I sincerely believe that banking establishments are more dangerous than standing armies – Thomas Jefferson
Europe
is failing. Europe’s leadership is preparing for war to cover their
mistakes of the past fifty years and the people aren’t having it.
Europeans don’t want war and to date, Russia has been unwilling to be
provoked into a wider conflict.
It’s
obvious to anyone who knows anything about military campaigns that
Russia lacks the logistical capacity to invade Western Europe. Their
domestic semiconductor fabs are 25 years behind the West which means
they are unable to fight a modern war. Besides, Western Europe is a
hollowed out economic shell that offers no advantages to Russia and
innumerable headaches.
Northern
Europe has outstanding defensive militaries, backed by NATO. Eastern
Europe has Poland with their massive, modern army which is more than
capable of blunting Russia if it somehow gets past Ukraine. Turkey’s
massive army sits on Russia’s flank.
It
would take an extraordinary level of credulity to paint Russia as a
military threat that warrants mass mobilization of Europe’s limited
industrial base. Regretfully, it’s not stopping them.
All Wars Are Bankers Wars
War is a racket – General Smedley Butler (US Marines)
Europe
is run by bankers and politicians; every other economic power center
has been marginalized. Green energy policies, pushed by bankers and
politicians, have destroyed domestic energy production in Germany and
Britain and have left the regional economy dependent on high-priced,
imported natural gas, and ultra-high-cost renewable energy. The result
is a regional economy that can no longer compete on world markets.
The
German Mittelstand, the economic rock that Europe is built on, has been
decimated by these disastrous decisions. The Mittelstand refers to the
small, private or family-owned businesses that represent the excellence
of German engineering and manufacturing and employs roughly 60% of
Germans.
These
businesses are being tasked with shifting from domestic products to
military products, to fight a war that is unlikely to start. Many of
their industrial inputs such as natural gas for chemicals and metallic
inputs were formerly sourced from Ukraine and Russia but now come from
new and more expensive sources.
The
Mittelstand, already decimated financially, needs to re-tool and find
new input sources, which will require massive capital investment. To
make this happen, Ursula von der Leyen, President of the European Union,
has proposed using €10 trillion from household bank deposits to fund
this capital investment, claiming these deposits are “idle” and “lazy”.
The
people who destroyed the European economy in the first place want the
voters to turn over their savings to fund a fool’s errand. They want to
fight a war that has no reason to be fought other than to bail out
bankers and politicians.
The
scary thing is that European leaders would rather risk destroying the
world than loosen restrictions on the pan European economy. They can’t think of any better ideas than World War III. It’s little wonder that voters in Germany, Britain, and France want the current leadership voted out.
There
is no appetite for war in Europe. The bankers and the politicians have
failed the European people and will not be allowed to destroy the
world.
Whither the Euro?
It’s
the invincible arrogance of Europe’s elites that gets me. These are
people who have seen the euro collapse. These are people who are
presiding over a migration crisis on their borders, and yet do they ever
acknowledge that they need to change? No. They say that they need
more integration, more of our money, more control over this country –
Michael Gove
The
euro was created to compete with the US dollar in global trade and
ultimately replace it as global reserve currency. The euro was
initially introduced at $1.18 for each €1. Over 27 years, it has
remained roughly the same – presently $1.14 per euro.
Yet
at the start of the GFC or Great Financial Crisis of 2008, the euro hit
just under $1.6 per euro when it appeared that the Federal Reserve was
losing its collective mind, only to fall dramatically since that time.
That was Europe’s opportunity to replace the buck and they failed. They
won’t get another chance.
Von
der Layen’s plan risks driving domestic savings out of the Eurozone
into other currencies such as the dollar and yen. If this happens, the
value of the euro in currency markets will fall, making it much harder
for the remaining European manufacturers to shift to arms production.
Inflation is already decimating European consumers, a drop in the euro
would accelerate an already untenable economic situation forcing
consumer inflation even higher.
The
timing is yet to be determined but the conditions have been set; the
euro is going to break, not the US dollar. Within ten years, Europe
will be irrelevant as an economic bloc and the euro, if it’s still
around, will resemble the Indian rupee.
Twilight of the Central Bank Model
The worst evils which mankind has ever had to endure were inflicted by bad governments – Ludwig von Mises
Central
banking is a British invention and it started with the Bank of England
in 1694 although it can be argued that the Knights Templar represented
the first central bank in history. Their power was seemingly destroyed
in 1307 by King Philip IV of France. I believe the power of the
European central banks and their offshoot, the Federal Reserve Board,
are presently facing an existential fight.
At
the heart of central banking is the process of money creation.
National governments borrow from central banks and pay interest on that
money. Central banks, which are largely private institutions, make
money by creating more money. They are incentivized to expand money
supply.
My
formative years in the investment business were built on the belief
that central banks needed to be independent to prevent runaway
inflation. The truth is the opposite.
Central
banks loot economies and destroy them. We can see this in Britain,
France and Germany where prices have been driven too high to compete.
That’s when industrial activity is exported to the lower cost venues,
hollowing out the economies that supported borrowing in the first place.
The
Fed is in the process of destroying the US economy. The country is
littered with former industrial cities and towns, a testament to the
destruction wrought by bankers.
The
chart below shows US government debt over my lifetime. Everything has
been inflated and monetized and now we’re left with the financial
wreckage of excess debt and a hollowed out industrial base.
It
was both political parties. JFK issued silver certificates to counter
the Fed; he was shot. Ronald Reagan was exploring a return to a gold
standard, not coincidentally, he was shot. From George Herbert Walker
Bush through Joe Biden, US Presidents ceded power to the Fed
incrementally until we got to our present condition.
M1
money supply has grown by 80% since 2020. This represents cash and
checking and it is the reason consumer prices are much higher. The
chart above shows how that money got there. It also shows why our
capital markets have remained elevated. It’s not sustainable.
The
only part of the yield curve that global central banks can impact is
the long end – 7 years and up. We can see the spike in 10-year bond
yields below. This doesn’t indicate rising inflation expectations; it
represents the death throes of global central banks desperate to derail
the efforts of the US to drain dollars out of global money markets.
The
inflation damage has already been done during the years 2020 through
2024. US dollars are being drained out of the global economy and
re-invested in the US. The US is effectively sucking the lifeblood out
of the global central banking system. I view the rise in long term bond
yields as a generational buying opportunity because interest rates will
be forced down to 0% in the US before long.
Eurodollars
Never interrupt your enemy when he is making a mistake – Napoleon Bonaparte
I wrote a piece called the Main Event that discusses the draining of the Eurodollar market in detail. Here’s a link: https://geovestadvisors.com/the-main-event/
The Cliff Notes version is that the abundance of oil and natural gas
developed in the US shale fields has resulted in the reversal of energy
flows from into the US to out of the US. Inversely, this redirects US dollars from moving out of the US to moving into the US, leaving global central banks bereft of US dollar assets.
US
dollars are being drained out of Europe and Europe’s international
banks in London, Paris, Zurich, Amsterdam, and Frankfurt. The war on
the international drug trade by the US military is destroying the
profitability of European banks which regretfully, rely heavily on this
ugly trade.
The City of London and UK Crown dependencies launder an estimated 40% of the world’s illicit trade.
Banks in Paris, Rome, Zurich, and Amsterdam also feed at that trough.
By cutting them off from this lifeblood, these bad actors are going to
be sharply curtailed in power and global influence. Central banks in
Europe are rapidly losing the ability to move markets around the world.
Globalism
was created by the Bank of England and other European Central Banks but
those banks are being marginalized in global matters, particularly
since their regional economies are fractions of their former relevance.
The pan European economy has been over-harvested by bankers and
politicians as discussed previously.
Food
and energy are traded in US dollars and the European banking
establishment is watching those dollars head back to the US. Every oil
tanker or LNG tanker that docks in the Port of Antwerp drains dollars
from European banking coffers. Without dollars, European banks decline
in relevance.
European
central banks have relied on hidden swap arrangements with the US
Federal Reserve Bank to supply them with US dollars when they are
short. I expect increased scrutiny of these arrangements by the US
Treasury going forward and if those swap arrangements are curtailed, the
euro is going to drop like a stone versus the US dollar.
Here’s
the same chart from above with some lines marking important levels. If
the euro falls convincingly below parity with the US dollar, it’s game
over. The Europeans have relied on their extraordinary influence with
the US Congress for 200 years but that influence is rapidly waning.
As
Europe goes, so too goes globalism and the central bank model. This is
why they need to drag the world into a war. It’s their final lifeline.
Conclusion
In politics, stupidity is not a handicap – Napoleon Bonaparte
Europe
isn’t going to disintegrate; it will cease to matter. Eastern Europe,
especially Poland and the Czech Republic, as well as Scandinavia have
bright futures. Britain, France, Germany, Italy, and Spain have serious
problems. The money has run out for those trust fund babies
The
US has been hampered by European influence since the beginning.
Presidents such as Jefferson, Jackson, Lincoln, McKinley, Kennedy, and
Reagan have tried to limit European influence in banking and policy but
the connection was too strong.
As
the US melting pot integrates the world into our hybrid genetic mix and
as European bureaucrats destroy what’s left of their economy, the
connection is finally breaking. Good riddance! Without the US, the
global central banking model finally fails and with it, the artificial
asset inflation that is preventing the US economy from renewing itself.
The
financialization cycle is over after 125 years. The future is about
re-building a destroyed industrial base, not about trading crypto and
Mag 7 stocks.
