WAR AND COMMODITY ENCUMBRANCE (ZOLTAN POZSAR)

War encumbers commodities. A recurring theme in my dispatches this year has been that in a moment when the world is going from unipolar to multipolar, the actions of heads of state are far more important than the actions of central banks. That is because heads of state lead, their actions affect inflation, and central banks merely follow by hiking rates to “clean up”. Central banks will be behind the curve in this game, and if investors read only the speeches of central bankers but not statesmen, they will be even more behind the curve. The multipolar world order is being built not by G7 heads of state but by the “G7 of the East” (the BRICS heads of state), which is a G5 really but because of “BRICSpansion”, I took the liberty to round up. 

 The special relationship between China and Russia has a financial agenda to it, and what President Xi and President Putin say about the future of money – that is, the future they envision – matters for the future of the U.S. dollar and liquidity in the U.S. Treasury market. Their actions are forging something new: Bretton Woods III is slowly taking shape, and in light of developments to date, my motto for Bretton Woods III – “our commodity, your problem” – remains apt.