Gongol.com Archives: June 2025
June 13, 2025
One of the reasons that markets work is that they offer people an unending stream of opportunities to put their knowledge to work, and to wager on the quality of their own judgment. Think interest rates are going to rise? You might act on taking out a loan sooner rather than later. Think you've discovered a breakout artist? Buy the paintings while they're cheap and flying under the radar. Think the produce department at one grocery store has an unusually good eye for quality? Make a special trip there to stock up on tomatoes and bananas. ■ Sometimes the call will be right, and sometimes it will be wrong. But when lots of people make intersecting choices, prices start to send signals. ■ The same goes for alliances in the world. One of the reasons it's better to engage with allies than to go it alone is that different allies will obtain information and process it differently. Some will then signal important judgments like their confidence in the seriousness of a threat by their actions. Seeing the same information filtered through different lenses helps to sort which threats and circumstances should be taken seriously. How much is "bet" in terms of real resources (like troops or munitions or diplomatic intensity) can reveal a lot. ■ The foreign minister of Latvia has recently published a column in The Economist, arguing, "The Kremlin is also stepping up its non-conventional attacks against European countries [...] We in the Baltics did warn about taking them seriously. Now we all see the consequences of not pushing back." The Baltic republics are (literally) in a place where their judgment on this subject is more significant than most. ■ The forthrightness about the alarm emanating from these small countries isn't enough on its own to make them right. But their commitment to spending a very noteworthy 5% of GDP on defense represents a considerable wager that their analysis is right. It would be foolish to ignore or downplay the market-like signal they are sending.
