The MB's Weekly Selection
To accompany the Monthly Barometer, my reflection on 5 macro themes, together with 5 significant articles to help you make sense of what’s going on and get an inkling of what might be next.
(1) THE GAME-CHANGING WAR, (2) TRUMP DRIVING THE $ DOWN, (3) AI: DISRUPTING THE DISRUPTORS, (4) HOW TO ESCAPE DIGITAL SURVEILLANCE, (5) COPING WITH OVER-TOURISM
THE GAME-CHANGING WAR - The conflict between Israel and Iran is a game-changing war that will reshape the Middle East, with worldwide ramifications and masses of unintended consequences (how, for example, will it affect the China, Iran, North Korea and Russia’s informal axis?). At this juncture, it looks promising but inconclusive for Israel, which can’t destroy Iran’s nuclear programme by itself. Only the US can, and soon the American President will have to decide whether to take part, or not. A plethora of analysis is endeavouring to make sense of how this will unfold, and it’s probably best to look beyond the vagaries of the very short term. In this FT article (sadly behind a strict paywall) John Sawers, a former British diplomat and chief of MI6, spells it out. (1) If the Islamic regime does fall at some point, then we shouldn’t expect a liberal pro-western government to emerge. (2) Fragmentation is possible, as happened in Libya, Syria, Yemen and Somalia, but on a much greater scale (between Arabs, Azeris, Baluch, Kurds and Persians – who represent only 60% of the Iranian population). (3) Iran’s authoritarian friends, most notably Russia and China, are unlikely to prop up the regime if it does start to wobble. One lesson from recent decades: “The fall of repressive regimes doesn’t always lead to a better outcome.”
TRUMP DRIVING THE $ DOWN - Since Trump’s inauguration in January, the $ has lost more than 10% of its value against a basket of the world’s major currencies. Worryingly, the traditional correlation between Treasuries and the $ has broken down too, with the $ falling even as bond yields climb. This is driven by a range of issues, notably: (1) the erratic and senseless trade war; (2) the failure of the “One Big Beautiful Bill” to address the unsustainable fiscal situation (in fact it makes it worse); (3) the repeated attacks against the rule of law (the status of a global reserve currency ultimately depends on a country’s legal and institutional integrity). On top of these, Trump seems determined to keep depreciating the dollar to buoy up US manufacturing – an illusion and a dangerous game that could trigger a doom-loop: a reduced appetite for US debt among foreign investors would drive interest rates higher and make the US fiscal position ever more challenging, pushing the $ down even further. Over the coming months, the greenback could fall by another 10%. This Bloomberg’s article (gifted) does a good job at explaining why - the reasons are multiple.
AI: DISRUPTING THE DISRUPTORS - Tech pundits are divided about what AGI (Artificial General Intelligence) and ASI (Artificial Super Intelligence) will look like when (and if) they arrive. Some think they could be with us in 2 years from now, others say 20 years. However, most agree on one thing: as it stands, AI is progressing at an astonishing pace, putting at risk many jobs in legacy industries (like accounting and law) and now tech. AI is indeed disrupting the disruptors, undermining the core businesses of the giants like Google (whose search engine is now at risk, undermining its revenue model based on adverts), Microsoft, and Apple. Charles Ferguson, a tech investor, explains why in this Project Syndicate article (behind a paywall that may require prior registration). In his own words, “AI is not only transforming the applications we use, but it also reshaping the very process of software development, threatening to render much of today’s tech sector obsolete.”
HOW TO ESCAPE DIGITAL SURVEILLANCE - As ever more countries exploit digital surveillance, more and more people are asking what to do to evade it. The spate of recent incidents in the US, either at the border where Customs and Border Protection can seize anybody’s phone and copy its contents or during demonstrations or protests to identify people, is a reminder that the threat to privacy is real, pervasive, and possibly very consequential. This Wired guide on how to protect ourselves from government surveillance (metered paywall), based on recommendations from experts, does the trick. It explains that protection from surveillance comes in two forms: (1) top-down legal and policy limits on data collection, and (2) bottom-up technological protections in the hands of the targets of that surveillance. Regarding the latter, actual end-to-end encryption of messages is key (Signal is recommended as offering the best privacy protections). Then, just as important as encrypting conversations is strongly encrypting the devices themselves. Turning on a VPN, using a privacy-focused mobile browser, and adding an ad blocker can all help reduce the location data leaked during mobile browsing. Read on: the article is full of practical and useful advice.
COPING WITH OVER-TOURISM - Summer is coming and over-tourism is back on the agenda. Tourism is a huge industry - like in Spain where is generates 12% of GDP - but the bigger it is, the bigger the risk that over-tourism will ruin parts of it. All over the world, there are mounting protests denouncing the high housing costs and environmental damage that results from over-tourism. How to address the problem? A rising number of over-touristy destinations are now acting by imposing new regulations and taxes, planning to ban or restrict Airbnb rentals, limiting cruise ships, etc. This BBC article (free access) looks at how Switzerland, Spain and Berlin are dealing with the issue, each in their own way.