🧵1/ I wonder how many people realise that what's really going on with stablecoins is a massive US statecraft play to re-dollarize the world on its own terms. You could even call it a "re-stablization op" (yep - there's a gag in there). 2/ My analysis is that the reason why many countries are panicking about the upcoming dollar onslaught is because it's a backchannel way to rebase the system, and force 2008-era capital holes to be finally written down.

1/ Just a short recap of why it pays to watch your blind spots.

On Feb 23 we argued that the Mar-a-Lago Accord was gearing up to be more of a Bretton Woods 2.0 affair than a Plaza Accord. But also that the real challenge was how to get everyone to the table.

the-blindspot.com/in-the-blind-s… 2/ March 1 we explained the real struggle was between two systems, both of which independently believe are liberating the other from oppression. We called it mutual liberation syndrome.

the-blindspot.com/in-the-blind-s…

1/ Amid the endless and breathless commentary today, worth remembering this is a giant game of high stakes Liar’s Poker.

It’s also an exercise in mutual assured economic destruction. MAED.

This means it’s not about markets or valuations, it’s almost exclusively about game theory and who can withstand the pressure longer.

The idea this hasn’t been war gamed is naive though.

A few things to remember: Officially China doesn’t own much long dated paper so it can claim plausible deniability re the long-end sell off. But in reality we have no idea what China really owns, because of its use of offshore proxies. 2/ As I set out in the Great Simplification podcast in March, for “MAED” theory to work you need to present the perception you really are MAD enough to do the unthinkable.

I also argued that there is a paradoxical stability in the game theory equation from having a consistently reliable Liar at the table.

I’m starting to think that the great stock market rotation from ESG/FANG to MAGA stocks could be one of the most obvious stock market opportunities in the post 2008-era.

I also think people are confusing Trump family grift with very tactical signalling about how to position to take advantage of the pump, and magnify it. And yes they will make money out of it, but that’s kind of the point. It’s an alignment of their political vision for America with VC-style carried interest. If their vision fails so will their portfolios.

That is arguably a healthier way to handle the conflicts related to insider-influenced political stock picks (based on regulatory arb) - usually removed from any comprehensive vision for the country - than having politicians run Nancy Pelosi-style stock portfolios, or take advisory positions after their terms end.

There’s an argument the Trump clan are just making the Pelosi thing explicit, and timely enough to ensure as many normal people can come on the ride as possible.

More at the below link 👇 the-blindspot.com/in-the-blind-s…

👉FREE WORLD VS GOSPLAN: a two-part essay on how I see the geopolitical/economic big picture. You don’t have to agree with it tho!

1/ Let’s start by assessing why anyone should really be surprised by Trump’s Greenland, Canada and Mexican “expansionism” policy.

In a nutshell - they shouldn’t. It’s no joke. It’s also far from arbitrary or illogical.

What we are facing is a renewed test of the Freeworld vs Gosplanworld systems.

This clash has come about because those spreading liberal and open systems - who believed in their superiority - overlooked how their openness also made them vulnerable to corruption by non-open authoritarian systems.

Anyone who has studied history or classics, however, can see the bigger picture and is not surprised.

But first, before scrutinising Trump, it’s important to understand that in the grand chess board of global statecraft, America is the only “power” that has been standing territorially still since the breakdown of the USSR while other systems have been aggressively expanding. [Don’t worry I will address NATO]

The EU expansionist agenda, for example, is self evident. It goes: if you are prepared to comply with our ways you get to benefit from our markets and our mutual security systems. You also get a modicum of a vote but our laws trump your local laws.

China’s “Belt and Road” expansionism is implicit but based on trade. It goes: We will build you nice airports but if you don’t comply with our terms we will take them over, and your rights won’t necessarily be guaranteed. You will become a de facto vassal.

America’s expansionism [until Trump] was also implicit but centered more so on security. [We will protect the commerce lanes of the world, and especially our NATO allies, but all we want in return is commitment to a rules based order that guarantees liberal markets and free trade.]

BUT! At some point post 2000 that rules based order which underpinned all of the West [aka Pax
Americana] began to break down and stopped being about compliance with a liberal market code.

Without any normies really noticing, the system instead began to embrace a new “multi stakeholder capitalism” approach which was highly tolerant of, if not openly supportive, of industrial policy and technocratic planning. Some have deemed this the “non system” of globalism (Napier).

What’s more, this new system insisted that the non-free zones of the world could and should engage in the global market under a pseudo consensus structure that no longer insisted on liberalisation as a condition of trade. Many Western leaders - especially in more dirigiste Europe were receptive. The logic was that the non-system would be better at generating growth and ensuring stability for all (especially of the financial kind).

To compete in that system and preserve the export of liberal systems, the security state of America naturally understood it too would have to engage in a secret industrial policy to ensure that when borderless tech systems ascended they would at least be hardwired on the foundation of a decentralised and open system. Or at least dominated by US tech platforms committed to digital freedoms.

If this ensured the global digital operating system was based on a free architecture then in theory the ends justified the secretly dirigiste means.

Except it turns out that wasn’t enough to preserve the liberal system. And over time it was liberal market structures that increasingly gave away to “capitalism with dirigiste characteristics” due to the growing popular notion that that model was better at generating growth. The security state, meanwhile, found itself unable to resist the temptation of exploiting the dominating tools it had created in increasingly illiberal ways (back doors etc).

👇PART 2 PART 2: 👇

THE BACKLASH BEGINS.

Except while the elites in urban centers pointed to the amazing success of the the non-system model, as supposedly evidenced by improvements in the Gini coefficient, it was clear the metric was failing to capture growing discontent on the ground and the true state of affairs.

Whole communities were being left behind, cultural pride was eroding, and the cost of this ‘success’ was the loss of freedom, autonomy, and the ability to govern their own futures — leaving many as mere dependents.

All this culminated in the populist shock of 2016.

2016 represented the economic zones that still had free market norms explicitly hardwired in their cultural and historical identity - America and Britain - undergoing an immune reaction. Both broke rank, paving the way for the great Western Culture Civil Wars of 2016 onwards.

Then Covid and lockdown hit.

For the planners this was a once in a lifetime opportunity to reset the system and prove the superiority of their ways. Many were persuaded to fall in line because of the challenges of addressing climate change especially.

They aggressively promoted their vision as an opportunity for a great reset that would allow the world to “build back better” - in a way that formally encoded the technocratic gosplanned system into the last holdout free market economies and dealt collectively with externalities like climate change or pandemics.

That’s why there was so much at stake in 2020. Who governed the subsequent period would either reframe America/West as a true market economy again or a gosplan system. It was MAGA or Gosplan.

The problem is lockdown also gave everyone a flavor of what a truly planned and dirigiste system might entail. The resistance to creeping technocracy grew, largely spreading online and via independent platforms.

The technocrats (being true believers) I don’t think saw the PR disaster coming. The online backlash against their slogans (Great Reset, Build back better and the Green New Deal) inevitably forced a rebrand. The Great Reset became the “inflation reduction act”, which colloquially became known as Bidenomics. In other parts it became the Draghi Plan or Securonomics etc.
More broadly the economic system itself, especially post the
2020 inflation shock, was named “Modern Supply Side economics”.

They also convinced themselves the original PR disaster was entirely linked to disinformation, which they now sought to control. Eventually the superiority of their system would prove itself.

And yet, despite delivering on growth better than any of the other technocrat systems, the associated baggage of inflation, censorship, banking crises, war and nuclear risk - not to mention the optics of having no one in control due to Biden’s lack of cognitive health - meant the system failed to persuade Americans.

When a key faction of the techno-security state also rebelled - recognising its previous error - in favor of resetting the free world, the writing was on the wall.

Now that power has been consolidated and America knows what it is, it is entirely logical it will aim to cast as big a protective net over the remaining free world system while the rest of Europe fights it out.

This is what American expansion is about. And when it comes to NATO, from the Trump perspective, it’s not just about paying your way, it’s that you’re not entitled to a US military subsidy to protect your economic systems if you continue to resist market liberalism. As far as the new America is concerned it is not prepared to subsidise Europe’s economic self sabotage.

🧵1/ Why glasnost matters. In November 2016 I wrote, in a piece called "The price of unfounded news hints at the true cost of the web" in the FT that: 2/ what this piece was all about was how the "free" and de facto subsidized internet [i.e. the "if you're free you're the product" model] was misdirecting the economy because of lies and false assumptions (especially about productivity). I believed that when the economic failings became obvious it would force a Gorbachev-style turn to perestroika and glasnost. Except I also predicted lots of people would not be able to handle the "openess" or having to fend in a less subsidized system, and would be happy to accept authoritarianism in return for the old "certainties" of the past. This would include accepting the return of a censored internet if needs be, but this time explicitly so.

🧵Here's a special Black Friday FATF Thread to complement @pmarca 's explainer on the Joe Rogan show about how the USG's "control mechanism" was applied to Big Tech by emulating the way it already controlled the banking system. 2/ FATF stands for the Financial Action Task Force (FATF). It originated in 1989 as a one-year fact-finding mission, championed by the United States during the “war on drugs,” but has since evolved into one of the most influential, yet opaque, financial regulators in the world.

Reading Alexei Yurchak's "Everything was forever, until it was no more" and have just realised that viral memes — or what they called anekdoty — were a critical feature of late-stage socialism, and arguably a key dissent mechanism. Anekdoty were basically the oral equivalent of today's digital meme. Among the structural similarilties is that they always centered on one prevailing scenario. In Poland 'Idzie Baba do lekarza" etc. — which was then adapted accordingly to depict current news events/developments.

The Blind Spot returns from summer holidays with a deep dive into the two-sided markets that have infiltrated the value system and how they are now systemically repressing productivity.

Why is it that we still can’t spot them despite all our regulatory efforts?

- We start with how such models applied to Autonomy’s business; who they really benefited and why they encouraged so much aggressive accounting.

- We then consider how they apply to more traditional business models like hospitality, and why the years of turning a blind eye to the questionable nature of such incomes might be drawing to an end - especially if recent litigation facing the Marriott group in Poland is anything to go by.

The latter is particularly pertinent in light of the crackdown on Telegram’s Pavel Durov and digital social media spaces more widely.

If these virtual spaces can no longer assume immunity for the potentially illicit content created on their systems by third-party users, why should the same not apply to the world of bricks and mortar agents such as well respected hospitality franchises? For now, they’ve mostly been immune.

And finally, we consider the implications for global growth if the economics of many well established businesses just don’t work without extensive use of “corporate beard” accounting.

Bottom line: honest actors have no chance in an economy where loss-leading strategies dominate cashflows (unless they too get a lift of their own from becoming informants to the state).

Either way, it’s not just a market for lemons problem. It may be a systemic Spencian crisis.

the-blindspot.com/in-the-blind-s… Separately, as the global grift becomes obvious to the average normie it will become ever harder to differentiate the “bad guys” from the “good guys” by actions alone. That’s because once trust is vanquished everyone thinks they have a moral justification as to why the law applies to everyone else but not to them.

🧵Aside from the headline news, today’s Russian prisoner swap seems to me to include a potentially involuntary limited hangout by the US. It pertains to the release of Vladislav Klyushin and what that suggests about how spies and spy agencies really fund themselves.

The official line is that Klyushin was involved in “hack-to-trade” insider schemes. But why would that be of interest to the Kremlin?

To understand, first watch this suspiciously well produced (given the turnaround time) CNBC mini doc about “Putin’s trader.”

youtu.be/J4kWugbH4qo?si… Not only is the doc extremely well produced for something that in theory only became public knowledge today - hinting of tactical embargo terms or pre-positioning of information by the Feds themselves - the access they were given to prosecutors suggests it serves a broader agenda.

These diagrams from “How they make money” are absolutely brilliant at pointing out the zero sum nature of some of the world’s most disruptive companies. (And by disruptive I mean unsustainable - just try getting a cab in central London these days? ) As costs bite and investors start to demand some sort of return beyond mere zero sum growth, these things will topple, because they just burn cash. The absolute opposite of this is Nvidia:

***Note for my followers***

Yes, I've read @nfergus's "We are Soviets".

Yes, I think it's bloody marvelous.

Yes, I'm overjoyed it's going viral because it means the message is resonating.

No, I don't think I've ever been forwarded or advised to read a single piece as many times as this one.

Yes, it echoes what I've been saying for a long time.

No, I'm not bitter he's getting recognition. I'm a huge fan of his writing and obviously don't even come close in terms of historical expertise. Also, as all traders know ... being too early on something is just as bad as not getting it right. And what matters is that it's belatedly being picked up.

But if you're interested in the expanded Kaminska on the topic dating back over 8 years follow the links I link to this tweet. It's not just a political story. It's an economic story. It's also a story about Gosbanking and digtalisation (and somewhere in there about bitcoin and CBDCs).

And if you want to know my current analysis, sign up to my weekly newsletter at the-blindspot.com Finally had time to add the links:

THREAD explaining why seizing Russia's assets is a crossing the Rubicon moment for the West.

1/ Property Rights.

The principle that forfeiture of property before conviction is illegal is one of the longest and most cherished in the Western capitalist tradition. It underpins the basic dimensions of our democratic society. As Wiki notes, the US Constitution's Fifth Amendment guarantees that "no person shall be deprived of life, liberty, or property, without due process of law", a phrase that was derived from Magna Carta.

It was instituted in large part to protect citizens from the overreach of the state.

Due process includes the observation of habeas corpus, the idea that everyone is innocent until proven guilty. 2/ State and central bank immunity.

Ah, you may think. These are not the assets of individuals. These are mainly state assets of either the Russian central bank, the Russian Finance ministry or the Russian Sovereign Wealth fund (though, actually, there are also Russian bank assets and individuals in the mix). Seizing their assets is entirely different.

Well no. The principles of sovereign and central bank immunity are, arguably, even more entrenched in the system.

Take as an example the case of the Afghanistan Central Bank (DAB). On February 21, 2023, the United States District Court for the
Southern District of New York held that DAB is a central bank entitled to jurisdictional
immunity under the Foreign Sovereign Immunity Act and that the court is constitutionally constrained from permitting creditors to seize DAB funds.

Why is it such a big deal? Because sovereign continuity is considered fundamental in the rule-based global order, with the only permitted exception for outright confiscation being for sovereigns that are officially at war with each other.

🧵The curious case of the visa outsourcing firms undermining Schengen 🧵1/ The top line on the Polish German border dispute is that Poland has been engaged in a bribes-for-visa corruption scandal, which has seen 1000s of illegal migrants flow into the EU despite the ruling party’s tough official stance on border control and migrants. 2/ This is all true enough and you can read about it👇. But Poland is facing a high stakes election in October which means much of the signal in the story may be being lost. This I think pertains to a much more significant story about Visa processing firms.

🧵Today is Nikola Tesla's birthday🐦‍⬛, July 10. It's also my birthday ... woo hoo. So I've decided to commemorate the day with a longish Twitter thread about the Tesla brand you've never heard of, plus a whole bunch of related curios. Full story is here: the-blindspot.com/its-july-10-so… 1/ Until Elon Musk pumped up the brand value of Tesla, it's fair to say Nikola Tesla's discoveries in the field of electromagnetic engineering and physics had for most of the 20th century been overshadowed by those of his contemporary Thomas Edison.

🧵Bloomberg's Matt Levine writes today about the bank deposit franchise, and how the traditional bank model assumes deposits can be treated as long duration liabilities because customers are loyal and deposits sticky... 2/ But if that's true then all efforts to encourage open banking (so as to make it easier to switch bank accounts) and to bring about "frictionless" finance were inevitably going to pose a risk to financial stability.

🧵In the latest Leaked Lunch podcast I sit down with former UBS Libor trader @robilypj to hear his side of the famous interest rate rigging story. We discuss the circumstances leading up to his arrest, the impact the affair had on his well-being and family, what time in prison… twitter.com/i/web/status/1… 2/ For those who don’t know the background, Tom Hayes was charged with conspiracy to defraud in 2012, eventually being convicted in 2015 for 11 years. He served five and a half years in prison, at times in some of the UK’s highest security facilities.

If there’s one thing you read today it must be @andyverity’s sensational account of what really happened with Libor rigging. New evidence reveals coordinated manipulation by international central banks. thetimes.co.uk/article/1d409a… Here are a few of the most shocking extracts from the leaked phone calls (now being serialised in The Times) that show traders - some of whom ended up going to jail - were being coerced into misrepresenting rates by the highest authorities.

**Big** multipolar drop from ECB's Christine Lagarde this afternoon signalling the potential suspension of independent-minded cbanks in favour of aligned interdependence focused on national security objectives (i.e. potential transition to a war economy) ecb.europa.eu/press/key/date… Here are some key quotes: 1/ "We are witnessing a fragmentation of the global economy into competing blocs, with each bloc trying to pull as much of the rest of the world closer to its respective strategic interests and shared values"

🧵TETRIS REVIEW🧵 (Small spoiler warning) Just watched it & absolutely loved it. Huge recommend from me and not just because (as an anglo/pole child of the 80s) it taps into every nostalgic pavolvian Cold War/pro West bit of conditioning in me a la Top Gun And not just because Gameboy and Tetris were my first addictive gaming experience, meaning the falling bricks and music got totally imprinted in my brain…

The reason we are facing this financial crisis is fundamentally because there is no intraday market for funding the massive daily settlement imbalances that emerge organically in the system. Crypto markets actually handle this much better. bloomberg.com/opinion/articl…? As I wrote for Bloomberg in back in August the financial system needs a real time Uber surge pricing mechanism for intraday liquidity :