Enduring Consensus.

Extreme fiscal undiscipline.

“The first news summary of the morning —the most comprehensive I’ll receive all day— and the last thing I read before going on air.” — Hugh Hewitt, host of The Hugh Hewitt Show.

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1. Eurointelligence:

It is hard to ignore Donald Trump. There is always some outrage that makes people turn their attention away from the main issue. But the really big life-changing thing that is happening in the US is not the new style of diplomacy or the systemic destruction of the elite university system. All of this comes and goes. What will stay is the US having given notice to end its role as the benign hegemon for western security and finance. We have written a lot about security, where deep tail risks lurk. But our worries about finance are no longer of tail risk variety. This is not sustainable. This will crash.

Do not start by asking who else is going to fill the role taken by the US dollar, then conclude that no one else is, and then lazily dismiss the whole idea. This is not going to be like it used to be when the dollar replaced sterling as the global reserve currency. This is going to be very messy precisely because there is nobody else to step in. The failure to embed the euro into a broader economic union constituted the biggest historic failure of the EU – a theme one of us just expanded on in a Eurointelligence column.

We expect the unwinding to occur in the form of a global financial crisis, a name already allocated to an event that will look harmless in comparison. (Source: eurointelligence.com)