300 years ago, a man who would reshape global markets and politics with one simple idea — capitalism — entered the world.
Adam Smith wrote “The Wealth of Nations,” arguably the single most influential piece of economic literature ever published.
He argued that free markets were the most effective way to allocate resources and foster economic progress.
His ideas became the foundation for not just modern economics, but governance as well.
Juxtapose that with OPEC,+ a coalition of countries with questionable integrity who manipulate global oil supply since its members account for half of the world’s production.
The OPEC+ family is comprised of 13 members from throughout the world — Saudi Arabia being the de facto leader, with oppressive nations, such as Venezuela and Russia, also taking part.
Amazingly, the cartel has weathered decades of challenges, including the U.S. shale boom.
But like any mafia family, distrust flows just underneath the surface.
For years, smaller nations didn’t mind playing second fiddle.
Yet, the latest meeting suggests the family might be dissolving sooner rather than later.
Why are Mom and Dad getting a divorce?
OPEC+ likes to pretend it is a harmonious group of friends who share a common vision and goal: to stabilize the oil market and ensure a fair return for their resources. But in reality, OPEC+ is a house divided by conflicting interests and agendas that feed on oil.
For a while, Saudi Arabia and Russia, the two largest producers, fought with one another. Despite sanctions and claims otherwise, Russia continued to pump well above its quota and sold the excess on the black market.
Now, it’s the smaller players that want some leeway.
Saudi Arabia appeased OPEC+’s other members with the “Saudi lollipop,” a voluntary cut of 1 million barrels per day, helping to get several under-producing African members to lower their baseline production levels, while awarding more output to the United Arab Emirates, which has the largest untapped reserves in the world.
It’s a tentative peace held together by mutual distrust, all in an effort to keep oil prices propped up.
However, that may not matter if the global economy keeps decelerating. And there’s one culprit behind it all…
The end of an era?
When the manufacturing powerhouse scrapped its zero-COVID-19 policy last year, economists anticipated a sharp reversal in growth. The sugar high was short-lived.
The latest data say China isn’t growing, and its growth may, in fact, be slowing:
- Industrial production rose 5.6%, far below the 10.6% forecast
- Consumer spending was up by 18.4%, juiced by the anti-COVID measures, which suffocated demand. Yet, that estimate was still well below estimates.
- Youth unemployment ROSE to 20.4%, surpassing the previous record of 19.9% from last summer.
- Property investment is down 6.2% for the year.
- Chinese exports grew 8.5%, way down from the 14.8% in March.
On a larger scale, China faces a population problem.
The Brookings Institute projects China’s population, which sits at around 1.4-1.6 billion, is forecast to drop below 1 billion by 2080 and 800 million by 2100.
Population growth is essential for any economy to flourish. Japan has faced the disastrous consequences of lower birth rates and an aging population that stagnated economic growth for the last three decades.
If the direction of China’s population growth doesn’t change, its place as the manufacturing powerhouse of the world will evaporate like FBI evidence.
We can change
Ironic is a fun word.
For example, it’s ironic that this administration is bent on curtailing OPEC+’s and China’s control over our economy, yet impedes every effort to exploit our own natural resources.
Somehow, permitting reform got buried in the debt ceiling deal — a solid first step.
Yet, we need, and can, do so much more.
And again, we turn to the word “ironic.”
America’s energy needs MUST be met domestically, or otherwise bad things will happen.
The left claims we shouldn’t destroy sensitive areas, which apparently means any area larger than one square centimeter.
Yet, they have no problem buying energy from global markets, letting someone else destroy land or water in some far-off country, and probably exploiting workers in the process.
Look, no one wants to use fossil fuels when cleaner alternatives are available. But they need to make economic sense.
Elon Musk knew this and made it the cornerstone of Tesla (NASDAQ:TSLA).
And guess what… he revolutionized the electric car marketplace, while Barack Obama gave Solyndra billions to go bankrupt.
No one knows this better than Dr. Mark Skousen. He’s not some condescending academic with no real-world experience.
He’s studied, taught and invested through the major market events of our lifetime.
And here’s a secret he learned along the way…
All the economic storytelling in the world doesn’t mean squat unless YOU can turn it into something actionable.
That’s what makes The Biden Disaster Plan so unique.
Mark lays the foundation for his arguments and then dives into what you, as an investor, can do about it.
Don’t worry about whether you already subscribe to one of Mark’s services or never plan to.
This video can help you learn how to turn a robust analytical framework into actionable ideas.