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Credit Bubble Bulletin/Doug Noland/5-16-2020
“Bubbles can have profound geopolitical impacts as well. The inflation of Bubbles and corresponding booming economies promote the view of an expanding global economic “pie”. The inflating Bubble phase is associated with cooperation, integration and solidarity. The backdrop shifts late in the Bubble phase, as inequities and maladjustment become more discernible. Bursting Bubbles mark a radical redrawing of the geopolitical landscape. The insecurities and animosities associated with a shrinking economic pie see a rise of nationalism and “strongman” leadership. The backdrop drifts toward fragmentation, disintegration and conflict.”
USAGOLD note: Noland reminds us that deflating credit bubbles not only wreak havoc in financial markets and the general economy, they also do a fair amount of damage to the geopolitical architecture – as we are beginning to see in the U.S.-China relationship.