Germany is locked in deep discussions about its future relationships with the United States, Russia and China. The issues at stake are all concerning the free trade of energy and telecommunications equipment, plus the free flow of investment capital. It’s not an exaggeration to say that the Geopolitical future of Europe is being decided.
It has been reported that China will severely restrict the importation of German cars to China if Germany decides to ban the Chinese telecommunications provider, Huawei, from its new 5G telecommunications infrastructure as desired by the United States. And further reports show that China may also restrict Chinese capital investments into Germany if this matter is not settled to their satisfaction.
So Germany is finding itself caught between the US and China in this delicate matter of free trade and the free flow of capital. In this dispute, it appears that China is in favor of free trade and the free flow of capital and the US is not.
Germany is also caught between the US and Russia in regard to its energy supplies. The US Congress, Senate and White House have recently passed legislation that imposes severe sanctions on European companies that are helping build the Russian Nord Stream 2 natural-gas pipeline from Russia to Germany, under the Baltic Sea. This pipeline is very important to Germany (and all of Northern Europe) as it needs a reliable gas supply that bypasses the unstable Ukraine, especially for heating. It is due for completion in 2020. Windmills and solar panels which are in abundance in Germany simply cannot generate heat during the long, cold northern European winters. As a result, Russian gas supplies are critical to the EU economy. But the Trump White House has decided to make the completion of the pipeline a political bargaining chip of the gravest importance.
So — Germany is faced with two impossible and simultaneous dilemmas. They can bow to US demands, closing the door to China and Russia or they can stand in defiance of the US in regard to both situations. In other words — will they proceed to use Huawei electronic parts in their new 5G telecommunications network and continue to use Russian gas to heat their homes and factories?
If so, the US can back down (Trump humiliated) or alternatively can move to the next step and threaten to remove its military protection from Germany that has been in place since 1945. This would entail an effective break-up of NATO — the North Atlantic Treaty Organization — with the American armies in Germany removed and the nuclear “umbrella” also removed from most of Northern Europe. This would presumably leave Poland and the Ukraine as “buffer” states.
The US sanctions placed on Nord Stream 2 participants and its demands on banning Huawei are similar to the old strategy of a naval blockade of a port. Such actions in past history have amounted to a declaration of war or have led to such in the long run.
The US (and that means Donald Trump) are rolling a very big dice here. If Germany (and France) turn their back on the Americans by effectively joining the Belt and Road Initiative, then the Geopolitical world that we have all lived in since 1945 will be shattered. America will become more isolated, the “protection” of Germany will be removed and, more importantly, the dominance of the US Dollar in international trade settlements will be potentially weakened.
The logical next step (in the long run) is for Germany to buy Russian gas with Euros and to buy Chinese telecommunications equipment with Euros, thus avoiding all settlement with US Dollars. Chinese capital for investment (in Yuan) would flow into Europe buying Euros for the purchase of stocks and bonds. And Euro currency would (eventually) flood the other way as increased European investment into China became the logical next step.
Trump will have been well and truly Trumped. Surely, he will have to back down? Or can he somehow force Germany to bend to his will?
The usual alternative strategy, historically, is war — but that is extremely unlikely in the circumstances. No-one wants to sacrifice millions of people’s lives just to keep Donald Trump happy. The US may be forced to sue for peace by backing down on both counts. Time will tell.
THE EU POSITION
What does the European Union think of these delicate matters? Ursula Von Der Leyen, the President of the European Commission (the unelected premier decision making body in the EU), has already said “The EU Commission emphatically rejects sanctions against European companies … that engage in projects in line with the law”.
In other words, she has sided with Germany against Trump and the US. And last week, the German Finance Minister Olaf Scholz described the sanctions as “a severe intervention in German and European internal affairs.”
Of course, they must be conscious of the position of their Eastern European EU member nations — Poland, Romania and Hungary in particular. But each of these nations, in turn, will eventually be asked the exact same questions by Russia and China. Do you want future energy, free trade and investment …… or not?
The US dominance of Europe and the dominance of the US Dollar as the major settlement currency for global trade seem to be weakening, slowly but surely, under Geopolitical and economic reality. Trump’s belligerence and America’s hypocrisy on free trade are now obvious to everyone. And Western Europeans, in particular, do not respond kindly to belligerence. They see it as crass and unnecessary.
CAN TRUMP BE REMOVED?
The removal of Trump from the White House might solve a lot of these problems and that is exactly what the Democratic party is attempting. But it may be too late for that despite the impeachment proceedings which at present are not proceeding to the US Senate where it will be strongly defeated anyway by the Republicans.
If the Democrats continue to delay such proceedings during 2020, leaving Trump as an “impeached” President, it may have severe consequences on his re-election prospects in November and it may embolden Hillary Clinton to return as a challenger. And if Trump is simultaneously faced with outright German defiance in Europe and the possible breakup of NATO, then he may opt for a declaration of a State of National Emergency, to ensure “political and economic stability” and “national security”. That would result in total power being placed in the White House. Read on to find out how this could happen.
A US STATE OF EMERGENCY
In the US, the President can declare a “National Emergency” and take full control. He can order troops onto the streets, he can declare martial law, he can seize control of the Internet and other electronic communications such as radio and perhaps television.
An excellent article “The President’s Emergency Powers” published in The Atlantic magazine in February 2019 explained the situation clearly — BOOM suggests you read the article in full. Wikipedia states that unsubscribed readers have access to five free articles per month. (See Atlantic Magazine Link below)
The article explains that a national Emergencies Act was passed in 1976. The law gives the President compete discretion to issue an emergency declaration. The author goes on to explain that 30 states of emergency are actually still in effect today and that most have been renewed for years on end.
After reading this, the question must be asked –“Is America already a Totalitarian State?”
The article also outlines how a foreign situation can be brought to bear on the decision making process. Apparently, the President can declare a National Emergency to deal with any unusual or extraordinary threat that has its source (or substantial part) outside the United States.
This short video on Emergency Powers by the author of The Atlantic article, Elizabeth Goitein, explains it all rather well — it only takes 3 and a half minutes to watch. BOOM suggests you do so. Elizabeth Goitein is a co-director of the Liberty and National Security Program at the Brennan Center for Justice in Washington DC and is the author of The New Era of Secret Law.
BOOM’s favorite quote from Winston Churchill springs to mind “The US can be relied upon to do the right thing, after it has exhausted all other options”.
Atlantic Magazine Link:
The President’s Emergency Powers
In economics, things work until they don’t. Until next week ………… Make your own conclusions, do your own research. BOOM does not offer investment advice.
EMAIL: gerry [@] boomfinanceandeconomics.com
Return to the BOOM Main Website – BOOM Finance and Economics at http://boomfinanceandeconomics.com/
HOW MOST MONEY IS CREATED
BANKS CREATE FRESH NEW MONEY OUT OF THIN AIR (but they always need a Borrower to do so)
THERE IS NO SUCH THING AS A DEPOSIT
BANKS PURCHASE SECURITIES, THEY DON’T MAKE LOANS
How is Most New Money Created ?
LOANS CREATE DEPOSITS — that is how almost all new money is created in the economy (by commercial banks making loans).
From the Bank of England Quarterly Bulletin Q1 2014 —
“Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.“
Quarterly Bulletins Index
Most economists are unaware of this and even ignore the banking & finance sectors in their econometric models.
On 25th April 2017, the central bank of Germany, the Bundesbank, released a statement on this matter —
“In terms of volume, the majority of the money supply is made up of book money, which is created through transactions between banks and domestic customers. Sight deposits are an example of book money: sight deposits are created when a bank settles transactions with a customer, ie it grants a credit, say, or purchases an asset and credits the corresponding amount to the customer’s bank account in return. This means that banks can create book money just by making an accounting entry: according to the Bundesbank’s economists, “this refutes a popular misconception that banks act simply as intermediaries at the time of lending – i.e. that banks can only grant credit using funds placed with them previously as deposits by other customers”. By the same token, excess central bank reserves are not a necessary precondition for a bank to grant credit (and thus create money).”
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