As an illustration of how geopolitics has hit globalisation, the image of an oversized balloon being shot down by a missile is hard to beat. The stratospheric perma-frost in US-China relations and the Russia-Ukraine war have brought an era to end that started a little over 30 years ago. I call it the age of hyper-globalisation. The irony is that it is ending where it started - with a world divided in two camps, its borders once again cutting right through the middle of Europe.

The word "de-globalisation" is too crude to capture what is going on. We are still trading with one another, and will continue to do so. Commentators who argue that globalisation is alive and well, like the historian Niall Ferguson, tend to focus too much trade. As a percentage of economic output, global trade peaked just before the global financial crisis, and has been moving sideways ever since.

The distinctive feature of modern globalisation is not trade, but inter-dependence. If you want to understand how globalisation works under the hood, it is best not to look at the flow of goods, but of money that pays for them and of labour that makes them.

Since the 1990s, China has become more closely integrated into the global economy. China played the role of providing the world with an ever increasing supply of cheap labour. China's development model is based on large industrial export surpluses. They pile up in the form of foreign reserves held abroad in dollars and euros.

The US has been the system's banker. By running large deficits against the rest of the world, the US absorbed China's - and Europe's - excess savings. Those financial flows contributed to low global interest rates and investment. It also helped keep inflation low in the previous three decades. Our higher inflation today is clearly related to the end of the virtuous cycle that underpinned hyper-globalisation.

The UK's own experience is a mini-version of hyper-globalisation. The end of the Cold War and EU enlargement brought Russian oligarchs and Polish plumbers, raised investment, and lowered wages and inflation, and contributed to Brexit.

Geopolitics is intruding. The spy balloon is reminiscent of similar incidences during the Cold War. The collective west has imposed sanctions on Russia, the largest ever in absolute value. The US has previously placed sanctions on Huawei, the Chinese mobile phone maker. Recently, it blocked high-performance semiconductor exports to China. The US has even managed to co-opt the Dutch government to stop ASML, a Dutch maker of lithography equipment, exporting its next-generation machine to China. Lithography machines are critical in the production of high-end semiconductors - the kind you find in rockets and missiles.

Unfortunately for those who believe in the power of sanctions, the one part of globalisation that is still working well is the grey market. Mercedes-Benz cars and iPhones are still freely available in Russia though grey imports from Kazakhstan. Sanctioned goods have become a fashion statement in Russia. China is helping Russia to channel oil exports to world markets. The West overestimated the effects of economic sanction on Vladimir Putin's ability to wage war, but underestimated the effects they would have on globalisation. It is naïve to think that you can deprive a country with the resources of China from critical technology. If you sanction both Russia and China, do not be surprised that they are forming a strategic alliance.

China and Russia are part of a wider group of countries previously known as the Brics. The acronym stems from the early 2000s and denotes the five high-growth tiger economies of that period. The other three are India, South Africa and Brazil. They were supposed to be the new pillars of our globalised future, along with the US and Europe. What has happened since is that the five are not playing in our team any more.

The Brics are united in their refusal to adopt western sanctions against Russia. They are now in talks to create a joint reserve currency. I struggle to see the economic case, but it makes political sense. A joint reserve currency would make them less prone to US financial sanctions. Through the dominant role of the dollar as the world's largest reserve and transaction currency, the US exerts power over the world's financial system. A Brics reserve currency would reduce, though not eliminate, that power. Russia and Iran recently announced that they have developed an alternative to the Swift intra-bank communication system, from which Russian banks were banned after the invasion. Both Russia and China have been developing their own payment system for the same reason. The world of crypto-currencies and blockchain offers further opportunities for de-coupling from the west.

The Brics are also undertaking steps to become less dependent on the western-run financial institutions - the International Monetary Fund and the World Bank, whose chiefs are always Europeans and Americans respectively. It is our globalisation, not theirs.

The west, too, wants to become less dependent on the east. The pandemic made us aware of vulnerable supply chains. Russia's war has revealed Europe's strategic dependence on Russia gas and oil. EU countries are becoming more security-conscious.

The whole world has fallen out of love with hyper-globalisation. The Nord Stream Baltic Sea have been destroyed and will never be rebuilt. Chinese operators are withdrawing their investments from European port terminals, and countries are to starting to friend-shore what used to be global supply chains. We are still trading with one another, and will continue. But we are just going to be a touch less global, and more regional. Like a hot air balloon, globalisation, too, has deflated.