via Eric Peters in his wknd notes letter:
“Deglobalization is the most powerful theme in the world,” said the investor. “It will reshape politics, economics and markets in profound ways.” The process has only just begun. “Everyone built global supply chains to produce goods for the US consumer.” In making those capital commitments, they assumed the geopolitical landscape and international trade relations in coming decades will remain unchanged. The process hollowed out middle America, while enriching the coasts. “It was inevitable that a leader came along to say this is not okay.” But globalization has advanced past the point where supply chains can be severed abruptly without inflicting catastrophic damage on the US economy. “That leader would have to give US corporations time to disassemble their supply chains and rearchitect their means of production closer to home, while preventing the Chinese economy from imploding and sparking a global depression.” The trade war was the warning shot to American CEOs that began the process. The battle with Huawei over 5G supremacy extended the battle lines to encompass the cybersphere.
The coronavirus will accelerate this trend. “What is unfolding in a slow-motion war, where there will be massive destruction of fixed-asset investments. And not just in China, but in Germany, Europe, and nations that supply many of the intermediate goods.” The impact will not leave American companies unscathed in that they too will suffer capital losses on existing supply chain infrastructure. But the US will suffer far less than nations that oriented their economies toward exporting to the American consumer. “And if real interest rates truly mediate the demand for investment capital and the supply of savings, then two things are likely: (1) as in any war, governments will continue to suppress real interest rates to mitigate the pain from the destruction of savings (obsolescence of supply chain capital investments), and (2) that suppression will meet its match as demand for capital (to rebuild North American supply chains) will ultimately lead to a rise in the real rate of interest.”