There’s nothing new about pundits and authors warning about the thread posed by China’s rapid rise. In his upcoming book, Red Alert, Stephen Leeb tackles this hot-button issue from a slightly different viewpoint.
“Everything about China we have to pay attention to…but what really concerns me is their accumulation of all these commodities,” Leeb tells me in the accompanying video.
When you think of “commodities” you probably think about oil, gas, gold, corn, soybeans, and maybe copper or zinc. China has been on a global buying spree to gain access to many commodities, but Leeb’s focus is on so-called heavy rare earth materials, which China already owns in abundance.
“OPEC’s control of oil [is] dwarfed by China’s control of rare earths, which are probably just as vital as oil,” Leeb says. “It’s something we have to wake up to and wake up to very quickly.”
Back in 2005, the importance of rare earths became evident when Congress blocked China’s attempt to buy Molycorp’s Mountain Pass mine from Unocal, its owner at the time. China’s control of rare earth minerals made headlines again last September when the Communist nation imposed an unofficial ban on related exports to Japan.
But for the most part, rare earths are a backburner issue (at best) for most Americans, policymakers included. This is a big mistake, according to Leeb, who notes rare earth materials are used in high-tech weaponry and are “vital” to renewable energy production, notably wind turbines and hybrid cars.
“If you want to create a society reliant on renewable energy, you need a major transition that’s going to rely on critical commodities [like] heavy rare earths,” he says. “Silver too is totally vital.”
Yes, while most of us think of silver as an alternative currency, Leeb notes it has major industrial uses, both conventional and in the development of solar panels. As a result, he is extremely bullish on silver, for the long term. (See: Why Higher Oil Prices Are Good for Silver)
“I think silver is heading for $100 [and possibly] much, much higher numbers,” he says. “It could become so valuable that like gold in the Depression,” the government will confiscate individuals’ silver holdings.
For the moment, however, Leeb is far more concerned about what our government is failing to do to respond to China’s challenge.
“There’s no point in demonizing China for pursuing its own economic interests,” he writes in the preface to Red Alert. “But as a disciplined, fast-growing economic juggernaut, China poses a massive challenge to the United States and represents a major threat to our economic well-being. And we have only a limited window of time in which to respond to this challenge in any meaningful way.”
Failure to respond will result in “severe dislocations and an irreparable drop in our national income [and] our children will experience a decidedly lower standard of living,” he warns.