Monday, September 18, 2023

Building a New 'Silk Road'

By Andrew Zatlin (View Archive)

Editor's note: In today's edition of Empire Financial Daily, we're sharing an essay from our friend and colleague Andrew Zatlin – a trained economist and top-ranked financial forecaster – over at our corporate affiliate Moneyball Economics...

Earlier this month, representatives from most of the world's top economies, a group known as the G20, met to discuss global opportunities...

I say "most" because two nations were conspicuously absent: Russia, for fear of being chastised over its invasion of Ukraine... and China, due to concerns over what the meeting might mean for its economic future.

Normally, this gathering is pretty ho-hum. But not this time...

This time it created what could be life-changing investment opportunities...

The meeting's central theme was a desire to link the economies of the world more tightly through infrastructure – a massive rail line, for example, that would enable goods to be shipped faster and cheaper.

Right off the bat, any talk of a global infrastructure project would create tantalizing investment opportunities. Whether we're talking about rail lines or oil pipelines, there would be billions of dollars up for grabs.

The idea of a single system connecting the world might seem far-fetched...

But keep in mind that we've had systems like this before.

More than 500 years ago, a network of Eurasian trade routes connected much of the world.

Nicknamed the "Silk Road," based on the lucrative trade of silk textiles that were big in China at the time, this network included an intricate web of land and sea routes connecting Central, East, South, and Southeast Asia with the Middle East, East Africa, and Southern Europe.

The Silk Road was active for roughly 1,500 years, enduring the rise and fall of numerous empires and major events. But use of the road wasn't without its challenges.

For example, mountains and deserts in places like Kazakhstan and Saudi Arabia forced traders to take detours, often through places like Egypt and Israel.

And notably, similar challenges will have to be accounted for with a modern Silk Road...

Consider Saudi Arabia's position, for instance.

This country is right in the middle of any potential trade route connecting Asia to Europe. And it's a huge oil producer. How can it get its oil out?

One way is to go up and through Turkey, but that's a treacherous route. Another is to go down and loop around the Saudi Arabian Peninsula. That involves putting oil on ships and moving it through the Nile River. Here, though, Saudi Arabia is exposed to Iran. It's also not the cheapest or simplest way to move oil.

The easiest path is to go through Israel.

This has its own challenges, and I don't mean from an infrastructure perspective. In fact, oil pipelines used to run through these two nations about seventy years ago.

The problem is politics. Simply put, the Arab world doesn't welcome Israel. That's why so much capital has been spent trying to bypass this country.

However, the tide might be turning...

There have been recent discussions between Israel and Saudi Arabia. And that opens up new possibilities.

A relationship with Israel would instantly change the layout of this new Silk Road and make it far more feasible. At the same time, in the case of Saudi Arabia, obstacles like nefarious relationships with Turkey and Iran would no longer be a problem.

Bottom line: This idea has legs. And if it moves forward, we'll soon begin to see major investments in the infrastructure to make it happen.


Andrew Zatlin

Editor's note: According to Andrew, on December 3, your personal wealth could change forever. As he says, every dollar you've saved, invested, and will earn in the future could fall victim to the biggest "wealth shock" in history – one that could affect how you work, play, shop, invest, save, and more. Get the full story here.