>Europe owns Greenland, it also owns a lot of Treasuries. We spent most of last year arguing that for all its military and economic strength, the US has one key weakness: it relies on others to pay its bills via large external deficits. Europe, on the other hand, is America’s largest lender: European countries own $8 trillion of US bonds and equities, almost twice as much as the rest of the world combined.

>In an environment where the geoeconomic stability of the western alliance is being disrupted existentially, it is not clear why Europeans would be as willing to play this part. Danish pension funds were one of the first to repatriate money and reduce their dollar exposure this time last year. With USD exposure still very elevated across Europe, developments over the last few days have potential to further encourage dollar rebalancing.

>. . . From our perspective the key thing to watch over the next few days will be whether the EU decides to activate its anti-coercion instrument by putting measures that impact capital markets on the table.

>With the US net international investment position at record negative extremes, the mutual inter-dependence of European-US financial markets has never been higher. It is a weaponization of capital rather than trade flows that would by far be the most disruptive to markets.

https://www.ft.com/content/beeaf869-ca12-4178-95a1-bfb69ee27...