Macro Voices

MacroVoices #530 Daniel Lacalle: China and The Us Will Decide The Outcome of The Iran War

1h 14min

This episode discusses the collapse of Iran negotiations, leading to a significant spike in crude oil prices and global economic threats. Guest Daniel Lacalle explains why the S&P 500 rallied despite this, attributing it to soaring money supply masking underlying stresses. The conversation highlights Europe's vulnerability to the energy crisis, the "staying power" of the US and China, and the expectation of persistent inflation and elevated oil prices due to geopolitical risk.

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✨ Key Takeaways

1

The S&P 500 rallied to new highs following news of collapsed Iran negotiations and surging oil prices, a phenomenon Daniel Lacalle attributes to soaring global money supply masking underlying economic stresses.
2

The US and China are best positioned to endure the prolonged energy crisis due to domestic production/stockpiles and strategic alliances (Russia for China), while Europe faces severe vulnerability from lack of preparation and eroding margins.
3

Persistent inflation is expected due to unchecked government spending, increasing debt, and policies aimed at boosting aggregate demand, exacerbated by the current energy crisis.
4

While oil prices may have reached a short-term top, they are expected to remain significantly elevated (around $15 a barrel above January levels) due to a lasting geopolitical risk premium, establishing a higher floor than in previous years.
5

Gold's recent inverse correlation with rising oil prices is linked to the unwinding of leveraged long-gold/short-dollar positions and central bank selling, while the US dollar's current strength is seen as a risk-off signal that may reverse post-conflict.

💬 Notable Quotes

"I think that there is a fundamental reason is that money supply grows is soaring. We have the fastest money supply growth since 2021 globally led by China, it's true, but also in the United States, Europe a little bit more so, dude, but in the UK it's also soaring."
"The big problem is in Europe, it's also a problem in Australia... many, many economies have not prepared themselves for this type of disruption."
"I think that the bottom is higher and that the top is much lower."