#386 Michael Every: Economic Statecraft Changed Everything, Old Playbook Is Dead, New Era Begins

Michael Every, Global Strategist for Economics and Markets at Rabobank, presents a radical framework: everything is now about economic statecraft and geopolitics, not traditional monetary or fiscal policy, meaning central banks, interest rates, and economic structures are all subsets of national security objectives. Central bank models are broken because exogenous geopolitical supply shocks (Iran war, Ukraine, COVID) constantly disrupt equilibrium assumptions, and the old playbook of managing demand through one global interest rate no longer works in a fragmenting world with different sectors having different national security priorities. He warns the biggest risk is far more war ahead, specifically predicting Iran war will resume after the midterms because tolls, sanctions, uranium, and Lebanon remain unresolved—Iran is losing leverage as oil flows increase and the world moves on, so it will need to "rock the boat" to regain attention. Interest rates will trend higher due to massive fiscal pressures on defense spending, reshoring, supply chain security, and infrastructure investment, and differential interest rates will emerge where sectors critical to national security borrow cheaper than speculative sectors. He argues the private sector will be tasked with moonshot innovations (like AI and Manhattan Project-style programs) that governments can't afford alone, with government potentially taking stakes in critical companies like OpenAI and Intel. On the Strait of Hormuz, he dismisses markets pricing 45% chance of normalization before October 1 as too optimistic, noting ships run dark, ship-to-ship transfers hide traffic, and geopolitics will escalate after midterms—Hormuz will never fully normalize as countries build alternatives. America will retain primacy going forward but must completely reinvent itself economically and politically, with broader appeal to allies while accepting a world where other powers have their own sphere of influence, and whoever holds office will face the same underlying reality that American power projection equals American living standards.

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Links:

https://www.rabobank.com/knowledge/our-experts/011085368/michael-every

https://x.com/themichaelevery

Timestamps:

0:00 Everything now about geopolitics, not traditional economics

2:00 Michael's background - 30 years, 9 countries, cross-border analyst

5:20 Economic statecraft framework - national power is driving force

6:06 Policymakers getting it, but many still don't understand

8:16 Central bank models don't work, they never did

8:40 Exogenous supply shocks (Iran, Ukraine, COVID) keep breaking models

11:36 One interest rate doesn't work in fragmenting world

15:33 Central banks being cagey about structural changes

19:21 Geography matters - some countries will thrive, others fail

23:20 Rates going higher, not lower for longer

23:29 Massive fiscal pressures on defense, supply chains, infrastructure

26:25 Differential interest rates by sector based on national security priority

27:06 Biggest risk - far more war coming

28:19 Iran war after midterms, not resolved yet

31:59 Defense contractors won't make huge profits - government controls pricing

34:40 AI is about national security, not making money

35:31 Government may need private sector to fund moonshots they can't afford

36:19 Government taking stakes in strategic companies (OpenAI, Intel, Trump)

39:04 Strait of Hormuz assessment

42:59 Iran needs to rock the boat, leverage slipping away

44:19 Kalshi market too optimistic on Hormuz normalization

45:08 Hormuz won't ever fully normalize again

46:04 US still primary power but must reinvent itself

49:15 America can retain primacy but it will look different

50:09 Whoever's in office has to return to same arguments on American power