Trump’s war is a clear and present danger to your future

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World asset markets have lost their fairy godmother. Vast global flows of recycled petrodollars and investment capital from the Gulf are drying up.

The Gulf states and Saudi Arabia have accumulated $US6 trillion ($8.8 trillion) of assets in 11 different sovereign wealth funds. They have built up a further $US1.7 trillion of foreign exchange reserves held by their central banks.

This source of global capital is twice the size of China’s declared reserves and wealth funds combined. It has acted as a sort of giant carry trade for years, juicing sharemarkets, holding down international borrowing costs, helping Westerners live beyond their means and turbocharging excesses in US private credit.

“It is almost certain they will now be pouring less funds into the global system, and it’s entirely possible that some countries will need to draw down wealth if things get much worse,” said Ken Rogoff, a Harvard professor and former chief economist at the International Monetary Fund.

A slowdown in outflows is one thing; a sudden reversal and panic-driven outflows would be quite another, sending tremors through the global investment universe at a time when bond markets are already under stress and the US is pushing its luck with runaway fiscal deficits near 8 per cent of GDP as far out as the 2030s.

Trump is an absolute disaster for the oil and gas industry

US President Donald Trump can kiss goodbye to $US1.4 trillion of investment in US semiconductors, quantum computing, biotech, energy, defence and AI infrastructure promised by the United Arab Emirates. Saudi Arabia’s trumpeted $US1 trillion of protection money is not going to materialise either.

Right now, the bailouts are going the other way. Scott Bessent, the US treasury secretary, says he backs an emergency dollar swap line (the ability to swap currencies at minimal cost for US dollars) for the uber-rich Emirates – to the consternation........

© The Age