A Few Things: Bretton Woods III, The Coming Disorder, The Past & Future of Russia, Whole Brain Living

April 9 2022

I am sharing this weekly email with you because I count you in the group of people I learn from and enjoy being around.

“The scariest moment is always just before you start.”

- Stephen King

“There will always be rocks in the road ahead of us. They will be stumbling blocks or stepping stones; It all depends on how you use them.”

- Friedrich Nietzsche

“The impediment to action advances action. What stands in the way becomes the way.”

- Marcus Aurelius

Hope you are having a great Easter break.

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A. A Few Things Worth Checking Out:

1. Zoltan Pozsar has written some of the most important research pieces of 2022, and we discussed him last week. His latest is: Money, Commodities, and Bretton Woods III.

Key bits from this one:

Commodity reserves will be an essential part of Bretton Woods III, and historically wars are won by those who have more food and energy supplies – food to fuel horses and soldiers back in the day, and food to fuel soldiers and fuel to fuel tanks and planes today. According to estimates by the U.S. DoA (the Department of Agriculture), China holds half of the world’s wheat reserves and 70% of its corn. In contrast, the U.S. controls only 6% and 12% of the global wheat and corn reserves. This has implications for the price level of food and the conversation about VLCCs and the oil trade for the price level of energy.

The co-existence of the two triangles then has huge implications for the course of inflation in the East versus the course of inflation in the West. This is serious:

Bretton Woods II served up a deflationary impulse (globalization, open trade, just-in-time supply chains, and only one supply chain [Foxconn], not many), and Bretton Woods III will serve up an inflationary impulse (de-globalization, autarky, just-in-case hoarding of commodities and duplication of supply chains, and more military spending to be able to protect whatever seaborne trade is left).

Empires fall and rise. Currencies fall and rise. Wars have winners and losers.

Paul Volcker had it easy... 

…he “only” had to break the back of inflation but had a unipolar world order and the rise of Eurodollars to support him. The triangle on the left supported him, and the triangle markets fussed about was the impossible trinity (you know, the stuff about monetary policy independence, FX rates, and open capital accounts), but that was about “our currency, your problem”. Jay Powell finding his inner Volcker won’t be enough to break inflation today. He’ll need a strong helping hand… 

…a strongman to take on the (inflationary) mess caused by other strongmen? 

The new trinity of Bretton Woods III will be about “our commodity, your problem” – the EU’s inflation problem for sure, if not the inflation problem of the entire G7. 

He was on the Bloomberg Odd Lots Podcast discussing his vision For Bretton Woods III.

THIS IS A MUST LISTEN.

2. If you are interested in Oil and Commodities and how it’s played the role of making the modern world and its role in conflict and chaos, Prof. Helen Thompson (of politics) at Cambridge University has written a great new book titled: Disorder: Hard Times in the 21st century. I’m reading it now.

It recounts three histories - one about geopolitics, one about the world economy, and one about western democracies - and explains how in the years of political disorder prior to the pandemic the disruption in each became one big story. It shows how much of this turbulence originated in problems generated by fossil-fuel energies, and it explains why as the green transition takes place the long-standing predicaments energy invariably shapes will remain in place.

She was just on the Rest Is History podcast discussing. It’s excellent.

Oil: The Making of the Modern World

Oil: Conflict, Chaos and Climate Change

3. Fiona Hill is one of the foremost experts on Russia. She’s served on the National Security Council and as a National Intelligence Officer. She was on the Ezra Klein discussing a range of issues, including: why she is pessimistic about the possibility of a peace deal (I’ve heard similar from people in UK armed forces and govt), why we are entering a “much darker” phase of the conflict, and what a renewed framework for European security could look like.

4. Interview between Bruno Macaes and Sergey Karaganov. Karaganov is a former advisor to both Yeltsin and Putin and honorary chair of the Moscow think tank the Council for Foreign and Defence Policy.

His thoughts and ideas are extremely influential on Russian foreign policy and in this frank conversation one gets a really good idea of what’s at stake from a Russian perspective as well as some revealing nuances into the psyche of the Russian decision makers at this point.

A quote:

We all feel like we are part of a huge event in history, and it’s not just about war in Ukraine; it’s about the final crash of the international system that was created after the Second World War and then, in a different way, was recreated after the collapse of the Soviet Union. So, we are witnessing the collapse of an economic system – of the world economic system – globalisation in this form is finished. Whatever we have had in the past is gone. And out of this we have a build-up of many crises that, because of Covid-19, we pretended did not exist. For two years, the pandemic replaced decision-making. Covid was bad enough, but now everybody has forgotten about Covid and we can see that everything is collapsing.

5. WILTW or 13D is a great weekly report by Kirik Sokoloff. It’s a must-read. He spoke to Jesse Felder about his framework, research and investment process. He then shared how he applies this framework to the inflation debate and the most meaningful conclusions he has reached as a result of this process.

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B. The Past and Present of Russia:

I have a bad habit of always trying to zoom out and understand the broader perspective and history around events. The micro details are less interesting for me than the broad perspective.

Over the last few weeks, I have been going down the rabbit hole that is the history of the Soviet Empire and how Putin fits into it. The journey has included these two books, which I am still processing.

But if you are interested in a great podcast narrative of the country, it’s really worth listening to the Rest Is History series (with historians Tom Holland and Dominic Sandbrook) in this order:

Young Putin, the KGB and the Soviet Union

The Fall of the Soviet Union

Yeltsin, Economic Chaos and President Putin

Putin’s Russia

and if you want to go deep into Putin and how came to rule Russia then, the How to Take Over The World podcast has a great two part on him from 2018:

Vladimir Putin, Part 1

Vladimir Putin, Part 2

I think the big ideas for me after reading this, was that Russia no longer exists as a normal country and hasn’t for maybe two decades. It is a KGB or Silovik (people of force in Russian) controlled asset.

For almost two decades it has functioned to enrich the insiders, who have only increased their control of the country further in that time, and no those people are not the oligarchs. By controlling the commodity and cashflow producing assets the goal has been to have the funds to continue the old KGB fight against the west.

While raw power and money are the core currency of this state, it is controlled by multiple factions. Yes we see Putin as the head of the country, but he needs to have the backing of multiple people and their factions to control a country as vast as Russia. That is a continuous balancing act.

Three people we should all learn more about: Igor Sechin, Gennady Timchenko, Yury Kovalchuk.

In the short term, there is a key date coming up: On May 9th, Russia observes Victory Day as its most important national holiday. It celebrates the end of the Great Patriotic War (1941-1945) by staging events that dwarf those of any other country. In 2021, the performance in Moscow included 12,000 Russian troops marching through Red Square, followed by tanks and missile launchers, and it concluded with an aerial show of 76 jets and helicopters—one for every year since the victory over Nazi Germany.

“We know they’re lying, they know they’re lying, they know that we know they’re lying, we also know that they know that we know they’re lying, but they still continue to lie.”

- Attributed to Aleksandr Solzhenitsyn

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C. Whole Brain Living

The human brain is endlessly fascinating and everything we see, do, learn and build is a function of our brains. By understanding my brain better, I hope to understand myself.

Jill Bolte Taylor is a well known brain researcher and she gave one of the most popular TED talks of all time in 2008. 28 million views on TED.com and 7 million views on Youtube. The talk was on what she learnt about the brain after suffering a stroke in 1996.

It’s definitely worth watching:

But what is even more interesting is the book she wrote in 2021 titled: Whole Brain Living. Thank you Steven Wood for sharing.

There are many narratives about brain, for example: that the right brain is our emotional brain, while our left brain houses our rational thinking, which then was further popularised by Kahneman has System 1 and System 2.

Neuroscience has allowed us to go deeper into our brains, and one of the things we have discovered is that our emotional limbic system is evenly divided between our two hemispheres. So that each hemisphere has both an emotional brain and a thinking brain.

The book discusses these four distinct modules of brain cells as four characters that make up who we are, in summary:

Ch. 1, Left Thinking. Focused on rationality, achieve goals today, linear thinking.

Ch. 2, Left Emotion. Focused on protecting you and living in the present.

Ch. 3, Right Emotion. Risk taker, creative, lives in the flow, expansive, loves.

Ch. 4, Right Thinking. Unconscious, open to possibilities, thinks in pictures, connected to whole.

Taylor discusses how to listen to the four different cells, rather than being driven by Character 1 or 2 (as I usually am), then dives into how to use the four parts together as one whole, and how to train your brain to let the other voices in.

I’m still absorbing this and working on accumulating it into my life. This is a more practical book than the Master and his Emissary by Iain McGilchrist that we discussed a few months back.

Here’s a recent talk she had that is a good introduction to her ideas:

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