26 of 26 people found the following review helpful
- Published on Amazon.com
I have been reading Dr. Leeb for a long time now, and I can think of no greater guide to world events and my investment portfolio than his books and financial newsletter. In his previous books (The Oil Factor, The Coming Economic Collapse, and Game Over), Dr. Leeb predicted, with chilling foresight, the sustained upturn in commodity prices that we are witnessing today, which has served as the major drag on US economic growth. Leeb continues his analysis in Red Alert, focusing on the primary culprit behind these skyrocketing commodity prices: China.
Leeb's thesis is extremely well thought out and multi-faceted, and I will do my best to sketch his arguments here. First, the increased demand that China places on basic commodities -- oil, copper, silver, rare earths, iron ore, etc. -- is creating a genuine scarcity of these goods, leading not only to higher commodity prices, but to the threat of our civilization running out of these commodities altogether. Of course, "running out" doesn't necessarily mean there won't be any copper or oil left in the ground; rather, it means we reach a point where there is a net resource loss from new extraction -- that is, any new resources will require more resource inputs than the resources we obtain.
If we had, by some magical means, access to unlimited, cheap energy, many of the other resource problems would be solved, and indeed, many of our current economic ills would be made far easier to deal with; low energy costs would make extracting other basic resources infinitely easier, in turn making production costs cheaper for almost all the goods we currently use, allowing companies to charge less and still turn a profit, creating jobs, etc.; indeed, Leeb makes the compelling case that the high price of oil and other vital commodities was one of the crucial (and widely-overlooked) causes of the financial meltdown in 2008.
The problem, though, is that our current, conventional energy sources are fast being depleted -- Leeb cites estimates that the world's oil production may already have peaked, and that there is far less coal and other fossil fuels in the ground than people think. So why doesn't the market switch to renewables? The key insight Leeb made in his previous book, Game Over, and that he reiterates in Red Alert, is that resources depend on each other in complicated ways. Building renewables itself requires massive resource inputs; the magnets in wind turbines require heavy rare earths, and large scale solar panels require silver, to name just two examples. Extracting these other resources in turn requires still more resources, not to mention massive amounts of energy -- a tangled web indeed. So to control one resource, such as energy, it is necessary to control many other resources as well -- all of which are subject to greater and greater scarcity.
Of course, resources can only be scarce relative to the demand put on them -- and as we said above, the lion's share of global demand comes from China. I read people all the time -- from Jim Chanos to Fareed Zakaria -- who say China's growth is simply a bubble, or they have overbuilt their infrastructure, or it is not sustainable for one reason or another. If only it were true. Leeb's argument is that the Chinese have methodically paced their economic growth with great foresight, and most of the so-called "overbuilt" infrastructure is part of a well-laid plan to sustain this growth in the long-term -- for instance, building more housing than is currently necessary in urban centers makes it available in the future for the large number of people moving from rural locations into cities. The most crucial purpose of this infrastructure, however, is to facilitate the construction of alternative energies around the country.
This leads us to Leeb's central argument: not only is it China whose demand is putting such a strain on resources, but the Chinese leadership is keenly aware of the emerging resource crisis, and has been vigorously mobilizing to secure the earth's remaining commodities so that they can build out alternative energies and secure their country's future. China's leaders recognize the interdependencies among resources, and seek to control the earth's supply of all the commodities necessary for future growth and the construction of renewable energies. China already has a near monopoly on heavy rare earths (crucial for wind power) and the production of solar panels; and they have been making deals with leaders in Africa and the Middle East to secure the precious commodities in these parts of the world. One fact Leeb cites that really boiled my blood is that while the brave men and women of the US army are risking life and limb trying to make Afghanistan secure, it is Chinese mining companies, not US firms, that have won the bids to the copper mines in this country -- copper being the commodity that will play a crucial role in building a smart grid across China.
China has also taken devious steps to derail the construction of alternative energies in other countries like the US, to ward off competition for the resources necessary for renewables. Leeb makes the interesting point that in the US, "alternative energies" have become almost synonymous with "climate change" -- that is, the people in this country who support renewable energy do so for environmental reasons, not for the sake of resource scarcity. The Chinese used this to their advantage when they sabotaged the Copenhagen climate change agreement; by preventing any binding agreement to reduce emissions, they all but guaranteed that Western powers, especially the US, would not commit to building alternative energies, since the US still sees emission reduction as the primary rationale for alternatives. The Chinese government has also kept the price of solar panels and rare earths relatively cheap to drive US firms out of business, thereby giving their country global dominance in the production of solar and wind energy -- and the accumulation of the resources necessary for this production.
Leeb paints a stark picture of the world we are likely to face in the coming years -- a world of resource scarcity and "resource nationalism" that will come to define the geopolitical landscape and drive our standard of living lower and lower. We simply cannot create sustainable economic growth in a world of persistently high and ever-increasing energy and commodity prices, and a persistent failure to recognize this is leading us towards a position that will make our current "Great Recession" look like paradise in comparison. China currently has a dramatic, and perhaps insurmountable, lead in the race to secure the earth's vital resources, while the US and other Western countries seem almost oblivious to the threat. Indeed, the vast stockpiles of rare earths that the US used to control have largely been sold off, and the one major rare earth mine on our land -- the Molycorp mine -- has been unused for several decades; in fact, the US training of engineers in rare earth mining has all but disappeared.
What we need in this country is a laser-like focus on securing the world's resources and building alternative energies -- and we could learn a thing or two from the Chinese about how to get this done. In particular, as Leeb discusses, it is senseless to wait for new technologies to save us; time is already short, and we must focus on improving the technologies we have and scaling them up. If we do not want to cede the 21st century to the Chinese and become a second or third rate power, we need to be devoted to building renewable energy infrastructure, and accumulating the resources necessary to do so, the way we were devoted pre-World War II to preparing for war with the Axis powers. Nothing less than the future prosperity of this civilization is at stake. Leeb has made the case as clearly and compellingly as one could, laying out the facts for all to see; it is up to our policy-makers, and the citizens of this great country, to listen.
24 of 26 people found the following review helpful
Loyd E. Eskildson
- Published on Amazon.com
China's long-term-focused state-directed capitalism is running rings around America's short-term focused private-sector capitalism. It now is implementing a new dimension of its efforts to leapfrog America's eocnomic power. China's new strategy is based on taking advantage of the fact that the world is rapidly incurring resource constraints. China has been on a global buying spree to gain access to many commodities - the most obvious examples being oil, copper, and iron ore; in 'Red Alert,' author Stephen Leeb's focus is on 17 heavy rare earth materials, referred to as 'industrial vitamins' in China. China already possesses more of than any other nation - 93% of the world's total, and more than 99% of some of the most prized ones that already sell for several hundred dollars/lb. Elements like indium, antimony, beryllisum gallium, germanisum, cobalt, etc. are some of the rare earths.
Leeb believes OPEC's control of oil is dwarfed in comparison to China's control of rare earths, a commodity just as vital. Recently China has alternately banned and limited shipments of these raw materials used for super-strong magnets in products like wind turbine generators (as much as 560 lbs/generator) and lightweight electric motors for hybrid cars, as well as the manufacture of glass, batteries, catalytic converters, CFLs, cell phones, solar panels, toughening tank armor, powering night-vision goggles, and computer display screens. Common to many of these applications is rare earth's enabling smaller electronic products.
China extracts much of its rare earths from iron-ore tailings, giving it unbeatable low-costs. It has also discovered cheaper refining processes that provide higher purity than in the U.S. A 2010 GAO report estimated it could take 15 years to develop alternative supplies. China, meanwhile, is developing stockpiles, subjecting potential alternatives sources to the risk of China flooding the market.
China also has a concern on the negative environmental impact from mining rare earths using lax practices. Many of its mines operate illegally.
Cornering the market on rare earths will provide China with a strong, sustainable competitive advantage in the manufacture of some green energy products; it already is the world's low-cost manufacturing leader in solar power (80 tons of silver are required to produce one gigawatt of electricity from solar power - Leeb predicts the price of silver could reach $150/oz.) and working to build strength in nuclear power. Monopolizing access to rare earths will also give China strong leverage over the U.S. in a world of decreasing oil supplies. Today, $2 trillion of the U.S. economy is dependent on rare earth minterals; mining those commodities itself is only a $2 billion global industry.
So, while the U.S. is fighting wars in Iraq and Afghanistan, struggling over the issue of gays in the military, engaged in non-stop ideological and political battles, being badly beaten by its adherance to free trade, and electing a president with no management or economic expertise, China is surging - led by a focus on building infrastructure, moving towards adding high-technology (especially in green-energy) to its areas of domination,
Bottom-Line: Leeb's material is interesting, but probably over-hyped. U.S. alternatives include reopening our own rare earth mine, and designing rare-earths out of products as Toyota reportedly has done in at least one instances.
11 of 11 people found the following review helpful
- Published on Amazon.com
As a Chinese American very much raised in a traditional household, I was questioned by my peers on whether or not the aptly titled book would be marred by a defensive political slant. While Dr. Leeb provides some very articulate, well researched, and compelling insight on the how Chinese leadership domestic and foreign policy will force the world to cope with the China's inevitable rise, it is not at all offensive or biased against China or its people. A lot of insight into the communist party's policies, some which would certainly be censored if this book is released in China, is treated with the up most delicacy by Dr. Leeb, reflective of how America needs to navigate its foreign policy decisions with its biggest creditor and potential competitor.
What is worrying is the lack of action and clear discourse from our nation's leaders and the frightening ramifications that will arise if nothing is changed soon.
In addition to the focus on past macro-oriented trends that Dr. Leeb has been so successful in predicting, the book builds on his obvious passion and experience in commodities and resources and adds a critical foreign affairs viewpoint that enables the reader to really understand the gravity of the situation that we will face. As the influence of the US wanes and that of China waxes, care must be taken to ensure that our competitor does not become our enemy.
5 of 5 people found the following review helpful
- Published on Amazon.com
"China's aggressive actions in Africa and elsewhere to secure long-term supplies of increasingly scarce natural resources have implications well beyond what Americans pay for their gasoline, cell phones, and other electronic devices. In the long term, China's control of key resources from Africa could make us hostage to our greatest adversary--a situation no American should be content to let stand." pp. 96-97
Wake up America! Most of the available evidence would indicate that our politicians are clueless and that the American people are blissfully unaware of the dangers lurking just around the bend. Americans have long taken for granted that when it comes to solving our impending energy, precious metals (gold, silver, copper etc.) and rare earth mineral shortages that "technology" would somehow magically save the day. But according to the noted economist and author Dr. Stephen Leeb the problems confronting the United States in the near and long terms are far more complex and ultimately much more difficult to resolve than any we have seen in the past. His new book "Red Alert: How China's Growing Prosperity Threatens the American Way of Life" is a clarion call for all Americans to wake up to the stark realities that are almost certain to result in substantially reduced lifestyles for all of us in the years to come. In his book Dr. Leeb warns that while our leaders in Washington continue to procrastinate and focus on the short term the powers-that-be in China have been quietly and systematically sewing up vast quantities of the world's remaining fossil fuels, precious metals and rare earth minerals at an alarming rate. The implications for countries like the United States, Canada and most of Europe are frightening to say the least. The shortsightedness and ineptitude demonstrated by the leaders of the Western world in these matters may well threaten our very way of life. Furthermore, Dr. Leeb fears it may already be too late to do anything about it!
Perhaps the most important lesson to be gleaned from "Red Alert" is that the assumptions most Americans have been operating under regarding future energy supplies have changed dramatically over the past two decades. That is because emerging economies in places like China and India are gobbling up ever increasing amounts of energy and other natural resources at a pace that seemed unimaginable just 20 years ago. As a result of this increased demand Americans can expect to see a dramatic rise in commodity prices in the not too distant future that will likely result in a greatly diminished standard of living for the vast majority of us. Dr. Leeb argues that we have probably already passed peak oil (the point at which demand for oil begins to outstrip the world's ability to supply it) and more importantly we are likely to reach peak coal in the next 10-20 years. Think about it. Americans have been told that we have enough coal to last us for at least 100 and perhaps 200 or more years. Clearly this is no longer the case and as Dr. Leeb is quick to point out much of the remaining coal contains far fewer BTU's that the coal that has been mined in the past. Meanwhile, the increased demand for precious metals and rare earth minerals will cause the prices of all of these commodities to rise dramatically in the coming years. Did you know that copper now sells for $450 per pound and is expected to rise exponentially in the near future? Think about the implications for new construction. Large amounts of copper are also used in building "hybrid" cars . It does not take a rocket scientist to see where all of this is heading. Unfortunately, despite the fact that our national security and economic future is at stake our leaders in Washington barely even acknowledge these issues and have done precious little to begin to address them while their counterparts in China have made stockpiling these commodities a national priority. Advantage: China!
"Red Alert: How China's Growing Prosperity Threatens the American Way of Life" examines these and a whole host of other critical issues in an extremely thorough and thoughtful way. Stephen Leeb argues passionately that the United States had better get off its duff and begin to address these monumental issues right away. Failure to do so will only exacerbate an already gloomy picture. Furthermore, he presents a compelling case that the 2008 financial meltdown had more to do with rising commodity prices than the so-called housing bubble. If this is indeed true American is already reeling from the issues Leeb is so concerned about. I am in complete agreement with another reviewer who opined that this book "should be mandatory reading for policy-makers". "Red Alert" is an extremely well-researched book and Dr. Leeb presents his case in language that most folks can readily understand. This is a great way to get up to speed on issues that are destined to change the way Americans live and work. Very highly recommended!
2 of 2 people found the following review helpful
- Published on Amazon.com
Format: Kindle Edition
Anyone interested in the super power China should read this along with other sources. The interesting thing about China is that it is an autocratically managed free market economy. The Party leaders are looking to preserve their status and that of China as a whole; unlike our US led Corporatocracy which appears only to be concerned about its own self-preservation. Unlike our Corporatocracy which is led by short sighted "quarterly earnings" , the Chinese Communist Party is planning for long term economic growth and stability. It is certainly an interesting experiment and time will tell if it becomes as mismanaged as some elected governments. This is not to say the dynamics of the Chinese Communist Party are totally ethical, efficient and without corruption. After all it is a human enterprise.