In their latest podcast, Brunello Rosa and Manas Chawla discuss the pros and cons of an embargo on Russian oil and gas versus a price cap enforced by the US and their trading partners.
3 June 2022
In their latest podcast, Brunello Rosa and Manas Chawla discuss how many leading indicators seem to point to an upcoming global recession, and how this may impact the more fragile economies, with low potential growth and high indebtedness.
26 May 2022
In their latest podcast, Brunello Rosa and Manas Chawla discuss the causes and possible development of the recent volatility in financial markets, and its links with the crypto-asset environment.
18 May 2022
In their latest podcast, Brunello Rosa and Manas Chawla take stock of the recent elections in Germany, France and Italy and their implications for the European integration process.
13 May 2022
In their latest podcast, Brunello Rosa and Manas Chawla discuss how Europe could be re-organised in concentric circles to permit a more effective and inclusive governance, and prevent conflicts, such as that in Ukraine.
11 May 2022
In their latest podcast, Brunello Rosa and Manas Chawla discuss the latest revision to the IMF's forecasts, which certify the stagflationary shock to the global economy.
29 April 2022
In this podcast, Brunello Rosa and Manas Chawla discuss the rationality China's apparent decision of embarking Russia as an ally in Cold War 2 vs US.
22 April 2022
In their latest podcast, Brunello Rosa and Manas Chawla discuss how the UK aims at becoming a global hub for crypto finance technology and investment.
18 April 2022
In their latest podcast, Brunello Rosa and Manas Chawla discuss the "new world order" that China and Russia are pledging to create, which implies a polarised global economy.
8 April 2022
In their podcast, Brunello Rosa and Manas Chawla discuss how the use of a certain language by the opponents of Russia could make it harder to reach an agreement with Putin in the short run.
31 March 2022
In this podcast, Brunello Rosa and Manas Chawla discuss the difficulties in devising the optimal policy mix to counter the effects of the pandemic and of the war in Ukraine.
24 March 2022
In this podcast, Brunello Rosa and Manas Chawla discuss how the ban of Russian banks from SWIFT may push them to adopt the Chinese CIPS or crypto exchanges to evade the sanctions from the West.
16 March 2022
Rosa & Roubini Associates has been recognised as the best independent macroeconomic research & advisory firm 2022 by Corporate Vision Magazine in the issue to be published in January 2022
by Brunello Rosa
4 July 2022
Last week, a G7 meeting took place in Germany. According to its final communique, the meeting of these seven developed nations sent “a signal of clarity and strength” on crucial matters such as the war in Ukraine, world hunger, and other key long-term risks such as climate change. German Federal Chancellor Olaf Scholz stressed that “what unites [the G7 nations is their] shared values: democracy, human rights, peace and freedom.” For this reason, the G7 countries invited to the party “partner countries” such as “Argentina, India, Indonesia, Senegal and South Africa.”
As we discussed in our recent analysis, with the war in Ukraine, global governance has collapsed. The UN Security Council is balkanised like the rest of the world, with the US, UK and France on one side and Russia and China on the other side. Equally, the G20 is divided between supporters of the US and the West and those more inclined towards China and Russia (though there are a bunch of countries that would prefer not to take sides). For this reason, the G7 countries invited other partners from the developing world.
The G7 countries have also pledged to raise USD 600 billion in private and public funds over five years to finance needed infrastructure in emerging markets to counter China's multitrillion-dollar Belt and Road Initiative (BRI), in a newly renamed project called "Partnership for Global Infrastructure and Investment."
While all this is happening, China and Russia are not just staying put. Instead, on May 27 the Foreign Ministers of the BRICS forum countries (Brazil, Russia, India, China, and South Africa) “reached consensus on its expansion process”, so as to potentially include Saudi Arabia and Argentina in this group of countries in the future.
If the extension takes place and gets implemented, this would amount to a new G7 gathering for developing economies, led by China. It would include countries with the largest populations in the world, and the largest natural resources reserves. With China’s BRI, which dates back to 2013, this new “EMG7” would have the firepower to compete on the international stage with the “traditional” G7.
Meanwhile, Russia has recently held its International Economic Forum of St. Petersburg, this year marking its 25th year. While one could think that, with the war in Ukraine, most world leaders would have deserted the forum and exposed Russia’s isolation, the Forum actually featured 13,500 participants from 141 countries and territories, with 43 foreign ministers and 1,500 companies represented at an executive level. At the forum, China, Russia and India discussed energy, supply and logistical corridors; the settlement of natural resources trading in currencies other than the dollar; the integration of the Eurasian geopolitical bloc with the Asian bloc; and even potential commercial agreements being reached between Pakistan and India.
Given this background, it is clear that a new model of global governance is emerging: one based on NATO and the traditional G7 to take care of the developed world, another based on the new EMG7 gathering, China’s BRI, and the military alliances that are being forged, which will primarily focus on developing countries. We could summarise this by calling it a “balkanised global governance for a polarised world.”
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What Lies Ahead For Global Geopolitics, Macroeconomy, Policy And Financial Markets
22 June 2022
Brunello Rosa and Nato Balavadze
16 June 2022
Brunello Rosa and Nato Balavadze
15 June 2022
10 June 2022
by John Hulsman
28 June 2022
Introduction: Caring About the Alliance More than Accession
During my Washington days, I become equally enraged by both the Wilsonians and the neo-conservatives, dangerous utopians of both the left and the right.
The Wilsonians, falsely thinking that international institutions somehow have a life and power of their own, were for the indiscriminate enlargement of Nato, the most successful military alliance in history. For Wilsonians, ‘filling in the blanks’ in Europe (letting everyone join) was a sign of Nato’s power and the rise of norms-based international institutions as the basis of the post-Cold War era.
For the equally dangerously wrong-headed neo-cons, the goal was to take in every nascent democratic country (no matter how corrupt and economically anemic, or whether such an accession was actually in US interests) and open the door to them, as America ought to be in the business of policing the world for democracies.
In both cases, in their ideological fervor to construct a world that has never existed and likely never will—one where states either willingly gave up the lion’s share of their military and strategic power to international institutions or we live in a world explained by Kant’s ‘democratic peace theory’ – struck me as inimical to the interests of both the United States and its citizens. Instead of advocating for specific members to join Nato, instead the realist question must be asked: Do the prospective new members add value and security to the most important military alliance in the world, or do they drain away its vital essence? For realists care little (and should care little) about any prospective member joining Nato; instead, they must care about the continued viability of Nato itself.
It is for precisely this reason that taking in longstanding Baltic neutrals Finland and Sweden serves Western interests. In both cases, the two new members in question add value to Nato rather than merely serving (as too often recent members have) as a security drain on an alliance that actually works. While there are surely accession problems ahead with Turkey, the West must strive to iron them out precisely because taking in both Sweden and Finland makes good realist strategic sense.
The case for Finland and Sweden
It is one of a series of Russian President Vladimir Putin’s strategic miscalculations that has gifted Nato with Swedish and Finnish accession. Sweden has been neutral since the days of Marshall Bernadotte turning on Napoleon, his former master. Likewise, Finnish neutrality, a strategic outcome of the Russo-Finnish war, has for decades been ensconced as a basic fact of life in Europe. Yet both countries’ longstanding neutralist orientation came undone in just a matter of months, as the Kremlin’s invasion of Ukraine made Baltic neutrality seem an invitation to further Russian aggression, rather than as a guarantor of the Nordics’ security.
(This is an excerpt of Dr. Hulsman's latest article, which you can read here).
Dr. John C. Hulsman is the widely-read Senior Columnist for City AM, the newspaper of the city of London. Dr. Hulsman is also a Life Member of the US Council on Foreign Relations. His most recent work, the best-selling, To Dare More Boldly; The Audacious Story of Political Risk, was published by Princeton University Press in April 2018 and is available for order on Amazon. His original writing work can all be found at johnhulsman.substack.com.
Week: 4 - 10 July 2022
The Week Ahead: Unemployment To Stay Stable In US; Service And Composite PMIs To Fall In US And EZ, And Unchanged In UK
In the US, in June, the unemployment rate is expected to stay stable at 3.6%. NFP is seen increasing by 295K (p: 390K). Also in June, services and composite PMIs are expected to decrease to 51.6 (p: 53.4) and 51.2 (p: 53.6) respectively.
In the EZ, in June, services and composite PMIs are expected to decrease to 52.8 (p: 56.1) and 51.9 (p: 54.8) respectively. In May, retail sales are seen increasing to 0.4% m-o-m (p: -1.3%). May’s PPI is likely to decelerate to 36.7% y-o-y (p: 37.2%).
In the UK, in June, services and composite PMIs are likely to stay unchanged at 53.4 and 53.1 respectively.
The Quarter Ahead: Russian Missile Strikes On Apartment Block In Odesa; Sweden And Finland Formally Invited To Join NATO
Ukraine war continues. Russian missile strikes kill 20 people in the Odesa region. Meanwhile, following a ‘remarkable operation’ by Ukrainian forces, Russians left Snake Island in the Black Sea.
NATO summit took place on June 28-30 in Madrid. Leaders agreed to cut NATO greenhouse gas emissions and move to Net Zero by 2050. Also for the first time, Pacific partners Australia, Japan, New Zealand, and the Republic of Korea participated together with the allies. President Biden reported that NATO’s sanctions are starting to have an impact economically and militarily on Russia and he vowed to support Ukraine for ‘as long as it takes’.
NATO formally invites Sweden and Finland to join the alliance. As the statement said: ‘the accession of Finland and Sweden will make them safer, NATO stronger, and the Euro-Atlantic area more secure’. In a response to this, Putin said that Russia will respond, in case military infrastructure is set up there. Turkey’s President Erdogan claims Sweden and Finland must extradite terrorist suspects linked to outlawed Kurdish groups.
Russia defaulted on foreign debt for the first time since 1918. Moody’s rating agency said that missed coupon payment was a default.
Real Economy: Quarterly GDP Shrank In US And Decelerated In UK, While EZ Inflation Rose; DM’s Manufacturing Activity Fell
In the US, in Q1, GDP growth plunged by -1.6% (c: -1.5%; p: 6.9%). In Q1, PCE and core-PCE rose by 7.1% q-o-q (c: 7.0%; p: 6.4%) and 5.2% q-o-q (c: 5.1%; p: 5.0%). On a yearly basis, PCE stayed unchanged at 6.3%, whereas core-PCE cool off to 4.7% (c: 4.8%; p:4.9%). In June, Michigan Consumer Sentiment decreased to 50 (c: 50.2; p: 58.4).
In the EZ, May’s unemployment edged down to 6.6% (c: 6.8%; p: 6.7%) . In June inflation surged by 8.6% y-o-y (c: 8.4%; p: 8.1%) and stayed unchanged 0.8% m-o-m, whereas core-inflation eased off to 3.7% y-o-y (c: 3.9%; p: 3.8%). Consumer confidence fell to -23.6 (p: -21.1), the lowest since April 2020.
In the UK, in Q1 the economy slowed down slightly to 0.8% q-o-q (p: 1.3%) and advanced 8.7% y-o-y as expected (p: 6.6%). In Q1, business investment shrank by -0.6% q-o-q (c: -0.5%; p: 1.0%), while it surged on a yearly basis by 8.3% (c: 8.5%; p: 1.0%). Retail sales plunged by -4.7% y-o-y (c: -4.5%; p: -5.7%) and -0.5% m-o-m (c: -0.7%; p: 0.4%) in May.
In DMs, manufacturing PMIs declined. In EZ, manufacturing activity fell to 52.1 (c: 52; p: 54.6). UK’s manufacturing indicator also edged down to 52.8 (c: 53.4; p: 54.6). In the US, manufacturing PMI decreased to 52.7 (c: 52.3; p: 57).
Financial Markets: Due To Recession Fears, Stock Market Moved Down; Yields Fell; Dollar Index Was Up, Whereas Oil And Gold Fell
Market Drivers: Investors remain pessimistic, as i) recession worries deepen; ii) concerns about earnings growth rise; and iii) fears of anticipated monetary policy rate hikes rise. In addition, the Atlanta Fed’s GDPNow gauge indicates the second-quarter growth to be -2.1% (p: -1.0%). Weak economic growth accompanied by lower-than-expected inflation pushed yields lower.
Global Equities: Decreased w-o-w (MSCI ACWI, -2.2%, to 599.1). The US S&P 500 index declined (-2.2% w-o-w, to 3,825.33). In the EZ, shares were down (Eurostoxx 50, -2.4% w-o-w, to 3,448.31). In EMs, equities declined (MSCI EMs, -1.81%, to 992.84). Volatility rose to 27.8 (VIX S&P 500, 52w avg.: 22.9; 10y avg.: 18.1).
Fixed Income: w-o-w, 10-year US treasury yields fell (-25 bps to 2.89%). The 2-year US Treasury yields were down too (-22 bps to 2.84%). The German 10-year bund yield decreased (-21 bps to 1.23%).
FX: w-o-w, the US Dollar Index was up (DXY, +0.9%, to 104.9; EUR/USD -1.2%, to 1.043). In EMs, currencies weakened (MSCI EM Currency Index, -0.45% w-o-w, to 1,663.38).
Commodities: w-o-w, oil prices fell (Brent, -1.5% to 111.5 USD/b). Gold prices decreased w-o-w (-1.0% to 1,812.9 USD/Oz).
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