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Protection against the storm

Written by Pablo González and Pedro Nonay, trying to find what we can do in our adaptation to changes in world order.

Entry 1

Protection against the “storm”.

Introduction. 

20  July 2024

I begin here a new series of entries. 

As I said in the previous ones, I believe that the world is about to evolve into a new era. And that this will imply changes in almost all of our social, economic, political, … environments.

I believe that these changes will not be implemented suddenly in all areas and places, but will be gradual. I think that the establishment of the new world order will take years, but not many. 

That time of change could be called “stormy”. I say that because there will be great tensions between those who understand what is happening and those who do not. And between the winners and the losers because of the changes.

However, I think it is important not to be afraid of change. The truth is that it is very likely that the later world will be better than the one we are leaving (very different, but better). It is for the same reason that the Renaissance was better than the Middle Ages. Even if we have to face the discomforts of any change, such as the small but descriptive example of moving to a better house.

In the previous entries I have tried to deduce “where we are going”. With more or less success, I have reached some conclusions that seem logical to me.

In this new serie I will focus on studying (and sharing) the actions that may be most advisable to overcome stormy times in the best possible way. I will do so from different points of view. Looking for approaches that are useful for individuals, companies, countries, …

Of course, these actions have some relation with those that will be useful in later times (in those of the new order, already established, after the storm). But they are not the same. It is for the same reason that the environment of a war is not the same as that of the post-war period. I will make some mention of those later times, but I will focus on those of the changes.

After thinking about how to order the ideas for a better exposition, I have decided that I am going to treat each change individually, and to expose what we can do in front of that change. At least, that is how I will do it at the beginning, because you know that this is not a book (with the index known before writing it), and I may decide on other approaches along the way.

Before attempting the exercise, I would like to excerpt here what I explained in a class I recently gave in a master’s degree organized by Pedro Nonay at the IEB in Madrid (the complete presentation can be seen here). I also expounded it in the closing entry of my previous serie of entries, and I think it is logical to start the new serie at the point where the previous one ended.

It read as follows:

• The “industrial revolution” (the train, the car, …,) so much studied by us at school, referred to advances in the “world of the movement of things“. The Internet is progress in “the world of transmission of ideas“. 
  
  In all of history, there have only been three advances in the world of transmission of ideas before the internet, which are: 

1. Learning to speak (when we stop being monkeys and start being “sapiens”); 

2. Learning to write (the beginning of what we call civilization), which, by the way, started for agricultural reasons: the first known writings are accounting of crop stores to control what was available before the next harvest; and 

3. The printing press, which made knowledge accessible to those who were not monks, librarians, or nobles (Leonardo Da Vinci would not have been possible without the printing press, because he was not a monk, nor a nobleman, and would not have had access to books).

The three advances I just mentioned completely changed the world. And I think we are in the midst of another such change, which is because of the Internet.

The good thing is that change can be for the better. The bad thing is that it can be for the worse. It all depends on our response (that of humanity as a whole, and of each one of us).

After the above said, the first thing to do is to summarize the type of changes that are underway. This is what I have discussed in previous entries. 

Where are we headed?

As I have said above (and in previous entries), everything that happens is a consequence of the existence of the Internet. KNOWLEDGE flows differently, and the same will happen with power.

The main consequence of this is that we are moving towards a world where decisions will increasingly be made in a way that is tailored to the wishes of the people concerned. This will be so because technology makes it possible to do something similar to “detailed democracy for every issue”. In other words, it seems that we are going to transfer power to individuals, not to governments or corporations.

But it so happens that, precisely because of these technologies, each person’s capacity to influence decisions is susceptible to being manipulated by the information he or she receives. The truth is that technological corporations know our profile better than we know ourselves, and they know the stimuli to which we respond better than the old advertising agencies did (in addition to being able to direct the stimuli in a much more personalized way).

Therefore, there will be an appearance that individual people are the ones who have the power and make the decisions, but most of them will make their decisions in a manipulated way.

Having said the above, which I consider fundamental in the evolution we are facing, I believe that the main characteristics of this evolution are:

• In geopolitics, the world hegemony of the West will come to an end, and we will move towards a world of two blocks of countries, with little relation between them, and separated by a “silk curtain” (Pedro’s idea name, which is intended to remind us of the “Iron” curtain of other times, and also of the importance of China).

• It will be necessary to define the international organizations in which these two blocs will negotiate common issues. This will be done after demonstrations of strength of each of them, both in military and economic aspects, …, which is what is happening now with the wars.

• Among these issues common to the blocs, in addition to the obvious ones (borders, climate crisis, and trade relations), those of “coexistence” in common spaces will be of great importance, i.e. at sea (for peaceful navigation) and in space (for secure communications).

• Also to be defined are the relations between countries in each bloc. And the alignments of each country, as well as whether there will be room for non-aligned countries. In other words, the intra-bloc organizations in which decisions will be made. 

• The economy will be greatly affected by the above, with little trade between blocs. Today there is talk of sanctions, but it will get worse.

• As a consequence, the dollar will cease to be the world’s reference currency. Each bloc will have its own. This may weaken the dollar so much that it may not survive to be the currency of the West. Meanwhile, the new hegemonic currencies are not yet clear.

• Inflation, debt and deficit will create many problems. Perhaps the fall of the dollar will be a solution to those problems, but it will generate others in the storm.

• The large and growing gap between social classes will generate more social tension and more populism. Solutions will be explored, including a minimum living income, but also more authoritarian governments to control social unrest.

• Technology (AI, and many other advances) will lead to changes in the way we do almost everything. At first there will be a lot of resistance, because of job losses. Then we will see a great improvement in productivity, which may be the solution to economic problems.

• This same technology will change power structures. Whoever controls it will have the capacity of influence that financial institutions had until today.

• Technology will also change the way of “educating” the masses (I have used the verb “educate” because it is more elegant than “manipulate”, but they have the same result). What the media used to do, will be done in a different way, much more effective, because the technological ones have a better defined profile of each citizen. 

• There will be an energy transition. It is essential, both for environmental reasons, resource depletion and efficiency in terms of yields. It will begin with the current trend towards the so-called “renewables”. But this cannot be the only future. There are not enough raw materials for that purpose either, and the yields are not that good. Other energy sources will be investigated (AI will help with that). I think the way lies in nuclear fusion power, as well as deep geothermal energy.

• Climate change will continue to be a threat, which will be increasingly visualized with natural disasters (tsunamis, droughts, …). As I said with energy, it will continue on the path started (CO2), but soon it will be seen that it cannot be the only one. There will also be more research, and AI will also help.

• Demographics will also have a major impact. Not only because of migration and its social rejection. Also because of the necessary changes in places that are losing population. 

As can be seen, not a few aspects are undergoing profound changes. Others, such as the concept of the capitalist system itself, or that of party democracy, may even be undergoing profound changes.

The time in which these changes are going to occur is what I call “stormy times“. 

It is a time when the old “instruction manual” for almost all matters no longer works well. It does not work fully, because there are already some changes in progress that the manual did not contemplate. But it still works a little, because there are not so many changes in place.

The problem is that the new instruction manual has not been written yet. We have to write it together with the new experiences. As I have said other times, it is time for pioneers. In this, I copy a sentence from the last entry of my previous serie:

• “Pioneers get eaten by Indians” (I know it is a very politically incorrect phrase today, but I think it expresses very well the risk of doing new things). In contrast, there is another old but very descriptive phrase: “when you realize that you are riding a dead horse, the best strategy is to dismount” (there is no point in using the spurs or the whip with more force). And, … I believe that today, in almost everything, we are riding a dead horse.

By the way, my good friend Jose Luis reminded me that the second of the sentences in quotation marks was taught to me by him many years ago. He is right, for which I thank him here.

After all the above, I have to say that, in the block of countries led by China, the “instruction manual” for almost everything is clear. As a good autocratic system, it is enough to listen to the leader and follow the law. That is something that makes decisions easier for those affected (even if the leader’s decisions are not the right ones).

On the contrary, in the bloc of countries we call the West, the instruction manual will change completely. The power structures will also change.

*****

Signs of change.

In relation to the above, and before starting with the exercise I have proposed for this serie of entries, I think it is important to mention aspects that I have read recently, and that I believe are very significant.

Ray Dalio writes clear. He doesn’t like what he sees.

Readers already know that I follow Ray Dalio (billionaire, founder of a large investment fund, and a person who, in his old age, has decided to share his ideas in a rather philanthropic way).

The fact is that a few days ago he shared a “disturbing” message. The title already says a lot: “Pick a side and fight for it, keep your head down, or flee” (you can read it here).

In his article, Ray Dalio tries to describe the situation in the USA. He also tries, for the sake of diplomacy, not to say which party he supports, or to say that he does not like either party, and that he would prefer that there be someone willing to seek communication between the two “extremisms”. But he ends up recognizing that there is no possibility for that option. That is why he gives the title I have already mentioned. It is time to choose the lesser evil (if it exists). And there is the other option, … the option to flee, which is something that, said by a proud American, rich, old, and philanthropist, is very striking. It is almost a surrender to his way of looking at life. Or a declaration of pessimism before what he envisions, mixed with realism and transparency, and that we must sift through the filter of his intelligence and good intentions, but also through the filter of his age and his way of seeing the world (I find it hard to say that he is old-fashioned, but it is clear that age and what he has lived through mediatizes him, being clear also that exposing those points of view, without having any need, gives him great merits of honesty and good intentions). 

It is also clear that Dalio sees the time to make these decisions as urgent. That is, he sees the big change coming. He may not be right, but it is something that makes me uneasy. In essence, he is saying, “get ready for the big changes.”

BlackRock is also showing signs of major changes.

An article I read recently has made me think a lot. Based on the way the article interprets BlackRock’s statements, it comes to say that what they are now proposing is to do something similar to a “corralito” in the pension funds (which they manage), as well as to prohibit investing in gold (which could be a safe haven security). You can see the article here.

In the same article, they refer to another BlackRock statement in August 2019 (before the pandemic was declared). In that statement, they said that the economy needed to do what was done after the pandemic (the “helicopter money” thing, as well as raising rates to curb inflation). They also made it clear that we needed to “find the excuse to do that”. And the excuse was the pandemic, which happened within a few months. The 2019 paper can be viewed here.

The thing is, what they were proposing in 2019 happened (I’m not accusing them of being pandemic inducers, but it seems to me that, if they weren’t, they knew something).

That leads me to believe that what they are proposing now has a high probability of occurring.

It also leads me to think that, if someone with so much power is forced to take (or support, or induce, …) such desperate measures, it is because they are desperate too. Which is not good news for the global balance. 

The petrodollar’s days are numbered.

The clever agreement Kissinger managed to sign on June 8, 1974 (the one that created the “petrodollar”), which obliged Saudi Arabia to sell oil in dollars, was valid for 50 years. It expired in June 2024. And Saudi Arabia has said it is no longer bound by it, and is not renewing it, so it can sell oil in any currency (news here).

It should be remembered that that agreement was the way to maintain the strength of the dollar as the hegemonic currency after the moment when Nixon cancelled the dollar’s parity with gold (which was August 15, 1971).

Linking the dollar to oil was a masterful move after decoupling it from gold.

Now it is not tied to gold or oil. The dollar is “on its own”. And geopolitics is not in the best moment to support it. The entire BRICS+ bloc is eager to move away from the dollar (and its banks), especially after the restrictions and embargoes applied to Russia after the war. 

These are things that move slowly. They greatly affect the contracts signed and still in force. It is a very relevant matter, which will have delayed effects.

Damage to the dollar and U.S. hegemony is guaranteed.

The SCO matters more than it seems.

The SCO is the abbreviation for the Shanghai Cooperation Organization.

It has met in the first days of July in Kazakhstan. With the attendance and significant participation of Xi Jinping, and Putin, among many others (news here).

It has not featured much in the Western media. The members themselves prefer to adopt what might be called a low profile. But it is clear that they seek to be one of the voices representing the “old developing countries” in the face of Western hegemony. Countries representing almost half of the world’s population have already joined. And they want to claim their rights to be taken into account.  

The SCO may not ultimately be the relevant body of the future, but they are doing what they can for their objectives. Of course, there will be changes in all international organizations.

The attack on Donald Trump.

As we all know, Trump has suffered an assassination attempt last July 13. 

For now there is very little information about the real instigators of the assassination attemp. The full truth will probably never be known, as in the JFK´s case. There are many theories circulating, but little evidence.

What is clear is that, if something like this happens, it is because there is a lot of tension in the background. There are many countries, and power lobbies that are against the changes that Trump would implement if he wins the election, so there are many potential suspects.

The mere fact that it has happened is another sign of changes. Since they have not achieved their goal (killing Trump), changes become more viable than before.

*****

Readings that have interested me.

In the process of writing this entry I have come across many issues of other subjects. I would like to share the following:

• I have found an article writer that I think is great and that I recommend everyone to follow. His name is Tomás Pueyo. He writes mainly in English, but he has a website with translations into many languages. He usually writes two articles per week (one free, and one for a fee). I recommend researching his website to choose what to read from the many he has written. It can be seen here. Of the many articles he has written, I especially recommend this one, although I recognize that I may be influenced by the fact that he says things very similar to what I write, so I may be biased.

• I also recommend another great article by someone who signs in the networks as “B”. I’ve been following him for a long time, and I always like him. This time, I think he has hit the nail on the head. He talks about the decline of the West due to energy causes. You can read it here.
  
  

*****

This is as far as I have gone for today. In the following entries I will try to go deeper into the alternatives for each of us to act in the face of what is happening.

As always, I welcome comments on my email: pgonzalez@ie3.org