The Next Bellwether Commodity

A new Iron Curtain will soon split the world in half.

Globalization, as we’ve known it since the Cold War, will undergo unprecedented changes beyond our imagination.

You already know how THIS will start if you’ve been a long-time Equedia reader. 

It will be a currency war provoked by the BRICS’s introduction of a new reserve currency— which is expected to launch imminently. 

This currency feud between the West and BRICS will reshape the entire landscape of global trade.

In fact, the Biden administration has already passed what I call the “Marshall Plan 2.0” to force its allies to embargo China in preparation for this new world order.

In a moment, I’m going to explain how it will play out and what it means for your nest egg. 

But first, it’s imperative you know what’s happened to understand what comes next.

The Marshall Plan

When people are asked about the Cold War and what they feared most, they usually think of the Cuban Missile Crisis.

But in reality, the nuclear arms race was just a sideshow for what really happened behind the scenes.

The real war took place through diplomatic channels. And it was fought by history-altering treaties, not weapons.

After WWII, the United States and the Soviet Union emerged as two major powers. 

And taking advantage of their positions, both scrambled to exert as much influence over war-torn Europe as possible.

To that end, US President Harry Truman proposed what we know today as the “Marshall Plan.”

It was a historic foreign aid package that racked up more than $115 billion (in today’s dollars) meant to rebuild Western Europe. But it wasn’t quite the humanitarian program the history books paint it as. 

Like all political philanthropy, the package came with strings attached. 

The most significant of these conditions was that those who received the aid were later compelled to stop trading with the Soviet Union and, subsequently, China.

Soon after the aid reached Europe, US lawmakers enacted another little-known provision. 

In short, that provision banned aid recipients from trading with “non-participating European countries,” referring to all nations but US allies. 

Via Cold War Economic Warfare, 1949–1951 paper:

“An additional instrument for controlling East–West trade was written into the Foreign Assistance Act of 1948 (Marshall Aid). Labelled the ‘Mundt Amendment’ after the Congressman who sponsored it, a section of the act directed the Administrator of Marshall Aid to refuse to participants delivery of such American goods ‘which go into the production of any commodity for delivery to any non-participating European country which commodity would be refused export licences to those countries by the United States in the interest of national security.’ The amendment went a good deal further than the NSC decision. If the first control action focused on American trade and aimed at all of Europe, this second action was aimed specifically at aid-receiving countries. It made them instruments of American foreign policy. As one commentator put it, ‘this provision throws part of the United States export control system around the Marshall Plan countries.”

In the end, the Marshall Plan turned Europe into the US’s foreign policy tool. It forced its entire Western flank to break all ties with the Soviets—ultimately leading to the raising of the Iron Curtain.

Fast forward to today, and history is about to repeat itself.

The Battle for Chips

A few months ago, I exposed the truth behind the US-China dispute over Taiwan. 

Long story short, China depends entirely on the West for the provision of the most sophisticated computer chips.

This is because Taiwan, a country allied with the West, represents 90% of the global advanced microchip production. And the lithography machines that Taiwan uses to crank them out are made in the Netherlands – a nation with strong diplomatic and military ties to the US. 

For China, that’s not just an economic problem. It’s also a matter of national security because all advanced military equipment runs on these chips. 

Which is why China’s Xi Jinping is scrambling to build China’s own self-reliant supply chain for chips.

The problem is that China doesn’t have the technology to produce these advanced chips, nor can it simply import the necessary machinery. This is because, upon the orders of the US government, these machines were placed under an embargo, making it difficult for China to acquire them.

Via Politico:

“The Dutch government confirmed for the first time Wednesday it will impose new export controls on microchips manufacturing equipment, bowing to US pressure to block the sale of some of its prized chips printing machines to China.

The US and the Netherlands reached an agreement to introduce new export restrictions on advanced chip technology to China at the end of January, but until now, the Dutch government hadn’t commented publicly on it. The deal, which also included Japan, involves the only three countries that are home to manufacturers of advanced machines to print microchips. It is a U.S.-led initiative to choke off the supply of cutting-edge chips to China.”

And according to the Center for Strategic and International Studies (CSIS) study, this can push back China’s plans by decades.

Via CSIS:

“The United States was, by itself, strong enough to reshape the Chinese semiconductor industry in the short term. However, Dutch and Japanese companies possess advanced technological capabilities in highly related disciplines. Whereas it would have likely taken China, by itself, decades to replace the equipment that the United States is no longer willing to sell, assistance from the Netherlands or Japan could have had China back up and running in as little as a year or two.”

It’s no wonder President Xi is willing to risk starting WWIII over Taiwan: Taiwan holds one of the missing elements of China’s technological independence.

But if you think China is dead in the water because of this, think again.

China has leverage over the West, too.

The New Copper

While the West holds the reins over the latest-generation chips, none of the gadgets powered these chips work without special raw materials.

I’m talking about rare earth metals.

As you may know, rare earths are one of the most important building blocks of every electronic device. They’re also indispensable in next-gen technologies like solar panels and batteries.

For example, you can’t produce night-vision gadgets without a rare metal called lanthanum.

And not a single electric vehicle (EV) would run without neodymium and dysprosium. These metals make up magnets that power EV motors by converting electrical energy into kinetic energy.

Most have never heard of these elements; yet, they are the “copper” of the future.

The problem for the West is that the supply of these materials is not only limited, but most of it is clustered in China.

China is not only the world’s largest producer and exporter of rare earth metals, representing 80% of the current global production, but also holds 44% of the world’s total rare earth reserves. 

In other words, rare earth metals are to China what oil is to the Middle East.

China knows its vital role in global supply chains and has repeatedly exploited this position to exert political pressure on the US and its allies.

But if you think the US isn’t fighting back, think again.

Marshall Plan 2.0

Last year, Congress passed a mammoth spending bill ironically called the “Inflation Reduction Act” (IRA).

One of the provisions included in the IRA allowed the government to allocate $369 billion toward green energy subsidies.

Now, that may sound great for America, but did you know that a good chunk of that money wasn’t even designated for domestic use?

Case in point…

Last month, Biden offered EU-based producers the opportunity to take advantage of IRA subsidies by supplying the US with five key battery minerals: cobalt, graphite, lithium, manganese, and nickel.

Via FT:

“US president Joe Biden promised EU commission president Ursula von der Leyen a deal on her visit to the White House earlier this month. The five metals to be eligible under the IRA are cobalt, graphite, lithium, manganese and nickel, which are used in battery production. The US is expected to join the EU’s “critical minerals club”, the brand Brussels wants to use for its global partnerships in this sector.”

This deal comes hot on the heels of a similar agreement with Japan.

As per that deal, Japan’s mineral suppliers will be able to tap into IRA’s tax breaks also:

But, just like Truman’s Marshall Plan, there’s a catch. 

The lion’s share of the supply chain of these minerals and metals has to take place within the borders of the US and its trading partners. 

Via the US Department of the Treasury:

“To meet the critical mineral requirement and be eligible for a credit, the applicable percentage of the value of the critical minerals contained in the battery must be extracted or processed in the United States or a country with which the United States has a free trade agreement, or be recycled in North America—as mandated by the Inflation Reduction Act.”

This applicable percentage will double to 80% by 2027, meaning that the IRA will subsidize only those who will largely bypass China:

• • For 2023, the applicable percentage is 40 percent.
  • For 2024, the applicable percentage is 50 percent.
  • For 2025, the applicable percentage is 60 percent.
  • For 2026, the applicable percentage is 70 percent.
  • Beginning in 2027, the applicable percentage is 80 percent.

Just as Truman showered Europe with aid after WWII only to embargo the Soviets later, the Biden Administration is now subsidizing Western suppliers to rid China of its supply chains.

This is Marshall Plan 2.0.

And if history taught us anything, it means big changes—both good and bad.

The Good, the Bad, and the Ugly.

Let’s start with the bad.

The biggest threat of this global disintegration of supply chains is that we may see the next Iraq somewhere down the line.

If China stops exporting rare earth metals in retaliation, the West will have to secure an alternate source. And because most of their reserves lie outside Western borders, that may call for a proxy war.

This is precisely why the US is constantly negotiating with Canada for supply. 

But the same goes for China.

If Beijing runs out of chips during this embargo, Xi will likely have no choice but to invade Taiwan. 

Even if we dodge war, such mercantilism will inevitably lead to endless material shortages, further exacerbating inflation. That’s the ugly.

But there’s a silver lining, too.

As major powers onshore their supply chains, programs like the IRA will shower domestic miners with tens of billions of dollars. And that federal money will become a feeding ground for future multi-baggers.

And you can bet we’re preparing for the biggest beneficiaries of this paradigm shift.

If you’ve forgotten about mining stocks in this crypto and alternative energy era, get ready to jog your memory.

Seek the truth and be prepared,

Carlise Kane