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The various analyses of the current situation in Europe and the narrative-shaping news coming out of Ukraine have been mostly wrong. That’s not new; we’ve been saying since February that the sanctions against Russia would backfire and do far more harm to Europe’s and America’s economies than to Russia’s and we were called “Russian propagandists” as a result.
Now, the same people who said the sanctions would tank Russia’s economy and do little to harm western economies are saying Europe’s economies ARE going to crash, but that it’s somehow a good thing because it will put an end to The Great Reset. Once again, I’m forced to debunk these claims. The crashing of western economies is EXACTLY what the architects of The Great Reset want.
You can’t sell a reset when things are going well. You can’t Build Back Better until a nation is effectively destroyed. This has been the case from the beginning and it’s how the globalist elites plan on pushing us down their Neo-Marxist road. I detailed all of this on today’s episode of The JD Rucker Show.
The Great Reset Will Be Presented as the Solution
An article by David Solway at PJ Media dropped over the weekend that was well-reasoned, extremely well-written, and absolutely wrong. I can understand the wishful thinking that can drive someone to believe a collapsing Europe would somehow derail the Cabal’s plans for The Great Reset based on the past and ongoing circumstances that tie globalist power to European prosperity. What Solway’s assessment doesn’t take into account is that the ties that bind the Eurozone’s capitalistic success with the globalist elites’ own financial fortunes are not nearly as permanent as most believe.
As Richard Morrison writes in National Review Capital, “The global regulatory cartel that technocrats such as Schwab envision—a system of supranational policymaking that insulates politicians and CEOs from the demands and expectations of their most important constituents—is exactly the course of action that will end…the amazing growth, health, education and prosperity” that the free-market system has created. Such is the policy that Klaus and his Davos minions would pursue, which the current imbroglio might well put paid to. There would be scarce maneuvering room to set the Schwabian program in place.
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Or, on the contrary, would the proponents of the Davos enterprise rejoice in the anarchy and see it as a timely opportunity to impose a socialist interregnum leading to a full-fledged totalitarian upheaval, a leftist takeover of the global community that would meet little resistance?
I suspect that such an eventuality is unlikely. Corporations would be severely weakened by the energy crunch and unable to successfully assert their “stakeholder” dominance. International bodies, nonprofits, and political organizations would be similarly hamstrung. In effect, there would be too little remaining “on the ground” for the Reset to take hold, which in the light of a global cataclysm would be cold comfort indeed. The Great Reset is something that can be opposed; the wreckage of the global economy and the destruction of the institutional structure of society offer no such consolation.
He was close. He acknowledged that a collapsing Eurozone economy would mean chaos through which the architects of The Great Reset could launch the next phase of their plan, then he dismissed it as “unlikely.” On the contrary, it’s extremely likely. I would go so far to say that it’s precisely what the Cabal has not only hoped for, but have planned for some time.
Rather than seeing western capitalism and globalist power as tied together, we need to see them more as heading in the same direction… for now. They appear to be in lockstep; the success of Eurozone economies means success for globalist organizations like the World Economic Forum, Open Societies, and the Council for Inclusive Capitalism. But just because they’re heading in the same direction doesn’t mean they’re going to the same destination.
Imagine two cars driving side-by-side on a dark road. In one car is the Eurozone economy. In the other car is the globalist cabal. The road is dark as they speed along and neither can see very far ahead. But the globalist elites have a map, one they created when they laid out the route they all would take from the beginning. On the map they can see the bridge is out. The Eurozone car doesn’t have the map. They can only see what’s immediately ahead.
Just before reaching the dysfunctional bridge, the car full of globalists will hit the brakes. The Eurozone car will keep going and plummet into the ravine below, crashing into fiery flames of economic distress and societal chaos. And who will remain intact to render aid and usher in a new vision of Neo-Marxism? Yep, the globalist elite cabal.
Here’s the article that I referenced in today’s show. It’s also the article Solway referenced for his article. Stay frosty, folks. Things are about to get bumpier than they already are.
Europe Is Bound to Collapse
I have been watching, with horror, the escalation of the economic situation in Europe since about mid-February. On Feb. 21, I published a short Twitter thread detailing the economic worst-case scenario for Europe if the war between Russia and Ukraine would break out, as it did.
The forecast had 10 stages:
- The West would be likely to respond with sanctions.
- Russia would respond by shutting gas to Europe.
- This would lead to a massive spike in energy prices in Europe, pushing the continent into a recession with high inflation pressures (stagflation).
- Inflation would reach double-digits within two to three months.
- Asset markets would fluctuate heavily first, then crash.
- Rampant inflation would force the European Central Bank to raise rates in a rapid manner and stop the Pandemic Emergency Purchase Program (PEPP) and quantitative easing (QE).
- The European banking sector would crumble.
- Sovereign yields would explode.
- The eurozone would unravel.
- Europe would fall into a depression.
Energy prices have skyrocketed, asset markets have fluctuated, and the European Central Bank (ECB) has stopped PEPP and QE (kind of). Inflation in the eurozone was 9.1 percent in August and shows no signs of relenting. So we most likely get to double-digits already maybe next month. So, ominously, we’ve already “checked” Nos. 1, 2, 3, 4, and 6 from the “worst-case” forecast.
What to Expect in Coming Months
The ‘credit default swaps’ of Credit Suisse, a Swiss banking giant labeled as a global systemically important bank (G-SIB), have reached levels not seen since 2009. German government 2-year bond yields are currently trading some 100 basis points higher than the 2-year EUR OIS swap rates, which reflect the ECB rates over the next two years. We haven’t seen such a divergence since the height of the European debt crisis in 2012. This is leading to a massive “collateral crunch” in banks, as the value of most-used collateral (sovereign bonds) with respect to deposit rates is collapsing.
A Banking Crisis is Brewing
Italian 10-year bond yields are flirting with the four percent mark thought to represent the ‘line in the sand’ for the Italian government not being able to cover its finances. The ECB has been using funds from maturing debt of, for example, Germany and the Netherlands to purchase the sovereign debt of Greece, Portugal, and especially Italy. At the end of July, ECB holdings of German, French, and Dutch bonds had fallen by $19.3 billion, while holdings of Italian bonds had increased by $14.3 billion. It’s expected that the ECB will increase its purchases further in the coming months.
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However, the question is, will it be enough to stave off the onset of another debt crisis?
Inflation in Italy is running at a euro-era record, more than 8 percent, and her households and corporations are feeling the full brunt of soaring energy prices and the disruptions in the flows of Russian gas to Europe. According to modeling by the International Monetary Fund, if the European gas market fragments, meaning that there would be gas supply disruptions, the Italian gross domestic product could shrink by roughly 6 percent. We’re very close to that point after Russia cut off its gas supplies to Germany (Italy still receives Russian gas). The Italian government is also already working on a bailout fund for the small lenders. Small lenders aren’t the real problem, however.
Italy, and Thus Europe, Is Closing in a Full-Blown Debt Crisis
According to a report by Equinor, a Norwegian energy group, energy companies are facing an annihilating $1.5 trillion worth of margin calls because of the violent price reactions in the European energy markets. Energy companies are required to maintain a minimum margin deposit in the case of a default before supplying the energy. These margins raced higher with the soaring forward electricity prices, which, while off from their highs, remain elevated. Recently, Finland became the first European country to sign a “bridge agreement” to cover the collateral agreements of Fortum, Finland’s largest energy producer. Other governments are likely to follow.
The price of electricity remains high. For example, in Germany, the spot price is currently about 10 times higher than in the summer of 2021. Many households and corporations are seeing their energy prices multiply by 10 or more across the continent.
Alas, unsurprisingly, the unraveling of the European economy is already on its way.
Many European energy-intensive industries are closing down or slashing their production heavily because of high energy prices. Even bars in the UK are deciding whether to close their doors (effectively an “energy lockdown”) because they can’t afford the energy prices. At the same time, inflation in the country may top 20 percent next year!
Business loan delinquencies are on the rise across the continent (see, for example, this), and a ‘flood’ of business and household bankruptcies loom—all due to the weight of massively increased prices of electricity, inflation, rising interest rates, and an impending recession.
Thus, Europe is currently heading into an economic depression, and it won’t stay here. As I mentioned earlier, 10 of the global 30 G-SIBs reside in Europe (PDF). To compare, the United States has seven G-SIBs, but the housing market collapse of 2006–09, which led to a banking crisis in the United States, still almost collapsed the global financial system. If the European economy unravels, which seems likely at the time of writing, her banking sector will follow, taking the global financial system and possibly the European common currency (euro) with it.
Could Something Be Done to Avert All This?
I don’t think we can any longer escape European recession, which is also overdue, but there could still be time to stop it from escalating into a depression. While unpopular, the only thing that could bring immediate relief is turning the gas flows from Russia to Europe back on, which requires the removal of western sanctions.
Even if the storage, demand cuts, and global supply could replenish the Russian supply to Europe, which is very unlikely (see more, e.g., from my newsletter), prices of natural gas would be likely to skyrocket across the globe. Rising prices have already led to a “tsunami of shutoffs” in the United States. Just consider how bad the situation will get if natural gas prices double or triple from current levels.
It should be acknowledged that we’re here because of political decisions. First, green policies made Europe heavily dependent on Russian energy. Second, the decision of Russian President Vladimir Putin to attack Ukraine, the decision by Western leaders to enact tough sanctions, and the decision by the Russian regime to respond to them set the crisis ablaze.
In 1924, John Maynard Keynes warned against using sanctions, which “would always run the risk of not being efficacious and of not being easily distinguished from acts of war.” In his “magnum opus,” “The General Theory of Employment, Interest and Money,” he also argued that a globalized economy would eventually stop all wars, because their economic costs would become so horrendous.
We’re slowly learning that lesson.