Guest Author: Carlo Sacino
Populism. If you open a newspapers or look up the news online, you are likely to find declarations from the President of the European Commission Juncker, or the German Chancellor Angela Merkel, or the French President François Hollande, just to name a few, that ‘’European people should not fall for populism’’.
Nassim Nicholas Taleb, author of ‘’The Black Swan’’, best-selling book on the verge of the 2007 financial crisis, offers a different interpretation in one of his latest commentaries in a harsh criticism of intellectuals: ‘’ What we generally call participation in the political process, he (The Intellectual) calls by two distinct designations: “democracy” when it fits the Intellectual-Yet-Idiot, and “populism” when the plebeians dare voting in a way that contradicts his preferences.’’ Continue reading
Some say that the common currency prevents less productive economies from cheating by weakening their national currencies and forces them to become more efficient and competitive. Industrial production data shows that it is not the case. Italy, France, Greece and Portugal have not only stopped producing more; they are producing now less than in 1990! The decay started immediately after the introduction of the euro in 2002!
The OECD industrial production data analysis leads to the following conclusions:
1. since 1990 industrial production (manufacturing and construction included) has been growing in volume at large, even in the most developed countries;
2. the disproportion between industrial output in Germany and two other biggest euroarea economies, Italy and France, occurred already just after the 2001-2002 crisis;
3. Southern Europe’s economies have lost their ability to rebound in industrial production alongside the adoption of the euro. Continue reading
The world’s demographics in Africa and Asia have changed dramatically over the last 50 years. Population in numerous African countries has a staggering growth of 300% up to almost 600%. There are no signs countries in Africa, and Central Asia can lift themselves out of poverty. The population explosion in Africa will be a driving force of large-scale migration. Many will leave their homeland to resettle in Europe and the US. This will have a profound effect on those who will stay in their countries and on those in the recipient countries.
European elites try to present immigration as a positive and cultural enrichment. However, forced re-population is a known military strategy, and is used to subjugate the enemy. William T. Sherman cabled Ulysses S. Grant: “Until we can repopulate Georgia it is useless to occupy.” From an abstract point of view, it makes no difference if the re-population is done by a vicious enemy, by bureaucrats or if it happens just naturally: the effects are the same.
During the last days of Honecker the people chanted “We Are The People”. Yesterday the police staged a spontaneous protest in Paris shouting ” citoyens avec nous “. In Bautzen Germany, the common people went to the street roaring: “Wir sind das Volk”
The efficiency of a monetary policy is disputable in recent times, especially in the Euro Area. But it is not a monetary policy to blame because it works in sovereign countries with their own fiscal policy. It is the design of the Eurozone itself that makes the European Central Bank’s actions ineffective, whatever they are.
The unending crisis in the European banking system is clear proof. In a sovereign country, adjusted monetary policy in combination with so called fiscal policy is enough to manage a banking sector during liquidity problems. It means that if banks stop trusting each other and do not lend money to each other any more, a national central bank wades in and provides temporarily some cheap money to stave off a threat and give the government (fiscal authorities) time to solve the underlying solvency problems. The Euro Area does not have this incredibly important mechanism. Continue reading
Oil companies and their beneficiaries that suffer from low oil prices are being rescued by the current ECB monetary policies. Negative interest rates and the ECB cooperate bond purchase program is turning corporate finances upside down and makes dividend payments rational even if revenue does not justify it. While the oil price is still low, there is no reason to believe that oil prices will stay at this level. There is a lack of investment in new production and world demand is increasing. Energy Information Administration (EIA) expects demand to outpace supply in 2017. The exact moment of a sharp price increase is hard to predict, but it will be somewhere between now and 2020. Oil companies and oil-producing countries have to weather the storm to survive. Continue reading
Problems of Deutsche Bank, Commerzbank, Monte dei Paschi and other German, Italian and Spanish banks are not the only concern of the European Banking System. Trouble is much deeper than it is thought because there is a systemic imbalance that has been increasing for almost ten years. Politicians do not want to tell us the truth, but soon we will experience the same crisis in the Monetary Union as we did in 2012.
The extent of the problems in the European Banking System is TARGET2 and its balances of the National Central Banks of the Eurosystem. These balances, or rather imbalances, reflect the direction of the capital flight. And there is only one way: from Southern Europe into Germany. After Mario Draghi’s famous words “I do whatever it takes to save the euro”, things seemed to improve; however, since January 2015 problems have been escalating again. Continue reading