What would happen to Spain in case of Catalonia’s secession? In terms of the debt sustainability parameters laid down by the Treaty of Maastricht, it’d be the Eurozone debt crisis 2.0. As Spain now maintains the second year of 3% GDP growth, an even bigger, immediate fiscal threat is looming. After multiple ineffective referendums in the previous years, this time the Catalan government is likely to finally assert independence. What will it look like against the background of the Maastricht financial requirements?

Debt to GDP ratio

The Treaty of Maastricht says it should be 60%. Spain’s debt to GDP ratio was 39% in 2007, but after the financial crisis it gradually rose to 99.4% today. Should Catalonia leave, there are two possible scenarios:

• Catalonia agrees to take a share of the Spanish total debt, as a “divorce bill”, because after all it benefited from the government spending in Catalonia itself;

or

• Catalonia leaves without taking any share of the total Spanish debt.

In the first case, nothing would change, assuming Catalonia would agree to take the share of Spanish debt equal to its share in Spain’s total GDP. In that case, Catalonia accounts roughly for 20% of the Spanish GDP, which means it would take 20% of the Spanish debt. Given that the Spanish debt is right now almost the same size as the Spanish GDP, calculations are rather simple. Continue reading →

The Economist ran a couple of articles promoting migration as good for the global economy. Professor Bryan Caplan argued that labour is the world’s most valuable commodity and its value depends on location. If borders were open, a world of free movement would be $78 trillion richer. Mexican labourers can expect to earn 150% more in the West. Unskilled Nigerians make even 1,000% more in Germany than in Africa. The value of an unskilled worker is so much higher in Europe that a Nigerian can make 10 times as much in Germany, adding 1000 times more to global GDP. Because Western societies are more structured and organised than the Mexican or Nigerian, the unskilled worker can be more productive in a factory in Germany or a farm in the USA than in Africa. A taxi ride in Berlin is much more expensive and thus valued much higher than a taxi ride in Lagos, while the amount of work, driving a car for a while, is the same. Continue reading →

Aristotle was the first to point out how a thriving middle class is a condition sine qua non for a functioning democracy: “A constitution based on the middle class is the mean between the extremes of the rule by the rich and the rule by the poor.” That the middle [constitution] is best is evident, for it is the freest from faction: where the middle class is numerous, there least occur factions and divisions among citizens” – For those who possess the goods of fortune in moderation find it “easiest to obey the rule of reason”. . When we speak of the middle class we therefore mean the median group of society, the one representing the largest group of people by income. To clarify with a simple example, in a population of 2000 people, if 500 earn 1000€ a month, 1400 people earn 2000€ a month and 100 earn 10000€ a month, then the 1400 people are the ”middle class”. Continue reading →

The decline of the social, economic and political situation in the United States will accelerate under Donald Trump’s term. The mainstream media are portraying his administration as a disaster and accusing him of destroying America’s standing in the world by moves such as withdrawing from the Paris climate agreement. The truth is that Trump’s presidency and the attendant political turmoil are the symptoms of a decaying nation rather than the cause, it merely proves that the American people have had enough of the Washington government and it shows their deep distrust of the American mainstream media. Donald Trump too, is a part of the establishment, so it came as no surprise that Steve Bannon and his “populist” platform (that won him the presidency) was removed from the White House and the President embraced the military complex (that nobody voted for) represented by the likes of John Kelly, H.R. McMaster and John Mattis. His base starts to crack as they burn the “Let’s Make America Great Again“ cap as a symbol of protest on Twitter and high profile supporters such as Ann Coulter turn against his policy. With the removal of Steve Bannon the US will continue its usual policy, which means that its public debt will increase indefinitely. The fight between the media and the White House is a distraction from the real problems: Trump’s budget can only work if tax revenue is twice as much as it is now, a doubling of social security spending while military spending increases, to wit 50%. The US will try to continue its so called “preponderance” military strategy as we will explain. Even if the Trump administration is able to build a wall between Mexico and the US, mass-migration has to continue to create 5% economic growth.

Gefira #16 is available for only 25 euros. Gefira researchers expect that the downfall of the West will start in 2020. The financial and political planners should only worry about the demographics. In 2015 the European populations began to shrink, which is why the economy will never fully recover, the financial markets will crumble, and the maintenance of large armies will not be possible. Gefira #16: The US Endgame. 

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The situation in the world raises the question of whether and when there may be armed confrontation between China and Russia on the one hand and the United States on the other.
Americans have begun to implement the offshore balancing concept which means that local powers, located far away from the US, have to take care of their own security. China’s economic and military activity is very extensive. Through the Belt and Road concept Beijing is striving for domination in Eurasia and the whole world. The conflict in Ukraine is going on, US-Russian relations are strained.

Russia feels encircled by the NATO and so is strengthening its ties with China. We can also talk about a trade war between USA and Russia. Germany and France are in opposition to Trump’s administration and the role of the United States in Europe and in the world. The effectiveness of NATO is questionable. NATO member Turkey has just bought the Russian S-400 air-deference system while Germany has put all major arms exports to NATO ally Turkey on hold. Americans do not want to lose their present dominant position. The political atmosphere in Europe and in the world is highly charged. One more impulse, one more conflict and another global war may break out. Therefore, it is well-founded to analyze forces of the global players: China, Russia and USA. Continue reading →

This article is based on the research by Francesca Totolo, which appeared on lucadonadel.it

In 1988 George Soros bought a participation in Société Générale, the French banking colossus privatized the previous year. The value of the stock of the bank would see a quick, significant increase that resulted in the French judicial opening an investigation for insider trading. George Soros joined the list of the people investigated in 1993 and finally in 2002 he was awarded 2.2€ million by the French court.

Unsatisfied with the judgment, George Soros appealed to the European Court of Human Rights in 2006; the final sentence arrived in 2011, the ECHR ruled against the billionaire. Continue reading →

How many times in history has a regime facing internal difficulties sought military adventures to “unite people behind the flag”? This time, it’s America’s turn.
The first 6 months of the Trump presidency have been characterised by an increase in ethnic tensions as US demographic shifts towards “white minority” with a significant ”Hispanic” population. The demographic change has been hailed by the Democratic Party and corporate America which promptly adopted ”identity politics” as a core ideology, exalting the individual if he (or she) belongs to an ethnic, religious or sexual minority: in practice, however, this translates into depicting “Blacks” and “Hispanics” as “oppressed”, “whites” as “oppressors” and “Asians” as “too good”, which is why discrimination against them in academic admissions is justified. Inevitably the vilification of the whites paved the way for “pride” demonstrations and the return of “white nationalism” as evidenced by the recent Charlottesville clashes. Continue reading →