Implications of Russia's attack on Ukraine are deep and complex. The team at WEquil Capital has been way out front in outlining the growing geopolitical risks facing the global economy. I am especially grateful to our Chief of Strategies and Operations, Rishi and Vishal Daryanani, who have helped us pull together around 200 pages of original research, 10+ hours of podcasts, and a growing team of investors collaborating on our efforts to better understand Inflation and the New World Order. That was the title we gave our WEquil.Capital Newsletter a month before this attack. We have even more conviction in these predictions today.
Russian Invasion Implications
There are many leading minds when it comes to piecing together the mechanics of the global economy and world order. One of these minds is Peter Zeihan who was anticipating the Russian Invasion for years and has been calling the escalation for three months. Today he calmly began discussing the implications for supply chains and commodity prices which have already been damaged and distorted by the Trump Trade War followed by Pandemic shutdowns.
Peter Zeihan's talk this morning is excellent in understanding Russia's role in global economy. In short, they are critical to many global commodities ... many of which are likely to be cut off in coming days and months.
Russia is the largest exporter of natural gas, fertilizer (Potash based, Nitrogen based/Ammonia); the largest exporter of semi-finished iron and low quality steel. Russia is the largest exporter of and a top exporter of nickel, which is needed to make stainless steel and certain batteries. Russia is a top exporter of crude oil, and oil's refined products, such as gasoline and diesel. Russia is the world's largest exporter of palladium and other metals in the platinum group of metals used in high end electronics and catalytic converters. Russia has bee a global wheat producer, and a top exporter of timber, which goes to East Asia. Russia also produces material quantities of the world's refined copper, seed oil, and coal.
Europe depends on Russia for 80% of its natural gas. East Asia (China, Taiwan, South Korea, and Japan) depend on raw materials like timber, steel and natural gas coming out from Russia. The Middle East depends on Russian wheat...and the last time there was a disruption of Russian wheat it helped fuel the Arab Spring. Europe and east Asia are the largest consumers of Russian commodity experts, but commodities are a global market so disruptions anywhere will impact consumers everywhere.
New World Order
The biggest challenge facing Americans today is perspective. Important lessons from history are not taught in public schools. One is the importance of geography in guiding the fates of countries like the USA and Russia. Russia has a rapidly aging population and is surrounded by more borders than any country on earth. In contract, the USA has two 6,000 mile wide moats on either side, and has closely tied cultural and economic allies in Canada and Mexico. Americans became the global superpower in large part because we sit on the largest set of interconnected navigable rivers on earth. There are many sources that provided clues to the insights we have been publishing, but these in particular came from the book "Accidental Superpower" which I recommend still today.
Inflation and Technology are in a tug of war that is perhaps best articulated by Sumay Lu in her article on Inflation and Decentralized Currencies. She dove into the history of Nigeria in particular, a country of "Warriors" according to my good friend Akins who immigrated from Nigeria to the USA. One of our lead instructors, Prince Dede, lives in Nigeria and also build blockchain solutions. Their discussion streamed live on Facebook was enlightening because there was a shared appreciation for the struggles of the people in Nigeria, a country that suffered a 10% decline in its currency in a single day.
To understand the implications of Russia's attack on Ukraine one need to love learning. That is the only way you will ever get through enough material on the vast number of subjects and thought leaders to begin piecing today's complex global puzzle together.
History is the story of humanity, and it's the greatest story ever because it helps us discover who we are. We all have to take responsibility for learning that story ourselves. Parents looking for a Primer would be wise to check out the book Sapiens. I felt strongly enough about the importance of this book that Sumay wrote a summarized version of it for kids three years ago. That's why she can join me in a discussion about the Russian invasion of Ukraine, find it relevant to her life, and contribute in powerful ways to the discussion.
Americans for the most part do not seem to appreciate how much worse things can get. Part of this is because we have failed to learn important lessons from history. Decades of being the world's unchallenged superpower will do that to a country. But its not the first time this has happened.
We have had generational gaps between the Revolutionary War, Civil War, and World Wars is that those who suffered were not around any longer to help us see how dangerous our actions have become. Actions like fueling an enormous bond bubble that I discussed during our podcast yesterday. Actions like demonizing people we disagree with and isolating ourselves from alternative perspectives.
As we wrote in our third newsletter... "Truly Great Societies are created by great people like the “Greatest Generation”. These people were great in large part because they experienced and overcame hardships during the Great Depression and second Great War. They understood that freedom is not free … and wealth comes from work."
The topic of the "Great Society" came up because today's moment appears to look more like 1969 than any year in our history. Well intentioned government spending created a new inflationary regime starting in 1965 as LBJ launched a series of government programs with the intention of reducing unemployment to zero. Within a few years inflation was running out of control. The Fed tightened just as they are know...and inflation fell some before exploding higher and government spending combined with currency devaluation continued to drive inflation in the USA higher than ever before.
Our uncomfortable predictions would be easy to ignore ... save the fact that so far we have been uncomfortably right. The turn of the stock market...reasons why...and a body of work on the nature and causes of inflation we were waiting to publish until the time was right.
Deep Learning by Doing
WEquil Group is constantly #DeepLearning ... that is what we call the process at WEquil.School ... the same process we are now using at WEquil.Capital. We are a community of all countries and colors who leverage their strengths to personalize their path to success.
We learn faster because we learn by doing, teaching, and building the future.
We grow faster because we are unafraid to leverage our individuality to personalize our path to success.
We create faster because we do so in service to others.
We build Specific Knowledge ... so we can become irreplaceable in our new digital, global, personalized economy.
We will be discussing the invasion at tonight's 5pm EST Happy Hour. Members of our Discord Server are welcome to join.