Will Eurasia Prevail?

Michael Every of Rabobank THINKS NOT. 

In this two-part video interview with Adam Taggart, Every argues that, DESPITE SERIOUS STRUCTURAL CHALLENGES FACING THE US AND THE GREATER WEST, China and Russia are at least EQUALLY and perhaps even MORE VULNERABLE.

And, POSSIBLY, MORE LIKELY TO COLLAPSE.

Here are my notes:

• The global economy is reverting to militaristic mercantilism.
• Yet, the West still holds more cards.
• The Fed may have to keep hiking because of geopolitics alone.
• Normally, only if a country has a trade surplus, can it still print.
• Japan is the trade-surplus test case, and it’s proving the rule.
• It’s begun running a trade deficit, and the yen is collapsing.
• The US is the only country that can run a large trade deficit.
• If the US Dollar remains primary, the Fed can keep cutting.
• If the US stumbles, bond yields are likely to spike.
• The US will fight to retain primacy and can do so even if its sphere of operation shrinks.
• The US Dollar would still control enough of the world “to rule.”
• For countries outside the US orbit, the outcome could be calamitous.
• The global supply chain is seriously overextended.
• The reality of this is only just hitting markets.
• As critical supplies — including food — fail to reach their destinations, a Global Spring, much like the Arab Spring of some years ago, could occur.
• Systems can adapt, but only if there’s competent leadership.
• Flush Western countries should share their surpluses.
• Russia, on the other side, is willing to do this; why allow them this advantage?
• We’re moving beyond populism as nationalists of the world unite.
• Europe and the US have gotten closer.
• The West is coalescing against the rest.
• But who else can the West attract?
• The China/Russia axis is daunting.
• But China and Russia don’t work well in many ways.
• If Russia loses Western markets, China will only buy from it at heavily discounted prices.
• Russia also relies heavily on Western supply chains and spare parts.
• The more China helps Russia, the more the West parts ways with China.
• There will be no workable Russian gold-backed currency; its economy is too weak.
• As for China, its economic structure consists of over-investment, property bubbles and fiscal deficits.
• As per credit creation, China is doing on stilts what the US is doing.
• The US will adapt, China can’t.
• China will have to pick a side, and it’ll choose China.
• Because it’s in a no-win situation.
• It can’t alienate either Russia or the US.
• And it has additional problems, such as demographics.
• Chinese fertility rates show China’s population shrinking by ONE BILLION by the end of this century.
• China also has a debt problem.
• And to top it off, exports can’t grow; and no one trusts its stock market.
• China is drifting towards the Japanese “stagnation model.”
• For investors, the only attractive assets now are commodities and the US Dollar.
• It’s not about demand, it’s about supply. Can we control it?
• Reshoring and friend-shoring now become critical; countries must pick the right team.
• Investing in defense firms has now become attractive and will remain so for years.
• Traditional militaristic mercantilism favors the West.
• The West can onshore and maintain its military superiority.
• What are commodity producers going to sell to each other – merely other commodities?
• China and Russia need technology.
• Be wary of volatility in all asset classes and markets.
• There’s no case for gold if the Fed is hiking.
• To buy gold is not to back Team-USA but instead Team Commodities.

PLENTY TO TAKE ON BOARD HERE, PARTICULARLY FOR A GOLD-HOLDER, SUCH AS ME.  FRANKLY, I’VE BEGUN PLANNING MY HEDGES ALREADY.  OR WOULD THAT BE — PLANTING THEM?