I'd look again at Laschet being the most likely candidate for the CDU in the next election. From my perch here in Germany, so far it seems Markus Söder, from the CSU, seems a much more likely candidate for, um, candidate. He has been far more decisive in combatting COVID-19 in Bavaria and that will stand him in good stead in his candidacy. Laschet is seen as indecisive, since he has been waffling back and forth on how to deal with restrictions around COVID-19.
Thank you for this insight from the German perspective. It does sound as if opposition is building against Laschet. I think you would agree, however, that the next Chancellor will likely take German foreign policy in a very different direction in the years ahead.
Many thanks for this excellent analysis. Domestically a similar situation:
Remember "Hope and Change" fraud? At least Biden is honest -- "Nothing will change".
- Yellen received $800K from hedge fund caught manipulating stock market.
- Bernanke sitting on board of deeply corrupt hedge funds,
- clearing house has two day clearing terms (specifically to exclude small players -- hedge funds build servers close to key optic cables to have few nanoseconds advantage against normal stock suckers) - on its board are Goldman Sachs and former Federal Reserve executives (one can bet 2-day clearing period will NOT be reduced/eliminated).
- Massive corruption of oligarchs in both parties will not be addressed
- Biden family is still a taboo theme (Hunter laptops, etc.)
- HiTech giants' monopolies will be protected - their information censorship is welcome from oligarchs
- independent media will be silenced more and more
We are moving forward to ever more distractions -- to mask the economic and democracy decline of United States.
Excellent write up, gentlemen. I would like to add a few thoughts. The Europeans are and have been American vassal states for over a half century. But for the previous 500 years it was the Europeans who ran amok over the world stealing other peoples lands and populations to become wealthy on the backs of other men's labors. Did we really think that they were going to sit around as our satraps forever? Those that thought they would are fools.
And Putin was spot on when he warned the US that using the US dollar as a weapon is a mistake. Dedollarization has already started and when the dollar collapses because we already have ~$28T in debt and only ~$19T in GDP. This summer should be interesting.
Don't know where you got that debt figure from, but it's irrelevant. U.S. Treasure Bonds are highly valued assets, and that's not going to change in my lifetime (probable less that twenty years, but still ...) The characterization of "the public debt" as the same as the debt a corporation takes on when it issues bonds is false. The dollar will collapse if the U.S. fights a war with China. Otherwise not.
The debt figure came from the US treasury. You can see it at www.treasurydirect.gov. I did not characterize US pubic debt as the same as corporate debt but it resembles corporate debt a whole lot more than it does personal debt. The US dollar will collapse when our debt outstrips our ability to sell that debt to willing suckers. The prime reason why countries buy US debt is to have it as a reserve currency. Russia will have no US financial instruments in their reserves in a month. The other major reason for buying US debt is to have US dollars for oil transactions which have been conducted almost exclusively in US dollars for the last half century. So we get a cut of business transactions of which we are not a party - sweet. But US sanctions have led to a reduction of the dollar as a reserve since most countries don't want to have their national wealth essentially frozen by US sanctions should the US choose to impose them and we're sanctioning two to the major oil exporters - Iran and Venezuela. They are doing business in other than US dollars now plus China (the world's largest oil importer) set up an oil futures market last year that only deals in gold back Yuan. To put it bluntly, US sanctions have turned the US dollar into a toxic asset. So when the demand for US debt goes down, we'll have to offer more and more return on those bonds and bills to get the suckers to buy them (have you considered buying Romanian bonds?). When the US has to offer 10% to sell our debt (we're currently offering less than 1%), you'll get a taste of everybody else's reality.
You also have a serious misimpression. T-bonds aren't highly valued (they have a face value and that's pretty much what they are worth) but they are highly trusted as a safe investment. Saying that that won't change in your lifetime (which is likely longer than mine) is mere projection on your part and given the crew in Washington today, not likely to be true.
Thanks for your reply. You certainly are correct that many countries have reasons to worry about being subject to U.S. sanctions which seem to be imposed and never lifted. They just kind of pile up. There's also the point that the U.S. seems to be agreement incapable. However, if any country wants to sell to the U.S. they have to deal in dollars, and it's better to go to Treasury Bonds, which are basically dollars that bear interest. The reason I call Treasury Bonds valued assets is because the current interest rate is around 1%. Low yield means high face value, and people do not pay high prices for things of little value to them. In fact I would say the high price of bonds means we aren't issuing enough of them to meet demand. What interest rate are Rumanian bonds offering? I'm old, so I don't expect to live until we are forced to offer 10% interest (I don't think I want to live more than twenty more years, maybe not ten), but I admit I fret about the strength of the dollar, since my pension is in dollars but my daily expenses are in Thai Baht. The dollar got pretty weak for a while a little over a year ago but has recovered to a more comfortable ratio. By the way, buying dollars in the European markets to pay for oil is not difficult, and in fact all kinds of currencies, even Iranian rials, are used in oil transactions even though the prices are quoted in dollars.
I admit that I had to laugh when I read your post. "Treasury Bonds, which are basically dollars that bear interest." On one hand, you're wrong; on the other hand, you're right. T-bonds are not money, you can't go into a store and spend them. Therefore, they are not dollars. They are nothing more than the US government's promise to pay. On the other hand, money is supposed to have an intrinsic value. For the longest time, paper money was looked upon with suspicion in favor of real money, i.e. gold or silver coins. But I well remember when Nixon took the US off the gold standard in August of 1971. At that point, the US dollar became just a promise from the USG to pay largely indistinguishable from a T-bond except you can't spend T-bonds.
Your understanding of the bond market needs some help. Actually, a T-bond does have a specified interest rate and the government pays that interest quarterly. At maturity you get the face value of the bond paid back to you. You can sell your bond on the bond market but it the prevailing interest rates are higher than the interest rate on your bond, you won't be able to sell it for face. If the prevailing interest rates are lower, you'll be able to sell for more than face.
Yeah, you can buy dollars just about everywhere but I think you'll find it's a bit harder when you need a billion of them to pay for a VLCC load of oil. Plus, except for those countries that are dealing in national currencies, the oil transaction will clear in dollars. Our problem will come when we have to roll over our debt. We sold a bunch of it at 1% interest rates but that's not going to last much longer. Our debt load ($28T) is a lot more than our annual income ($19T GDP). Historically that leads to massive inflation.
I wrote, "Low yield means high face value,.." Sorry. I should have said, "Low interest rates means high sales price." That's just the way the bond market works. The bond itself does not specify an interest rate -- it specifies how much will be paid to the holder at maturity. The government's interest burden is the difference between the price they receive at auction and the face value of the bond. If they get a high price, the interest rate is low. If they get a low price, the interest rate is high.
"Russia isn’t going to invade," claim three more or less totally unknown pundits on substack, and if Europe wants a more reliable guarantee, they can whistle for it.
Marshall Auerback, James W. Carden, and Patrick Lawrence say "Russia isn't going to invade," so we don't need no stinking armies!
Maybe Marshall Auerback, James W. Carden, and Patrick Lawrence don't remember when half of Europe was occupied by Russian armies, from 1945 all the way to 1989. After all, that was more than 40 years ago, and who was even born then?
""Russia isn't going to invade" say Auerback, Carden, and Lawrence, but when the tanks roll again, will any of those happy-go-lucky pundits volunteer for the front lines?
The United States has upwards of 800 military bases scattered across the globe and out spends Russia by some 11% when it comes to military spending. Follow that pointing finger backward to U.S. soil if you want to identify which country poses the greatest threat to global security.
"Russia isn’t going to invade" say Auerback, Carden, and Lawrence, and it's a quote word for word, but Marshall Auerback apparently forgot it already, like he and his playmates forgot Russian tanks rolling down the streets of Prague, Warsaw, and Berlin. But it really happened once upon a time, and no amount of reassurance from three unknown pundits will turn back Russian armies if they invade again.
What a doofus! The Russian armies occupied Eastern (or, as my wife would have it, Central) Europe as part of defeating Nazi Germany in WWII. American tanks rolled through the streets of most of the rest of Europe at the same time. What's your point? The Russians withdrew from their occupied countries, the US has yet to do so.
Sorry, this is so dumb. You really are stuck in the past, aren't you?
Yes, I don't think Russia has any interest in taking over Eastern Europe. They understand that the cost (economic, political, etc.) would be immense and they would be ruling over a deeply hostile foreign population.
I remember some Russians, after the collapse of the USSR, being deeply critical of the Soviet leadership (which was largely Russian), for squandering the wealth of Russia of USSR pet projects (non-Russian SSRs, Eastern Europe, 3rd world), and Russia, which is potentially a wealthy country was poor when the USSR collapsed. Russian leadership understands well that USSR did not collapse because it was militarily defeated. It collapsed because of economic failure. Ever heard of the term "imperial over-reach"?
Neocons and their Eastern European nationalist sidekicks tell us that Russia is super-eager to take over former USSR and Eastern Europe, any chance, any opportunity they get. Right Jacob? Then explain us this.
In August 2008, after a 6-day war, Russia had destroyed Georgian army (like totally wiped it out). Russia tanks were in Gori and with a nice paved road going to Tbilisi less then 100 km away, and not a single Georgian soldier around anywhere. So if Russia wanted to take over Georgia, that would have been a perfect time, right? There was nothing anybody could have done about it or prevented it. Yet, the Russian tanks did not move.
Donbass, just like Crimea, held a referendum (2014) declaring independence (from Ukraine) and asking to join Russia. Yet Moscow basically just ignored it. So explain me this. If Moscow is not interested in taking over Donbass, which is ethnically Russian, with a population sympathetic to Russia, with a pretty ok economy, why on Earth would they want Poland?
Eastern europeans have been buying American weapons lately. They don't need weapons. They need to get more Prozac.
And Jacob, you forgot to tell us about the Molotov-Ribbentrop pact.
The Russians have occupied Western Europe twice (Napoleon and then Hitler). Both instances were a direct response from attempted expansionist imperial invasions from Western Europe. As long as some Western European doesn't go deranged and think they can conquer Russia again, they're pretty safe.
A more enlightening analysis than any I've seen in a long while in what used to be called the mainstream media.
I'd look again at Laschet being the most likely candidate for the CDU in the next election. From my perch here in Germany, so far it seems Markus Söder, from the CSU, seems a much more likely candidate for, um, candidate. He has been far more decisive in combatting COVID-19 in Bavaria and that will stand him in good stead in his candidacy. Laschet is seen as indecisive, since he has been waffling back and forth on how to deal with restrictions around COVID-19.
Thank you for this insight from the German perspective. It does sound as if opposition is building against Laschet. I think you would agree, however, that the next Chancellor will likely take German foreign policy in a very different direction in the years ahead.
Many thanks for this excellent analysis. Domestically a similar situation:
Remember "Hope and Change" fraud? At least Biden is honest -- "Nothing will change".
- Yellen received $800K from hedge fund caught manipulating stock market.
- Bernanke sitting on board of deeply corrupt hedge funds,
- clearing house has two day clearing terms (specifically to exclude small players -- hedge funds build servers close to key optic cables to have few nanoseconds advantage against normal stock suckers) - on its board are Goldman Sachs and former Federal Reserve executives (one can bet 2-day clearing period will NOT be reduced/eliminated).
- Massive corruption of oligarchs in both parties will not be addressed
- Biden family is still a taboo theme (Hunter laptops, etc.)
- HiTech giants' monopolies will be protected - their information censorship is welcome from oligarchs
- independent media will be silenced more and more
We are moving forward to ever more distractions -- to mask the economic and democracy decline of United States.
Thank you for the outstanding and timely article.
Excellent write up, gentlemen. I would like to add a few thoughts. The Europeans are and have been American vassal states for over a half century. But for the previous 500 years it was the Europeans who ran amok over the world stealing other peoples lands and populations to become wealthy on the backs of other men's labors. Did we really think that they were going to sit around as our satraps forever? Those that thought they would are fools.
And Putin was spot on when he warned the US that using the US dollar as a weapon is a mistake. Dedollarization has already started and when the dollar collapses because we already have ~$28T in debt and only ~$19T in GDP. This summer should be interesting.
Don't know where you got that debt figure from, but it's irrelevant. U.S. Treasure Bonds are highly valued assets, and that's not going to change in my lifetime (probable less that twenty years, but still ...) The characterization of "the public debt" as the same as the debt a corporation takes on when it issues bonds is false. The dollar will collapse if the U.S. fights a war with China. Otherwise not.
The debt figure came from the US treasury. You can see it at www.treasurydirect.gov. I did not characterize US pubic debt as the same as corporate debt but it resembles corporate debt a whole lot more than it does personal debt. The US dollar will collapse when our debt outstrips our ability to sell that debt to willing suckers. The prime reason why countries buy US debt is to have it as a reserve currency. Russia will have no US financial instruments in their reserves in a month. The other major reason for buying US debt is to have US dollars for oil transactions which have been conducted almost exclusively in US dollars for the last half century. So we get a cut of business transactions of which we are not a party - sweet. But US sanctions have led to a reduction of the dollar as a reserve since most countries don't want to have their national wealth essentially frozen by US sanctions should the US choose to impose them and we're sanctioning two to the major oil exporters - Iran and Venezuela. They are doing business in other than US dollars now plus China (the world's largest oil importer) set up an oil futures market last year that only deals in gold back Yuan. To put it bluntly, US sanctions have turned the US dollar into a toxic asset. So when the demand for US debt goes down, we'll have to offer more and more return on those bonds and bills to get the suckers to buy them (have you considered buying Romanian bonds?). When the US has to offer 10% to sell our debt (we're currently offering less than 1%), you'll get a taste of everybody else's reality.
You also have a serious misimpression. T-bonds aren't highly valued (they have a face value and that's pretty much what they are worth) but they are highly trusted as a safe investment. Saying that that won't change in your lifetime (which is likely longer than mine) is mere projection on your part and given the crew in Washington today, not likely to be true.
Thanks for your reply. You certainly are correct that many countries have reasons to worry about being subject to U.S. sanctions which seem to be imposed and never lifted. They just kind of pile up. There's also the point that the U.S. seems to be agreement incapable. However, if any country wants to sell to the U.S. they have to deal in dollars, and it's better to go to Treasury Bonds, which are basically dollars that bear interest. The reason I call Treasury Bonds valued assets is because the current interest rate is around 1%. Low yield means high face value, and people do not pay high prices for things of little value to them. In fact I would say the high price of bonds means we aren't issuing enough of them to meet demand. What interest rate are Rumanian bonds offering? I'm old, so I don't expect to live until we are forced to offer 10% interest (I don't think I want to live more than twenty more years, maybe not ten), but I admit I fret about the strength of the dollar, since my pension is in dollars but my daily expenses are in Thai Baht. The dollar got pretty weak for a while a little over a year ago but has recovered to a more comfortable ratio. By the way, buying dollars in the European markets to pay for oil is not difficult, and in fact all kinds of currencies, even Iranian rials, are used in oil transactions even though the prices are quoted in dollars.
I admit that I had to laugh when I read your post. "Treasury Bonds, which are basically dollars that bear interest." On one hand, you're wrong; on the other hand, you're right. T-bonds are not money, you can't go into a store and spend them. Therefore, they are not dollars. They are nothing more than the US government's promise to pay. On the other hand, money is supposed to have an intrinsic value. For the longest time, paper money was looked upon with suspicion in favor of real money, i.e. gold or silver coins. But I well remember when Nixon took the US off the gold standard in August of 1971. At that point, the US dollar became just a promise from the USG to pay largely indistinguishable from a T-bond except you can't spend T-bonds.
Your understanding of the bond market needs some help. Actually, a T-bond does have a specified interest rate and the government pays that interest quarterly. At maturity you get the face value of the bond paid back to you. You can sell your bond on the bond market but it the prevailing interest rates are higher than the interest rate on your bond, you won't be able to sell it for face. If the prevailing interest rates are lower, you'll be able to sell for more than face.
Yeah, you can buy dollars just about everywhere but I think you'll find it's a bit harder when you need a billion of them to pay for a VLCC load of oil. Plus, except for those countries that are dealing in national currencies, the oil transaction will clear in dollars. Our problem will come when we have to roll over our debt. We sold a bunch of it at 1% interest rates but that's not going to last much longer. Our debt load ($28T) is a lot more than our annual income ($19T GDP). Historically that leads to massive inflation.
I wrote, "Low yield means high face value,.." Sorry. I should have said, "Low interest rates means high sales price." That's just the way the bond market works. The bond itself does not specify an interest rate -- it specifies how much will be paid to the holder at maturity. The government's interest burden is the difference between the price they receive at auction and the face value of the bond. If they get a high price, the interest rate is low. If they get a low price, the interest rate is high.
Really enjoying your work gentlemen. Thanks
"Russia isn’t going to invade," claim three more or less totally unknown pundits on substack, and if Europe wants a more reliable guarantee, they can whistle for it.
Marshall Auerback, James W. Carden, and Patrick Lawrence say "Russia isn't going to invade," so we don't need no stinking armies!
Maybe Marshall Auerback, James W. Carden, and Patrick Lawrence don't remember when half of Europe was occupied by Russian armies, from 1945 all the way to 1989. After all, that was more than 40 years ago, and who was even born then?
""Russia isn't going to invade" say Auerback, Carden, and Lawrence, but when the tanks roll again, will any of those happy-go-lucky pundits volunteer for the front lines?
No, they won't.
The United States has upwards of 800 military bases scattered across the globe and out spends Russia by some 11% when it comes to military spending. Follow that pointing finger backward to U.S. soil if you want to identify which country poses the greatest threat to global security.
I hate to be picky, Cara buuuuut......the US outspends the Russian Federation by a factor of 11, more than an order of magnitude. (11X vs 1.11X)
Oops. My mistake. I gladly stand corrected. :)
Thank you for your complete mischaracterisation of our position, Jacob!
"Russia isn’t going to invade" say Auerback, Carden, and Lawrence, and it's a quote word for word, but Marshall Auerback apparently forgot it already, like he and his playmates forgot Russian tanks rolling down the streets of Prague, Warsaw, and Berlin. But it really happened once upon a time, and no amount of reassurance from three unknown pundits will turn back Russian armies if they invade again.
What a doofus! The Russian armies occupied Eastern (or, as my wife would have it, Central) Europe as part of defeating Nazi Germany in WWII. American tanks rolled through the streets of most of the rest of Europe at the same time. What's your point? The Russians withdrew from their occupied countries, the US has yet to do so.
Sorry, this is so dumb. You really are stuck in the past, aren't you?
Yes, I don't think Russia has any interest in taking over Eastern Europe. They understand that the cost (economic, political, etc.) would be immense and they would be ruling over a deeply hostile foreign population.
I remember some Russians, after the collapse of the USSR, being deeply critical of the Soviet leadership (which was largely Russian), for squandering the wealth of Russia of USSR pet projects (non-Russian SSRs, Eastern Europe, 3rd world), and Russia, which is potentially a wealthy country was poor when the USSR collapsed. Russian leadership understands well that USSR did not collapse because it was militarily defeated. It collapsed because of economic failure. Ever heard of the term "imperial over-reach"?
Neocons and their Eastern European nationalist sidekicks tell us that Russia is super-eager to take over former USSR and Eastern Europe, any chance, any opportunity they get. Right Jacob? Then explain us this.
In August 2008, after a 6-day war, Russia had destroyed Georgian army (like totally wiped it out). Russia tanks were in Gori and with a nice paved road going to Tbilisi less then 100 km away, and not a single Georgian soldier around anywhere. So if Russia wanted to take over Georgia, that would have been a perfect time, right? There was nothing anybody could have done about it or prevented it. Yet, the Russian tanks did not move.
Donbass, just like Crimea, held a referendum (2014) declaring independence (from Ukraine) and asking to join Russia. Yet Moscow basically just ignored it. So explain me this. If Moscow is not interested in taking over Donbass, which is ethnically Russian, with a population sympathetic to Russia, with a pretty ok economy, why on Earth would they want Poland?
Eastern europeans have been buying American weapons lately. They don't need weapons. They need to get more Prozac.
And Jacob, you forgot to tell us about the Molotov-Ribbentrop pact.
The Russians have occupied Western Europe twice (Napoleon and then Hitler). Both instances were a direct response from attempted expansionist imperial invasions from Western Europe. As long as some Western European doesn't go deranged and think they can conquer Russia again, they're pretty safe.
Historical context much ?