by Doug Casey, International Man:
Nick Giambruno: The European Union is looking shakier by the day. Marine Le Pen wants France to leave the euro. And she has a real chance of winning the country’s presidential election later this month.
Eurosceptic parties like Le Pen’s Front National are the Continent’s populists. Donald Trump’s victory has given these parties even more political rocket fuel.
What’s your take?
Doug Casey: The Social Democratic, Christian Democratic, Socialist, Communist, and similar parties have ruled Europe since the end of World War 2. They’re all pretty similar in that they promote massive welfare benefits, strong labor unions, large state bureaucracies, very high taxes, strict regulations, and an atmosphere of Cultural Marxism. Then, every few generations, the voters react and install a “fascist” regime. These keep most of the socialist characteristics, but tend to be supported by, and friendly to, Big Business. That, and they add on nationalism, xenophobia, and militarism.
The last time this happened was in the 1930s. In those days it was spurred by the Great Depression. This time it will be spurred by the Greater Depression, plus massive waves of Muslim migrants from the Near East and Africa. So I expect to see more neo-fascist political parties everywhere.
Oddly, the Europeans can’t seem to imagine a libertarian alternative of private charities, limited government, minimal taxes, an unregulated economy, and intellectual/psychological freedom. It’s another reason the Continent is a sinking ship.
Incidentally, people think of these countries—Italy, France, Germany, and so on—as though they are fixtures in the cosmos. But they aren’t. In their current forms, they’re all newcomers on the stage of history.
The average person doesn’t realize that the country we know as Italy today was only created in 1861, a consolidation of many completely independent and very different entities that had been separate states since the collapse of the Roman Empire.
Germany was only unified in 1871, out of scores of principalities, dukedoms, baronies, and whatnot. Both unifications were very bad ideas; World Wars 1 and 2 are just at the head of a long list of reasons why that’s true.
There are about 200 nation-states in the world. The international “elite,” the “intelligentsia,” the members of the Deep State everywhere, and organizations like the EU in Brussels, would like to see a much smaller number of more powerful states. Some of them want to work towards a one-world government that they control. Orwell anticipated just three mega-states in his dystopia. But the actual trend is in the opposite direction. The trend is the disintegration of nation-states everywhere.
Today, there are separatist movements in big Western European countries, like the Basques and Catalans in Spain. And the Scots in the United Kingdom, who wish it weren’t quite so united. There are many others.
You will rarely hear about this in the mass media, but there are dozens of secession movements throughout Europe. The colors of the map are always running.
That’s one more reason why (in addition to the interest rate risk and the inflation risk, which are both substantial) you should stay away from long-term government bonds.
Nick Giambruno: What does this mean for Europe’s banking system?
Doug Casey: Europe’s terminal condition is increasingly hard to hide, its symptoms obvious; they are even making headlines now.
Deutsche Bank, one of the biggest banks in the world, is underwater by scores of billions of euros. In fact, most of the banks in the world are essentially bankrupt, and will go under once the economy turns down in earnest.
What are the central banks going to do? Bail them out? Or let them go under? If they let them go under, it’s going to lead to an economic catastrophe without precedent. People will lose their savings, day-to-day commercial activities will be disrupted, businesses will collapse and the entire economy will come to a screeching halt.
On the other hand, if they bail them all out through even more freshly printed money, currencies will lose all value. Which is even worse than the first alternative. It’s a disaster either way.
At the end of the day, actions have consequences. They’ve been experimenting and tinkering with the world’s economy and monetary system for decades now and finally the price will have to be paid.
I expect a truly major banking crisis. Much worse than that of 2007–2009.
Governments, who are all bankrupt, borrow money from commercial banks. Commercial banks have lent it to them because they believe it’s a risk-free loan. Governments encourage them to lend recklessly, hoping that will jump-start sluggish economies. Central banks, which are the arms of their governments, have taken interest rates to zero and below for that reason and to make it easier for governments to service their debts. This policy has encouraged businesses to take on debt.
It’s an idiotic and reckless experiment that will end—likely in this cycle—with bankrupt central banks and governments bailing out bankrupt commercial banks and businesses. Just the way they did in 2007–2009. Except this time, the situation is much more serious.
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