Michael Hudson: What the demise of Germany will mean for the Euro
Through DissidentNL-2022-10-026957 2
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DThe rapid demise of Germany reminds me of the German intelligence agent Bachmann in “A Most Wanted Man”. He is made to believe he is on par with the CIA and British intelligence, but realizes too late that he was being played the whole time, writes Conor Gallagher .
Hudson gets to the bottom of what Germany's demise will mean for the euro and what the options are for the southern and Eurasian nations trying to resist US hegemony:
The response to the sabotage of three of the four Nord Stream 1 and 2 pipelines in four locations on Monday, September 26 has centered on speculation about who did it and whether NATO will make a serious effort to find out the answer. But instead of panic, there is a great sigh of diplomatic relief, even calm. Shutting down these pipelines puts an end to the uncertainty and concerns of US/NATO diplomats that nearly reached crisis proportions the week before when large demonstrations took place in Germany calling for an end to sanctions and Nord Stream 2 in use. to solve the energy shortage.
The German public began to understand what it meant for their steel companies, fertilizer companies, glass companies and toilet paper companies to close their doors. These companies predicted they would go out of business — or relocate their operations to the United States — unless Germany lifted trade and currency sanctions against Russia and resumed imports of gas and oil, presumably falling back on the astronomical eight. - up to a tenfold increase in it.
Still, State Department hawk Victoria Nuland had stated as early as January that “Nord Stream 2 will not go ahead anyway” if Russia responded to NATO-Ukraine accelerated military strikes on Russian-speaking eastern oblasts. President Biden supported US tenacity on Feb. 7 by promising that “there will be no more Nord Stream 2. We will put an end to it. … I promise you, we will be able to do it.”
Most observers simply assumed that these statements reflected the obvious fact that German politicians were completely in the US/NATO pocket. They persisted in their refusal to approve Nord Stream 2, and Canada quickly seized the Siemens alternators needed to send gas through Nord Stream 1. That seemed to settle things, until German industry — and an increasing number of voters — finally started calculating what blocking Russian gas would mean for German industry.
Germany's willingness to impose an economic depression on itself faltered – but not the politicians or the EU bureaucracy. If German policymakers put German business interests and living standards first, the common sanctions of NATO and the New Cold War front would be broken. Italy and France could follow suit. That nightmare of European diplomatic independence made it urgent to take the anti-Russian sanctions out of the hands of democratic politics and settle matters by sabotaging the two pipelines. Although an act of violence, it has restored calm in international diplomatic relations between American and German politicians.
There is no longer any uncertainty as to whether or not Europe will break with the goals of the US's new cold war by restoring reciprocal trade and investment with Russia. That option is now ruled out. The threat that Europe will break away from US/NATO trade and financial sanctions against Russia has been resolved, seemingly for the foreseeable future, as Russia has announced that a loss of gas pressure in three of its four pipelines will allow saltwater infusion will irrevocably affect the pipes. (Tagesspiegel, Sept. 28.)
Where are the euro and the dollar going?
When one sees how this "trade solution" will change the relationship between the US dollar and the euro, one can understand why the seemingly obvious consequences of the severing of trade ties between Germany, Italy and other European economies and Russia are not overt. discussed. The “sanctions debate” has been resolved by a German and even European economic crash. The next decade will be a disaster for Europe. It can be blamed for the price it paid for letting NATO dictate its trade diplomacy, but it can do nothing about it. Nobody expects (yet) to become a member of the Shanghai Cooperation Organization. What is expected is that his standard of living will fall.
Germany's industrial exports were the main factor supporting the euro exchange rate. The strong appeal for Germany to switch from the Deutsche Mark to the Euro would prevent its export surplus from driving up the D-Mark exchange rate to the point that German products would be priced out of the world market. An expansion of the currency to include Greece, Italy, Portugal, Spain and other countries with a balance of payments deficit would prevent the currency from skyrocketing. And that would protect the competitiveness of German industry.
Indeed, after its introduction in 1999 at $1.12, the euro fell to $0.85 in July 2001, but recovered and even rose to $1.58 in April 2008. It has fallen steadily since then, and since February of this year, sanctions have pushed the euro exchange rate below par with the dollar, to $0.97 this week. The main factor was rising prices for imported gas and oil, and products such as aluminum and fertilizers that require a lot of energy for their production. And as the euro's exchange rate declines against the dollar, the cost of carrying US dollar-denominated debt – the normal condition for affiliates of US multinationals – will rise, depressing their profits.
This is not the kind of depression where “automatic stabilizers” can work “the magic of the market” to restore economic equilibrium. The dependence on energy is structural. And the eurozone's own economic rules limit budget deficits to just 3% of GDP. This prevents the national governments from supporting the economy by spending deficits. Higher energy and food prices – and dollar-denominated debt service – leave much less income to spend on goods and services.
It seems curious that the US stock market rose 500 points for the Dow Jones Industrial Average on Wednesday. Maybe it was just the Plunge Protection Team stepping in to reassure the world that everything would be okay. But economic reality reared its ugly head on Thursday and the stock market returned its ghost gains.
It is true that the end of German industrial competition with the United States has come on the trade account. But on the capital account, the depreciation of the euro will reduce the value of US investment in Europe and the dollar value of the profits these investments can still bring if the European economy shrinks. So the reported profits of US multinationals will fall.
As a final kicker, Pepe Escobar pointed out on September 28 that “Germany is contractually obligated to buy at least 40 billion cubic meters of Russian gas per year until 2030. … Gazprom has the legal right to be paid even without shipping gas. That's the spirit of a long-term contract. … Berlin does not get all the gas it needs, but still has to pay.” It looks like it will be a long legal battle before the money changes hands – but Germany's ability to pay is getting weaker.
Incidentally, the ability of many countries to pay is already reaching breaking point.
The effect of US sanctions and the New Cold War outside Europe
International commodities are still priced primarily in dollars, so the rising dollar exchange rate will cause import prices to rise proportionately for most countries. This exchange rate problem is exacerbated by US/NATO sanctions that are pushing up world prices for gas, oil and grain. Many countries in Europe and the South have already reached the limit of their ability to pay off their dollar-denominated debt and are still dealing with the Covide pandemic. They cannot afford to import the energy and food they need to live if they have to pay their foreign debts. The global economy is now exceeding its debt limits, so something has to be done.
On Tuesday, September 27, as news of the Nord Stream gas attacks broke, US Secretary of State Antony Blinken shed crocodile tears and said attacking Russian pipelines was "in no one's interest." But if that were really the case, no one would have attacked the gas pipes.
I have no doubt that American strategists have a game plan for how to proceed, and that is indeed in the interest of what the neocons claim is in the interest of the United States – that of maintaining a unipolar, neoliberal and financial global economy.
They have long had a plan for countries that can't pay their foreign debts. The IMF will lend them the money, provided the debtor country collects the foreign exchange to repay the (increasingly expensive) dollar loans by privatizing what remains of their public domain, their natural resource patrimony and other assets, mainly to US financial institutions. investors and their allies.
Will it work? Or will the debtor countries unite and work out ways to restore the seemingly lost world of affordable oil and gas prices, fertilizer prices, grain and other food prices, and metals or commodities supplied by Russia, China and their allied Eurasian neighbors?
That is the next major concern for US global strategists. It seems less easy to solve than the Nord Stream 1 and 2 sabotage. But the solution seems to be the usual American approach: something military in nature, new color revolutions. The goal is to gain the same power over the South and the Eurasian countries that US diplomacy has exercised over Germany and other European countries through NATO.
Unless an institutional alternative is created for the IMF, the World Bank, the International Court of Justice, the World Trade Organization and the many UN agencies now influenced by US diplomats and their proxies, the US economic strategy of financial and military dominance will evolve in the coming years. decades to unfold as Washington has planned.
The problem is that the plans for the Ukrainian war and the anti-Russian sanctions so far are exactly the opposite of what was announced. That may give some hope for the future of the world. The opposition and even contempt of US diplomats for other countries acting in their own economic interests and social values is so strong that they are unwilling to think through how these countries might develop their own alternative to the US world plan.
So the question is how successfully these other countries can develop their alternative new economic order and how they can protect themselves from the fate Europe has just imposed on itself for the next decade.
The aim of Manicheanism (since Carl Schmitt first made the point) is to foreclose on any mediation with rivals, by portraying them as sufficiently 'evil' that discourse with them becomes pointless and morally defective.
MREs make the SEALs gassy.
...truth....
Michael Hudson: What the demise of Germany will mean for the Euro Through DissidentNL-2022-10-026957 2 TelegramTwitterFacebookLinkedinPinterest
DThe rapid demise of Germany reminds me of the German intelligence agent Bachmann in “A Most Wanted Man”. He is made to believe he is on par with the CIA and British intelligence, but realizes too late that he was being played the whole time, writes Conor Gallagher . Hudson gets to the bottom of what Germany's demise will mean for the euro and what the options are for the southern and Eurasian nations trying to resist US hegemony:
The response to the sabotage of three of the four Nord Stream 1 and 2 pipelines in four locations on Monday, September 26 has centered on speculation about who did it and whether NATO will make a serious effort to find out the answer. But instead of panic, there is a great sigh of diplomatic relief, even calm. Shutting down these pipelines puts an end to the uncertainty and concerns of US/NATO diplomats that nearly reached crisis proportions the week before when large demonstrations took place in Germany calling for an end to sanctions and Nord Stream 2 in use. to solve the energy shortage.
The German public began to understand what it meant for their steel companies, fertilizer companies, glass companies and toilet paper companies to close their doors. These companies predicted they would go out of business — or relocate their operations to the United States — unless Germany lifted trade and currency sanctions against Russia and resumed imports of gas and oil, presumably falling back on the astronomical eight. - up to a tenfold increase in it.
Still, State Department hawk Victoria Nuland had stated as early as January that “Nord Stream 2 will not go ahead anyway” if Russia responded to NATO-Ukraine accelerated military strikes on Russian-speaking eastern oblasts. President Biden supported US tenacity on Feb. 7 by promising that “there will be no more Nord Stream 2. We will put an end to it. … I promise you, we will be able to do it.”
Most observers simply assumed that these statements reflected the obvious fact that German politicians were completely in the US/NATO pocket. They persisted in their refusal to approve Nord Stream 2, and Canada quickly seized the Siemens alternators needed to send gas through Nord Stream 1. That seemed to settle things, until German industry — and an increasing number of voters — finally started calculating what blocking Russian gas would mean for German industry.
Germany's willingness to impose an economic depression on itself faltered – but not the politicians or the EU bureaucracy. If German policymakers put German business interests and living standards first, the common sanctions of NATO and the New Cold War front would be broken. Italy and France could follow suit. That nightmare of European diplomatic independence made it urgent to take the anti-Russian sanctions out of the hands of democratic politics and settle matters by sabotaging the two pipelines. Although an act of violence, it has restored calm in international diplomatic relations between American and German politicians.
There is no longer any uncertainty as to whether or not Europe will break with the goals of the US's new cold war by restoring reciprocal trade and investment with Russia. That option is now ruled out. The threat that Europe will break away from US/NATO trade and financial sanctions against Russia has been resolved, seemingly for the foreseeable future, as Russia has announced that a loss of gas pressure in three of its four pipelines will allow saltwater infusion will irrevocably affect the pipes. (Tagesspiegel, Sept. 28.)
Where are the euro and the dollar going?
When one sees how this "trade solution" will change the relationship between the US dollar and the euro, one can understand why the seemingly obvious consequences of the severing of trade ties between Germany, Italy and other European economies and Russia are not overt. discussed. The “sanctions debate” has been resolved by a German and even European economic crash. The next decade will be a disaster for Europe. It can be blamed for the price it paid for letting NATO dictate its trade diplomacy, but it can do nothing about it. Nobody expects (yet) to become a member of the Shanghai Cooperation Organization. What is expected is that his standard of living will fall.
Germany's industrial exports were the main factor supporting the euro exchange rate. The strong appeal for Germany to switch from the Deutsche Mark to the Euro would prevent its export surplus from driving up the D-Mark exchange rate to the point that German products would be priced out of the world market. An expansion of the currency to include Greece, Italy, Portugal, Spain and other countries with a balance of payments deficit would prevent the currency from skyrocketing. And that would protect the competitiveness of German industry.
Indeed, after its introduction in 1999 at $1.12, the euro fell to $0.85 in July 2001, but recovered and even rose to $1.58 in April 2008. It has fallen steadily since then, and since February of this year, sanctions have pushed the euro exchange rate below par with the dollar, to $0.97 this week. The main factor was rising prices for imported gas and oil, and products such as aluminum and fertilizers that require a lot of energy for their production. And as the euro's exchange rate declines against the dollar, the cost of carrying US dollar-denominated debt – the normal condition for affiliates of US multinationals – will rise, depressing their profits.
This is not the kind of depression where “automatic stabilizers” can work “the magic of the market” to restore economic equilibrium. The dependence on energy is structural. And the eurozone's own economic rules limit budget deficits to just 3% of GDP. This prevents the national governments from supporting the economy by spending deficits. Higher energy and food prices – and dollar-denominated debt service – leave much less income to spend on goods and services.
It seems curious that the US stock market rose 500 points for the Dow Jones Industrial Average on Wednesday. Maybe it was just the Plunge Protection Team stepping in to reassure the world that everything would be okay. But economic reality reared its ugly head on Thursday and the stock market returned its ghost gains.
It is true that the end of German industrial competition with the United States has come on the trade account. But on the capital account, the depreciation of the euro will reduce the value of US investment in Europe and the dollar value of the profits these investments can still bring if the European economy shrinks. So the reported profits of US multinationals will fall.
As a final kicker, Pepe Escobar pointed out on September 28 that “Germany is contractually obligated to buy at least 40 billion cubic meters of Russian gas per year until 2030. … Gazprom has the legal right to be paid even without shipping gas. That's the spirit of a long-term contract. … Berlin does not get all the gas it needs, but still has to pay.” It looks like it will be a long legal battle before the money changes hands – but Germany's ability to pay is getting weaker.
Incidentally, the ability of many countries to pay is already reaching breaking point.
The effect of US sanctions and the New Cold War outside Europe
International commodities are still priced primarily in dollars, so the rising dollar exchange rate will cause import prices to rise proportionately for most countries. This exchange rate problem is exacerbated by US/NATO sanctions that are pushing up world prices for gas, oil and grain. Many countries in Europe and the South have already reached the limit of their ability to pay off their dollar-denominated debt and are still dealing with the Covide pandemic. They cannot afford to import the energy and food they need to live if they have to pay their foreign debts. The global economy is now exceeding its debt limits, so something has to be done.
On Tuesday, September 27, as news of the Nord Stream gas attacks broke, US Secretary of State Antony Blinken shed crocodile tears and said attacking Russian pipelines was "in no one's interest." But if that were really the case, no one would have attacked the gas pipes.
I have no doubt that American strategists have a game plan for how to proceed, and that is indeed in the interest of what the neocons claim is in the interest of the United States – that of maintaining a unipolar, neoliberal and financial global economy.
They have long had a plan for countries that can't pay their foreign debts. The IMF will lend them the money, provided the debtor country collects the foreign exchange to repay the (increasingly expensive) dollar loans by privatizing what remains of their public domain, their natural resource patrimony and other assets, mainly to US financial institutions. investors and their allies.
Will it work? Or will the debtor countries unite and work out ways to restore the seemingly lost world of affordable oil and gas prices, fertilizer prices, grain and other food prices, and metals or commodities supplied by Russia, China and their allied Eurasian neighbors?
That is the next major concern for US global strategists. It seems less easy to solve than the Nord Stream 1 and 2 sabotage. But the solution seems to be the usual American approach: something military in nature, new color revolutions. The goal is to gain the same power over the South and the Eurasian countries that US diplomacy has exercised over Germany and other European countries through NATO.
Unless an institutional alternative is created for the IMF, the World Bank, the International Court of Justice, the World Trade Organization and the many UN agencies now influenced by US diplomats and their proxies, the US economic strategy of financial and military dominance will evolve in the coming years. decades to unfold as Washington has planned.
The problem is that the plans for the Ukrainian war and the anti-Russian sanctions so far are exactly the opposite of what was announced. That may give some hope for the future of the world. The opposition and even contempt of US diplomats for other countries acting in their own economic interests and social values is so strong that they are unwilling to think through how these countries might develop their own alternative to the US world plan.
So the question is how successfully these other countries can develop their alternative new economic order and how they can protect themselves from the fate Europe has just imposed on itself for the next decade.
Hence the scuttling of negotiations.
...precisely....
ok ..., just who are the names that make up the [ Euro-elite ]
...just read the roster of the WEF....