Izabella Kaminska - Global Macro Series - May 4th, 2022

[00:00:00] Izabella

Those are the foundations that brought us the dollar standard, right? So we are literally reversing those. That’s why I’m a bit more skeptical of those who are saying, “Oh, no, no, the dollar is never going to… This is all rubbish about the decline of the dollar.” I don’t think it’s the decline of the dollar per se within America or whatever. But in the international trading circuit, I do think we’re going to multipolar. That’s not to say that yuan or the rubble or bitcoins are going to be better than the dollar. I just think we lose that neutral clearing point altogether.

[00:00:44] Intro

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Here’s your host, veteran hedge fund manager, Niels Kaastrup-Larsen.

[00:01:40] Niels

A New World Order is becoming clearer by the day. And in our global macro series I, along with my co-host, Cem Karsan, want to dig deep into the minds of some of the most prominent experts to help us try and better understand what the new global macro driven world will look like. We want to explore their perspectives on a host of game changing issues, and hopefully dig out nuances in their work in places that others may have missed. And we want to share our journey with you.

Our guest today is one of the most respected journalists in the financial media who focuses on stories being missed by the wider journalistic pack. So, please enjoy our conversation with the former editor of the award winning financial times Alphaville blog, and now founder and editor of The Blind Spot, Izabella Kaminska.

Izy, welcome! And thank you so much for joining Cem and I today for what I’m sure will be a fantastic conversation as part of our global macro series. How are you doing? It must be a busy time for you at the moment.

[00:02:40] Cem

I’m doing really well. Thank you very much. And yes, it’s been really busy.

[00:02:43] Niels

Yeah, no, absolutely. Right now we’re witnessing some significant shifts around the world. Not just in terms of policies and events, but also how they’re being reported to us.

So we could not be more excited than to have you on the show because of your background within the media space. Also because of the shift that you’ve made recently in order to get a bit more journalistic freedom. If I can phrase it like that. So let’s just dive in.

Since it’s the first time you’ve been on our podcast, perhaps I could ask you just to set the stage and provide a little bit of context for our conversation, by maybe sharing some of the highlights from your journey so far, and what got you into journalism and your time at the Financial Times? And of course what led you to go independent and start The Blind Spot.

[00:03:30] Izabella

Well, thank you very much for having me on! It’s really a pleasure. My journalistic career started many moons ago in 2001. In fact, I did a journalism Master’s at a now defunct (well, it’s not defunct, it’s part of the London Institute now) London College of printing. From there, I went to work at Reuters, at CNBC, Platts. I’ve been very much market focused in my time.

I also did a bunch of independent journalism in the former Soviet Republics back in the day. Then I ended up at the Financial Times in 2008, on Alphaville, which was the award winning financial blog there. I became editor there in 2017. I left just a few months ago, actually.

Now I’m heading up The Blind Spot, which is my own independent venture. Currently a one woman job with a few freelance helpers here and there, but I’m hoping to expand shortly. The idea really is to leverage the ability to be independent in a way that I think is… Back in the day Alpha was very, I would say, creative and adventurous in its coverage. Just through the nature of bureaucratization and professionalization that becomes more difficult when a brand gets established. So the cutting edge stuff we were doing became a bit harder to do at the FT as the rest of the newspaper caught up with the digital phenomenon.

Back when we were starting out no one was really on Twitter, (believe it or not), there was a blogosphere. But everything was fairly amateur. So we were able to operate quite quickly and loosely. But as the rest of the media professionalized, there were higher standards expected. I’m not saying that I want to lower the standards, but it’s more that the community based feeling fell away because it became a much slicker operation, so to speak.

With The Blind Spot, I want to get back to that sort of early days feel where it’s organically led. I’m very interested in expanding and what I would call financial ‘osince’, or open source intelligence as well. Which I think you have to really do in an independent way. It’s harder to do that at a major corporation. So that’s the short and tall of it, the longer and taller. Whatever you want to say. But yes, that’s about it.

[00:06:18] Niels

Absolutely. That’s just fantastic. Cem, why don’t you kick it off today with some of your thoughts and topics you want to dive into?

[00:06:26] Cem

Yeah, absolutely. Thanks for joining us, Izabella. I’m a big fan of your work. It’s really refreshing to hear your independent views. I have been a follower of your blog for a while.

You capture a lot of stories that are being missed, kind of by the wider journalistic pack, if you will. I’d love to start at 30,000 feet and kind of talk big picture before we zoom in. On a recent blog post you mentioned this view of history as old as time, if you will, and the cyclosis,in that democracy is potentially at this point where it’s descending into mob rule.

I’d love to hear your thoughts about the history of what the Fed’s role has been in this. And where do you see us in the West, autocracy versus democracy right now?

[00:07:21] Izabella

I’m so glad you picked up on my anacyclosis crazy. I’ve been a fan of the theory for many, many years. I did ancient history at UCL as my undergraduate. That’s where I really first came across the theory. I just thought it was fabulously elegant in many ways. The cyclicality of it; for those who don’t know, the basic idea is that power corrupts, and all forms of government are susceptible to these corruption forces. Whether it’s a monarchy and oligarchy, or even a democracy, over time the forces of corruption turn a good example of say, all of the three into a bad one. It’s the archetype you see in Star Wars or Game of Thrones, so that’s the neat summary of the of the theory.

Where we are now, I was commenting today in a piece I just put out in my rap that I think there’s a real schism in the kind of commentariat space, in general, with respect to whether we are as a Western civilization teetering on the brink of collapse. I think there are those who definitely think that there are forces of malaise and I guess, risk coming in such ways that the stability we’ve been so used to is under threat.

Then there are those who, when people discuss this, are saying, “Well, the problem isn’t democracy. The problem is all these other things, blah, blah, blah”. Whereas I do sense that is one of the problems is that just proposing the idea that democracy itself might be under threat, because of the system itself having become corrupted is a controversial point in and of itself. It’s all very well, saying, “well, we live in a democracy, blah, blah, blah”, but that doesn’t really cut it in from my perspective. The checks and balances that have been put into the system aren’t enough anymore to prevent certain powers dominating in ways that are undermining, specifically the middle classes, I would say.

Historically, it’s only a thriving middle class that allows for a good form of democracy. So once you remove the thriving middle class from the equation it’s very hard to retrace to a healthy democracy. Are we teetering back towards government influence over central banks? I think possibly, yes. That’s really the question on my mind, I think for Central Banks, is how independent are they these days?

[00:10:20] Cem

Yeah, I find it very interesting. I’ve actually pulled on a few of these threads myself. And I couldn’t agree with you more that the Federal Reserve ultimately has made it easy for government. They’ve been solving a lot of problems along the way. Which has relieved the pressure on government to build to a much bigger level. I think the government is now, with COVID and several other pressures, really taking the mantle.

I’m a volatility manager, actually, by training. We think a lot about and talk a lot about the mathematical kind of distributions of events. I’ve talked a lot about leptokurtic distributions lately and that is, fat tails. Essentially, my analogy (and what I like to think about, and I’d like to hear your thoughts) is there is a building potential energy within a constrained system. That’s been happening for a while. But that doesn’t mean the leverage or the risks haven’t been building. The question is, when do the constraints which have been, in my view, the Fed and liquidity broadly, when they get removed that potential energy has been there all along, but people haven’t really been thinking about it.

I think you talk a lot about that in some of your blogs about people, in finance in particular, who have been thinking everything’s normal. There’s nothing that’s changed in this world, but certain forces have been building for a while. The world is still a dangerous world out there. The energy is actually bigger than ever. Love to hear your thoughts.

[00:11:54] Izabella

I would agree with that. I think there is still this battle between those who perceive risk as fundamentally reducible. And those who see it as transferable only. I think those are due to clashes in the market in terms of how to deal with these things. I believe that definitely, the risk situation is,(from my perspective), we’re only transferring these pressures. Over time people belatedly realize this, but they’re always caught out because of this thing that when you’re in the group thing you don’t realize you’re in the group thing. Being one of the problems is the group thing, which emerges from the solutions. We create solutions, like for example, the 2008 crisis came along and we created all these regulations. We supposedly stabilized the system and made it stronger. Now we’re sitting there fairly complacent about that.

But have we inadvertently transferred that risk elsewhere and into different forms? We won’t know because, until the bubble bursts within those new risk zones, it will be hard to know. People in the bubble don’t realize that they are taking undue risks. That’s the whole point of the bubble. If you know what it is, it’s not going to be a bubble.

So that’s why with The Blind Spot, I’m always trying to look beyond what the consensus is saying. That makes me a natural contrarian. But I do think that the only way you can hedge against some of these unexpected future fallouts is that you really have to stress test not just the conventional risks, but the new risks coming from all sorts of different areas. My hunch right now is that this is where we’re stepping into a schismatic world where it’s going to be multipolar from now on. There is a perception, I think, that we, the West, can maintain our supremacy within that world or at least maintain a healthy kind of financial structure. I’m not sure that is a wise perspective, because I think the era where so much of the wealth that we’ve produced in the last 10, 30 years or so, the whole period of globalization (like intensive globalization), I don’t think we can simply go to a multipolar world and not suffer a regression. This will impact the stability of the financial system itself. That’s my hunch. Wherever it plays out that way, I guess we will only see it.

[00:15:05] Niels

I want to try and go in a slightly different direction. As I mentioned, there are so many directions we can go with you. I’d like to try and… I get this feeling that your sources and the things you’re going to be writing about on The Blind Spot are different to what the mainstream media has been reporting. So I would like (because I think for me, at least), a lot of the challenges that we see play out now, although they have been building up for a while, for me they became very clear during COVID.

COVID, for me, is kind of a starting point, in some ways, stripping out some of the bubbles like that we are seeing now. I would like to try and go back and ask you, now that we’ve got COVID behind us, to some extent, we’re not so emotionally involved in it. I would like to hear your analysis of where we are in that and what it’s meant. We can go from biosecurity, bio-warfare. We can go to Wuhan, we can go to Bobby Malone and censorship. I would like to actually also hear whether you’ve come across Robert Kennedy’s latest book. There are so many things I’d love to dig into. So feel free to start where you want and give us your analysis of the situation.

[00:16:27] Izabella

Yeah, I do think, for me, COVID was definitely a turning point in terms of how I see the world. I’ve been on a journey, myself, and I go through periods of optimism and periods of pessimism. I tend to be pessimistic when everyone else is optimistic, and visa versa.

With COVID, my personal journey that I was incredibly fearful in January and February when the original news was coming out. This is typical of me that everyone else was dismissing it at that point. And I was like, “No, this is huge. This is going to be a really big thing.” And I was the overreacting one. I was buying all the masks, and all the goggles. I was preparing for a nightmare. Then, as the system picked up with my mentality, I took myself off that cliff and I started to realize that so much of my fear was based on social media. I’m not saying there was nothing to be fearful of. I had COVID myself, I think it’s a serious disease. It’s obviously a major issue. Don’t get me wrong. But I do think that what made me second guess myself was the way we just collectively decided to take the lock down policy and not really review it or analyze it. That challenge or questioning it became taboo almost overnight. I found that very hard to digest. I especially found it difficult to understand where my colleagues were coming from.

As journalists, I thought it was our job to question things. And the kind of new universal compliance with the policy completely confounded me. As a natural contrarian, I just felt I had to continuously question this. I always thought that we would be kicking the can down the road. To some degree that view has been vindicated when you look at Australia and you look at sort of the zero COVID nations and you see that they haven’t really withstood the impact.

Obviously now, you see Shanghai and you see what’s going on in China. You realize that this lockdown policy wasn’t necessary. It was always in my mind completely mad. It seemed inevitable that we would have to face the consequences of the virus itself. Now, that’s not to say we weren’t to do anything. I guess I am open to the idea that we bought some time in terms of developing treatments and in terms of doing better protocols and all that.

So I can just about get on board with the idea of the first lockdown, but I still favored that Swedish approach. I didn’t like the “nanny” state mentality that completely eliminated personal choice from the equation. I like to think of the citizenry as being able to decide what they can handle in terms of risks, themselves.

I think the scandals that we’re now seeing with everything from Boris Johnson’s party gate to there was so much hypocrisy amongst the people setting these laws. Which just shows that the rules themselves, they were impossible to follow. So much of it was theater.

The other thing that grates me now is in terms of figures, in terms of death figures at least, perhaps not in terms of compared to the early 2020 period but certainly compared to the other intensive lockdown periods we’ve had, the new waves are still going. COVID is still a thing. But somehow, we’ve just completely switched into this mentality that it doesn’t matter. That to me proves how much of a media phenomenon and how much of a collective fear, brainwashing situation it was. Obviously there are still the fearful out there but a large part of society has just decided to move on now, and it doesn’t care. I find that quite fascinating.

It just proves to me that groupthink, that is exactly the same sort of thing you see in financial markets it’s the same groupthink phenomenon. That’s what’s dangerous, I think. We have not been swept up in that sort of massive way, really, since the Second World War. The last time that many people were encouraged to do something that was ultimately self sabotaging,(in my opinion), was the Germans during the Second World War. That might seem quite an extreme thing to say, but I think it was similar forces. These forces of, you think you’re doing something that is, in your tribe, considered to be the right thing and you don’t question it because it’s so part of the peer or the conformed view that this is the right thing to do. I mean, that’s quite a lot of rambling.

[00:21:58] Niels

No, I mean, sure. There may be some specifics I would like to dive into a little bit. But just when you say this thing about being asked to do something that you’ve been just told to do. Frankly, it seems like that’s a little bit what’s happening with these poor Russian soldiers who are being sent to a training exercise not knowing they’re going to war. We can think of the war what we want, and I think we all fall on the side of Ukraine, but we have to distinguish between the Putin regime and the Russian people because they’re not the same thing, in my opinion.

There are some crossovers. I don’t know. I have this feeling that you have some great intelligence and sources that we don’t know of. There are some overlaps because, for example, things like the COVID and the Bio Labs. Right now we’re hearing, at least Russia saying, and actually the US, we’re having Bio Labs in Ukraine. That’s one of the reasons why they went in. We have Hunter Biden’s laptop, which is being exposed, where there seems to be kind of evidence of that. What are you hearing on topics like that? And how do you think it plays into all of this?

[00:23:14] Izabella

Well, I think there were a lot of parallels in that, again, it’s this sort of collective mentality that is a group format. It’s some sort of group formation where we can’t really question what the consensus is, because if you do so you’re seen as some sort of traitor or saboteur, and you’re going to undermine your tribe, so to speak. So that’s the obvious parallel. In terms of the Bio Labs, again, I find it fascinating how what seemed to be quite logical questions are seen as taboo and how the media complex constrains any questioning that challenges the sort of established narrative.

I’ve come up with a theory about that, which I would call the kind of media segmentation theory. But before I explain that, I’ll just say that the same exact thing happened with the lab leak theory with Wuhan. Any questioning that it might not be of natural origin, it just wasn’t allowed, like nobody even raised it. When I brought it up, internally, at the FT, I was one of the few people pushing for it. I felt because I wasn’t privy to all the conversations, I felt very much that when I had those conversations with senior editors I got the impression that no one else was pushing for it because of this fear that they might be deemed a conspiracy theorist.

I am very confused these days as to what is the difference between a journalist and conspiracy theorists. My job as a journalist is to question things and to question and find evidence. Obviously, it’s not to just make random connections without any evidence. That’s not what we’re doing. But I don’t think that’s what we were doing with the lab leak theory. We were, as I explained to the editors, I felt there was a really important investigation to be done, whether it was to debunk the idea that it was a lab leak or whether it was to confirm, or to keep the idea open. It didn’t really matter. The point was that there was enough evidence, enough circumstantial evidence to merit an investigation. Yet everybody was shying away from it.

What’s really interesting about this sort of groupthink phenomena is that once the tide turns it becomes like the once Overton Window expands and allows for this taboo shop topic to be talked about, then it’s all in and everybody goes for it, and it’s fine. We almost forget that it was taboo to talk about it just six months ago.

The other point was why is this happening? My theory is that the social media landscape has changed the way we communicate. Not controversial, but sensitive information these days. In the old media model we had a free press in the West, of course, but it was always segmented, which meant that the news targeted different sorts of demographics, and it packages the news in very different ways. It would, you know, like the tabloid press would, if it was to break controversial stories, it would still put them in a way that was understandable. People would go on the journey relative to their demographic sort of cliche.

This is why the financial press got a reputation for being the truly kind of truth speaking one because the financial press was seen as ambivalent to the politics of everything because business people just want to make money. And so business people can’t afford to be biased, they have to be dispassionate about all these things, they just need to go where the money is going to be made. This allowed for the financial press to sort of be very matter of fact about things that say, the more popular press might not be able to get away with saying without causing a massive, like hoo ha, or some sort of storm.

With the internet and with social media, especially, that segmentation has broken down. So, even the financial press has to think about the possibility that they’re ( I’m not saying they’re not writing what they consider to be the truth), but they have to think about how it might be received by the lowest common denominator. I don’t mean that in a pejorative sense, I mean, it in the sense of like, the least informed demographic that doesn’t necessarily follow the topic in hand. And that could be, for me, if there’s some news of pop music, blah, blah, I’m the lowest common denominator in that. I wouldn’t know what’s going on in the world of music. So, I’m just trying to neutralize what I’m saying there, that in terms of the knowledge base of the recipient.

As a result, everyone has to kind of walk around on eggshells and create content that has to be very, very careful in case it’s taken the wrong way by people who don’t have the backstory. That dumbs down the entire cross section of news because everyone’s on the internet. So then (and this sort of maybe is a bit self promotional), I think the only way around that is to then regate things. You see that with Twitter and all the social media. The censorious nature of it, it’s these forces of segmentation trying to get back in there and sort of say… It’s that old cliche of Jack Nicholson and a few good man, “You can’t handle the truth.” So, we’re going to have to compartmentalize and Twitter is too broad a public forum to really allow for any kind of unconstrained discussion.

If you are prepared to pay and prove that you’re an informed person in this particular field, then behind the little gates that we’re now creating all these independent, bloggers and independent media, they can, because they’re speaking to their own audience again, it’s the return of segmentation that allows for truth speaking. So I think the future of media is going to be, it’s sort of this eternal cycle of consolidation, fragmentation. We’re now fragmenting to re-segment to bring these segments back into the media so that we can tell the truth but in a controlled way, because the broader population can’t handle it, so to speak. That’s the perception, I think.

[00:30:25] Niels

Yeah, and I agree to a lot of that, and I, but I do think that, unfortunately, I think that I’m not so sure that media will ever be the same after COVID, frankly. Also, because there’s so many other things that we learned during COVID, such as how to control a crowd, as you rightly said. China, obviously, is doing that very effectively, right now, using mostly, I think, technology that’s developed in the Western world. We saw, even very close to home, some pretty extraordinary measures, like in Austria with their COVID policies.

We’ve seen, now, things happening in Canada in the last few months, which is, again, something that I don’t think we would have seen five years ago, but now we have these extreme measures. So democracy is changing. And I fear a little bit for the children that we have put into the world, that it’s more going to be like the rules they’re going to live under than the rules we grew up under.

Just before you jumping in, Cem, here, and it leads me to a question which I haven’t thought about much myself. So I’d love to hear your thoughts about it. We often talk about these shifts in economics, you know, cycles, and obviously we talk about demographics as well. But shifting culture; for me, this is a shift in culture, if I can put it like that. I wonder what a shift in culture like this actually does to economics, if I can put it like that. Have you ever thought about what the economic impact of a shift in culture like this can have?

[00:32:13] Izabella

Oh, yeah, 100%. I mean,economics; I would say there’s 90% of the stuff in economics that everyone agrees on, and then there’s 10%, which is highly politicized, and nobody agrees on. So, it’s that 10% margin that makes all the economists on Twitter hate each other, from the different schools. What I think, with the culture wars, as they end up kind of being applied to the field of economics, that 10% is kind of becoming increasingly polarized.

I think you see that already, to the point where what were perceived as legitimate schools, like, look, neoliberalism or laissez faire concepts are going to be seen as extreme. It’s already taboo to say you are an Austrian economist. I think that is not a good place for debate for academia, whatever you think of that. I am the sort of person who thinks there’s a little bit of truth and a little bit of wrong in absolutely all theories. Yeah, I like to analyze all of them. I always learn from all sorts of theories, I don’t like to just completely close my eyes to an entire field. That doesn’t mean I’m not going to critique it.

Where that leaves us is in the sort of economics where just like in journalism, we ended up with one sided journalism, you’re going to end up with one sided economics. Well, we’ve been in that situation before. The USSR is a very good example of one sided economics. And my mother, for example, she’s now passed, so she won’t mind me telling you this, she did an economics degree at SGH, which is the Warsaw School of Economics. It’s basically a very illustrious university these days, and the equivalent of like the Polish LSE, so to speak. Even though she had a master’s in economics, when she came to the UK in the ‘70s, she did not use that on any of her credentials when she was looking for a job because she was embarrassed. She thought that people in the UK were just going to think, “I have a joke degree because the economics I’m learning is a one sided economics. It’s Marx’s space. It doesn’t like accept free markets, it doesn’t accept any of the conventional doctrine.” She basically said, “This is not a real economics degree,” whatever.

What she found fascinating, many years later, is that all her fellow economists from that year, they had no trouble using those credentials in the international sort of market. So you had this situation. More people had been heard taught who’d been taught communist style economics ended up being accepted in the sort of international economic community as if they had learned like the broad brush economic space. Many of them will have probably adjusted and adapted and self learn, you know, evolved their thinking, but a lot of the older guys won’t have done so. There are these massive knowledge gaps that appear mainly because by the time you’re in your 50s, you’re not gonna admit that you didn’t learn the basics of DSG, or whatever, because it wasn’t like part of the syllabus in that system.

So, that’s why I worry is that we will end up in this one sided economics, educational environment, which will make it not just taboo to think about free markets. I’m not saying I advocate unconstrained neoliberalism, free markets, whatever. But I am just saying I’m worried that is totally off the table. I don’t think anything should ever be off the table, because then that will impact the real world. Of course, where did the thinking in communist Poland end up, or the USSR? They ended up in a system that, frankly, self imploded because of the economic misallocation. So that’s the risk, I think.

[00:36:25] Cem

Yeah. To go down that path a little bit more, you know, I don’t think we can talk about economics without talking about the Fed a bit more. We’ve had one side economics essentially for 40 years, which is supply side monetary policy driven economics. So, it has been free market economics on steroids. It has created a technological revolution. It’s created an infinite supply for capital. That has actually been a great thing for supply but created a slightly deflationary environment, which led to more of the same that now, I think, has led to a lot of inequality over that 40 year period. I think that’s pretty well established at this point. The question is, is that opening the door for the other side now being overly dominant? Is the pendulum now going to swing too far the other way? I mean, I guess, I’d love to hear your thoughts on where we are in terms of regime change, the Fed monetary policy, etc.

[00:37:29] Izabella

Well, I think that’s exactly it, I think we went too far one way, and then now we are sort of over correcting and going too far the other way. I’m also concerned that, in a perfect world, you get those undulations and one keeps the other honest. That’s the whole beauty of having an open debate situation or free system where you can regulate again. So actually, a good comparison is shadow government, like a shadow. Here in the UK, obviously, we have the cabinet, but we also have the Shadow Cabinet, because that’s how we keep the core government accountable. And there’s a sort of alternative that’s pushing back against it and offering different ideas.

We also had it with COVID, we had SAGE, which was like the policy making division in the government, the advisors, but we also had shadow SAGE, which actually ended up being even more extreme. The idea being that it’s good to have this sort of undulation between one and the other; a devil’s advocate for the defense as well as for the prosecution. So I think that’s where we’re going.

The problem is that the undulation is swinging more and more erratically, and more extremely. Whereas we used to be sort of just (if you think of it visually), undulating about a centimeter from one to the other. We’re now like, in the meters, you know, so we’re going from one extreme to the other extreme. I worry that now, especially, we will have this kind of period where governments will become increasingly influential over money markets. I’ve dubbed it, specifically with reference to the US, I’ve dubbed it sort of the end of the neutral dollar period.

Of course, that’s a misnomer in some ways, because it’s not like the dollar hasn’t always been political to some degree, like it represents free markets, free system. That’s political. Don’t get me wrong. Certainly the US government has always been a political beast even in the ‘80s and 90’s, whatever, and in the standoff with the USSR and the Cold War.

What I mean about the neutrality of the dollar is that there was a separate sort of ecosystem for the dollar as a medium of exchange, which was fairly neutral and totally depoliticized. That was in the euro/dollar market and the offshore dollar. Where really the dollar could be transacted by anyone, whether they were an enemy of America, or friendly country to America, or an unfriendly country didn’t really matter.

In fact, to the contrary, we were quite happy if, say, the USSR started using the dollar as its second currency, because we saw it as a sort of mechanism to infiltrate a closed system with an open mechanism. So, the dollar would then undermine all those capital controls and open the system up. It did in many ways, because absolutely every single corrupt official in the USSR had a $1 account in Switzerland. That made them have an interest in opening themselves to the Western system.

So now we’re doing the exact opposite, which is that we don’t want the dollar to be touched by anybody, even our enemies, and we’re going to do our best to completely withhold access to it. To the degree that in some ways, with respect to the Russia Ukraine crisis, it’s Russia that is moving ahead of creating a more free and transferable medium of exchange, which is the ruble. This by simply saying you have to hold rubles to be able to buy our oil, that opens up the capital account. It’s saying, we want to sell you stuff for rubles.

I find it a weird shift in positions by the US and Russia. I think that’s indicative of the fact that we have learned that there’s more to a functional system than just a free market. We have to have principles and a level playing field. I actually do agree with that, but I’m concerned that that level playing field and those principles are going to be pushed upon the system from the top down, as opposed to, I think a better mechanism is from the bottom up – an organic system, which is community led, where we create principled interactions based on common community values. I think that would be preferable, because as soon as you get the government telling you what your principles are supposed to be, that’s not going to work. That’s when you start to emulate actually, the old systems of the USSR, more so than actually anything resembling a flourishing, free market system that is based on trust and a level playing field.

[00:43:16] Cem

Yeah, there’s this great irony of having to protect liberal democracy by force. Those two tensions are…

[00:43:25] Izabella

I’ve termed it like liberalism for liberalism. It’s kind of crazy.

[00:43:31] Cem

Do you think that, you know, the seizure of dollar assets, etc, all the economic warfare that we’re amidst right now, do you think it in any way leads to (and this is the 100 trillion dollar question), leads to a decayin the exorbitant privilege of the dollar?

[00:43:50] Izabella

Yeah, I certainly do. I think it’s, unfortunately, a much underappreciated point in policy circles actually. I think there’s no doubt that if you want to be the go-to reserve standard for the world, you have to be neutral. You have to turn your head away from bad practice because otherwise you won’t be able to be the currency of commerce.

I studied ancient history. So I will look at a lot of things through an ancient historical perspective. At the end of the day, what is a trader, an international kind of Privateer, or anyone involved in international commerce is somebody who is just looking at the business side of the equation. They just want to look at two different systems, of totally different political ideologies, like whether it’s the Spartans and the Athenians or whoever. They might not agree politically, but each of these different zones have their advantages and their disadvantages.

The Athenians will need X and they have too much of Y. A trader, a person of commerce, can interact only. They can become an intermediary, a common intermediary only if they don’t care about the politics of either side. They’re just purely pragmatic and they can see an opportunity to make some money.

They need a neutral currency of exchange to be able to talk to all the other people interacting in that sort of commercial space. It’s the language of, you know, it comes from, I mean and I hate to say it, but it comes from like the era of pirates, and privateers, and sort of unshackled, you know, enterprise. That’s what people needed. In those days, it was gold. It was usually some form of precious metal that was seen as totally apolitical. And that’s why there was a preference for it. And that’s not to say fiat currency was never used. But that wasn’t the normal common denominator between all the different zones. The dollar became that common denominator because precisely there was this amnesty or sort of diplomatic immunity to who held the dollars, we didn’t care. We would respect it. That’s gone now, I think. It’s not just gone because not so much because of Russia. Actually, I think the Afghanistan precedent was much bigger, because that was a direct confiscation, essentially. There is going to be some due process in terms of reallocating the Taliban money. But it’s already set a precedent unlike any before where you have a Central Bank, that they can’t trust that foreign exchange deposits are going to be there when they need them. So yeah, I think that is quite significant.

[00:47:00] Niels

It’s quite interesting when you sit there and you describe what is needed and this kind of forum of neutrality, and what could a “global currency” be? It reminds me of when I was listening to a panel that your friend Pippa Malmgren attended a few weeks ago at the Government Summit in Dubai. She was sitting next to or she was on a panel with I think the Saudi oil minister. And what you described, in terms of not getting involved in these kinds of politics, was exactly how he described OPEC. As soon as they walk into that room, even if Russia is part of it, the Ukraine situation does not enter into their discussion. And even Iran and Iraq, and Saudi, they are enemies, they throw drones at each other. But still, when they go into that OPEC meeting that’s not part of the conversation. It’s very interesting to make those parallels actually.

[00:48:05] Izabella

Yeah, you need a neutral common ground like that is the first rule of diplomacy. You need to be a diplomat as opposed to having this common respect for all the other diplomats. I mean, that’s the first rule of diplomacy, and we lose that. And I feel we will. That is going to be problematic.

I think even in the Cold War, there were trade channels that were open. It’s not like all trade was completely killed off between the USSR and America and the West. And I think there was always a practical underbelly to itt. That’s a good example of the thing that couldn’t really happen these days, because of the internet. If there was a bit of discrete state to state trade because of essential goods that are needed, but you know, essential swap of goods to the benefit both countries. That would leak into the popular press and become too controversial. Therefore, I suspect that even that sort of real politic becomes much harder to enforce in the current situation.

[00:49:25] Niels

Sure. And you could, of course, argue that in around 1973 or 1974, perhaps, encouraged by Kissinger, that oil became the de facto backing or how to back the US dollar, rather than gold. Which obviously, it had stopped being a couple of years earlier.

I just want to throw in one thing because we were talking a little bit about the Russian, Ukrainian situation, and I just wanted to hear your thoughts on this. At least in the media, it’s often presented as Russia having a very weak economic or economy as a result of all the sanctions, ect. ect. So that’s kind of how I feel that it’s being positioned.

On the other hand, if you think about in terms of the West having all the leverage, but if I’m thinking about all the things that the Western world has decided to do, in kind of a U-turn, in terms of policies in the last six, seven weeks, and what it means in terms of costs for the Western world; in terms of further emergency packages. On top of all the COVID stuff we did, and also that the rising interest rates and rising inflation, it does seem to me that the West could actually be in not as advantageous a situation as you would think.

So I just wanted to hear your thoughts and that kind of “power balance” in terms of Western economics and the Russian economy right now, given what you’re seeing and hearing from your sources.

[00:51:08] Izabella

Oh, I completely agree. I think it’s really undemocratic what we’re doing, actually, because I don’t think we’re consulting our own population on what will be quite horrific consequences if we go through with this policy. During the oil embargo in ‘19, in the 1970s. Nixon actually was hoping to get the American population on side. There’s this incredible video of him speaking to the American people and saying, “you know, because of X, Y, Zed we’re going to have to really sacrifice, we’re going to have to have no driving on Sundays. And we might face shortages, and this and that”. And there was this quiet hope that the American population would get on side. But in the end, that didn’t last very long.

America effectively capitulated and OPEC became the established norm and that this massive transfer of power and wealth happened in terms of Saudi Arabia. Specifically, we transferred all of his power to the Middle East. So I think in this situation, it is sort of a self made embargo. So it’s not at the hands of a third party… well, it is obviously, indirectly it is, but we are the ones that are pushing the embargo on ourselves, which will make it hard to enforce.

Now, theoretically, that will make it harder to enforce in the black markets, so to speak. And there’s already news about how lots of ships are loading Russian cargoes, but being very discreet about their identifiers. And so there’s already a push towards that.

The problem is, in this day and age of hyper transparency, how long can those sort of underhanded mechanisms survive? I think it’ll be a bit like with COVID. Where we’re going to be very hysterical about any kind of breaking of the sanctions for the next year or so. Then there’ll be the direct impact on our quality of life that comes with it. And then slowly, we’ll just pretend like when, say the black market is or some companies decide to take a bit of a risk and trade it or accept Russian cargo will start turning a blind eye to it. Because we will get sanction fatigue eventually.

That’s my very cynical take on the sanctions. I think they’ll last. You know, we’ll do this big virtue signal, they’ll work then our own populations will really suffer. We’ll see shortages and the electorate will not get behind it. People will start losing elections.

I mean, it could be like when you look at France, there isn’t really an alternative that is digestible, so McCrone gets to stay no matter what, because the alternatives are not really acceptable. So maybe, the electorate won’t have an option to vote its way out of sanctions. But I do think there will be a reticence once the real impact hits. The real impact is going to be massive because even though Russia is obviously not as significant as any of the G7 in its GDP, the key point is that it is one of the top exporters of commodities, food and wheat products in the world.

The equity in the Treasury markets and the bond markets like to sell commodities are just tiny, relative to the rest of the financial market. What they neglect is that commodities are the input, they are the core sort of life… They’re not the lifeblood, they’re the oxygen in the lifeblood. So the lifeblood is all the other stuff. It’s like the equities, the bonds, all the financial complex securities that we have. Commodities are the oxygen that the system needs to carry around itself to ensure the other stuff flows. And if you remove the oxygen, it doesn’t take very long for the entire life blood and the entity itself to essentially die. So that’s the metaphor that I’m using.

But I think we have really underestimated, it’s not the numerical kind of financial dollar value of the commodities that matters. It’s how they interact with the rest of the financial system. They are literally at the key input. It’s out of commodities that all the other stuff in the system is made and depends on. So, yeah, that’s my view..

[00:56:17] Niels

Absolutely. It reminds me of a quote I heard. I don’t know who came up with it. But someone I think just said that, “the Americans are ready to fight the Russians until the last Europeans and will probably be the ones who feels the pressure first”.

[00:56:34] Cem

Yeah I think commodities is an interesting thread to pull on here. There’s a lot. Many argue, that one of the most important things that’s happened, the last 20 years, is the shale revolution in the United States and the energy independence that’s happened in America.

That energy independence has freed America from dependence itself, not Europe, obviously, and not Western liberal democracy. It’s what has allowed the US to step away from the world stage in many ways, and become a little bit more egocentric. So, it is also, what you can argue, continues to make dollar dominance, I won’t say it is indisputable, but from a practical standpoint there are very few countries that have everything. They don’t have negative demographic trends that have the commodities, etc. and that underpins, still, dollar strength, nevermind rule of law, etc.

I’d be curious to hear your thoughts on the shift in commodities, particularly to US’s role and also, just to be polemical, if you think the practical realities of America and what underpins the dollar, ultimately are strong enough to counteract the moral high ground we’re giving up in your thoughts?

[00:57:59] Izabella

Well, it’s an interesting point you made, I do see what you’re saying. And I do think that certainly shale and energy independence does make America a more independent and isolation prone entity. That said, in terms of the politics, in terms of the push from government circles to interfere, not interfere, but sort of influenced the politics of outsider countries, I think that remains like the neocon perspective on the world that we have to sort of export democracy and freedom. I don’t think that’s gone away.

The question is whether the world is going to be as receptive to those messages with an isolationist America, because you can kind of see an interdependent world how and why it makes sense for America to export democracy to its trading partners. People who are trading with America want to operate on the same standards. All of this encourages the $1 standard because that’s the underpinning force for the dollar standard is the trade with your counterparts and your trading partners. But if you’re becoming more and more isolationist, that goes away. So, I think by definition, an isolationist America undermines the dollar, even if it strengthens it, in theory because America is strong, that’s not what makes the dollar standard.

The dollar standard is as much a function of how happy people are to accept it for trade and exchange, Which has to be a function of neutrality and the fact that even the enemies of America are going to use the dollar, and a function of a continuous flow of dollars from America abroad. If it becomes isolationist and doesn’t have to trade with anyone, well, that flow extinguishes itself.

So the petrodollar, which was one of the main throughputs for dollars into the international system, that dies. And that undermines the kind of sheer volume of dollars circulating through the offshore system and will naturally undermine how much of a presence it has in international reserves. So, I think there’s a paradox in that situation. Of course, if you think about how America came to be the flagbearer of the dollar standard, or whatever. It came through losing its independence. It came through, effectively dropping its isolationist attitude and joining a war. It came as a product of Lend/Lease. It came as a product of showing to Europe that it was prepared to invest in Europe after the war as well and not worry about the consequences of whether it will get repaid. That was not an isolationist perspective, and those are the foundations that brought us the dollar standard..

So we are literally reversing those. That’s why I’m a bit more skeptical of those who are saying, oh, no, no, the dollar is never going to like, you know, this is all rubbish about the decline of the dollar. I don’t think it’s the decline of the dollar per se within America or whatever. But on the international trading sector, I do think we’re going to be multipolar. That’s not to say that the yuan, or the rubble or bitcoins are going to be better than the dollar. I just think we lose that neutral clearing point altogether, which will add cost to transactions and just general commerce overall. Traders, if they lack a common ground, they’re going to have to add a premium for the risk of not knowing the common cost of everything. So that naturally is going to impact inflation. So that’s my view of it.

I don’t I don’t think a multipolar world is a world where inflation is kept in check. I think a multipolar world is one where there are continuous sort of bouts of shortages and imbalances in the market that feed inflation because you can’t get that common valuation the way you would do. You have to continuously create these big arbitrage opportunities to incentivize the traders to come in and take the risk.

[01:02:52] Cem

Yeah, to use your analogy, from your blog, of the British Royal Navy underpinning the strength of commerce of an empire in Britain, isn’t it ultimately (and you just spoke to the dollar dominance coming out of World War Two), isn’t it really ultimately though, power, that and strength and creating order, in a sense, that power that ultimately led to that strength in all those environments? I mean, in a way, the strength is more important during times of bifurcation. During times of instability, people are looking for a bigger, sturdier ship or who’s that Navy that’s the strongest that’s going to protect our assets and allow for… I’m being polimical here, I guess. There are two sides to every story.

[01:03:48] Izabella

No, I think you’re right. I mean, I think ultimately, strength matters. But certainly the American NATO military complex is second to none at the moment and is likely to stay that way. But that doesn’t mean in an isolationist world you can have the biggest army in the world, but if you’re not prepared to use it is kind of meaningless.

That’s what we learned from the Second World War. Was that we needed to break America’s isolationist attitude to get it to act at all. So actually, it’s quite a funny story with respect to how the British role that fake news played in that entire episode, because it was the Secret Service. The UK Secret Service that apparently came up with a fake map of South America and some fake plans about how Hitler was planning to invade South America that ended up pushing, or at least persuading FDR that. I think it was a South American plan that ended up helping as well as obviously, Pearl Harbor. But in the end, it was a lot of skullduggery that ended up pushing America into the war as well. For noble reasons, don’t get me wrong, but we had to work hard to do that.

So in a power, yes, absolutely, we retain the power. But unless we’re prepared to use it, and at the moment, we were pushing aside the kind of raw power of it and focusing more on the economic warfare. But economic warfare can only go so far. And eventually, you’re going to starve a system out. I think this is when you look at the Second World War, you look at the role that oil and acquisition of commodities played in that war.

I think you’ve got NATO and you’ve got power. But do you have the commodities and the rare resources that are needed to continuously power that military? That’s the bigger question, and yes, I’m sure America’s self sufficiency will help, but it doesn’t have self sufficiency on a lot of rare materials and resources that are also very necessary to maintain that dominance. One of which is a lot of materials that are used in nuclear generation and in ballistic missiles.

More generally, there are a lot of commodities that the Western system is lacking, actually, relative to Russia. And we might not have necessarily heard that much about, say, the shortages in noble gasses like helium or neon, all of which are essential in the making of semiconductors and ballistic missiles, in rocket launching, all these other kinds of exotic technologies that are needed to maintain the military industrial complex. So one hopes that necessity is the mother of invention. So perhaps there is a workaround. Certainly, there was nothing like a World War to incentivize innovation. Think of what came out of the Second World War. But at the moment, I’m not sure it’s as clear cut as perhaps the market is assuming.

[01:07:27] Niels

You talked about de-globalization. I know we have to start winding down. We don’t want to keep you all afternoon, even though we would love to do but we will respect your time, of course. But you talked about de-globalization. I just wanted to ask you one thing, because I’m sure this is an aspect of the financial world you’ve been following and writing about as well. And that is, because Peter Zeihan, our previous guest, talked about, well, we actually have to kind of play the whole game (not game), but the way things have evolved in the last 30 or 40 years, we now have to start playing that in reverse. So my question is, in a de-globalizing world, what is the impact, do you think, on things passive investing in index funds, which have been kind of in our world a very dominant trend, so to speak, in the last 10-15 years?

[01:08:16] Izabella

Yeah, I mean, I’m not sure that Index investing is going to suffer from de-globalization in and of itself. It really depends on more. Index investing is now more influenced by factors like ESG. If ESG extends itself to ESGA, as I’ve been saying, adding A for ally, that limits where retail investors, all sorts of investors can put their money. It should, in theory, create a bifurcation where we’ve already seen it with like, the Russian ETFs, ect. obviously falling out of favor and suffering massive outflows relative to that. That money has to go somewhere. Right?

So I think, I don’t see an immediate impact other than, winners and losers based on how, if you’ve got an ETF that is focused on global growth in some way, that’s not going to do well, but say the kind of domestic giant tech companies that will continue to do probably quite well. So again, it’s about selectivity and picking. Maybe stock picking will make a comeback because you’ll have to pick the companies that are more effective as sort of reshoring or friendshoring, as Janet Yellen has called it. The overall effect on index funds, I think it’s going to just be up through the price level, isn’t it? It’s going to be through whether the equity prices, in general, are going to keep up with inflation. Certainly one thing to bear in mind is that equity markets, wherever there has been uncontrolled inflation, they’re very favorable environments because where else do you put your money? My view is you don’t want to buy debt securities as much as you want to buy equity because you want to invest in real companies and essentially anything that can hedge your inflation risk. So, that would be my instinct, but I haven’t thought about it enough.

[01:10:56] Niels

No, no, that’s completely fair. And I do like your reference to ESG. And I would also have thought that some of the things, and I don’t want to sound too political here, but just some of the things we’re seeing in China right now, I do think that the G must be in trouble. Simply and yet, we still see a lot of funds actually being raised for the hinese. I think I’ve always had difficulty with that, myself.

[01:11:23] Izabella

One thing we might talk about is that there is this fundamental clash between the E and the S and the G. Right? One of the best examples of that is the solar market where you will want to invest in solar companies, because it’s E, but what if those solar panels are being made by slave labor, by Uyghurs? That compromises on the S, and, and to some degree on the G as well. So, which one of those is going to be more important? So, I think the bundling of ESG together (and some might say, the A falls under G anyway), but I think that might face a reckoning.

I think there might have to be a rethink in terms of what qualifies. Are we going to be more focused on the E, in which case, it shouldn’t really matte whether it’s an enemy state, so to speak, that’s making your solar panels or whatever; at any cost, even slave labor is okay. That’s the mentality, or it’s the wider bucket of things like, yes, we’re worried about climate but we’d rather maintain core values and not exploit people, blah, blah, blah. But that is a luxury, right? So it’s either we are principled, or we are in a save the environment at all costs kind of situation. The E, I think, is fundamentally in some ways, an ends justifies the means mentality.

[01:13:10] Cem

I mean, that’s an astute point. I mean, to continue on that a little bit. If you look at what’s happening in Europe, right now, with the energy crisis, many, many people are pointing to ESG investments over the last decade as a major driver of the energy crisis that we’re seeing in Europe. Many argue that it’s unsustainable, and many argue that Russia’s feeling of being emboldened and the actions that are happening now, in terms of bifurcation are ultimately and for many reasons, because of a lot of that energy policy. Speaking directly to how these two things can be diametrically opposed, how much of that do you agree with and what do you think the path forward is in terms of energy policy?

[01:13:55] Izabella

I totally agree with that. I think we have been very naïve with our energy policy. I think our net zero entire framing of Net Zero is completely naïve. The architects of that policy obviously know nothing about basic supply and demand and environment and economic stability. I’m actually quite appalled by what’s happened on that front. It was always clear to me that the transition has to be funded, so to speak, by an interim period of nat gas consumption, where nat gas becomes increasingly the dominant fuel. Only nat gas, only a fossil fuel can really sustain the base load requirements that our system needs. With renewables just the technology isn’t there.

In fact, the other day I was listening, I don’t know which minister it was or some industry lobbyist, whatever speaking on the radio, and when pushed on these exact points the only thing that she could come back with was, “well, you know, hopefully in a few years we’ll have the technology”. I was like, well, it’s like jumping out of an airplane and knitting your parachute on the way down. That is not a way to manage these things. If we are going to be humanitarian about it, what is worse, a nuclear crisis or a nuclear war or climate change? I mean, both of them have their own consistent existential risks. So, you have to balance out. I guess you have to grade your different existential risks.

I’m a bit more concerned about nuclear war than I am about environmental climate change. Not to say I’m not concerned about climate change, I am very much. I’m very concerned about pollution as well. I think you have to be realistic, and the nat gas situation is just absolutely shocking horror, because it was always clear that we would have to have this interim period.

And I don’t know what they were thinking. In the UK, specifically, they cut out all our storage. So that means the big facilities we had for allowing nat gas to be accumulated in the summer to bridge the imbalances over the winter that was gone. The idea was that we could depend on international LNG markets instead, well, this is very equivalent to the financial system; the wholesale markets idea of that brought down Northern Rock. The idea was that you didn’t need to have your own long term secure funding, you could just get it from the market if you really needed it, and then the markets just closed up and there was none there to get.

So that is equivalent in the nat gas field. It was just not going to be a very prudent approach, and then on top of that, we have under invested in that gas development. We’ve under invested in the assets that we have, whether it’s the North Sea or Shale gas in the US. I think, obviously, that was always going to give the countries, that don’t care about climate change but care more about power, a mechanism by which to gain international leverage.

That’s exactly what’s happened. And Putin was no doubt… In my mind, it seems obvious that he probably was very happy to see all these environmental movements or even fund some of these environmental movements, because it was clearly going to work in his favor in the long run. We would become less resilient to the possibility of removing ourselves from dependence on Russia. So, I don’t buy this idea that this accelerates our move to renewables because that is the other thing you hear a lot. I think that’s very naive, because if it does it, maybe it will happen in the long run.

Like I said, necessity is the mother of invention, but what will be the collateral damage in the interim? And I’m very concerned about this winter, I’m even more concerned about the winter afterwards. A shortage of energy to heat people’s homes leads to actual death as well. So yeah, I’m a bit worried. I do agree with the general perspective, though. This was us shooting ourselves in the foot. We haven’t even discussed Germany, which was even more… To shut down its nuclear power generation this year…

[01:18:53] Cem

Yeah, the nuclear threat is what I wanted to pull on. It seems like we do have a solution. The solution is, you need time now to wind it back up. But the big question for me, to your point of Nuclear war or environment, what do you choose? Well, how about nuclear power as a solution to nuclear war? I mean, it seems like, particularly in Germany, obviously, France gets the majority of its power from nuclear.

But it’s always fascinating to me that in Europe, which doesn’t have the natural resources, that there’s such an unwillingness to make that investment in nuclear power and the move away from it given it’s twice as cost effective than even carbon based resources. So I’d love to hear your thoughts on nuclear and if you think there’s going to be a nuclear renaissance given it seems to be the one kind of breaker, other than coming up with new technologies or faster ways of doing it. And if we’re talking about going to Mars, I think we can control the potential fears and fallout of a nuclear reactor.

[01:20:04] Izabella

Well exactly like, if we can control a virus we’ve locked down, which we can’t, obviously (hat’s been proven), it’s very unlikely that we can constrain climate change immediately with a policy of cold turkey, fossil fuel kind of elimination. It’s the same mentality of this incredibly blunt mechanism to deal with an imminent crisis, but not at all thought through in the longer run. We need more subtle measures, ones that create incentives; carrots, as well as sticks, so to speak.

On nuclear, there is a lot of innovation. Because nuclear was so unpopular for so long because of Chernobyl, because of Fukushima, etc., the one in America, Three Mile, I think it was Three Mile. Yeah. There hasn’t been that much innovation in that space. But now, finally, we’ve got a lot of innovation. There’s a lot of interesting and encouraging technology in the micro nuclear generation field or in the battery kind of model where you don’t necessarily have to have a reactor that operates in the classical sense. So there is no risk of meltdown, because these new power generation mechanisms effectively charge down.

I’m not in any shape or form a nuclear physicist, but from what I understand that the risk of nuclear meltdown is just not there. So these are all really interesting technologies, which were sidelined for unknown reasons. I think it’s absolutely crazy that we haven’t been looking at these in a more sensible way. And it seems, again, to be mostly ideological, because it’s so connected to the anti-war and anti-nuclear proliferation movement in general. And there is this concern that nuclear is very elitist, not elitist, but it’s like a Western, non developing country friendly technology, because we would never trust developing countries to have nuclear plants or whatever.

But I think that we have to find ways around those problems. And, certainly, there is enough potential now to generate different designs and nuclear power plants to merit further investigation, and certainly those countries that don’t have consistent sunshine or wind. It makes a lot of sense to look at nuclear for those countries.

[01:23:12] Cem

Maybe that’s The Blind Spot.

[01:23:14] Izabella

Yeah, I’m very much pro-nuclear, but the conventional plants, unfortunately, take up to 10 years to make. So that’s a long time to get all the permits. There can be a little bit of acceleration in terms of the bureaucracy of it, but in just basic development and ‘not in my backyard’ mentality has to be overcome for these plants to be built in the first place as well.

[01:23:44] Niels

It’s just interesting. It’s a really interesting topic. And actually, Cem and I are going to dive into natural resources and energy in a full episode coming up very shortly, as well. And I think it’s going to be a topic we’re going to be talking about for a very long time.

Although I live in Switzerland, as a Dane, growing up in Denmark as a kid, I always found it very interesting that the Danish anti-nuclear movement was very, very strong. Yet we ended up having a nuclear plant 15 miles from the capital of Copenhagen, because it was in Sweden.

So I mean, completely crazy policies. Of course, you’re right it takes about 10 years to build these plants. And we would expect our policymakers to be ahead of time thinking about what we were going to be needing in 10 years time and, now we find ourselves in this crazy situation.

I have two small questions left so that we don’t take up all of your time this afternoon, Izy. You said earlier on that you were fearing the winter coming and maybe the next winter coming, and I was just curious. Are you a little bit of a prepper? That just seems to be becoming a term now, mainly in the US, but I think even in Europe now. I heard a Danish podcast this morning about prepping and I thought “Wow, I’ve never come across that”.

[01:25:04] Izabella

I am, I guess. I am definitely the person who plans for all eventualities. So, when I go anywhere, I like to figure out an escape plan. I always like to hedge myself with respect to know if this doesn’t go this way, then maybe I have a contingency here and there. So I’m big into contingencies. I’m not necessarily convinced that I’ll have to use them, but I am a prepper in the sense of wanting to have those things just in case. At the same time, I have to say that my rational head (like that’s very irrational, kind of like animalistic, panic fear), but my rational head always concludes that in an actual crisis, all that prepping is likely to be useless unless it happens on a social level.

In a real crisis, what really gets you through it is the networks that you have, and the access to the networks, and you’re standing within those networks. So, if you have a good reputation. If people can trust you or if you know four or five doctors. You need to know the right people with the right skills. It’s the network that’s going to help you, not your own individual kind of Scrooge McDuckkey sort of attitude. There’s just no way, no matter how well prepped you are, you’re going to last a maximum of a month or two months by yourself.

So if you want to look beyond the crisis, you have to look towards the networks that you’re going to build. I think the billionaires, like when you read about all these billionaires prepping and buying land in New Zealand or whatever, just in case the worst comes, they’ve realized that in that crisis situation, that billions are meaningless. They can have the best underground base but if there’s no network how are you going to pay your little army that’s going to protect you and your wealth? At the end of the day, it all goes a bit Mad Max. So you need to have more of a social community based approach to these things. And I would call it more like a fire drill. You need to have a plan.

If governments were really smart they would be helping us establish these networks very much like the programming we saw during the Cold War. And that was, in the first instance, people focused on surviving the nuclear attack, but then also how you would operate in a severely impacted environment.

So I think that’s the stuff we should be learning at school. I think that would be really, really good, sort of worthwhile, practical survival skills in how you interact. In a way I think kids are maybe learning this, but not through school, but through video games. That’s my thesis.

[01:28:23] Niels

Yeah, absolutely.

Okay, fair enough. Now, we’re going to end this now. But just before you leave, there were so many things we could have asked you. And we haven’t even gotten through probably half our questions. So I just want to ask you, whether there was something we missed that you really wanted to have brought up and to give you a chance to bring?

[01:28:48] Izabella

I think we’ve covered everything. I mean, obviously, the big topic du jour is Elon Musk taking over Twitter.

[01:28:59] Niels

Exactly. Yeah, that could be one.

[01:29:03] Izabella

It’s fascinating to watch and I just find it very interesting that it’s such a polarizing topic. My own perspective is that I’m not a free speech absolutist at all. I’m actually what I would call a free speech maximizer which means I think there are fair enough limits. I think we should have libel and I think incitement to violence and really bad stuff like that should not be allowed.

But I wonder whether the system will be able to… I suspect that Elon, once he takes over, if he takes over Twitter, he will learn the hard way that some of these systems are thrust upon you not because I don’t think you know Jack Dorsey or whoever, had any intention of creating a censorious environment on Twitter. I think these are natural forces that are thrust upon social systems. Just feeding back to my original point about segmentation. It’s because the market can’t handle the truth very often. And it’ll be interesting to see if Elon Musk can actually change any of that. I will be watching with a lot of curiosity.

[01:30:25] Niels

I think there will be many people watching with a lot of curiosity. Izy this has been a tremendous conversation with so much knowledge shared from your experience. Thank you so much for doing this today.

And by the way make sure to follow and subscribe to Izy’s work over at The Blind Spot. You can, of course, find the links in the show notes for today’s episode. And as you can tell from today’s conversation, we are living in a true global macro driven world and it is perhaps more important than ever before to stay well informed. From Cem and me, thanks so much for listening, and we look forward to being back with you on the next episode of the global macro series. In the meantime, take care of yourself and take care of each other.

[01:31:03] Ending

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