D (25:55)
So look, I think first, first things first, it's, it is a shame that Zoltan doesn't come on your show because he has been, I think, you know, he's been so right through this crisis and I think time, time will show that, that his analysis has been very much on the ball. So having said this, here's for me, your question is a very important one because we've always lived in a world where indeed there was one head honcho, one big dog to dominate all others. It used to be gold, then it became the US Dollar. And so I think inherently we're formatted to believe that, that you need one currency to rule them all. To your point, if the US Dollar isn't going to do that because the US Dollar all of a sudden no longer offers safety of assets for half of the world's population, then who steps in? Well, perhaps here's an idea is perhaps we move to a world where there isn't one massive head honcho anymore dominating everybody, but just lots and lots of different currencies. In essence, something where if you look at China's trade with Indonesia gets settled in renminbi, India's trade with Russia gets settled in rupee, Brazil's trade with Argentina gets settled in Brazil and real and so on, you no longer need to go through the intermediary of the US Dollar because partly technologically, this is now much easier to do. I think there's already massive signs of that, right? The obvious consequence of this crisis and one again, because we decided everything in a weekend and perhaps we didn't really think things through. The first obvious consequence is that Russia is now turning to countries that it deems friendly, I.e. brazil, India, China, and saying, well, look, look, there's no point in me earning euros or US Dollars anymore. I can't do anything with them. So if you want to buy my commodities, if you want to buy my weapons, pay me in your local currency. And so we're already seeing oil for rupee trades, we're already seeing coal for renminbi trades and natural gas for renminbi trades. But this right there, this is a massive game changer. Now put yourself in Xi Jinping's shoes for just a second. Second, Russia exports 8 to 9 billion dollars every month to China, which is roughly pretty much all of it is commodities, right? So that's $100 billion a year that China used to have to earn. It Used to have to go to the US sell $100 billion worth of tennis shoes and electronics and textiles and whatever else, and then turn around, take that money and buy the commodities and need it from Russia. And now it can just print the money. It doesn't need to trade with the US anymore. So now if you're Xi Jinping at the stroke of a pen through the course of a weekend, you've had $100 billion improvement in your terms of trade right off the bat. And you've also gained massive leverage. Because now that Russia sells you your coal in renminbi, now that Russia sells you the oil and the gas in Renminbi and the iron ore, you can turn to Indonesia and say, you know what, Indonesia, I like your coal so much better than this Russian crap. It's such higher quality. I really love your coal. But, you know, in Russia, I get to pay it in renminbi. So unless you're going to do a deal in Renminbi, I'm going to just buy more from Russia. And you can do the same with Saudi Arabia for oil and so on and so forth. So we move to a world where all of a sudden instead of having one currency, we move to many different currencies. And that brings me, and I'm sorry to be long winded, but that brings me to what I think is the single most important thing going on today that most people aren't taking enough time to think about. And that's deglobalization. Now, when we talk about deglobalization, most people think about Apple's supply chain or Nike supply chain and how the factories need to move from China back to Mexico or wherever else. And that's true, that's an important deglobalization and that's contributing to today's inflation, etc. No doubt. But the much more important deglobalization for most of us who work in financial markets is the deglobalization in financial flows. That's much more important and has far deeper consequences than Nike bringing factories back from China to Mexico. Look at it this way. Since the Asian crisis, all of emerging markets savings have basically flown into the Western world. And what you've had is an odd world where where emerging market consumers were in essence subsidizing consumption in developed markets, subsidizing consumption through undervalued exchange rates, subsidizing consumption through a constant recycling of savings. What if we move to a world where Chinese savings now stay in China and where Indian savings stay in India and where Russian savings stay in Russia, where all this money no longer turns around to buy London real estate or buy US Treasuries or whatever else. Well, then how do Britain, France, the us, all these countries that were benefiting, running massive twin deficits year in, year out and funding them through the sale of assets, how do they keep doing that? The answer is they don't. So either you need these countries to adopt severe fiscal tightenings and basically move into recession, or their currencies are, are bound to go down structurally against those of emerging markets. And I know I'm being long winded, but I just want to finish on one point because I think it's important. If we'd spoken a year ago, Eric, and if I'd said, look, Eric, oil is going to be above 100 bucks, US treasury yields will be 3%, the Fed's going to be very hawkish, or sound at least sound very hawkish. Turkish, the euro will be at 105, the yen is going to get crushed. And if I told you, and by the way, you're going to massively outperform U.S. treasuries by owning Brazilian bonds, that'll be up for the year, and Indian bonds, that'll be flat, and Indonesian bonds that'll be up for the year, and Chinese bonds, I'll be only marginally down for the year, you'd have said, louis, you're the biggest idiot I know and I'm never doing an interview with you again. Don't you know, haven't you know that after 30 years in working in markets, don't you know that when the Fed tightens, emerging markets get smoked? And yet here we are, we have the Fed tightening and all your fragile fives, your Brazil, your India, your Indonesia are actually holding up very, very well. So it tells you right there. It's like the dogs that didn't bark in the Sherlock Holmes thing today. The fact that Indonesia is holding up so well, India's holding up so well, it's the dog that didn't bark. These are the guys that are actually benefiting from the deglobalization of financial flows.
