Markets Are Realizing This
Since 1800, 51/52 countries had Gross, Government Debt >130%.
Their fate was one or more of the following:
- Massive debt restructuring;
- Currency devaluation;
- Higher inflation;
- Outright Default
Will History Repeat?
Source: FRED, Pinetree Calculations
Last time when US government finances were stretched during 1944-1952, they went ahead with rapid industrialization –
growing the industrial output by ~60%.
Can that performance be repeated in
2023-2028?
Will History Repeat?
Yes, They Are Industrializing
Mexico Boom
Banks And Bank Credit Is Not Even Relevant In Brave New World
This Is Known As Hyperinflation
EMs Have Become DMs
EM Not Following DM On Rate Cycle
Govt Becoming Bigger..Deciding Winners
Indian Govt Is Doing Its Bit
India - Resurgence in Manufacturing
“India’s domestic electronics production has increased significantly from US$29bn in F2015 (1.4% of GDP) to US$105bn in F2023 (3.1% of GDP), reaching ~3% of global electronics Manufacturing. MS sees India’s electronics manufacturing sector growing at a 21% CAGR over the next 10 years (F2022-32) to US$604bn by F2032 (8.6% of GDP)”
Morgan Stanley India
Due to Infrastructure Build Up
India moving from Digital infrastructure (infra.) to Physical infra. build. Digital infra. allowed India to leapfrog Manufacturing directly to services and created an IT and services boom. With Physical infra. push, India is headed for a manufacturing boom.
Rising Capacity Utilization Will Lead To Increase In Capex
India Transitioning From A Service Led Economy To Manufacturing
Macro Theme Of The Decade - Electrification
“In India, it also means adding an equivalent of the European Union’s entire existing grid by 2040.” (Hitachi India)
A recent study by the Energy Transitions Commission, a coalition of companies and financial institutions, found that $1.1tn must be spent on the grid every year until 2050 if the world is to reach its net-zero goal. That is on top of the cost of new generating capacity.
For every dollar invested in renewables another dollar needs to be invested already in grid, transmission and distribution.
Connecting The Dots – Nuclear Energy – The Only Clean, Green And Cheap Energy
GOLD Is Headed HIGHER
GOLD Buying By Central Banks Has Accelerated Since Russia Conflict
Key Takeaway
- Follow the Government – Follow the Liquidity in this Brave New World
- US and India both going for “Reindustrialization”
- Decoupling happening between US and Rest of the world
- Get ready for Capex boom..Stagflation comes next
It’s Different This Time: Cyclical Changes For 2024
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