Great note - and thanks for mentioning my points in “9”. I agree with almost everything, but just to be sure re “5” and “9”: My argument is not to dump US assets as a way to put pressure on the US. Rather, it’s purely defensive to reduce European exposure to assets which have become less safe - and to help finance European investment instead.
Thanks Erik, yes I understood that to be what you meant and hopefully readers will have done too. I think we're already seeing something of what you suggest in Britain and Europe and indeed Canada with governments setting minimum domestic equity investment targets and offering tax incentives for domestic equity investment. I've previously argued against that as I see it as a form of capital controls and I worry that Britain, as a significant deficit country, has much to lose in such a world. That said, I suspect it is the way the world is going and may make sense of the EU, for reasons you suggest...
Thank you. This reinforces everything I have been thinking the past few days - Starmer needs to ignore polls, rejoin the EU, the EU reinvest in Europe and pull together with EU's not inconsiderate capabilities - we need to think strategically, not sit on fences - afterall, the other so called 'major players' are doing their own thing - it's a game of poker, not dominoes and.. no - time - to - waste!
Thanks Cristina. I agree, though I am not sure that is where British politics is heading... The UK is so closely integrated with the US on defence and security, so vulnerable to US coercion on trade, particularly after Brexit, and parts of its political and media class so in thrall to US money and influence, that it will be a hard battle to win. But we must try!
I think the problem is that if the 'thinking' half in the UK just 'give up' because we've been lulled into a false sense of security and comfort by our current way of life, which has been so heavily influenced by 'globalisation', we risk a far more uncomfortable future reality, which people either can't or don't want to see and feel they can do little individually, (some can more than others) but, as with the environment, every little bit counts now and above all Starmer needs to prepare for and embrace the EU alternative, before it IS too late..Moreover, Canada, Germany + Japan, Brazil and Mexico are big importers of steel to the US..
as always Simon NIxon worth reading on interface between trade, geo-politics and the real barriers to effective action by policy-makers. I doubt if many British MPs (across all aisles) have thought about or discussed hard the issues he raises in this important piece. It's much easier to sound off against Trump which is so much hot air off a vulture's back
Thanks Denis. I agree, sounding off about Trump is too often a deflection strategy from an analysis of our weakness, meanwhile the right in politics and the media, afraid to anger Trump, simply pretends none of this is happening...
Great overview. I will just note, tongue-in-cheek, that there is nothing heretical about suggesting that Europe put up yet more taxes and regulations...
What a lot to react to. On the subject of holdings of US bonds I think the sales of current bonds are unlikely to be significant. However, as the US tries to replace maturing bonds its gigantic indebtedness could cripple it. Surely it looks a much less secure home than it did 13 months ago. On the question of whether Trump has a subtle strategy I would say "no chance". If however we are wondering if he is simply a glove puppet for a Steven Miller or Russel Vought or even Peter Thiel I would say "quite possibly".
On the bonds, I agree the risk is that investors stop buying (so much) rather than that there is large-scale dumping. Given that the US sets the reference rates for everywhere else, that raises the risk of a crisis blowing up somewhere else in the world, as we may even be starting to see in Japan.
On Trump's strategy, he strikes me as entirely impulsive, unable to think more than one step ahead. But as you say, he seems to be surrounded by people with very clear agendas, though I'd be more inclined to point the finger at his business cronies rather than the ideologues in his administration
Brilliant breakdown on the TACO moment and what it actually means. The distinction betwene market-driven retreat vs political pressure is crucial cause it dictates how both sides will play next hand. I've seen this pattern before working with hedgefunds during Brexit negotiations where unclear signals led to wildly divergent positioning.
Agree, though opposition from Republicans/the US military may have played into this too. I suspect the European reaction was the least important since that would have been fully discounted
Interesting piece in the FT suggesting that there is a big debate in Whitehall about whether to award a new satellite contract to Lockheed Martin. Evidence that reducing military dependency on the US now an active policy consideration
Japan defense forces hit as US fails to deliver $6.9 billion in promised military hardware including spy plane parts - The Economic Times https://share.google/bnRBx5asv4zahCI2u
Starmer knows he is in a fight with the US but just cant say it. His decision to focus on foreign affairs is potentially the best option for him. Thankfully the Burnham diversion has been seen off.
I agree, I wrote a column for Euractiv last week on Starmer's dilemma which I should have linked to in this post. He's trapped between a British state that cannot contemplate any decoupling from the US and a party that increasingly wants to return to the EU fold in some form. My rather gloomy view is that even if Starmer was replaced by someone more publicly pro-European, the facts of British political life would mean the dilemma remains the same...
In the light of what has been going on I think there will be less objection to moving back to the EU though how far and with who’s support may be the issue. Defence seems the best place to start.
Because the UK needs a change of "mentality" - years of globalisation and capitalism have changed the face of UK politics post Thatcher with no real viable alternatives - we'd need proportional represenation and a shift from US influence in every sphere of UK life..not impossible, but would need to be politically and economically led! Politically no one represents that, even if a large number think it! Fancy standing Simon?
Great note - and thanks for mentioning my points in “9”. I agree with almost everything, but just to be sure re “5” and “9”: My argument is not to dump US assets as a way to put pressure on the US. Rather, it’s purely defensive to reduce European exposure to assets which have become less safe - and to help finance European investment instead.
Thanks Erik, yes I understood that to be what you meant and hopefully readers will have done too. I think we're already seeing something of what you suggest in Britain and Europe and indeed Canada with governments setting minimum domestic equity investment targets and offering tax incentives for domestic equity investment. I've previously argued against that as I see it as a form of capital controls and I worry that Britain, as a significant deficit country, has much to lose in such a world. That said, I suspect it is the way the world is going and may make sense of the EU, for reasons you suggest...
Why not dump?
Thank you. This reinforces everything I have been thinking the past few days - Starmer needs to ignore polls, rejoin the EU, the EU reinvest in Europe and pull together with EU's not inconsiderate capabilities - we need to think strategically, not sit on fences - afterall, the other so called 'major players' are doing their own thing - it's a game of poker, not dominoes and.. no - time - to - waste!
Thanks Cristina. I agree, though I am not sure that is where British politics is heading... The UK is so closely integrated with the US on defence and security, so vulnerable to US coercion on trade, particularly after Brexit, and parts of its political and media class so in thrall to US money and influence, that it will be a hard battle to win. But we must try!
I think the problem is that if the 'thinking' half in the UK just 'give up' because we've been lulled into a false sense of security and comfort by our current way of life, which has been so heavily influenced by 'globalisation', we risk a far more uncomfortable future reality, which people either can't or don't want to see and feel they can do little individually, (some can more than others) but, as with the environment, every little bit counts now and above all Starmer needs to prepare for and embrace the EU alternative, before it IS too late..Moreover, Canada, Germany + Japan, Brazil and Mexico are big importers of steel to the US..
as always Simon NIxon worth reading on interface between trade, geo-politics and the real barriers to effective action by policy-makers. I doubt if many British MPs (across all aisles) have thought about or discussed hard the issues he raises in this important piece. It's much easier to sound off against Trump which is so much hot air off a vulture's back
Thanks Denis. I agree, sounding off about Trump is too often a deflection strategy from an analysis of our weakness, meanwhile the right in politics and the media, afraid to anger Trump, simply pretends none of this is happening...
Great overview. I will just note, tongue-in-cheek, that there is nothing heretical about suggesting that Europe put up yet more taxes and regulations...
Haha, you are of course absolutely right as usual Marco!
What a lot to react to. On the subject of holdings of US bonds I think the sales of current bonds are unlikely to be significant. However, as the US tries to replace maturing bonds its gigantic indebtedness could cripple it. Surely it looks a much less secure home than it did 13 months ago. On the question of whether Trump has a subtle strategy I would say "no chance". If however we are wondering if he is simply a glove puppet for a Steven Miller or Russel Vought or even Peter Thiel I would say "quite possibly".
On the bonds, I agree the risk is that investors stop buying (so much) rather than that there is large-scale dumping. Given that the US sets the reference rates for everywhere else, that raises the risk of a crisis blowing up somewhere else in the world, as we may even be starting to see in Japan.
On Trump's strategy, he strikes me as entirely impulsive, unable to think more than one step ahead. But as you say, he seems to be surrounded by people with very clear agendas, though I'd be more inclined to point the finger at his business cronies rather than the ideologues in his administration
Brilliant breakdown on the TACO moment and what it actually means. The distinction betwene market-driven retreat vs political pressure is crucial cause it dictates how both sides will play next hand. I've seen this pattern before working with hedgefunds during Brexit negotiations where unclear signals led to wildly divergent positioning.
My 'money is on' market driven as that is how Big Brother works
Agree, though opposition from Republicans/the US military may have played into this too. I suspect the European reaction was the least important since that would have been fully discounted
Thanks, agree - the challenge for investors is to see through the political/media narratives and try to work out what is signal and what is noise.
Aren’t we on the hook for the awful F35, and didn’t I read somewhere that Japan has spent billions on American arms which they haven’t received yet?
Interesting piece in the FT suggesting that there is a big debate in Whitehall about whether to award a new satellite contract to Lockheed Martin. Evidence that reducing military dependency on the US now an active policy consideration
https://www.ft.com/content/55af024b-7c09-4610-89e9-366f3f504dda
You're right- just looked it up!
Japan defense forces hit as US fails to deliver $6.9 billion in promised military hardware including spy plane parts - The Economic Times https://share.google/bnRBx5asv4zahCI2u
Starmer knows he is in a fight with the US but just cant say it. His decision to focus on foreign affairs is potentially the best option for him. Thankfully the Burnham diversion has been seen off.
I agree, I wrote a column for Euractiv last week on Starmer's dilemma which I should have linked to in this post. He's trapped between a British state that cannot contemplate any decoupling from the US and a party that increasingly wants to return to the EU fold in some form. My rather gloomy view is that even if Starmer was replaced by someone more publicly pro-European, the facts of British political life would mean the dilemma remains the same...
In the light of what has been going on I think there will be less objection to moving back to the EU though how far and with who’s support may be the issue. Defence seems the best place to start.
Because the UK needs a change of "mentality" - years of globalisation and capitalism have changed the face of UK politics post Thatcher with no real viable alternatives - we'd need proportional represenation and a shift from US influence in every sphere of UK life..not impossible, but would need to be politically and economically led! Politically no one represents that, even if a large number think it! Fancy standing Simon?
So I've just forwarded Simon's article to Starmer, let's see if he actually receives, reads it and acts on it!