G7 to NATO - more fiscal spending?
Macro Perspectives
We've talked about the G7 leaders meeting in Germany this week. These meetings have rolled into NATO meetings in Spain.
With this, and the events of the week, we should be paying attention to (potential) World War III flashpoints;
To start the week, the U.S. and G7 allies banned imports of gold from Russia.
That was soon followed by a Russian debt default (a missed debt payment) - the first default to foreign creditors since 1918. But it wasn't a "can't pay" issue, it was forced by the asset freeze and banking sanctions (transactional restrictions) placed on Russia from the Western world - so there was virtually no financial market impact.
Next, NATO announced plans to increase "troops on high-readiness" from 40,000 to 300,000.
Then the G7 included in its communique that they would phase out Russian oil, and in the meantime, threatened price caps on Russian oil imports - which would only further limit global supply and increase prices.
Late Tuesday, Finland and Sweden signed an agreement paving the way to join NATO. Putin has already said that he will respond (in kind) if NATO were to deploy military and infrastructure in these bordering countries (Finnish land border, and Swedish maritime border).
Biden followed that up by announcing that the U.S. will ramp military presence in Europe by opening a permanent army base in Poland (formerly controlled by Russia and a flashpoint of WW2).
Is this flexing a position of strength to deter or provoke? We will see.
We know that Western leaders are all coordinating to execute on an economic, social and political agenda. And we know that the current economic environment (high inflation, record high debt and deficits, and record low interest rates) is a conundrum, which threatens the execution of the agenda. Still, we also know that they have the appetite to keep spending, to keep executing.
What better way to excuse more fiscal spending (to get the agenda done) than to enter a global war. And I suspect, if the current proxy war turned into a global war, it would be a war of posturing. It would be as ambiguous as the current war.