How will Geopolitics Shape the PostCorona World?

Brett Alegre-Wood
April 14, 2020

It's clear the rising tension between ailing US power and the expansion of China, allies are being redrawn and potentially a new cold war could result. It will it? What role does the War machine play, is China's Belt and Road initiative working and what about China's Corona Diplomacy, will it work. Will the petrodollar and US economy come unstuck soon.

Will any of this have an effect on property investors?

For all Brett's Coronavirus resources https://www.gladfish.com/recession/

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Video Transcription:

Hey guys and welcome onboard to today's today's session so when it comes today is we only do a bit of politics today but what I'm going to try and do is is actually keep it really sort of basic and just the two things I mean it's a hugely complex in geopolitics but I think it's important to understand the big picture of where things are going because it's all you know fine to focus on recessions and depressions and all this sort of you know these buzzwords in that but actually if we look at a bigger picture you know end of the day you know inflation recession depression all those things end ok but what we have is it on a broader scale is actually the geopolitics and and and the direction they're heading it and what we're finding now is we're the cusp of a massive change you know and that massive change we haven't seen since World War II which is you know 60 odd years ago and I think be the real interesting thing is how does that impact us as property investors.

You might say that it's you know far too big and far too big a concept but the reality is actually it does impact us and so a little bit the major players will look at what's going on and we'll look at the direction it's going to head I think that's pretty certain that it is going to head that way unless there's a major difference of some sort which would normally be a war or I mean I suppose a famine or you know virus that affected only a certain portion but that's unlikely it's probably war is the is I guess the instrument of massive geopolitical change for the most part and it has been for centuries and still is you know and America certainly has that covered in terms of the largest army navy air force military force most technologically advanced bar none. In fact, they've got bigger than the next five so you know it's pretty serious and formidable you know stick if they need to use it and they're very happy using it too which is you know they need to keep that engine moving and you know yeah but anyway so let's get them with the other usual stuff we do just having a look at it now.

I'll be honest with you we've changed up this slide which I've been counting down thirty days originally but to be fair what we've you know we've got to the end of the the lockdown which was yesterday we should have been coming out according to their first three weeks we're not going to we're supposed to only reach the peak in the UK this week okay so what I'm suggesting is that we've probably got originally was 24th of March they said the 14th of April would we cut we'd be coming out for three weeks and then we'll review it they will review it this week so it's likely to come out because they said every 21 days I'll renew it but I think it's likely to be extended for 3 weeks you know and I think maybe they might start doing certain things and moving certain directions in certain areas once they see the peak and I think that that'll be the real determination but I'm saying about the 4th of May I think you know we're going to you know write paper will be a write-off for the most part and I think probably that's what we're likely to do so I'm sort of gunning for the 4th of May is my prediction that may change when they meet they may want to open things up a lot quicker I just my concern is the political wheels there to open it but the medical advice isn't you know the medical advice is to really get control of this we don't want it flaring back up which it could do and it is likely to do but if we can you know get over this peak now and then start to manager people change their ways then that's quite good and it's likely to change things.

So you know the case is 1.9 to 5 million I didn't track it over Easter the last four days so you know on Thursday it was 1.6 yeah so another 300,000 and as you can see by the list here the list is getting longer of countries that have more than 10,000 cases and you know pretty soon on money and be tracking 20,000 cases and when I first heard it was 100 cases in a thousand cases than 10,000 cases so I'm not really something to be laughing about but you know this sort of recovery so 567 outcome outcomes so 1.9 million five hundred sixty-seven have had 447,000 recovered so still 79% okay that figure probably won't change too much until we get to the very tail end of it and then we'll have a lot more recoveries than we will the other side which is the deaths you know but 120,000 recovered over Easter so that's good news for those 127 thousand people including obviously Boris Johnson who's back at work I imagine today or possibly still resting I'm not sure but anyway so that's good news you know good news and I think we're getting there you know they're talking about the peak they're talking about you know it seems to be that it hasn't been as bad as everyone thought which is great but that doesn't mean that we're not and that we're in the woods you know out of the woods yet cool.

So let's have a look at the geopolitics so let's have a look at the side so let's start off so the first side is the US and I think you guys must know this it's US and China they are the two largest economies they're the two biggest players and they're the two most you know diametrically opposed yet philosophically the same I mean it's amazing you might say that these are a democratic capitalist country and this is a communist you know socialism whatever but the reality is the way they treat their people is very similar and you may say that's rubbish you know human rights in China blah blah blah well I'm sorry but as much as areas in China there is in the US to the way they, you know yes it may not be in certain areas and you know that but the reality is the regard for how life is you know the or disregard for life is something that's pretty ridiculous and it's you know it comes to the fore very much so in the way they've dealt with coronavirus I mean it's amazing how far ahead I mean that the US is you know in Corona deaths you know it's it's incredible but anyway let's not get into that hang on for days but look

Bottom line is the US has been the biggest since World War two if you think about it in World War II they didn't have a massive drop in I'm sorry destruction so the whole of Europe was destroyed and needed to be rebuilt that cost a lot of money the US didn't need to do that in US was able to provide stuff and sure and also through the Brenton woods agreement and a number of agreements I had to establish from the UN camp you know World Health Organization all these sort of international money fund or monetary fund these sort of guys all of this would some degree surrogates for the US all right and now are able to produce favorable terms same with the petro dollar like they have had it since World War II they come out of that doing very well okay and that has really persisted but what they've got now is massive debt they are the world's reserve currency but they've got low wage growth so things are not getting better for their people you know and that's a reality for the wealthy maybe but not for the poor on your middle-class you know and growth is coming from overseas markets.

Most of their people yeah are you know they're higher their middle class you know by worldwide standards they're actually quite wealthy yeah the GDP per capita is quite good compared to say somewhere like Africa you know or some of these underdeveloped countries or even China you know then that's where we'll see a big difference, yeah you know NATO was another one they you know was to build the defender against you know the Soviet Union and world monetary farmers world monetary stable stability you know it's kind of like the Reserve Bank but the worldwide one you know the World Bank was to stop poverty you know which actually has been very successful in doing a lot of these things, yeah you know UN is peace and security WHO is the world health you know so all these things were they weren't just US initiatives but they certainly were well funded and well-controlled and really pushed the agenda of the US you know

So the other side of the things in China and really China now is it's the biggest GDP within a decade so it's not yet but it will be I'm it's moving towards they're moving more people out of poverty and up into the middle class than anywhere else in the world you know massive wealth large army but a decade behind the US army so they're not as technologically advanced you know they've got a bigger army too in terms of numbers but not as technological advance you know the standard of living actually increasing but what that means and this is something the US hasn't got which is domestic demand that can grow yeah the domestic demand is always there so they're getting incremental increases whereas China is getting masses of millions of people and it has obviously billions of people or billion plus people who after who are coming out of poverty and so that creates a consumer demand so natural growth they don't need to look internationally for growth however they are the world's manufacturing about all there that is again being questioned now because of coronavirus.

I mean in some ways people saying you know coronaviruses has caused all the issues and you know was then putting China doing it you know and getting it so they can take advantage the reality is I think if we look in a year or two or three years time China will actually have potentially given away its place as the global manufacturer in places like Vietnam, Indonesia you know these sort of places the Southeast Asian places we're still got cheap labour they will have taken over to watch those places boom they already are, yeah I mean that's one thing the trade you know stuff did with the tariffs it moved a lot of Chinese companies out into other countries so you know it may be surrogates for China but China is definitely you know strategically better positioned than the US. The US is burning bridges whereas China is creating them, yeah and I think that's the fundamental geopolitical push and theme it's gonna be over the next 5-10 years and this is not just Trump thing you know.

Trump has certainly exhilarated and it's made it more fun and what I mean by more fun it's made it easier to make fun of the US having Trump there because you know you've got a buffoon that's totally incompetent you know and you know self-serving and that's that's the reality of the situation look you know you've got this and most people don't know about this Shanghai Cooperation Organization yeah watch this organization because over the next in a few it's the equivalent of NATO if you like which was more about security and protection but this is of an economic one see China is exerting its force not through having the biggest military in the biggest armies and navies and things like that it's basically doing a by lending money and by spending money on infrastructure now a lot of people saying that infrastructure what happens when the country can't afford it they're gonna go in and take it over and they'll own it that's how they'll take it over and exert influence they'll exert influence anyway.

I mean this is this is geopolitics and there's nothing we can do about that China has a massive population they've got a massive head start the US is failing they've got massive debt they haven't gotten Ashima growth they haven't got a lot of things so they are doing what the UK did yeah prophetically prior to you know the 100 years prior to World War II you know when and even before that we would soar the UK started to lose that there anyway these places are you know China, Pakistan, Uzbekistan, Russia, Kazakhstan, Krygyztan, Tajikistan, and all the stan's India so they're actually parties to the agreement then you've got the observers which is Afghanistan,Belarus, Mongolia, Armenia, Azerbaijan, Cambodia, Nepal, Sri Lanka and interestingly Turkey enough with their back up in there and the amazing thing of this is is you know you're a place for Turkey which actually was applying to become part of the EU which is very us centric all of a sudden have said well maybe what we'll do is we'll join with the SCO Shanghai Cooperation Organization so that's a massive coup for them is it a right one boy actually to be fair I think it probably is you know for them because let's face it the US isn't doing them any real favours I don't think EU not doing them any real favours but look the other side is and this is this is China's response and this is not about coronavirus this is geopolitics this is bigger than coronavirus.

All coronavirus is doing is making it happen quicker and making it more obvious so the first one on the on the left-hand side here with member states is earth that's the SCO (Shanghai Cooperation Organization) over those so you can see the coverage of that now interestingly if we look at this yeah then we have a look at the belt and right so this is the SCO then you've got the belt and Road initiative belt and Road initiative is the old Silk Road effectively what they're doing is shipping lanes and ports and roads and
you know infrastructure electricity live train lines all through now you can see at the top this was the initial proposal with green being and China and this being me if you like the Mongolia Russia you know basin and then what you've got is underneath that you've got the sort of Asian area so this is the economic powerhouse now that's you'll notice that missing from that is North America, South
America but then when we put North America, South America this is how it currently looks now if you look the amazing thing is the number of people is jumping on board with China and not the US.

So North America is not involved in this you know you've got then if you look at America you know that the Chiles and they're you know like a lot of these sort of places along the western coast of South America but then amazingly you've got places like New Zealand yeah which you wouldn't have expected and in fact, that was a bit of you know shock to most people but what we're finding is a lot of countries are choosing and effectively moving away from the US leadership, they're not accepting anymore the most powerful person in the world is no longer you know Trump I mean you might say yes he is and you know a lot of people still say that but you know very quickly it's moving you know across to China you know China India and you know effectively those sort of places where you know very soon it's going to be less about the US and its consumers because consumers have no money they're wracked with debt and so eventually that will slow things down and I'm spending as much if they're not suspending enough they're not consuming as much so the axis is moving from the United States to China and I think one of the interesting things is and my kids I'm teaching Chinese you know I'm not giving them up to go to universities in America I mean you know maybe universities in the UK but I want them to learn Chinese and it may well be that they end up going to a Chinese university or you know an Indian University even because let's face it there is a lot more happening over there in terms of you know fast growth and you know change and a lot of these you know new things coming on so potentially that could be geopolitically where my kids are at now my kids are young so we're talking you know 15 years away but 15 years you know that's a long time now I will say this I'm not saying that America is gonna fall over anytime soon okay that's not gonna happen.

America is still gonna be a powerhouse for many years to come decades, okay but it's gonna be a slow gradual decline exactly the same way as the Empire you know the British Empire did when it declined you know it took many years yeah until too large degree we were the number one GDP in the world at the time you know we ruled the world and then what happened over time it's slowly decreasing me number five now you know the fifth biggest economy you know we're still the fifth biggest economy that's huge so America's not going anywhere it'll go to second or third you know depending on how India does and things like that but you know it will be probably the next decade or so you know it could change as I said wars change things geopolitically but it would be because
you've got China and Russia and Iran and the Shanghai cooperate a cooperation organization you know it's very hard for America now to go and invade a place like that it can go after an Iran because it's probably not big enough to you know really threaten but when it goes after China not only economically can it hurt America very quickly but yeah so this is where there's happening.

So okay so just I'll show you one more slide so this is actually this is the response to the corna virus all right America you know they try to buy exclusive access to bath in for Americans yeah make America great again that's been their attitude it's all about them yeah screw the world where America yeah look at China's response they've offered support to over 80 countries, yeah South Korea, Italy Hungary, Iran, Malaysia, Germany, Serbia, Spain, France, Philippines you know and the list continues to grow sending you know tons and tons of PPE masks all this sort of stuff you know that is what's gonna start to happen you know that's the coronavirus diplomacy that they're playing yet and that actually will win hearts and minds you know this is where America has failed this they failed in Afghanistan they failed in Iran and you know I'm sorry Iraq you know they've really failed everywhere they've done it because there's no authenticity behind it now is China authentic in what they're doing look there's no doubt about it this is geopolitics so you don't offer something without expecting something in return and right now what China wants in return is it wants good publicity from those countries it wants the photos it wants to social media not necessarily for the rest of the world but internally so it's people think how great Chinese are and how they're helping out the wall fantastic you know what it's no different than anyone else did yeah we may judge it differently but the reality is is that is the game of geopolitics.

Now what does this mean to property vessels I think this is you know let's get down to it right now what it means is this yeah we have been as the UK and Australia and Canada and many many westernised countries have been heading the direction of the US but what you're going to start to see now is we're now gonna start to be torn between the two on some issues we'll be Chinese some issues will be American you know and actually more and more what's gonna happen I think where the pendulum is it's gonna be if we're British we're British if we're amount Australian were Australian and those sort of things and I think for us and as you as an individual investor this doesn't mean a lot okay what it does mean is that more and more you are going to have to make sure you're on the side of having money, having wealth having assets than not having these if one thing's for sure in America look at the people who can get a test they're the people with money you know look through the people who can get a test they're people with power and that is always been that is not going to change.

And what is wealth and power mean that means having assets having cash flow and having those sort of things and so really if nothing else get that sorted out I mean and the unfortunate thing is with this much money gets spent right now to prop up economies all around the world what that means is the value of cash is probably going to drop you know and all that means is if you've got lots of cash it's probably gonna be worth less than it was yesterday and even less than it was worth a month ago and so things like that you've got to really consider you know in your broad thing but look you know.

Geopolitics doesn't have a play an impact in your day to day life no, but it's good to know where things are heading because let's face it if you're investing in the US right now you know for property investment there might be cheap and they're not going away in a hurry but you know you've got to really understand two things it's all about making America great again, in other words, they're thinking about themselves, not about you you know so if you're American fine if you're not then you know you've got to really consider that and the second thing is you know they're a declining economy over a long period of time whereas you might find there are other economies like you know Vietnam and Indonesia there too that I'm sort of looking at right now that actually is you know growing economies you know but there are always opportunities in you know even Japan who has had deflation for so long is now starting to come out and look good you know a ba economics Abe-Nomics.

You know has been working you know so yeah so that's so I find just started pressing play I don't know how anyway good fun so guys that's pretty much me done for today and you know look any questions you've type them into the thing you know make sure you remember to subscribe I'm coming and I'm doing this every day now I'm on different subjects you know and I really think you know what right now for me things are looking quite good.

From from an overall perspective, we're starting to talk about coming out of wet wood beaten in terms of lockdowns and things that Europe starting to open up it's nothing so we're two or three weeks away from that happening and getting back to some level of the new norm you know and so that's good news so now is the time to really start planning and looking at what you're gonna come and how your business is going to come out how your careers gonna restart how your position your role your job is gonna but also how your finances you know how you gonna survive over the next three weeks three months in the new norm alright guys have a fantastic day stay safe, stay healthy and stay inside still but hopefully for only another couple of weeks guys chat later see you bye


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