James Rickards - Sold Out: How Broken Supply Chains, Surging Inflation, and Political Instability Will Sink the Global Economy

Currency Wars

The Death of Money

The New Case for Gold

The Road to Ruin

Aftermath

The New Great Depression

Sometimes technology creates such a complex operation that people no longer understand the way the place works.

REUBEN SLONE, J. PAUL DITTMANN, JOHN T. MENTZER

The New Supply Chain Agenda (2010)

Theres nothing new about supply chains. They have been around as long as commerce, as long as civilization.

Off the southern coast of Turkey near a point called Uluburun lies a Bronze Age shipwreck discovered in 1982 by a sponge diver named Mehmed akir. Based on akirs descriptions of what he saw in the wreckage, including metal ingots with ears (recognized by experts as protrusions for ease of handling), Turkeys Museum of Nautical Archaeology in Bodrum began a series of inspections to ascertain the extent of the wreckage and the contents of the vessel. Excavation dives continued from 1984 to 1994. The vessel has been reliably dated to around 1300 BC, the Late Bronze Age. The underwater excavations have produced one of the most spectacular assemblages of Late Bronze Age artifacts ever to emerge from the Mediterranean.

Among the trade goods and works of art found in the vessels cargo were 354 copper oxhide ingots, 121 oval copper ingots, and one ton of tin. Copper and tin were alloyed to make bronze. Other items included Canaanite jars likely made in what is present-day Israel, turquoise, lavender, and cobalt blue glass ingots, ebony from Africa, ivory tusks, tortoise shells, amber beads, gold, statues, medallions, and a scarab inscribed with the name of Nefertiti, queen of Egypt and wife of the Pharaoh Akhenaten.

The vessel also carried extensive foodstuffs, including almonds, figs, olives, and coriander. Weapons were found in the cargo. These included arrowheads, maces, daggers, axes, and four swords of varied types identified as Mycenaean, Canaanite, and possibly Italian. The vessel itself was made of Lebanese cedar.

The Uluburun vessel followed a Mediterranean trade route that relied on prevailing winds to proceed counterclockwise east along the African coast, north along the Levantine coast, and west along the coast of present-day Turkey, and into the Aegean and Ionian seas, calling at ports and palaces along the way. Apart from its sheer size and diversity, the most striking feature of the vessels cargo is the variety of its origins and its destinations.

The scarab was bound for Egypt. The ebony and gold came from Africa. The amber came from the Baltic region. The jars likely came from the Levant. Some of the weapons came from Mycenae, present-day Greece. In effect, the Uluburun wreck was at the center of a complex supply chain stretching from modern Sudan to Sweden, and from Sicily to Syria, an area of over five million square miles. The vessel never sailed in the Baltic or the Red Sea. Goods from those regions would have had to make their way to Mediterranean ports such as Rhodes, Knossos, and Pylos, where merchants could consign them to the vessel for export or receive goods for delivery. Eventually the gold could make its way to the Baltic, and the amber would be delivered to ancient Memphis. The process was not as fast as Amazon Prime. Still, the goal of matching supply and demand was the same.

In the fourth century BC, Alexander the Great revolutionized warfare by truncating supply chains for his army. He insisted that his troops carry most of their weapons and food themselves, obviating long supply chains, carts, draft animals, and supporting personnel. This gave him unprecedented mobility, which enabled flanking maneuvers and the element of surprise. Alexander was undefeated in battle. Perhaps his tutor, Aristotle, was the real father of just-in-time inventory management.

Todays extended global supply chains (7,600 miles from Chongqing to New York) are also not new. The Silk Road, which prospered from ancient Rome to the Renaissance, ran from Changan (now Xian) to Constantinople, a distance of 4,250 miles as the crow flies. The actual overland route was longer, and as daunting as any logistics lane today. There were critical markets along the way in cities such as Samarkand and Kashgar. Goods such as silk, jade, precious stones, and spices were not carried by the same caravans from end to end. These could be off-loaded from one caravan to another in the market cities on the way. Such transfers were comparable to whats called cross-docking in todays transportation logistics. Walmart is credited with pioneering cross-docking in the retail sector in the late 1980s. Twelfth-century traders in Samarkand might dispute that claim.

Supply chains running from Egypt to Ireland, traversing the Mediterranean, were interrupted with the rise of Islam in the seventh and eighth centuries. Yet human ingenuity and a desire for trade are never completely defeated. Norsemen forged new logistics lanes that ran east through the Baltic Sea, then south along the Dnieper and Vistula rivers toward Constantinople. This route did an end run around Islamic barriers and accounts for the discovery of Roman coins in Viking graves and the rise of the blond, long-haired Varangian Guard who provided personal protection to Byzantine emperors.

The Islamic lock on Mediterranean trade was broken by the Crusades, beginning in the late eleventh century. This coincided with the rise of the Republic of Venice, which reached its peak of financial and seagoing power from the thirteenth through the seventeenth centuries. Venice and rival maritime powers in Genoa and Pisa reopened Mediterranean trade links with the Middle East that had been mostly closed for five hundred years. Todays landmark Galata Tower in Istanbul was erected by the Genoese in 1348 at the height of Italian-Byzantine commerce. Venetian trade links to the Levant were maintained even after the Holy Land Crusades ended in 1291, as Muslims and Christians found the maritime lanes too beneficial to abandon.