Zoltan Pozsar Bears Witness

"If there is trust, trade works. If trust is gone, it doesn’t." So said Zoltan Pozsar, in a new note documenting the dissolution of the "two giant geostrategic and geoeconomic blocks" atop which sat the "three pillars" of the low-inflation world. The blocks were "Chimerica" (cheap Chinese goods helped offset the impact of stagnating US wage growth from cheap immigrant labor) and "Eurussia" (German industry, and Europe more generally, were powered by cheap Russian gas). Pozsar described a "he

Get the best daily market and macroeconomic commentary anywhere for less than $7 per month.

Subscribe today

Already have an account? log in

Speak your mind

This site uses Akismet to reduce spam. Learn how your comment data is processed.

24 thoughts on “Zoltan Pozsar Bears Witness

    1. I actually think the opposite. I think he needs to find a higher calling. There isn’t anything he doesn’t know about money. He’s the only person on Earth who could navigate the labyrinthine plumbing of the dollar-based financial system without getting lost. He (literally) created the blueprint. There’s nothing else left for him to do in that arena. He could write every note penned by every short-end strategist at every major bank, by himself, in his sleep. I think that’s part of why he’s ventured out into other things. I don’t agree with a lot of what he says, but he’s a genius. And the best way to deal with geniuses is generally for governments to identify them and employ them in the service of some greater purpose, where “greater” doesn’t necessarily have to mean noble, just something more consequential than what he’s doing now. The idea that Zoltan is still writing notes for a sell-side firm is, with all due respect to Credit Suisse, a great mind going gradually to waste.

      1. Is Zoltan old enough to collect a pension from Credit Suisse? If so, he could retire. I imagine they would give him a great pension. Then he would be in a position to espouse whatever assertions, grandiose visions, or beliefs that he wishes to share by creating a site on WordPress…

      2. You could pull down the video clip in Good Will Hunting, the main character being interviewed by the NSA. Being instrumentalised is no bueno for oneself. Hopefully he is genius enough to refuse to be instrumentalised. A bit like Einstein.

  1. “At this point, I’m reasonably sure that even the Kremlin’s pet oligarchs are upset with him. (“Dude, where’s my yacht?”)”

    I suspect quite a few are upset at more than losing their yachts… There’s been an epidemy of murder/suicide amongst oligarchs with wives and kids getting killed… That’s… not okay.

  2. Can I read the whole piece without a subscription? H, I’m curious about your take on S. Korea here.

    Last I checked, the NATO alliance has a much stronger military and allies across the globe. Even if Trump/DeSantis moved us into isolationism and further into a real life Idiocracy, could China take out Japan / Australia / UK / France / Israel?

    I hope the government identifies me soon, definitely wasting my time trying to enlighten young software engineers.

    1. Nobody can “take out” UK, France or Israel. Those are nuclear powers.

      But these, even adding Australia, Japan and whatnot would be unable to do much if China decided to invade Taiwan or Vietnam. And Ukraine is already fighting its heart out but is in a difficult position and, without support, would probably succumb to Russia.

      1. Yeah, “one does not simply ‘take out’ Israel,” to employ the Lord of the Rings meme. They’re… let’s just call them “formidable.” I mean, Hezbollah has had some “success,” but a lot of that is just the realities of asymmetric warfare. Notwithstanding the challenging (to put it mildly) geography, I wouldn’t want to be on the wrong end of a full-on, no holds barred IDF military campaign. There’s no telling what they have in terms of weapons. And I don’t think anyone, anywhere would be terribly excited about finding out.

  3. Pozsar being a Genius likely does not like to be digested and evaluated by divergent ideologies . I try to appreciate purely what I think and can (maybe ) understand that he is saying .

  4. There’s been a ton of chatter around the world about the end of globalization and predictions of global economic restructuring. There’s also been some chatter about it providing a pretext for world war. Pozsar’s South Korea observation blindsided me, but it makes sense. And he provides a clear and useful view of the global landscape for alliances being formed and pieces falling in place for possible war.

    One point to note from my perspective… Russia weakens itself everyday by engaging in a fruitless war. In parallel, China, a genuine, major world power, grows smaller every day as the CCP reaches out to grasp and control capitalist (and freedom-seeking) impulses among Chinese businesses and people.

    Everything I’m reading suggests that the Russian economy and its capacity for war will be woefully weakened after the war in Ukraine is over. And while the west helps Ukraine to rebuild, Russia, having the largest landmass and resources in the world, will largely be sidelined on the world stage for more than a decade.

    But China has not crossed the threshold of outright aggression. The other day Henry Kissinger suggested the US administration should be reaching out to China and starting a conversation. I think Henry Kissinger is correct, as he was in the 70’s.

    1. Questions about Russia:
      – What will become of the oligarchs?
      – What becomes of the valuable tech workers who left Russia after the Ukraine invasion?
      – What will be the disposition of Russia when the war is over?
      Will it be like a bee’s nest that’s knocked out of a tree?
      Will they express any wish for connecting more closely with Europe?

    2. Sorry, but: “October 7th, 1950: Chinese People’s Liberation Army invades Tibet without provocation.” Tibet, while considered a Chinese autonomous region, is officially ruled by the Chinese which annexed it decades ago.

      1. Exactly! That is the problem. China has those impulses. We should have no delusions about this. The official position of the US has always been that Taiwan is part of China. But the same was true about Hong Kong, which was supposed to remain democratic until 2047 under the agreement with the United Kingdom that facilitated its turnover to China. There is no similar agreement about Taiwan, which is merely a greater logistical challenge to occupy and control.

        The idea of Chinese capitalism, though it seemed to be a promising vision in the 1970s and gave Chinese families and businesses hope during the 20th century, seems to have become a contradiction in terms in recent years. The CCP is slowly and gradually, but certainly clawing back control of broader Chinese society on a granular level. Forget the idea of open capital markets in China. Bejing is applying compulsive control of their economy.

        If I had a business in Taiwan, I would deliberately and as quickly as possible move the operation to another country. Sure, I’m an American and I’m used to having the freedoms of capital markets and life and liberty protected by the US constitution. But the Taiwanese have also been free and enjoyed open capital markets since the time of Chiang Kai-Shek. I can reckon how they may feel when China floats their landing craft close to the Taiwan shore.

        1. Open systems allow evolution while closed systems do not. This at least partially explains why closed economies (autocracies) fail while open ones can repair and heal. When nations become autocratic it’s their creativity that flees first taking along with it the new ideas needed to right the ship.

  5. H

    It was interesting to see you use the phrase “vassal states” for Russia and China. Essentially that notion is medieval and I couldn’t help but want to turn to some of my map books from that time frame to see what the world looked like 500 years ago and who the vassal states were. Globalization really started in the middle ages under the aegis of Mercantilism and external resource acquisition. Also, while globalism has been declared dead, China doesn’t seem to know yet as exports are still rising.

  6. Would just note that Robert Kaplan laid out the same thesis (Eurasia + India as the “new” geopolitical center of the globe) in his 2018 collection “The Return of Marco Polo’s World.” TL|DR version: as neoliberal globalization wanes, four legacy empires — Russian, Ottoman, Persian, Han — will try, and succeed, in reasserting themselves while at the same time their rump states suffer a loss of internal cohesion; Europe, as the longtime economic and intellectual engine of “the West” will continue to lose power and relevance vis-a-vis revived Eurasian empires; and the U.S., though no longer the sole global superpower, will remain a leading global power thanks to its advantageous geography, large internal market, and democratic institutions. (We can only hope.)

  7. Remembering back to the period before WW2 Nazi Germany and Stalin’s Russia were ‘aligned’. And then Germany attacked Russia (realizing that their regional goals overlapped and they would be in conflict anyway). I don’t think China will ever completely trust Russia nor will Russia ever completely trust China. Ultimately their goals will overlap. China needs what Russia has – vast amounts of raw commodities and will never let Russia gain an advantage making them equals militarily. Russia wants desperately to get to the same point as China in the size of their economy and industrialization. But will never get there because their political system is so corrupt and unfulfilling for the people. And, again, China’s education system will leave Russia in the dust.

  8. Pozsar’s views are colored too no small extent by the place and time of his birth. Magyars may leave their country behind but rarely do they shed their cynical worldview whether it is informed by a brilliant mind or not.

    Regarding this piece, I am less sanguine about Turkey’s intentions and actions than Heisenberg – based on his comments – appears to be. Staying as a US (and NATO) ally seems intuitively the course that is most likely to pay off for Turkey. Yet Turkey sees itself as a potential great power and there undoubtedly is a point where it would be willing to roll the dice in order to fulfill its ambitions. As for South Korea, I do not doubt that Korean politicians are well aware of the geopolitical neighborhood they inhabit. Should the US fail to convince as a protector, I am certain that China and Korea will arrive at a modus vivendi based on historical precedent.

    Ironically, if TRICK is to challenge American hegemony and try to establish a new world order it will be due primarily to the US and its policies. Far from not being tough enough on China, the real threat is backing China into a corner where their leaders may conclude that fighting (even at a significant overall disadvantage) is preferable to being forced into becoming a collapsed state. China faces enough major challenges that it may never achieve parity with the US much less overtake it as global hegemon. If such is the case, American policy makers have to finesse the bilateral relationship as the situation evolves.

NEWSROOM crewneck & prints