It's that old saying: "if it looks like a duck, swims like a duck, and quacks like a duck, then it's probably a duck." The (more than) historian Niall Ferguson has used this ancient anecdote to draw a parallel between the current situation between the US and China and the classic Cold War.

Just as in that moment, there's a clear ideological dispute between the vision of liberal democracies (Rule of Law, contract respect, representativeness, discourse in favor of human rights, etc.) and the Marxist-Leninist tradition, which is less individualistic and more collectivist.

There's also a technological confrontation, especially regarding 5G, chips, artificial intelligence, and hypersonic missiles, akin to the space race of the past.

Obviously, we also identify strictly economic elements in the dispute, with two more prominent points:

Finally, we come to geopolitics, with the debate over a potential China invasion of Taiwan being the focal point. If Russia's aggression against Ukraine found parallels with the Korean War, Taiwan would have an analogy in Vietnam, potentially leading to something similar to a new missile crisis.

We don't want to imagine the consequences of a hot war between the US and China. In fact, we probably don't need to, because we likely wouldn't be here anymore to provide investment recommendations. But something fundamental is already happening in light of this new geopolitical arrangement.

As there are no fools in soccer anymore, China observes what happened with Russia. When those dollar reserves were frozen, if you're in a conflict, even a tacit one, with the US and you represent their main antagonist, it seems rational not to keep your reserves in Treasuries. If the dollar can be a geopolitical weapon, we need an alternative...

Thus, an important marginal buyer is lost. And this happens during a time of global liquidity tightening, with the Fed needing to shrink its balance sheet and Janet Yellen having to conduct successive massive debt auctions in the US.

This is when the elementary mechanism of price functioning comes into play. If there's a large supply and demand falters, the price falls—and market interest rates rise!

Add to this the distancing from the idea of a recession in the US in 2023—Atlanta's Fed, in fact, projects quarterly annualized growth of over 5%! This is a significant figure for those who were talking about contraction earlier this year just a few months ago...

Consider also that Japan is loosening its yield curve management, allowing for greater long-term interest rate increases—meaning they're also competing with international capital flow, given the marginal increase in attractiveness of Japanese bonds.

And finally, remember the lack of spending control and the upward trajectory of public debt in developed countries—all of them also need a new fiscal framework to call their own.

The idea finds its most concrete symbolism in the recent deterioration of the American sovereign rating outlook. As I wrote during the concern over the "debt ceiling," the discussion shouldn't have been centered on parliamentary voting about short-term US debt ceiling increases, but rather on how to structurally make the debt-to-GDP ratio more convergent.

Otherwise, what we recently witnessed in the UK, whose dynamics became more similar to those of emerging markets, could affect all other developed countries.

This is the backdrop behind the rise in yields (market interest rates) of debt securities in August, with widespread consequences for international capital flow and pricing of risk assets—it all begins with the rate on US bonds, considered risk-free.

If it goes up, all other expected returns need to rise as well, bringing current prices down.

The current dynamic represents a fundamentally different force from what was observed in the early 2000s, dubbed by Ben Bernanke as the "Global Savings Glut," a kind of global savings excess that pushed interest rates down.

In my interpretation, it was the International Economics version of Alvin Hansen's secular stagnation thesis, resurrected by Larry Summers for modern times. China exported heavily, took those dollars, and bought Treasuries like crazy, pushing interest rates down.

The new equilibrium requires higher interest rates and, even though the dollar shouldn't necessarily lose its status as the main global store of value, there's a trend of reduced relative participation. The problem is that viable alternatives are lacking.

If the origin of the problem is geopolitics, China also couldn't rely on euro reserves—ultimately, it would end up with NATO. Japan is also not necessarily a historically reliable friend of China.

Bitcoin, on the other hand, after behaving like "digital gold" at the start of the year, regained its performance more akin to a risk asset in this August crisis. We're back to the old idea that the available "safe haven" is indeed gold, especially for geopolitical events.

We're entering a vicious cycle where countries adopt loose fiscal policies, pushing the problem forward and aligning with cheap populism. This is happening at a time when there aren't the same buyers as before for these debt securities that will finance public spending.

We might ignore the problem and sweep it under the rug. Sooner or later, however, there will be no escaping the elementary arithmetic of public accounts.

Mathematics imposes some of the solutions: a drastic increase in taxes, a abrupt reduction in public spending, more inflation, default, or a large confiscation. Down the road, are we all heading towards a global Collor Plan? While we ponder the answer, I'm off to buy my gold bar.