Market Rundown | The Asiatic Challenge

"The USD will retain its global role despite the ‘Bretton Woods 3’ hype"

Apr 18, 2022

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Market Rundown

Good Morning: The dollar is slightly firmer. Bonds are s little softer. Stocks are down 35bps. Gold is up $23 and firm just under $2,000. Silver is leading so far today up 63 cents. Crude oil was very weak, but is now down 38 cents. Natural Gas in the US is very strong, up 24 cents. Crypto is getting killed at the bottom af a multi-week range already

We’ve been on a Mercantilism kick lately, for good reason. Here is an excerpt from a Zerohedge prem post this morning that screams

“Asiatic Mercantilism Challenges Western Financialization”

Eric Peters, One River Asset Management summarizes what must be on the minds of western world leaders in one long paragraph ( We broke into bite sized ones and optically edited)

Cooling an over-heated, capacity-constrained, hyper-financialized economy, in a time of deglobalization and war, without first tightening financial conditions is proving rather difficult.
Like all complex problems, this one took decades to create. Back when the US economy had less debt and leverage, when financial assets had lower valuations, and when wealth was less concentrated, the ups and downs of the real economy drove financial markets.
In such a world, the Fed quite easily used conventional rate policies to influence our behaviors to achieve their objectives. When those became less effective, they introduced unconventional policies, and forward guided their intentions to become highly predictable. The effect was the hyper-financialization of our economy.
Now, with such high levels of debt, leverage, valuations, and wealth-concentration, it is financial markets that drive the real economy [ EDIT- And that dominance is what Russia and China are testing right now- GoldFix] not the other way around.
We have never experienced a modern economic cycle that looks anything like this. And Dudley may be right in his prescription. But if it is one thing, it is certainly not certain. Source

Many banks, from slightly different points of view are saying the same thing. The actions of China and Russia, either intentionally or by coincidence, are challenging US global hegemony by attacking the over dependence financialization of western economies . Their tool is nascent mercantilism.

The real assets that enable the financialization we’ve become so dependent on are no longer so freely given. Either the West bends and adopts some mercantilist behavior, or it will double down on financialization and risks either breaking or shooting the moon.

Be careful