Definancialisation Doesn’t Mean Peace, It Means Prep For War

By Michael Every of Rabobank

For years, some analysts talked about the problems associated with ‘financialization’ and only a small subset talked about a looming backlash ‘definancialization’. What did you think it meant? Vibes? Papers? Essays? “Because markets”?

In the big picture, an FT op-ed notes that Trump’s new ‘Great Game’ is “mining, mapping, and mercantilism,” where “the contest for resources between the US and China will continue after the president is gone and affect us all.” All true, and flagged here for over a decade now – recall 2017’s ‘The Great Game of Global Trade’? Yet as think tanks and global media notice that Europe is said to need a 100,000 strong army. The EU defense spending boost penciled in by 2035 is not enough, and it’s against moving targets – Trump wants to boost his military budget by 50% in 2027, China is forging ahead, Russia is ‘all in’ Moreover, you can’t have 27 armies acting as one, so who runs it? Even assuming it gets there, in an age of maps, mining, and mercantilism, where is Europe going to be getting its raw materials from *cheaply*, as the US is aiming for in the Western Hemisphere, at least?

Australia and the UK don’t sit prettier despite political unity. Indeed, we just saw hedge funds prowl for Donroe Doctrine bargains.)

Within the US itself, we have now seen President Trump attack multiple targets from the meat-packing industry, to health insurance companies, to defense firms; ban Wall Street from buying single family homes; force credit card companies to cap interest at 10%; take stakes in Intel, US steel, rare earths producers, and nuclear power; and now threaten to take stakes in oil companies (presumably to get them to invest in Venezuela). On top of that, the Trump just told AI firms they are not allowed to pass on their soaring costs of electricity to consumers, and must “pay their own way.”  

And so, to the Fed. As the Wall Street Journal warns ‘Trump’s Investigation of Powell Is Also a Warning to the Next Fed Chair’, three past Fed chairs decry the “unprecedented” assault, some media warn of the risks of a 1970’s-style inflation crisis, and even the Treasury Secretary reportedly says it’s created “a mess” (says Axios), the FT states: ‘The next Fed chair is… Donald Trump.’ Very few media are asking if it’s possible if Powell is actually guilty: is this presumption of innocence or a reflex reaction that central banks aren’t capable of sin?

Of course, as Reuters summarizes it today, ‘Trump crosses Fed Rubicon, market shrugs.’ And that is logical to the extent that we are clearly in a world where the US is going to ‘run things hot’ in some sectors. Effectively, it is what I have dubbed as using legacy US financial fartcraft to prepare for a near-future world of warcraft.

Yet at the same time gold is tipped by some to crack $5,000 ahead, as the latest exceptionally-small US trade deficit helping to see the Atlanta Fed GDPNow estimate hit 5.4%(!) was helped by bullion exports (showing the US is not accumulating it), and an Italian parliamentary panel approved the “people’s” claim on its central bank’s bullion with the ECB, which may crack other things people now tip. Silver is also up to a new record near $86, and copper is near a record high at $13,273. By contrast, oil is at $64, up significantly in the past week over Iran, even if the geostrategic play is clearly lower due to US action in Venezuela.

So, definancialisation doesn’t mean peace – it means prep for war. It doesn’t mean free trade – it means trade blocs. It doesn’t mean free markets – it means freeing markets from a focus on short-term profits. It doesn’t mean higher rates and lower fiscal spending – it means lower rates and higher fiscal spending for different things: consumers, and ‘maps, mining, and mercantilism.’ It doesn’t mean legacy correlations – it means new ones.