In the AFR today, I write that there are only three important questions in financial markets right now. In fact, one could argue that these are the most serious questions confronting humanity today. If you don’t have an informed sense of the distribution of possible futures that flow from them, you risk being wiped out. Perhaps both financially and physically. Click on that link to read my column or AFR subs can click here. Brief excerpt only:
It sounds alarming but anyone who understands the situation knows that there are truly catastrophic, low probability possibilities that include global kinetic conflict.
The first question is who is China’s brilliant leader for life, Xi Jinping? It sounds simple, but in an incredibly opaque, one party – and increasingly one person – political system designed to maximise the Communist Party of China’s (CPC) control while minimising information leakages, it is devilishly difficult for even “deep” China watchers to obtain durable insights. As one expert remarks, “they are much better at keeping secrets than we are”.
A second pressing question is how Xi and the CPC will respond to the inevitability of increasingly vitriolic attacks emanating from Washington as we head into the November 2020 election. Embedded within this is a subsidiary question regarding the nature of America’s strategy in the defining great power conflict of the 21st century under both a capricious President Donald Trump and his successors.
The third core question is how Xi and his heirs, if there are any, manage a complex array of threats deriving from the biggest challenge China has faced since it decoupled from the Soviet Union in the 1970s and agreed to embrace the Western rules-based trading and financial system.
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Are you suggesting we take the advice of John Wick - Parabellum?
Great article Chris. These are really critical issues. Furthermore, the risk of increasing conflict before the election is not being appreciated by risk assets, which once again seems very complacent about critical issues ahead of us, including this one and the massive default and solvency issues. The FED can't solve every problem that markets face - and over time is setting us up for more frequent crises. I suspect it is really worth understanding the current issues within Hong Kong as potential indicators of how the Chinese and the US will act from here on in. The small but escalating risk of regional conflict is very concerning. As I've previously discussed, history suggests that post a pandemic, geopolitical and social risks including armed conflict are heightened.
we don't live in the 'capitalist west' we live in the rent seeking west. The CPC are just more overt on where they spend their cash, in the west the owners of capital have rigged the system to make it look like it's competitive, but they simply take all the spoils