What the New Cold War Means for the Global Economy

March 9, 2023

The world has been mired in a new Cold War for at least four years, according to Niall Ferguson, a columnist for Bloomberg Opinion and Milbank Family Senior Fellow. Ferguson joins this episode of Merryn Talks Money to discuss the implications for inflation, the Federal Reserve and how investors should navigate the current economic climate.

Ferguson tells Merryn Somerset Webb that the global economy—with the inclusion of China and Eastern Europe—flourished in the years after the first Cold War. Seeming stability came with decades of low inflation and low interest rates, as well as fast-rising asset prices and a supposedly symbiotic relationship between the US and Chinese economies. But it wasn’t sustainable: not when both sides view the other as a “totalitarian regime with aspirations to world domination.”

The West needed to wake up to the Chinese threat, says Ferguson. A cold war is obviously a lot better than hot war, but it still comes with consequences: reduced globalization, fractured supply chains, huge demand for domestic investment and—of course—very high inflation.

What should investors do? Keep a very close eye on central bankers and buy the few things that still offer value. Like gold.

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