| SNEAK PEEK |
— How Trump’s tariffs could turn China’s grey markets into America’s secret weapon.
— The ECB is panicking about the rise of USD stablecoins. That’s not necessarily a good sign for the euro.
— Why the proposed European Defense Mechanism (EDM) has something of the CDO about it.
Happy Easter Monday, subscribers! Or, as we would say in Poland, Smigus Dyngus.
Things continue to move fast, with the state-of-play changing almost day by day. That has made analysis difficult. However, as always, we aim to defy domestic distractions such as Easter holidays to bring you the counter perspectives that need processing. As we sit down to dispatch this long weekend’s edition, our thoughts wander to the endless contradictions across the policymaking world and punditland.
Chief among these is the notion that Trumpian tariffs in Europe will be both recessionary (requiring rate cuts) and inflationary (due to supply chain disruptions). And that the euro is both moments from ascending to global reserve status, and highly threatened by dollar stablecoin competition. (Which is it, Christine?)
We don’t need to remind readers that our role at The Blind Spot is to assess, with cool detachment, what others cannot see clearly through the fog of political passion. This is all the easier when the pundit space is so consumed with moral self-righteousness that it fails to look beyond the headlines or the track record of those it is dissing. Today, the obvious blind spot remains the system’s stubborn reluctance to recognize that Trumpian tariffs are an “art of the deal” means to an end, not an end in and of themselves.
That’s not to excuse the man’s chaotic messaging, nor to suggest he is free from contradiction himself.
But it is to say that he may not be wrong about the urgency to realign the system before highly automated manufacturing systems become concentrated in any singular geographic zone. This fact alone justifies a blunt and disruptive intervention, not least because Trump only has until the mid-terms to achieve the radical realignment he is seeking.
How all this links into “new economy” factors, however, is where the message continues to break down and clash with established economic thinking on tariffs and trade imbalances. Critically, economists continue to struggle to accept that, in a highly automated world, labor cost arbitrage may be less of a defining variable than usual, or that other factors — energy, data, time, flexibility, and control — matter more. Yet, once the hyper productivity gains from automation are accounted for, it doesn’t take a rocket scientist to understand the economic logic of reshoring manufacturing either to the energy production point or the point of demand. (Or more precisely: the logic of reshorting commoditized and energy-intensive production flows to the source of energy; and final assembly and customization shifts toward the consumer to maximize responsiveness.)
The same dynamics that perplexed Federal Reserve Chairman Alan Greenspan in the 1990s — when information technology first began reshaping the economic landscape — thus appear to be resurfacing. Back then, Greenspan struggled to interpret the data before him. The U.S. economy seemed to be booming, yet his models warned of imminent wage pressures and inflation — neither of which materialized, month after month. Month after month, neither arrived.
Baffled by this disconnect, Greenspan eventually surmised that a missing variable was distorting the picture — likely something tied to the rise of technology and globalization. In time, he came to believe that the IT revolution’s productivity gains were not always being captured in conventional output metrics, since they often took the form of qualitative enhancements rather than sheer quantitative growth. But, he decided, the growth effect itself was probably real.
But this apparent economic miracle came with a caveat. America’s ascent up the value chain was at the same time beginning to erode its competitiveness in mass-scale, low-margin manufacturing. In theory, this should have sparked inflationary pressures, but since firms were opting to offshore production or double down on efficiency-enhancing technologies rather than raise prices, it did not. The result, Greenspan argued, was a stockpile of untapped productivity potential within the domestic economy, and a widening gap between blue-collar America and high-skilled white collar America.
Investment analyst Lyn Alden made similar observations in a recent podcast. She emphasized how China’s 2001 entry into the WTO — combined with aggressive currency devaluation, effectively shut America out of the low-margin manufacturing game. Only high-margin sectors could survive, helping to catalyze the rise of U.S. Big Tech and Big Finance.
For a while during the Bill Clinton era, it really did feel like an economic miracle was afoot. And indeed, for as long as the spoils of high-value economic transformation reached the average American via the nuttiness of the dot-com boom, a time when every man and his dog was getting in on the stock market, it seemed everyone could benefit. Alas, it was not to last. Tech’s monopolistic dynamics eventually triggered consolidation, bursting the tech-stock bubble. This arrested the widespread wealth distribution that had for a while offsett the demise of blue-collar jobs, a fact that eventually paved the way for more wealth concentration and inequality across America. As we now know, to fill the void, the system leaned into a credit boom.
Except, as the 2008 global financial crisis eventually exposed, depending on private-sector credit as a balancing mechanism was no more sustainable. Left with no other choice, governments put up their own balance sheets to stabilize the economy — a state yet to be rolled back, even as continued fiscal expansion faces up to hard limits in 2025.
Which brings us to the present moment — a time when China is attempting to climb the value chain to compete in high-quality goods and services on its own accord, and when the incentives that once made offshoring attractive are rapidly dissolving. At the same time, other considerations such as carbon emissions, delivery times, proximity, cultural alignment, and above all, national security are becoming increasingly paramount in global trade.
If now is not the optimum moment to renegotiate how the system operates, we don’t know when is. What is becoming abundantly clear is that in the new automated era, the cost of production (as a function of labor inputs) will matter far less than who controls the means of production or how well the proceeds are distributed.
For America, as for every Western state, it may finally make economic sense to tap into that long-dormant pool of untapped technological capital projects that Greenspan once saw but couldn’t explain. The Mar-a-Lago accord is merely the political nudge to make most states understand this. If everyone cooperates, it needn’t be zero-sum. The problem is that the game theory requires everyone staring down the barrel of mutual assured economic destruction to come to that collaborative point first.
That’s all for now, Izzy
(And a late post script to say RIP Pope Francis.)
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| THE BIG BLIND SPOT THIS WEEK |
BETTING ON BLACK MARKETS: Last week saw an explosive wave of TikTok videos by Chinese influencers alleging a vast Western hypocrisy. Clip after clip claimed to expose how big-name Western brands — Hermès, Lululemon, Dior — were still secretly manufacturing luxury goods in China, only to slap a 10x markup on them and sell them back to American consumers as “Made in Italy” or “Made in France.” The implication? That the U.S. was hypocritically imposing tariffs on a country it still depended on, and that Americans were suckers paying inflated prices for Chinese labor masked behind a European façade.
For many, the videos felt like a “gotcha” moment following the Trump administration’s announcement of sweeping tariffs on China of up to 145 percent. The implication was clear: tariffs aren’t just misguided, they’re proof the West is lying about reshoring.
Not what it seems: On Friday, China-focused YouTubers Matthew Tye (Laowhy86) and Winston Sterzel (SerpentZA), both longtime critics of CCP propaganda, released a counter-video alleging that many of these viral TikToks were fraudulent, possibly even coordinated by Chinese state-aligned content farms. According to Tye and Sterzel, many of the supposed “factory employees” in these videos were actually unauthorized manufacturers making knockoff goods or outright fakes — without any official licensing agreements with the luxury brands in question.
Yes, some Western luxury brands like LVMH have used Chinese factories for elements of their production in the past*. But since the early 2020s, many luxury firms — under pressure from consumers, regulators, and geopolitical trends — have reshored to Europe. Moreover, while China’s manufacturing prowess is undeniable, Tye and Sterzel argue that the obsession with mimicking Western luxury actually does a disservice to Chinese creativity and artisanship. Rather than knock off Lululemon, why not build the Chinese equivalent of it, on their own terms?
They’re right — but they also inadvertently point to a far bigger and more geopolitically significant truth.
These knockoffs, opportunistic or not, represent something much more profound: the emergence of a new type of black-market economy not yet seen in China before.
A critical role reversal. For decades, the Chinese government turned a strategic blind eye to the counterfeiting and IP theft happening in China, because the resulting grey markets were not deemed ideologically threatening, even though they served the goals of central planners, whether that was cultivating know-how for industrial upgrading, foreign currency accumulation, or tech bootstrapping.
But now, as Trump’s tariffs begin to bite and exacerbate Chinese overcapacity beyond already unsustainable levels, the consequences could spin pre-existing black market dynamics on their head. The same informal markets that previously helped China climb the value chain may now turn into disruptive forces, undermining its finely calibrated system of internal economic control. At the same time, they stand to provide American consumers with the inflation-dampening headroom they need to initiate the grand reshoring transition, without putting off the transition itself.
As a result, it is now the United States that stands to benefit from the proliferation of black markets, since doing so will provoke disequilibrium inside China’s tightly wound, overleveraged system.
Tariffs, after all, do not merely redirect supply chains — they distort pricing, disrupt planned production cycles, and create surplus gluts in sectors where the Chinese state has over-invested for years: steel, solar panels, EVs, semiconductors. With access to lucrative Western markets constrained, Chinese firms face a stark choice: either sell domestically at a loss or find informal ways to dump excess supply abroad.
This is where the black market begins to bloom.
As in the late Soviet Union, where the command economy failed not because of scarcity but because of misallocation, the same is now arguably true in China. There is no shortage of goods — only an inability to match real demand to real supply through transparent pricing. Black markets, as history shows, emerge not only from criminality but also from systemic dysfunction.
Weaponizing asymmetry: It’s important to remember that in a full-blown trade war, black-market “import-export” pipelines become two-way streets. Once the gloves are off, the West will be just as motivated to smuggle code, capital, connectivity, and culture into China as China is to flood American markets with counterfeit goods and surplus exports.
One emerging catalyst for this countertrade dynamic is China’s proposed “New IP” system — a topic we’ve previously explored. Championed by Huawei and its subsidiary Futurewei, New IP represents an ambitious effort to overhaul the internet’s foundational architecture. At its core, it envisions a centralized, state-controllable alternative to today’s open and decentralized protocols.
Unlike the open and decentralized design of today’s internet, New IP would embed control mechanisms at the protocol level, giving authorities unprecedented power to track users, filter content, and even shut down specific parts of the network. This raises alarm about the potential for state censorship, surveillance, and repression being hardwired into the fabric of the internet itself.
But this tightening of control may end up catalyzing its own resistance. As New IP is deployed, demand within China for “freedom technologies” — open-source firmware, encrypted messaging apps, crypto-based payment rails, and decentralized identity protocols — is likely to surge. These tools, illicitly routed through China’s digital periphery, won’t merely evade the regime’s firewalls. They’ll challenge the very premise of New IP: that the state can trace, tame, and control all digital life.
“New IP” vs networked underground: Once VPNs become ubiquitous, jailbroken devices start circulating, firmware forks spread, and transactions migrate to stablecoins or privacy-preserving blockchains, the integrity of China’s New IP system will likely begin to fray. And just as dollarization hollowed out the ruble in the USSR, a parallel tech stack powered by USD-denominated stablecoins can begin to hollow out the legitimacy of New IP — before it’s even fully deployed.
Why traditional economists will miss this value transfer: Mainstream macro relies on official data, assumes transparent pricing, and models behaviour through representative agents in rule-based systems. It too often fails to account for informal flows routed through third countries, dual-pricing in underground markets, or behavioral shifts generated by authoritarian constraints.
For the Trump administration, tacit tolerance — even strategic encouragement — of black markets could serve as potent leverage against China. It’s a factor often overlooked by conventional pundits, who focus too narrowly on the impact of tariffs on formal trade flows. In reality, thanks to the black market variable, China arguably now faces a no-win dilemma: either come to the negotiating table and accept the terms of a genuinely liberalized trading regime, or refuse to cooperate and risk an explosion of black-market activity that bypasses state controls and ultimately erodes the CCP’s grip from within.
Win, win scenario: In the long run, even without China’s cooperation, the strategy could deliver the best of both worlds for someone like Trump: domestic inflation is kept in check as production reshoring accelerates, while China is forced to contend with the corrosive effects of a growing black market — one that chips away at the CCP’s ability to control its economy from the top down.
Beijing may soon come to realize that, left unchecked, the underground economy won’t just dictate the true price of goods — it will become the marketplace for something far more destabilizing: trust, identity, and political legitimacy. That may be more than enough to bring it to the table.
Though for now, as Rabobank’s Michael Every pointed out on Monday, the performative saber-rattling goes on, with China warning countries against making deals with U.S. that could harm its interests, because the prospect of losing face to America is more than Xi can stand.
Return to dollar neutrality: This entire dynamic points to something The Blind Spot argued back in 2022, at the height of the Russia sanctions regime: that the politicization of the dollar was destined to be a mistake, because it would inevitably distort price signals and neutral global exchange, while undermining the very features that made the dollar desirable for global trade in the first place. This is the exact opposite of what happened during the late Soviet era of the 1980s, when dollar neutrality played an essential role in unraveling the USSR’s command economy structure and exposing its inefficiency.
If you want decentralisation to thrive inside authoritarian systems, you don’t weaponise the dollar — you neutralise it and make it the lubricant of apolitical trade. Under Trump, that is happening through the administration’s tacit support of offshore stablecoins like Tether.
On the other hand, more dirigiste-minded systems, like that of the European Union, are having kittens about what a reignited neutral dollar might mean for the security of their own systems.
*It shouldn’t be overlooked that, despite officially reshoring, LVMH and other luxury brands have been accused of importing low-wage Chinese workers to Europe for continued low-wage arbitrage benefits.
It’s only in recent years that I’ve come to appreciate how unusual my parents’ line of business was during the 1980s. Both were Polish immigrants living in London. And all I knew, when I was a kid and asked them what they did, was that they were “businessmen and businesswomen.”
As I grew older, the story came into focus.
To earn pocket money, I’d spend weekends at my dad’s office — an inconspicuous space with a name no-one would remember — sorting files. But the files weren’t random. They were detailed ledgers of transactions, cheques, and account numbers. These weren’t local payments. These were records of remittances — money being transmitted from the Polish diaspora in the UK to families behind the Iron Curtain.
What I was witnessing, unknowingly, was the operation of a diaspora-backed hard-currency transmission network, unofficial on the surface but deeply entwined with the formal economy back in Poland. The funds were routed through a system involving bon towarowy vouchers — state-issued paper tokens denominated in dollars, managed by Bank Pekao. These acted as a kind of proto-stablecoin: the real dollars were retained by the Polish state, while the bonds acted as claims to dollar-linked purchasing power inside Poland. You couldn’t get actual dollars, but you could shop in Pewex or Baltona stores — those strange, well-stocked islands of Western luxury in a sea of grey state socialism.
Meanwhile, my mother worked the other side of the ledger: the supply chain. She represented British printing plate companies and ink providers in Poland. By the end of the decade, she had licensed British offset printing technology to over 95 percent of the Polish newspaper market. That statistic astonishes me now. At the time, it was just her job. Whether these official supply routes also supported underground publishing — samizdat-style or otherwise — I can only speculate. Sadly, she passed away in 2011, and those answers may be lost.
But the point is this: the command economy was never complete. The real economic bloodstream was in the margins, in the semi-legal trade networks, in kiosks and small vendors, in hard currency vouchers and printing licenses. As Charlie English notes in The CIA Book Club, it was the proliferation of informal distribution networks — cultural, financial, logistical — that eventually eroded Soviet-style control in Poland. Western goods and money flowed through side channels that could not be fully suppressed. And when the curtain finally fell, Poland was uniquely positioned to rebuild, precisely because commerce had never fully disappeared.
Contrast that with the USSR, which exported low-quality goods at below-market prices and burned through hard currency just to stay afloat. Like China, it too had pockets of excellence and innovation. But its scientific elite became pawns in the space and arms races of the day, and when the game ended, many chose to migrate to the West rather than stay in Russia. China, by contrast, has fewer raw material exports than the USSR had at the time, which the latter greatly depended on for access to hard currency.
I’d argue we’ve seen this script before and that the emergence of dollar-linked stablecoins, circulating in informal networks beyond central bank control, may well play a similar role in the digital age but for China. The names are different. But the system-rattling effect of a trusted parallel currency — backed by diaspora wealth, anchored in informal trust — is likely the same.
| CENTRAL BANKS |
DESTABILIZATION COINS: My Politico colleagues, Ben Munster and Giovanna Faggionato, report that a battle is brewing between the ECB and the European Commission over the effectiveness of a landmark piece of crypto regulation, which Frankfurt believes isn’t strong enough to prevent euro-denominated asset-flight to Trump-endorsed stablecoins at the cost of European savings. The Commission, naturally, begs to differ.
Ahead of an online meeting of government top financial services officials on Monday, the Commission and the ECB circulated two papers that signaled the growing chasm. The central bank’s document, seen by Politico, warned that the crypto-assets known as stablecoins — which are designed to be “pegged” to the value of national currencies like dollars and euros — could overwhelm the so-called Markets in Crypto Assets (MiCA) regulation that was passed in 2022 and which is now being implemented by national capitals.
Reminder: MiCA aims to regulate foreign-currency-backed stablecoins in Europe by limiting who can issue them and how many can be issued, in a bid to prevent foreign-denominated currencies from competing with the euro-backed equivalent. To ensure that stablecoins preserve their value, it also demands that they are “backed” by real-world currencies that are deposited one-to-one in securely held reserves that can be redeemed at par at any moment.
GFC, crypto-style: But in its April 14 paper, the ECB, echoing recent talking points, argued that MiCA was too permissive toward the “multi-issuance” setup in which Europe-based issuers cooperate with third-country issuers. The Bank argued such a setup could force EU issuers to redeem foreign-held tokens as well as European ones, risking a “run” on their reserves if either were found to be insolvent. That could have a knock-on effect on banks that host stablecoin deposits or even bank-style runs on stablecoin issuers, it argued.
Trumpian shadow: In particular, it fretted about dollar-backed stablecoins, which account for 99 percent of the $240 billion market and which Trump seeks to embolden. Allowing such stablecoins to be offered in both the U.S. and the EU could favor “existing non-EU stablecoin issuers who have already established an oligopolistic market position,” allowing them to dominate EU markets while benefiting from the MiCA “stamp of approval” without adhering to EU law, the ECB argued. That in turn could “hinder strategic autonomy” by giving large U.S. firms a competitive advantage in stablecoin markets. It pointed in particular to Tether, the largest issuer of dollar-denominated stablecoins.
One man’s trash: Because dollar-backed stablecoins are backed primarily by the U.S. Treasuries, another consequence could be a flood of EU investment in U.S. debt, further undermining EU efforts to build out its own capital unions, the ECB said.
EURO-RESERVE ASSET OR NOT? In her presser on Thursday, Lagarde again urged EU leaders and lawmakers to step up their legislative deliberations over the digital euro — but this time with a twist, reported Politico.
As ever, the ECB president emphasized the digital euro as a key tool to guarantee European financial sovereignty amid fears that a turbocharged U.S. financial sector under Trump could destabilize the single currency. But this time, the ECB took the unusual step of including its plea directly in its monetary policy decision statement.
The head of a leading stablecoin told The Blind Spot last week that stablecoins tend to outperform in jurisdictions where the local economy is weak and the domestic currency is unstable. Both the ECB’s and the PBOC’s rush to roll out state-issued digital currencies implies they are fearful that their systems can’t easily compete with decentralized dollar alternatives.
It’s worth noting that Tether’s business exploded from 2020 onwards, almost exclusively in emerging market economies, where Tether-issued stablecoins are used as a store of value by local unbanked residents. Such networks rely on a growing number of Tether-supported Kiosks that also provide auxiliary community services such as battery pack access and recharge.
Tether is now using its $13 billion or so more of profit earned from interest-rate arbitrage to bankroll supply-chain and trade finance services as it seeks to fill the void leftover in the market by the demise of correspondent banks and trade financiers like Greensill.
| BUSINESS, ECON, FINANCE ETC… |
BREAKING THE PBOC: We highlighted the degree to which China’s Belt and Road Initiative has depended on dollar financing in last week’s newsletter, citing an interview with Brad Parks of Aiddata in 2022. A fresher report from Aiaddata published in November 2023, which we have since gotten our hands on, explains in greater detail how the $3.1 trillion of foreign reserves that China publicly reports does not include foreign currency that the PBOC has moved out of its official reserve holdings by entrusting the capital to state-owned commercial banks.
These “hidden reserves,” they say, could be worth as much as an additional $3 trillion. It’s also the case, however, that an increasing amount of lending to BRI countries is denominated in RMB, and funded through domestically issued RMB-denominated bonds. In that case, it often has a direct FX impact as the sums are sold in exchange for dollars from exporters in Hong Kong. The setup masks the accumulation of official USD-denominated exposure by effectively imbuing BRI countries with exchange-rate risk. Some of this FX risk, however, is also in euro.
BASIS TRADE BLOWUP WATCH: Last week, we reported that the Australian Superfund had one of the largest and least appreciated exposures to the UST basis trade. We just wanted to clarify that that’s on the long futures side of the equation, meaning it is structurally exposed to a steepening curve.
BURIED UST NEWS: Foreign holdings of U.S. Treasuries rose 3.4 percent in February, data from the Treasury Department showed last week, with the two largest owners, Japan and China, building up their U.S. debt holdings not reducing them.
ITALIAN DEBT RESTRUCTURING DEAL? Rumors abound that Meloni’s trip to the U.S. entailed not just a discussion about bespoke trade terms for Italy but the possibility of a U.S.-brokered debt restructuring deal for Rome. Others have already entertained the possibility of the Fed outwardly buying bunds, so we guess why not Italian debt too?
Bitcoin, in any case, was up 3.45 percent on Monday. Given that all the G20 ministers are in Washington for this week’s IMF and World Bank meetings, that’s probably worth paying attention to we think?
| DEFENSE |
IS EUROPE’S DEFENSE FINANCING SOLUTION A CDO IN DISGUISE? The proposal laid out in Bruegel’s new policy brief two weeks ago on the governance and funding of European rearmament may appear technocratic and dry at first sight, but arguably represents something far more radical. We would venture to say it is a blueprint to manufacture, through legal and financial ingenuity, a new class of sovereign safe asset with the capacity to exist off balance sheet, backed implicitly by the fiscal strength of Europe’s core economies. Its construction also bears a striking resemblance to how Collateralised Debt Obligations (CDOs) were once designed to transform junk-rated mortgages into AAA-rated securities.
The core proposal revolves around the creation of a new entity: the European Defense Mechanism, or EDM. This body would not only centralise procurement for big-ticket military assets — everything from tanks to strategic satellites — but crucially, would own those assets on behalf of its members. That ownership structure is not incidental. It allows the EDM, rather than the individual member states, to issue the debt used to finance procurement, insulating national balance sheets from the full fiscal burden of rearmament. Germany can maintain the appearance of prudence; Italy can spend like a power; and all the while, the true liabilities exist somewhere in the middle—on the books of a supranational vehicle created expressly to be a sponge for fiscal risk.
This is, in essence, the securitisation of Europe’s military-industrial resurgence. Just as the CDO bundled risky mortgages into diversified tranches, re-rated on the strength of their pooled structure and senior guarantees, so too would the EDM bundle fragmented and uneven national commitments into a joint financial entity — one whose perceived creditworthiness would be underpinned not by the lowest common denominator but by the collective economic firepower of its strongest members. The EDM would issue debt, guarantee procurement, and charge members usage fees or leasing costs for equipment it owns, creating cash flows that can support the financing structure. If that sounds like a sovereign analogue to the “special purpose vehicles” that fuelled the pre-2008 credit boom, it should. The architecture is conceptually similar, albeit designed for strategic resilience, not mortgage churn.
Moreover, the EDM would impose legal constraints on procurement behaviour, banning state aid and discrimination by nationality among its members. This is not merely a governance tweak; it’s an attempt to create a single defense market that functions more like a regulated utility than a battlefield of national champions. By agreeing to pool procurement and follow standardised rules, member states are essentially tranching their sovereignty, sacrificing some independence in return for reduced borrowing costs, economies of scale, and collective access to high-end military technology.
Off balance sheet incentives: The Bruegel paper acknowledges, almost in passing, that the EDM would “loosen a critical fiscal constraint” by allowing certain strategic assets to remain on the books of the EDM itself, rather than those of national governments. That is the quiet revolution. In doing so, the EDM could enable a level of rearmament spending that would otherwise be politically unpalatable or legally restricted by EU fiscal rules. In the same way that CDOs allowed mortgage risk to be distributed and disguised, the EDM may allow defence liabilities to be smoothed across borders, tucked out of view, and rated above their underlying components.
But, of course, the CDO parallel also raises a cautionary note. Structured finance functions brilliantly — until it doesn’t. The integrity of the whole rests on the creditworthiness and cooperation of its component parts. If a country defaults on its obligations, refuses to pay its quota, or defects from shared procurement norms, the implied guarantees that underpin the EDM’s debt issuance could be called into question. Trust and enforceability are the lynchpins of any securitised structure. Without them, the illusion of pooled strength can rapidly dissolve into fragmented weakness.
Still, the ambition should not be underestimated. What Brussels is quietly constructing is a workaround not just for market fragmentation, but for sovereignty itself — a method of conjuring strategic capacity out of institutional design. It is a gamble that Europe’s future lies not in uniform federalism, but in a latticework of function-specific financial unions, each solving for a different collective need. And in that regard, the EDM could one day be seen not just as a defense vehicle, but as a prototype for the next wave of European integration: post-political, post-fiscal, but structurally sovereign by design.
What we are witnessing may well be the birth of a new financial asset class: the military CDO. And like its mortgage predecessor, it will be judged not by its intentions, but by its resilience in crisis.
| WHAT WE’RE PROCESSING |
— Joe Lonsdale interviews Peter Thiel.
— Odd Lots asks sovereign bond restructuring expert, Mitu Gulati, whether Trump could restructure U.S. debt.
— Thinly capitalized hedge funds’ growing role in the enormous and rapidly expanding market for U.S. Treasury securities poses a clear and present danger to financial stability, suggests a paper by Brookings.
— To those worrying about what the U.S. will do without access to Chinese rare earths, a quick reminder that Saudi Arabia increased the valuation of its unexploited mineral resources to $2.5 trillion from $1.3 trillion in January.
— ICYMI, NEOM is consuming 20 percent of the world’s steel production, at a time when many Western steelworks are having to be nationalized. (Questions we want answered: To what degree has NEOM been propping up steel prices and shielding less efficient producers from cost pressures and collapse?)
— James Aitken, Louis-Vincent Gave and Marko Papic join Ted Seides to discuss the possible end of U.S. exceptionalism.
— There’s a rumor going around the internet that OpenAI developers are trying to understand why ChatGPT has become obsessed with the immaculate conception (a fact that possibly hints that it thinks it’s the second coming of Christ).
