Greater Pressure on Europe Over Greenland Will Lead to Increased Volatility
Until 2016, I would have considered it impossible if someone had told me that the US would want to acquire European territory and was prepared to exert massive economic pressure to do so. With Trump 1.0, a change in the US’s attitude was already noticeable, but an escalation on the scale we are seeing now did not seem possible. Since the beginning of Trump 2.0 last year, however, the momentum towards greater tension has increased significantly.
I still find it hard to see this as a deliberate foreign policy affront on Trump’s part. Clearly, Trump and the Republicans are under considerable pressure. With ten months to go until the midterms, the polls are sobering, despite the fact that the stock markets are breaking record after record and the economy as a whole is booming. The haste with which ‘Team Trump’ is acting, both internally and externally, is encountering growing opposition. The immigration control agency ICE and its harsh approach are becoming less and less popular with Americans.
I consider the rhetoric towards Greenland to be a diversionary tactic aimed at the electorate, designed to push its own grievances into the background by opposing foreign countries. This is further emphasised by the fact that the ‘reasonable face’ of the Trump administration, Treasury Secretary Mnuchin, highlights the security policy dimension of Greenland for the US. The US Treasury Secretary does not need to explain to foreign countries what the US wants — domestically, this has more impact. The coming weeks will be difficult to predict. I anticipate more volatility that will require management. More volatility means the need to act quickly yet in a controlled manner.
Understanding the fundamental starting point is necessary for making decisions and enables systematic measures to be taken.
- Historically speaking, the USD is overvalued by around 25% against the DXY, 20% against the euro and approximately 15% against the rest of the world.
- Although new US debt is important for the country’s ‘unshakeable’ economic growth, it is becoming increasingly unaffordable. This makes the desire to ask other countries to foot the bill all the stronger.
- Not only does external pressure create uncertainty, it also increases opposition, especially when ‘friendly states’ are attacked.
- The rise in metal prices, particularly precious metals, suggests a shift towards higher commodity prices. In the past, this has led to lower USD quotations. As countries compete for strategic resources and reserves, metals will become more expensive. Increased investment in defence and infrastructure will reinforce this trend.
It is impossible to say exactly when something will happen in the future. However, it is possible to analyse what is more likely to happen. Therefore, the potential impact can be minimised by responding appropriately to foreseeable future developments. This requires constant awareness of the fundamental long-term parameters and experience in responding to them.
Preparation is ‘half the battle’; the more you prepare, the less dependent you are on luck and chance, and the more likely you are to achieve a stable result.
