Exclusive: Why CHiPs may be as important as Oil in the Future

Energy, money, and control all wrapped into one

Authored by Goldfix

Between ChatGPT, the increased chatter about computer chips, the infrastructure bill emphasizing them, the defense of Taiwan as key to technology.. etc. as well as GoldFix opinions already catalogued2, it makes sense to look a little closer at the semiconductor as growing economic tool. 

There’s a lot that can go wrong with this stuff. It is real but very early in the game. But it ticks a lot of boxes in the overlapping areas between Energy, money, geopolitics, climate, and national pride. So it’s on our radar.

It Started With Gold

For us the very broad strokes coming into this were strangely enough closely related to Gold and the Eastern push against the dollar while the West demonized Oil:

• Geopolitical/Economic: The west (we feel) wants to replace oil to save the dollar status- they can’t make everyone use the dollar anymore, so they must reduce western Oil use to weaken the East economically. The renewed interest in Cold fusion and use of Chips would reduce energy costs3

• Technological: industrial revolutions increase efficiencies of production and accompany boom times— robots lower costs and increase productivity like the assembly line did.

• Ideological: dovetails nicely both with their ESG and their desire to make everything free for everyone— a computer chip replaces workers, reduces oil dependency and is therefore economic energy etc

• Incumbent Self-Interest: those in power want to stay in power and believe this is a good time to wind some capitalism4 down—WEF, Davos etc

There are positive and negative implications of course to all this. We’re not saying we agree with the reasons. This post is about recognizing trends and deciding if they are worth investing in.5

The US moves to hamper Chinese technological growth...

The potential positives seem self-evident. However, most utopian ideals end up being dystopian in practice.

Chips can therefore be viewed in that light as:

• Economic Energy: rivaling oil in that they reduce operating costs, use of oil, and keep economic power in the hands of western creators
• Money: a programmed chip can power an assembly line. What is that worth?
• Traded Commodity: They already trade more globally than oil (see below) … that makes them liquid, a medium of exchange, and a unit of accountancy like money… but not a store of value.

The applied technology occupies an  overlap between: economies of scale, MMT, and Net-Zero Energy. Anyone in power can and will project their opinion on it favorably. It ticks all the boxes… E.G.- are you against space travel? Are you against stopping poverty? Are you against jobs?…etc etc

To the extent they are wrong or early.. That is why Oil is needed to be owned. Long oil is a hedge for Western arrogance.. of which there is plenty. Long dollars is a bet on Western innovation. Long gold and bitcoin is both.

 

Western Innovation versus Eastern Traditionalism

Regarding Silver & Gold: it will be decades before the world rejects gold as a store of value again.. and if they do, it will be a mistake. Why? Because while CHIPS may be money/currency, they are technology, and cheapen in value every day they exist as new ones will replace them. So unless they learn how to create Gold with them, Chips and nuclear fusion are no threat.

Gold and silver will be the only things left on earth that can be trusted to remain stable over time. What will that be worth?

More liquid than Gold and Oil...

The West in our opinion aims to eventually juxtapose their new improved economic power with the East’s old school industry and give the world a choice. The west’s Innovative Chips —potential successor to the assembly line, the gas engine, and the printing press all rolled into one— versus the East’s use of the most efficient and reliable Industrial methods on earth.

 

Tools of War Against Russia and China

In November, Deutschebank did a number of thematic write-ups (Geopoli-chips, Oil vs Chips, and US/China Chips) on the industry, the geopolitical changes, and  the implications with China. Here's what they had to say on recent developments in the US/China Chip competition (their emphasis)

The new US rules will likely further hinder China’s chip development efforts by restricting Americans from assisting Chinese chip plants. To acquire the necessary licence to continue supporting Chinese chipmakers, these individuals will have to prove that their work does not assist China’s military development. In effect, these types of restrictions on direct help from experts may significantly suppress Chinese technological progress, not only in relation to advanced chip production, but in all industries that rely on advanced chips, including AI and military technology.

Bottom line: chips are one tool of war against China and Russia now. They won't replace oil, but to the extent they can be used to shoehorn Western demand for oil into a smaller size... they will be used to attack the East economically.  

 

Two Key Footnotes

4-in combination with reduced individual freedom as the gov’t uses chips to centrally lower your thermostat in the winter…. but that is another issue altogether

5- The CHIP motivation is there, and the concepts are not going away. If they are successful.. they will also unemploy millions of people: white, blue, and pink collared. The potential for a very dystopian future ensues as well. Societal upheaval ( immigration, poverty) will be tremendous with authoritarian (power grabs, freedom suspensions) pushback inevitable.

Continue Reading  here.