The World Order Is Fraying. Will The Global Economy Survive? | Michael Every
Dec 17, 2023
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Michael Every, Global Strategist at Rabobank, discusses the shifting dynamics of the global economy, with a focus on the rise of nationalism and the reversal of globalization. He emphasizes the need for a new operating framework and expresses concern that we may not adopt the right policies in time to avoid conflict and crisis. The podcast also explores the challenges of disentangling supply chains from China, the importance of industry and tariffs in shaping the US economy, and the potential for a more equitable economic system.
The current economic and political landscape requires a new policy framework that goes beyond traditional left-right ideologies.
Implementing this new policy framework will face resistance and challenges from various players, including the financial sector and the global elite.
While the current geopolitical landscape is uncertain, there is a growing sense of dissatisfaction with the current system.
Western powers must not underestimate the potential of rising nations like China and Russia, but rather capitalize on their strengths and prioritize their national interests.
The current global landscape demands a fresh policy approach that transcends traditional ideologies and prioritizes domestic industries, national interests, and economic resilience.
Deep dives
The Need for a New Policy Framework
The current economic and political landscape requires a new policy framework that goes beyond traditional left-right ideologies. The failed policies of the past cannot solve the challenges we face today, such as rising inequality and political polarization. A new approach is needed to address these issues.
The Transition to a Post-Post Keynesian Model
The proposed model, also referred to as a post-post Keynesian or Neo-Hamiltonian approach, emphasizes the need for a combination of policies that promote domestic industries, protect national interests, and prioritize national security. It involves measures such as industry protectionism, targeted subsidies, infrastructure investment, and regulatory changes to incentivize local production and economic resilience.
The Challenges Ahead
Implementing this new policy framework will face resistance and challenges from various players, including the financial sector and the global elite. There may be geopolitical tensions and internal divisions to overcome. Additionally, the transition will require strong and capable leadership, strategic decision-making, and a clear understanding of the complexities involved.
The Importance of Acting Now
While the current geopolitical landscape is uncertain, there is a growing sense of dissatisfaction with the current system. Many people are looking for change and a focus on domestic priorities. However, delays and failures to act decisively could lead to further instability and potential conflict, making the transition more challenging. It is essential to recognize the need for change and take steps towards a more resilient and equitable future.
The Role of Western Powers and Rising Nations
While rising nations like China and Russia have their own challenges and limitations, Western powers must not underestimate their potential. They should not fold and give up their advantages, but rather capitalize on their strengths, coordinate policies, and prioritize their national interests. Balancing domestic needs, geopolitical dynamics, and economic resilience is crucial for both Western powers and rising nations.
Conclusion
The current global landscape demands a fresh policy approach that transcends traditional ideologies. A post-post Keynesian or Neo-Hamiltonian model that prioritizes domestic industries, national interests, and economic resilience is needed. While challenges and resistance may arise, the urgency to act and implement strategic measures is undeniable. Western powers must seize the opportunity to rebalance power dynamics and build a more equitable and sustainable future.
Low Volatility and Complacency in the Market
The podcast episode discusses the current low levels of volatility in the market and the resulting complacency among investors. Volatility, measured by the VIX, has reached multi-year lows, indicating a lack of fear of a market downturn. The S&P 500 has been on a consecutive weekly uptrend, raising concerns about a potential blow-off top in the market. Adjustments have been made to portfolio hedges to protect against potential downside risks. Additionally, adjustments have been made to bond positions, with calls being established in higher price areas and puts being purchased in lower price areas. The expectation is for sideways movement in bonds with a potential retracement and a retest of previous price and yield levels.
Resilient Strategies and Changes in Economic Relations
The podcast episode highlights the importance of nations taking steps to become more resilient and less dependent on trading partners. This includes resetting economic relations with other countries, stemming the flow of capital and technology, and investing in technical leadership and economic resilience with allies. The intent is to reduce vulnerabilities and promote self-sufficiency. The example of economic relations between the United States and China is discussed, focusing on the need for a trade reset and reducing dependence on China's manufacturing capabilities.
Investment Themes and Market Outlook
The podcast episode explores potential investment themes in light of changing global dynamics and market conditions. It suggests that opportunities may exist in sectors such as construction, infrastructure, and physical production in countries geographically or politically closer to the United States. From a currency standpoint, the speaker still backs the US dollar due to expectations of moderation in interest rate cuts. Lastly, concerns are raised about the outlook for China, highlighting its structural problems and potential challenges in maintaining clients and market share.
In my recent interview with Felix Zulauf he mentioned that we are shifting from a unipolar world order into a multipolar world dis-order.The majority of folks who watch this Thoughtful Money channel are primarily from the US, Europe and Australia, so to provide a perspective from a point of view outside of the West, we're fortunate to hear from Michael Every, Global Strategist at Rabobank, who is based out of Singapore.Michael is concerned that the playbook nations are familiar with does not apply to the future dynamics ahead. Globalization is reversing in many corners of the world, and nationalism is on the rise. The tools used by economic central planners are becoming less and less effective. A new operating framework is needed.Will we adopt in time to avoid conflict and crisis?Michael is not optimistic. He thinks we may eventually discover and adopt the right policies...but likely only after we've exhausted every other option.Follow Michael on LinkedIN at https://www.linkedin.com/in/michael-every-38983214/?originalSubdomain=sg
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