The takeaway ….
As I get ready for the release of the jobs report, a thought on the relationship between the world’s major geographic regions hit me. Do western nations, primarily the United States, the United Kingdom, and Eurozone, really want to see a developed Africa, Asia, or Latin America? Would development of these areas fit in with the global banking industry’s mission of seeking out collateral that can be used to place bets?
Bank trading desks from western countries that rely heavily on imports engage in a carry trade with a country like Japan. By carry trade I mean that a bank trading desk from the U.S. may borrow at low rates in low-interest rate countries like Japan and then invest in countries offering higher rates like the United States.
The yen borrowed in Japan is converted into the currency of a western country that is heavily reliant on intellectual property such as the United States, the United Kingdom, or the Eurozone. The US dollars, UK pound sterling, or euros are then used to purchase bonds from these respective jurisdictions.
These bonds are then used as collateral against which loans for investment are made. The cash from these loans is invested into regions of the world from which resources are extracted, namely Africa, Asia, and Latin America. The resources provide the inputs used for producing final goods with those goods ironically sold by the intellectual property reliant countries to the resource-blessed countries at prices that only the elite in the resource-blessed countries can afford. The irony.
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But what happens if Asia, Africa, and Latin America were able to raise prices on their resources by nationalizing their resources, building bridges, ports, and roads, constructing processing plants, and developing new intellectual property? The cost of borrowing on the part of the U.S., the UK, and Europe would become more expensive and the Anglo currencies would drop severely in value.
I suspect that future moves on the part of the United States, United Kingdom, and the Eurozone will reflect this overall philosophy especially with the mounting expression of the need for more economic independence being seen in the Sahel and other regions in Africa and Asia.
The data ….
By the way, data from the U.S. Bureau of Labor Statistics shows that non-farm payrolls came in at an increase of 139,000 jobs in May while the unemployment rate stands at 4.2%. These surface numbers don’t move me much. On the surface, an increase of 139,000 jobs is below the historical range of employment associated with full employment, that level of employment where we get decent growth without a heated increase in consumer prices.
At least these figures may give President Trump and Elon Musk less to feud about.
Alton Drew
6 June 2025
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