Daniel Leichsenring

Very thought-provoking argument by Louis-Vincent Gave @gave_vincent, co-founder and CEO of Gavekal (one of the most respected macro research firms on China). His argument - which is correct - is that one of the The biggest problem for Western governments today (be it France, the UK, the US) is the rapidly rising cost of funding their debt. He says that governments have 3 broad ways to get it under control: 1) Austerity, cutting spending massively, which basically no politician wants to do because it makes you massively unpopular 2) Specific to the US, they could dramatically reduce AI data center spending, which soaks up a huge share of the world’s capital and pushes up borrowing costs for everyone, governments included. Not good either since it kills the AI boom. 3) Or, they can go back to embracing China, which he calls "the one deflationary force in the world today." He says it's by far the easiest path, and policymakers always take the easiest path. Louis-Vincent argues that's exactly what Mark Carney (“the least dumb of the western leaders today,” in Gave’s words) did when he opened Canada to Chinese cars: it's a cheap and easy way to fight inflation, and to reduce the cost of funding Canada’s debt in the process. It's fairly ironic when you think about it: you can actually find plenty of quotes by Western officials castigating China for "exporting deflation" (like Klaas Knot from the European Central Bank here: en.protothema.gr/2024/12/30/…). Louis-Vincent’s argument is basically that, sooner or later, folks in Western finance ministries are going to look at bond yields, then at the inflation numbers, then at all those speeches about China exporting deflation, and go like: "wait a minute..." 😏 Full video of Louis-Vincent’s interview here: youtube.com/watch?v=kT_cV_Wa…