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Maintaining global trust.

It is part of the market’s psyche to be fearful. It even creates languages for that – are we in a “v”, “U”, “L”  or even “W” shaped recovery? Are we in a “Bubble”? Has the market “disengaged” from the broader economy? But, and here’s the point, whatever the pattern analysts will explain it within the context of received economic wisdom. However the times today are unusual. What if the received economic wisdom no longer applies?

Here’s a different way of thinking that may get us nearer the truth.

First the big picture and we should be fearful. The world is facing a multi-facetted downturn. Poor leadership, systemic undercapitalization at all levels of society, cutbacks in infrastructure, R&D, Education and Health Care and misdirected Defense expenditure  have led to economic, political and social confusion throughout the developed world. The distance between the Haves and the Have Nots has widened. On top of this we now face the combined Black swan challenge of Climate Change and a Pandemic.

The immediate impact is there for all to see. China has its hands full. Its time will come within the next 20 years.

Europe is in decline and the great E.U. experiment is challenged. Politics have become polarized. Fascism and Communism are gaining ground whilst unemployment, especially youth unemployment, rises and national debts increase. Unable even to coordinate its post Corona return to work, Europe cannot look to printing the Euro as more than a temporary band aid. It has still to rationalize its fiscal structures and focus on its economically viable and savable member states. It has still to create disciplines that are both understood and followed by its own members.

The stand out exception is the United States. The world’s sole super power faces its fair share of challenges. But it alone is economically self sufficient and of a scale to enable it to remain so. It is the world’s reserve currency and its consumer is a live and major force. This is where anyone with treasure goes to invest.

The strength of its economy, its powerful consumer base, its reserve currency status make up the three foundations for an aura of financial trust – all the monies of the world ultimately flow this way. Whilst this foundation stands the US can print its way to prosperity with impunity. Previous economic thinking need not apply whilst global trust in the US and the dollar remains. 

So maintaining that “Trust” should be the focus of the new leadership here and our new foreign policy. In part this means making friends around the world, building alliances, encouraging cultural exchange. Above all it means encouraging mutually beneficial global trade and it means a new focus for our investment of treasure, skills, and time on partnerships, alliances and joint ventures. The Doomsday scenario begins the day that Trust is broken and it will be broken for sure if other economies are allowed to decline, crash and can no longer trade with us. There will be no future for the United states as an island surrounded by poverty, civil unrest, terrorism and despotism.

The new economic reality however gives us a shot at a second century as a super power. Winning this opportunity depends on our maximizing our unique economic position into a possible Pax Americana and on refocusing our leadership* and foreign policy.

Have a good day.

  • the New Leadership master class will be published shortly by James Cooke Enterprises.