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This is an iHeart podcast. Guaranteed Human.
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Let's be honest. Buying cannabis shouldn't be complicated, sketchy or low quality. That's why I want to tell you about mood.com that's m o o d.com Mood ships federally legal cannabis straight to your door. No medical card, no hassle. And here's the kicker. The quality is better than anything you'll find at your local dispensary. Yeah, I said it. Whether you're into edibles, concentrates, flower, or just looking to explore, you'll find it all at Mood. And it's not just the variety that makes them stand out. Every product is sourced from small American owned family farms that care deeply about what they grow. It's cannabis you can trust, delivered discreetly and ready to elevate your mood. And because you're a listener, you get 20% off your first order. Just head to mood.com for that's M-O-Ood.com to get started. Cool Zone Media.
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Welcome to Get Appened here, a podcast about things falling apart and although not today, putting them back together again. Today we are going to be talking about some of the ways in which the world is falling apart and the ways that they've been invisibilized. Now, there are obviously a wide and broad variety of ways in which the world is coming to pieces, but one of them is the impact of the continued dual blockade now of the Strait of Hormuz. The sense you get reading the papers, if you were looking at the economic reality of the situation, is that everything is broadly fine. The economic impacts have been less bad than expected. The economy is proving more resilient. Economies, particularly in East Asia, are hanging on better than predicted. China has been resilient. America has been resilient. Trump will eventually back down, which will head off the worst case scenario, long range forecasting of material shortages. Now, the rest of you, I'm assuming if you're listening to this podcast, you live in reality and not the distorted mirror world of the stock market. Stock market, as I think everyone has been able to see by this point, is increasingly unmoored, if it ever was moored to begin with, from the reality of how the global economy is actually functioning. Trump has been able to play a game by which he makes the appearance of backing down every time the stock market seems to be actually tanking. And the markets have simply come to believe as an axiom that that if they simply bet that Trump will eventually back down, it will simply happen. No, it hasn't. The war is continuing apace. And it seems to have no signs of slowing down. But the markets are behaving as if they know that it's going to happen. And this has created a kind of paradox where on the one hand, there is us living in this world, and on the other hand, there are the markets living in a world where everything is going to be fine. And in the world that we live in, things are not good, but they are breaking, I think more slowly than people tended to expect. Now, part of this, and we will go over this in this episode, is that the impacts of this have been worst felt, obviously in Iran itself and then across south and East Asia, which are markets that are incredibly. And economies that are incredibly reliant on not just oil, but things like naphtha and also fertilizers that pass through the Strait of Hormuz. But if the markets are Wile E. Coyote hovering in the air through the sheer power of not looking down, the rest of the economy is a kind of slow moving train wreck. It isn't collapsing all at once, but the more you poke through and the more you go past the first page of the newspaper and start looking at the later ones, and the more that you look at the press in other countries, the more you begin to realize that things are going quite, quite badly. Now, in the west, the sign of this has been $5 a gallon gasoline in vast portions of the United States. We are quite frankly, seeing the better side of it. There have been widespread shutdowns of transportation across south and East Asia, but buses simply aren't running, both public and private. There have been strikes and protests over high gas prices by people who normally drive buses. Even in the US you can talk to people who try to do Uber deliveries. And it's becoming effectively impossible even to do that simply because gas prices are so high. But they are simply nowhere near as bad here as they are in places like the Philippines. Now, the interconnected nature of the global economy means that there are things that are being broken right now that are going to break more things later down the line and are continuing to break things down and cross the supply chain. But the ripples are moving slowly. Transportation costs are something that we tend to think about in terms of moving people around. Right? We kind of think about it in terms of buses, in terms of cars. However, one of the very significant issues that we are running into across particularly Southeast Asia, also Southeast Asia, to combining all sort of, I don't know, three of the regions, a bunch of the island nations in the Pacific are dealing with this Too, to various extent. Sri Lanka has been one of the worst hits to the extent that we're seeing a bunch of these countries are doing kind of like miniature government shutdowns. And obviously there's a bunch of different versions of this. Pakistan, for example, is going into more debt in an attempt to sort of keep the economy running. But returning to transformation costs for a moment, it is important that we also understand that goods are transported and increases in the price of gasoline to the point where it's simply impossible to afford also affects shipping and in particular affects things that are delivered on trucks. I'm going to read this quote about Vietnam and rice production in Vietnam. In today's abnormal times, rice buyers are hesitating. Shipping delays of 10 to 15 days have become common as carriers slow steam to conserve fuel. Basmati rice from India bound for the Middle east has been unable to get through the Strait of Hormuz in the Philippines. Wholesalers are not sure when there might be enough diesel to move imports around the country. That means rice has been piling up across Asia, creating a short term paradox. Wholesale prices declining as production costs rise after a year of healthy harvests. Traders are paying farmers less right now to hedge against future risk. So this is a really complicated fucking mess, right? What the New York Times is saying here is that buyers aren't buying the massive amount of rice that has already been planted, right? But on the other hand, there's also. Now we're running into fertilizer shortages because of a bunch of elements for fertilizers that is used in a lot. I mean, this is also affecting the United States too, but it's significantly worse in places like the Philippines and places like Vietnam. Some of the important elements needed to create fertilizer past the trade of farmers, they're not getting through. And this means that on the one hand, farmers are facing enormous rising production prices. But production is a process that takes place over and through time, right? And this is something that very importantly, most economic models are really, really bad at dealing with. Conventional macroeconomic models assume time and space don't exist to a large extent. Like this is like a real issue for a, for a lot of large scale economic models. Unfortunately, they exist here. And so what we're dealing with, right, is that there has been production that's already happened because there's already have been harvests. But now farmers can't sell the stuff that they've harvested because the transportation costs are so high that the buyers don't want to buy it. But that means also on the Other hand, food is still getting more expensive on your end because even though the people making the food can't get enough money for the food they are selling because, again, the buyers won't buy it because it's too expensive, you're now also paying. Like people in the region are now paying increased rice prices because they have to pay the shipping cost. So even though, on the one hand, right, the actual price that consumers are paying is going up, right, and the cost to produce the rice is also going up, the actual price at which these people can sell the rice is going down. And this is a fucking nightmare. It means that crops are getting planted. It means that crops are also just rotting in the fields because there's. There's no way to sell and move them. This is causing really, really significant concerns that we are going to be, you know, like, we are looking over the coming months at a kind of agricultural catastrophe where you're. You're starting to see sort of projections of people going, oh, God, like, hey, what if people simply stop exporting food? There's a great quote in, in this New York Times article from a guy who's a senior fellow in food security at Singapore's IS EAS where he says, quote, complex systems have a habit of creating wicked problems. The way that, like, capitalist markets interact with food shortages is a complete fucking nightmare. And this is something that we have seen that has caused famines all over the world, is that once you get into the point where food genuinely becomes scarce, which is not quite the point where we're at now, we're in the beginning of the process by which this could happen, right? The part of the process we're in right now is, is these farmers who also, by the way, and this is also very important, these rice farmers are not operating on particularly high margins, right? They are not very wealthy. When I say low margins, right? They are not making all that much money. And so, you know, being unable to sell your rice or being forced to sell it at an extremely low price and then having your production costs rise because your cost of fertilizer is skyrocketing is how these things effectively go under if this stuff continues. This is how you get waves of people being forced off their land because they simply can't afford to do the farming anymore, right? But then, you know, you also have sort of, in some sense, you have the reverse of this in other places where, if you look at what's happening in India, we talked about this on an executive disorder a few weeks back, you know, like a bunch of the ceramics industry is just like shut down and like 400,000 people are out of work from this. And this is causing those people to, okay, like what do you do when you can't get work in sort of urban industrial centers as you go back to a lot of the rural places where these people are from. But you know, the thing about oil, right, is that oil price increase is something that hits people across the board. It hits both rural and urban economies because they both are heavily oil dependent. This is something that New York Times mentions when you're talking about like rice problems in Vietnam, right. Part of the other thing that's been making rice harder to farm is that their irrigation system is powered by diesel engines. It's pump driven diesel stuff. And so because of that, there's sort of broad scale shortages in Vietnam. And you have to choose whether you're using the limited amount of diesel that you have in cities or in rural areas. And so these things are just kind of rapidly becoming a nightmare now. You know what isn't a nightmare? It's the products and services that support this podcast.
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Let's be honest, buying cannabis shouldn't be complicated, sketchy or low quality. That's why I want to tell you about mood.com that's mood.com Mood ships federally legal cannabis straight to your door. No medical card, no hassle. And here's the kicker. The quality is better than anything you'll find at your local dispensary. Yeah, I said it. Whether you're into edibles, concentrates, flour, or just looking to explore, you'll find it all at Mood. And it's not just the variety that makes them stand out. Every product is sourced from small American owned family farms that care deeply about what they grow. It's cannabis you can trust, delivered discreetly and ready to elevate your mood. And because you're a listener, you get 20% off your first order. Just head to mood.com that's M-O-Ood.com to get started.
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And we are back. So I want to talk a bit about why the system is structured like this and why, you know, on the one hand, like, we are starting to see things that are very incredibly alarming in east and Southeast Asia on varying levels. That, and I guess I should be really clear about this, right? The actual economics impacts of this are really dispersed. It depends a lot on how wealthy of a country you are in and then also like how reliant on oil your economy is. So the Chinese economy, for example, is not been that badly affected because they have large oil supplies. The Taiwanese economy, you know, like, there's kind of plastic bag shortages. And that's been another element of all of this is like people panicking about, are there going to be enough trash bags? Because for reasons that I will get into in a second, like, plastic is made of oil, right? Everything around you that is plastic is just oil oil. And it does turn out that you do need crude oil in order to produce plastics. And this is. This has been causing a lots of production issues across like, a whole variety of sectors that use plastics. Now, the bottom hasn't just completely fallen out yet, and it's worth taking a little bit of time to examine why. And the reason why it hasn't immediately collapsed is actually strangely the same reason why we're in this mess from the first place, which is that in a lot of ways the way that our system of production works, the way that we produce things in the world and the way that we move things around is made in the image of oil. So what do I mean by that? What I mean is that the system of production is very nodal, right? It operates on a whole bunch of these nodes. And you have a node where a part of a production is happening, and then that node moves an item from one thing to another, work goes to another stage of production process, and inputs and outputs come in in these nodes. And the thing about these nodes, right, is that in theory, the way the system is supposed to be designed, in the way that it's been sort of, they call it like flexibilization to some extent. The way that it's supposed to work is that like, okay, so like, if you are a company that needs to get like, I don't know, you're like a ramen company. To take an example that's been in the news, at least in these, in like in East Asia is like, there's been disruption to like ramen making companies, right? And you need plastic. You have like one plastic supplier you're normally going to, but there are a bunch of other ones, right? And so, you know, or maybe, maybe a better way to explain this would be using the example of like the way that like fast fashion works and the way that like drop shipping works, right, where they're like, there are all of these different, like small sort of factories around China or like these small, like sort of garment production places where you can like very, very quickly crank out the same, like, dress or whatever. And if you're doing the dropshipping, you can like source your dropship stuff. From one of like a hundred of these places, right? Now, this is what I mean when I say that it's nodal is that it's designed in such a way that a blockage in one part of the system isn't supposed to be that bad, because the system isn't designed in a way where, you know, there's like one railway from one place to another. And you have to move all of your goods along this one railway. And you can only get it from, like one buyer who produces the thing, it produces another thing, produce and everything. You're supposed to be able to get it from, like a broad distributed network of people. And if one node of the network goes out, you're supposed to be able to pivot to another one. And this is the way that the economics of oil works, right? There are a shit ton of different oil producers, and in theory, you're supposed to be able to pivot around between different oil wells in a way that's different from, for example, the way that coal worked, right? With coal. And a lot of this I'm sourcing from Timothy Mitchell's book Carbon Democracy, which is very, very good with coal, you're usually not moving it by ship, which is. This is like another thing that, that we're going to get to in a second. But with coal, it's very easy. The way that coal is mined and the way that you have to move it, right, it goes from one place to another to another to another in a line. And if one part of that process shuts down, there isn't like another coal thing you can get your coal from, right? You're just fucked. Like, there's not like another mine that feeds into your factory. This is sort of the way that coal production worked in sort of the 18 and early 1900s. Oil works in basically the opposite way, right? Where there's just like a shit ton of things. And because you're mostly moving it by water and to some extent by pipeline, the way the production process works and the way that it's sort of easier to move and just like the way that it flows means that it's harder to block off the entire supply of oil in the same way that it was actually kind of easy to just like completely stomp up huge swaths of the economy by just blocking off their access to coal. And capital has long realized the danger of choke points. This is called foreshadowing. This is a literary device, et cetera, et cetera. The choke point used to be coal mines and the railways on which coal was moved. Right? And one of the things that Timothy Mitchell argues is that a lot of the militancy of the 19th and 20th century labor movement is a direct product of the ways in which these coal miners were both extremely militant and also very, very easily able to shut down production in a line by mobilizing a force that was greater than their numbers. Right. A relatively small portion of hyperbiligent coal miners can shut down the rest of the economy because everyone else is relying on their being coal. But oil has the opposite problem where, like, the problem with coal is that there's not enough of it, so you have to constantly extract it. The problem with oil is that there's too much of it, right? If you shut down coal production, it's a nightmare for the companies that produce coal because they can't make any money because they, there's like a fixed number of mines and it takes like large scale capital investment to like, get them out. And it's also true that, like, it's expensive to extract oil, but the thing about oil is again, like, there were just, there are too many refineries, right? This is sort of why OPEC was formed. If you shut down production, if you restrict the amount of oil that comes onto the market, that's actually how you make money versus if you shut down coal production, suddenly nobody's making any money, versus oil, where it's like, if you shut down oil production, usually it just means that like, the oil companies make more money because the price of oil goes up. And the specifics of why this is true, I would encourage people to go read Carbon Democracy. I could spend another, like two hours talking about the materiality of oil and why it specifically works like this differently. But yeah, oil has the opposite problem of coal. Like there's too much of it. And so this goes to a point where Mitchell talks about how in the early 1900s, companies are deliberately setting off oil strikes, right? Because it'll raise their production prices. Because shutting down their own production and having an excuse to shut down their own production, like, will let them just knock off oil refineries so they can reduce the amount of oil in the market. The system of oil is designed to get around these blockades, right? This is, this is a big part of the reason for the transition from coal to oil was specifically, it was like the US and the Marshall Plan was trying to defeat these extremely militant, like, French unions after World War II. And these unions were largely coal mining based. And they were like, oh, shit, we can, you know, we can do like a Pivot to Saudi Arabia to move to oil. And this can be like, this can be our solution to like, crush these coal mining unions. Because oil is extremely hard to unionize. It has like a highly divided workforce, you know, and so they tried to design a system that doesn't have choke points. But the problem is there's one fucking big one, and that one big one is the straight of Hormuz. And at this point, the sort of advantage of the system, right, which is that it's all these different nodes that are like bound together in this, like, extremely convoluted weave. The strength of the system is also its weakness. It means that we're all getting dragged down together with the system when it stops working, because we all rely on stuff from all over the world. The way that the system has bound us all together means that we're all reliant on every other part of the economy and we're all reliant on oil. And this is sort of the root of the catastrophe and also the reason why, why this crash is operating in slow motion in order to stop the international, like, labor movement, right? The system was set up in a specific way where it works along nodes and is supposed to be designed to deal with a crisis like this. So instead of collapsing immediately, it collapses in slow motion, but it is still collapsing because capital, and I guess like the presidency of the United States has taken the action that the system was designed to, to avoid, which is like, you know, like a large scale blockade of production. And the consequences of this are both dire and expanding as we speak. Yeah, this has been. It Could Happen Here. Things are only going to get worse before they get better.
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It Could Happen Here is a production of Cool Zone Media. For more podcasts from Cool Zone Media, Visit our website coolzonemedia.com or check us out on the iHeartRadio app, Apple Podcasts or wherever you listen to podcasts, you can now find sources for It Could Happen here, listed directly in episode descriptions. Thanks for listening. Let's be honest. Buying cannabis shouldn't be complicated, sketchy, or low quality. That's why I want to tell you about Mood.com that's M-O-Ood.com Mood ships federally legal cannabis straight to your door. No medical card, no hassle. And, and here's the kicker. The quality is better than anything you'll find at your local dispensary. Yeah, I said it. Whether you're into edibles, concentrates, flour, or just looking to explore, you'll find it all at Mood. And it's not just the variety that makes them stand out. Every product is sourced from small American owned family farms that care deeply about what they grow. It's cannabis you can trust, delivered discreetly and ready to elevate your mood. And because you're a listener, you get 20% off your first order. Just head to mood.com that's M-O-Ood.com to get started. This is an iHeart podcast.
- [24:19]
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Guaranteed Human.