Transcription
[CC may contain inaccuracies] How we define US exceptionalism. You can define by reference to financial markets or more broadly as to what allows you to perform well in the financial markets. I think the five factors that go into US exceptionalism.
The first is the breadth and depth of the capital markets, which is a very significant, I would say, US exceptionalism, capital markets, which remains where it is today. 65% of equity is US dollar denominated stocks. You've got 60% foreign currency debt is US dollar denominated and then it's flows 80%. So a lot of is driven also by capital markets as well. So that's one level to look at.
The second is innovation. The US exceptionalism also drives on the back of innovation, and that's science. That's the universities that have that ability to attract talent to come in, all of which right now may be under a little bit of stress, no doubt.
The third is the US military power, which gives them that sort of hegemonic ability to to push itself beyond its boundaries.
The fourth, I would say, is institutions, the US and the rule of law, which also is coming under a little bit of stress right now.
And the fifth, of course, is the reserve currency, which now accounts for 58% of central bank reserves and is used for transactional flows almost everywhere. So we look at these five factors, US exceptions, and for the time being doesn't look as though it's going to be is going to be at risk. But for all of these five factors, you do have things that could cause a little bit of fraying and that could cause us excessive exceptionalism to be at risk.
If you think over the longer term, you've got two countries looking at this. Primarily, you've got the US, you got China. The race is not over yet in power. The US is ahead in energy. China is ahead in product services because India, the US is ahead in adoption. China is ahead. So where this turns out is a big question for all of us.