Donald Trump has now completely undermined the Nobel Peace Prize, making it clear that the US no longer cares about the order it has spent the last 70 years building up. The pursuit of power and the securing of spheres of influence and raw materials are giving way to international law and rule-based governance.
The attack on military facilities in Venezuela was certainly contrary to international law, and the abduction of President Maduro and his wife is an unprecedented case. I have never seen anything like it in history, although perhaps the abduction of the Sabine women or some of the things colonial powers allowed themselves to do were similar. In the last 80 years, one or two tyrants have been overthrown, but never before have they been kidnapped and taken to the US.
This Is Europe’s Final Wake-Up Call
‘This is a final wake-up call, especially since Donald Trump recently described Greenland as being of strategic importance to the US. Who could stop the world’s strongest army?
While the contempt that Americans feel and express towards the EU and its member states is unjustified, it is understandable from their perspective. Europe is too weak to stand up to the US. We already struggle with Russia. However, perhaps this approach will serve as a wake-up call for Orbán and his supporters, who believe that a fragmented EU is preferable. The EU must now finally pull itself together or risk collapse. This would have serious consequences for freedom and prosperity in Europe as a result of the weakening of individual states.
Market participants do not appear to be concerned about the near future. Apart from the sharp rise in precious metal prices in the wake of the attack on Venezuela, market reactions are weak.
The Stock Markets Have Ignored the Attack on Venezuela
I think the ignorance is justified. It is still unclear whether China or Russia will react in the short or medium term.
Brazil’s protests are relatively loud, probably because there are concerns that the US might want to claim the whole of Latin America as its sphere of influence. If this happens, Latin America will face considerable challenges. This could also impact the rest of the world.
What Impact Will This Have on the USD?
It is not expected that the USD will come under pressure in the short term. There is insufficient cause for this. However, the current situation of high debt, coupled with the prospect of further increases in interest expenses, which are expected to continue rising until 2026, will necessitate more significant interest rate cuts by the Fed this year than would be justified by considering inflation trends alone.
In the past, the Fed has bowed to national interests when in doubt. Given that the US has increasingly relied on short-term refinancing for years and is likely to continue doing so, interest rate cuts by the Fed limit the increase in the government’s interest burden. If Trump nominates a Federal Reserve chairman to his liking, this could trigger another wave of USD weakness. In the long term, the power politics of the US could change things, but in the short term, I see them as a burden on the USD.
I Hope You Have a Great Start to the New Year!
