https://miro.medium.com/max/400/0*tlGQDfuHcTy9yJ9j
(Any views expressed in the below are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.)
This will be the last essay in my “White Boy” series. I am done talking about Sam Bankman-Fried (SBF) and the collapse of FTX/Alameda. It’s not fun dunking on someone when they can’t fight back. The only tweets SBF will be sending in the coming weeks — if any — are likely to be bland, carefully-crafted platitudes designed to render him more likeable before his trial. But, before I commence ignoring him and his deeds, there is one final and important lesson to be learnt from the FTX debacle and what it signifies from a global macroeconomic and political perspective.
Throughout this series I have used SBF and the FTX saga as a foil to make a broader point — and I intend to do that one last time with today’s essay.
As has become abundantly clear, the world is splitting into two major blocks: The West (or as I’ve referred to it in my past essays, Pax Americana) and Eurasia. Pax Americana is a combination of America, Western Europe, and their fair-weather allies. Eurasia is a combination of China and Russia, with China the major and Russia the minor partner in their alliance. The Ukraine war is a physical manifestation of this competition, as it has quickly become a proxy war between Pax Americana and Eurasia. The semiconductor chip/trade war between America and China is another example of the non-lethal/economic side of this war.
In the middle of Pax Americana and Eurasia are a number of non-aligned countries that have the things both sides need. These countries have young productive workers who can make things at affordable wages. And these countries possess critical resources like hydrocarbons, cobalt, lithium, nickel, copper, etc. These are the materials that will power the next phase of human economic and technological advancement. These countries have a choice of who to trade with. This choice is predicated on sentiment — that is, how they feel they are being treated in any bi-lateral trade relationship — and the actual economic terms of trade. The economic terms of trade include both the quantum of money paid and which currency is accepted (e.g., the USD, the RMB, gold, etc.)
This essay focuses on the sentiment piece of the equation. Specifically, I’ll be exploring how the world’s perception of Pax America may start to shift after yet another pillar of Western financial exceptionalism, SBF/FTX — aided and unwittingly abetted by the Western financial and media establishment — robbing the rest of the world (ROW) blind. I say the ROW because a majority of the impacted individuals and entities are neither American nor Western European. It was the Global East and South that were harmed the most by this fraud. And I will argue that the reason these countries let the fox in the hen house yet again was misplaced trust due to centuries of social conditioning, which has historically resulted in little “white” soy-boys like SBF being given an automatic seat at the proverbial table, no questions asked.
This is important because if we are to navigate the next few decades of financial markets, we have to analyse whether the West, which consumes things, or the ROW, which produces things, will triumph in terms of returns to investors. I and many others believe that the secular trend of the West gorging to its heart’s content at the expense of unfair trade deals for the ROW will slowly reverse. The growing confidence the ROW has to challenge the West is driven by a historical sense of aggrievement from unfair treatment (both perceived and real) — and I believe the FTX saga is a perfect example of the behaviour that rankles the ROW and that is likely to motivate them to further stand up to the West. And that means that investors allocating funds in various instruments and businesses that do well when producers choose to adjust the terms of trade in their favour will earn above-average returns.
And with that, please digest and consider my usual warning as I delve into the issues of “race” in Pax Americana and globally:
One of the primary goals of these essays is to help you recognise when stereotypes are clouding your judgement. There is no human alive who doesn’t use stereotypes and heuristics to simplify the trillions of subconscious and conscious decisions made over our lifetimes. We are all racist to some small or large degree. The elites of any system will use this against us in an attempt to nudge our behaviour in a direction that suits them. Recognize when you are being played, and adjust your behaviour accordingly.
Pigment
Vitiligo is a condition that results in the de-pigmentation of the skin. I have a mild form of it on my face, and it results in blotchy pink patches. Where am I going with this? Well, human civilisation writ large has experienced a mild bout of its own figurative form of vitiligo over the past few centuries. Let me explain.
The Eurasian landmass contains 70% of the world’s population and, up until recently, was the locomotive of human civilisation.
Source: K.Mahbubani “Has the West Lost It?”
Up until quite recently, India and China accounted for 50% to 60% of the world’s GDP. It wasn’t until the 16th century that the Western Europeans (followed by the Americans) began to supplant their mostly Asian competitors and create venerable empires such as Pax Britannica and Pax Americana.
These pink-beige people — known in the lingua franca of Pax Americana as “white” — lacked numbers, but they made up for it with strong political organisation and technological advancements. That’s a slight oversimplification — the intricacies of why the West has triumphed over the East in the last few centuries is a topic of hot debate amongst historians, and everyone has a theory. But regardless of your specific views on how the West applied its advantages to ascend from its position as the perennial underdog, it is indisputable that the West has always been deficient in its number of human subjects (i.e., its users) and the natural resources it brought to bear upon the world. (Eurasia contains the majority of the world’s human and critical natural resources, and most importantly, its hydrocarbons.)
To overcome this lack of homegrown labour and resources, the West resorted to slavery and the colonial subjugation of the rest of the pigmented world.
Armies of hundreds of thousands, sailing in ships far away from their homelands, were able to subdue and subjugate populations in the hundreds of millions. In the beginning, overwhelming technological might did the trick — picture bows and arrows vs. breech-loading muskets. But as information about basic science and technology spread alongside education, it became harder to use pure might to subdue the locals. Recognising that their iron grip was slipping, the West adapted by synthesising a social caste system that deputised the local pigmented elites by purchasing their loyalty.