posted on Feb, 28 2020 @ 09:37 AM
Been watching the stock market this morning. It's no shock to anyone who has not been under a rock the last week that it's down... way, way, WAY
down! The reason is obvious... China's corona virus is spreading across the globe, and a lot of our economy is tied to China.
We're tied to China for a couple of reasons. One, obviously, is their wealth in rare earth minerals needed to create the electronic marvels we all
enjoy. Semiconductors, especially specialized semiconductors like solar cells and many types of sensors, require these rare earth minerals. China has
the bulk of the planetary deposits of these we know of. While some do exist elsewhere, the infrastructure has not been developed to compete with
China. After all, China was the first to recognize the need and develop their infrastructure, and Chinese goods are cheap... why bother?
I'll tell you why: a fool places all their eggs in a single basket. I remember a time back in the latter half of last century when one of the two
major ceramics manufacturing facilities in China burned down. Semiconductor costs shot through the roof! Many were completely unavailable for several
months at any price. One would think that would have been a wake-up call to other countries to start diversifying into semiconductor technology, but
nothing came of it. The plant was rebuilt and things went back to normal. In short, the world gathered up as many eggs as they could salvage, put them
right back into the same single basket, and went on their merry way.
Now it seems we may have tripped and spilled all our eggs again, over something called the "corona virus."
This got me thinking... the stock market is dropping like a rock on Jupiter because the investors know their ability to make the goods is greatly
dependent on China, and they fear China may become unable to supply the global needs. This didn't happen back when that ceramics plant burned down;
it was a blip in the overall market, primarily because we weren't at that time quite so dependent on Chinese semiconductors. But something else has
changed: the US has dropped many of the more heinous regulations and lowered the excessive taxation here, which is what caused many businesses to
relocate and others to depend on Chinese technology.
So what is now preventing companies in the West from getting into semiconductor production?
Only one thing so far as I can see: rare earth minerals. China has been playing a little dirty with theirs... they do not export rare earths in any
large amount, instead choosing to export the completed semiconductors. This has worked well for them, as it forced others to buy not just the rare
earths from China, but the technology derived from them as well. One can buy Chinese solar cells from China cheaply, for instance, and solar-powered
lighting using those cells even more so, but it's about like pulling hens' teeth to try to buy the materials from China that are needed to make the
solar cells. I can buy a retail box of solar-powered walkway lights for the same price I can buy surplus solar cells (the exact ones used in
the lights)! And forget the idea of setting up even a small manufacturing facility... the raw materials cost literally a fortune.
And remember, I am in the industry. I buy this stuff all the time. My costs are much lower than what most will pay, especially on raw materials and
But what would happen if someone decided to start mining for these rare earths somewhere besides China? If mining became globalized instead of
concentrated, China would lose a large part of their inherent advantage in the semiconductor industry and have to start to compete honestly in the
Now, I'll admit that it will take a lot of work to expand the infrastructure beyond China. But a dropping stock market is not bad news for
everyone... during the Great Depression, quite a few made fortunes and started economic dynasties that exist still today. While the vast majority of
people lived in squalor, those with the insight, tenacity, and perseverance prospered. We still have people like that, and I am thinking perhaps this
dropping stock market could wind up being a good thing in the long run.
At the very least, China now has reason to negotiate with the USA. Their economy has become a house of cards, and they're sitting across the table
from someone known to blow down card houses.
The worst I see happening is that prices for semiconductors will skyrocket. As that happens, more people will move to fill that need as materials
allow. As material prices skyrocket as well, more people will move to create infrastructure to mine these elements. That additional supply will
stabilize the market at a new level, admittedly much lower than before, but not rock bottom either. And the market will return to growth... a sudden
jump, but then more of the slow, steady growth we have come to expect. This time, we won't have all of our eggs in one basket, either.
I said in 2016 that a Trump Presidency would be the best thing to ever happen to the US and the most painful thing to happen to the US at the same
time. Looks like I may have been right. If one gets a splinter in one's finger, one has a choice when to lance it out. Doing so hurts, and the longer
the splinter has been there, the worse it hurts. But if one never lances it out, that little splinter can set up infections that lead to blood
poisoning and gangrene... and it is possible to die from it (although that would be quite unusual to let a splinter go long enough for that to
happen)! China's business practices have been a splinter in the world economy for quite a long time, and now the infection is getting serious... it
has to be lanced. It's gonna hurt like crazy, but that's the only way it can ever heal.
Would like to hear thoughts from others here on this possibility. Remember, this is NOT the Mud Pit, so everyone please play nice.