Quid Pro Quo
The Return of Economic Statecraft
TL;DR: The financialized era was the anomaly. Quid pro quo is the baseline. The U.S. is using military power and the dollar to lock in commodity leverage before China’s factories translate into aircraft carriers. Everything is a board piece, not a moral cause.
My whole adult life I’ve been told to believe in comparative advantage, peace dividends, and the slow global convergence toward efficiency (having to define globalization every year in high school comes to mind).
The world would get richer and weirder. Wars were for people who hadn’t discovered supply chains yet. The dollar was a unit of account, not a weapon.
We were all in on it. The Boomers, the Gen Xers, and Millennials like myself. My grandparents would have laughed, though.
They lived through a world war, a civil war, currency collapses, an autarkic dictatorship, and the Marshall Plan. They knew about quid pro quo. They knew that currency was never just a unit of account. They knew there was a reason you kept things in the basement (or under the mattress, dare I say).
My generation forgot all that.
The half-century I mistook for the default – what I called Boomerlandia the post-war wealth anomaly we treated as the permanent condition – was the exception, not the rule.
But the rule is coming back.
Ursine Qua Non
Michael Every, Rabobank’s global strategist, said something I haven’t been able to unthink.
So I’m going to think through it out loud here.
Oil trades above $100. The world is starved for diesel. (Energy) supply chains haven’t been this fucked since Covid. The one-world, one-price assumption at the base of every neoclassical textbook is breaking down.
Every has been writing the obituary of the financialized era since before it was fashionable. He calls himself “ursine qua non.” Structurally bearish on consensus, not a permabear on everything.
The “dollar collapse, bury gold in the backyard” crowd is selling you a trade. But Every is selling you a regime. I’m long the bet that he’s right, so read accordingly.
The regime has a name: capitalism with a national security face.
The Eurodollar Prison
Here’s the joke Americans have been telling themselves for forty years: the dollar’s reserve status is the single greatest privilege any currency has ever had. Exorbitant privilege. The ability to import goods and export inflation. The ability to run deficits forever.
Every calls it something else: “The Eurodollar system is a prison. The bricks in that prison are made from what used to be American factories.”
America buys German cars and Chinese electronics. Germany and China take the dollars and park them in Treasuries. America gets cheap stuff; the factories that used to make it close down. Repeat for four decades.
The textbook version goes something like this: the world holds dollars by running trade surpluses (Exports − Imports > 0) against America, which means America runs the corresponding deficit.
A deficit means consuming more than you make. And consuming more than you make means not making. You deindustrialize.
Previous reserve currencies have followed the same arc. The privilege hollows out the privileged.
What do you do if you’ve realised you’ve been locked in your own currency for four decades?
You could surrender reserve status. Let the Chinese renminbi or the euro take over. Fine for a post-hegemon Britain in 1956. Not fine for a 2026 hegemon still watching China build warships faster than it can.
Or you redesign the prison. The kid in Chile who wants dollar savings his government doesn’t know about doesn’t need Eurodollar futures. He needs USDC (USD Coin) on his phone.
USD-denominated stablecoins. Phone-native. They soak up global dollar demand without requiring the corresponding American trade deficit. “Stablecoins should be looked at as a geopolitical weapon rather than an investment asset,” Every says. The GENIUS Act forces issuers to back reserves with U.S. Treasuries – every dollar of demand funds the U.S. government without hollowing out another factory.
Reserve currency 2.0. Programmable money, not paper.
The prison just installed a secret exit… touché.
(I find myself explaining stablecoins to my father on the phone and wondering which of us sounds crazier – me for believing this, or the system for making it plausible.)
Capitalism With A National Security Face
The government taking stakes in Intel and U.S. Steel? Not bailouts. State capitalism in a suit.
Allies pouring FDI (Foreign Direct Investment) into American factories because they were told to. CFIUS (Committee on Foreign Investment in the US) screening Chinese capital out while outbound controls keep American capital in – bifurcation, not decoupling.
The shift, Every says, is from “a jungle where they can go wherever they want, to a safari park.”
Shell is still Shell. TSMC is still TSMC. But neither gets to pretend anymore that their strategy is theirs alone.
The Fed is in the safari park too. Interest rate-cut watching has been the consensus sport of the last eighteen months and Every thinks it’s beside the point. “Because markets” is his shorthand for the crowd betting on a Fed rescue. He expects yield-curve control, capital controls, sector-specific lending. Scott Bessent, he notes, “is openly no longer looking at Fed funds. He’s looking at the 10-year.”
The independence of the Federal Reserve was always a polite fiction – the Fed’s own website lists financing World War II as an institutional achievement. The pretence is wearing thin.
Every instrument the MBA curriculum banned (tariffs, subsidies, price controls, industrial policy, state-directed capital, military-backed commodity deals) is being deployed simultaneously, on purpose.
Civilian R&D returns roughly $1.50 per dollar invested. Defense R&D returns $8 to $9. For a government choosing where the next decade goes, the spreadsheet was never a contest.
The econ professor would have failed you. The Pentagon doesn’t play the same game.
Iran Is America’s Suez. Europe Is Egypt.
In 1956, Britain and France tried to reassert great-power status by seizing the Suez Canal back from Nasser (Suez Crisis, ring a bell?). The U.S. didn’t need to fire a shot.
It triggered a run on the pound and the franc, and both powers retreated. Afterward, Britain and France were still powers – lowercase p. The U.S. was the hegemon.
Fast forward to today: Iran.
Win it: restructure the Middle East, lock in the energy footprint, turn the Gulf’s compass back toward Washington, and it’s 1956 with the roles intact.
Lose it: China takes it, markets do to the U.S. what the U.S. did to Britain, and America becomes the UK of 1956. Still a power. Not the power.
That’s the American half of the frame. The European half is uglier.
Europe in this analogy isn’t Britain. It’s the territory fought over – the board piece. Every’s description is brutal: “trade deficits, deindustrialisation, polarisation. Not unity and remilitarisation.”
ReArm Europe is what happens when you’re told you’re on the menu and decide you’d rather not be. Defense spending surges. Nuclear revival conversations. The awkward realisation that forty years of “never again to war” produced a continent that outsourced its security to America and its energy to Russia.
I’m European. I’d prefer Europe not be on the menu. The analysis stands anyway.
The Three-Finger Trade
Imagine you have to fight someone. You know in advance you’re going to lose three fingers off your left hand. You’re also going to take his right arm and one leg. You will live. You will hurt. You will never get those fingers back. But the alternative is losing, and losing is permanent.
Would you take the trade?
Easy when the fingers are yours. Harder when some of them are someone else’s – and you’re the one who decided they were worth spending.
That’s the calculation America is running. Reindustrialisation is expensive. Tariffs make goods pricier. Price controls distort markets. Public-private partnerships are corporatism, full stop. It’s what you do when the market won’t produce industrial capacity in the timeframe you have.
Tariffs plus subsidies plus industrial policy plus finance harnessed to state power. The 19th-century American playbook, dusted off because the 20th-century one ran out of road.
Some factories will get built. Some won’t. Some of the mineral deals are ugly: physical security in exchange for resource access. Or, translated from the diplomatic: “We’ll go and kill those guys over there for you if you let us have access to your minerals.”
The stakes aren’t the next business cycle. They’re whether the U.S. is still the hegemon in 2045 or permanently number two. The goal is to win. The pain is the point.
2G Not G2
Trump and Xi meet in Beijing in May, postponed from March because of Iran.
Every’s read: “It’s not any kind of peace deal. We’re still heading for a 2G – the world with two different groups.” A ceasefire to rearm. Twelve to eighteen months of modus vivendi. Then bifurcation completes.
Three monetary blocs, each with its own logic.
Dollar allies get the upgraded version – stablecoins, sanctions coded into the money itself, settlement in seconds rather than SWIFT reprimands six weeks late.
Non-aligned countries (the ones with no leverage in dollar negotiations and nothing to lose by hedging) drift toward Bitcoin. El Salvador didn’t adopt it for ideology. It adopted it because neutral money stops looking like a libertarian fetish when you don’t trust either pole.
The Russia-China-BRICS orbit builds a gold-flavoured settlement layer: mBridge, BRICS Pay, record central bank gold buying since 2022. Gold as a unit of account for bilateral trade that routes around Western financial infrastructure. Currency blocs last seen in the 1930s, redrawn with digital rails.
(I realize I'm describing three parallel monetary systems as if this is normal. It wasn't – but neither was the single-currency assumption.)
Economic MAD (Mutually Assured Destruction).
Cold War mutually assured destruction, transposed to the supply chain. Less bunker, more port terminal. Both sides wire in the ability to destroy each other economically via tariffs, sanctions, dollar access, rare-earths choke-offs, supply-chain kill switches.
Both recognise the other can. Neither pulls the trigger.
The equilibrium isn’t trust. It’s blocked moves on a board where every counter is visible. Markets will hate the road to it. The equilibrium, if it holds, is the soft landing.
The pessimistic read is that one side miscalculates.
I’m hoping they don’t.
Every’s arguments here are drawn from his recent appearances on In the Company of Mavericks, MacroVoices, and Less Noise More Signal. Listen to them.