Germany is the Rotten Heart of Europe

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.

Because the design of the euro, as a currency, was guided by German industrialists looking for the advantage a single currency would bring them.

This is a point I’ve made many times that the single exchange rate underprices the value of Northern European industrial entities while overpricing Southern Europe’s productive capacity.

Moreover, it raised the effective quality of the debt of those countries far above the market rate. This allowed them to borrow at far lower rates than they would ever have been able to.

This has led to exactly where we are today with massive internal imbalances which have hollowed out these economies, further eroded their productive capacity and competitiveness and left them with a mountain of unpayable debt which is then used as a further means to extract the last of the country’s real wealth when the inevitable crisis hits and the debt has to be restructured.

And to think that this point wasn’t understood by the people who designed the euro is to be terminally naive. This is a point not only made by Connolly but also by Gyorgy Matolcsy, the President of the Hungarian Central Bank.

Thanks to a very generous regular reader I’m reading his book, “The American Empire Vs. the European Dream” right now. And Matolcsy opens the book with a scathing attack on the euro and how it never should have been introduced in the first place.

Because the effects of the single currency have been wholly predictable. But he makes an even larger point than Connolly did in his book. Germany, through wealth extraction and collecting rent thanks to the exchange rate arbitrage.

It may anger my German readers to hear this but, again, if you didn’t think this was the plan by some all along, to colonize countries like Greece that couldn’t be conquered militarily in WWII, then you can’t also see why the rest of Europe is becoming angry.

But Matolcsy goes one step further in his criticism of Germany, saying that if that wealth extraction had been distributed throughout the EU over the twenty-plus years of the euro via investment then things would be far better today.

But Germany never gave up its mercantilist mindset, preferring instead to sell Spanish and Greeks BMWs and Porsches while lending them the money at suppressed interest rates to do so.

And then when the bills come due demand austerity to pay them back and call them deadbeats in the process.

That’s why Germany, today, is the rotten center of a crumbling European would-be empire. And why everyone, including Germans, will now be impoverished as the mountain range of unpayable debt collapses.

Empires always rot from within.

The American empire is facing the exact same problem, but because it is the world’s reserve currency and has the biggest synthetic short against it will simply get hit later.

This is why the Dow Jones Industrials and the S&P500 are trading at all-time highs despite President Trump’s latest trade war salvos at China and the German DAX is struggling to best its 2018 high.

The Dow is sniffing out the differences in the political and economic uncertainties between the U.S. and Germany. Because …

The big news is that Angela Merkel’s coalition partner, the Social Democrats (SPD), just elected new leadership that is hostile to the governing coalition as they blame Merkel for their collapse as a political force nationally. That puts Merkel’s political future in jeopardy or, at a minimum, ensures she has even less control over a mostly gridlocked German government.

For the past couple of months we’ve seen the markets in general breath a sigh of relief after the Fed and ECB stepped in to provide liquidity. But that doesn’t fix the underlying problems, it only delays them for a few more months by reflating the yield curve, in this case the U.S.’s and Germany’s.

But is the reflation trade the new dominant one or simply a lull between crises, as Jeff Snider at Alhambra Partners suggests?

My guess is the latter as the Fed keeps piling term Repos onto its balance sheet, now more than $207 billion since September, and another 42-day repo operation yesterday that was 2x oversubscribed.

Sure that could be normal quarter-end shenanigans but why? And will we be asking these same questions when these 42-day repos expire in late January?

The bigger questions is what is causing U.S. banks to need so many dollars to keep the money markets liquid? And why is everyone struggling with this dollar shortage?

Because everyone is feeling the same thing, something is going to change in a big way and when it does they want dollars, not euros, pounds, yen or yuan.

The German economy is slowing. It has been for more than a year.

And when the reflation trade is over, markets that haven’t made new highs will be much more vulnerable to collapse. Germany’s multi-generational mercantilist empire has reached its zenith. It can’t push it any further without conceding political ground to the rest of Europe or abandoning the very thing that created the empire in the first place, the euro.

That’s the central problem which sits at the heart of the European Project. And it can’t be papered over much longer.


By Tom Luongo
Source: Gold Goats ‘n Guns

3 comments

  1. There ain’t no such thing as even any “ma” stuff. All relates.

    In 2012, US private sure Communists called me WMP. World Ministerial President. online.

    So am I “uhnline”, – by ma mind.

    … Under the old many euro(pean, LOL) currencies, there was ALREADY a constant inflation IN foremostly ITALY.

    … This Planeto, as in, our socalled “humanity” needs two thangs: ONE Currency, – and a government, which is Antifa. Period.

    We the People do not want capitalists, nor “religious” fanatics opressors, nor racists, nor misogynists, nor any other undue cuz unduly draconic where undue abusively judging types of “judges”, nor “psychiatrists” who are to, in 80 percent of cases, simply NAZISWINES, nor kitsch type of naivism of an extreme shallowness of a dumbed down “middle class” mass of insano-dumbos, — as in, we want no abusive disobjective evil incompetent type of government.

    Until all political power will ultimately and indeed finally be handed over to an AI, will probably but be in soonestly 300 years — then, less than half a billion humans will exist anymore.

    Ma idea of water tunnels, which idea deserves at least 99 billion $ reward for me, for the water to spill into simply les tubes, yeah, LEZ Tubes, of course, indeed. The Water then spills not on land – would not. But they won’t get built, of course, – as capitalists are not ethical, but rule —

    mankind via “jobs” tricked into playin tha pawns of greedy and incompetent idiots such as of schroeder;

    merkel herself an uncritical fullidiot, which has apparently never read any of the anticapitalist critical articles; She doesn’t care for anything going against what was brainwashed into her: She but cares for her own country – and thusly, she is an EVIL type of thusly mere sudo-illuminata: Because that’d mean enlightened, Illuminatus – which she is not at all;

    But Ye art that, Lord, – and, LOL, I’m tawkin to You, LOL – not to a not existing “god” type of “dog” or what. Indeed, here, to Ye, Sir, Sire, I am not, not that. Cuz You’re a SUPER Entity:

    But merely, IF Ya BALIEVE me vutt I zed, ja. ASAWEIS, ja, another of these who trust rather the newspapers and their unstyle, than a private Person saying the truth.

    That I am the Wraith of Consequence, hasn’t yet dawned ‘pon Humanité, oy. I’ma doin NADA! THAT’s best! 🙂

    … ALL “ppl” are mostly TOTALLY wrongly conditioned WITH LOTS of motivating villain-stuff, villain-phrases; they’re mostly TOTALLY uncritical, not able, to think BY themselves.

    not all, but in the west, People are mostly weakened, kept powerless. The sudo-academic majority among academics, doesn’t see this, gets mis-educated into spoiledness, which is another assurance toward absolute failure by the west. Like scientists who gas trees, murder Ants (ed wilson: insano), and can’t even handle Nature correctly, but mistreat in many cases nature.

    FEAR of different Types, has to get differnentiatedly defined: From WHAT? From REAL or unreal threats. Prejudices are onbringers of unreal threats concerning fear-types. Yet, the real issue is, that we DO need authority, to secure harmless against harmful people, individuals – be those harmful ones private OR in government.

    Wherefore, WE DO have a NEW war-context: between governments and people, whereas racists are nowadays mostly rejected by People – but by how many. Not by SO very many. IN the west, there ARE MORE racists, than in all other – BY the west opressed, exploited – countries!

    Then, greta thunberg the young fervent “TEENIE” indeed, says, with her full Child face, “panic”, “do panic”, she says – LOL. She is a not in-detail talker. She but touches the surface.

    HORDES of insanely drivable people RUN AROUND “for syria” in the west – then for thunberg —

    but not against governments leading to child abuse.

    … which demo in tha last 200 years was against child abuse?

    … the capitalist governments keep such demos surely secretly from taking place;

    or, the west is largely simply a sexmad swine, in most cases of western socalled “people”.

    I have lust, to let mankind go down the drain. To let it drive into poverty, haha. “lovely”.

    … maybe, “some ppl check somefn now”? not so. To take out, as in, to depower and to limit the capitalists’ and the fanatic religious opressors and the rightwing racists’ political power, as in, their ability, to even any act, means, would require, a concerted and issue-true, details-true, yet just firm huge effort, organisation, by People. IN europe, this IS not thinkable. IN europe, “people” are sadly REALLY now mostly ALL in jobs – it’s their sudo-life, which not they control, but their work-giver. They are idiotic, the workers, and sacrifice their time – for nothing – and thusly, they are not able, don’t have time, to educate, merely inform, themselves.

    There is no outway out of that, but the utter destruction of europe. In 2079, I just this night started to assume, ww3 or civil war, also intrusion by other huge countries, will come to europe.

    … the consequence of what – also irrepresentative, LOL – governments do, will inevitably hit all poor People, who live in such countries, who caused, perpetrated, exploitation of undue, opressive type.

    In 44 years, no Rainforesto anymo: Goodluck breathin then, wrote a. Merely da good Chomsky Bot told me that.

    The media never mention that, of course. That in 44 years, if thangs continue as is, no rainforest anymo.

    The anti-slangers are the swines. period.

    “wordpress” is a faked numbers game. SO many People can’t be THAT idiotic, — that You and the UprootedPalestiniansBlog wouldn’t have more than merely 1500 Followers.

    “wordpress” is exactly like the other capitalist sudo-social sites, in fact capitalo-fascist sites such as yahoo and facebook, “in” it: In the western capitalist conspiracy against People of merely good type, as in, into slavery, simply; “wordpress” also gave a website to “ted nugent”, an obvious pro-hitler swine nazi insano.

    I stumbled upon some even many alleged “books” of the 80s, which tried to bring on “religion” AND capitalism – “with greetings”, nay, not that honestly, by some fanatics from usa – who were ALL abused as Children – but also brainwashed, typically, then, into both religion and into a primitive, totally evil form of capitalism – which helps any big huge ruthless capitalism, simply.

    Chomsky had no humor nor comprehention concerning the Youth of nowadays, in that crucial Interview by Ali G. Chomsky also “hailed” the “warren commission” more than dumbly, but that is now suspicious about him. He docked on to a things hiding “it must be so”. Chomsky, the demented unintentional “traitor” – jussa dumbo, actually, a typicalo. An oldfashioned stereotype. he uses newspaper-words, which mean nada to even a halfyoung 40s Person. !

    “we have to forgive the US govermment” stated he, when somebody asked, should we forgive Snowden.

    But why forgive? to the US government? “forgive”? chomsky did there not take his own formulation – but docked on merely syntaxically, to the other formulation – as if HIS own linearity would be “plain” linearity, – OF all People. !

    He’s in a constant wiggly waggly wave, a trance; and not thinkin ba himself, not re-looking at the SAME thang OVER n OVER again. Unlike earlier, he doesn’t anymore “whack” his brain REALLY out over a matter – he doesn’t even research properly, apparently;

    Neither does Lesch, Harry Lesch, of Germany: Who didn’t even stumble over the Hutchison-Docu. An here, a reallae don’ repeet that all.

    Some professor, who a guess, ommitted toward me, what Bloggers even know already: That the Americans have a “mindmachine”, human control by brain over computer.

    But I am not that idiotic himself grandMAKING professor. !

    yet even so, I have to tell people, what he told me abusively (I heard years ago of the ibot project that got abusively cancelled due to bankrupcy: there, the gov didn’t bail out – but banks and petrol cars get bang-bailed out wha joke bizarre gruesome swinery filth):

    To namely READ MA WEBSITE.

    he badly told me, to “make maself smart online” — he said the typical down-treading phrases. of a sudo-academic only keen on the enforced sudorespect. gruesome.

    such filth sudo-academy as most part of academy, makes even any sensible Entity commit SUICIDE. !

    the governments don’t even respect us. Not even concerning merely self-concerning Actions of private People. Into which the “government” has no right intruding into – it does it even so. inacceptable.

    vader out 4 now, Dude. I am the WMP – You are as well. NOW. Behold the dark Side of the Force, for it is good. The bad new stars wars movies unintentionally DO show THAT, LOL. Dark Energy is antigravity, found Hutch out. Whose apartemento got raided by les nsa in 2000 –

    nobody giveth SHIT. wtf be that. !

    ARE ppl SO silly, that they’re GLOBALLY self-eradicatin? yeah, era-DICK-atin. 🙂

    when nobody engages for a Hutch, then, clutch. as in, not 3rd gear, but merely da first, LOL – that’s man-unkind plus man-UN-kinda-idiotic-haha: treading on the LOWEST gangway gear — thusly treadin, drabbin, down da motor. !

    also ba petrol. stead of Hydro. goodluck breathin. Prodigy 4ever and Jeopary 4never, LOL, indeed, wha.

    NUMMER EINS: ENERGIE! 🙂

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  2. LOL, Jeopardy 4neva. 🙂 ALL Peeple (da Peeples from dat Mooffe ENIVEI Du, ja) must simply pay no value to money. :]

    Jesus’ Concept was, that ruthless type of opressors-exploiters get depowered. We can but do this then, when merely the good People don’t trust so much in, but RELY on me. If People get not brainwashed, not lied-to, BY teleVISION namely. TV is ma biggest enemy. The stringpuller fascists and capitalists and religious fanatics abuse television into bringing on childabuse and violence and capitalism. this rots mankind. makes it rot.

    trump “committed” his first actual murder: a 16 years young Latino at the guatemalan US Border. “Guatemalan” was there an attribute, an adjective, merely in this last phrase here. Respect of other Cultures is good, but writing languages with a big initial, where the languages are but adjectively used, is somewhat overdone, structurally “queer”. And “queer” can’t be used against Homosexuals anymore. So did I not mean “queer” as in any “anti-homosexual”, simply. Maybe, distinguished respect for other Cultures has to get bewritten. In more words. Less is not more. While, EXACTLY YOU display the REAL Context SO well – as in, You don’t focus abusively; Thusly, your not REALLY any short Statement, doesn’t miss Context, and is SO fairly concepted.

    Jesus never founded and never wanted to found any type of “religion”, simply. THAT, the religious maniacs ALL overlook. blatantly. They ABUSE “Jesus” who was called YESHU and not “Jesus”, into a “religious” “figure”: Which he was simply not, not at all, namely.

    But MOST people ARE brainwashed, plain not informed, not properly. Not what we would call “properly informed”, that is. 🙂 A play Eric Idle now, I know. :] PLAY? more zen zet, ja. :] AND DID THOZE STREETS…

    … that silly idiotic female, who said bout PETER STEELE, all that rubbish, this extreme malsight, LOL, that “he would have” and all that crap, that “he” would “have made himself grand”, LOL, when HE WAS simply GRAND, LOL, so ok and SO mega —

    this idiotic woman “had” never anything, in her socalled “life” – other than the TYPICAL nazi type of jealousy, – but not ANY type of knowledge, simply. ! 🙂 I DO find that good. That so many ppl are so stupid. period. let me show that side now. ey. “haha”. maybe now they check it? “they” don’t even read this. They read “only” what is evil – as evil as they are: the idiots. most ppl are idiots. ! it’s so, no use denyin it. it’s gruesome. more than bizarrio… LOL simply LOL bout “humanity”: humanity the criminal. the west, the thousandfolder of that evil. the west, the continuation of those, who massmurdered the Mammuths and massmurdered the Neanderthals. mankind’s “authorities” almost always absolute maniacs of dumbness, put there so evil can rule. “fine”, LOL. a need naught act. in no way need a act. a think. period. thunberg doesn’t. she talks SHIT. she says “panic”, LOL – would any other one say that, such another one’d get arrested or sued-against. she uses fame, and hordes run around for what is anyway clear. I can but write and say, what is.

    the media will never show the truth. never ever. that alone kills mankind. fine. fine with me! 🙂

    === *** TYPE O NEGATIVE: CINNAMON GIRL *** ===

    “people” who got sumfn “gainst” ma music quote, could mayhap get a “mugshot” from otha hataz, LOL, write, chooseth I here to write it so, haha. ironic? almost not. 🙂

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  3. As a shambling working version of federalism please consider Canada. The basis for the working agreement is competition between municipal, provincial and federal levels of government for voters, investment, working populations, immigrants, and infrastructure projects. This competition requires constant negotiation and articulation of needs between various areas and entities. Even when one party or political philosophy attains dominance it seldom has dominance over the other levels of government or sectors of the economy. It does require a strong central government with public loyalty, shared values and projects.
    The second level involves sharing of tax revenues between various provinces and regions known as ‘equalization payments’. These payments shift tax revenues from wealthier provinces to less wealthy provinces so that basic governmental services such as health care, social services, highways, and other programs can be maintained on a basis of relative equality. This sense of equity maintains a degree of social cohesion.
    The EU’s and Germany’s problem is that they aren’t sharing the wealth. This is also the problem with multinational corporations and billionaires: pumping out too much money from a jurisdiction ruins local economies, collapses public and business confidence, and creates intense resentments that all reduce public support for the project.
    Germany and the EU need to understand that weakening the periphery will not work long-term, and will produce intense anger in the short term. Their problem is that they still haven’t turned the corner on their ‘Imperial Colonialist’ past. The various countries merely transferred their exploitation from overseas clients to their neighbours over the next hill. So the strong central government necessary to support this project is lacking. It’s regulations are seen as oppressive edicts from ‘over there’. This allows yahoos like Farage and BoJo to tell lies and game the system for political gain while ignoring common interests and projects with long-term benefits: internal peace = lower defence budgets = more power in the world, for example. Or the end of ‘butter mountains’ and ‘wine lakes’ and other examples of regulatory arbitrage.
    Basically the EU problem is a lack of effective central power and shared values and projects. Its biggest threats are the old ones of greed and petty bigotries.

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