Tag Archives: Euro

Winter in Central Europe and for the dollar, by Alasdair Macleod

Posted on December 3, 2022 | Leave a comment

Economic realities may drive the West to the bargaining table with Russia on Ukraine. From Alasdair Macleod at goldmoney.com:

In this article I examine the current state of the fight for hegemonic control between America on the one side, and Russia and China on the other. It is being fought on two fronts. Ukraine, the one in plain sight, is about to endure a winter without power and adequate food potentially leading to a humanitarian crisis.

The other front is financial with America facing a coordinated attack by Russia and China on its dollar hegemony. The Russians are planning a replacement trade settlement currency, which if it succeeds, could unleash a flood of foreign-owned dollars onto the foreign exchanges.

We have no way of knowing how advanced this plan is, but the indications point perhaps to a gold-based digital currency. Moscow establishing a new gold exchange, Asian central banks accumulating additional gold reserves, and Saudi Arabia seeking non-dollar payments for oil sales are all circumstantial evidence.

As well as these plans, there has been an underlying shift away from a long-term everything financial bubble, with the prospect of higher interest rate levels in time. The reasons for foreign ownership of fiat dollars are diminishing, and a successful new Asian trade currency will only add to the dollar’s woes.

Could this pressure compel America de-escalate Ukraine and sanctions against Russia? The argument to do so has become compelling. It is also a way to lower energy prices, giving central banks needed room for interest rate manoeuvre. 

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The collapsing euro and its implications, by Alasdair Macleod

Posted on July 15, 2022 | Leave a comment

This one’s baked in. From Alasdair Macleod at goldmoney.com:

The euro system and its currency are descending into crisis. Comprised of the ECB and the National Central Banks, the system is over its head in balance sheet debt, and it is far from clear how that can be resolved.

Normally, a central bank is easy to recapitalise. But in the case of the euro system, when the lead institution and all its shareholders need to be recapitalised all at the same time the challenge could be impossible. And then there’s all the imbalances in the TARGET2 system to resolve as well before national legislatures can sign it all off. Additionally, but part of the TARGET2 problem there’s the repo market with €8.7 trillion outstanding, set to implode on rising interest rates, destroying commercial bank balance sheets which are already highly leveraged.

This goes some way to explaining the deep reluctance the ECB has about raising interest rates. While producer prices in key member states are rising at over 30% year-on-year, and consumer prices by over 8%, the ECB keeps its deposit rate at minus 0.5%. It knows that if euro bond yields go any higher their situation which is already untenable will disintegrate into a full-blown crisis.

Therefore, the euro is sliding. Markets can see that all the ECB is doing is talking the talk and otherwise is frozen into inaction.

Fiddling while Rome burns…

TheCollapsing1.png

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The Dollar Devours the Euro, by Michael Hudson

Posted on April 9, 2022 | Leave a comment

While Russia wages war on Ukraine, the U.S. wages war on Europe. From Michael Hudson at thesaker.is:

It is now clear that today’s escalation of the New Cold War was planned over a year ago, with serious strategy associated with America’s plan to block Nord Stream 2 as part of its aim of blocking Western Europe (“NATO”) from seeking prosperity by mutual trade and investment with China and Russia.

As President Biden and U.S. national-security reports announced, China was seen as the major enemy. Despite China’s helpful role in enabling corporate America to drive down labor’s wage rates by de-industrializing the U.S. economy in favor of Chinese industrialization, China’s growth was recognized as posing the Ultimate Terror: prosperity through socialism. Socialist industrialization always has been perceived to be the great enemy of the rentier economy that has taken over most nations in the century since World War I ended, and especially since the 1980s. The result today is a clash of economic systems – socialist industrialization vs. neoliberal finance capitalism.

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A euro catastrophe could collapse it, by Alasdair Macleod

Posted on January 16, 2022 | Leave a comment

The reckoning for a lot of bad loans is coming and it may well destroy the euro. From Alasdair Macleod at goldmoney.com:

This article looks at the situation in the euro system in the context of rising interest rates. Central to the problem is role of the ECB, which through monetary inflation embarked on a policy of transferring wealth from fiscally responsible member states to the spendthrift PIGS and France. The consequences of these policies are that the spendthrifts are now ensnared in irreversible debt traps.

Even in a Keynesian context, the ECB’s monetary policy is no longer to stimulate the economy but to keep the spendthrifts afloat. The situation has deteriorated so that Eurozone commercial banks appear to have credit restricted in New York, evidenced by the reluctance of the US banks to enter into repo transactions with them, leading to the market failure in September 2019 when the Fed had to intervene.

An examination of the numbers strongly suggests that even Eurozone banks, insurance companies and pension funds are no longer net buyers of Eurozone government debt. It could be because the terms are unattractive. But if that is the case it is an indictment of the ECB’s asset purchase programmes deliberately suppressing rates to the point where they are unattractive, even to normally compliant investors.

Consequently, without any savings offsets, the ECB has gone full Rudolf Havenstein, and is following similar inflationary policies to those that impoverished Germany’s middle classes and starved its labourers and the elderly in 1920-1923. That the German people are tolerating such an obvious destruction of their currency for the third time in a hundred years is simply astounding.

Institutionalised Madoff

Schemes to pilfer from people without their knowledge always end in disaster for the perpetrators. Central banks using their currency seigniorage are no exception. But instead of covering it up like an institutionalised Madoff[i] they use questionable science to justify their openly fraudulent behaviour. The paradox of thrift is such an example, where penalising savers by suppressing interest rates supposedly for the wider economic benefit conveniently ignores the theft involved. If you can change the way people perceive reality, you can get away with an awful lot.

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The destruction of the euro, by Alasdair Macleod

Posted on October 24, 2020 | Leave a comment

The euro will be destroyed by debt and the idea that somebody besides the debtor countries must pay it. From Alasdair Macleod at goldmoney.com:

The Eurozone is bust. The deterioration of TARGET2 imbalances have been hardly noticed, but in recent months it has been alarming. Despite official denials over the years that it is a matter of concern, it is increasingly obvious that the national banks of Italy, Spain and other nations with increasing bad debts are hiding them within the TARGET2 system. The first wave of Covid-19, which is leading to bankruptcies throughout the Eurozone, is now being followed by a second wave, which will almost certainly take out a number of important banks, in which case the cross-border euro system will implode.

Introduction

If ever there was a political construct the unstated objective of which is to enslave its population, it is the European Union. Its opportunity stems from national governments which, with the exception of Germany and a few other northern states, had driven or were on the way to driving their failed states into the ground. The EU’s objectives were to support the policies of failure by corralling the accumulated wealth of the more successful nations to fund the failures in a socialistic doubling-down, and to accelerate the policies of failure to ensure that all power resides in the hands of statist looters in Brussels.

It is Ayn Rand’s vision of the socialising state as looter in action.[i] All of surviving big business is aligned with it: those who refused to play the game have disappeared. Senior executives with extensive lobbying budgets are no longer at the beck and call of contentious consumers and have hollowed out their smaller competitors. They have opted for the easier non-contentious life of seeking favours of the looters in Brussels, enjoying the champagne and foie gras, the partying with the movers and shakers, and the protection they bribe for their businesses.

It is a corrupt super-state that evolved out of American post-war policy — the child of the American Committee of United Europe. Funded and staffed by the CIA in 1948, the committee’s objectives were to ensure the European countries bought into a US-controlled NATO, in the name of stopping Stalin’s westwards expansion from the post-war boundaries. This was the official story, but it is notable how it formed a template for subsequent American control of other foreign states. It is the action of the jewel wasp that turns a cockroach into a zombie, so that its lava can subsequently feed off it.

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On the Verge of an Incredibly Chaotic Period That’s Nothing Short of Revolutionary, by Chris MacIntosh

Posted on August 22, 2020 | Leave a comment

Chaos is coming (actually, it’s already arrived). From Chris MacIntosh at internationalman.com:

Doug Casey’s Note: There aren’t too many newsletters that I can recommend wholeheartedly. Chris MacIntosh’s is one of the few. It covers the entire investment waterfront, it’s thoughtful and well-written.

Let me add I’m completely on the same page with Chris and his views. I urge you to read what he has to say.

International Man: First, I’d like to introduce Chris MacIntosh.

After working for many top-tier investment banks, Chris left the corporate world. He has since built and sold multiple million-dollar businesses, built a VC firm allocating $35m into early-stage ventures, and become a full-time trader.

He now manages money for clients of Glenorchy Capital; a macro focused hedge fund. Chris is the founder of Capitalist Exploits, with its flagship investment subscription letter called Insider.

Alright, let’s get into our discussion.

Chris, the government’s response to Covid-19 has unleashed an unprecedented amount of economic destruction around the world.

In the US alone, tens of millions of people are now unemployed. The government-ordered shutdowns have decimated many businesses. The Fed has printed more money out of thin air in just the last couple of months than it has for its entire 107-year existence.

From your perspective, what’s going on here, and what trends do you see taking shape?

Chris MacIntosh: There is quite a bit to unpack on that.

If we go back to before the global lockdowns began in February, Western governments were in debt to an extent where it would have been impossible to repay. That’s just a fact that can be proven with mathematical certainty.

So, we went into this crisis—and this is not a crisis, as it is currently being portrayed as an existential threat. For anybody who looks at the data, you can understand that this is largely a big “nothing burger” for what the virus itself is.

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EU Economy Traveling Along Same Worn Dead-end Road, by Bruce Wilds

Posted on June 8, 2020 | 1 comment

The problem with the majority of Europeans is they really think economic growth comes from and is directed by governments and central banks. From Bruce Wilds at brucewilds.blogspot.com:

With so many countries across the world facing difficulties, many people have yet to notice the Euro-Zone has become a place where hope goes to die. The last round of elections in the Euro-Zone should bring little comfort to those supporting a stronger Europe. Huge gains were made by forces seeking more power for the populist agenda. In short, it is a boost for the rights of individual nations to have more say in how they are governed.  Two of the most pressing issues are that insolvent Italy struggles with a stagnant economy and Spain is coming apart politically with Catalan separatists defying Spain’s Prime Minister.

To avoid the union coming apart at the seams and a miserable future, the European Commission recently unveiled an unprecedented  €750BN CoVid-19 recovery plan. It consists of €500 billion in grants to member states, and €250 billion would be available in loans. This means they are asking for the power to borrow. This is geared to tackle the worst recession in European history and shore up Italy. It would mean transforming the EU’s central finances to allow for it to raise unprecedented sums on the capital markets and hand out the bulk of the proceeds as grants to hard-pressed member states.

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Germany is the Rotten Heart of Europe, by Tom Luongo

Posted on December 4, 2019 | Leave a comment

Germany has used the EU For its own ends. From Tom Luongo at tomluongo.me.com:

germany-rotten-heart-car-exports

The crisis in Europe will come from Germany. Germany has entered a period of political crisis that, as yet, has not exploded.

But the pyre is built, the torches lit and all that remains is dragging Chancellor Angela Merkel up and setting the whole thing on fire.

For those that want to understand the fundamental impulses which have led the European Union to where it is today and Germany’s central role one really needs to read Bernard Connolly’s “The Rotten Heart of Europe.”

It’s a book that damns pretty much everyone in their monomaniacal drive for the European Project but, Germany, in particular, to me, comes across the worst.

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The EU’s other Periphery, by Frank Lee

Posted on July 29, 2019 | Leave a comment

The EU has not been a blessing for the Balkan and Southeastern European countries. From Frank Lee at off-guardian.org:

We’ll start with the 10 per capita poorest countries in the whole of Europe. In rank order:

  1. Moldova – GDP US$2560
  2. Ukraine – GDP US$3560
  3. Kosovo – GDP US$3990
  4. Albania – US$4450
  5. Bosnia and Herzegovina – GDP US$4769
  6. Republic of Macedonia – GDP US$5150
  7. Serbia – GDP US$5820
  8. Montenegro – GDP US$7320
  9. Bulgaria – GDP US$7620
  10. Romania – GDP US$9420

Average per capita income in Europe as a whole is US$37,317 (2018 figures).

What is noticeable is that most of these states are situated in either the Balkans or South-Eastern Europe. But that is not the end of the story.

Portugal, the poorest country in western Europe with GDP standing at US$238billion, is just pipped by the Czech Republic (now Czechia which is actually in the centre of Europe) as the star performer of the East whose national income stands at US$ 240,105.million.

Thus, in terms of per capita income the Czech Republic is the sole representative of the ex-Soviet states in Europe. This geopolitical and economic cleavage could hardly be starker. These two Euro-zones replicate the division of North and South between the US/Canada and central and Latin America.

Much of the attention to European development – or the lack of it – has been preoccupied with the gap between the West and South of Europe. This present schism is attributable to tried, tested, and failed economic strategies promulgated by the various institutions of globalization: the IMF, WB, WTO and so forth.

The single currency, the euro, became legal tender on 1 January 1999 and was adopted by most of the countries in the Euro area. But this proved to be the undoing of the political economy of the South.

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Europe is Dying on a Cross of Gold, by Tom Luongo

Posted on July 23, 2019 | Leave a comment

Are investors and speculators edging towards the exits on Europe? From Tom Luongo at tomluongo.me:

Gold is calling out the insanity of the European Union. It is also calling out the insanity of the global economy. But really it’s all about the euro at this point.

Since breaking through the post-Brexit high of $1375 per ounce, gold has pushed higher. Yes, it’s been volatile. Yes, the forces of control keep trying to stuff gold back inside the box, as it were.

And they keep failing.

Last week’s price action was impressive, even if the close was less than stellar. In the world of financial commentary everyone is looking for proximate causes for spikes and dips.

But most of that is simply noise. I don’t care why gold touched $1450 last week, only that it did.

Because a bull market that shakes off a number of big intra-week corrections to then blast to a new near-term high is a healthy one; one climbing the proverbial wall of worry.

And what’s important here is that this is not an anti-dollar trade. It is an anti-euro one. The U.S. Dollar Index has fully shaken off all attempts by the Fed to talk it down, trading at 97.6, and threatening a back-to-back monthly reversal at 97.8.

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