Chilling Global Wind Blowing Stronger: Chilly In Chile

For Episode 74.0 of Eurodollar University’s Making Sense, Emil and I were incredibly honored and thrilled to have been able to bring on Allison Fedirka from Geopolitical Futures, the outfit of George Friedman fame. Specifically, we were interested in her specialty which is Latin America because after China that’s where you want to go next to understand how developments money or economy-wise might be playing out in a global rather than specific fashion.

During our lengthy conversation, Allison agreed that stability was a key component yet very few EM’s in South America – or more broadly – are ever able to manage it. Of the few who have, Chile stands out for not having succumbed to the brittle and ultimately self-defeating process of giving up and starting over every decade or so; rewriting constitutions and whatnot.

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Our interview was recorded last Friday, the 14th, ahead of Chile’s national referendum from which it was decided if that country was going stand upon its current foundation, or, like so many others, surrender itself to these forces of instability. If we had waited – had Allison’s schedule allowed – rather than some passing mention we might have spent another hour and a half on the Chilean election results alone.

They surrendered – big time.

What does this mean? Why does anyone outside the far side of South America care?

It’s one of those asymmetrical instances where a seemingly very small otherwise trivial occurrence actually indicates a quite profound and globally relevant signpost for the direction the whole world could be taking.

Ever since August 9, 2007, the planet has been searching for its next big theme, a new direction given that the old (eurodollar globalization) ways were about to become unsuitable for the long run (thanks, in part, to QE lulling the world’s peoples back to sleep thinking nothing permanent had occurred).

This isn’t strictly about investments, rather more fundamental than all that. We’ve been warning for more years than I care to remember about the relationship between lack of economic growth and the rise of political and social instability which always fills in the gap. Specifically: socialism, Socialism, and, if left unfixed, Marxism. Where is it this newfound infatuation with really bad ideas is coming from?

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Simple: they call it late-stage or end-stage capitalism and the global economic direction since August 2007 has steadied more and more as if that’s a realistic case. In many places around the globe, especially EM countries like Chile, ever since 2013 when Euro$ #3 began its grossly destructive slide, there’s nowhere left to hide from this.

In response, “our” leadership says there is no problem, the economy fully healed if not downright prosperous. The leftists together say, if this is a boom, yep, there’s no other conclusion than late-stage capitalism. Their growing ranks have nothing to do with the failures of the Soviet Union or Mao’s unchecked rampages.

These Marxists know socialisms of the past didn’t work; they simply don’t care because, for them, “our” “capitalists” are shepherding the multitudes hurt by the lack of global economy right into their waiting open arms. It’s not about Russia before 1991, it’s about Chile, China, and, yes, America and Europe in 2021.

With regard to Chile’s sharp left turn, today I wrote up the shocking details of their recent hustings which culminate in what’s most likely a political breakup begun back in the “boomtimes” of 2019 over a pittance, a 30-peso subway fare hike. Spoiler: the minor metro cost adjustment was just the last straw:

Look nowhere other than the peso, meaning dollar. The 21st century (and even before) Chilean economy has performed in lockstep with the shape of the eurodollar. Double its misery since 2013, as the peso has dropped (meaning dollar up) economic growth has dried up in local terms while prices, broadly speaking, have surged across-the-board. October 2019’s violence wasn’t about a single subway ticket’s price; it amounted to just one-too-many in a system that hadn’t found much right in such a very long time.

And now the constitution will be rewritten by a democratically elected body dominated by committed leftists including a sizable chunk who are out-and-out Communists. Even the mayoral contest in Santiago, Chile’s capital and largest city where more than a third of the country lives, was won handily by one of those Marxists.

This had little or nothing to do with COVID. Instead, it has been looming in the eurodollar’s background for years, too many years, as it turns out.

Trending in the Marxist direction, the 2008 “recession” caused by that virulent strain of global monetary disease (dollar shortage) remains to infect more and more of the world closing in on a decade and a half unchecked. What happened in Santiago over metro tokens happened to a somewhat lesser extent in the US just last summer, common cause uniting each event.

In this setting, I can show my work:

You have to go back to the early eighties for sustained economic weakness at these low rates; the election results show that most Chileans don’t want to go back or even think about it. If their economy isn’t coming back – and after seven years since 2013’s top can anyone blame them for thinking this way? – then redistribution using the socialist model if not a wholesale rewriting of the whole social structure on the more extreme Marxist (fantasy) model sounds no more hazardous than the already-painful status quo.

If you’re a Chilean suffering under the world’s post-2013 “boom”, why not risk something different that at least promises tangible benefits instead of sticking on the same course and inevitably only more of the same?

Concluding:

Rate of change. The one in economy goes down and stays down, the one for politics goes up and only becomes more extreme. And this really isn’t about just Chile.

Emboldened by nearly a decade of futility in much of the world as the eurodollar era and its obvious prosperity fades further into long ago history, like the monetary system behind all these things there isn’t any place on Earth this doesn’t or won’t affect negatively. More than it already has.

And yet, for however many more months still, all we’ll hear about is global recovery (yet again) when so much – beyond GDP – has already been lost.

Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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