Fragile Economy

The fragility of the European economy has been exposed by Russia. Green energy policies have crippled the European economy, perhaps fatally. Inflation will explode higher for a generation if they can't get a handle on it quickly. Unfortunately, the only way to bring prices down quickly is by crashing the economy.

The United States could probably afford soomething close to autarky with vast natural resources, but it would have to rebuild manufacturing. This would be highly inflationary, but would generate growth as opposed to Germany and Japan, whoh would lose export markets—assuming this is a global movement.

The U.S. is politically fragile though. Would the country unite and make the sacrifices necessary for rebuilding or would it turn to infighting? There probably is a majority coalition for taking action. Everything that will happen in a China invades Taiwan scenario, is like the Trump 2016 platform on steroids. Trade war with China, bring the troops home from Europe and Asia, focus on domestic production. Had the country started along that path voluntarily 5 years ago, it would be in better shape. Instead, Trump couldn't stand a drop in the DJIA and the ruling class was entirely opposed to him anyway.

I didn't have a major point with this post, but only thinking about how extremely fragile globalism has become. Everything we knew could be a disaster is now coming into view. Would China risk invading Taiwan? It depends entirely on whether they think now is the time to deliver a death blow to U.S. hegemony. Their best option is to wait, but the question is, will they ever get a better shot? Trump looks like the likely winner in 2024 right now, or someone who probably is more like Trump than Trump in terms of policy. If China's "free lunch" from the USA is ending, it alters the calculus. If the U.S. reversed its decline, perhaps China cannot wait. Maybe this is their only chance to take Taiwan without starting a wider war.

Stocks like Apple have far lower price targets than imagined in a war scenario. Amazon would have no products to sell. Wal-Marts without supermarket departments would also see their sales head towards zero.

Layer on that most Americans have their retirements in stocks. Most of the stocks they own are index funds or closet index funds loaded with geopolitically sensitive companies such as Apple and Amazon and Wal-Mart. Financials of course would be wrecked either by the disruption or by the ensuing inflation. All the social media stocks such as Facebook and Twitter live off advertising. They are dependent on the wealth of the nation. Most of the growth darlings the past decade will implode in a trade war scenario because they are companies built for an economy that will cease to exist the moment the first shot is fired. Ironically, someone like Elon Musk will probably do well even if Tesla doesn't. Bold entrepreneurs with big ideas for building stuff will be in demand. It's hard to say what happens to EV in this scenario because greens will probably be wiped out politically, but the massive cost of rebuilding the economy might make the EV transition look like a rounding number. It might come down to relative inflation rates for battery metals such as nickel and crude oil.

At the other end are the beaten down mining, energy and various industrial companies. They are extremely cheap on a relative basis if there's a shift towards greater domestic production.

As they say about going bankrupt, history moves slowly for many decades and then suddenly accelerates in a crisis. Major shifts build into a tipping point. Russia reached a tipping point with Ukraine. It's verbal complaints reached their limit and it went to war to stop NATO expansion. The sanctins against Russia confirm to China that it will lose market access if it attacks Taiwan. What price is it willing to pay? The highly nationalistic country is willing to pay a higher price than the United States right now, of that I'm sure.