Warning signals from the US economy

We have previously written about Donald Trump’s desire to cause a recession in the US. The poor state of the economy, for which his predecessor and the Fed’s policies were largely responsible, will be made even worse by his policies and tariffs. Here are just a few factors that prove this:

① The property market. The bubble in the property market, which has been going on for years, means that fewer and fewer Americans can afford to buy a house. The chart below shows that acquisition costs of a home at the median price are as high as for an American’s 15-year income! We haven’t seen levels this high since 2017, and we know what happened then. The chart also shows that this price trend has already materialized. Now it’s time for an appropriate correction (the next crisis).

② Cross-Atlantic travel has always been the best source of revenue for travel agencies and airlines. But now Americans are limiting their spending on travel to Europe and Asia due to the economic situation at home, and Europeans are no longer as willing to fly to the US and spend their money there. Canadians feel they have been treated unfairly by Trump: Air Canada reports a 10% drop in flights to the US. Canadians, who accounted for 13% of property purchases by foreigners in the land of the free last year, are now selling their homes in Florida and Arizona on a massive scale.

③ Trump has also cancelled the exemption on imports of goods worth less than 800 dollars. Americans are now rushing to place orders with the Chinese platforms Temu and Shin to stockpile their purchases before 25 April (the date on which the tariffs on goods under 800 dollars come into force). A bitter pill for US giants like Amazon.

④ The sentiment index calculated by Goldman Sachs, taking into account the most important investor groups, recently proved to be fairly low, although not extreme. The path from extreme optimism to pessimism, on the other hand, was long, but it came about fairly quickly. The key question now is whether this figure has fallen and will recover fairly quickly or whether it will remain as low as it was in 2022.

The Chinese dragon behind the Russian bear

Will the war in Ukraine end soon? Not necessarily: because you always need to follow the money. Money has been flowing into Beijing’s coffers for a good three years. China is not sitting at the negotiating table because it is not interested in bringing the war to an end because the hostilities translated into China’s exports to Russia, which greatly boosted the economy of the Middle Kingdom. The negotiating table is hosted by the Saudis or Turks because they want to play the leading roles in the world of diplomacy. China will stand behind the Russian bear like a dragon and support it as long as it can.

By the way: the West’s sanctions against Russia are schizophrenic and stupid. They are designed to harm one enemy (Russia) and make the other enemy (China) even bigger and stronger.

Source: X, Robin Brooks.

Gefira 93: A big picture of purpose

When it comes to the war in Ukraine, Europe – the European Union along with the United Kingdom – is in a fight mode while the United States is not. Europe is still flaunting its so-called human and democratic values, while the United States has just reversed the course of wokeism and genderism. European leaders have shut themselves off from the outside world in their echo chambers and surround themselves with like-minded bellicose individuals, while the United States is trying to find a balance in its foreign policy. Europe is still objectifying Ukraine – the country and the nation are only viewed as a battering ram against Russia, Europe’s topmost foe, while the new American administration seems to be red-pilled to for-ever wars and has become to deal with reality on the ground as it is. European and American ways have ceased to align.

Europe has a history of aggressiveness directed towards the east, which was encapsulated by the notorious German political catchphrase Drang nach Osten or Drive to the East. Indeed, wars between the western and eastern parts of the Old Continent were invariably initiated by its western part. These were the military raids of the Teutonic Knights, these were the invasions launched by Sweden or France, by imperial Germany and the Third Reich. For all that historical record, it is Russia that is credited with aggressive intentions. Why, Europeans, including those with university degrees, are not familiar even cursorily with their own past. Schools are not there for the Europeans to let knowledge sink in; schools are for mind shaping.

Europe obsessed with Russia and Putin appears to be overlooking the worldly political and economic trends. The developing countries are slowly but steadfastly gaining economic and – what follows – political momentum. The United States has broken with globalism and is focusing on its own affairs, recognizing that its role as a global hegemon has come to an end. Not that Washington has given up on exerting leverage here and there in the world: the action to control the Panama Canal or the plans of taking control over Greenland show that the American empire is alive and kicking. Yet, the United States needs to reckon with powerful rivals and concede them some political room on the world stage. It is not only Russia, it is China as well.

Europe has let itself be pushed out of Africa, Europe has developed a guilt complex towards Africans for all the failures of the latter and Europe embarked upon letting itself be colonized. The vacuum created on the Dark Continent has attracted the attention of the Middle Kingdom. China is taking Africa over from degenerating Europe. China’s population is numerically almost a perfect match to that of Africa, while Europe’s dwindling indigenous population is on a slippery road to nothingness. While European influence in Africa is often denounced in European capitals as neo-colonialism, China’s take on its presence on the Dark Continent is framed by Beijing as Going Global. Europe, riddled with guilt and shame, cannot stand up to the Middle Kingdom with the latter’s political ambition. Europe has become irrelevant, while China is a rising star. Also on the Dark Continent.

Gefira Financial Bulletin #93 is available now

Russia – a stumbling block of nations
Greenland
Europe out, China in
The Mar-a-Lago plan

Entene Cordiale in the Balkans

It was on April 1, this year that Hungary and Serbia signed a military agreement. Hungary is a NATO member, Serbia is not. One might be tempted to think that once we have NATO in most of Europe, no other military alliance – agreement – cooperation outside NATO is possible. Lo and behold, it is. Why?

All uniting organizations – whether economic or military – sooner or later (rather sooner) begin to fall apart simply because the interests of the member states are discrepant and also simply because dominant states usually cannot restrain themselves from throwing their weight about, which naturally pushes the weaker players to look for ways out. Now Serbia is a kind of a political odd man out: it neither belongs to the European Union nor does it belong to the Atlantic military alliance. Worse, on March 18 this year in Tirana, Albania, Kosovo and Croatia signed a joint declaration of cooperation on defence, clearly a measure directed against Serbia. Hence, Belgrade needs partners. Hungary is a member of both the EU and NATO, but – as is well known – Hungary’s leadership is not compliant with the policies conducted by Brussels and was not compliant with those of Washington during the time of the Biden administration, reason enough for Budapest to feel insecure and to search for support outside the two mentioned international structures.

The military agreement between Belgrade and Budapest is open to other signatories. Since Brussels has already alienated a number of member states, they might consider joining the Serbia-Hungary bloc. Slovakia comes to mind as first. Its political leaders have repeatedly thrown the gauntlet down for the EU to take up when it comes to the latter’s belligerent policy towards Russia. That would create a vertical north-south axis, which might be further joined by Czechia and Austria if only anti-EU parties take the upper hand there, which is quite possible. We would land up with a military and political bloc uniting most members of the former Austria-Hungary (Habsburg) Dual Monarchy.

Since Serbia has good relations with China, Beijing might try to expand its influence in the Balkans and central Europe a bit further. China means not merely the Middle Kingdom, but also the BRICS countries (of which Russia is one of the more important member). Brussels’ insatiable drive for dominance and the resultant pressure that it keeps exerting on Serbia and Hungary might push those countries into the Chinese embrace. Was not Moscow pushed into the alliance with China by the collective West?

More pressure on the part of the EU on the countries of this region might translate in a loss of influence that Brussels still has here. One needs only to think about Romania and the EU’s unprecedented interference in the presidential election there. Given a victory in the May election of a candidate who is not particularly pro-European, and given the offence that the Romanian nation experienced at the hands of the EU autocrats, all scenarios are on the table.

The Western world pays little attention to such things as the agreement between Serbia and Hungary. They see through such tiny entities, and that’s where they are wrong. The collective West thought little of BRICS for that matter and today BRICS is emerging as quite a threat to both Brussels and Washington. So much so that the declaration on the defence cooperation signed between Belgrade and Hungary might also aim at involving in it Republika Srpska, an autonomous part of Bosnia and Herzegovina, which territorially adjoins Serbia. Republika Srpska is a fully artificial political creation of the managers of the world: rather than allow Serbs to live together in one state, the managers of the world have created Serbia outside Serbia, and have subdued this “outer” Serbia to yet another artificial political creation that is known as Bosnia and Herzegovina. A typical tinderbox that only waits for someone playing with matches. Yet, as we have remarked again and again, politicians are not individuals who are conversant with even the recent past to draw lessons from. Thinking about the Balkans, about Serbia proper and outer Serbia, thinking about Bosnia and Herzegovina, they should recall Sarajevo. Not the Sarajevo that became notorious during the wars that were waged in the former Yugoslavia towards the end of the twentieth century, but about the Sarajevo from the beginning of the same century. It was in that city where Gavrilo Princip, a Serb, carried out his successful assassination of Archduke Ferdinand struck the spark that ignited the whole continent. The Austria-Hungary Dual Monarchy – the predecessor of the European Union (made up of Austrians (=Germans), Hungarians, Czechs, Slovaks, Romanians, Croatians, Slovenians, Serbs, Poles and Ukrainians), after the initial military success suffered a debacle and disintegrated. It was virtually smashed to smithereens giving rise to a number of independent states which have existed ever since. Are we in for a historic repeat?

The difference between tariffs and sanctions is that there is no difference!

The whole world is talking about the many tariffs that President Donald Trump has imposed and is about to impose on various countries around the globe. That is by the way something that he promised he would do on several occasions before he was elected to the highest office in the United States. The leaders of different countries seem not to have believed a word from what President Donald Trump said he would do. They didn’t believe it because they themselves are in the habit of promising things and not delivering on them, not even thinking of delivering on them. This time they have been confronted with a politician who keeps his word, and that comes as a surprise.

President Donald Trump believes in the benefit of tariffs, that is to say he believes that restrictions on international trade, restrictions on the amount and number of goods imported to the United States are beneficial for American economy. Imposing tariffs he must have reckoned with retaliation, which, indeed, is being applied. In other words, President Donald Trump must also believe in the beneficial effects for American economy of the limited exports. To put it otherwise, President Donald Trump is well aware of the fact that his sanctions seal American economy off from the economies of other countries, and yet he also believes that it is good for the United States.

Since tariffs and the retaliatory measures limit or make impossible exports and imports, they are no different from… sanctions. Sanctions are sort of tariffs: a country that is at the receiving end of sanctions cannot export or import as much as it wishes. The result is the same, or is it? Now President Donald Trump may have believed in the beneficial effects of tariffs a long time ago, but it is also possible that he realized the beneficial effects of tariffs (or his long-standing belief was reinforced) as he observed what happened to the Russian Federation since sanctions were imposed on it. Russian economy not only did not collapse, but seems to have developed its potential.

Just as the Western economists have prophesied that the Russian Federation was just about to collapse due to the thousands of sanctions directed against its economy, so are they now prophesying that President Donald Trump has overreached his hand and rather than helping the United States is going to do it enormous harm. Time will show. Still, the similarity of the economic effect that tariffs and sanctions appear to have is striking. Two labels denoting two seemingly different economic policies and apparently the same result.

Then what’s so basically wrong with the tariffs which the American president is so enarmoured of? Does the European Union not separate itself from the rest of the world by means of tariffs? Does the EU not rely on tariffs to defend its economy against that of China? Why then are so many economists critical of America-imposed tariffs while they remain silent when it comes to the EU-imposed tariffs or – for that matter – sanctions?

It’s interesting to observe that all that glib talk about free trade, free market, free flow of capital, free flow of goods and services, all that glib talk is just another weapon in the arsenal of the powers that be. If they can turn free trade and free flow of goods and services to their advantage, then they are all in favour of it and they go to great lengths to impress it on others how beneficial it is for all players on the world’s stage. The moment, however, free trade and free flow of goods and services does not serve their purposes, they strike a different note. What yesterday was considered economically good, today is considered economically bad. Sure enough, an explanation or a string of explanations is offered and the consumers of information usually buy into such explanations.

Tariffs and sanctions are two sides of the same coin. President Donald Trump has effectively imposed sanctions in the European Union; conversely, one might say, the European Union has been imposing tariffs on the Russian Federation. The result? Russian economy has emerged victorious, and so will American economy emerge victorious. That’s at least the logic of this economic mechanism of separation or protection of one’s own market, of one’s own entrepreneurs and customers (economic protectionism). Economic protectionism is nothing new in the history of mankind. In point of fact, there were periods during which protectionism was the order of the day, and periods during which it was denounced, as the case may be.

Besides, the application of tariffs by the United States clearly shows that the country’s economy has long ceased to be dominant or else why would Washington use this means in the first place?

Lawfare against Le Pen

Marie Le Pen has been found guilty. Whether Marie Marie Le Pen is guilty of the charges or not is a different matter. ECB’s boss Christine Lagarde or EU’s CEO Ursula von der Leyen have also faced charges and weaseled out of responsibility with ease. The former has been “guilty of negligence but” the court “did not hand down any punishment” while the latter was not even forced to as much as resign from her post over the so called Pfizergate affair. Now Marie Le Pen has been indicted and sentenced. Altogether she must pay a financial fine and serve a suspended term in prison, which is compounded by the duty to wear a humiliating electronic bracelet. This is not all. Now comes the gist of the whole matter: Marie Le Pen has been banned from funning for political office. It is the 2027 presidential election that is on the radar of the French establishment.

With the presidential election cancelled in Romania, with the threats of delegalizing Germany’s AfD, with Brussels’ similar acts of interference in Italy and Austria, one cannot rid oneself of the impression that a certain pattern is in play. It appears, the EU commissioners overlooked the “threat” rising in Bucharest and then were forced to act in a panic mode by resorting to ridiculous pretexts on which the cancellation of the election was based, so now they decided to act preemptively in Paris. Why wait for Marie Le Pen’s victory? It is much more advisable to nip the problem in the bud. Since Marie Le Pen and her National Rally become more and more popular, they need to be stopped in the tracks. The make such a verdict justified to the public, the leftist media across Europe and in the United States reporting on the case and writing about Marie Le Pen and her National Rally are going to great lengths to impress the reader or the viewer with the term “far-right”: Marie Le Pen and her National Rally are far-right.

Everybody and any organization that does not comply with the party line of the Western self-styled elites is automatically called “far-right”, while the consumers of information circulated by the mass media have been trained for years to make a straightforward association between the term far-right and Nazi Germany. Adolf Hitler’s henchmen, though waving red flags and professing their belief in socialism are somehow not referred to as left or – still better – far-left but right, far-right. Which is to say in other words that such “capitalists” and “financiers” as Hitler, Heß, Goebbels, Göring and Borman were far-right, you see?

What does this far-right mean? The association that is imposed on the consumers of information suggests nothing less than concentration camps and witch hunts. In reality, the National Rally wants to make France French again. The National Rally wants to stop immigration, make peace with Russia, put a ban on the propaganda of rainbow sexuality and a few other normal things, things that were regarded as pillars of society and culture twenty-thirty years ago. That’s what far-right stands for in reality. Since most people would like the same goals to be pursued, another association has been created by the powers that be: that of “nazis”. Somehow even this rabid propaganda against Marie Le Pen and the National Rally turned out to become less and less effective, hence the powers that be decided to resort to lawfare. Marie Le Pen had to be stopped from taking part in the 2027 presidential election by hook or by crook or else France might run the risk of having a female counterpart of President Donald Trump, which is unpalatable to the European elites in general and French elites in particular.

Doomed to make the same mistakes

Nations are in very many aspects just like individual people: some are stronger, some are weaker, some are capable of controlling others, and some are prone to falling prey to such control. Nations seem to be like individual people also in this respect that they appear never to learn from the past or that they appear never to draw inferences from the mistakes made by others.

Yes, stronger nations tend to control weaker nations. Still, just as it is among individual people, a weaker partner is not doomed to being controlled by a stronger partner. You become controlled mainly because you let yourself be controlled. Similarly, you become cheated because you let yourself be cheated. Within the European Union it is such small nations like Hungary and Slovakia that do not toe the EU party line. They are small, and yet they are following reason more than ideology. They are small, and yet they know how to defend their own interests. On the one hand we have much bigger countries and their leaders have brought them to utter ruin.

Look at Ukraine. It has let itself be used as a tool at the hands of the collective West. It has put all its trust in the seemingly all-powerful Western world and it has lost miserably. The best proof that Ukraine has been and continues to be the West’s instrument (against Russia) is the fact that whether the hostilities are prolonged or are about to be stopped depends entirely on either the United States or the European Union. The decision-making lies outside Kiev. The talks that are held at present over the war in Ukraine are the talks between Moscow and Washington, with Kiev acting as a supporting actor at best. The fact that Ukraine decided to wage war with Russia was in turn the result of the diktat on the part of the European Union, and the Biden administration. Now the United States wishes to end the war, the European Union wishes to continue the conflict till 2029. Ukraine appears to have absolutely no say. It has been serving two masters and now when these masters have divergent interests, Kiev is falling between two stools. The question is, could Ukraine’s leaders not have envisioned it long ago? Of course they could. A cursory knowledge of recent history of their own country would have been enough, let alone common sense.

Before the outbreak of the Second World War Ukraine was split between the Soviet Union (the greater part) and Poland (a much smaller part). Ukrainian chauvinism was particularly rampant in the Polish part because the Polish government was not so ruthless as its Soviet counterpart and because it is in the westernmost part of Ukraine where national sentiment is the strongest. This part was outside Russia the longest. Ukrainians let themselves be used and abused many times in their history, but we want to call the reader’s attention to the events occurring in the run-up to the Second World War, during the same war and in the wake of it. Strange that present-day Ukrainian leaders did not have a similar reflection, strange that they did not want to learn from the recent past of the nation.

Just as the tensions between the Third Reich and the Polish Republic grew in the 1930s, Ukrainian nationalists operating on Polish territory saw a ray of hope: they dreamed about Germany weakening Poland and helping them gain independence of Warsaw. Germany, sure enough, was more than willing to employ Ukrainian national sentiment and Ukrainian readiness to fight against the Poles. Germans launched a project of creating clandestine Ukrainian military units. It was planned that they would sabotage the Polish war effort once the hostilities between the Third Reich and the Polish Republic erupted. Then war broke out. Germany launched an all-out assault on Poland, which gave rise to the beginning of what later would be termed Second World War. The Polish state was swiftly subdued, the Polish government collapsed and fled abroad, while the armed forces were defeated and dispersed, with some of the soldiers and officers working their way to other countries, with some others of the soldiers and officers being taken prisoner of war, with still some others – going underground and continuing the fight. The campaign was so swift that the Ukrainian clandestine unit did not manage to participate in it, though there were some 400 instances of Ukrainian saboteurs thwarting the Polish war effort. With Poland defeated, one might think, the hour of Ukrainian independence or at least autonomy had eventually arrived. Alas!

It had been a few days prior to the outbreak of the hostilities that the Third Reich and the Soviet Union struck a deal (Ribbentrop-Molotov) partitioning Polish territory between the two aggressors. Neither of the signatories to this deal included in his plans Ukraine’s independence. The whole of Polish Ukraine was incorporated into the Soviet Union and joined to the Ukrainian Soviet Socialist Republic. That was not precisely what Ukrainian nationalists had hoped for.

Even if Germany had conquered the whole of Poland and had occupied all of its territory, would they have carved out a chunk of it and allowed Ukrainians to have an independent state? What kind of state would that have been? Landlocked, small, with few natural resources, wedged between mighty Germany and the mighty Soviet Union. This Ukrainian state would have had to act as dictated to by Berlin. Think for comparison about the then Slovakia, a country – a nation – that with the aid of the Third Reich gained independence from Czechia only to become fully dependent on Germany.

We don’t even need to think about what if Germany had conquered the whole of Poland because three years later as the Third Reich attacked the Soviet Union all prewar Polish territory was occupied by Germany. Did Berlin think about creating a Ukrainian state, even one with limited autonomy? Hell, no! A part of Western Ukraine was joined by the German authorities to the General Government (German: Generalgouvernement), which was the administrative region under German rule recognized by Berlin as (occupied) “Poland”. So, territories around the city of Lvov became again part of Poland, even if occupied by Germany. And these were the territories with the strongest Ukrainian national sentiment! Neither did a Ukrainian state emerge later on although Ukrainians served the Third Reich hand and foot, even forming in 1943 the notorious 14th Waffen Grenadier Division of the SS (1st Galician) made up of Ukrainians, which fought on the eastern front. Did Ukrainian leaders draw inferences? Did they learn a lesson? Far be it from them! They continued to serve their perceived protectors and their perceived benefactors.

Ukrainian nationalist leaders and ideologues along with the commanders of the Ukrainian Insurgent Army were somehow tolerated by Berlin during the war and by Bonn after it. Tolerated, yes, that’s the word for it. The leader of the Organization of Ukrainian Nationalists – Stepan Bandera – ultimately found refuge after the war in West Germany. It is noteworthy that during the war he was arrested by the Germans for a time, including in… the Sachsenhausen Concentration Camp! Why? His political aspirations concerning creating a Ukrainian state were too high… Bandera wanted to serve Germany, to ally Ukrainians with Germany and those were his wages… And yet, he was to be used further after the war in the political combat between Washington and Moscow. Did he learn his lesson? As if! He could be used again after the war but at the same time his war record and the record of the deeds of his followers was such that his presence and political activity in Germany was not particularly palatable to his new German masters. The world got word about the numerous massacres that his subordinates and his followers perpetrated during the war against tens of thousands of Polish, Jewish and Russian civilians. So he became more of a political and moral burden, and as such was not protected enough by West German services. The effect was that a Soviet agent could track him down and eliminate him in broad daylight in Munich. No hint.

It is relatively recent history. It was some eighty years ago that Ukrainians let themselves be used against Poland and then against the Soviet Union by Germany. The result? Germany lost the war, Poland emerged from the war without any part of Ukraine, while the whole of Ukraine was incorporated into the Soviet Union. Was that what Ukrainian nationalists had been dreaming of? Not really. Is it not similar today? Ukraine let itself be used by the collective West against Russia. After three years of devastating war, Russia is emerging victorious, the United States seeks to wash its hands of this war, while the European Union puts a bold face on its political, economic and military impotence. Ukraine? Ukraine has suffered enormous losses. Millions of people have been killed or physically and psychologically mutilated, millions of people have left the country for good. The economy is ruined, the state territory has shrunk, white the country’s debt has skyrocketed. Today even Yulia Tymoshenko, known for her passionate hatred of Russia, was shocked as she heard Germany’s defence minister Boris Pistorius say that war in Ukraine ought to last till 2029 to allow the European Union to prepare for a conflict with Russia. Even Yulia Tymoshenko awakened to the realization that Ukraine had been used as a tool to weaken Russia, that Europeans or Americans do not care two hoots about how much Ukrainian blood has been spilled, is being spilled and is going to be spilled.

Ukraine sustained enormous losses because Kiev’s leaders wanted to join NATO and because they thought that Russia would be intimidated by the West and do nothing to prevent Ukraine from becoming a member of this alliance. Ukraine’s leaders sacrificed millions of people and territory and billions of dollars to join a military alliance. They could have stopped the war in its tracks during the Istanbul talks, but they preferred to trust in the collective West, they preferred to part with commonsense. Now it is clear to everybody and anybody that Ukraine is not going to join NATO. What was this war for then? There seems to be virtually nothing whatsoever that Ukraine might gain from the three years of suffering, the three years of bloodshed, the three years of sacrifice. The country’s leaders preferred to obey Ursula von der Leyen and Boris Johnson, to act at the behest of Joe Biden and Jens Stoltenberg rather than serve and spare their own nation, rather than look for guidance into recent history. What a bitter outcome! What a bitter lesson. Yet, a lesson that will not be learned. You may rest assured that in a few decades’ time precisely the same mistake will be made by Ukrainians and – for that matter – by any other nation whose leaders wish to please their Western overlords more than to work for the benefit of their own people. Look at the Baltic states. Tiny though they are like mice, their leaders are as bellicose as tigers. So it goes.

Two explanations for such policymaking on the part of the leaders of such small nations can be offered. Either they are patriotic but deprived of the faculties of reasoning (in which case why they are leaders in the first place?) or they are placed as governors by the stronger states, governors who do not care about their nations, governors whose families and bank accounts are outside their own countries, governors who can always rely on a safe landing promised to them by those from whom they take their orders.