LONG THREAD:
We are witnessing the unraveling of the complex system of globalization – in fact the pace of its unwind is picking up rapidly. My view is that pretty much all things have self-correcting mechanisms and once you find the tipping point, you can determine 1/n

when the pendulum will swing the other way. The tipping point for globalization was the moment foreign central banks stopped recycling the USD they received in trade into UST. I’m a firm believer that EVERYONE wants their cake and to eat it too. 2/n

The US clearly can clearly maintain the USD as global reserve currency, but apparently it also wants mfg to return to the US & the USD to remain strong. On the other hand China & other export nations want USD to weaken & yet also want maintain their export levels to the US. 3/n

I won’t even get into the onshore/offshore currency debate. *SIGH* There is also a debate on how far deglobalization will go – full autarky or major reduction. 4/n

I’m in the camp of North America+UK+Australia. Mexico has factories, Australia and Canada are rich in natural resources, the US has EVERTHING (military most importantly), and the UK has London (financial meca). 5/n

I started by calling this a complex system and will add now that the repercussions of its unwind will be EXTREMELY complex internationally. Our leaders will need to “Thread the Needle” (copping this from Jim Rickards when he said it a while back). 6/n

This will be very difficult, but not impossible. Also I’m going to say this - read @JamesGRickards books. And listen to the interview between Jim and @KeithMccollough. The ideas here deserve a full read and more in depth review that a tweet can provide 7/n https://twitter.com/JamesGRickards/status/1246458766754807808?s=20

Having said that, I’m going to point out a few things I think are important.
Hoarding: It’s my new favorite word that can be used pretty much everywhere. Velocity collapsing? Hoarding ($$/UST). Inflation? Change in what people hoard (swapping $$ for stuff to hoard). 8/n

What’s important is it's a behavior that’s been dead – fully killed off with Amazon Subscribe&Save like services – since our grandparents lived through the Great Depression. This “new” phenomena has very important ramifications for macro & markets that haven’t been explored 9/n

Unemployment: Yikes – we’re hitting a rapid downward spiral in which unemployment is becoming a self-fulling prophecy that only serves to create more unemployment. This has happened in the span of TWO WEEKS. 10/n

Of all the things that worry me – this is the key worry. I’m not worried about the Fed/Treasury printing $$, I’m worried about maintaining our productive capacity as a nation. 11/n

Where this all gets interesting is the intersection of the recent CoronaCollapse and Deglobalization. Make no mistake, there is no way to have new onshore factories up and running to replace lost jobs quickly and at scale. The collapse in our economy is real and 12/n

will need massive $$ printing to replace lost wages so people can buy food & pay rent. Not an option. But the pace of mfg returning home is picking up as a RESULT of the CoronaCrisis and there is hope in that acceleration. 13/n

Supply chains cannot withstand the economic disruption that has resulted from the damage of Covid. Trade has literally died & with it demand for oil. The petrodollar is another area where things get interesting. The MBS/Putin spat may well become the death of the Petrodollar 14/n

The USA has enough energy internally now. Other large buyers, like China and India, may fully collapse. It’s by no means certain, but there is a definite possibility that the demand for oil doesn’t recover for a very long time. 15/n

I am worried about the domestic oil sector with oil at $25 or less, however, the bigger picture may end up looking very different. In the North America + UK + Australia (+/- Japan) alliance there is enough energy to go around. Petro is no longer the king-maker. 16/n

But there is no alternative to the USD for trade-purposes and the rest of the world will still have to trade with each other to some extent, so we have to ask what will be the Petrodollar alternative. I don’t know – but gold certainly looks like the front-runner 17/n

If gold is to be the new chosen king-maker, I’d watch to see if the US starts accumulating gold again. If not, it will be something else, maybe even remain Petro. We will see – too early to tell. Since this is all happening at lightning speed so we won’t have to wait long. /end