Looking at the most recent trip to China of the US Secretary of State Anthony Blinken, ending with additional sanctions threats towards China in relation to “support” provided to Russia in its ongoing conflict with Ukraine, when it came to selecting our title analogy we reminded ourselves of the “Law of the instrument”. The “law of the instrument”, law of the hammer, Maslow's hammer, or golden hammer is a cognitive bias that involves an over-reliance on a familiar tool. Abraham Maslow wrote in 1966:
"If the only tool you have is a hammer, it is tempting to treat everything as if it were a nail."
When ones look at the trajectory of the Russian economy under multiple sanctions, one can opine that using the same blunt “sanctions” instrument on China will most likely generate the same results, but we ramble again.
One thing fairly clear and we have been fairly vocal in our musings, the “stagflationary” outcome is playing out and, in our book “war” is inflationary. As such we continue to view positively the commodity sector in general and precious metals in particular.
In this conversation we would like to look at “the beta game” and ask ourselves if it is running out of steam and the bounce in Chinese equities as well as the trajectory of the Japanese yen and the stance of the Bank of Japan which remains of great importance when it comes to our macro world and underlying “carry trades” and trade wars.
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