Leitmotif 3: Localization and Global bifurcation
The world economy is undergoing a “hard fork”
The endgame to Global entropy – Global bifurcation – is increasingly apparent, even if not fully appreciated by the consensus. The global political economy already is coalescing into two blocs driven by geopolitics: the US-led Western bloc and the Chinese-led Eurasian axis. The boundaries between those blocs – in trade, finance, payment systems, technology, political and trade unions, super-sovereign regulatory bodies and institutions – are both expanding and hardening as national security imperatives. But the members of each bloc, at least for now, remain fluid: e.g. which side will Brazil, India, Indonesia, Nigeria, Saudi Arabia, or Turkey take? The choice each nation makes is not just a move in the Great Game of geopolitics, but given the hardening of bifurcation will be the determinative policy choice for its economy, currency and asset performance. Hence, Global bifurcationlikely is the most important new Theme for internationally diversified investors, and especially emerging market investors. But it also has a crucial implication for the path of developed market rates and currencies.