Englund

  The story about sandpiles and the financial system may be the most popular letter I’ve written in the last 25 years.  It is one we should all re-read every few years to remind us how change happens slowly, then suddenly.  A very important book by Mark Buchanan called Ubiquity, Why Catastrophes Happen.  I HIGHLY recommend it if you, like me, are trying to understand the complexity of the markets.  The book is about chaos theory, complexity theory, and critical states. It’s written so anyone can understand—no equations, just easy-to-grasp, well-written stories and analogies. Imagine, Buchanan says, dropping one grain of sand after another onto a table. A pile soon develops. Eventually, just one grain starts an avalanche. First, economist Dr. Hyman Minsky showed how stability leads to instability.  The more comfortable we get with a given condition or trend, the longer it will persist, and then the more dramatic the correction when the trend fails. Go back t...

Those siding with me in believing that we are already in a second cold war Then there is the Yale University/Hoover Institution view. the global situation today more closely resembles the world on the eve of one or the other of the world wars.  In an excellent new piece, Zelikow argues that it is a comforting delusion — indeed, “wishful thinking” — to believe we are in a cold war with China. Rather, we confront a new Axis — China, Russia, Iran and North Korea — that in many ways poses a bigger threat than the Germany-Japan-Italy Axis of the late 1930s and early 1940s, or the early Cold War combination of the Soviet Union, China and the other communist-controlled states. “The worst case, in a major crisis,” writes Zelikow, “will be if the United States and its allies commit to victory, animated by their own rhetoric and dutiful but ill-considered military plans, and then are outmaneuvered and defeated. It would be the ‘Suez moment’ for the United States, or perhaps much worse.”...

Today, the idea of Cold War II is fast becoming conventional wisdom.  President Donald Trump’s initial trade war against China was evolving into a tech war — and more. I vividly remember a world map highlighting which countries were buying Huawei’s 5G hardware The US floods the world in dollars; China floods the world in hardware. One reason that some were slow to discern the drift to a new cold war was that it seemed economically irrational from the point of view of a “Washington consensus” that for years had prioritized free trade, global capital flows and open borders, not to forget the wishful thought that greater economic integration between the US and China would magically lead to political liberalization in the latter. the widespread belief that the European Monetary Union (EMU) would fall apart in the wake of the global financial crisis of 2008-09  I was emotionally attracted to the breakup of the euro area, as I had been against the idea of monetary union in the 1990s...

To understand what is at stake in the fight against the axis of China, Russia and Iran, just read “The Lord of the Rings. The emergence of this new Axis was foreseen by Zbigniew Brzezinski, President Jimmy Carter’s national security adviser, as long ago as 1997. In his book The Grand Chessboard, Brzezinski wrote: Potentially, the most dangerous scenario would be a grand coalition of China, Russia, and perhaps Iran Ferguson’s Law — states that any great power that spends more on debt service (interest payments on the national debt) than on defense will not stay great for very long.  Tolkien’s hobbits are also isolationists, in their way. However, despite their strong preference for the quiet life, Frodo and Sam come to realize that they must fight their way to Mordor and risk their necks to destroy Sauron’s Ring of Power.  Niall Ferguson 21 april 2024 https://www.bloomberg.com/opinion/articles/2024-04-21/china-russia-iran-axis-is-bad-news-for-trump-and-gop-isolationists On his ...

If the Jewish state can be bullied into letting Hamas survive, how can any free nation defend itself? Every Islamist terrorist Israel kills is one fewer threat to the rest of us. Every setback Israel can deal to the Iranian puppet masters of Hamas, Hezbollah and others inflicts a loss on the regime that is sworn to eliminate us, the “Great Satan,” and our allies.  There is no historical evidence that appeasing enemies committed to our extinction ever keeps us safe. If Israel can somehow be bullied into forgoing victory over this enemy, our own capacity to wage wars inflicted on us will be dramatically diminished.  We will have allowed a coalition of armchair media critics, far-left agitators and Islamist-sympathizing activists and governments to hold Israel to a standard no nation taking necessary measures to protect itself would ever be able to meet, a standard to which our enemies will certainly never hold themselves. Gerard Baker Wall Street Journal  8 April 2024 ...

Denna vackra betraktelse från 1994 har sedan dess legat i mitt bakhuvud. Sven Otto Littorin; Akvedukten vid Zaghouan – Svensk Tidskrift Den artikeln satte mig på spåren till Akvedukten vid Zaghouan : en essä om stat, moral och liberalismens framtid, av Per Molander  https://www.bokus.com/bok/9789176811436/akvedukten-vid-zaghouan-om-stat-moral-och-det-liberala-samhallets-framti/ Och vidare till min Guru Niall Fergusons CIVILIZATION The West and the Rest   The financial disasters of 2008 and its continuing fallout; political partisanship and gridlock in the face of daunting problems; divisions within the United States and within the European Union; the overextension of American military forces in the wake of costly wars in Iraq and Afghanistan; and the rise of China: Is the West headed toward a fall like ancient Rome’s? Even more alarmingly, he suggests that the collapses of great civilizations tend to come quickly. Rome, he writes, imploded “within the span of a singl...

The total fertility rate (TFR) — the number of live children the average woman bears in her lifetime   In one country after another, it has dropped under the 2.1 threshold (the “replacement rate,” allowing for childhood deaths and sex imbalances), below which the population is bound to decline.    This fertility slump is in many ways the most remarkable trend of our era. And it is not only Elon Musk who worries that “population collapse is potentially the greatest risk to the future of civilization.” Our species is not done multiplying, to be sure.   “More than half of the projected increase in the global population between 2022 and 2050 is expected to be concentrated in just eight countries: the Democratic Republic of the Congo [DRC], Egypt, Ethiopia, India, Nigeria, Pakistan, the Philippines and the United Republic of Tanzania.”  When the human population begins to fall, it will do so not gradually, but almost as steeply as it once rose. The problem ...

... if at some future date the Ukrainian army, starved of ammunition, were overrun by its Russian adversaries. And how will we react if — say, later this year — we are informed that Iran has successfully built a nuclear weapon and has unleashed its proxy in Lebanon, Hezbollah, to rain missiles down on Israel? Or what if we hear news that Taiwan has been blockaded by the People’s Liberation Army ... How much attention will we devote to the end of Taiwan’s democracy and the imposition of Chinese Communist Party rule on its people? More than we pay to the next Grammy awards ceremony or Super Bowl? Kabul in 2021 Re-reading Len Deighton’s novel SS-GB  By comparison with Robert Harris’s more ambitious Fatherland — published in 1992 and set long after a German victory — SS-GB is imbued with gritty realism. A quarter of a century has passed since I persuaded Andrew Roberts to write a chapter of the book Virtual History devoted to the historical plausibility of Deighton’s scenario.  ...

For more than 20 years, the federal government has run an unsustainable fiscal policy, with excessive spending and inefficient taxation causing deficits to become the norm, even at full employment, and the federal debt to rise rapidly above total GDP (to say nothing of the unfunded liabilities of welfare programs).  This is a major vulnerability, given US reliance on foreign investors and the Federal Reserve to buy the bonds and other paper issued by the Treasury.  The rise in real interest rates since 2022 has significantly increased the cost of servicing the debt, to the point that it is close to exceeding the total defense budget. Finally, we must look at legitimacy at home and abroad.  It is perhaps harder to quantify than any other attribute, but “soft power” clearly matters in two respects. First, it is beneficial if the US is perceived in a positive light by actual or potential allies. Second, it is crucial that American power should be regarded as legitimate by US...

https://www.youtube.com/watch?v=dtN7Z20ga6Y 1177 B.C.: The Year Civilization Collapsed Englund: 1177 B.C.: The Year Civilization Collapsed (englundmacro.blogspot.com) Rome fell. Will West follow suit? Englund: Rome fell. Will West follow suit? (englundmacro.blogspot.com)

 Anyone who has a naive belief in the power of higher education to instill morality has not studied the history of German universities in the Third Reich. Niall Ferguson December 11, 2023 https://www.thefp.com/p/niall-ferguson-treason-intellectuals-third-reich

  Back  - Next -  Book Home  -  Climate Change John Authers Bloomberg 16 oktober 2023 China Nice While It Lasted Consensus Builds That the Low-Rate Era Is Dead Bloomberg 16 oktober 2023  https://www.bloomberg.com/news/newsletters/2023-10-16/global-economy-latest-the-end-of-low-interest-rates Zirp https://www.marketwatch.com/story/why-bond-market-investors-are-not-panicking-about-the-worst-treasury-bear-market-in-history-7bcba5bc Ledare: Flera goda skäl för Riksbanken att sluta höja räntan - DN.se Banks Have a Big Commercial Real Estate Problem Fed has a liquidity program (BTFP explained below) to help banks paper over losses. Small regional banks overleveraged in long term treasuries and were clobbered by paper losses and then bank runs. In response, the Fed agreed to shield the banks from losses by offering swaps at par value, ignoring the losses. Mish 15 October 2023 https://mishtalk.com/economics/banks-have-a-big-real-estate-problem-but-its-com...

  - Law of Unintended Consequences Caused the Great Bond Rout Nobody could have predicted the Treasury market’s collapse of the last two years — apart from every critic of artificially low interest rates since John Locke. Niall Ferguson Bloomberg 9 oktober 2023  Worst Bond Collapse in 150 Years Caused by Unintended Consequences - Bloomberg John Locke https://www.econlib.org/library/Enc/bios/Locke.html Problemet är att utbudet av obligationer är gigantiskt.  Min gissning är att obligationsköparna snart återvänder.  Henrik Mitelman DI 10 oktober 2023 https://www.di.se/analys/nya-hotet-mot-borsen/   Treasury-market selloff has become the worst bond bear market of all time, according to BofA MarketWatch 9 October 2023 https://www.marketwatch.com/story/treasury-market-selloff-has-become-the-worst-bond-bear-market-of-all-time-according-to-bofa-9bed8832 Back  -  Next  -  Book Home  -  Climate Change

First up, we have artificial intelligence. Niall Ferguson recently read a new book by Mustafa Suleyman, which details the coming struggles between the US and China in a world dominated by artificial intelligence.  Which brings us to the second technology: nuclear weapons. Hal Brands says the war in Ukraine has exposed the world to a new era of nuclear brinkmanship, one that is “both a throwback to Cold War-era superpower crises and a preview of what lies ahead.” The third and final technology that could send civilization into the dustbin is nuclear fusion. But it could also save us, too: “If humanity survives for thousands more years, our primary energy source could very likely be nuclear fusion,”  Jessica Karl Bloomberg 27 augusti 2023  https://www.bloomberg.com/opinion/articles/2023-08-27/nuclear-weapons-fusion-and-ai-will-scientific-breakthroughs-break-the-world-llteso5d

From those who prematurely predicted that inflation would be “transitory,” we now hear claims of vindication.  As Humpty Dumpty says to Alice: “When I use a word, it means just what I choose it to mean — neither more nor less.”  Inflation has been above target for nearly two and a half years. Whenever it returns to 2%, we’ll be told: “That’s what we meant by transitory!” I keep having to remind people that the dream of pain-free disinflation was a recurring delusion of the 1970s. The only times the Fed succeeded in bringing inflation down in that unhappy decade there were recessions: in 1970, 1974-75 and 1980. A key part of the story is obviously that President Joe Biden’s administration is providing more than $2 trillion to subsidize investment in infrastructure, green technology and microchips.  But there is also the resilience of the housing market,  illustrating how much less sensitive Americans are to rises in mortgage rates than they were 15 years ago. Despite ...

 Rsing global temperatures would appear to be killing this version of summer.  None of what I have just described is enjoyable if the mercury is above 30 degrees C. Indeed, sunbathing becomes life-threatening. And who wants a week on Corfu if a large tract of the island is ablaze?  Those who own the capital stock — the hotels, the houses, the boats — naturally cling to the hope that this summer is an aberration and next year will return to normal. But they have been clinging to that hope for quite a few years now. The horrible question keeps suggesting itself: What if this is the new normal? Niall Ferguson Bloomberg 30 July 2023 https://www.bloomberg.com/opinion/articles/2023-07-30/record-heat-is-killing-summer-vacation-for-hotels-airlines-beaches

Winston Churchill  “democracy is the worst form of Government except for all those other forms that have been tried from time to time.”  He uttered those words in the House of Commons in 1947 Is there a political economy of democratic self-destruction via excessive debt and inflation?  That old idea looks more compelling these days, as the federal debt piles up and inflation, though declining, remains well above the Federal Reserve’s target of 2% on average.  Even if inflation keeps falling, the same will not be true of the national debt  Niall Ferguson Bloomberg 16 July 2023 https://www.bloomberg.com/opinion/articles/2023-07-16/is-biden-right-that-us-democracy-is-beating-china-and-russia Martin Wolf “The Crisis of Democratic Capitalism” Årets viktigaste bok https://englundmacro.blogspot.com/2023/02/martin-wolf-crisis-of-democratic.html

It is not every day that I read a prediction of doom as arresting as Eliezer Yudkowsky’s in Time magazine last week. “The most likely result of building a superhumanly smart AI, under anything remotely like the current circumstances,” he wrote, “is that literally everyone on Earth will die. The debate we are having today is about a particular branch of AI: the large language models (LLMs) produced by organizations such as OpenAI, notably ChatGPT and its more powerful successor GPT-4. We are already well on our way to Raskolnikov's nightmare at the end of Crime and Punishment, in which humanity goes collectively mad and descends into internecine slaughter.  If you still cannot foresee how GPT-4 will be used in 2024 to “flood the zone” with deepfake content, then I suggest you email Eliezer Yudkowsky. But just make sure it’s really him who replies. Niall Ferguson Bloomberg 9 april 2023 https://www.bloomberg.com/opinion/articles/2023-04-09/artificial-intelligence-the-aliens-have-lande...

— even if investors and policymakers never tire of fantasies about soft landings, immaculate deleveragings or Goldilocks scenarios. JPMorgan estimates that the Fed might end up lending as much as $2 trillion to banks. That would spell the end of Quantitative Tightening (QT).  The authorities have redefined the meaning of the word “systemic.” If losses on SVB’s uninsured deposits posed a systemic risk, then every medium-sized bank that screws up is a systemic risk. Is there a parallel for the authorities’ intervention? Several commentators cast their minds back to the rescue of Continental Illinois in 1984, the largest bank failure in US history until the 2008/2009 financial crisis.   Paul Volcker, then Fed chairman, was persuaded to protect the bank’s uninsured deposits for the sake of financial stability.  As Volcker later recalled, he had intended “a rescue where, as a formality, some of the private banks put some money in with us so it looked like a private rescue.”...

 America’s Achilles heel is often seen as its unsustainable fiscal path. At some point in the coming decade, according to the Congressional Budget Office, interest payments on the federal debt are likely to exceed defense spending.  Meanwhile, it is not immediately obvious who buys all the additional Treasuries issued each year if the Federal Reserve is engaged in quantitative tightening. Might this give China an opportunity to exert financial pressure on the US? In July, it held $970 billion worth of Treasuries, making it the second-largest foreign holder of US debt.  As has often been pointed out, if China chose to dump its Treasuries, it would drive up US bond yields and bring down the dollar, though not without causing considerable pain to itself. In October, President Joe Biden’s administration belatedly published its National Security Strategy.  Such documents are always the work of a committee, but internal dissonance shouldn’t be this obvious.  Niall Fer...