In MacroVoices #542, Luke Gromen explains why the Strait of Hormuz closure lasted far longer than expected but crude prices didn't spike, revealing China's strategic power to slash oil demand via EVs and solar. The conversation focuses on how war, fiscal expansion, and bond market stress are accelerating a shift toward financial repression and gold as a neutral reserve asset, with China's tactical patience positioning it to win the long game.
Summarized by Podsumo
China's ability to slash oil demand by 3-4 million barrels per day through EV and solar adoption surprised global markets and demonstrated Beijing's strategic leverage.
Gromen predicts an inevitable shift to yield curve control in Western bond markets as Japan, Germany, the UK, and the U.S. collectively borrow for defense spending, triggering synchronized currency weakness against gold.
Gold has corrected 30% but Gromen argues it is the best asymmetric trade, as the long-term trend favors its role as a neutral reserve asset in a fragmented monetary system.
Oil prices remain highly uncertain, ranging from $50 to $200, depending on China's willingness to intervene; Gromen prefers gold over oil for lower volatility and superior long-term positioning.
U.S. electrical infrastructure equities and Japanese industrial equities are favored for their exposure to reshoring and power grid bottlenecks.
"War always, always, always inflationary. There's never been a deflationary war ever in history."
— Luke Gromen
"The longer this war goes on, the more everybody makes other arrangements. And there's only one other arrangement - Yuan and gold settlement."
— Luke Gromen
"America needs to pivot into basically building ourselves out, fixing what we messed up. Then we'll have really good products to offer people and compete on that basis, versus dumping the whole chessboard."
— Luke Gromen