I am stunned every time a client asks me if I am worried about the current
level of reserves in the U.S. banking system. The market’s search for the
level of reserves at which the system “breaks” implies that the market is
worried about a repeat of the 2019 repo blowup. Such fears are misplaced.World War III already started, it’s just that it is a hot war in cold places (in space, cyberspace, underwater, and Svalbard) and a cold war in hot places (militarizing islands in the Pacific and mines in Africa).Hot wars in cold places also involve corridors of power that determine who gets
to use cutting-edge technologies (the U.S.’s technology blockade of China),
who gets paid how much for commodities (the G7’s price cap on Russian oil),
and how commodity trades get settled (Moscow’s demand to get paid in gold
as an analogue to Moscow’s demand this year to get paid in rubles for gas).