The Death of the Euro
While we get a lot of discussion about the death of the U.S. dollar, one currency that is going unnoticed is the euro.
We are getting close to the end for this failed experiment.
As we edge closer to World War 3, one casualty will be the euro. This currency will not survive a conflict of this magnitude and the global system knows this.
Of course, you hear a lot of ignorance regarding the matter, including hedge fund managers who are losing their clients money.
The Death of the EU
The European Union is a failed experiment. The fact that it hung on this long is a major miracle. Nevertheless, by the middle of the next decade it will be a skeleton of itself.
Over the past couple years I took a rigid stance against the EU. This upset many of those from Europe. Nevertheless, it is nothing personal. This stems from the fact the EU was a euro was a crap design from the start.
Much like the promises we hear about the BRICS, we were told this currency would rival the USD because of the GDP of the member nations.
The idea was to remove FOREX risk while also keeping interest rates the same across the entire region.
Here is the flaw: the only way to successfully achieve this is consolidate the debts. Since the Union was unwilling to do that, especially Germany, it was a con job.
All the promises of the EU failed. The rivaling of the USD never took place. In fact, over the last 25 years, the USD only got stronger. Certainly, the euro did better than most since it did become a regional currency. Yet, it still is not really much of a currency outside the EU.
Death of their Debt
By failing to consolidate their debts, they shifted the volatility from FOREX, which occurred between the different currencies, to the debt markets.
This was compounded by the decision to embrace Negative Interest Rate Policy (NIRP) in 2014. This blew up the bond markets, ending the debt as high quality collateral in the global financial markets (read Eurodollar Market).
In other words, banks outside the EU are not touching this debt. What happens when you cannot sell it?
Of course, this ends up reflecting on the currency. For all the talk of de-dollarization, the Europeans were the first to find out what is really taking place: the world is being de-dollared. The need for USD has only grown, especially as USD denominated debt has grown.
SWIFT data is showing that euro transactions are in a nosedive. This shows that many major players are starting to see what is occurring. It is not the US dollar that is dying but, rather, the euro.
The EU is ground zero for the implosion that is going to take place. It is interesting that Trump, when renegotiating trade agreements, didn't bother much with the EU. The British were given an agreement after they left the EU but that it is.
Capital flow tells the entire story. Historically, it has always fled areas of war. This is not going to change. Money will continue to move out of Europe as the neocons on both sides of the Atlantic keep banging the drums of war.
NATO will end up going to battle with Russia. Biden is a puppet with no control. It is the Neocons who have been waging proxy wars since the fall of the Soviet Union, all with failure. They are running the ship. So when Lindsey Graham talks about the best money the U.S. ever spent, that reveals the mindset.
Without the possibility of peace, this is going to fall hard upon the EU.
This is on top of demographic issues. When the bond market gets blown up, this negatively affects pension funds. Some countries have enormous obligations already committed. Since 2014, they were falling further behind.
With hedge and pension funds bleeding money, this will put further pressure on the obligations that already exist. New York and Tokyo banks are not scooping up the debt from this region.
All of this weights on the currency.
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Wow this is very detailed information and so much expressions. I love this write up
The main flaw of your political analysis is that it assumes that non-Westerners have no agency. Russia has no plans or aspirations of its own nor do the Chinese or anybody else. Everyone is a mere puppet of some poorly defined group of neocons or merely reacts to its actions at best.
When American politicians say that the military aid given to Ukraine is the best money the US military has ever spent they are saying that as a counter to the position that the Ukraine aid should be discontinued.
Discontinuing the aid now would be a foolish proposition because Russia's war aims have not changed: the total eradication of Ukraine as a nation state and as a people. If Russia is allowed to do that, it will interpret that as weakness and go for other countries next. You should remember that Putin has called the downfall of the Soviet Union the greatest geopolitical catastrophe of the 20th century and that Russia never lost the Cold War because it never ended. Russia is a declining empire (mainly for economic and demographic reasons) engaged in violent revanchism.
Also, the Chinese have been aiming at taking Taiwan since the communists took power. Mao said to Nixon that taking Taiwan was China's goal but the time was not ripe yet. Now that China has serious economic problems but has the second largest economy in the world and has massively expanded its military, the CCP has both the motive and the means to bolster its legitimacy in China by preparing for the military conquest of Taiwan. The Chinese government has been promoting militant patriotism in China for quite some time already.
Imperialism is at the core of Russian national identity. The loss of the empire in Eastern Europe is something they want to reverse. Russia spent 500 billion dollars on reforming its military in the last 20 years. Last year, Putin figured the time and the conditions were right to end Ukraine's statehood and its aspirations to join the West. Ukraine is a nation separate from Russia. Its language and mentality are separate from Russian.
The USA is a newcomer among nations. Russia (Muscovy) and its imperialism predate the USA by several centuries. China is thousands of years older than the USA.
Putin failed to destroy Ukraine because Ukrainians resisted and quite effectively at that. Mainly the EU and EU member countries have given Ukraine financial assistance. Ukraine has also receive significant military aid from all NATO member states and a number of other countries.
Russia is fighting Ukraine with everything it's got (except nuclear weapons). Russia is not going to start any other wars so long as it hasn't conquered Ukraine. NATO is not going to attack any country. The Russian economy is in dire straits. The rouble is tanking and raising key interest rates to 12% from 8.5% last month only temporarily stabilized the rouble. The rouble is in trouble because Russia's export income from hydrocarbons has crashed due to it losing nearly all of its export market in Europe and due to the price cap and other sanctions.
Russia has been visually confirmed to have lost about 2000 of its 3000 operational main battle tanks. It has lost thousands of artillery pieces and it's been running through its old Soviet artillery ammunition stockpiles at a massive rate from 60,000 a day in July 2022 to the current 10,000. Russian tube artillery is suffering from a lot of wear and tear. Half of its professional military has been killed.
Preparing to wage war on NATO would require total mobilization of Russia. That wouldn't solve Russia's significant problems in training and supplying new formations. NATO countries have mainly given Ukraine surplus gear slated to be disposed of.
If Russia wanted to start more wars it would need to wrap up Ukraine first, mobilize its entire population and economy and rebuild and reconstitute its forces. Such an undertaking would take years at best. A larger war with Russia may be in the cards depending on certain future developments mainly outside Russia. Another possibility is the collapse of Russia. China's friendship with Russia has limits. At the moment, China and India are both taking full advantage of cheaper than normal Russian energy. If China joins Russia in a world war, its economy can be destroyed simply by interdicting its energy supply routes that run across many choke points controlled by the West.
The EU will collapse, but not yet. I'm pretty sure we won't see PolEnd nor ItaLeave. Instead the integration efforts will be put into overdrive for selected countries - Germany, France, Netherlands, Belgium, maybe Austria and Denmark. Only when that experiment also fails we will see true end of EU.
The inability to sell debt is going to be problematic at some point. Market crashes will crush pension funds even further.
A war will only add to the misery.