resources and value-added manufacturing. This path requires cooperation, not confrontation, with the U.S. and Western Europe. My estimate is that China will refrain from an invasion consistent with the geoeconomic thesis. At the same time, Xi Jinping will continue threats and economic confrontation with the West. Investors should expect the following from this unstable confrontation: The U.S. and China will continue to decouple economically. Supply chain disruptions will grow worse before they get better. A new supply chain configuration will emerge involving more onshoring and shorter transportation lanes. China’s growth will lag and it will be unable to make the technological leaps it needs to escape the middle-income trap and become a high-income developed economy. Over time, excessive debt and adverse demographics will overtake China’s ambitions and leave it an aging and low-productivity shell. China’s economic problems will sustain its demand for energy and put a floor under energy prices. Manufacturing costs will rise as China’s labor pool evaporates. Investors should not rule out a financial crisis in China that would spread to a global collapse in capital markets, probably worse than those of 2008 and 2020. But geopolitical tensions will disrupt global supply chains, which will result in higher input prices and transportation costs. That’s a receipt for sustained inflation, and higher interest rates. And any form of uncertainty is a plus for the one safe-haven investment that never fails — gold. While Americans are preoccupied with balloons and other stories that are mostly for show, more serious thinkers are applying themselves to oil, natural gas, gold, the dollar, technology and other geoeconomic benchmarks. Regards, Jim Rickards for The Daily Reckoning [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) P.S. Just the other day, I dropped a [bombshell…]( - I told how the Biden administration has secretly launched a war on U.S. investors… - I also told how a series of new regulations are set to go into effect that force companies to sacrifice profits for political brownie points. And… - I said that although these new regulations will likely destroy hundreds of companies… they will also serve as the [ultimate impetus for 116 stocks]( all of which are slated to ignite in price. In fact, it’s already happening. Some of these companies have already started to bubble to the surface, producing gains of up to 66%, 72%, and 90% in recent weeks. And this is only the beginning. [click here for more...]( Once you see what I’ve uncovered, you’ll understand why I believe these companies are virtually unstoppable from here on out. Unfortunately, you might not get another chance like it again. [Now is the time to make a move. Click here for details.]( Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) [Jim Rickards] [James G. Rickards]( is the editor of Strategic Intelligence. He is an American lawyer, economist, and investment banker with 35 years of experience working in capital markets on Wall Street. He is the author of The New York Times bestsellers Currency Wars and The Death of Money. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your The Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@dailyreckoning.com. This address is for feedback only. For questions about your account or to speak with customer service, [contact us here]( or call (844)-731-0984. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized financial advice. We allow the editors of our publications to recommend securities that they own themselves. However, our policy prohibits editors from exiting a personal trade while the recommendation to subscribers is open. In no circumstance may an editor sell a security before subscribers have a fair opportunity to exit. The length of time an editor must wait after subscribers have been advised to exit a play depends on the type of publication. All other employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. The Daily Reckoning is committed to protecting and respecting your privacy. We do not rent or share your email address. Please read our [Privacy Statement.]( If you are having trouble receiving your The Daily Reckoning subscription, you can ensure its arrival in your mailbox by [whitelisting The Daily Reckoning.](