If the U.S. does not want to be held responsible for triggering a global economic crisis with this disastrous war, I think it is now under considerable pressure to agree to a peace deal with Iran.
A long time ago, I noticed that virtually every stock market and economic crisis in the post-World War II era either originated from speculative bubbles or political mistakes made in the United States.
The fact is that we cannot blame the rest of the world for these problems. What the US is doing in Iran, with Israel’s involvement, has the potential to trigger the greatest crisis of the post-war era. Donald Trump’s legacy could be that he is responsible for a global economic crisis. This is not the legacy he would want.
When in Doubt, TACO!
The problem is that if Trump’s stubbornness were to trigger a global economic crisis, he would have to back down. This is something he doesn’t like either. The question is which outcome he can tolerate better. I think the scenario of a global economic crisis carries more weight because Corporate America would suffer too and put significant pressure on him.
Either way, Iran will come out on top, as it can cope with either outcome. The Iranians are far more resilient than the rest of the world.
Australia, Sweden, and Canada Are the Least Exposed
All three countries have a robust energy mix and ample supply capacity to handle any eventuality. Australia and Sweden have exceptionally low levels of public debt, meaning they would be well placed to support their populations in the event of a widespread crisis.
I find it interesting that both the Australian dollar (AUD) and the Canadian dollar (CAD) are resilient against the US dollar (USD) and therefore also rise against the euro when the USD is strong. When the USD is weak, they are likely to remain relatively stable or depreciate only moderately against the euro. In particular, the AUD is fundamentally undervalued against the euro. Against the USD, however, the AUD is massively undervalued.
U.S. Policy Will Remain a Concern for Us for a Long Time to Come
A range of scenarios regarding what is likely to happen over the next 36 months must be considered.
Five years ago, I came to the conclusion that the good times were coming to an end, and that geopolitics would be the key factor of the 2020s — and, from today’s perspective, the 2030s as well. I predicted that these two decades would be dominated by geopolitics and marked by disruptive events, for which I believe European industry is unprepared.
You need much larger liquidity buffers than are currently in place. This is partly because, while some processes improve the balance sheet, they also consume cash flow that you desperately need right now. Don’t hesitate — make building up your liquidity buffers the focus of your efforts. We will support you in achieving this while taking on as little risk as possible, but as much as is necessary to make it happen.
