Robin Brooks

Every day gold prices are making a new high. And every day Switzerland's convenience yield - the ability to issue debt more cheaply than others when hedging foreign yields back into Swiss Francs - makes new lows. The world is running out of safe havens. Switzerland kept its debt low and now wins...

The global rise in long-term yields on gov't bonds and the rise in gold prices are interconnected. Markets fear that high and rising debt burdens will be monetized and fiat currencies debased. So you get higher risk premia on gov't debt and a growing flight to safety into gold...

The AfD in the latest polls has overtaken the CDU as the most popular party in Germany. It feeds off the issue of immigration, which the political center is unwilling to confront forcefully because it's such a contentious and loaded issue. There's no choice but to confront it or else AfD takes over.

2025 y todavía siguen con el rollo protestantes ascetas vs católicos vividores. Bueno, hay gente que construyó carreras enteras sobre ese dogma (y sobre las millones de víctimas de la austeridad, claro).

The 3 ingredients of the global debt crisis: very high global debt levels; budget deficits all over the place remain exceptionally wide; idiosyncratic trouble spots that periodically blow up, causing contagion. Yesterday was all about the last point

When will Germany finally dig itself out of the hole it's in? Not any time soon it looks like. The problem is that the treatment - big fiscal stimulus and softening up of the debt brake - isn't what will cure the disease. German consumer goods manufacturing orders are down to COVID levels...

The global debt crisis - like all crises - advances in fits and starts. Yesterday, longer-term yields globally rose because of a sharp spike in Japanese yields on news of a fiscal dove as likely new prime minister. There's just way too much debt everywhere.
robinjbrooks.substack.com/p/the-global...

An implosion of Japanese government bonds has been on the cards for a long time.

This could lead to contagion in US treasuries and even other asset classes too, like US equities that are well into bubble territory.

A bloodbath in the markets is a distinct possibility.

Today was a really bad day in global bond markets, with longer-term yields spiking everywhere. At the root of all this is Japan, where markets worry about the likely next prime minister, who's a fiscal dove. Huge spike in Japan's 30-year JGB. Japan is a safe haven no more...

Sanctions fail; shadows surge. Trump? #econsky

This is a deeply misleading talking point I'm afraid. Running a primary surplus isn't enough. That primary surplus has to be big enough to actually reduce debt. Italy has never ever achieved that and - incidentally - hasn't run a primary surplus since COVID with fiscal went off the rails...

Gold prices are now up a stunning 18% since the Fed's dovish pivot at Jackson Hole on August 22. The Dollar is stable. This should be giving governments around the world serious pause. Markets fear global debasement in the face of post-COVID debt overhangs. This is all fiscal...

The Fed's dovish pivot at Jackson Hole on August 22 bought France time. It pulled down US longer-term yields, which also helped pull down French yields. But the effect from that was always going to be fleeting, especially given the unsustainable political equilibrium in France...

The crisis in France is about 3 things: (i) a political center that's desperately trying to keep right-wing populism out of gov't; (ii) broken Euro zone fiscal incentives that enable bad policy; (iii) a global rise in debt post-COVID. The fix is to let markets set Euro zone yields. Not the ECB...

In May 2023, Erdogan devalued the day after winning Turkey's Presidential election. Pressure from capital flight was just too big. Looks like that's what Milei is aiming for in Argentina. Just make it to the election on October 26. Then devalue on the 27th.
robinjbrooks.substack.com/p/capital-fl...

So? Just tax that wealth. The fact that it's mostly in housing is a benefit, because it can't flee. You can easily introduce higher property taxes and make those progressive and means tested. That has to be a better solution than for Spain to go cap in hand to Germany every time there's a bad shock.

Most of Spain's household wealth is in housing. But what does that matter? You can easily introduce more robust property taxes and make those progressive and means-tested. That strikes me as better solution than going cap in hand to German tax payers...

👎❗❗

The Euro zone is a system where fiscally responsible countries subsidize chronically irresponsible ones like Italy & Spain. This happens via open-ended, no-strings-attached transfers by way of joint EU debt issuance and periodic ECB yield caps. A system that will fail because incentives are broken.

Median net household wealth in Spain (blue) is more than double that in Germany (black). The current set up in the Euro zone, where German tax payers make hidden transfers to Spain via joint EU debt issuance and ECB yield caps, is politically unsustainable because it's so unfair. This will end...

The shadow fleet operates with impunity in the Baltic. Putin just ignores this year's massive wave of EU and UK sanctions and runs his shadow fleet (gray) more heavily than ever. The EU must stop this. It's gone on for far too long. Whatever it takes. Come on. @econharris.bsky.social @brookings.edu

The UK and EU sanctioned a huge number of shadow fleet ships this year. Putin ignores them. Shadow fleet traffic (gray) is heavier than ever. Europe must get Trump to join in on these sanctions. If that means secondary tariffs on India and China, so be it...
robinjbrooks.substack.com/p/shadow-fle...

The problem is that the US probably *is* stepping up its own game.

This year's rise in gold prices has come in two steps: (i) after the "Liberation Day" chaos in early April; and (ii) following Chair Powell's dovish Jackson Hole speech on August 22. The rise in gold prices is about a flight to safety from erratic policies and rising political dominance of the Fed.

It's increasingly clear that the fall in the Dollar earlier this year was an isolated episode, not the start of a medium-term depreciation trend. The glass-half-full take is that the Trump administration learned its lesson. Chaotic Dollar falls push up long-term yields, which the US can't afford...

The US used to lead on sanctioning Russia's shadow fleet, which is Putin's Achilles heel. But no longer (lhs). The US hasn't sanctioned any ships since early January and now sanctions only a pitiful 17 ships on its own (rhs, blue). That has to change. @econharris.bsky.social @brookings.edu

The UK in September sanctioned another 70 Russian-controlled vessels and now sanctions 493 ships overall. It takes the lead in confronting Putin's money machine, ahead of the EU. The US now sanctions only 17 ships on its own. The US must step up its game...
robinjbrooks.substack.com/p/the-uk-tak...

There's two big "fear of floating" countries in EM: Argentina (lhs) and Turkey (rhs). Both have fallen back into pegging their currencies to the Dollar, i.e. preventing needed depreciation. The result is that both currencies are overvalued, the Peso much more so than the Lira...

There's never been a period in history where Swiss long-term yields have decoupled more from global yields (pink). What's going on with Switzerland parallels the big rise in gold. The world is running out of low-debt safe havens. The few that remain are getting massive inflows...