The European Disease: Germany Enters The Debt Spiral

   This is not about Germany. The country is simply following the same scrip that ALL countries have followed in the past and present when confronted with a slowing economy and dwindling fiscal revenues. Germany is just the latest domino to fall. Short term expediency has always been preferred to long term prudence which promises little but harsh times ahead. Here we'll get a much worse outcome but later which is perfect for all politicians at any time in history. The old time French nobility was talking in jest of burning the furniture and the timber frame of the castle to keep warm a few more days! Germany will now follow the lead of France, Italy and Belgium in Europe. Japan in Asia although the debt structure of Japan is different since it is mostly owned by Japanese and can therefore be repressed with low returns to a much greater extend. And of course the US which having access to the main world currency also benefit, for now, of less strict conditions. (Until investors start fleeing the dollar. We are getting close but we are not there yet.)

  So what comes next, then? History is telling us that first we'll get punishing interest rates, then restrictions on foreign exchange and investment. Once these measures are in place, interest rates will become controlled, voluntarily or not. War bonds for example. At each stage, history will accelerate. When the Europeans are telling us that they expect to be at war with Russia by 2027, they are indirectly telling us that they expect to be bankrupt by that time and that consequently war will be used to have restrictions accepted by the population. I believe that they would be very lucky if all this profligacy can last another two years. But who knows, maybe two years. Just remember that this is an upper limit. Any black swan before that and the budgets are toast! 

The European Disease: Germany Enters The Debt Spiral

by Thomas Kolbe

Germany is on a path to losing its reputation as a fiscally responsible state. Through unchecked spending, the federal government is steering the country into stormy waters. 

On Thursday, Handelsblatt reported a new budget gap. By 2029, previously unfunded additional debts are expected to grow from €144 billion to €150 billion, according to several government sources. These are not part of the planned federal debt but come on top of it. Most recently, the coalition agreed to bring forward a planned pension supplement for mothers to 2027, adding another €4.5 billion in spending.

It must be said clearly: Under Chancellor Friedrich Merz, Germany has abandoned its last efforts at fiscal seriousness and conservative budgeting. The costs of a shaky coalition’s political consensus, designed to avoid conflict, are being offloaded onto taxpayers.

A Predictable Crash

These numbers are already alarming—but we are still in the calm before the storm. In 2025, the net new debt ratio is expected to reach 3.2% of GDP. This includes roughly €82 billion in new federal debt, €15 billion in additional borrowing from states and municipalities, and about €37 billion in federal “special funds”—off-budget shadow debt.

This forecast will collapse the moment the German economy sinks deeper into recession. Rising unemployment and falling tax revenues will put further strain on the federal budget and social welfare funds. While politicians still feel safe with public debt at 63% of GDP, once we include the €1 trillion debt program of the Merz government, debt levels could surpass 90% of GDP by the end of the decade.

Germany is now practicing a kind of fiscal policy most citizens are unfamiliar with. Mediterranean habits have arrived—but not in the form of sunny weather, rather in the mismanagement of public finances.

Tax Revenues Can No Longer Fill the Gaps

In a display of unprecedented hubris, German politics has kept its welfare state wide open for migration-driven poverty over the past decade—causing not only fiscal but also cultural and economic disarray. Added to this is the aging population and a self-inflicted economic crisis. All signs in the welfare system now point toward disaster.

By 2025, a combined deficit of over €55 billion is expected — foremost in statutory health insurance, which will run a record shortfall of nearly €47 billion. Long-term care insurance adds a further €1.6 billion in losses, and the pension fund faces a shortfall of roughly €7 billion.

Once touted as a system “fit for future generations,” Germany’s welfare model has become a bottomless pit. Federal bailouts, emergency loans, and ever-higher contributions now characterize a social state entering the early phase of collapse.

Vae victis — woe to the vanquished — and blessed are those who foresaw this descent and had the means to escape the welfare-state trap. The bill is now being paid by the quietly suffering workforce — the heroes who absorb the fallout from the reckless debt policies through their labor and lost time.

Social policy today is primarily a repair shop for damage caused by political interventionism. In trying to fuse artificial social glue into society, the state’s share of GDP has risen to 50%. Despite massive tax hikes—think CO2 levies, road tolls, property taxes, and cold progression—the gap between government spending and actual tax revenue keeps widening.

Since pre-lockdown times, public spending has jumped by around one-third, while real tax revenues have only increased by 14%. Even an economic illiterate could deduce that this mismatch requires structural correction—urgently.

The Crossroads Ahead

But there’s no sign of retreat in Berlin. The political competition among statist parties—including the CDU—produces only one outcome: larger social budgets, endless benefit promises, and deeper interference in the economy.

With dogmatic loyalty to climate policy and open-border ideology, the German state stumbles blindly toward a crossroads. Budgetary crises can’t be timed—they arrive when governments lose the ability to borrow on the capital markets. As Hemingway once said about bankruptcy: “First slowly, then suddenly.”

Once that moment comes—when bond markets say no—a society faces two paths: total statism or radical economic liberalism. In the former, both energy and capital markets fall under state control, as economic management turns authoritarian. This is the road Germany is currently on.

The alternative is the one Argentina has chosen under President Javier Milei—symbolized by his now-famous chainsaw. That route returns to a civilization based on limited government, confined to protecting internal and external security.

Europe as a Laboratory

Whether we like it or not, we are all part of a vast social experiment. The question is: Can Europe shed its degenerative socialism—the ideology that has inflicted so much harm on the continent and the world—or will we fall back into infantile patterns, refusing reform out of fear and sentimentality?

France’s budget debate and political paralysis offer a preview of our own future. The French state quota has climbed to 57%. Its open-border policies have failed. Its bloated welfare state has made the country ungovernable.

All this culminates in a permanent state of government crisis—translating into a collapse in public trust. Economic volatility, long suppressed by the welfare state, is now erupting as social unrest in the streets.

From Epstein To Exponential Debt: Signs Of A System Unraveling

    In fact, what is currently going on is nothing new. There is a great book called The Great Wave by David Hackett Fischer which analyses the waves of price revolutions which can be summarized by:

The first wave up – The Medieval Price Revolution – (ca. 1180–1350)

Price Stability ^ The Renaissance Equilibrium (ca. 1400–1480)

The Second wave up – The 16th Century  Price Revolution  (ca. 1480–1600)

Price Stability ^ The Enlightenment Equilibrium (ca. 1660–1730)

The Third wave up – The 18th Century  Price Revolution  (ca. 1730–1820)

Price Stability ^ The Victorian Equilibrium  (ca. 1820 to 1896)

The Forth wave up – The 20th Century  Price Revolution   (ca. 1900 to recent)

  And all these waves of course systematically ended up in social convulsions and wars. So, could this time be different? As far as we know history is not predictive... 

Authored by Chris Macintosh via InternationalMan.com,

So much to talk about and so little time...

I will make this statement because it is relevant to the situation we all find ourselves in today:

“Lord Anton says that ‘power corrupts and absolute power corrupts absolutely’. But reflecting, it is key to understand that power does not transform, it amplifies.

He who leads, shows what he really is… with more impact. Power doesn’t change people, it just takes away the need to pretend. The righteous protects, the ambitious abuses, the insecure becomes a tyrant. It is not power that corrupts, it is the true face of each that emerges when there is no longer fear of consequences.”

I believe that the reason we are seeing outright abuses is that the abusers used to operate in the shadows (covert). But now, as the cloak is forcibly removed, these actors move out of the shadows, becoming overt.

The problem with being overt is that the strategies that are used under covert (Epstein blackmail operations) are very different from overt ones. Once the actions become overt, the cloak is removed and trust evaporates. The ability to control the peasants when trust is no longer there also evaporates.

This is why we’re about to enter a time where authoritarian overt actions come to the table — where the pointy shoes drop the pretenses and show the peasants who they really are.

B.S. Fatigue

“President Trump’s Justice Department and FBI have concluded they have no evidence that convicted sex offender and disgraced financier Jeffrey Epstein blackmailed powerful figures, kept a ‘client list’ or was murdered, according to a memo detailing the findings obtained by Axios.”

Of course, this brings up the problematic question of Ghislaine, who was jailed for trafficking kids… to nobody. If there’s no list, then you can be darn sure her lawyers will be looking to spring her because… well, you can’t be convicted of a victimless crime, can you?

It’s all a bit absurd. Anyone asking obvious questions is called crazy. Shut up, you peasants, with your conspiracy theories. Wear your mask. It’s for your protection. Trust the news, they’re there for you.

Some humorous quips on the topic…

They expect you to believe this shit. Meanwhile…

And it all kicked off around 2021. It’s all so puzzling. I wish someone could figure it out.

Why point this all out?

Easy. It is what happens at the end of empires. The peasants lose faith in their masters. I mean, who but the retarded believes the guvmint, media, big pharma, big banking, big AG or any of the pointy shoes at this point?

And you know where trust in the pointy shoes is expressed in financial markets? Yup, the sovereign bond markets.

Which brings us to…

Exponential Interest Costs

Let’s revisit the numbers…

Just before the plandemic, federal debt was $20 trillion and GDP was $21 trillion. Ever since then, the path of travel has been accelerating in one direction. Consider that now we’ve $37 trillion of federal debt, while GDP is $29.1 trillion, putting US government debt to GDP at 127%.

So the parasitic guvmint sector has climbed by 85% while GDP grew only about 20%. Why am I not surprised?

To keep it going, the pointy shoes are now running a 7% annual deficit. Keep in mind the average for the last few decades was around 3.8%. This all matters because debt always matters, even if only eventually.

Recall in some issues back we listed out the four elements which exist for a massive change in the geopolitical order of the world and consequent repricing of assets which takes place. To refresh your memory, they are:

1. The monetary and credit cycle where nations get into a sovereign debt problem, which needs to be dealt with.

2. Domestic conflict, typically beginning as political disagreement, but where disagreement isn’t resolved by discourse.

3. A rising power challenging the existing power and causing international conflict.

4. Technological changes that assist in disrupting the status quo.

This brings up the question of, “Oh well, how can they deal with the debt problem?” History provides a solid list of actions. There are four options:

1. Taxation.

2. Confiscation or seizure of assets.

3. Austerity (the pointy shoes looking around and saying, “By golly, we’re a bunch of parasitic muppets, destroying things, best we rein ourselves in.” This, of course, rarely, if ever happens.

4. Debt restructuring, which is what Orange Man was attempting to do with tariffs, which amounted to a negotiation with creditors and which has, for the most part, failed.

As of right now, the federal debt is skyrocketing, and traditional policy levers are no longer working effectively. Raising interest rates simply inflates debt service costs, causing losses for bond holders while presenting a real risk of not only maturing debts NOT being rolled over but holders of these debt instruments selling them.

My colleague Lyn Alden makes a point regarding the total debt vs base money. She argues that total credit is expanding with base money lagging and that past shocks such as the global financial crisis of 2008 and CONVID didn’t reverse this. Her argument — one I agree with — is that this trend ain’t going backwards… ever.

Which brings us to… gold and real rates.

As real rates plunged, gold has surged. If gold thrives in this environment (and it clearly does), so does Bitcoin, challenging old assumptions that scarce assets perform poorly in high-rate regimes.

Consider that gold has now outperformed the US stock market (dividends included) over the last 25 years. And yet, very few institutions and almost no retail investors own it.

*  *  *

The unraveling isn’t coming — it’s here. From covert corruption to exponential debt and the death of institutional trust, the signs are no longer subtle. If you’re reading this, you’re likely not waiting for permission to question the narrative — you’re already doing it. But understanding what comes next — and how to prepare for it — is another matter entirely. We’ve put together a special report to help you make sense of the chaos and position yourself wisely.

Clash of the Systems: Thoughts on Investing at a Unique Point in Time

The war between Thailand and Cambodia - Day 5

   Normally, I try not to follow closely current events as my goal is to provide data and background in order to get a deeper understanding of why they are unfolding as they do. 

  But every rule has its exceptions. I happen to know the Eastern part of Thailand quite well and although conflicts have flared in the area regularly over the centuries, this is one of the last place where war should break up at the current time. So what exactly is going on? 

  There seems to be a trend right now in looking at the cause of the conflict by accusing the French authorities who in 1907 negotiated unequal treaties about the border with Thailand. This is to my opinion erroneous. 

  Thailand has a very long history and is the only country in South East Asia and one of the very few in the world which never was a colony. Conversely, this means that Thailand has been almost continuously at war with its neighbor; The Burmese in the West, The Mountain people in the North and of course the Cambodians in the East. 

  When negotiations took place in 1907, the French tried to "push" the limits of colonial Cambodia as far as possible, so as far as they could find Cambodians living in the countryside but since the populations were rather mixed in the area, the border ended up a few kilometers North of two major temples which at the time were under the administration of Thai monks. Finally the Monks were permitted to stay and the temples ended up being Thai on the wrong side of the border. 

  This has been the cause of endless conflicts ever since. At most times, tourists from Thailand were permitted to visit the temples by depositing their passports at the border, except of course when people were shooting at each other, usually on a very small scale, which was happening once every 10 years or so.

  Also, usually the conflicts were initiated by the Cambodians irritated by the Thais encroaching on "their" land. 

  This time is different, which is why the conflict seems more prone to inflating into war that in the past. Both governments in Thailand and Cambodia are under pressure and cannot "look" weak. And then of course there is the ominous conflict of influence between China and the US in the background which automatically gives a strategic dimension to every skirmish. (as explained below)

  The good thing is that because the location of the conflict is so remote, as long as the "war" is confined to the area, nothing much will happen. This is jungle warfare, not ideal for large scale confrontation. But since the border between the two countries extends to over 700 kilometers, it can easily spread to other areas which will have less reasons to be at war since the border is better defined but where war would conversely be much easier with better road access to the frontier.  

 The Thailand–Cambodia war isn’t just about temples. It’s a geopolitical fault line and the target may be China’s Pan-Asian Railway.

Since July 24, artillery has fallen, airstrikes have escalated, and over 30 are dead. More than 170,000 have fled their homes. Thailand blames Cambodian incursions. Cambodia says it’s resisting Thai aggression. Trump has inserted himself as mediator, using trade threats and leverage, but the real stakes may lie beneath the tracks.

China’s Belt and Road megaproject, the 6,000+ km Pan-Asian Railway, is set to transform Southeast Asia. High-speed lines are underway from Kunming to Laos, Cambodia, Thailand, Malaysia, and Singapore. The China–Laos line is operational. The China–Thailand line is under rapid construction, with the Bangkok–Nakhon leg on pace for 2026 and full connection to Nong Khai by 2030. Cambodia’s lines are next, linking Phnom Penh and Ho Chi Minh City to Bangkok, and ultimately to China.

But that junction, the Cambodia–Thailand border, is exactly where the war just broke out.

China’s vision is seamless connectivity: freight, tourism, multipolar trade. A physical alternative to maritime chokepoints and Western control. But every nation along this railway tells a deeper story. Cambodia is a Chinese ally. Thailand is a U.S. treaty partner with joint military drills and weapons contracts. Myanmar’s China rail is frozen in conflict. Vietnam’s China line was delayed by Japanese failures and is now quietly being restarted by Chinese firms.

Who benefits if the network stalls?

In this context, the outbreak of war looks less like spontaneous escalation and more like disruption, a possible proxy move in the broader U.S.–China contest. Analysts have called it a “new Cold War flashpoint” in Southeast Asia. Western powers cannot match China’s infrastructure scale, but they can sabotage it. Stir conflict. Delay links. Keep ASEAN fragmented and dependent.

China blames “the colonial legacy.” The U.S. calls for restraint while signaling support for Thailand. And the railway, once a corridor for peace, may now run through a battlefield.

Peace here isn’t just about borders, it’s about who builds Asia’s future.

CHINA-EU SUMMIT ENDS IN DEBACLE by Pepe Escobar

  A long, long time ago, the EU (European Union) was sold as a new concept to the Europeans; to avoid future war, integrate markets, facilitate circulation and delegate responsibilities from nations back to local authorities. Who would have oppose such lofty goals? 

  But in reality, deeper dreams of former imperialism reborn were looming behind the project which after 70 years now represents almost the exact opposite of the original objectives. 

  Peace inside but promoting war at the border. Integration of the markets but at the price of over-regulations which negate the purpose. Easy circulation but mostly for illegal immigrants. And finally no delegation of power whatsoever but conversely extreme concentration in unellected administrative bodies who aim to lord over participating members and lesser countries around the world. And all this managed by second rate individuals like European Commission President Ursula von der Leyen for whom lack of intelligence is the most polite description which can be used.  

  But once in a while, there is real work to do like having a discussion with China and lo, this merry coterie of bureaucrats jump on a plane all the way to the Imperial Palace of the Central Empire (中国) to go lecture the Chinese. 

  No prize for guessing how this went... 

CHINA-EU SUMMIT ENDS IN DEBACLE,  EUROPEAN DELEGATION LEAVES BEIJING EARLY

The EU delegation left the Chinese capital Beijing after the summit, which lasted less than a day, ended in complete failure.

According to the Australian magazine The Diplomat, the EU-China negotiations did not lead to a rapprochement, despite the transatlantic rift between the EU and the United States.

Reuters reports that the negotiations were very tense, especially on trade and Ukraine issues, and no agreement was signed. "The EU tried to talk to China from a position of strength."

The EU delegation was led by European Commission President Ursula von der Leyen, European Council President António Costa and EU High Representative for Foreign Affairs Kaja Kallas. China was represented in person by President Xi Jinping.

Some notes: in order to "talk from a position of strength" you actually need strength, and if at the helm of diplomacy there's the trifecta of those three clowns, failure is guaranteed.

China's Mega Hydro Power Project

 

  Could this work? Could mega projects as the dam below reflate the Chinese economy? 

  Unfortunately, the answer is: No! This has been tried, most recently by Japan following their big real estate bubble. It didn't work. It will create "some" economic activity by increasing demand for iron and cement, temporarily, but what China needs is not to consume more cement or iron. And then it will explode the debt further.

  The problem of a bubble is that as prices of real estate are inflated, the debt explodes in parallel. Debt which is backed up by... real estate. So when conversely, the value of apartments and mansions starts falling, the debt remains high and dry with nothing to back it up, often exceeding the total assets of people and companies.

  This is what normally should be called bankruptcy although a nicer name is negative equity. The assets should be sold at a discount and the banks should absorb the loss. Except that when a bubble pops this becomes impossible because all the money available in the country would not be enough to reflate the banks. The country itself would have to declare bankruptcy and re-denominate the money. If you can avoid it, which both Japan before and China now can, this is the very last option on the menu list.  

  Another possibility would be to distribute cash to the population. This too has been tried on a small scale in Japan. It only creates inflation in proportion to the total amount distributed. As for the debt, it keeps rising, only faster. In-between, you can also give money to cities and villages to invest wisely. This also has been tried in Japan. Almost everything failed. Small villages ended up with international swimming pools that they could not even heat in Winter and which consequently had to close three or four years later. And the debt kept piling.   

  All this is why, a bubble should be avoided at all costs. Short of a jubilee, total bankruptcy and hyper inflation, we have tried for over 5,000 years since Babylon and haven't yet found a painless solution. The probability that there is none must be very high!   

Buzz This Week Has Been Around China's Mega Hydro Power Project

China's policymakers are locked in a fight with the deflation monster, and any path to economic recovery hinges on cutting excess supply and production capacity, while reviving the ailing property sector. Tariff tensions with the U.S. have further clouded the outlook this year, adding urgency to the need for targeted stimulus. Also, authorities may ramp up fiscal support, and one of the boldest ways to do that was recently launched in the country's most ambitious infrastructure project since the Three Gorges Dam.

According to the state-run media outlet Xinhua News Agency, Chinese Premier Li Qiang launched construction of the world's largest dam project, with a total planned investment of 1.2 trillion yuan ($167 billion). 

Li described the multi-decade Yarlung Zangbo River dam as a "project of the century" and said special focus "must be placed on ecological conservation to prevent environmental damage." 

On Wednesday, Guo Jiakun, China's Foreign Ministry spokesperson, told reporters, "To build the hydropower project in the lower reaches of the Yarlung Tsangpo River is fully within China's sovereignty," adding, "China acts with a high sense of responsibility in harnessing cross-border rivers, and has rich experience in hydropower projects. The planning, design and construction of this newly announced project strictly follows the highest national industrial standards." 

The dam will comprise five cascade hydropower stations and is expected to begin operating in the early 2030s.

Once its generators come online, the project will dwarf the electrical output and scale of China's Three Gorges Dam.

Via Goldman 

Timeline comparison of the Yarlung Zangbo Project vs. Three Gorges Project

In a separate note, UBS analyst Sunny Zhang highlights major sector and stock-specific beneficiaries of this new mega project. 

"We detailed the sector-specific implications of the Yarlung Zangbo Dam project, highlighting key opportunities and expected impacts across Heavy Duty Trucks, Materials, Infrastructure, and Power equipment," the analyst noted, adding, "The key stock beneficiaries are Weichai Power, SInotruk, CNBM, Tibet Tianlu, NARI, CCCC, China Railway Group." 

Highlights of the note:

• Heavy Duty Trucks: The project could boost annual HDT sales by 3–4%, with an estimated 35,000 additional units driven by long-cycle engineering demand. Sinotruk and Shaanxi Automobile (Weichai Power) are well positioned to benefit, especially amid strong electric HDT momentum and trade-in subsidies.

• Basic Materials: The dam's construction is expected to drive annual demand of 4.3mt cement and 0.6mt steel, significantly lifting Tibet's cement consumption and supporting steel producers. While earnings impact is modest, CNBM stands out with a buy rating due to its valuation and exposure, compared to neutral ratings on Conch and steel names.

• NARI: NARI could gain Rmb69 bn in revenue from the project by 2033, with contributions from hydropower equipment and ultra-high voltage infrastructure. Despite recent share gains, the long-term upside is not fully priced in; buy rating maintained with Rmb28 price target, supported by strong order growth and margin improvement.

• Construction: Around 60–70% of the Rmb1.2 trn investment will go to construction, with annual spend of Rmb80–120 bn over 10–15 years, representing 0.3–0.5% of China's infrastructure investment. While revenue impact on covered firms is limited, policy support and low H-share valuations (0.2–0.3x PB) with 5–6% dividend yields support a cautiously optimistic outlook for the construction sector.

Another note from the bank, featuring analyst Ryoya Wakamatsu, noted: 

"While the trade truce is a plus for markets, it is also true that market participants are becoming immune to trade headlines. Sentiment is good at the moment with anti-involution focused over the last month. This week the buzz word has been the mega hydro power project on the Yarlung Zangbo River. This is a 10-year 1.2tn Yuan project to build the world's largest dam." 

Beijing is once again turning to its playbook of infrastructure-led stimulus to combat deflation and shore up its domestic economy. Let's see how that works out... 

The letter (Joke)

This joke refer to all the now dead people who for a reason or another once crossed the path of the Clintons.  Clearly not a good carrier move!

But with Ghislaine Maxwell, we’re not talking just about the Clintons but potentially hundreds of similarly powerful people with “friends” in high positions who know that in some US prisons the guards are sleepy and the cameras do not work reliably...

Would you and I be in a similar position, the first thing which comes to mind is taking an “insurance policy” to avoid anything nasty coming our way. This is most certainly what she had done too.

And so did Jeffrey Epstein! Remember, his job was embezzlement and blackmail. So all this take us back to the disgraced millionaire who mysteriously disappeared at the right moment. Like Virginia Giuffre, I also do not believe that Epstein killed himself as it was practically impossible in his cell nor that he was killed. Some incriminating documents from his “insurance policy” would have emerged. We have seen none = He is NOT dead. Neither have we seen the body up close by the way. 

So what is much more likely to have happened is that Epstein was “exfiltrated” from the prison and given a new identity to live peacefully a nondescript incognito new existence far from the not so sharp gaze of the medias.

Exactly the same exit cannot be used twice so something different will have to be found for Guislaine Maxwell but let’s be certain that some people are hard at work on the subject right now with a pardon being the most likely possibility.

As for the “list”, it is actually far more complicated than what is being explained. Just being in an address book and therefore an acquaintance of Epstein is no proof of criminality. Nor actually being on the log book of the “Lolita Express” Boeing 767. But being pointed by Ghislaine Maxwell AND being on the address book AND on the log book of the plane? That would definitively be highly incriminating and difficult to recover from.

So in the end, will we see anything at all? I guess, it depends very much on another person who is also using “the list” as a leverage against his enemies: Donald Trump. All this is very dangerous for some people as eventually, “someone” of importance will have to be sacrificed.  But in the end, all this circus is about “people” although unfortunately our problem as a society is about debt, not people. So an important distraction since it is about the integrity of the system but a distraction nevertheless.