Reinhard Panse's Perspectives
Reinhard Panse's Perspectives
Podcast
17.4.2022
Putin's war against Ukraine is not yet over. But there are increasing signs of how it will end. Economically, one thing is already clear: Russia is one of the losers. The prices of long-term Russian bonds have already almost halved and the sanctions will put the country under further pressure.
In the West, we feel the war through inflation, we believe. But is that true? What has actually been more important for the development of the global economy and inflation in recent years is the shift in the global political order. Because historically, as long as a single world power dominates, world trade flourishes, whereas it stagnates or even declines in the case of bi- or multi-polarity. This was the case with Great Britain after the Napoleonic Wars until around 1880. When the USA, and later Germany and Russia, overtook Britain's economic power, international trade fell.
Such multipolarity has many consequences, the two most important being increased government spending on armaments and sub-optimal supply chains with increased development of production facilities within the economic bloc to which one belongs. This creates public and private investment as well as additional demand for intermediate products and labor, which are already in short supply. Their price rises, which in turn leads to higher inflation.
We are now living in just such a time. Since the weakening of the USA and Europe as a result of the financial crisis and the rapid rise of China, a new phase of multipolarity began in 2009. Since then, China has been creating its own sphere of influence, Russia has been pursuing a military-backed policy since Putin came to power and the West is its own sphere. This bloc thinking is once again leading to deglobalization and therefore higher inflation rates, which we will consequently have to adjust to in the coming years.
For investors, the only way out is to invest in long-term assets that will offset the increased inflation, which we estimate at three to three and a half percent per year in the US over the next ten years. Gold and real estate are both likely to benefit from rising inflation, albeit not immediately. Equities, on the other hand, are likely to come under pressure, depending on the country and industry, if refinancing on the capital markets becomes more expensive again.
Reinhard Panse's Perspectives
17.4.2022
Reinhard Panse
The war in Ukraine has driven up prices. There is more behind this than just the scarcity of energy and resources.
Putin's war against Ukraine is not yet over. But there are increasing signs of how it will end. Economically, one thing is already clear: Russia is one of the losers. The prices of long-term Russian bonds have already almost halved and the sanctions will put the country under further pressure.
In the West, we feel the war through inflation, we believe. But is that true? What has actually been more important for the development of the global economy and inflation in recent years is the shift in the global political order. Because historically, as long as a single world power dominates, world trade flourishes, whereas it stagnates or even declines in the case of bi- or multi-polarity. This was the case with Great Britain after the Napoleonic Wars until around 1880. When the USA, and later Germany and Russia, overtook Britain's economic power, international trade fell.
Such multipolarity has many consequences, the two most important being increased government spending on armaments and sub-optimal supply chains with increased development of production facilities within the economic bloc to which one belongs. This creates public and private investment as well as additional demand for intermediate products and labor, which are already in short supply. Their price rises, which in turn leads to higher inflation.
We are now living in just such a time. Since the weakening of the USA and Europe as a result of the financial crisis and the rapid rise of China, a new phase of multipolarity began in 2009. Since then, China has been creating its own sphere of influence, Russia has been pursuing a military-backed policy since Putin came to power and the West is its own sphere. This bloc thinking is once again leading to deglobalization and therefore higher inflation rates, which we will consequently have to adjust to in the coming years.
For investors, the only way out is to invest in long-term assets that will offset the increased inflation, which we estimate at three to three and a half percent per year in the US over the next ten years. Gold and real estate are both likely to benefit from rising inflation, albeit not immediately. Equities, on the other hand, are likely to come under pressure, depending on the country and industry, if refinancing on the capital markets becomes more expensive again.
About the author
Reinhard Panse
Reinhard Panse is Chief Investment Officer and co-founder of FINVIA Family Office GmbH. Until February 2020, Reinhard Panse was a member of the Management Board and Chief Investment Officer for HQ Trust GmbH, which is owned by the Harald Quandt family. From 2004 until joining HQ Trust GmbH in 2011, Reinhard Panse was Chief Investment Officer of the UBS Sauerborn business unit created within UBS Deutschland AG. From 2001, Reinhard Panse was a member of the Management Board of Sauerborn Trust AG and its legal predecessors. He was responsible for the investment strategy and played a leading role in the holistic asset management and administration of large private assets. Reinhard Panse began his career by taking over capital market and client support activities at Feri GmbH in 1989, after having founded and managed his own wealth management as managing director.
