US Geopolitical Hubris Presents Terrifying Fat Tail Risks
Disappointing Earnings and Neoliberal System
Despite disappointing earnings at NVIDIA, world markets and the global economy managed to survive without a complete meltdown. The neoliberal ‘Too-Big-To-Fail-is-how-we-succeed’ system needs to try harder to create the Perfect Storm. Central banks and central bank-watchers continue to discuss 2% inflation and financial stability. Meanwhile, related systemic storms are brewing.
The Dangers of a Global System
The dangers of a global system in which the Federal Reserve not only ‘understands’ complex reality with internally inconsistent, secular-religion ideology, but believes it creates it, were pointed out. The same solipsistic hubris is institutional in geopolitics, which presents terrifying fat tail risks as bad as a burst bubble or Fed policy error.
US National Security Advisor in Beijing
US national security advisor Sullivan is in Beijing to smooth relations. His team appeases Iran, allowing Tehran’s proxies to expand regionally. The result has been the closure of the Suez Canal to many, the defeat of the US Navy in reversing it, and now a potential Red Sea environmental disaster after the Houthis blew up a European oil tanker.
US Foreign Policy and National Security
Most current US foreign policy experts are politically 180 degrees removed from the neocon, neoliberal hubris of George W Bush’s presidency. They exhibit the same ideologically-closed minds and self-confidence, just in different ways. They can’t see it, which is why they can’t course correct – but others do.
Geopolitical Approach and Reality
Taking a naïve/hubristic geopolitical approach presents staggering fat tail risks. Reality always wins out over those who think they can create it in the end. The US will have to spend far more and more efficiently ahead to avoid increasing geopolitical tail risks, regardless of its deficit and debt.
US and Other Countries
If you think this is a US issue, it’s infinitely worse elsewhere. The US, the EU, UK, NATO allies, Japan, and South Korea are in a far worse starting position. There will have to see far larger increases in defence spending to help fill US gaps.
Central Banks and Geopolitical Experts
The systemic hubris of central banks who ‘don’t do geopolitics’ is challenged by this realpolitik. The systemic hubris of geopolitical experts who ‘don’t do central banks’ (or “war” or “country”) will be challenged too.
Complex Reality and Internally Inconsistent Ideologies
The heuristic still says it’s a question of if, not when, complex reality supplants internally inconsistent, secular-religion ideologies at US think tanks and the Fed in favour of something more pragmatic. This is fiscally AND monetarily expansionary – at least for the government / military, if no one else.
Financial and Physical Economies
Such looming fat tail risks are hard to price for in a financial economy. However, in the physical economy, CEOs have no such excuse. Neither do politicians, much as they may try. Nor central banks, who are there for a reason, or have no reason to be there.
Bottom Line
Life is simpler when all you have to worry about is once-a-quarter earnings from one firm; but such secular religion offers purgatory, at best, not anything heavenly. What are your thoughts on the US geopolitical hubris and its potential risks? Do you agree with the points raised in this article? Share it with your friends and let's discuss. Don't forget to sign up for the Daily Briefing, which is everyday at 6pm.
