“The global resilience paradox is that the multilateral system was made resilient as every country was contributing to it, whereas the choke points helped to stabilise the system. Now everyone wants to become locally resilient, which destroys the global system,” said Markus Brunnermeier, Edwards S. Sanford professor of economics at Princeton University, during a keynote speech at the ESM/SUERF/Bruegel workshop on 3 April 2025. He talked about resilience in the context of a shifting global order, covering aspects of , global finance and trade.
Being resilient on your own is the new game in town
Brunnermeier noted a shift from a multilateral, rule-based order to a more bilateral, transactional one, driven by technology and changing political landscapes. This shift “means that small countries will suffer the most,” requiring them to be part of larger blocs.
“The previous world order was characterised by mutual interdependencies,” he said, deliberately making nations non-resilient to ensure peace. However, Brunnermeier suggested that the current trend towards national resilience creates a global resilience paradox where the pursuit of individual resilience undermines the resilience of the global system as a whole. “In trades, we had just-in-time, and now we have just-in-case.”
The US losing its international influence: an unknown and risky transition
Brunnermeier speculated on a potential shift from a unipolar world order to a five-polar world. He argued that history has shown that unipolar worlds (after the Thirty Years War and after the Napoleonic Wars) have moved to five-polar worlds. “It was always a five-country arrangement.” He thinks that the setup would include the US, China, the European Union and India. Interestingly, he was unsure as to whether the fifth candidate would be Russia or Japan.
The transition to this new order carries risks, with the possibility of a sharp decline before reaching a new steady state. It may even hit a tipping point, leading to systemic failure. “That’s a danger.” He thinks that resilience will be crucial for navigating this transition.
Global finance: poor countries insuring rich economies
Brunnermeier expects the US dollar to remain dominant, but stablecoins might further strengthen its role should they be used across the world. “I wouldn’t be surprised if Elon Musk created on X a stablecoin very soon.” Europe’s digital euro (central bank digital currency, or CBDC) is seen as a potential countermeasure, an initiative that may start to fly despite initial hesitations. As for China, he believes that it will create its own CBDC to keep control of monetary policy.
Brunnermeier perceives the current global financial architecture as fragile and asymmetrically designed, as flight to safety tends to benefit advanced economies at the expense of emerging ones during crises. “It makes the whole system much more volatile and less resilient.”
Brunnermeier likened a safe asset to a reliable friend, maintaining or even increasing its value during crises and allowing for sales at a good price.
If you’re an emerging economy, you face exactly the opposite, because you have to fight the safety out of your government debt.
The economist commented that the US and other advanced economies’ ability to issue safe assets at very low rates grants them an “exorbitant privilege,” which becomes more pronounced in times of crisis. “It allowed these countries to run fiscal stimulus programmes and overcome the global financial crisis... even when the crisis originates from the US.”
“If you’re an emerging economy, you face exactly the opposite, because you have to fight the safety out of your government debt,” stated Brunnermeier. It prevents these countries from stimulating their economies, prompting them to go for austerity measures. “The poor countries are essentially ensuring the richer ones.”
Alternative safe assets in a multipolar world: “Radical rethinking on the table”
Brunnermeier thinks that the next generation EU fund bond redemption in 2030 is not an adequate alternative to US treasuries. He suggested the creation of a European safe and liquid bond, an ESBies/SBBS (sovereign bond backed securities) to potentially gain from the exorbitant privilege whereby the bonds from the EU member states would be pooled in a structure acquired at market price to promote “good financial behaviour.”
The ESBies/SBBS would then issue senior and junior notes, with the latter absorbing initial losses from defaulting bonds/countries in the structure. “There's no default risk in the senior bond… that could compete with US treasuries,” exaggeratedly claimed Brunnermeier. To gain traction, he thinks that the note should be zero-risk weighted on bank balance sheets as “it is way less risky than a single bond.”
Emerging economies could also create similar pooled sovereign bonds and hold the senior note of their regional structure instead of holding US treasuries as a safe asset. “Some in the flight to safety would stay in the global south instead of moving to the global north.” In addition, he suggested that instead of global destabilising cross-border capital flows, “you have cross-asset class capital flows.”
Moving to global trade system could backfire on us all
In global trade, the focus is shifting from cost efficiency and interconnectedness, marked by numerous “choke points,” to national self-reliance and minimising these vulnerabilities.
“A choke point is an essential product that cannot be substituted with anything else,” said Brunnermeier. Its elasticity analysis involves assessing the ease of substituting products, both immediately and over time, at both downstream (consumer) and upstream (input) levels of the production chain.
Resilience is not risk management
Brunnermeier explained that risk management focuses on correlations to minimise risk, whereas resilience is about the ability to bounce back and adapt after a shock. Strategies for enhancing resilience in trade include reshoring, “friendshoring,” multi-sourcing, storing strategic reserves and flexible production that can be scaled up on short notice.
He commented that the interplay between globalisation and industrial policy is also changing, requiring nuanced responses to other countries’ industrial policies rather than simply adhering to a strict rule book. “The US’ Inflation Reduction Act… and Chinese industrial policies also distort free trade.”
A return to a symmetrical should be encouraged
The old global order prioritised global resilience through mutual interdependence, whilst the new focus on national resilience may undermine this common good. Addressing the asymmetry in global finance by creating safe assets is crucial for a more stable and resilient global economy.