#251: Don't Forget The DRC

Jacob Shapiro: 00:00:00

Foreign to set the world on fire. Hello listeners, and welcome to another episode of the Jacob Shapiro Podcast. As usual, I am your host, Jacob Shapiro.

I am not joined by Rob or anyone else today. All you have are the delicate bass tones of my voice on this solo podcast. It's been an interesting start for the year for me personally.

So week one, I had a sick toddler. Week two, I had a sick baby. They are both doing better. Thank you for being concerned. Week three brought the Bayou Blizzard.

We got over a foot of snow at my house here in New Orleans on Tuesday.

I was actually supposed to fly out on Tuesday afternoon to speak to a group of farmers in Phoenix, Arizona, and to fly directly from Phoenix to Winnipeg to go to Manitoba Ag Days to speak to a group of Canadian farmers. Just a side note, I could have probably prepared the same presentation for a group of American farmers as a group of Canadian farmers.

Even a couple of weeks ago I couldn't. Now I had to prepare two markedly different presentations because the situation is very different for U.S.

farmers versus Canadian farmers because of some of the things that are happening in Washington and that are happening in U.S. canada relations.

Needless to say, though, I did not make it on my speaking gigs because the airport here was completely closed on Tuesday and Wednesday and as far as I know, not a whole lot of flights got out on Thursday.

So I did those flights virtually while we were snowed in with our beautiful children here together, which was magical the first day, still pretty cool the second day.

And by the third day you're starting to think about, well, when are the roads going to be open so that maybe we can get back to daycare or getting some childcare support here in general. All of which is to say it's been hard for me to keep on top of everything that's going on in the world.

Not just because world is moving at quite an accelerated pace, but also because my attention bandwidth has been relatively low compared to where I normally am.

That said, there are a couple things that I wanted to sort of shine a bright light on or highlight that happened this week that I think are particularly important. And I also didn't want you to go a whole week without hearing from me and worried that something had happened to me.

The first, obviously, President Trump's inauguration, a lot has been said about this, but for me, at least from a geopolitical standpoint, the most important signal that I saw was that President Trump did not come into the office and start immediately raising tariffs against China and some other countries as he promised.

Instead, what Trump did was he said that he was going to order an investigation into globally unfair trade practices and to investigate whether China had complied with the phase one US China trade deal that was signed during his first term. If you are looking to support the new Department of Government efficiency, this is not an investigation that needs to happen.

China did not meet its quota of purchases. It didn't do that because of the COVID 19 pandemic. It didn't do that because Trump did not win the next election.

It didn't do that because it didn't want to. It did it for some commodities. China actually purchased more corn, for example, from the United States than it committed to.

It purchased far fewer soybeans than it committed to in general. But the point is, you don't need an investigation for that.

That's about as transparent a way as I'm going to buy some time before I do the thing that I promised I was going to do on day one.

Which lends itself to the argument that Cousin Marco made on this podcast a couple of months ago, which is that all of the talk of tariffs and globally unfair trade practices, it's all a bluff, and that all Trump really wants is a deal, that everything with him is about leverage and about making deals, and it's not about completely upending the global trade architecture system.

Now, ever since the inauguration, which was only a couple of days ago, Trump has already been talking about, oh well, if they don't do what I say they need to do by February 1, those 10% tariffs on China, we're gonna start them and we're gonna be off to the races.

So this can ping pong back and forth very carefully, but we got this initial signal when Trump was inaugurated and took over the office that he did not follow through on the immediate promises of tariffs that he did before. Now, markets were buoyed by this.

They read in this that perhaps tariffs were going to be off the board or perhaps that we were going to get Trump the deal maker, Trump the leverage guy, rather than Trump the imperialist, isolationist, American protectionist. I'm not so convinced yet. I still believe some of the rhetoric and think some of those tariffs are coming.

But early indicators put a check mark in the column for Cousin Marco's stance, which he enunciated on this podcast before.

The other really interesting thing that I think has gone unnoticed around the inauguration was where new Secretary of State Marco Rubio is going to visit first. It's not any major US Allies, it's not in sort of to support US Efforts around the Russia, Ukraine, war, or to combat China.

His first visit as Secretary of State is going to be in the coming weeks to Panama. And from there he's going to go to Guatemala, El Salvador, Costa Rica and the Dominican Republic.

Also, one of the first things that Trump did when he was inaugurated was he reversed a series of last minute measures that the Biden administration made that would have made it easier for Cuba to acquire US Dollars that was sort of a day late and a dollar short, if you'll forgive the unintentional and terrible pun there. The Biden administration was really not friendly to Cuba in any meaningful way. The Obama administration really tried to reset U.S.

relations with Cuba. Biden really wasn't interested in that. Rubio, being from Florida, with his background, obviously has his own perspective on this as well.

You might read into Rubio's visit to Panama that he's going to follow through on President Trump's threat to take over the Panama Canal. And I don't think that's an idle threat.

And it's not an idle threat because the United States has invaded Panama before, has invaded Panama in the last 50 years, was a joint owner of the canal for quite some time. But I'm not sure that that's really where Trump is, where Trump is headed.

And I think it's interesting and perhaps ironic that maybe it's going to take a figure like Marco Rubio to get the US Government to actually focus on Latin America for a change.

Not to just pay it lip service like the Biden administration did and the first Trump administration did and all the other administrations before it, but to say no, if we're going to do all these things to combat China and to combat Russia and to put America first, we have to have our own backyard together.

And that means we need stronger relations with these Central American countries and with South American countries, especially if migration is one of the big issues as well. So maybe nothing will come of it.

Maybe it's another one of those meaningless trips that produces some PR statements and bilateral statements and that'll be it. But I think it's very interesting that Rubio chose as his first visits Panama, Guatemala, El Salvador, Costa Rica and the Dominican Republic.

That could be a real sea change and a necessary sea change in US Domestic policy, turning away from the inauguration and the United States. Another thing that struck me, and I can't believe I'm going to say this, was what Ursula von der Leyen said at Davos this year.

Can't believe I'm saying this, because I regard Davos as basically Unimportant that not a whole heck of a lot is going to happen there besides reporters being able to write articles early because they can just file whatever was said there and go have a beer. But von der Leyen gave a really, really big special address in which she said a couple things.

And I'm going to quote her verbatim here because I think both of these points are really interesting and point to some things we need to think about in terms of the future of Europe in these next at least two to four years. So the first thing she said is actually something I've been saying in my own talks around the world for the last year or two. So I'll quote her here.

the one hand, since the year: 2000

It is common that a chip that is designed in the United States is built in Taiwan with European machines, packaged in Southeast Asia and assembled in China. On the other hand, last year alone, global trade barriers have tripled in value.

International trade institutions have often struggled to address the challenges posed by the rise of non market economies that compete by a different set of rules.

That is so bang on to what I've been saying that I have to say something else in my talks in the future, I guess, because now it's conventional wisdom. I was saying points like that five, seven years ago and either putting people to sleep or getting laughed at afterwards when I gave the talks.

And now here's the president of the European Commission basically saying what I was saying.

Note there that what she's saying is that even as globalization as a broader edifice for how the world is interacting with each other is beginning to decline, the regional spheres of influence, the regional power centers around the world are actually trading more with each other. And that's one of the really confusing things here. Even as we are globalizing at a top level, we're actually regionalizing even more.

Regional markets are becoming, are becoming even more integrated. And that's even as also global trade barriers, as she said, have tripled in value.

So that's a really important concept to have in mind because I think it's easy to think about de globalization as this one way street. It's not we're heading towards regions of power rather than just every country taking its ball and going home and playing with its own market.

Here's the bigger thing though. I'll quote her again. First, Europe needs a deep and liquid capital market.

European household Savings reach almost 1.4 trillion euros compared with just over 800 billion euros in the United States. But European companies struggle to tap into that and raise the funding they need.

Because our domestic capital market is fragmented and because that pushes money overseas, €300 billion of European family savings are invested abroad every year. That is a key issue, holding back the growth of our tech startups and hindering our innovative clean tech sector. We do not lack capital.

We lack an efficient capital market that turns savings into investments, particularly for early stage technologies that have game changing potential.

This is why we will create a European Savings and Investments Union with new European saving and investment products, new incentives for risk capital, and a new push to ensure the seamless flow of investment across our union. End quote.

Now, we have heard tons of ambitious things from the European Commission, tons of paper has been defiled by European bureaucrats in describing all the ways that Europe is going to integrate better and do things better and not continue to trip over itself.

All of that said, that is as transparent and clear minded a thing that Europe really could use in the context of the global challenges it faces as I've ever heard coming out of a European bureaucrat's mouth. Now, she says she's going to unveil some of this next week.

I already started reading the larger plan that apparently this European Savings and Investment Union is based on. There is a huge sort of gulf between what she is saying and getting this realized.

There's also the thorny problem of, say, countries like Hungary, which have outwardly thwarted European rules and received no consequences. If you think I'm picking on Budapest unfairly on the off chance that Tucker Carlson is out there listening and he's like, don't be mean to Budapest.

All of you people like to rag on Budapest.

France has also ignored these rules completely, especially when it comes to deficit spending and how it takes on debt and state support of French companies. So the European Union has really not held all of its countries together to the same rule sheet.

And if Europe really is going to start moving down this path of centralization, it's gonna need to make sure that all countries are treated equally.

When you get into a political union like this, and this is, you know, folks who know their US History should know that when the states came together to form a more perfect union, every single one of those states gave up some of their sovereignty. The southern states in the end got buyer's remorse. They felt like they gave up too much of it.

So if Europe is really, really going down this path, it is a massive geopolitical development. I don't Quite believe it yet. And I think the big bellwether here is gonna be German elections.

It looks like cdu CSU is polling ahead in the upcoming German elections that are in March. I am expecting a center right, maybe even a right government in Germany, but it's not just about right, left wing.

I'm expecting a much more muscular German government, one that is going to deliver some tough medicine to the German economy and one that is going to be able to take over the leadership mantle in the European Union pushing for integration.

France can't do it anymore and never did a really particularly good job because Emmanuel Macron, even though he's a farsighted, a strategic thinker, couldn't get out of his own way domestically and now is facing basically an inability to rule France domestically with all the political challenges that he faces as a result of his failed election gambit.

So a lot hinges on the ability of Germany to elect a new government, a decisive government, one that is powerful enough to put some, not to put, to enact some harsh reforms in the German economy to get the German economy going in the right direction and then using Germany's power not to force austerity, not to virtue signal about migrants, not to do all the things that Germany has done for decades, but instead to say this is a matter of survival.

And if Europe is going to compete with China and is going to compete with the United States and is going to be able to defend itself from Russia or from the migrants that are coming to its borders, whether they like it or not, it's going to require Europe being able to announce something like a European Savings and Investments Union and actually follow through on it. So you have plenty of reason to doubt that they'll be capable of doing it. They haven't done it at all, despite promising it in recent years.

But this is one where it looks like they're about to take another shot. This is last but not least, and it's actually really not last.

It's just last on the list of things that came across my desk that I thought was particularly important. Things are not going well in the Democratic Republic of Congo now. You've heard that before.

We actually did a podcast almost exactly 12 months ago on what is happening in the DRC. I would suggest that you go back and listen to that podcast. It gives a lot of great background about the country itself.

Congo wars of the mid to late: 1990

It was a much larger conflagration that involved African powers and external powers all basically interfering with each other and fighting with each other to the tune of millions dead. And what's happened in the past week is that M23 rebels, who allegedly are backed by Rwanda, Rwanda denies this.

The UN Says that they are arming them. It goes back and forth.

But these M23 rebels who have been fighting in some of the rest of portions of the DRC from quite some time, they advanced on two fronts in a major way in the country's east. And now tens of thousands, thousands are fleeing as a result of that. It's the latest in a series of M23 attacks against Congolese forces.

But here's one UN statistic that boggles the mind that M23 has recruited of its 8,000 fighters, they've recruited over 5,000 of them since September. So something has really accelerated here. And it looks like the rebels are beginning to finally close in on the provincial capital of Goma.

Things are bad enough that the military governor of the North Kivu Province, where a lot of this fighting is happening, died from wounds that he suffered on the front lines earlier this week. Why is this so important? Well, it's important because it's a sign of multipolarity.

I talk about these sort of conflicts that are going to be around the world that will emerge as the great powers are more focused on themselves and they're expanding regions of influence rather than on some of these things that are happening throughout the rest of the world. The Democratic Republic of Congo is also a major source of very specific mineral commodities. Cobalt is the most important.

Upwards of 70% of the cobalt that we mine out of the earth in today's age is out of the Democratic Republic of Congo. A lot of it done by, in horrific conditions, by slave labor or child labor, which is a depressing thing in and of its own. Right?

You can't do all the fancy things you want to do with batteries and things like that. If Suddenly you've got M23 rebels who are saying, now we're going to restrict some of this cobalt coming out from the drc.

If we don't get what we want politically, and that's before we get to the copper, the gold, some of the other things that are coming out of the DRC thus far in this fighting, and this fighting has been going on for years, the rebels have not stopped the flow of mineral commodities out of these regions. Whether that was because of a lack of control or because it didn't mean anything for them, that it didn't help further their gains, it's hard to say.

But they're getting to the point where if they want to, they probably could. And that's going to mean massive things.

we were talking about in the: 1990

So some people are covering this, but it's nowhere close to the front page. It is nowhere close to the top of people's minds.

And I would argue that if you're thinking globally, geopolitically, actually what's happening in the DRC should be one of the front things on your mind, too. That is not an exhaustive list.

There are so many things happening in the world, from the bank of Japan raising interest rates to the Brazilian government talking about cutting import taxes because they're dealing with lower food costs.

Monkeypox is, I mean, you start going down the list of things I didn't even mention Japan and the wage hikes that are happening there, and maybe the virtuous cycle of Japanese investment, finally doing the things that Rob and I love to talk about on this podcast all the time.

So many things are happening before you even start to parse all of the developments that have come out of Washington, out of the White House this week.

But in my, in my limited state, in my, in my sort of in my home office here, without Internet, just hotspotting on my computer, in the random moments that I had time to figure out what was going on in the world, those are some of the things that I thought were most important. Hopefully next week is the first week of the year that is relatively normal for me, that I can really sink in.

We'll be having Darrell Richardson, our weather expert, on the podcast, very soon. You can bet I'll be quizzing him about the Bayou blizzard and whether this means that in the future New Orleans is going to be an epicenter for snow.

Crazy statistic. Also, by the way, I heard that New Orleans received more snow in one day, so this past Tuesday than the city of Minneapolis, St.

Paul, the Twin Cities have, have received all of January. When is that ever going to happen again? It actually, for me, it was not just Sobering. It was a reminder of how humble we need to be as analysts.

When I was being introduced virtually for one of the conferences that I did this week, the one in Phoenix that I couldn't appear to in person, but they put me up on teams and put me in front of the audience, they said that one of my jobs is to explain the world to my clients. And I began with, how am I supposed to explain the world when I'm literally sitting at my desk watching a foot of snow fall in New Orleans?

Like, literally nobody in the world predicted that. And that's where we're at when it comes to geopolitics.

And some of these things we're going to face, things that nobody, no matter how smart they are, is going to predict. The real definition of success, I think, in the world that is emerging is flexibility and resilience. How quickly can you identify what's going on?

How quickly can you pivot and how resilient can you be to the challenges that are happening?

A good friend of mine who became a therapist, an art therapist, she works with people to do art in order to work through things like trauma or mental difficulties, things like that. She once told me that her definition of resilience was the capacity to imagine that the world can be different.

And I would put to you, if you're thinking about, well, what does it mean to be resilient? One of these buzzwords that's out there, Jacob, don't give me the buzzwords.

And this is one of the messages I have sort of in all the audiences that I talk to, try to imagine what it's like if the world could be different. You can do that from a negative sense. But I think we have enough negativity out there. I think we need to imagine, how could the world be better?

How are some of the things that are happening? Could they actually create situations that are better than we might expect today?

Because one thing we know for sure, the media profits off of negativity. It gets more clicks, it gets your attention more.

I know this because the podcast that specialize in negativity or on geopolitical crises or World War iii, do better than this podcast because I'm not willing to go down in the mud there.

I'm instead thinking about, what are these things that are happening on the top level, and what does it mean not just from a risk perspective, but what does it mean could change in the world? What does it mean about things that could be better?

So on that little hopeful note, we'll be back, hopefully with our regularly scheduled program next week. Unless the world has something else in store for me. There's the old Yiddish saying, making plans is a good way to hear God laugh.

I have certainly been hearing him chuckling to himself all year, so hopefully next week he stops laughing and I can get dive a little bit more deeply into some of these things. Thank you as always for listening. Thank you for rating and reviewing the podcast. Thank you for sharing the podcast with your friends and family.

Take care of the people that you love. Cheers and I will see you out there. I love you too much. I just want to stop a great big flame down in your heart.

Thank you so much for listening to the Jacob Shapiro Podcast. The show is produced and edited by Jacob Smulian and it's in many ways the Jacob Show.

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If you're interested in learning more about hiring me to speak at your event, or if you want to learn more about the wealth management services that I offer through bespoke or cognitive investments, you can find more information@jacobshapiro.com you can also write to me directly@jacobjacobshapiro.com I'm also on on X for now with the handle JacobShap. That's JacobShap. No Dats, Dashas or anything else, but I'm not hard to find.

See you out there Set the world on fire I just want to start a flame in your heart.