Simon has a long history of being involved in the metals industry focusing on copper. To achieve accurate forecasts for future supply-demand balances and prices sensible projections of the global economy need to be made.
Economic activity moves in cycles; the laws of recession have not been repealed. To make these calls an appreciation of debt, interest rates, demographics and geopolitical developments must be taken into full account, even more so today as some cycles are at critical turning points.
The major evolving cycle is the growing conflict between the BRICS+ group of nations and the Western Alliance led by America. What America fears is that its hegemony together with its currency dominating the world is nearing the end of its life. What BRICS fears is that America’s stance could end in war with its largest supporters Russia and China preparing for that outcome.
The war between Russia and NATO over Ukraine and Israel’s war with Hamas, Hezbollah et.al are part of this escalating conflict.
Wars are not confined to military affairs but include also trade and currencies. The powers which control foreign policy in Washington will use their full toolbox in their efforts to at least contain China’s growth and to dismember Russia which has been America’s foreign policy objective since at least 1991 and even since WWII.
Russia and China have their own resources to combat America’s sanction, tariff and currency ploys. For instance, despite the levying of so many sanctions against Russia, her economy has strengthened with the IMF projecting GDP growth of 3.2% this year; and China’s economy has more resilience than most commentators give the country.
But, when push comes to shove China is likely to announce that its currency is supported by the gold which its citizens own, north of 23,000 tons; and Russia, whose physical gold reserves are more than 12,000 tons will start pricing oil in ounces of gold.
Quietly gold is emerging as central to the monetary system, at least within the BRICS+ group of nations. Gold is the asset used in trade differential accounts between some countries, not dollars.
These are a few of the trends that we follow closely which allow us to make more accurate forecasts for the future than the usual consensus projections. It all boils down to Reality versus Illusion!
The Global Economy
- Global Debt with world broad money supply rising by around $270 trillion more than the value of Global GDP since 2015.
- High Inflation will only correct on a temporary basis because of the above, increasing energy and food prices and the de facto war between NATO and Russia growing into an actual war which could then bring in China.
- These developments will lead to a depression starting in or around 2025
China
- The country’s growth has been driven to a large extent by property, exports and consumption
- The property market has begun a long-term decline for demographic and falling marriage reasons
- Exports will become more difficult to Western Alliance countries due to tensions rising if not conflict so will focus on many countries in the Belt and Road Initiative, more specifically to BRICS+ member countries
- Future growth will be based on the approx. 860 million whose average disposable income is lower than the national average.
Copper
- China accounts for over 50% of global copper production and consumption so what happens within the country has worldwide implications
- The industry’s fundamental problem is that mine grades as well as the copper content of concentrates are falling.
- Once the world comes out of depression, there won’t be enough copper to meet demand with or without the consequences of climate change on Renewables and Electric Vehicles.
- Prices risk rising sharply which always result in substitution in all its forms reducing the demand for copper.