Well, after we've looked at a few examples of how geopolitics can impact markets and businesses, many might wonder, "How do I start understanding all of this and learn to make accurate forecasts?"
Let's begin with a general hierarchy of dependencies:
Elite interests → Geopolitical actions → Macroeconomics → Stock/Forex markets, business, crypto market
This is a super generalized and surface-level scheme, but in my opinion, the overall hierarchy of dependencies looks just like that.
Suppose, for instance, you're involved in trading altcoins. In that case, you add one more step to the very end of this scheme.
Moreover, all these six steps are strongly interconnected. For example, if there's a collapse at the second or third step, it will also affect the sixth.
The key step is the elites. Of course, this category includes a wide range of individuals, from owners of major holdings and businessmen to African dictators. However, when it comes to the political arena, I would highlight the following categories:
Leading countries (whose relationships have the most significant impact on the economy, business, etc.)
All other countries
Large transnational corporations and funds that often have even more influence on markets. One such example is BlackRock, managing over $10 trillion. Many crypto enthusiasts are likely familiar with this fund.
International organizations like BRICS, OPEC, and others.
Each of these categories is represented by a specific group of individuals – these people are what I refer to as the elite.
So, the first thing you should do is familiarize yourself with the players in the political arena. Understand what they are involved in, what interests they pursue, and who is fighting with whom and for what. For a thorough understanding, it may take someone a month or even a year. You might also need to delve into history to comprehend the full picture.
It's worth mentioning that given the planet's limited resources, equal distribution among everyone is not feasible. There is a constant struggle among nations and individuals for these limited resources.
Therefore, all politics and geopolitics primarily revolve around this – the fight for resources (the term "resources" is used in the broadest sense here). Everything else stems from this basic premise.
Among the mentioned categories, the most powerful structure is, naturally, the state. We will mainly focus on the interaction between states.
How states interact today varies widely. Some aim to gain more power, often at the expense of others since resources are limited and not readily available from space. They try to influence and bring other countries under their control. Others attempt to unite with each other, while some strive to escape from someone else's influence, and so on.
Correspondingly, there are specific ways elites (acting on behalf of states) use to influence each other:
1. Military Seizure and Control
Examples abound, especially in Africa and the Middle East over the last 20-30 years. Major leading countries actively vie for influence in these regions, primarily through military means. Pay attention to NATO's actions and policies – the primary military bloc in Europe.
2. Economic Influence
Notably through sanctions, a direct economic influence. There's a positive analogy as well – providing loans, financing from the IMF, etc. The carrot and the stick. Indirect influences include ousting competitors, capturing markets within another country, introducing and imposing goods/services that create dependency, and more.
3. Energy and Food Influence
For instance, the energy trap Europe found itself in last year when gas prices surged fivefold. Also, the division of grain resources and the hype around grain deals this year.
4. Ideological Influence
Active promotion of LGBTQ trends, possibly aiming to reduce birth rates. Imposing cultural values to provoke the migration of valuable scholars or specialists from one country to another, etc.
5. Informational Influence
Controlling the information space to shape public opinion. Tools for information influence include global instruments like the iPhone and local ones like social media platforms with algorithms tailored to the client's wishes, blocking and deleting any undesirable content.
6. Cultural Influence
Imposing necessary cultural values through film, music, art.
7. Influence using "Managed" Chaos Technology
Funding opposition and inciting protests to overthrow a government – a popular example from this category.
8. Religious Influence (recently diminished)
Introducing a convenient religion to manipulate the citizens' consciousness in their interests.
9. Demographic Influence
A situation where a certain ethnic group gradually infiltrates another country (posing as tourists or migrants, for example) and then gradually takes over the territory or gains control over the indigenous population. This process can take decades.
Final step. After thoroughly studying the political arena, understanding, and even predicting the actions of the players, begin analyzing the connections between political actions and market reactions.
Here are some of the simplest and most obvious connections:
OPEC countries regularly gather, reduce oil production → potential impact on oil prices → economic growth in oil-producing countries.
Anticipation of a large-scale war → increased consumption of various metals, like silver for defense purposes → rise in metal prices.
Risk of escalation of the conflict around Iran, a key player in the oil market → possible disruption of supply chains → rise in oil prices.
Imposition of sanctions against a country, prohibiting mutual trade → country's shift to other adjacent markets → increased trade in new directions, growth of new markets.
Planned dumping of U.S. Treasuries and international calls to avoid them → possible increase in yields → slump and decreased demand in the stock market.
Emergence of a new hotspot, the outbreak of a military conflict → additional funding and support for defense industry enterprises → rise in defense industry company stocks.
There are fundamental economic mechanisms and laws. Spending a week or two reading an economics textbook will automatically and subconsciously apply that knowledge to real-world situations.
After you've ingrained all the theory into your brain, all that's left is to monitor the global situation 24/7 and accumulate practical experience. Observe and analyze the actions of all players, both on the international stage and within the largest leading countries.
Conclusion:
Understanding global politics and economics is crucial and beneficial, regardless of your field, location, or other factors.
If you're involved in trading or your activity is closely linked to risk market behavior (such as funds, crypto, etc.), knowledge in this area is simply essential.
To reiterate, global politics, elite behavior, and the state of the world economy are the first, key step in the hierarchy of influence, shaping the behavior of all other markets.
Wishing everyone success in their studies!
