Global Analysis from the European Perspective. Preparing for the world of tomorrow




5 million more unemployment claims expected, but layoffs are now broader and could be more permanent

  • New claims for unemployment benefits last week are expected to total about 5 million, bringing the number of Americans filing to more than 15 million.
  • The claims initially were expected to have come from millions who lost their jobs in restaurants and travel-related fields, but now they are likely to include hundreds of thousands of retail workers.
  • Economists say there could be more longer-term and permanent layoffs included in more recent claims, as companies look to trim costs. Source CNBC

Social upheaval and mass bankruptcies are coming: cash and gold reign supreme.

The global financial system with its two powerful pillars – the IMF and the World Bank – continues to play a big role. It needs to cope not only with the pecuniary processes but also with other global occurrences because these have a direct impact on markets, stock exchanges, manufacturing and services. The outbreak of the notorious epidemic that is on everyone’s lips is just such an event. It has economically impacted China, the world’s factory, and now it – or rather the precautions are taken against it – is ravaging Europe and the United States. Businesses are ordered to stop operating or to limit their activities while people need to make their living if only to pay the fixed costs such as rent, credit, leasing, employee remuneration and the like. Yes, governments offer solutions and these include tax exemptions or they provide citizens with unearned money just to allow them to survive. Does it not resemble the quantitative easing of a few years ago? Yet, the divergence between the amount of money available and the amount of goods and services is not going to ameliorate the economic problems.

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Vladimir the Great and the beneficial virus

Yesterday (March 25, 2020), Vladimir Putin held a televised speech addressed to the citizens of the Russian Federation, occasioned by the emergence of the coronavirus worldwide epidemic. He talked about the unfolding events that have hit Europe and the United States and announced a number of measures that the government was engaged in, combating the biological threat. During the whole coming week all professional activities are to be suspended while citizens will be secured with money from the state and a number of tax exemptions. A speech like any other that might be held by any leader of any state under the circumstances. There was, however, something that distinguished this address from similar speeches.

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Towards the end of his appearance President Putin announced an important fiscal initiative: recipients of dividends earned in Russia will have to pay a 15% tax (rather than the 2% as binding at present) if they intend to transfer the money abroad. Consider that the income tax in Russia amounts to 13%. With this measure President Putin is doing away with yet another yoke that was put on Russia during the Yeltsin era. With this proposal of a legislative bill President Putin will put a stop to capital flight. Surely, the moment for such an announcement was carefully selected: who during the time of the worldwide pandemic, as the current events are referred to, will dare to oppose the move?

President Putin also announced that Russia would renegotiate with other countries agreements on double taxation and in case those other countries did not yield to Moscow’s demands, Russia will unilaterally renege on those agreements.

Consider also that President Putin can kill two birds with one stone. Capital will be kept within the country and the same measure will affect the oligarchs and their Western partners. There will be less money to line the pockets of foreign investors, less credited to foreign bank accounts, less money for subversive political activities in Russia and – what follows naturally – a resultant more intense – let us express it in mild terms – dislike for the Kremlin “regime”, voiced in unison at home and abroad. Also, since almost every action is like a double-edged sword, there might be smaller foreign investment in Russia.

High-blown ideas put to an acid test

As things accompanying the epidemic are developing, we can note a few interesting phenomena:

[1] borders are useful after all whereas the mass movement of people may be deleterious;

[2] virtue signalling has long gone beyond being ridiculous;

[3] the international solidarity is wishful thinking;

[4] Beijing and Moscow are far closer to Italy – a European Union member-state in need – than Brussels, Paris, Berlin or for that matter Washington.

[1] Borders are useful. Up to now the principle of the free movement of people (to be precise: labour and customers) has been enshrined in all Western states and regarded as unassailable. Whoever had second thoughts about it was ridiculed mercilessly and touted as inhumane, backward and what not. Nowadays all European governments have decided to isolate their countries from the outside world, including their EU member-state neighbours, and they did not need approval from Brussels. Fear of the DNA double helix soaring here and there made conceited politicians and self-assured citizens bow their knees to reality. They have all at the long last recognized that reality is something that refuses to satisfy our wishes.

[2] The other value enshrined in the Western world was its ethics of being race blind. Lo and behold fear of death has shown that people are race conscious, xenophobic and tend to cherish in-group loyalty rather than the global fraternity of all human beings. In Italy and the United States people naturally have begun to behave in a way suggestive of their conscious avoidance of the Chinese co-citizens or visitors. A quite natural behaviour when you consider that the epidemic started in and spread from China. This, however, was like the gauntlet thrown down to the politicians and social activists who have made a point of virtue signalling. Coronavirus prompts ‘hysterical, shameful’ Sinophobia in Italy (Al Jazeera); As the coronavirus spreads across the globe, so too does racism (The Atlantic); Coronavirus: Spike in reports of ‘racist’ abuse of Chinese people in Italy (The Local). These are but a few titles. For them it is not the epidemic that poses a problem, it is racisms that is rearing its ugly head. Only when it comes to acid tests can we see reality – something that refuses to bow to our wishes – of inter-human relations. People are in-group oriented (why shouldn’t they be, after all?) and xenophobic. They are hard-wired for that. Naturally, they are concerned first and foremost about their families and then about their extended families (even though they may not admit it consciously or in an attempt to avoid official ostracism) and not about the whole world, about nations in neighbouring countries, let alone about communities located in the other parts of the globe. This provides fertile ground for the few who want to tout themselves as friends of humanity and feel they are operating on moral high ground, which is a shot of dopamine as good as any other: Italian Mayor Urges Citizens to ‘Hug a Chinese’ to Fight Racism; Italian virologist says political correctness doomed his country’s coronavirus response; and On February 1st Florence, Italy, Celebrated “Hug a Chinese” Day.

You still don’t know why the death toll in Italy has surpassed that in Wuhan?

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We will not recognize the world of tomorrow

Recently we have been witnessing a number of events that have captured our attention. These are: the trade conflict between Saudi Arabia and Russia over the price of oil, the changes to the Russian constitution that are under way, the impact that the coronavirus has on the Western world and the resultant ban that the American president issued on European visitors to the United States. Let us have a closer look at them.

All of a sudden the Saudi authorities came up with the initiative to push down the price of oil worldwide. The OPEC countries were easy to deal with but to make oil cheaper globally, Riyadh needed the consent of one of the biggest oil producers outside OPEC: Russia. Moscow declined the proposal. The question arises: why does Riyadh want to have a smaller income generated by oil exports? After all oil makes up the lion’s share in the country’s finances.

The situation reminds one of the year 1985. In April of that year Mikhail Gorbachev came to power with his revolutionary ideas of reforming the Soviet system. A few months later Saudi Arabia announced its intention to bring down the price of oil and so it did. Now it is known that the move was done in league with Washington. At that time the Soviet Union – just as the Russian Federation today – had a large income from oil. Less money meant trouble for the Kremlin, especially at the time of the reforms that had been announced. The result was the collapse of the Soviet state within a couple of years.

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The world is changing and woe to the politician who remains stuck in the rut of yesterday’s geopolitical thinking

At times, almost every decade can bring about a global change. Consider China: this weak colossus, roughly a hundred years ago torn by colonial powers, eventually became the world’s most populated communist country. As such, it naturally aligned itself with its Soviet elder brother, and this ideological alliance transpired as a huge threat to the West. Next, came Nixon’s ingenious political sleight of hand and China was turned into the Soviet Union’s rival, much to Washington’s delight. And then, when the capitalist economy adopted by the Middle Kingdom seemed to be pushing Beijing into the West’s embrace and anchoring it firmly within the global financial system, China has gradually emerged as a superpower on the rise, a challenger, to be reckoned with. At present, swerving more towards Moscow than Washington, Beijing is pursuing an ambitious policy of its own.

Much the same can be said about Turkey. A sick man of Europe at the end of the nineteenth and the beginning of the twentieth century, on the verge of disintegration in the early twenties of the previous century, it slowly recuperated and rebuilt some of its former greatness. Anchored in the Western military defence system, it was a reliable foothold of the free world in the Middle East and a bridgehead for possible operations against the West’s archenemy: the Soviet Union. This was not to last long, though. With the fall of the “first country of workers and farmers” and the political earthquake that took place in the following decade or so, Turkey seems to be parting ways with its pro-Western and secular policies and reviving among its population the great ambitions of the long defunct Ottoman Empire. Nor is Ankara’s allegiance to NATO a given. With the purchase of the Russian S-400 air defence system done in open defiance of Washington’s wishes, Turkey exercises its sovereignty like barely any other American ally.

Are we facing a realignment of alliances in the making in the Middle and Far East? The February Gefira issue tries to shed some light on it.

 

Gefira Financial Bulletin #41 is available now

  • Is the Coronavirus serving the Xi Jinping government?
  • Kemalists – Erdoganists –Gülenists
  • Turkey: The Game Changer

Money is the be-all and end-all of any country’s economy

Money is the be-all and end-all of any country’s economy. There are renowned professors of economics who maintain that anybody who says he understands money is a liar. There is something to it. History is fraught with economic and financial theories and although they operate on numbers and mathematical formulas, political parties that are at loggerheads with one another employ experts who sometimes cannot agree on the most basic issues, who advance solutions that are very much discrepant. Those who lived in Eastern Europe and are old enough to remember will have recalled that in the universities in socialist countries two incompatible types of economy were taught: capitalist and socialist. One wonders whether economy –  despite its numbers and formulas – is something more of an ideological  persuasion rather than a science.

 

Gefira-Bulletin #40 delves into the problem of the global financial system and its effect on countries and nations. Our analysts present the bare financial mechanism and its origin. In a world where economic and political interests of the many players are often on a collision course, in a world rife with political-cum-financial institutions, accords, compacts, agreements and banks, it is not an easy task to see through this deliberately(?) designed thicket pecuniary problems and get to the core of the matter. We do not pretend to have found the Grail, but we hope to have made the problem more translucent to our readers.

 

Gefira Financial Bulletin #40 is available now

  • The Global Financial System
  • Europe’s unending downturn has just begun.
  • Residential real estate
  • Gold

The Global Warming Theory Doesn’t Fit the Reality

By guest author C. van Rijn MD

We are at a crucial point in history. Climate change is seen as the biggest threat humanity has ever known. The feeling of pending disaster, guilt about the climate and a need to do penance seems to be growing in all wealthy Christian countries, but is totally absent from others. The origin of the threat is global warming which is, according to the prevailing opinion, caused by the greenhouse gases. To prevent this alleged catastrophe, we have the intention of investing an enormous amount of money to reduce the use of fossil fuels. This investment will lead to a huge economic downturn, exacerbated by the loss of economic competitiveness with other countries which will not be burdened with this scheme. This will inevitably lead to the deterioration of the prosperity of the Western countries in all areas. So before these extreme expenses are made, it may be wise to look carefully at the scientific basis underlying the global warming phenomenon.

In this article we first consider all the misconceptions and deceit rampant in public debate on this the topic of the green house effect. We arrive at the conclusion that if you omit all lies and exaggerations, the scientific basis appears to be paper-thin. Second, we hope to point out why the European version of the green new deal will be a tragedy.

The past 600,000 years
The empirical evidence for the greenhouse effect over this period has consisted mainly of a chart that suggests a causal link between CO2 and temperature levels.

The fact that CO2 increases have always occurred a few hundred years after temperature rises means that the causality is reversed: a temperature rise causes a CO2-increase. Al Gore who used this graph in the movie “an inconvenient truth” was rightly condemned in an English court for misinterpreting this graph.

The past 1000 years
The warming in this period is notorious because of the iconic hockey stick graph fabricated by hide-the-decline Michael Mann and prominently shown in the 2001 Intergovernmental Panel on Climate Change (IPCC) report.

Rife with warped data, mixing data from tree-rings and thermometers, hiding the medieval warming and using poor statistics, it turned out the be a plain fraud. The author filed lawsuits against the accusations, but lost them all to his denouncers.(Mann vs. Ball, Mann vs Steyn).

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