Thematic Edge Podcast

Introduction In this episode of Thematic Edge, Marvin Barth and Mark Farrington are joined by John Cochrane, Senior Fellow at the Hoover Institution, former Professor of Finance at the University of Chicago Booth School of Business and author of The Fiscal Theory of the Price Level . One of the most influential voices in modern financial economics, Cochrane brings his trademark intellectual curiosity and willingness to challenge conventional thinking to a wide-ranging discussion of economic models, inflation, fiscal policy and central banking. The conversation explores why sophisticated economic models can fail to capture economic reality, how government debt and fiscal credibility influence inflation and exchange rates, and what Switzerland’s remarkably strong currency reveals about the relationship between fiscal discipline and monetary stability. The discussion also examines Japan’s response to supply shocks, the reliability of inflation measures and whether central banks have misunderstood the role of expectations. Ultimately, it raises a fundamental question: can central banks deliver price stability without the support of responsible fiscal policy? Key themes * Economics beyond conventional boundaries: Cochrane reflects on his career spanning finance and macroeconomics, the growing specialisation of academic research and the contributions of 2026 Nobel laureates Robert Hall and Michael Woodford. * Economic models and their limitations: Marvin challenges the Federal Reserve’s persistent underestimation of US potential growth, while Cochrane argues that models are most useful as ‘quantitative parables’ rather than forecasting machines. * The fiscal theory of the price level: Cochrane explains how confidence in a government’s ability to honour its debt influences inflation, providing an alternative perspective to conventional monetary explanations. * The Swiss franc and fiscal credibility: Switzerland’s fiscal discipline offers a compelling explanation for the franc’s sustained strength, illustrating how fiscal policy influences exchange rates and sovereign borrowing costs. * Japan’s response to supply shocks: Mark explores Japan’s use of subsidies to cushion rising energy and food costs, prompting a debate over the economic consequences of suppressing market price signals. * Measuring inflation: From headline and core inflation to trimmed means, the discussion examines whether central banks’ preferred measures provide better guidance or obscure persistent inflationary pressures. * Inflation expectations and credibility: Marvin and Cochrane explore the distinction between financial market expectations and those of consumers, questioning whether central bank communication can substitute for credible policy action. * The Fed’s mandate and fiscal responsibility: The discussion concludes by questioning what price stability should mean, whether Congress should provide clearer direction and why monetary policy alone cannot guarantee low inflation. Timestamps 00:00 Introduction and welcome to John Cochrane 01:50 A career spanning finance and economics 05:50 The 2026 Nobel Prize and New Keynesian economics 13:16 Economic models and the Federal Reserve 16:21 Why the Fed underestimates US potential growth 18:37 The limits of economic forecasting 24:00 Fiscal theory, inflation and exchange rates 27:37 The fiscal theory of the price level explained 33:20 Economic models as quantitative parables 38:10 Japan, subsidies and the dangers of distorting prices 42:26 Core versus headline inflation 51:04 What should price stability really mean? 53:14 Inflation expectations and the lessons of 2021 58:15 Forward guidance and the credibility of central banks 1:02:46 The Fed, Congress and fiscal responsibility Further reading * Themistocles’ Lesson for the Fed , Seriously, Marvin?!, 8 May 2026. Based on Marvin’s presentation at the Hoover Institution Monetary Policy Conference, this research examines the Fed’s forecasting failures, inflation expectations and the case for institutional reform. You can watch the full speech on Youtube here: * Fiscal Dominance: Narratives Versus Reality , Marvin Barth, 25 November 2025. An examination of fiscal dominance, financial repression and the relationship between government financing and monetary policy. * Ep. 023: Noise Awaiting Signal , Thematic Edge Podcast, 23 September 2026. Marvin and Mark discuss persistent inflation, central bank policy and the fiscal and market forces shaping the global outlook. Explore John Cochrane’s research, publications and commentary on his official website This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thematicmarkets.substack.com/subscribe

Introduction The European crisis that Marvin Barth and Mark Farrington have long warned of appears to have begun…while Marvin and Mark were focused on the “mother of all resolution windows” in the US ahead of the US midterm elections, the AI race, Fed credibility, and geopolitics. Mark and Marvin review the thesis for why Europe was a growing pile of dry tinder waiting for a spark before turning to what events and forces coalesced to create that spark. They then discuss how Europe’s increasing self-isolation, its deep and difficult to reconcile problems, and the loss of a credible German balance sheet limit sources of “circuit breakers” to the crisis, raising the stakes and differing markedly from 2011-12 when Europe last had a debt crisis. Marvin then leans on Mark’s deep experience managing institutional portfolios in financial crises of the last four decades for both the “generic” crisis playbook and the specific ways to position for and play this crisis. Key Themes Europe as “the pit of despair” Marvin and Mark review why they have long warned of an impending European crisis: * Persistent low-growth, the wrong economic model, * poor energy policies that have left it with the highest energy costs in the world, * unsustainable member-state debts dependent on the German balance sheet, * how Germany’s rash fiscal splurge under Merz undermined the whole structure, * increasing political instability, * and the dual hits of the Ukraine and Iran wars worsening all other vulnerabilities. Triggers of the current crisis Proximately, the crisis began with riots in France, but Mark and Marvin point to pressures from rising US real rates and the increasing international competition for capital as the ultimate trigger, plus the surprising role of the UK moving closer to Europe. Europe’s increasing isolation As Chinese mercantilism has evolved from a source of European growth to a threat to it and America has turned more defensive, Europe has increasingly isolated itself in the “rump” of the post-War liberal order as North Asia, the Gulf States and Latin America increasingly align with the US, leaving Europe with few friends or reliable sources of capital. A lack of resolution mechanisms Unlike in 2011-12 when Europe last faced a crisis it no longer has an internal member with a strong enough balance sheet to “solve the problem” by credibly backing European Central Bank interventions, while Europe’s isolation leaves it without likely external help. The crisis playbook What are the general rules for a portfolio heading into a crisis and how do you look for opportunities. What are the specific risks and opportunities in this crisis. Timestamps 00:00 Introduction: Europe’s emerging crisis 02:22 The crisis arrives while attention is elsewhere 05:48 Why Europe was a pile of dry tinder 10:42 What triggered the crisis now? 15:05 US real rates and the competition for capital 22:11 The surprising role of the UK 29:55 Europe’s increasing isolation 36:40 Where is Europe’s circuit breaker? 43:09 The crisis playbook 48:15 Countertrades and relative value opportunities 52:32 The US resolution window and the dollar 55:02 Why the traditional volatility trades may not work 58:27 Closing thoughts Further reading Brexit Blues, ten years on , Seriously, Marvin?! , 1 July 2026 Observations: Closing thoughts for 2025 , Thematic Markets, 22 December 2025 Keystone Cops , Seriously, Marvin?!, 28 October 2025 La Cosa Nostra Americana , Thematic Markets, 4 March 2025 Leitmotif 7: Breaking point? Thematic Markets, 22 January 2025 Leitmotif 6: A “Western Spring”? Thematic Markets, 21 January 2025 Leitmotif 5: Time to pay the piper , Thematic Markets, 20 January 2025 This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thematicmarkets.substack.com/subscribe

Introduction In this episode of Thematic Edge, Marvin Barth and Mark Farrington revisit the “resolution window” stretching from the summer through the US midterm elections examine what market signals we’ve gleaned so far. They assess the latest inflation data and central bank decisions, the changing shape of the US Treasury curve, Scott Bessent’s management of the bond market and the strength of corporate earnings. They also examine the growing anxiety surrounding AI, from regulation to US-China competition to the rapidly expansion of financing needs for the investment boom. They note that many of the outcomes feared have so far failed to materialise. Earnings remain strong, Treasury markets have stabilised and capital investment is broader than the “only-AI” narrative suggests. Yet uncertainty remains as the US midterm elections approach and political narratives are approaching a crescendo. The challenge for investors is separating noise from signal. Key themes • The resolution windowMarvin and Mark assess the major events that have passed since their last discussion and whether the balance of evidence is beginning to shift. • Inflation remains stickyThe latest CPI reading was widely characterised as “hot”, but both question that interpretation but agree that inflation expectations remain sufficiently elevated to require further tightening. • Central banks still have work to doThe Fed, Bank of Japan and ECB are all signalling that they may finally understand that their inflation problems have not disappeared, even if their approaches and communication differ. • Bessent and the Treasury curveThe discussion examines how Treasury Secretary Bessent’s buybacks and clear communications have helped improve liquidity and anchor the long end of the US yield curve, drawing institutional investors back to the market. • US China relationsAhead of further talks between Washington and Beijing, Marvin and Mark consider where cooperation remains possible amid continued strategic competition, particularly around trade, technology and managing the dangers of AI. • The AI financing boomAI borrowing has increased dramatically, creating genuine competition for capital. But set against sovereign borrowing and pre-financing being assembled by institutional investors to extend the boom, the picture is more positive than many narratives imply. • The investment boom is broader than AICapital expenditure, manufacturing investment and earnings strength extend well beyond hyperscalers and the Magnificent Seven. The US investment story began before generative AI and remains much broader. • Earnings versus the wall of worryCorporate earnings continue to surprise positively. Marvin and Mark discuss why strong fundamentals can coexist with persistent bearish narratives and how investors should interpret that divergence. • Noise, politics and resolution eventsAs the US midterms approach, political narratives are likely to become increasingly prominent. The discussion focuses on how investors can distinguish those narratives from underlying economic and market signals. Timestamps 00:00 The resolution window revisited03:25 Inflation, the Fed and the global central bank cycle16:06 Treasury fair value, term premia and Scott Bessent23:05 US Japan and US China relations29:26 Earnings continue to surprise33:20 AI risk, regulation and strategic competition39:19 AI financing and competition for capital46:19 Why the investment boom is broader than AI52:04 Trading the wall of worry59:01 Global bifurcation and what comes next Further reading Missing Productivity , Thematic Markets, 3 June 2026Why the US productivity and investment boom began before generative AI and extends far beyond the technology sector. The US outlook takes shape , Thematic Markets, 21 August 2025Marvin’s framework for stronger than expected US growth, persistent inflation and a broader capital expenditure boom. Global Entropy: Enter the dragons , Thematic Markets, 9 November 2023The foundation of the Global bifurcation thesis and the emerging strategic competition between the Western and Chinese centred economic systems. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thematicmarkets.substack.com/subscribe

Introduction In this episode of Thematic Edge , Marvin Barth and Mark Farrington reunite to examine what is really driving the rise in sovereign bond yields around the world. Their central argument is that the move is bigger than fiscal policy or any single government: capital is becoming more expensive as investment demand rises, global savings come under pressure and central banks struggle to rebuild credibility. The conversation moves from Kevin Warsh’s first months at the Federal Reserve and the bond market response to the Iran war, to Treasury buybacks, FX intervention and the structural effects of Localization . Looking ahead, they map out what Mark calls the “mother of all resolution windows”, spanning the September Fed and Bank of Japan meetings, the Trump Xi summit, Q3 earnings, and the US midterm elections. They finish with the market implications, including why the yen may offer one of the clearest ways to trade the path to resolution. Key themes * Competition for capital: Rising investment demand, from Localization , defence spending, energy infrastructure, and AI datacenters, is colliding with pressure on global savings. The result is structurally higher real yields and steeper sovereign yield curves. * Fed credibility: Kevin Warsh’s first months as Chair have left bond markets in “trust but verify” mode. The September meeting now poses a difficult test as softer inflation data collides with the Fed’s need to restore credibility. * Looking through shocks: The Iran war demonstrated why central banks can no longer assume markets will simply look through supply shocks. With credibility already depleted, geopolitical shocks are feeding more directly into inflation and term premia. * Bond market intervention: Treasury buybacks and currency intervention are examined as tools for improving liquidity and influencing market behaviour, rather than evidence of covert QE or an impending Treasury market crisis. * The mother of all resolution windows: The Fed and BOJ meetings, the Trump Xi summit, Q3 earnings, and the US midterms create a sequence of events that will determine the ultimate direction for the dollar, equities and global rates. * Equities compete for savings too: Strong US returns to capital continue to attract global savings, while growing corporate debt issuance places companies in more direct competition with sovereign borrowers for capital. * The yen reversal: A more hawkish BOJ and movement towards neutral rates could finally break the yen carry trade, creating the conditions for a sharper fall in dollar-yen and potentially more supportive conditions for Japanese assets. Episode recorded: 8 September 2025 Timestamps 00:00 Introduction: Why global yields are rising 02:30 Marking Kevin Warsh and the Fed to market 04:04 The Treasury sell off and steepening yield curve 07:20 Bond markets move to “trust but verify” 11:30 Why the September Fed meeting matters 20:09 Central bank credibility and the Iran shock 22:11 The structural competition for capital 23:40 Localization , investment and higher real yields 26:53 Treasury buybacks and yen intervention 30:47 Why higher yields do not necessarily signal crisis 35:24 The “mother of all resolution windows” 38:11 US earnings, equities and the dollar 40:48 CPI and the September Fed decision 42:36 Why equities also compete for global savings 43:45 What to expect from the Trump Xi summit 46:34 Is the Fed becoming untradeable? 50:51 The case for a yen reversal 54:57 Japan, capital flows and positive contagion 56:39 Europe and the US election: what comes next Further Reading * Observations: Marking to market , Thematic Markets, 8 September 2026 * The velvet glove , Thematic Markets, 20 June 2026 * Themistocles ’ lesson for the Fed , Thematic Markets, 8 May 2026 * Alea iacta est , Thematic Markets, 23 March 2026 * What debasement? (Debasement Part II) , Thematic Markets, 8 March 2026 * May you live in interesting times, The Devi l , Thematic Markets, 5 January 2024 * The Politics of Rage , Barclays 2016 This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thematicmarkets.substack.com/subscribe

Introduction In this episode of The Thematic Edge , Marvin Barth and Mark Farrington speak with Alexander Stahel, Chief Investment Officer of Burggraben Holdings and author of The Commodity Compass , about an emerging crisis in global petroleum product markets. The conversation examines how the war with Iran, Ukraine’s increasingly sophisticated attacks on Russian refining infrastructure and China’s focus on domestic energy security have combined to create severe pressure in diesel, gasoline and jet fuel markets. They explore how Ukraine’s strategy has moved beyond damaging Russian energy infrastructure to disrupting the economic and political networks that sustain the Russian state. The discussion also considers whether these pressures could destabilise the regime, or instead strengthen the patronage system around it. Key themes * A global petroleum product crisis: Why the real pressure is in diesel, gasoline and jet fuel rather than crude oil. * China’s strategic energy reserves: How China’s inventories helped absorb the initial shock, and why Beijing may not use its spare refining capacity to support global markets. * Ukraine’s refinery strategy: How targeted drone attacks on critical equipment are causing lasting damage to Russia’s refining system. * Russia’s domestic fuel shortage: Why Russia is moving from a major exporter of refined products towards gasoline and diesel deficits at home. * Why refined products cannot be easily replaced: How crude quality, refinery design and established supply routes limit substitution. * The Siloviki system: How fuel shortages interact with the patronage networks that underpin Russia’s political economy. * The Russian endgame: Whether economic disruption could destabilise the regime or strengthen by increasing the power of patronage. * A perfect storm for diesel and gasoline: How Russian disruption, Middle Eastern supply risks and limited spare refining capacity are tightening global markets. Episode recorded 21 July 2026 Timestamps 00:00 Introduction to Alexander Stahel and The Commodity Compass 02:58 Alexander’s background and commodity investment approach 06:43 Why he created The Commodity Compass 10:28 The Iran war and the global energy market 12:24 Why the disruption has not yet produced a larger oil price shock 13:26 China’s inventories and their role in stabilising the market 17:04 Algorithmic trading, oil futures and the physical market 19:51 China’s approach to refined product imports and exports 26:12 Ukraine’s changing strategy against Russian energy infrastructure 27:23 Mykhailo Fedorov and the transformation of Ukrainian drone warfare 29:48 Why targeting critical refinery equipment matters 31:22 Russia’s dependence on Western refinery technology 35:16 The decline in Russian refining capacity 36:27 How Ukraine selects its refinery targets 38:47 Russia’s emerging gasoline and diesel shortages 40:28 What global markets have lost from Russian product exports 41:44 Why established fuel supply chains are difficult to replace 43:42 The Siloviki system and Russia’s political economy 51:33 Whether economic disruption weakens or strengthens the regime 53:00 Ukraine’s strategy and the possible Russian endgame 58:00 Public criticism, elite tensions and potential political tipping points 01:03:22 The greatest risks facing global energy markets 01:04:01 The global petroleum product crisis 01:05:59 Whether China could relieve the shortage 01:07:22 Red Sea shipping risks and the Houthis 01:08:09 The perfect storm for diesel and gasoline 01:09:00 The Strait of Hormuz and the outlook for product markets Further reading * Observations: Dazed and confused , Thematic Markets, 10 April 2026 Why the ceasefire may have been a strategic pause, including the need to release tankers trapped inside the Persian Gulf and prepare for renewed conflict. * Perspective , Seriously, Marvin?! , 8 April 2026 Eight potential paths for the Iran war, the Strait of Hormuz and global energy markets, viewed through the history of major supply shocks. * Alea iacta est , Thematic Markets 23 March 2026: How the Iran war and insecurity in the Strait of Hormuz could reshape global energy flows, alliances and market risks. * Global entropy: Dragons challenged , Seriously, Marvin?!, 16 September 2025: How changing US foreign policy, China and Russia are accelerating global fragmentation and increasing geopolitical tail risks. * Observations: Revealed preference meets real limits, Part III , Thematic Markets, 4 November 2024: The constraints that emerge when political and strategic preferences collide with economic and physical limits. * Global entropy: Enter the dragons , Thematic Markets, 9 November 2023: The strategic foundations of the emerging global order and China’s efforts to secure the resources required to withstand geopolitical disruption. * Wagner’s lessons , Thematic Markets , 14 July 2023: What the Wagner rebellion revealed about the fragility, patronage networks and internal power structures of the Russian state. The Commodity Compass , Alexander Stahel’s Substack , featuring detailed research into commodity markets, energy supply chains and the structure of global petroleum markets. The Great Product Squeeze; The World is Running on Empty , Alexander Stahel, 21 July 2026: Slide show referred to in this episode. Note: All links above point to thematicmarkets.com, now the home of the complete Thematic Markets archive, including research, podcasts and commentary. Existing paid Thematic Markets Substack subscribers can continue to access the same research through Substack. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thematicmarkets.substack.com/subscribe

In episode 020 of Thematic Edge , Marvin Barth and Mark Farrington consider the broader implications of the European Central Bank’s retreat in Sintra, Portugal where there seemed to be shift in global central bank philosophy led by new Fed Chairman Kevin Warsh and his drive to end the practice of forward guidance. Marvin and Mark discuss what the end of forward guidance means for near-term Fed policy and markets, and how Sintra may have helped Chairman Warsh push a rate hike back home. They also discuss how forward guidance and increasingly activist monetary policy changed market behavior — for the worse — and what the withdrawal symptoms are likely to be. The conversation concludes with the implications for interest rates, volatility, and the US dollar versus both G10 and emerging market currencies. Key themes * Why the Sintra conference suggested a global shift back towards traditional central banking. * Kevin Warsh’s rejection of forward guidance and what it means for markets. * How forward guidance evolved from an emergency tool into permanent policy. * Why suppressing volatility ultimately encouraged excessive leverage. * The relationship between credibility, optionality and monetary policy. * Whether markets have become too dependent on central bank signalling. * The outlook for US interest rates under the new Federal Reserve. * Why Marvin and Mark remain constructive on the US dollar. * Regional implications for Europe, Japan, North Asia and emerging markets. Timestamps 00:00 Introduction 02:00 What Sintra revealed about the future of central banking 08:00 Kevin Warsh, Greenspan and the end of monetary activism 16:00 The rise and fall of forward guidance 20:00 Why forward guidance should only be an emergency tool 26:00 Volatility, leverage and market behaviour 33:00 What the latest economic data means for Fed policy 37:00 Why real interest rates are not restrictive 40:00 The bullish case for the US dollar 45:00 North Asia, Latin America and emerging market currencies 55:00 Geopolitics and the outlook for emerging markets Further Reading 📖 The velvet glove , Thematic Markets, 20 June 2026 [Free article] What we learned from Kevin Warsh’s first meeting as Fed chairman 📖 Warsh cycle, Part I , Thematic Markets, 10 June 2026 What to expect from the Warsh Fed in its first few meetings. 📖 What debasement (Debasement Part II) , Thematic Markets, 8 March 2026 Countering the dollar debasement myth with facts & forecasting its future path 📖 Weighing Warsh , Seriously Marvin , 11 February 2026 Hawk or dove? Or just a return to orthodox policies? 📖 Observations: Goshawks , Thematic Markets, 4 December 2025 Markets and the commentariat don’t expect a hawk, but Kevin Warsh is coming. 📖 A hawk in dove’s clothing , Seriously Marvin , 1 July 2025 Leave President Trump’s rhetoric to the side: he’s incentivized to choose a hawk for Fed chairman 📖 Fiscal dominance: narratives versus reality , Seriously Marvin , 25 November 2025 Forget about fiscal dominance, it’s regulatory dominance driving the Fed’s balance sheet 📖 Regulatory arbitrage , Seriously Marvin , 18 December 2025 The battle for the Fed isn’t primarily about interest rates; its about bank regulation 📖 The presidents problem , Seriously Marvin , 25 February 2026 Don’t forget that Federal Reserve Presidents also play an important role in monetary and banking policy 📖 Train wreck , Seriously Marvin , 23 September 2025 Jerome Powell will go down in history as one of the Fed’s worst chairmen, objectively 📖 The Fed fumbles , Thematic Markets, 20 September 2024 The Fed’s rushed policy rate cuts were a mistake that further tarnishes their credibility 📖 Leitmotif 4: The Fed sheds cred , Thematic Markets, 17 January 2025 The Fed has a lot of work to do to restore its credibility. 📖 Everything you know about QE is wrong , Thematic Markets, 2 4 February 2026 QE isn’t the market support many believe; nor will QT have a significant negative effect 📖 The employment situation , Thematic Markets, 2 9 September 2025 Both the Fed and markets overestimate the softness of US labor markets This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thematicmarkets.substack.com/subscribe

In this episode of Thematic Edge, Marvin Barth and Mark Farrington sit down with Arthur Hayes to explore one of the most important questions in crypto today: what ultimately gives Bitcoin value? While all three agree that liquidity, monetary policy and sovereign incentives shape markets, they discuss their differences in evaluating fundamental value. Arthur Hayes is one of the most influential figures in the history of cryptocurrency. He co-founded BitMEX, once the world’s largest crypto derivatives exchange, pioneered the perpetual swap contract that now dominates crypto trading, and helped build one of the industry’s first unicorns. Today he serves as Chief Investment Officer of Maelstrom, his family office, where he combines analysis of macroeconomic analysis, liquidity and market psychology to navigate both crypto and “TraFi” (traditional finance) markets. The conversation ranges from Hayes’ background, how his early experience during the Global Financial Crisis helped shape his view, to Bitcoin’s relationship with gold, the future of stablecoins and payment rails, the institutionalisation of crypto, the politics of digital assets after FTX, and why Donald Trump embraced the sector. The discussion spans the modern global political economy, how it shapes digital assets values, and how they integrate with traditional macro trading. Key themes • Arthur Hayes’ journey from traditional finance to founding BitMEX and inventing the perpetual swap. • How the Global Financial Crisis shaped his views on central banks, liquidity and financial markets. • Why Hayes believes almost every asset class is ultimately a bet on future money printing. • Bitcoin as “technology plus liquidity” and why liquidity dominates valuation. • The debate between liquidity-driven and adoption-driven models of Bitcoin value and how they interact. • Whether Bitcoin is money, an asset, digital gold, or something entirely different. • Why Bitcoin differs fundamentally from traditional finance because it cannot be bailed out. • The similarities and differences between Bitcoin and gold. • Whether Bitcoin adoption is approaching saturation. • The impact of ETFs and institutional ownership on Bitcoin’s future. • Why network usage and transaction activity matter for Bitcoin’s long term value. • Stablecoins, payment rails and the future of the dollar system. • Why the Democrats turned against crypto after FTX. • Why Trump embraced crypto and what that means for the industry. • How geopolitics increasingly influences cryptocurrency markets. Timestamps 00:00 Introduction 03:30 Arthur Hayes’ background and arrival in Hong Kong 06:30 Lehman Brothers and the lessons of the Global Financial Crisis 08:50 Discovering Bitcoin and founding BitMEX 11:00 Macro investing, David Dredge and tail risk 16:45 Everything is a liquidity trade 20:00 Bitcoin valuation: technology plus liquidity 23:00 Bitcoin versus gold 24:45 Adoption, saturation and valuing Bitcoin 27:20 Why adoption may matter less than investors think 30:00 ETFs, institutionalisation and Bitcoin’s future 33:00 Sovereigns and strategic Bitcoin reserves 34:00 Payment rails, transaction fees and network sustainability 37:00 FTX and the politics of crypto 39:30 Why Trump embraced crypto 41:00 Bitcoin, geopolitics and the future of digital assets Further Reading 📖 21 Million And Other Myths Of Value , Seriously Marvin , 17 June 2026A critique of three core Bitcoin narratives: fixed supply, power law pricing and inevitable debt monetisation. 📖 Valuing Bitcoin , Thematic Markets, 29 May 2026A novel epidemiological model of Bitcoin adoption, valuation and long run macro drivers. The framework challenged directly during this conversation. 📖 What Debasement? , Thematic Markets , 8 March 2026Why the dollar’s position may be stronger than many crypto investors assume, and how stablecoins reinforce dollar dominance. 📖 Easy Money , Seriously Marvin , 29 July 2025How liquidity creation, monetary policy and financial conditions drive asset prices, often in ways investors misunderstand. 📖 Revolutionary Money and Banking , Thematic Markets , 27 June 2025How technological innovation is reshaping money, banking and financial intermediation. 📖 A Monetary Revolution in the Making , Seriously Marvin , 23 June 2025Examines the growing role of stablecoins, digital assets and alternative payment systems in the global monetary order. 📖 Stand and Deliver: your crypto or your life, Seriously Marvin , 3 June 2025Why payment rails, financial sovereignty and control of transactions may matter more than reserve currency status in the next phase of geopolitical competition. 📖 The Geopolitics of Crypto (Payments) , Thematic Markets, 23 Jan 2025Why independent payment rails may become a strategic battleground between the United States and China. Subscribe to ThematicMarkets.com This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thematicmarkets.substack.com/subscribe

In this episode of Thematic Edge, Marvin Barth and Mark Farrington examine whether central banks are finally being forced to confront a changing inflation regime. They argue that policymakers have been too willing to look through supply shocks, too focused on protecting growth, and too slow to respond to rising inflation expectations. The discussion centers on the arrival of Fed Chairman Kevin Warsh and whether his appointment signals a broader shift in central banking philosophy around the world. Key themes • Why central banks may have misread the inflationary consequences of the Hormuz shock • The distinction between market-based inflation expectations and consumer inflation expectations • Why inflation credibility matters more in temporary supply shocks • How years of prioritising growth protection may have left central banks behind the curve • The case for a global regime change in monetary policy • Whether Kevin Warsh represents a decisive break from the Powell era • Why markets may be underpricing the risk of Fed rate hikes • The challenge of restoring credibility after repeated inflation forecasting errors • How Warsh could reshape the Fed through committee dynamics, communication, staffing and governance • The tension between Fed independence, politics and inflation control • Why a simpler, fact based policy statement could force greater accountability within the FOMC Timestamps 00:00 Introduction and the global central bank backdrop 01:30 The policy response to the Hormuz shock 05:00 Inflation expectations versus market pricing 09:00 How central banks became overly focused on growth risks 10:45 The emerging global monetary policy regime change 14:00 Kevin Warsh and the future direction of the Fed 18:00 Why current policy settings may be too loose 22:00 Why markets are underpricing rate hikes 31:00 How Warsh could change Fed communications 35:00 The case for a fact based FOMC statement 42:00 Groupthink, dissents and institutional reform 48:00 The hidden powers of the Fed Chair 53:00 Governance, staffing and the mechanics of regime change Further Reading 📖 Warsh cycle, Part I , Thematic Markets, 10 Jun 2026: What to expect from the Warsh Fed in his first few meetings. 📖 Everything you know about QE is wrong , Thematic Markets, 24 Feb 2026: Kevin Warsh’s expected Fed balance-sheet reduction is central to the outlook for U.S. rates, the dollar, and asset prices in 2026–27. 📖 Observations: Goshawks , Thematic Markets, 4 Dec 2025: Implications are a more hawkish Fed than markets expect with a strong focus on reform of the institution, including downsizing the balance sheet and bank deregulation. 📖 Themistocles' lesson for the Fed , Seriously Marvin, 8 May 2026: The Fed’s independence problems are of its own making. Speech given at the Hover Institute’s Monetary Policy conference. 📖 Weighing Warsh , Seriously Marvin, 11 May 2026: Warsh is a hawk, but the real difference is philosophical. 📖 The bank that swallowed a fly , Seriously Marvin, 2 Dec 2025: Why Basel III regulations helped create the Fed's oversized balance sheet and why reformers such as Warsh want to change it. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thematicmarkets.substack.com/subscribe

In this episode of Thematic Edge , Marvin and Mark examine the evolving Iran conflict, the shift in US strategic thinking, and the emerging logic of trying to “make business not war” amid Global bifurcation . The discussion explores why the expected energy shock hasn’t been as severe as projected, how the US has pivoted toward a maritime containment strategy, and why the US has shifted its focus to controlling global choke points. Marvin and Mark also examine China’s hoarding strategy across commodities, reserves, collateral, and logistics, arguing that Beijing has spent years building buffers for a low trust world. The conversation then turns to the Trump-Xi summit in Beijing, where geopolitics, industrial policy, and statecraft increasingly blurred together. Was the real message less about headline issues and more about resolving how to keep the peace between two sharply differing models of national power? Finally, the episode explores the deeper implications of a world shifting from globalisation toward resilience, redundancy, strategic stockpiling, and selective interoperability. Key Themes • Iran and the shift from rapid conflict to maritime containment • Why the anticipated energy shock has been less severe • Strategic reserves, redundancy, and resilience as statecraft • Maritime choke points and US sea denial strategy • Europe’s continued vulnerability to geopolitical shocks • China’s hoardingstrategy across energy, metals, gold, and collateral • The emergence of a more transactional, “zero trust” global economy • Sinodollar dynamics and China’s evolving reserve architecture • What Trump’s Beijing business delegation really represented • Multi-domain competition between the US and China • Public private partnership as a strategic response to China • The limits of globalisation and the rise of Global bifurcation Timestamps 00:00 Introduction and framing the Iran conflict 02:00 Why the conflict evolved differently than expected 05:20 Maritime strategy and the logic of containment 07:00 Strategic reserves and why the energy shock was muted 10:00 Trump as trader and adaptive strategist 14:30 Maritime choke points and sea denial strategy 17:40 Which countries were prepared and which were exposed 22:00 Resilience, self sufficiency, and diversification strategies 29:45 “Make business, not war” and trustless trade 32:40 The Trump-Xi summit and G2 dynamics 37:00 Industrial policy and America’s business “entourage” 42:50 China’s mitigation strategy and strategic hoarding 46:00 CBDCs, atomic settlement, and China’s buffer model 49:00 The Sinodollar thesis explained 52:00 Euroclear, custody diversification, and reserve strategy 55:00 Final reflections and preview of Kevin Warsh discussion Further Reading To explore the framework behind these arguments in more depth, see Marvin Barth’s recent work: Observations: Dazed and confused , 10 April 2026 Alea iacta est , 23 March 2026 Leitmotif 9: It’s not the economy, stupid!, 24 January 2025 Leitmotif 3: Localization and Global bifurcation , 16 January 2025 This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thematicmarkets.substack.com/subscribe

In this special episode of Thematic Edge, recorded around the Hoover Institution Monetary Policy Conference at Stanford University, Marvin Barth explores why the greatest risks to Federal Reserve independence may be the Fed’s own policy errors, institutional overconfidence, and expanding mandate. Through conversations with leading economists, former policymakers, and Fed officials, the discussion examines the growing tension between fiscal sustainability, monetary policy, bank regulation, and political control. Key themes * Why central bank independence ultimately depends on fiscal credibility and political legitimacy * How overreliance on economic models weakened the Fed’s ability to understand structural change and real economy conditions * The growing overlap between monetary policy, fiscal dominance, and bank regulation * Why the Fed’s expanded role as a bank regulator has made the institution a political target in its own right * John Cochrane explains the fiscal theory of the price level and why inflation ultimately reflects confidence in government solvency * Historical parallels between fiscal stress, money creation, and political pressure on central banks * Why the next battleground for control of the Federal Reserve may be the regional reserve banks rather than the Board itself * Michael Bordo’s warning that rapid deregulation without institutional safeguards could recreate the instability of earlier banking eras * Randy Quarles and Darrell Duffie explain why meaningful balance sheet reduction and banking reform could take a decade or more * The operational and political constraints preventing a rapid unwind of the Fed’s post crisis framework * Marvin Barth’s argument that the Fed’s credibility problems stem not only from policy mistakes, but from an institutional unwillingness to confront and reform them Timestamps 00:00 Introduction and reflections from the Hoover Monetary Policy Conference 01:03 Why economists are still debating the structure and role of central banks 01:37 Political economy, real world complexity, and the limits of economic models 02:40 How expanding mandates have diluted the Fed’s focus on price stability 03:20 Fiscal dominance and the risks to central bank independence 03:54 John Cochrane on the fiscal theory of the price level 07:35 Why rising debt and deficits increase political pressure on the Fed 10:39 Historical lessons on Fed independence and political influence 11:25 The battle for control of regional reserve banks and bank regulation 12:43 Michael Bordo’s warning on deregulation and banking instability 13:48 Randy Quarles on why meaningful deregulation and balance sheet reform may take a decade 23:21 Darrell Duffie on the operational realities of shrinking the Fed balance sheet 28:39 Marvin Barth’s concluding remarks on policy errors, hubris, and institutional reform Further Reading To explore the framework behind these arguments in more depth, see Marvin Barth’s recent work. 📖 Themistocles’ Lessons for the Fed , The Fed’s independence problems are of its own making, Seriously Marvin?!, 8 May 2026 📖 Everything You Know About QE Is Wrong ,Preparing for Fed balance sheet reduction requires a reality check, Thematic Markets, 24 February 2026 This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thematicmarkets.substack.com/subscribe

In this episode of Thematic Edge , Marvin Barth and Mark Farrington are joined by Danny Dayen for a wide ranging debate on inflation, monetary policy, and whether the Federal Reserve is now behind the curve. The discussion begins from an unusual point of agreement. Both Marvin and Danny argue the Fed has committed a sequence of policy errors that risks overheating the US economy and reigniting inflation. But from there, important differences emerge, especially over the likely conduct of a Warsh Fed, the role of balance sheet policy, and whether supply shocks now require an explicitly hawkish monetary response. The conversation explores inflation expectations, neutral rates, oil shocks, financial conditions and whether repeated supply disruptions have shifted the global inflation regime itself. It is also a rare compare and contrast episode, with Mark pressing both Danny and Marvin on where they agree, where they diverge, and what markets may be missing. Key Themes 1. Fed policy errors and the overheat thesis Why both guests believe rates are below neutral, why inflation risks may be underestimated, and why passive easing may now be worsening the problem. 2. Inflation expectations as the central battleground How inflation expectations have become structurally unanchored, and why this changes how supply shocks should be treated. 3. Central banks constrained by past errors in responding to supply shocks From oil and labour shortages to tariffs and critical minerals, the case that repeated shocks and de-anchored inflation expectations may limit central banks’ room to “look through” the latest supply shock. 4. Kevin Warsh and the coming Fed regime change Will Warsh prioritise reform, balance sheet reduction, or rate hikes first? Marvin and Danny offer sharply different interpretations. 5. Balance sheet policy versus rate policy Could quantitative tightening substitute for hikes, or are markets underestimating how much tightening may still be required? 6. Macro disagreement as edge Side-by-side comparison of two different but broadly aligned macro frameworks gives a unique perspective on current risks. Timestamps 00:00 Introduction and why listeners wanted this debate 03:24 Danny Dayen joins, macro framework and market mispricings 07:20 US growth, overheating and Fed policy errors 15:15 Supply shocks and why “transitory” may be over 22:25 Inflation expectations as policy constraint 31:00 Kevin Warsh and Fed regime change 41:20 Balance sheet reduction versus rate hikes 49:45 Closing debate on overheat risks and policy endgame To explore the framework behind these views in more depth visit thematicmarkets.com This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thematicmarkets.substack.com/subscribe

A detailed and at times sharply contested discussion on the strategic direction of the Iran conflict following the collapse of US-Iran peace talks and what it means for markets (recorded at noon London time on 13 April). In this episode, Mark and I analyse the shift from an historically intense air campaign to a US-led maritime interdiction strategy. While we both agree that the US is attempting a novel “sovereignty-denial” strategy for regime change, we differ on how much control the US will have over the intensity of the conflict from here. We discuss how the US is shifting responsibilities to allies, how they are responding, and how the US midterm elections affect the Trump Administration’s calculus. We then turn to the economic and market implications. While we find much to agree on in terms of relative effects, we differ over the implications for the dollar. Key themes: * The shift from a large scale bombing campaign to a maritime conflict focused on securing the Persian Gulf and maintaining open trade routes * The US attempt to reframe the conflict and transfer responsibility to allies through a coordinated international presence at sea * The ceasefire as a tactical pause rather than a negotiated settlement, enabling a transition in strategy rather than resolving the conflict * Two competing interpretations of US intent, one focused on managing escalation and internationalising the response, the other on denying Iran the ability to govern and ultimately forcing regime collapse * The concept of a “denial of sovereignty” strategy, where pressure is applied without invasion or nation building * The risk that Iran, as a weakened but still capable actor, may escalate through asymmetric attacks on regional infrastructure * The vulnerability of Gulf energy infrastructure and the limits of missile defence despite high interception success rates * The role of international law and the UN in shaping allied participation, particularly for Europe and Asian economies dependent on energy flows * A likely convergence of global behaviour around freedom of navigation operations, even among reluctant participants * Constraints on European military capacity compared to stronger operational readiness in parts of Asia and the Gulf * The emergence of a lower intensity but more distributed phase of conflict, with multiple actors shaping outcomes * Implications for markets, including the potential for short term resilience or relief rallies alongside persistent tail risks * Diverging views on the durability of this equilibrium and what it implies for the US dollar and global capital flows Timestamps 00:00 Introduction and framing 01:00 Breakdown of peace talks and announcement of US blockade 03:30 Nature of the ceasefire and why it was unlikely to hold 06:00 Transition from air campaign to maritime strategy 10:00 US objectives and the degradation of Iran’s conventional capability 14:30 Debate on control versus escalation risk 18:00 Iran as a weakened but still dangerous actor 22:00 Allied participation, constraints and incentives 25:00 Role of international law and UN positioning 27:00 Global convergence around maritime security 30:00 Transition to market implications 32:00 Competing interpretations of US strategy 36:00 Regime stability versus denial of governance 40:00 Escalation scenarios and downside risks 45:00 Market pricing and potential relief rally 50:00 Dollar implications and closing views Further Reading To explore the framework behind these views in more depth, see the following publications, which set out the strategic logic and potential endgames of the conflict. 📖 Dazed And Confused: Making sense of the ceasefire and what it might mean , Thematic Markets, 10 April 2026 📖 Perspective: Uncertainty suits neither quantitative modeling nor hyperbole , Seriously Marvin?!, 8 April 2026 📖 Strange Action At A Distance: Circumstance and savvy Machiavellianism compound Trumpian confusion , Seriously Marvin?!, 25 March 2026 📖 Alea Iacta Est: Don’t ignore irreversibility in the Iran war , Thematic Markets, 23 March 2026 → Foundational framework for the current phase This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thematicmarkets.substack.com/subscribe

This week Mark Farrington and I are joined by Zoso Davies , formerly Managing Director in European Investment Grade Credit Research at Barclays, where he spent over 15 years analysing major credit cycles including the European sovereign crisis, Brexit, and COVID. Now at a leading London based hedge fund and author of Macro Credit Thinking , Zoso brings a rare combination of top down macro perspective and deep credit market expertise. The discussion reframes how to think about credit risk as markets from stable but nervous about private credit to the realization that Iran-related disruptions likely will be more severe. That transition threatens to turn credit risk from narrative-driven volatility to broad-based concerns over defaults. In investment grade markets, realized losses so far are minimal, yet spreads remain elevated as investors demand conpensation for uncertainty, liquidity, and mark to market risk.. The Iran conflict thus is acting as an accelerant to earlier concerns. What had been a relatively contained concern around private credit now sits within a broader macro shock, as energy and petrochemical disruptions begin to feed into growth, revenues, and confidence. The risk is a transition towards tighter financial conditions that, once underway, can become self fulfilling ( Being is believing ) through institutional channels such as pension funds. Key themes * Credit typically is narrative driven : Market pricing reflects volatility and uncertainty far more than expected defaults * Investment-grade fundamentals are good : Default rates are minimal, but spreads compensate for liquidity and mark to market volatility * Private credit is heterogeneous and often misunderstood : The asset class spans a wide range of quality and structures, masking the narrower segment where risks actually sit * Iran risks changing that : The Iran conflict amplifies existing vulnerabilities but also risks undermining fundamentals * Energy and supply shocks matter for credit : Disruptions feed through to growth, earnings, and ultimately credit quality * Europe appears most exposed : Greater sensitivity to energy shocks and structural fragilities increase vulnerability * Institutional structures can amplify tightening : Pension fund behaviour and regulation may reinforce credit contraction once it begins Timestamps 00:00 Introduction00:25 Who is Zoso Davies01:38 Iran, private credit, and broader credit risks02:39 From chemistry PhD to credit analyst04:31 Breaking into finance in the 2008 crisis06:45 AI job fears versus the 2008 reality10:00 Careers, adaptability, and rolling with change12:02 How Zoso thinks about credit13:00 What investment grade credit actually is14:15 Why credit spreads are about more than defaults16:10 Credit as story and narrative shift17:22 When investment grade credit really breaks19:01 Why private credit gets all the attention21:24 What private credit actually includes22:43 How the private credit story got out of control26:18 BDCs, leverage, and where the real stress sits28:23 The real issue is confidence, not defaults32:00 Is this systemic before defaults rise35:24 You go bankrupt when no one will lend to you36:01 Why software was the original pressure point38:35 How tightening becomes self fulfilling42:34 Tightening credit conditions and rising defaults44:14 Iran, oil shocks, and macro spillovers46:00 Why Europe looks most exposed47:35 The market may be reading Trump wrong50:33 When credit damage starts to become real51:26 From software risk to cyclical sectors52:48 Final thoughts54:22 Where to find Zoso’s work This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thematicmarkets.substack.com/subscribe

A sharp and wide-ranging discussion on the strategic consequences of the Iran war. In this episode, Doomberg joins Marvin Barth and Mark Farrington to unpack why markets have remained surprisingly calm despite escalating violence in the Middle East, what may be coming next, and what the long-term, strategic consequences of this conflict are likely to be. The conversation digs deep into the structure of the global energy system. Key themes: * Market resilience despite conflict, supported by inventories, spare capacity, and supply leakage * Escalation risk and the limits of rerouting flows around the Strait of Hormuz * Oil pricing dynamics, where spikes are constrained by demand destruction * Structural shift in global energy power, with US self sufficiency and China’s external dependence * Divergence between US resilience and Europe’s structural vulnerability * Transition from efficiency to security across global supply chains * China’s strategy of controlling midstream and processing bottlenecks * Likely overcorrection and reinvestment in domestic capacity across the West * A coming infrastructure cycle in pipelines, shipping, and refining * Historical pattern of supply response and potential technological breakthroughs * Geopolitical realignment across key regions, including Asia, Europe, and North America Timestamps 00:00 Introduction and framing 02:00 Market resilience despite conflict 03:30 Escalation risk and Iran strike 05:00 Can supply bypass Hormuz? 06:30 The coming infrastructure response 08:30 Why oil spikes cannot persist 12:00 Long term logistics and distribution shifts 14:00 China versus US in the Middle East 18:00 US resilience and domestic supply 22:00 Europe’s structural vulnerability 32:00 The third dependency shock 34:00 Energy transition versus reality 36:00 From efficiency to resilience 41:00 China’s supply chain strategy 46:00 Who must adapt and how 47:00 Korea, Japan and regional positioning 52:00 Taiwan risk and strategic exposure 53:30 Market implications and closing This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thematicmarkets.substack.com/subscribe

How could the Iran conflict reshape global markets, China risk premiums and emerging market capital flows? Marvin Barth and Erik @YWR discuss geopolitics, uncertainty and the investment implications of a changing global order. In this episode, they explore whether a US-aligned Middle East could reduce geopolitical risk, why emerging markets may benefit from shifting capital flows, and whether China’s equity story changes if Taiwan risk declines. The conversation also examines Europe’s strategic positioning, the future of the dollar, and the broader macro consequences of global power realignment. Key themes • Iran conflict and market uncertainty • China risk premium and valuation debate • Complexity cascades and tail risks • Emerging markets and global capital flows • Europe’s strategic, technological and debt challenges • Dollar strength, stablecoins and global liquidity Timestamps 00:00 Intro and why AI was postponed 02:30 Iran conflict and market uncertainty 03:00 Bullish macro view and the “new empire” thesis 04:35 China markets and Taiwan risk premium 07:45 Complexity cascades and tail risk 10:50 Volatility, options and market pricing 12:40 Is containing China bullish for China? 18:30 The Godfather analogy for US strategy 25:20 China’s economic model versus market pricing 28:30 Emerging markets bull case explained 32:00 US versus China, global alignment choices 37:20 EM flows, currencies and investor FOMO 39:00 The end of the old world order 40:30 Europe’s strategic mistakes 43:30 AI regulation and Europe’s competitiveness 47:50 “Europe as the new EM” debate 49:30 Debt, growth and macro positioning 51:00 Dollar outlook and stablecoins 54:00 Europe risks from dollarisation 55:25 Final thoughts and next episode teaser This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thematicmarkets.substack.com/subscribe

Forest Fire Insurance explores how risk truly builds in financial systems and why volatility is not the enemy it is often portrayed to be. Marvin Barth and Mark Farrington are joined by David Dredge, CIO of Convex Strategies, to unpack the idea of self organised criticality in markets using the forest fire analogy. The discussion ranges from leverage, correlation and contagion to the failures of Sharpe ratio thinking and the dangers of suppressing volatility. The conversation moves through convexity, tail risk, demographic decline, central bank policy and the growing fragility of the global financial system. Dredge explains why insurance is cheapest when it feels least necessary and why the real risk lies in accumulated undergrowth rather than the spark that eventually ignites it. This episode is a deep dive into how systemic risk forms, how it is mispriced and why prudent investors should think less about forecasting outcomes and more about preparing for nonlinear shocks. Timestamps 00:00 Introduction to Thematic Edge and today’s guest 01:00 David Dredge, Convex Strategies and tail risk investing 03:20 Forecasting versus risk management 05:30 The forest fire analogy and self organised criticality 07:00 What is Sharpe World and why it fails 09:30 Rational Accounting Man versus prudent risk management 12:00 Incentives, leverage and systemic fragility 14:45 Good volatility versus bad volatility 16:00 Convexity, skew and why upside volatility matters 18:50 Why investors are not taking enough risk 21:30 Forest management, undergrowth and controlled burns 24:30 Geopolitical and financial systems colliding 27:40 Volatility pricing and the cost of insurance 29:30 Japan, debt dynamics and demographic decline 33:30 Population ageing as a structural risk driver 37:30 Global competition for capital and bond market stress 40:00 Arsonists, campers and fire marshals in the global system 43:00 Markets driving economies, not the reverse 45:00 Bond market stress and policy intervention 47:00 Kevin Warsh, central banks and balance sheet risk 49:30 Basel III, regulation and unintended leverage 52:00 Why systemic risk keeps being misdiagnosed This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thematicmarkets.substack.com/subscribe

Unfortunately, the audio for this episode was terrible, so in addition to the time-stamped table of contents, a full, edited transcript is included below. In this episode, Marvin Barth and Mark Farrington reflect on a sequence of events that together signal a decisive shift in US strategy, from Venezuela to Greenland, and from emerging markets to monetary policy. They examine how recent US actions have reasserted strategic deterrence, clarified a new Western Hemisphere doctrine, and forced allies and adversaries alike to confront an uncomfortable reality. Whether welcomed or resented, American power still sets the terms. The discussion moves from geopolitics to markets, exploring what these shifts mean for asset allocation, the dollar, and global capital flows. Drawing on historical parallels with the 1990s, they unpack the case for a year of two halves, a steepening yield curve, bank outperformance, and a rotation away from debasement trades. They also assess the implications of a more orthodox Federal Reserve, balance sheet contraction, and deregulation, questioning widely held assumptions about gold, bonds, and portfolio construction. This is a wide ranging conversation about power, deterrence, and markets in transition, cutting through noise to focus on structure, incentives, and consequences. Table of contents 00:00 Why this year feels different 02:00 Venezuela and the return of US deterrence 06:00 Allies have fewer choices than they think 08:00 Nigeria and the logic of alignment 10:00 Capital leaving China, where it goes next 11:30 Greenland, power, and nuclear deterrence 15:00 NATO tension is not new 19:00 Why Europe wants out of US assets 21:00 The 1990s playbook markets forgot 24:00 Dollar fear versus earnings reality 27:00 What a harder Fed really means 30:00 Yield curve, banks, and rotation 36:00 Gold is a risk asset, not a hedge 40:00 Why the 60–20–20 portfolio failed 43:00 Bonds may matter again 46:00 Hawk or organiser, redefining the Fed 48:00 Power, markets, and the next phase Full, edited transcript MARVIN BARTH I’m Marvin Barth, and I’m here with my good friend and colleague, Mark Farrington, The Global Watchtower. We’re back to talk about some of the issues that we discussed in our last few episodes, where we got to interview some very interesting guests. We also changed our environment and are actually together at the Cross Keys Pub in Chelsea. Something I think we should do more often, do this in person. MARK FARRINGTON Absolutely. MARVIN BARTH What I wanted to start with is looking back at the Venezuela event and the David Kilcullen interview. Because that interview was unbelievable. Though it went way over time we could have talked to Dave for, I think, another hour or two if we had had the time. But for me, Venezuela set the tone for the year in the sense that last year, there was a lot of shock and awe from the Trump Administration, but there was never any clear definition. And I think other than tariffs, people didn’t get the sense of a real change in US strategy and position in the world. And then as we got towards the end of the year, we had the National Security Strategy, which we discussed back in December as widely misinterpreted. But it was abstract. Venezuela made the NSS tangible. First, it brought home very clearly the Trump corollary to the Monroe Doctrine, or the “Donroe Doctrine,” as people have been calling it. Second, it demonstrated an exceptionally important point Dave made about need for the US to reassert strategic deterrence. After the Afghanistan fiasco after the disaster of Ukraine US strategic deterrence was basically nil and while I’m not saying it’s back and I don’t think Dave was either, I do think it makes it very clear that any adversary around the world has to think twice before they try to counter the US or at least how they go about countering the US. I also think, and we’ll get into this more later, it also sends a very strong message to allies as well. Especially so given the contrast with how European allies handled the whole Greenland situation, Venezuela, as Dave said, wasn’t a flawless operation, but it was a very impressive show of capabilities, especially relative to the European show of sending a few soldiers to Greenland to, literally lay a towel on the ice. It clearly established to every ally that they cannot do this without the US. So, I think that’s going to be very important given how adversarial Trump administration has been in its rhetoric and actions with allies. Do you read that differently? Or what are your key reflections from the Kilcullen interview? MARK FARRINGTON I definitely agree with all those points, and I think that point that Dave made about re-establishing US deterrence was a very important insight. I didn’t immediately put that together, but, you know, he did, and that was helpful. And I also think, explains a lot of behavior of the Trump Administration around Greenland. There’s also an element of reinforcing nuclear deterrence too. The slight difference I might have to how you described it is that I broke the National Security Strategy into three compartments. I was interested in what it implied for the new corollary, the Western Hemisphere corollary, but also what it means for projection of power in the Pacific, the first island chain strategy, and also what it means for Europe and NATO and the Middle East, etc. So Venezuela definitely defined the Western Hemisphere doctrine clearly. And I think everyone got the message. It’s received the usual criticism you would expect anytime you use force. But otherwise, I feel like it has been surprisingly well accepted by the world and South America. I think it’s helped to tip elections in Latin America, as we’ve seen Costa Rica, for example, to the right as well. And I think it will be a successful strategy. Also, I would say Rubio deserves a lot of credit for that as well, not just Trump in this case. And that Latin America views it as a Trump / Rubio strategy, which is helpful. So yeah, I would concur on all the points. MARVIN BARTH So, I don’t disagree with any of that. When I say that it was a defining event, I agree that it was a demonstration only in the Western Hemisphere and only of one slice of the broader National Security Strategy, i.e. the Western Hemisphere Trump corollary. But it had a broader implication as the first clear manifestation of the NSS and the complete shift we’re seeing in the US relationship with the rest of the world. That’s what it brought home to me, because one of the problems with the Trump administration is they say so many different things and he’s so good at misdirecting that you often are left questioning what is real. This made the strategy real. MARK FARRINGTON It definitely means it’s real for everyone in the Caribbean. Exactly. Cuba is immediately standing to attention. MARVIN BARTH But it wasn’t just there. And by the way, you remember Dave said, watch Cuba next. Another really interesting point from the interview with Senator Dafinone of Nigeria, that you couldn’t join, that we should definitely delve into more here, is this tension between people being shocked and offended by how the Trump Administration treats them but realizing they have no choice because you’re either out in the wild by yourself or you have the protection of the United States. Senator Dafinone put that in very clear terms: the US Christmas Day bombings in Nigeria were not an imposition on Nigeria, we were equal participants; we wanted this. Yes, President Trump may be selling it at home in his own way that he needs to do for his politics. But for we Nigerians, this was about an ongoing counter-terrorism operation, and we were really happy to have a big, powerful friend come join us. At the same time, however, he did express very clearly they were very concerned about the Venezuela operation. So it wasn’t just in Latin America, it was around the world. People said, whoa! MARK FARRINGTON No, it was a strong statement, and it has various implications. And I think that one of the implications can be, that you’re concerned, you’re either aligned with the US or you’re not aligned. But one of the other implications can be that if we have an overlap in our goals, it can be the most useful partnership that you can have. In this case, Nigeria definitely wanted and collaborated with that operation. It supported the government’s goals as well. So, I think the US will be used like that. Not as a policeman, but as the deliverer of the painful, punitive message. And perhaps that’s what the Trump posture will be like. Not a normal policeman, but standing ready to act, to create decisive change in the use of military force. MARVIN BARTH By the way, the Dafinone interview brought home another topic we’ve discussed that we need to devote a whole podcast to, which is emerging markets where we both have strong backgrounds. I was fascinated by the opportunity that Senator Dafinone described in Nigeria under the reforms that President Tinubu is undertaking, and in the broader context of these geostrategic realignments, in the competition for these regions’ resources, populations and hearts and minds. That latter point was well illustrated in the news after our interview was that President Tinubu went to visit Turkey and establish relationships with the Turks and increasing trade ties there. Separately, China and Nigeria reaffirmed their strategic partnership. All these pieces are in the mix, and that competition is potentially a huge opportunity in emerging markets. MARK FARRINGTON Totally agree. And if you look at the equity flows that we’ve seen so far in the emerging markets, there’s clearly a big outflow from China and then redeployment in emerging markets ex-China. So, for all of the West, which have some restrictions now on being fully invested or invested at all, in China, they’ve made that strategic allocation and so they’re on the search for new stories, stories which maybe are less impacted by geopolitics and where the country or the resources or the sectors have some potential to benefit from this great competition that we see going on now. MARVIN BARTH Yes, we definitely need to come back to that one and while we could spend a lot of time just talking about those two interviews, there have been so many other things that have taken place in the last couple of weeks, as has been true through the entire Trump Administration, it has been a very event-packed period. We’re going to want to get on to gold, we’re going to want to get on to the Fed nomination, all of those things. But let’s start with, I think, the next big trauma that started immediately after Venezuela, which was the whole affair with Greenland. Perhaps you could start with your perspective on what was at stake, what actually was agreed – because I think there’s a lot of confused information about that – but my big picture question is, was this a disaster? Was it a strategic coup, especially when you consider how it landed at Davos for the United States? Or was this a bit of both? I mean, it does seem like they got something out of this and that this was a successful coercion, but I wonder at what cost? MARK FARRINGTON I think Davos was on the calendar and the Trump entourage definitely planned months in advance to go there, and now puffed up with overconfidence after Venezuela, they came in large and shocked the hell out of everyone. But I think it’s very strategic. It has been well thought out and planned. And while I think most of the world says, okay, yes, I can see the strategic significance for the US of owning Greenland, helps with the Greenland, Iceland, UK gap, managing all of the submarine traffic from Russia into the Northern Atlantic, the access to minerals, all of these sort of things. Even the clever people who looked deeper and understand the need for a backup substation to Svalbard’s satellite communication... MARVIN BARTH You’re referring to island above Norway where NATO has critical arctic radar and communications station... MARK FARRINGTON Yes, which could very easily be be sabotaged by Russian naval attack, so building a backup station in Greenland is just smart planning, and this relates to a bigger issue that has nothing to do with all of the theatrics that we saw in Davos and is instead about nuclear deterrent. So, this is a kind of a throwback to the Cold War detente that we had with Russia, where mutually assured destruction is no longer guaranteed because of the development of low-yield nuclear weapons and strategizing about local low-yield theater usage, etc. So Russia deployed intermediate missiles in Belarus last month. And the US needed to respond, Europe needed to respond, NATO needed to respond and they didn’t. So, this is like one of the first times I can remember where our historic Cold War rival incrementally moved the chessboard forward and we did nothing. MARVIN BARTH A lot of people watching/listenting aren’t our age, but you and I remember the whole Persian missile push in Western Europe and how controversial that was, but it was exactly what you were talking about. Soviets were moving intermediate range missiles into Europe. The US had to respond with them in Germany, right? MARK FARRINGTON Exactly. So, the US I think will not only build the base for its Golden Dome as a backup relay station to Svalbard and Greenland, but it will deploy a nuclear deterrent. That will bring the stakes back in line because detente requires you to remain in balance so that the first strike capability is never an option. And I think people don’t understand that while Denmark has been unbelievably flexible in granting long-term leases and revising the military treaties with the Biden administration, it’s still a part of Denmark, it’s a part of Europe, and it has actually a nuclear-weapons-free zone constitutional backing. So, the way that the US has always got away with doing what it’s doing on Greenland is for Denmark just to look the other way. But putting nuclear weapons on Greenland during peacetime is actually an outright disagreement with the constitutional stance of both Norway and Denmark. So, I think Europe doesn’t understand how important it is when you have two superpowers which are providing the nuclear deterrent to have freedom to control the narrative, to control the incremental escalations without some second or third party intervening through legal means or constitutional means or just narrative disruptive means, etc. So, I think this desire, this strategic desire to have Greenland is about the nuclear deterrence and eventually Europe’s going to get it. And eventually NATO will understand it and it will be resolved. I have no fear of a permanent rupture between Europe and the US. I think that this is getting conflated with some of the other end of a world order type of ruptures that our good friend Mr. Carney has put forward that the world is seizing upon. I think on the nuclear deterrence, it’s hard power and hard strategy that dictates things, and even the Europeans understand that. MARVIN BARTH Well, I think that you are perhaps more hopeful than me that NATO doesn’t suffer some ruptures, and I think you would probably admit that there are greater underlying issues issues for NATO to deal with. But I do think that one of the things that is very clear from this whole process, and I think is an underlying issue that we’re going to see over and over in our discussion on all of these issues, whether it was the shock from Venezuela, whether it’s the shock from Greenland, whether it’s the shock around Kevin Warsh’s nomination, that all of these things are transitions back to things that we had before. Many of these things that people think are outrageous and are completely new are actually very much things we’ve lived through before. E.g. the Trump corollary to the Monroe Doctrine (which also had a Roosevelt corollary); these things have repeated a few times through American history here. As we discussed with the Pershing missile example, there was a lot of push back then, but since we have had 30 years of falsely perceived Western ascendancy, where people sort of forgot about all these security issues. And so we’re having to go through a transition to that. This gets to my point that I worry about the cost of how the Trump Administration pursued this in terms of their aggressive stance on Greenland, threatening Denmark and NATO itself. I’m glad that you’re hopeful, or that you have no doubts that NATO is going to survive this. I am hopeful NATO is going to survive this, because I do think that, again, when push comes to shove, most NATO countries are going to see they have no choice. They have nowhere else to turn, and they are so far away from having the capabilities to defend themselves. But how do you see that rupture in relations and this transition for asset markets? Because, you know, I’ve been doing a few different client dinners over the course of the last two months, even before Venezuela and Greenland, I have been amazed at European asset managers’ reaction to all of this. They say, “We don’t want anything to do with the US. We’re getting out of the US. We’re done with this.” There is a big narrative out there about de-dollarization, decoupling from the US. There’s an even crazier narrative, by the way, about, how Europe is somehow going to pivot to China as if that was somehow even remotely possible. But talk to me about these narratives, because you’ve managed big portfolios over decades, looking at major asset allocation relationships. How do you view this one and the potential for an asset allocation? MARK FARRINGTON Okay, that’s good. I mean, I think that it does favor those who’ve been in the markets for many years and have a little bit of grey hair. Younger people do not appreciate like how to favor the US dollar was and how aggressive the US government tactics were in the early 90s. Most people look back and think of the 90s as this blissful period of the Berlin Wall falling and globalization causing us all to dance around the campfire together and sing Kumbaya. It was not like that at all. The US was using super 301 tactics to beat the Japanese into submission to open their markets because they wouldn’t import anything from the US, and the US dollar was in a free fall all the way to 1995 until the G7 begged the US to begin the “strong dollar” policy under Treasury Secretary Rubin. MARVIN BARTH Yes, you remind me, amid this whole dollar debasement craze, do you remember Lloyd Benson explicitly calling for a weaker dollar? Loyd Benson was President Clinton’s first Treasury Secretary, who before his successor, Bob Rubin, instituted the strong dollar policy directly called for the dollar to depreciate. MARK FARRINGTON But that was the tactic back then. It was a two-tracked strategy with Japan and with Germany at the time. We’re going to use Super 301 tariffs to bash open your markets and simultaneously drive the currency down to force you to comply, because we understood that most of their trade barriers were invisible. We needed to balance the budget. We had a twin deficit problem at that point in time, too. So, you know, the federal deficit was not easy to resolve, so the focus was on the trade. So, we’ve been through this before, and the thing, if you go back and look at the 90s, the dollar can be in a downtrend and still the US asset performance can be fantastic. And that’s what all these emotional reactions from asset managers like those that you have met will soon learn. You can be angry at the politics, you can be offended by the way Trump shocks and behaves in order to create some movement in a frozen debate. But still in the end, you get paid to deliver asset performance in your portfolio. So, you can hedge your currency risk for a while, but then if US equities and US growth stories start to outperform, you’ve got to then lift your hedges and rotate back to the US.

Nigeria is the largest economy and population in Africa, is abundant in natural resources, is an emergent cultural and technology center, and increasingly a regional manufacturing hub. Senator Ede Dafinone of Delta Central State (the main oil-producing region) explains the reforms of President Tinubu, the vast potential opportunities they may release, and how this lynchpin of Africa can navigate strategic competition between the US and China. 0:33 Why Nigeria merits your attention. 2:40 Who is Senator Ede Dafinone of Delta Central State? 6:19 The basis of Nigeria’s cooperation with US attacks on ISIS. 9:33 Nigerian perspectives on the shift to a new world order. 14:35 Nigerian views on President Trump. 17:14 President Tinubu’s willingness to challenge the system and reform. 21:00 What will define success and prospects for long-run success. 23:30 Senator Dafinone’s priorities for Delta State and Nigeria. 25:36 Opportunities in Nigeria created by reform. 31:52 Nigeria’s secret weapon: its educated diaspora. 33:52 Fine arts and fashion in Nigeria. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thematicmarkets.substack.com/subscribe

The Thematic Edge opens 2026 with its first guest, David Kilcullen , retired Australian Army colonel, intellectual architect of both the “Surge” in Iraq and Afghanistan, and the world’s foremost authority on counterinsurgency. Colonel Kilcullen helps us make sense of what happened in Venezuela on 5 January and what to expect going forward. The discussion is structured around three questions that matter for markets. * First, what actually happened operationally, and what it reveals about escalation control, deterrence, and the limits of legacy air defence systems. * Second, what the episode signals about US grand strategy, the “Trump corollary of the Monroe Doctrine, the return of gunboat diplomacy, and the use of suzerainty style constraints to shape trade, currency choice, and commercial alignment. * Third, what long-term “success” means and what must be achieved to meet it, including political stabilisation of Venezuela, establishment of payments systems, control over resources, and how quickly the US needs to move before the window closes. Along the way, we challenge the prevailing narratives including claims of pre-negotiation with or foreknowledge of China and Russia, implications for the emergent global order, Taiwan, Ukraine, Europe, other regions’ security, who might be “next,” the scramble for resource control, what to watch for, and Venezuela’s potential as a test case for dollarization via stablecoins. With so much to talk about and such an insightful guest, this episode is longer than usual, but it will be required listening/viewing for anyone interested in assessing risks and making informed decisions in today’s rapidly shifting global order. Full transcript 1 00:00:06.560 --> 00:00:09.120 Marvin Barth: Good evening, and welcome to… 2 00:00:09.150 --> 00:00:25.030 Marvin Barth: the Thematic Edge. We are very excited, to start 2026 with our very first guest on the Thematic Edge. So, this time I’m not only joined by my longtime friend and colleague, Mark Farrington. 3 00:00:25.030 --> 00:00:29.289 Marvin Barth: Who’s going to join me in asking some of the questions of our guests. 4 00:00:29.290 --> 00:00:39.329 Marvin Barth: But I’m also joined by another very old friend of mine, David Kilcolon, and we are very fortunate to have him. 5 00:00:39.620 --> 00:00:54.339 Marvin Barth: for reasons we can discuss another time. My nickname for him is the International Man of Mystery, and most of that has to do with the fact that I can never get ahold of him, and he seems to be in some crazy place without cell phone connections. 6 00:00:54.700 --> 00:01:02.499 Marvin Barth: So we’re very lucky to have him, because he is exactly the right person to talk to 7 00:01:02.750 --> 00:01:13.620 Marvin Barth: about the events in Venezuela that occurred over the weekend. David is a retired colonel from the Australian 8 00:01:13.620 --> 00:01:24.070 Marvin Barth: Army. He, was a key advisor in both the Bush and Obama administrations. He has a consulting business, Cordillera Applications Group. 9 00:01:24.070 --> 00:01:29.290 Marvin Barth: That consults to many of the leading militaries, military alliances. 10 00:01:29.290 --> 00:01:40.729 Marvin Barth: and companies, around the world on security issues. He is universally acknowledged as the world’s foremost authority on counterinsurgencies. 11 00:01:41.280 --> 00:01:57.119 Marvin Barth: And he also happens to be a tremendously good, grants strategist, as illustrated by his last book, The Dragons and the Snakes. All his books are fantastic. I highly encourage you to go out and 12 00:01:57.420 --> 00:01:58.490 Marvin Barth: read them. 13 00:01:58.660 --> 00:02:02.519 Marvin Barth: David, welcome, and thank you for joining us. 14 00:02:02.990 --> 00:02:09.389 David Kilcullen: Thanks, Marvin. It’s an honor to be here, and my publisher thanks you for that very blatant plug of my books. 15 00:02:10.300 --> 00:02:21.289 Marvin Barth: well-deserved. I mean, if you want to understand any of the military or geostrategic developments of the last 20 years. 16 00:02:21.290 --> 00:02:34.590 Marvin Barth: you have to read David Gilkullen’s books. You know, Counterinsurgency is literally the field manual for counterinsurgency, not only for the U.S. military, but for most militaries around the world at this point. 17 00:02:34.600 --> 00:02:48.110 Marvin Barth: Out of the Mountains really described many of the things that we are now seeing take place, whether it was in Gaza or Ukraine. All of those things were basically forecast by David over a decade ago in that book. 18 00:02:48.110 --> 00:02:58.420 Marvin Barth: And in terms of the best possible framework for thinking about the geostrategic environment and the challenges that Western democracies face. 19 00:02:58.420 --> 00:03:09.939 Marvin Barth: Both militarily, economically, and strategically. You know, The Dragons and the Snake was second to no book out there, so, you know… 20 00:03:10.470 --> 00:03:16.739 Marvin Barth: I’ll give you another plug there. Now, before we… Before we go on, 21 00:03:16.740 --> 00:03:38.359 Marvin Barth: The, I do want, to remind everyone that nothing on this podcast should be considered, financial advice. You need to do your own research. We are providing information here, and especially on this topic, where we are literally in the fog of war, even though it’s an undeclared war. 22 00:03:38.840 --> 00:03:49.660 Marvin Barth: You should not rely on any of this information as being factual, because everything is up in the air right now, and we are doing our best to make sense of the information that is available. 23 00:03:49.930 --> 00:03:57.890 Marvin Barth: So with that, let’s start with, I actually wanted to structure this in sort of 3 segments that I think 24 00:03:58.120 --> 00:04:16.149 Marvin Barth: best fit your expertise, Dave. The first is just, like, diagnostic. What actually happened? You know, if you were a theater commander or something, and you were getting in this, this information, or you were, 25 00:04:16.149 --> 00:04:21.899 Marvin Barth: the head of the PLA trying to figure out what the heck the Americans just did. 26 00:04:21.959 --> 00:04:25.400 Marvin Barth: How would we assess what actually happened? 27 00:04:25.400 --> 00:04:35.189 Marvin Barth: Based on the information we have, today, the 5th of January. The second is really getting to that geostrategic point. 28 00:04:35.190 --> 00:05:00.130 Marvin Barth: you know, what are the grand strategy implications of this, not just for the U.S. and for the region, but globally, and then finally get back to where you are the, you know, clear, acknowledged expert, on counterinsurgency, which is really, and you’ve emphasized this over and over, really about creating a stable society, which is what it’s going to take to make this operation ultimately successful. So we want to get that. 29 00:05:00.320 --> 00:05:12.070 Marvin Barth: And in the end, I think we’ll get to, if we have some time, some, markets issues, which, feel free to, ask Mark and I questions around that. 30 00:05:12.580 --> 00:05:13.440 David Kilcullen: Absolutely. 31 00:05:13.900 --> 00:05:16.430 Marvin Barth: So let’s start with… I mean… 32 00:05:17.510 --> 00:05:28.149 Marvin Barth: One of the things that has been floated around a lot, is that this was somehow, pre-arranged, right? That this was a negotiated. 33 00:05:28.180 --> 00:05:41.639 Marvin Barth: settlement. And, you know, there are several signs, at least to my untrained eye, that suggest that. One, the strikes that were… that took place were actually quite limited, it seems. 34 00:05:42.190 --> 00:06:00.480 Marvin Barth: And there are a lot of, anti-aircraft weapons in, Venezuela. Their army may not be fabulously trained, but they’ve got lots of, equipment from, all their, foreign friends. And yet you were able to have a helicopter-led, 35 00:06:00.690 --> 00:06:18.329 Marvin Barth: exfil within a couple of hours without losing anybody. And then there’s also the sort of confidence that President Trump displayed in his press conference, suggesting that, you know, they’re basically going to run things under the new regime. 36 00:06:18.570 --> 00:06:28.579 Marvin Barth: Do you see this as a prearranged, or a negotiated settlement, or… and how did that work, or do you have other theories about what was going on? 37 00:06:29.220 --> 00:06:29.900 David Kilcullen: So… 38 00:06:35.220 --> 00:06:40.040 David Kilcullen: So I’ll put that caveat out there to start with. But I think it’s pretty clear… 39 00:06:40.040 --> 00:06:44.080 Marvin Barth: Dave, you froze for a second, so if you wouldn’t mind, what was that caveat again? 40 00:06:44.560 --> 00:06:57.519 David Kilcullen: Sorry, I was just saying that, the short answer to many of these questions is we don’t know, right? Or we don’t know yet. So, we should just bear that in mind as we’re… as we’re talking about it. 41 00:06:57.710 --> 00:07:00.220 David Kilcullen: The… I think the… 42 00:07:00.460 --> 00:07:18.170 David Kilcullen: it’s not a secret that there’s been ongoing negotiation between the US government and the Venezuelan government over almost a year now about a set of issues, but the one that’s become the sticking point was the stepping down 43 00:07:18.270 --> 00:07:23.879 David Kilcullen: of Maduro. As far as we know, about a week ago. 44 00:07:24.010 --> 00:07:30.470 David Kilcullen: that set of negotiations reached an impasse, where Maduro was essentially offered 45 00:07:30.660 --> 00:07:43.920 David Kilcullen: safe passage to exile, perhaps to the Middle East, or to Russia, where Bashar al-Assad is right now, of course. And this has seemed to have been a… 46 00:07:43.980 --> 00:07:56.840 David Kilcullen: preferred playbook from the Trump administration to offer a way out and a graceful exit with as much cash as you can carry, you know, to a comfortable retirement somewhere else. 47 00:07:56.840 --> 00:08:09.899 David Kilcullen: by the way, watch that space for Zelensky’s future, too, depending on how things go in Ukraine. But, I think the, the ultimate breach came about a week ago, when Maduro 48 00:08:10.020 --> 00:08:18.580 David Kilcullen: essentially said, no, I’m not stepping down under any circumstances, and then engaged in a fairly public trolling of 49 00:08:18.760 --> 00:08:22.000 David Kilcullen: the Trump administration by dancing on… 50 00:08:22.000 --> 00:08:39.270 David Kilcullen: television and, talking about, you know, let’s make love not war, or let’s make peace not war. And that seems to have been the trigger, for the move on the operation, which of course had also been set up in a military sense for several months beforehand. 51 00:08:40.070 --> 00:08:53.069 Marvin Barth: Okay, and now, there’s another whole set of conspiracy theories around this, that this was all some sort of quid pro quo with the Russians and the, 52 00:08:53.070 --> 00:09:02.839 Marvin Barth: Chinese. In fact, this goes back to some of the issues that Mark and I discussed in our last episode of the Thematic Edge. 53 00:09:02.840 --> 00:09:15.680 Marvin Barth: where we talked about a lot of the misperceptions of the latest national security strategy, that seemed to suggest the U.S. is going to pull back and leave everybody else with their spheres of influence. 54 00:09:15.760 --> 00:09:17.810 Marvin Barth: And… that… 55 00:09:18.000 --> 00:09:33.300 Marvin Barth: has led a lot of people to think that’s what this was all about, and that basically, you know, Taiwan is now going to be given free rein to… you know, China’s going to be given free rein on Taiwan, Russia’s going to be given free rein in Ukraine. 56 00:09:33.970 --> 00:09:47.710 Marvin Barth: How do you read this? Do you think that the Chinese or Russians were involved in this, that there was any sort of quid pro quo, or were they completely unaware of this, or were they aware but just couldn’t do anything about it? 57 00:09:48.570 --> 00:10:08.099 David Kilcullen: So again, we don’t know, but the evidence we have so far suggests that they probably were not aware of it ahead of time, or at least aware of the specifics. They knew something was coming, and we’ve seen comments, like warnings from Beijing and Moscow over the… and Tehran, by the way, over the past… 58 00:10:08.110 --> 00:10:16.550 David Kilcullen: few weeks, attempting to warn the US off the operation. So, and then we saw a very vociferous response. 59 00:10:16.660 --> 00:10:20.149 David Kilcullen: from Chinese, state-controlled media, which is… 60 00:10:20.310 --> 00:10:39.349 David Kilcullen: basically all media in China, and from the Russians, in the last couple of days since the operation. So I don’t think they were involved in the operation, or I don’t think that there was any effort given to, you know, get their permission or make them okay with it. That doesn’t mean 61 00:10:39.480 --> 00:10:46.900 David Kilcullen: that the Trump administration isn’t going to offer them some kind of a sweetener in the next few weeks as a way of minimizing. 62 00:10:46.900 --> 00:10:47.880 Marvin Barth: Pushed… 63 00:10:47.880 --> 00:10:56.010 David Kilcullen: And that’s quite possible. But I think, they were probably… Either decided not to… 64 00:10:56.750 --> 00:11:10.159 David Kilcullen: resist, and not to assist, Venezuela in aid of not picking a fight with the US in its own backyard, or they potentially were unable to, and this is one of the technical questions 65 00:11:10.210 --> 00:11:26.119 David Kilcullen: that’s going to have to come out, about the performance, in particular, of Chinese and Russian air defense systems, over Caracas during the operation. And we can talk about that more if you want, but that’s a key issue. 66 00:11:26.130 --> 00:11:44.969 David Kilcullen: the Chinese have been, riding high a little bit since the Indo-Pakistan conflict in 2025, because of the better-than-expected performance of their air and air defense systems. And, I think it’s going to be an interesting question to see exactly 67 00:11:45.080 --> 00:11:51.249 David Kilcullen: what comes out once a bit more detail comes out. We can talk about that in a military sense, if you’re interested. 68 00:11:51.500 --> 00:12:09.309 Marvin Barth: Actually, I mean, I think this was a question that Mark had raised with me earlier, definitely, and, you know, it does relate to a broader set of questions that I had on sort of tactical lessons that we learned from this operation. What did we learn about 69 00:12:09.400 --> 00:12:13.799 Marvin Barth: the U.S, you know, there were also reports that 70 00:12:14.460 --> 00:12:19.380 Marvin Barth: you know, several, U.S, 71 00:12:19.710 --> 00:12:31.610 Marvin Barth: targets were, missed or hit, civilian infrastructure that was unintended, things like this. So even in what seemed a very permissive environment. 72 00:12:31.850 --> 00:12:35.369 Marvin Barth: From, an air superiority perspective. 73 00:12:35.570 --> 00:12:48.220 Marvin Barth: there were mistakes on the U.S. side, despite what the Trump administration is casting this as. What lessons did we learn there? And then, exactly to this point, you know, that gets to one of these critical questions. 74 00:12:48.430 --> 00:12:52.730 Marvin Barth: About it being a negotiated settlement, or were there failure of systems? 75 00:12:53.550 --> 00:13:13.179 David Kilcullen: Yeah. So, why don’t we just baseline it by talking a little bit about what we know right now about how the operation went down, and then we can talk a little bit in more detail about it. So, for several months now, the US has had a build-up going on in the region of Venezuela. 76 00:13:13.340 --> 00:13:17.090 David Kilcullen: At its peak, in the last few weeks, you had 77 00:13:17.240 --> 00:13:21.689 David Kilcullen: A, an aircraft carrier battle group. 78 00:13:21.860 --> 00:13:34.379 David Kilcullen: You had an amphibious ready group, which is basically a big-deck amphibious ship with a marine organization on there, and lots of helicopters and other ancillary… 79 00:13:34.380 --> 00:13:45.950 David Kilcullen: material. Almost certainly there were submarines, and a number of other assets in place, because you don’t risk those kinds of assets without that sort of protective envelope around them. 80 00:13:46.210 --> 00:14:02.000 David Kilcullen: In addition, we saw the build-up of Special Operations Forces on islands close to Venezuela, and a build-up of Marines in Puerto Rico. So we saw a sort of regional build-up. 81 00:14:02.170 --> 00:14:20.359 David Kilcullen: of Army, Navy, Marines, Air Force, Space Force, Cyber, all those assets building up overtly in the region. It now appears, and I think not surprisingly at all, that there was also a CIA team on the ground in Venezuela. 82 00:14:20.860 --> 00:14:32.030 David Kilcullen: And almost certainly a special operations paramilitary team as well. So a special warfare team, and of course, when we talk about the CIA, it’s a bit unusual. 83 00:14:32.060 --> 00:14:43.959 David Kilcullen: in terms of global intelligence services, but it has both a paramilitary arm and a traditional intelligence arm. And I think we saw both of those potentially play a role here. 84 00:14:44.120 --> 00:15:03.249 David Kilcullen: So what essentially seems to have happened is that the operation began by knocking out command and control systems, probably some cyber and space-based activity, and signals, disruption of the Venezuelan systems, followed by a very large-scale 85 00:15:03.260 --> 00:15:20.439 David Kilcullen: what we call a SEAD package, Suppression of Enemy Air Defenses package, coming from the ships and from a variety of land bases, at least 150 aircraft, approaching Caracas from multiple directions, which is something you do in order to throw off 86 00:15:20.730 --> 00:15:30.820 David Kilcullen: radar systems when you’re about to do a SIAD mission, and then striking various air defense systems. Russian S-300, S-400, 87 00:15:30.820 --> 00:15:43.559 David Kilcullen: Chinese systems, probably some others, a lot of guns as well, like anti-aircraft guns, essentially trying to black out Caracas and knock out its air defenses. And then while that was going on. 88 00:15:44.070 --> 00:15:48.159 David Kilcullen: We saw low-level helicopter insertion. 89 00:15:48.270 --> 00:15:55.349 David Kilcullen: of Delta Force, which is the Army’s, Tier 1, strike organization. Probably some other assets as well. 90 00:15:55.350 --> 00:15:59.070 Marvin Barth: What is Delta Force’s official initials, I think? 91 00:15:59.300 --> 00:16:03.560 David Kilcullen: with ODD, Special Forces Operational Detachment Delta, right? 92 00:16:03.560 --> 00:16:06.660 Marvin Barth: Aren’t they also called something like Combat Oper… 93 00:16:07.270 --> 00:16:07.789 David Kilcullen: Oh my god. 94 00:16:07.790 --> 00:16:08.950 Marvin Barth: group. 95 00:16:08.950 --> 00:16:12.810 David Kilcullen: Combat Applications Group, yes, they have been called that in the past. They have various. 96 00:16:12.810 --> 00:16:14.630 Marvin Barth: No relation to, to, to. 97 00:16:14.630 --> 00:16:15.270 David Kilcullen: relationship. 98 00:16:15.270 --> 00:16:15.929 Marvin Barth: Applications great. 99 00:16:15.930 --> 00:16:20.130 David Kilcullen: Any resemblance to CAG is purely accidental. 100 00:16:20.150 --> 00:16:27.720 David Kilcullen: But, yeah, so those guys came in, raided the palace where… 101 00:16:27.730 --> 00:16:38.650 David Kilcullen: President Maduro and his wife were located. He seems to have attempted to enter a safe house, but was… or a safe room, but wasn’t able to do that. He was extracted. 102 00:16:38.650 --> 00:16:55.150 David Kilcullen: they then got into a gunfight, in Caracas as they were attempting to extract, which is rather a similar scenario to Black Hawk Gown, for those who remember that incident 30 years ago. But it went much better. Some Americans were injured. 103 00:16:55.150 --> 00:17:07.089 David Kilcul

After a brief hiatus, the Thematic Edge is back! In the first half of this week’s episode, Mark queries me on Fed reform, a consistent theme of senior Trump officials that hasn’t received sufficient attention given its immense implications: what do they want to do and what can they do without Congress. In the second half we switch roles as I pull from Mark the real international relations implications of the abrupt turn in the latest US National Security Strategy paper. 0:00 Intro 2:23 Who will be the next Fed chairman? 3:23 Fed reform and financial deregulation is more important than low interest rates 8:16 Trump as Mafia don and not as an insult 11:38 Why Warsh stands out: early proponent of Fed reform 16:10 Why we need to do a podcast on the Global Financial Crisis response sometime... 17:04 Why regulatory reform is critical to slimming down the Fed’s balance sheet 20:32 Fed reform is a consistent Administration priority 22:16 The role of regulation in extending banks’ and central banks’ asset duration 24:51 How bank regulation can be unwound by the Fed 27:19 First-order effects of bank deregulation: US banks versus foreign; small versus large banks 29:13 The role of the Reserve Banks in implementation of deregulation 31:12 Implications for bank stock prices 33:20 Yield curves and broader stock prices 35:22 The US National Security Strategy 36:42 Clear continuity of NSS with think-tank analyses showing the need for the US to pull back from imperial overstretch to a more defensive position 38:29 A live war in Europe forces a change in framework: the US no longer can be as transparent as in a period of peace 39:44 Look to Asia for a live example of how this new framework will work 41:18 China’s blockade contingency forced Japan’s hand 42:14 US not withdrawing, but shifting its focus to be a strategic reserve force 44:48 NSS in a nutshell “Quality adjustment, not quantity adjustment” 49:16 Definitive message to China: we don’t want war...but are preparing if you do 52:40 What investment themes arise from the NSS 54:50 Stepped-up euro and European asset risks 57:50 Increasing US pressure on Northeast Asian currencies 59:04 Investment themes for 2026 This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thematicmarkets.substack.com/subscribe