By Christian Takushi
The independent research boutique that predicted Brexit, Trump, the supply chain demise, war in Europe and the coming energy-food crisis
These podcasts only complement our geopolitical newsletter. The in-depth strategic analysis that flows into our newsletters allows the listener to put these timely podcasts in the right context. These podcasts are thus rather tactical in nature and should be interpreted within the strategic Big Picture outlined in our geopolitical newsletters.
Geopolitical Research Aug 05, 2023
US Interview: India slows down BRICS - China shifts to Oil trade, Gold
This interview complements our recent newsletters and developments that seem to be underreported by financial media.
As we anticipated in our newsletter earlier this year, Chinese Gold prices have begun to decouple from the stagnant gold prices in the West. Shanghai prices reached levels up to 4-6% higher than in London. We are monitoring this carefully - Beijing seems to be testing our markets' response. A foreshadow? This interview helps fill the gaps in this developing story.
The interview with Mr. Takushi was done by San Diego-based Financial Sense/Mr. Cris Sheridan
Key topics raised:
Gold investors disappointed
For now Washington pivots India against China - Rift within the BRICS
Higher prices, more inflation and higher rates - more G7 state control
Real threat to the West: China shifts to Oil production - Targets to replace 1/3 of USD usage
While Western investors were thrilled about the postponed roll-out of the new gold-backed reserve currency, the real threat to the USD may be the BRICS dominance over Oil exports and Oil imports, where they can gradually replace the USD and force US interests to better reflect the US deficits and debt. It would be hard for the G7 to avoid a repricing of Gold - they may have to constrain gold arbitrage to investors holding their gold in Western markets. For years we have been warning investors to prepare for such a scenario.
On immigration and the economy: Independent economist Takushi believes that massive illegal immigration ushers three economic effects over time: 1st) In the short term positive impact on aggregate consumption, 2nd) After the initial years massive increase in costs to society until newcomers are fully productive, 3rd) In the long run, and with appropriate policies in place, the newcomers have an overall positive impact on the economy.
Independent Global Geopolitical Macroeconomic Research
Switzerland 15 Sep 2023.
Geopolitical and economic conditions need close monitoring, because they can change suddenly.
No part of this analysis should be taken or construed as an investment recommendation.
Deflation, Inflation & Job losses ahead, BITCOIN renaissance?, Africa defies Europe
A round-up of big macro events that consensus is not paying enough attention to
1) Deflation is next, but next Inflation shocks are on the way
2) Job losses are coming to America and Europe - US economic data is covering up underlying weakness
3) A Bitcoin Renaissance is likely
4) Africa defies Europe - No one will want to build a gas pipeline to supply Europe
Caution: None of our comments should be construed as an investment recommendation
#bitcoin #deflation #inflationaryshock #niger #africa
Christian Takushi MA UZH is an independent Swiss Macro Economist.
You can follow him on Twitter (@ChrisTakushi) and subscribe to his strategic newsletter on geopoliticalresearch.com
Is West converging with China? Growing state interventions & Monopolies set West on convergence course with China
Will BRICS Gold Currency Usher in the End of USD?
Will the expected launch of a Gold-backed Currency (new gold standard?) by the BRICS usher in the end of the USD?
Many commentators are making bold predictions about the demise of the USD or the end of the USD hegemony. But many things are open and much will depend on the US retaliation and the response of the BRICS next month.
For the 1st time since the end of WW2 a large number of nations in the non-Western world is uniting behind a new currency project. Many say it is to “unseat“ the USD. This is the popular narrative, but our independent research shows the following:
a) Main objective of the BRICS is De-Risking from the West - the healthy Emerging Markets are worried about the collapse of the West's huge asset bubbles, massive debt and the demise of our over-printed paper currencies. Their economies are overtaking the G7 in size, but all their trade and their savings are nominated in the USD and other G7 currencies. That is a great risk to their economic stability and increasingly national security
b) China's main objective is a Gradual De-Dollarisation Process of their "reserves". Beijing's main concern is "stability". Given the growing risks of the Western financial system, China and other emerging nations see these objective only attainable with a currency outside under their own control.
c) Much of the non-Western world is not seeking actively to destroy the USD, it is rather about the preservation of their stability .. at a time that their economies have become too big to remain bound to the USD and G7 policies.
d) An attack on the USD only if necessary. I have ascertained that while the BRICS need a stable and orderly adjustment process (a gradual increase of the role of their local currencies and the BRICS gold currency in their economies - an somewhat understandable need), they are preparing to go to monetary war if necessary. They are reserving a "killer option" should open hostilities be unavoidable or forced upon them.
Because of expected retaliation, BRICS have moved to a multi-pronged strategy that includes the use of their existing currencies and decentralised crypto currencies (Bitcoin) in order to diffuse the Western retaliations. Ambiguity and back-ups were introduced after President Biden hit them hard last year with preemptive measures.
In fact with much of their debt issued in USD and much of their assets and savings in USD the BRICS it is not in the best interest of the BRICS to see a rapid decline in the USD value.
d) A matter of trust: The non-Western world is not primarily seeking a confrontation with Washington. They have rather lost trust in the West's handling of their currencies (they are printing ever more money to finance their growing deficits) and need an alternative.
In a nutshell: Contrary to the spectacular claims so many experts are making about the desired imminent collapse of the USD, I expect a much more gradual process. It is in everybody's interest. Furthermore, although China is rising, the BRICS are no where near capable to replace the USD nor leadership the USA provides. It is easy to criticise Washington and indeed much wrongdoing or abuse took place, but the USA is still the most benevolent superpower humanity has had so far. Any other super power would have done the same as Washington, probably worse.
Independent Global Geopolitical Macroeconomic Research - Made in Switzerland.
Why Chile matters - in 80 seconds
Economist Christian Takushi explains why world leaders are paying close attention to Chile at the moment. Independent Balanced Global Geopolitical Macroeconomic Research by Macro Economist Christian Takushi - 11 May 2023. GEOPOLITICAL RESEARCH MADE IN SWITZERLAND Disclaimer: No part of this opinion should be construed as investment advice. This opinion is based on the current state of our analysis, which builds on several working hypotheses. As more data is available our working hypotheses are continually re-tested and if necessary we will adjust our analysis. We do not work with conspiracy theories.
Why FED is holding rates high for longer (it’s not inflation) and why investors get pivot wrong!
BRICS overtake rich nations (G7), defy the USD and risk imploding asset bubbles
Why Credit Suisse might have to be taken over or broken down ...
CS has passed the point of no return. A likely controlled failure offers policy makers an opportunity to engineer a sector consolidation and a contained credit squeeze that could ease inflation pressures. That would allow for an earlier pivot by the FED and ECB.
Why Inflation matters
Christian Takushi talks about inflation in 2023 and the outlook for this decade
Even if inflation would normalise down to 4% by 2025 the cumulative impact of inflation during 2022-2025 could have destroyed more than 20% of the purchasing power of peoples' savings. It is a massive wealth destruction, but also a wealth transfer that benefits indebted governments and households.
Independent Balanced Global Geopolitical Macroeconomic Research by Macro Economist Christian Takushi - 12 Jan 2023 - Switzerland
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Disclaimer: No part of this opinion should be construed as investment advice. This opinion is based on the current state of our analysis, which builds on several working hypotheses. As more data is available our working hypotheses are continually re-tested and if necessary we will adjust our analysis.
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Interview: Rise of G7 state-run economies
Europe finds it has no friends - Five important things consensus overlooks ahead of 2023
By October 2022 Berlin & Paris had ascertained that Western Europe really has no friends at all.
Five things of strategic importance that consensus is overlooking and media barely reporting about.
Disclaimer: No part of this opinion should be construed as investment advice. This opinion is based on the current state of our analysis, which builds on several working hypotheses, available information and our own analysis. As more data is available our working hypotheses are continually re-tested and if necessary we will adjust our analysis. We do not work with conspiracy theories nor informers/insiders.
Independent Balanced Global Geopolitical Macroeconomic Research by Macro Economist Christian Takushi - Dec 2022 in Switzerland
Rishi Sunak may be the leader the UK and the world need the next two years
A year of political upheaval may have been the "blessing in disguise" that opened the door for Mr. Rishi Sunak to become the next UK Prime Minister for one of the most challenging periods in post-WW2 history.
The UK has two formidable candidates: I humbly think both Mrs. Penny Mardaunt and Mr. Rishi Sunak are fit to lead the UK and the free world in the years that lie ahead. A joint ticket could be even a greater blessing for the country. A Sunak-Mardaunt government or the reappointment of Johnson and Truss cabinet members could unite the party and allow Britain to take advantage of its regained independence post Brexit. The UK can be both a close US ally and also a nation rebuilding the relationship between East and West (emerging and developing nations want trade opportunities that improve their geopolitical and security situation - the UK is a respected geopolitical and military power).
The UK and the free world need a leader that brings the following to the table ..
1) Character - integrity, being thoughtful and even-keeled. The risk of nuclear war is elevated
2) Intelligence - he or she will have to understand dynamic complexities and handle multiple crises
3) The trust of financial markets - this can be a decisive asset
4) Help ease the growing West-East conflict and distrust - A well mannered British gentleman, Mr. Sunak, stands out with his Asian connection and understanding. As nations need to rebuild supply chains outside of China, the UK can play a key role with its maritime tradition and the Commonwealth.
I think Mr. Boris Johnson has made a brilliant move by not entering the race (if confirmed). He has been the right man for BREXIT and in an uncertain and challenging world he might in the future lead the UK again. Downsides of Sunak: there are obviously downsides with every political figure. Mr Sunak is being criticized for being open to the advancement of Central Bank Digital Currencies research. Which has its risks (social scoring etc). But all G7 and G20 nations are working over time on it. Even Brazil, led by a very conservative Christian President. I would be careful with believing everything the head of the WEF “supposedly” says or is being said about him. I have respect for his achievements, but sometimes it comes across as if the WEF shapes and runs the world. Just because people attend the WEF forum, and have overlaps with the WEF, it doesn’t mean that the WEF kind of owns them. No single man is currently owning or running the world at his will. Which doesn’t mean the risk is not there. Nevertheless as I have said before, digital currencies are coming and governments will run them. I am not taking sides, this is pure balanced analysis. My personal opinion does not shape my research. At this juncture Sunak’s rise is stabilizing and a rather positive shock for the UK, the West, India, East Africa .. and negative for China.
The UK needs a brilliant Prime Minister to navigate what lies ahead
The new UK PM should rethink the global security situation. The UK and Germany are being devastated and may never recover from this economic shock. The new PM should rethink the sanctions: The sanctions looked only good on paper. Since powerful emergency nations are not supporting it, Russia is being barely affected, the UK and EU are being devastated while the USA and Saudi Arabia are profiteering in a huge way. In two years the bankrupted EU won’t be able to defend nor rebuild Ukraine. Also mentioned: Five other areas of geopolitical-economic tension we are monitoring around the world
America wages economic war and could re-industrialise at the expense of Europe
America wages economic war with a triple onslaught and could re-industrialise at the expense of Europe. Europe doesn't seem to be fit for the highly complex convergence of geopolitical and monetary forces of our time.
The strong USD, a fast-paced increase in interest rates and high energy prices are reinforcing America’s Superpower status. Washington is definitely hurting China-Russia and their allies, but the biggest victim or collateral damage by far is likely to be Western Europe: the EU and UK. Some say the EU can only blame itself, and ironically Britain has been America's most loyal ally. Europe runs the risk of being devastated.
Other victims are indebted developing countries. Emerging Nations with disciplined monetary and fiscal policies superior to the G7's are likely to overcome the geopolitical-economic onslaught by Washington much better. But when they do, they are likely to move away from the USD. I expect the USD to go from 60% share of the world's reserve currencies to just 40% during the course of this decade. It will limit the extent to which Washington can simply print money and spend beyond its means at the expense of the rest of the world. Thus, following this massive onslaught, Washington is likely to want to usher in a monetary reform - retaining the initiative.
To play geopolitics,
- you need to know your weaknesses and strengths
- you also need to know which assets you can deploy and your competitors' assets
- you need to be exceedingly pragmatic
Risking your entire future by banking on so-called loyal friends - as Europe is doing - works only in movies. In an existential crisis, every nation is on its own, because every government's first duty is to its own people. Common interests can unite them, but they tend to be temporary. Their differing needs and assets will lead to conflicts of interests or betrayal: UK-US relations during and after WW2. Those nations that over-emphasise how "united they are with other nations", are the ones that fail to prepare for tough times. Washington doesn't need Brussels, but Brussels needs Washington and London.
Queen Elizabeth II, Inflation, USD as a weapon, Trade shifts, War
Britain is shining these days - Today we look at how the passing of Queen Elizabeth II is a rare event that is allowing world leaders to pause, reflect, meet and hopefully review some of our policies or reach reconciliation.
Washington is using the USD as a powerful geopolitical and economic weapon. The super-strong Dollar is causing untold pain and inflation acceleration all over the world: in Western Europe, Asia, Africa and Latin America more and more political leaders are furious at the combination of high energy prices with a super-strong USD. On this track not only developing nations, also Western Europe could see economic devastation and social unrest. The problem is not so much how to overcome the next winter, but how Europe can stay competitive after the next winter. Will European manufacturing and jobs move to the USA and elsewhere?
EU and USA struggle with aftermath of their sanctions as BRICS & ASEAN stand up
In Europe, Berlin is increasingly facing having to decide between supporting Ukraine's war effort or the stability of the EURO financial system. A crisis in the EURO Zone is gathering pace as Germany is staring at a possible unprecedented depression. As we said in March, our sanctions were not really thought through. The EU and USA have underestimated the response of the non-aligned world (more than a dozen large nations) to our economic war on Russia. Eleven South East Asian nations will follow the lead of the BRICS to trade without the USD and avoid our European payment system. Other important economies like Mexico, Argentina and Nigeria are considering their options to also reduce their dependence on the West.
Over time this will further erode the influence of the West and reduce our ability to print money and finance our massive fiscal deficits without inflation.
Takushi also addresses the possibility of the rate of inflation and interest rates peaking over the next 12 months.
Geopolitical Roundup: Johnson, Israel, Iran, Japan, Taiwan, China-Russia trade, LatAm, inflation etc
Why Conservative MP’s should not vacate Boris Johnson
Interview: 82 nations defy the West - Growing isolation of the West?
The West sits in the trap: Trying to fight inflation of 10% with 1% interest rates
France: experts see a tight race. I see Mr Macron winning
A prayer for the East & West, Ukraine
Resurgent Britain: UK-German collaboration on the rise?
As we have been predicting for years Brexit and now the Ukraine crisis are accelerating the rise of Britain as a global geopolitical power. Britain is stepping in the vacuum that a retreating divided America is leaving in parts of the world. The harsh way President Biden treated German chancellor Scholz this week in Washington will only encourage Berlin to seek more military protection from the U.K. As we have been warning for years the EU is a compromised NATO ally, but this still doesn’t mean Washington can ignore that France and Germany have a difficult history and economic ties they cannot overlook when trying to help Ukraine. Thus, while the USA and Britain can help with weapons, Germany and France have to take a slightly more cautious approach. After all both powers invaded Russia with tragic outcomes. This is something that London seems to have more understanding for than Washington.
Inflation is closer to 10% - FED and ECB are not fighting inflation
If the FED sand ECB were really serious about fighting inflation, they would be holding key interest rates at 5 to 7% (USA) or 2 to 4% (EU) respectively. They don’t want to do it, because they are so indebted, they need as much inflation and zero interest rates as possible. They talk instead about eventually raising interest rates by some mini steps later this or next year. Nevertheless policy markets have several options people should not underestimate - one of them is to shock markets with a massive hike, in order to stimulate soon after. The problem is that this would come at the expense of risk assets.
Any late policy reaction would result in a shock to markets and especially developing nations as they would be facing a strong USD and a liquidity/funding squeeze
FED could shock markets in 1st half 2022
<em>Christian believes FED chair Powell is only deviating from his script, because of massive pressure from his new boss, President Biden. It is about politics. Americans are furious about rising inflation and they are on track to hand over both the House and the Senate to Republicans this November. Thus, </em><em><strong>the FED has to shock markets within the next 6 months</strong></em><em>, not 12 months. The FED may allow interest rates to overshoot in the 1st half 2022 to achieve this! </em><em><strong>Christian expects a rate shock outside of the FED schedule.</strong></em><em> What matters most in 2022 is the degree of surprise. </em>
<em>After taming inflation the FED wants go back to over-stimulating the economy and printing money. Thus, while the FED doesn't want sustained high interest rates, it surely could use a strong interest rate spike before August 2022 - that opens the door for more monetary and fiscal stimuli after the Fall. Without excessive liquidity and stimulus G7 economies will otherwise shrink - thus, inflation and negative growth would set in (stagflation). Both FED and ECB are working together for years to create inflation, letting it run hot (by keeping rates near zero while inflation runs at 7%) and taming markets with "we will hike interests rates next year". </em>
<em>In a nutshell, the high inflation we are facing around the world has been induced by central banks and aided by the financial industry's rush into ESG and green investments. Good idea, but flawed implementation - For over one decade energy companies among many other industries have not been investing enough in facilities. Banks and investors wouldn't even lend them the money. Now, in desperation a totally Russia-dependent Europe is trying to put nuclear and coal plants back on the grid. The same they did with Europe's military. Another example of Europe's lack of strategic foresight. </em>
Ten difficult months for investors ahead!
But over the next 10 months investors may pay a high price for this FED view. They grew accustomed to the fact that political and geopolitical factors were mere noise. Not so this time. Politics rules: The FED is on a "short leash" by President Biden and he won't let the FED hand over the House and the Senate to Republicans next year. Currently it looks very bad for Democrats. Americans are upset about higher consumer prices. Thus, President Biden must have said to the FED Chairman "Fed policies funned this inflation for years, now you bring it under control". This is why Powell II has nothing to do with Powell I - Not over the next 10 months. Once the Mid Term Elections are over, President Biden will let Powell have more leeway again in monetary policy.
G7 Central banks became Russia's and China's best friends
During the next 10 months there will be more volatility for equities and other risk assets - the Dollar could easily break out on the upside and markets may build in expectations of higher interest rates. All that could make overpriced assets correct significantly. Worse off, the enemies of the West are now closely monitoring our highly vulnerable economies and stretched financial markets. They are conceiving plans to set off events so that the implosion of our financial markets, inflated wealth and vulnerable supply chain do most of the damage for them. As I have been saying last year, our Central Bank Policies have become the biggest threat to our National Security. G7 central bankers became in a way President Putin's and President's Xi Jinping's best allies.
Update on inflation
After inflating the price of bonds, stocks and real estate, central bank policy is now inflating consumer product prices thanks to excess money. But there is now a "policy bias" tension between the FED and ECB - something we didn't have over the past decade. The former has been given a mandate to fight inflation again to help President Biden avert a disaster at the Mid Term elections, while the latter is still fanning inflation and keeping interest rates at zero in order to reduce its debt burden. While most experts talked the USD down for months, a stronger USD could emerge. President Biden is shifting to the centre in order to lure back moderates. After years of fanning inflation a new role for central banks. And they are now been held on a "shorter leash" than in past years. Less central bank independence means more deficit spending in the long run. In the short term though governments can fight inflation by overreacting to the new Covid variants this coming winter. But the geopolitical-structural problem "energy" won't go away. Europe sits in the trap.
Biden shifts to the center - even FED policy
President Biden is shifting to the center to avert a catastrophic outcome at Mid Term elections. Pres. Biden has given Mr. Powell a mandate to fight inflation in order to avert a Mid Term Elections disaster. This is also affecting Fed policy, the USD and real interest rates. Now a new "policy bias" between FED and ECB (which is still fuelling inflation) has opened that could feed a stronger USD. Swiss Franc is also winner in the short term, while Bitcoin and Gold have to digest the shift.