This interview from Matterhorn Asset Management was worth listening to. They’re part of a larger financial company with somewhere north of 5 billion CHF under management.
As a side note, I have fond memories of the real Matterhorn, and look forward to my next visit.
The general theme of the interview is the global re-alignment between Russia, China, and Europe along with the skittishness that foreign powers are feeling in relation to the US in general and the dollar in particular.
Malmgren’s sense is that influential centers like the Council on Foreign Relations seem to be discounting this more than they really ought to, even though it’s broadly understood that the US has dropped dramatically in terms of diplomatic standing in recent years.
What’s difficult for Americans, even those who have been theoretically raised to have a global outlook, is that American education is so weak even at the elite level, that most Americans don’t really have a good understanding of either themselves or how their country is seen by foreigners.
The interview subject basically tells it like it is: the US has a history going back to the revolution of defaulting on its external and internal obligations through inflationary policy. Chinese and Russian elites recognize this, and are saying “we want hard assets.” This is one of the drivers of the conflict in Ukraine. Russia acted to keep a key agricultural country within its sphere.
With the US willing to use sanctions against a major country like Russia, undermining rhetoric about global free markets, it’s no surprise that we’re seeing echoes of mercantalism show up, with these countries going after land and influence, edging away from the American-dominated international trade network.
The US subverted Ukraine without any real material motivation that made any sense at all — it was evidently driven by democratic messianism, with some gibberish about natural gas routes thrown in to enrich a few consultants here and there.
Malmgren also notes that the motivation behind austerity policies is diminishing, because all that’s really being done is that it slow the speed at which debts are accumulated, rather than addressing the root issue. She phrases it as “the social contract will need to be renegotiated,” because what people currently expect from states is not actually deliverable.
Parties like the AFD in Germany and FN in France are growing rapidly in popularity, and it’s evident that Europe is not likely to hold together. The doctor is confident that Germany and the Bundesbank have plans in place to replace the Euro with only minimal disruption to the Germany way of life.
Market participants tend to be at least moderately irritated that the markets have been tipped to financial institutions — she terms it as “the playing field is tilted” — and it’s not clear that that state of affairs can be maintained for all that long. People are confident that the markets will remain open even during a crisis, but are not confident that it will remain anything like a fair playing field in terms of purchasing power in a crisis.
What’s heartening to hear about these sorts of discussions is that people are becoming somewhat more willing to be open about what’s going on in the global markets, but only by a little. The new era that we saw come into play in the early 1970s is coming to an end. It’s going to upend a lot of common-sense assumptions about how the world works and how it’s likely going to work in the future. To put it mildly, there are going to be a lot of ‘renegotiations’ and ‘realignments’ going forward.