The Coal Trader

War, Industrial Policy, and Inflation

Credit Suisse’s Zoltan Pozsar writes that “War means Industry.” For the US to maintain its hegemony, it needs to initiate the following industrial policies:

  1. Re-arm (to defend the world order)
  2. Re-shore (to get around blockades)
  3. Re-stock and invest (for commodity/resource supply)
  4. Re-wire the grid (for energy transition)

For investors looking over the above to-do list, it’s important to note each item is…

  1. Commodity intensive
  2. Capital intensive
  3. Interest rate insensitive
  4. Uninvestable for the East

This means inflation will be a nagging problem and a credit boom will be necessary regardless of Federal Reserve interest rate policy. The last point speaks to how the East will most likely shun US Treasuries going forward. Zoltan’s broad thesis over the past year is that a new “…Bretton Woods III is destined to happen.” He predicts a future where commodities and real assets are in vogue once again, and global currencies are perhaps even backed by baskets of commodities.

I recommend reading his latest paper titled War and Industrial Policy, linked here and below:

Here’s a interview w/ Zoltan in late March (2022) discussing his Bretton Woods III thesis: