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The New Pre-Fascist World Order

Aug
05

Mind September/October for a serious stock market correction

 

The World is developing fast from a post WW2 liberal world order into a Nationalist Pre-Fascist World Order. Unfortunately, the President of the United States has hijacked the GOP and is leading this movement with an evil determination; the US has effectively stopped to be an advocate of human rights, a liberal world order, free speech, and media, strengthening of the rule of law.

 

This changing US role in the World will have dramatic consequences in the coming years and decades, and we should be prepared that we are heading into a post-democratic age. It gives an excellent pretext for other political leaders/movements to abolish inconvenient democratic standards. And it will have a significant impact on global trade and investment flows. These developments happen slowly but steadily while being blurred by the amount and speed of new scandals and while societies wrongly and dangerously get accustomed to the new normal.

 

Typical signs of a Pre-Fascist political order (and recent examples) are:

  • Undermining the Rule of Law and Independence of Courts
    Mueller investigation is a witch hunt, Judges against immigration orders are a shame
  • Abuse of Immigrants/Foreigners as Scapegoats
    Walls shall be built to friendly neighbors, Mexicans are labeled as drug dealers and rapists
  • Use of Aggressive Language and Threats
    Un-cooperative nations shall be erased, former allies are labeled as foes
  • Bashing of Media/Press
    Unpleasant facts become Fake News, Reputable media institutions are the Enemies of the People, journalists are singled out and publicly insulted or humiliated
  • Incriminating/Criminalization of Political Opponents
    Lock her up chants against Hillary Clinton and other opponents
  • Authoritarian Leadership
    Promotion of North Korean Public Administration Culture as the new benchmark for the White House
  • Promotion of Nationalist Framework
    Mega MAGA, US First and Only, Cancellation of Multinational Agreements/Contracts, Undermining WTO, NATO, EU, G7
  • Jeopardizing Due Political Processes
    Governing by Decrees, Inciting Public Pressure via Twitter
  • Direct Communication with Masses
    Using agitation of masses to avoid parliamentary/political discourse

 

This erosion of global democratic norms and safeguards takes place, while the economy is booming – watch out for the looming recession. On a populist foundation, where masses have smelled blood and have been whipped for aggression against media, foreigners, political opponents, worse developments might happen. Pre-Fascist World Order implies that we are on the verge to a Fascist World Order. Unfortunately, the next recession is written on the wall:

  • We are approaching the end of a nearly decade-long economic and financial market boom-cycle, fueled by excess liquidity from central banks and historically low interests rates;
  • Interest rates are rising across the globe and will pose a real-life stress test to many business and investment models, the liquidity bubble might burst;
  • The US has started an extended trade war with China out of a long-term strategic interest to dominate future core technologies;
  • Energy prices have risen fast over the last 12 months and might continue to rise on the basis of a potential escalation with Iran;
  • Decreasing risk appetite on the basis of stronger US dollar and higher interest rates will deepen a beginning emerging market crisis;
  • Record debt levels on Government, corporate and private level might prove unsustainable;
  • Energy prices, Tariffs, interest rates will start an inflation cycle, that will require an even faster increase in interests5 rates;

 

Mind September/October for a serious financial market correction. Cash is king. An un-orderly Brexit caused by an incompetent UK Government and a reckless Tory party will only be an additional footnote in this scenario.

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Professore Nebuloso – A comment on the Italian Political Drama

May
27

or How to Realize Fast that You Cannot Eat the Pasta and Have It.

The Trumpist revolution of narcissism, denial of reality, national egocentrism, and pre-dominance of lies has reached a new climax in Italy – although admittedly briefly outshined by Trump’s letter to cancel the nuclear summit with North Korea. It looks like Italy did not study the Greek adventures of Professor Varoufakis, another case where a self-declared expert wanted to save the country by denying basic economic laws. Alas, we will take front seats in the Colosseum, watching how Professor Conte – whom a French magazine already attested to show all characteristics of a professional crook – will explain, how Italy can avoid bankruptcy while spending additional billions of Euros on the back of an already bursting deficit and debt status of its public finances. While the German Hausfrau is developing an immediate allergic reaction, even the French are scared big time now. Given this situation, the political life of the Professor might be as short-lived as his academic visits to the US.

 

Following bigger footsteps from across the Atlantic, the Italy First Movement wants to eat the Pasta and make the World (first Europe) pay for it. This undertaking is doomed to fail dramatically. Obviously, the Italians do not have the USD, the strongest military in the World and also not the consumption power of the US. The bullying potential is limited in this case. Remember the Greek experience of trying to enforce on Europe and the Euro-System a carte blanche spending spree for Greece. It ended in an economic disaster that left the Greeks with a prolonged crisis, a humiliated Government, stronger controls, more unemployment and additional lost years. They had to swallow the savings dictate from Brussels and Frankfurt.

 

The real choices for Italy are very simple. Restructure profoundly or leave the Euro and devaluate. All else is another aria, that nobody wants to listen to anymore: the French have to look for themselves, the Brits are no more interested, the Germans do not want to pay, and the Spanish have run through the painful experience, why spare the Italians the same? And all Governments face at home the identical outcries of Germany, France, England, Dutch, Whoever First. Nobody is willing or able to come to the rescue. Perhaps the Italian drama will finally enforce on the EU to have the discussion that Macron started, but nobody wanted to lead and decide on: further integration or looser association.

 

The real scary part of the story is, that the Italian voters wanted to have exactly the Government, that they have received now, implementing the very same agenda, that is now promoted. This is contrary to Brexit, where one could argue, whether voters were just tricked by BoJo and alike. No, this time, all was clear and stated during the campaign, and the announced political program reflects a soft version of the election promises. Here are the main reasons for this situation:

 

  • The political bunga bunga elite failed completely over the last 20 years to reform the country and work for the long-term success of Italy. This has led to a lost generation of 18/35-year-old people without job, experience, and perspective. A perfect breeding ground for the extremists.
  • The credibility level of traditional parties and established politicians after 20 years of complete mismanagement was below zero. Many Italians preferred to vote for a journey into the unknown than to live on with their un-performing status quo system leading to a slow but steady decline. And they were right.
  • The EU showed no(!) solidarity with Italy to control and manage the refugee invasion on Italian coasts. Colorful declarations to strengthen European maritime commandos or threats to close down the Brenner border, the over-arching symbol of European free movement, have not helped, but have been taken understandably as cynical in Italy.
  • The Italians have a top-line mentality and a tendency to bend rules (in a positive way!), they are revenue, not cost-driven. In this mentality, the system and philosophy of a common, strictly rule-based currency with frugal Dutch and German Protestants, is completely counter-productive; austerity not compatible with Italian lifestyle and drama.

 

All this has led to a profound change of the political landscape, the Government will stay longer than many expect and implement the will of the voter. However, Italians cannot expect other nations to pay for this emotional overreaction and the following political experiment. What does this all mean for the EU and Italy in specific:

 

  • ECB directors get nervous in Frankfurt. Their overly relaxed willingness to buy Italian bonds without guarantees for sound state finances is in severe danger of backfiring, it has rendered the ECB too dependent on national Governments and prone to financial blackmailing. The falcons have started to take off their hoods. In case that the situation with Italy would escalate, it could herald an inglorious departure of Mr. Draghi.
  • The new Italian Government will start to implement their program and raise spending levels, putting huge pressure on both the EU Commission and the ECB to relax budget restrictions and grant debt relief/write-offs. Finally, we will see a show-down on the Euro. And while Greece had to surrender, Italy has a much stronger bargaining position: they are a founding member of the EU, they are the third strongest European economy and the ECB has an Italian debt stock-pile on its books. Nevertheless, it is inconceivable that other countries, the commission and the ECB would open the Pandora box of further softening debt ceilings and/or financing Italy through ECB debt write-offs.
  • This situation has all potential for big drama with only two potential outcomes: Italy leaves the Euro or faces new elections very fast. Renzi and Berlusconi could celebrate a surprise comeback in the latter case.

Italians voted for change. They are sick of their political elites. They are sick of the most inefficient public service in Europe. But they lack the strength and perseverance to go through radical reform programs. Spending the way out of this crisis does not work within the Euro System. The departure from this system is, therefore, the only credible, viable and productive way forward. Everything else is a lie and illusion. A devaluated Italy leads to a restructuring of the country through lower standards of living for a certain period (less German cars), a relative reduction of wealth and pain for the old and poor in the country. But after this period of pain and the revaluation of the Italian asset base, it would also lead to much stronger competitiveness, an orientation towards the future and attract big streams of foreign investment into the country, which would, in turn, reduce unemployment.

Other Governments and the ECB need to wake up to this new political reality. If not now, at a certain point in the near future, the economic development of Italy and/or financial markets will force a decision on them. As Turkey and President Erdogan are currently realizing: economic laws cannot be denied ad infinitum. Professore Nebuloso and his masters will soon have to decide, whether they surrender, lead the EU to an institutional crisis or their country out of the Euro. We bet they will first try with the crisis.

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Why Europe will Shine in a Robot Future

Apr
25

Investment Climate and Opportunities in Good Old (New) Europe

This analysis was presented and discussed in a different format by VI2 Partners at the

NUS (National University of Singapore) Medicine International Council Berlin Conference: New Europe and Germany on April 23, 2018

 

Many political and financial analysts believe, that Europe is doomed to fall behind in the competition with the new economic and technological powerhouse China and the massive talent hoover and technology breeding ground US. We want to argue in a different direction and explain why we believe more in a next level European Renaissance than in Europe turning into a Museum for the World. The reasoning will start on a global level, move on to European developments and give an outlook, on which industries we are particularly bullish for the future.

 

The Global Arena – War is in the Air

 

The World is moving fast into diverse armed conflicts, without any power showing significant interest or activity to stop or contain these developments. The political post WWII order is trembling and shuttering and will ultimately make room for a new world order following a big earthquake. War is in the Air everywhere and in multiple dimensions:

 

  • Twitterman versus Rocketman Saga: Do not trust the fog bombs that both parties are throwing around. While Trump has changed the quality of the North Korean leader from insane to honorable in a minute, and Kim Jong Un is reflecting on de-nuclearization, both players are lying big time. Hangover more probable, than honeymoon (Macron might also be jealous, in case that Trump would start to kiss Kim during their encounter). In any case: good marketing show for both actors.
  • Isolation and Radicalization of Russia: Russia has overplayed his hand and gets punished for this on all levels. Pushed into the corner of the ill-mannered child, more chaos and disruptions in Europe and the Middle East will be targeted. Alienation between NATO and Turkey, sowing disaccord in the EU, conflict between Israel and Iran, and escalation in Syria. The resulting side effect of higher oil prices will over compensate for the sanctions of the West.
  • Iran, Israel and the JCPOA: It is only a question of time, when the Syrian mess will also lead to a bigger clash between Israel and Iran. Israel in this case can be expected to also inflict material damage to the ballistic and nuclear program of Iran. On the JCPOA, we believe that Netanjahu, Pompeo, Bolton and the conservative establishment will win over the European attempt to save the Iran nuclear deal. If not in May, the plan might soon be history.
  • Trade War: As we have discussed in earlier contributions, China will be punished by the US. It is in the long-term economic, political and military interest of the US, to weaken or at least decelerate the economic rise of China. Trade war is coming.
  • Cyber War: is already taking place. All capable countries are increasing their defensive and attack capabilities. More battles to be seen soon.
  • Authoritarian Tendencies: In times of fundamental global and societal changes, people are voting for authoritarian leaders. This can be observed around the globe. With the free press being in recline, political parties as power buffers dissolving, war memories of the population fading and the nation state back in fashion, water temperature is rising in the risk pot of leaders going wild or rogue.

 

Europe – Renaissance or Museum?

 

To Europe. Given the global percussions, Europe feels like a safe haven of stability, which will be rewarded. There are signs, that Europe can stay a main player in the future and enjoy a bright economic future:

 

  • Broad based recovery: finally, after nearly 10 years of disappointing growth, all major EU economies have started last year a broad-based recovery. We will experience over the next 24 months stronger wage growth, decreasing unemployment, reduction of budget deficits, and rise in inflation in all major EU economies.
  • Diversity and Innovation are elements that mutually support each other. Mixed with a tradition and culture of sciences and invention, Europe has the best natural breeding biotope for game changing technologies and research. And the countries in Eastern Europe from Poland to Romania and Ukraine are only starting to join the game by returning to their roots of scientific excellence in engineering, mathematics, information technology, aviation and others. A young generation of scientists and entrepreneurs take over and will lead Europe to a new level of innovation. Check out where the game changing innovations in most natural sciences and technology areas originated over the last 50 years. No wonder the Chinese are out hunting.
  • Re-industrialization: The peak globalization is behind us and the big move of production to Asia is over. Many companies in Europe are considering to re-locate at least parts of the production back to Central Europe. Automatization and robotisation favor excellent skills, rule of law, IP protection. Labor cost becomes close to irrelevant. Increased protectionism, changing tax regimes, and the political will to re-industrialize are increasing this trend.
  • New social models: Europe will be the first region to test new social models of general income and/or general pension. As certain professions will soon become obsolete on a large scale and faster than many can imagine, new social models and contracts will be a necessity, and Europe will profit from its lead.
  • Quality of Life: Europe is the place to be. In a world of robots, VR and constant information and communication, people will long for a place of serenity, nature and pleasure. To offer quality of life will be key to attracting talent in the global arena in the future. Top talent will choose to live in the best places. From the top 10 cities in the world in the latest Mercer Report on Quality of life, eight cities are located in Europe.

 

Certainly, there are risks around. Brexit, Catalonia secession and traditional Italian political chaos will keep the European capitals and Brussels busy. But in our view the economic impact of Brexit will only be short lived (on the EU side of the Channel), and in the mid-term already prove beneficial to the continent. The constant aging of the population is cause for concern and will require a massive overhaul of social security systems and massive attraction of qualified foreign immigrants against the general mood in the population. Alone in Germany 500.000 qualified immigrants will be needed per year, to keep the pension age at its current level. Europe is falling back in patent applications and industrial production in comparison to Asia, but do not mix up quantity and quality of patents and innovations.

 

Key Investment Areas – Go and No-Go Zones

Looking to the key investment sectors in Europe for future investments and why we have chosen those:

 

  • Fashion, Design and Luxury FMCG: The world wants to consume European and mirror European taste. Wherever you travel in the World these days, luxury brands are dominated by European players. The new affluent population and middle classes of the world want to drive Mercedes, wear Prada and Gucci and drink Bordeaux wines. Rising global wealth in China, Russia, the Middle East and other regions will lead to higher demand.
  • Defense: Higher independence from the US, the growing insight that European governments allowed the run-down of their military, the accepted NATO doctrine of 2%-defense spending relative to the GDP, and new global threats, lead to significant modernization and increase of defense spending of all major European countries. Gone are the times, when it was en vogue to decrease the national defense budgets.
  • IT/Cyber: Corporates, Governments and Privates are waking up to the cyber threat in all areas. Huge need to catch up with reality leads to an investment wave into devices, services and processes. No trust into US, Israeli or Russian solutions. Big chance for European players.
  • Clean/Blue/Green Tech: It is the continent of environment freaks, where train tracks and motorways are not built because of rare species, the population turns maniac about nuclear, GMO, pesticides and any type of emission. Innovation in this area will be developed and tested here.
  • MedTech: The fusing of medical technology, IT, robotics and nano engines and machines will prove to be a key sector of European development, bringing together historical key strengths and skills of the continent.
  • Agriculture and Bio-Food: The westernization of eating patterns, increase in wealth and concentration of population in the cities lead to increased demand of animal farming as well as traditional crops, while at the same time fertile agricultural land is shrinking globally. Central Europe from France to Germany via Poland, Russia, Romania and Ukraine has by far the largest black soil agricultural surfaces in the world, and the potential in some Eastern European countries in terms of professional agro management, output efficiency and logistics is by far not fully utilized. We believe in strong price growth both in agro products and land in the near future, especially in the high-end segments of non-GMO food and low pesticide and bioorganic production processes.

 

NO-GO: Banking (weak capital base and legacy systems in a fintech world) and car Industry (emission scandals, new ownership models, electric vehicles).

 

COUNTRIES: We would overweigh France, Netherlands, Germany, Austria, Poland and Romania. The risk-takers should have a look into Albania, Serbia and Ukraine.

 

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Xi Jinping – The Dragon Rider

Feb
28

During the next decade we will experience the technological, political and military rise and transformation of China to a real super-power. And most probably also its first major economic crisis. Constitutional changes in China will enable its current leader Xi Jinping to stay longer in power than the currently foreseen maximum of two Presidential terms. We reflect on the current situation and potential in China, the reasons why a prolonged reign of Xi Jinping is a blessing for China and the World, and the reasons, why the Western world has difficulties to accept this.

 

Even after 30 years of an incredible economic boom, we still tend to underestimate the power and energy of the Chinese dragon. We take for granted that China is a giant workbench for cheap mass products, not reaching the technological level, design optics, and reliability of Western, i.e. US and European products and services. Just recently, being in Romania, a senior banker told me, they are not interested in leasing offers for Chinese investment goods – because of the risk, that they would have to take these goods to their balance sheet later. Guess what, now the Chinese arrive with their own leasing offers, at much better rates than any Romanian player can offer, of course cross-subsidized by Chinese producers and export-financing agencies. China is slowly, but steadily conquering key markets, through clever and orchestrated market entries and selective acquisitions. Together with the clear path of China to technology leadership in many areas, this entrenchment in other markets will also make China much more resilient for any future domestic downturn. For the fatal under-estimation of the Dragon’s firepower, the next generations of the Western World will pay dearly, some food for thought:

 

Economic Situation and Development Potential

 

  • Chinese Universities are graduating more engineers than any other nation, on top more than 300.000 Chinese students are attending leading international universities, concentrating on the subjects that will shape the World of tomorrow. Chinese technical universities, mere underdogs twenty years ago, are counted among the leading academic institutions today.
  • This week, it was announced, that Geely has bought an important stake into the leading luxury car manufacturer Mercedes/Germany, which is one of the innovation powerhouses in the automotive industry. This is only the highly visible tip of the iceberg. Every day transactions take place, that secure critical knowhow and technologies, strategic market shares and key resources. And services are following. Chinese commercial and investment banks are starting to expand rapidly outside of China.
  • WeChat, Tencent, Alibaba and others are transforming the Chinese business and consumer world into themost mobile society in the World, with an unprecedented innovation power in applications.
  • The World’s fastest super-computers are today located in China, built entirely from Chinese components, in stark contrast to a decade ago.
  • While in the US and the EU infrastructure is rotting away, China is building new infrastructure at the speed of light (or nearly) and connecting itself to the World (New Silk Road): With more than 12.000 miles of existing high-speed train tracks, China has more tracks than the rest of the World combined. And it will add a further 16.000 miles over the next decade. Meanwhile California is struggling to put 600 miles between San Francisco and Los Angeles into operation, over a period of 20 years.
  • The challenges for China are well-known to its leadership and they are discussed: transformation of society, countryside vs. cities, pollution and ecological balance, social services, fight against corruption. Better count on these challenges being addressed and solved within Xi’s reign.
  • The managed growth of a tightly interwoven political and business network for the key industries has proven to be very successful and efficient – enabling much faster economic evolution and transformation than traditional free market social economies with a tendency to over-protect minority interests, especially given the size and complexity of the country. This model will be further developed and professionalized under Xi and be a cornerstone of the next level transformation of China into a global super power.

 

Xi Jinping is the leader of a new global super-power

 

  • China is rapidly developing into a global super power, the only credible contestant to the US. Following specs:
    economic powerhouse with huge home market, technology leadership, educational excellence, clear political vision and ambition, build-up of economic and financial dependencies, strategic bridgeheads in other countries.
  • Some challenges are so big and important, that they can only be solved by one. China is in front of many internal and external challenges. It will help to have a proven, stable and experienced leader like Xi in charge, who will not have to look at an end-date of his term, but who can embark on the next level evolution of the country. Xi has demonstrated a determined but calm and thoughtful hand in dealing with all sorts of unexpected problems. Although being one of the prime bashing targets during the US election, he was one of the first to build a personal relationship with Donald Trump; and was not following other politicians’ examples to enter into a useless counter-bashing exercise. He used the alienation of Trump with continental Europe to step in as the best friend in town.
  • China is blessed by an absence of raw materials. This is forcing China to promote an open and peaceful world order to keep the country and its economy running, and it is not a miracle that China today is recognized as main promoter of free trade and liberalization of markets (just watch again Xi’s speech in Davos this year). China also has a clear anti-interventionist political and military doctrine, which kept it out of global military conflicts in the past.
  • China does not have any dominating religion or radical evangelist movements that want to act as missionaries or jihadists. It does not want to make the World copy its own model – but concentrates on the maximum success of itself.
  • We should not be naïve: Xi is by far the most strong and powerful leader of China since Mao, and he leads an economic powerhouse. China will use this power to push its agenda selfishly and with enormous self-confidence and work on its global objectives with a clear direction and strong perseverance, but cool-headed. As any nation would in a similar situation.

 

The envy of Western leaders

  • Western media, commentators and politicians were fast to criticize the additional power for Xi, not taking into account the differences between China and Western democracies.
  • At the same time, it looks like Western democracies are much more on the verge of losing their societal balance: social and generational contracts are no more working, regulatory frameworks are much too complicated for the needs of fast transformation in a tech world, all major countries are experiencing and welcoming authoritarian tendencies with strong leaders.
  • Parliamentary democracies reach their limits in today’s fast changing environments, opinions are easily influenced and pushed into certain directions. Movements replace parties and lead to partially bizarre results. Just watch the current UK tragedy.
  • The US as a guiding torch for human rights, liberal rights and democratic values is awfully missing on the World stage. This void will have long-term implications for the World order and benefit China’s rise.
  • Strong leaders in secret envy the power and possibilities of Xi to follow through on his vision and transformation plans. They struggle with media, unions, minorities in their countries. And while they criticize China and Xi, they slowly try to copy parts of this model to their own countries, results open.

 

So, despite wide-spread criticism: The signal that the reign of XI Jinping will go beyond the current Government cycle is good news for China – and for the World, at least for all who believe in the sake of a multi-polar World. China will be a stabilizing factor in today’s epic of Twitterman and Rocketman and a strong contributor to global growth and technological progress: The World needs a strong dragon rider.

 

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THE EVER UNDERESTIMATED CHANCELLOR OF GERMANY

Feb
08

Merkel did it again. Another grand coalition between Conservatives and Social Democrats is sealed and will rule Germany for the coming 4 years – should not the youth organization of the Social Democrats be able to mobilize members to reject the coalition contract. While most political commentators are proclaiming the victory of the Social Democrats and the beginning descent of Angela Merkel, I would recommend not to write her off, yet. It is not the first time, that observers and commentators are underestimating her political skills and her brutal instinct for power. Like it or not, Germany has developed into the European powerhouse over the last 12 years of Merkel’s rule with by far the strongest economy and industrial basis, practically no unemployment, budget surplus, and a high reputation in the World. And while Trump and Macron will enter into the competition of the biggest military parade (chased by Putin and Kim), she will continue to do her job, perhaps not at high speed, but silently and steadily. Here are the takeaways what this Government will mean for Germany and the World:

 

GERMANY

  • Tax Inertia: Do not expect any tax improvements for corporations or the middle class. All will stay as is. Luckily positive economic development in Germany with higher salaries and record employment will make the giant exploitation of the performers less obvious. And Germany can save some fiscal ammunition for tougher times.
  • Spendaholics: Social Democrats have pushed and will further bloat a costly social spending program, that will reach nothing but appease their traditional clientele, that is dreaming of more money for less work. What a pity that this money will not be spent on infrastructure developments, universities, and future industry clusters. Good news for private consumption.
  • Reflation: Germany will be one of the first countries in the EU to experience wage-driven inflation. With record employment and high growth, Germany is finally set to adjust its salary levels (Goldman Sachs is recommending 9% increase!). Less competitive neighbors will welcome this development. But beware an already stretched real estate market, and a possible simultaneous increase of interest rates, stronger dollar or energy prices, and we will experience a dangerous cocktail.
  • Survival:  Bravo! With Mutti’s help, the Left in Germany survived and has a new lifeline. It will keep key power positions in the new Government. However, it has to be seen, whether the Left will use this opportunity for renewal or whether the deadly embrace of Merkel will deal them the final blow within the next four years.
  • Strength: The new Cabinet of Ministers is strong and experienced. It will do a better job than many expect. Against all odds, it was a great move of Merkel to give the Social democrats the Finance ministry (this will restrain the spending spree of their own party) and the Interior Ministry to the Bavarian Conservatives (this will put them in charge on the controversial refugee topic).
  • Stability: Germany will see a stable Government for the coming years. There is a solid majority in Parliament, the actors know each other well from many years of political work, and in major political areas they share identical views. Potential disruptive elements will be the youth organization of the Social Democrats (who are closer to Corbyn than Schulz), the liberal-conservative and business wing of the conservative party, which will cry for innovation, tax reform and liberalization and finally the far right AFD, which will exploit all problems around the critical refugee and immigration agenda.
  • Nationalism: Nationalism and new conservatism have grown stronger, and more people follow the lead of other countries, this time shouting “Germany First”. The German People have elected a Bundestag with 60% members from conservative/liberal parties. The traditional left has been badly beaten. The new Government does not represent this, neither in its composition nor in its policies. It has made losers to victors. This is a dangerous game. The German people, like many other nations, are asking and have voted for stronger national identity, less immigration, more sovereignty, new social balance, guidance, and leadership. In case that the Government cannot or does not want to deliver on these demands, a conservative revolution will be on its way, shaking up the German party system faster than many will consider possible today.

 

WORLD

  • The youth and energy of Macron in combination with the cheques appeal and political cleverness of Merkel will lead to a powerful revival of the Axis Berlin-Paris. In an EU without the UK, this Duo will wield the power and seek selective alliances on a case-by-case basis. Romance.
  • Brexit will become even more ugly, as Paris and Berlin will obstruct any easy farewell or special treatment of the Brits. A warm welcome party for UK bankers is prepared in Frankfurt and Paris, there will be no way London will keep unlimited, open access for its services to the EU markets. Illusion.
  • The EU will be braced for more integration and new centralization, and if smaller or Eastern countries will not jump on the train, the famous two-speed EU (which already does exist) will happen. Good news: cash loaded Germany will be ready with its new Government to shoulder the additional cost, investments, and guarantees for the EU. Noise.
  • The dynamics for easing on Russia sanctions will receive a new drive. Trump is keeping them up against his will, but forced by Congress, France is against them, German Social Democrats will convince Merkel to move, and then there is the resurrection of the Italian Cavaliere which could happen in March; he is known to be strongly against the sanctions. The UK as currently the strongest opponent of Russia will be sidelined and marginalized after leaving the EU. The economy, stupid!
  • Trump will have to acknowledge that he will have a strong opponent in the EU (France/Germany/Commission) in case that he will impose any trade measures against Europe. The growing mistrust between the US and the EU will also lead to stronger borderlines in the military and intelligence spheres, the more as the UK is falling away as a bridging factor. From Iran to North Korea, Syria, Palestinians and China, there are now fundamental differences in political strategies and objectives. The transatlantic axis is and will be more weakened, the US will lose influence. Not good!
  • If it plays its game well, China has the potential to develop into a real partner for the EU. All countries are keen to service this giant export market while being hungry for Chinese investments at home (except for high tech). On a global stage, Chinese interests are in many economic areas and even in political areas similar to EU interests. Good Game.
  • Turkey might be the big loser. It has alienated France, Germany and the Netherlands with direct involvement in elections, politicizing the local communities and in prosecuting EU journalists. There is no chance that any Government in Europe would take a battle for getting closer to Turkey at this time, and it would be suicidal given the current nationalist tendencies in Europe. Moreover, Turkey’s former strong supporter US is angered with its military role in Syria/Iraq and has anyway lost its political clout in Europe. Overplayed.

 

Or in a nutshell: Germany will continue to be a stabilizing factor, for now. The Government is not what the population would prefer today, but it could prove stronger or more popular than expected. European integration will benefit. US and UK relations will be challenging.

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Bizarre Year 2017 leading to a Journey into the Unknown

Dec
22
A bizarre year is coming (luckily) to an end. It still feels like attending a high speed, absurd theater play. Some of the most prominent topics of 2017 will (unfortunately) be shaping our world also in the coming year and beyond:
  • Twitterman hits Rocketman: the US cannot and will not allow North Korea to develop the capability of reaching US soil with nuclear, biologic or other dirty warheads. Escalation can happen anytime.
  • The Rise of the Great Narcissist Leader: New leaders are putting the political landscapes upside-down and render political parties obsolete. Brexit, Trump, Macron and now even Kurz in tiny little Austria have proven, that the time for „great“ leaders in Western democracies is back, their behavioral patterns well-known: nationalism, bashing/blaming of others, strong security, centralization of power, control of media, me and my country first and alone. Combine this with a tendency to blur facts with fake and to bypass parliamentary discussion processes and media. We have been there before in history.
  • British Self Flagellation: In admirable self-humiliation the British Government is trying hard to make the Brexit process as chaotic and costly as possible for its population. For the sake of the unity of the Conservative Party the leadership is sacrificing the UK economy. Torys will have to shoulder historic blame if this will push a communist Prime Minister into office.
  • Middle East Hazard: Local and global powers are successfully steering the most explosive region of the World from bad to worse. It doesn’t need much to ignite a fire, that would belittle the Syrian and Yemen civil wars. Energy rollercoaster included.
Other interesting developments in 2017:
  • Diesel Obituary: Thanks to criminal and industry-wide cheating in combination with cities choking from pollution, a steep decline of the Diesel engine has started, which will shake up the industry
  • #metoo: The sick behavior of maniacs leads to a crazy over-regulation of human interaction, both at the workplace and in private interactions
  • Cryptocurrency frenzy: People are putting money into the unknown in an investment frenzy last seen during the great internet bubble.
  • Bubble Party goes on: Central Bank ecstasy injections to markets are still showing effect. No hangover yet – despite warnings on the wall and interest rates rising.
  • Spanish Bullfights: Royal Matadors are trying to tame the Catalan bull from breaking free. Who will go down first? Injuries on both sides to be expected.
More to come. We dare to forecast the following for 2018:
  • The Return of the Dollar: Global uncertainties, the smell of war and the tax present of Santa Donald strengthen the USD
  • US turning against China: Frustrated with not being able to solve the Korean problem, Trump delivers on a further election promise and starts hostile trade activities against China
  • Energy Price Surge: Smart OPEC, Middle east explosions and strong economic growth in EU and US lead to a further increase of energy prices
  • Inflation Reloaded: All of the above in concert with strong growth, rising interest rates and stronger employment bring back inflation, possibly stronger and faster than many believe
  • Cryptocurrency breakdown: Crypto Heists, regulation and taxation and the issuing of cryptocurrencies by asset backed national banks lead to a steep loss of early cryptocurrencies
  • The Bears go Hunting: The bears are back for the big fish, as economic realism is coming back to the investment table and all the good news are already priced into the market
  • King BoJo playing Hamlet: “To Brexit or not To Brexit“ is the question of the year, which will be raised louder and louder. Dramatic showdowns and changes of main actors included
  • French Renaissance: King Macron further takes the lead on the European and global stage and delivers in France. New strength of the French economy, resurrection of the Grande Nation
We wish to all our partners and friends a joyful and peaceful start into a sparkling, successful and healthy 2018! We would be honored and glad to help you grow your businesses successfully in the New Year. Stay out of trouble and try to watch less TV than the US President.
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MERKEL, MERKEL ÜBER ALLES!

Sep
20
Sunday evening Angela Merkel will have won parliament elections in Germany for a fourth consecutive time and start her fourth term as German Chancellor. It sounds paradox, but it is true, that she is longer in office than the World is using Apple iPhones and a generation of young Germans do only know her as the leader of Germany. Yet, in a world where twitter-man is hitting at rocket-man, and BoJo is not the name of a reality-show porn star, but of her Majesty’s foreign minister, the German „Mutti“ is a welcome deja-vu experience.
While narcissist and lunatic leaders are willing to steer our planet rapidly into chaos, her lack of ego and need to shine, and her sober approach to slow but steady problem and conflict solving have given her a unique political sex appeal, which will not only be honored by voters on Sunday but is recognized by political friends and enemies alike. Here are the main reasons for her seemingly un-ending success, which should become a case-study for the handbook of political leadership:
  • Merkel was able to turn her Chancellor role into a Presidential role, putting her beyond the day-to-day quarrels of political fights and giving her a Mother-of-the-Nation image
  • Merkel crushed the Social Democrats, by moving her party to the left, leaving no political wiggle room for her junior partner in the coalition government
  • Merkel is constantly avoiding to enter into any controversial political discussions but lets her party soldiers and officers lead the fight. She only comes in to announce the results, thus never taking a direct hit
  • Merkel’s cool-headed, logic-driven and stubborn approach to conflicts has helped her to ride undamaged through the European debt crisis as well as major geopolitical controversies, e.g. the Ukraine/Russia conflict
  • Her party has succeeded to turn her sober character and appearance into an untouchable political weight. Her style and behavior is no more ridiculed but admired
  • Believe it or not, but under the camouflage of her general appearance, Merkel is the biggest populist leader of Europe. She has an excellent feeling for the mood of the population, and will jump on anything that she feels would impact on her leadership or incense major discussions, not hesitating to throw major concerns, values and beliefs of her own party under the bus: as happened with the exit from nuclear energy after the Fukushima accident or the legalization of same-sex marriage or the Diesel scandal of the German auto industry
  • Last, but not least, she has been able to use Trump, Brexit, and Erdogan to promote her style of Governance as a guarantee for stability and predictability in Germany and in the World – and there is nothing that Germans love more
However, starting her fourth and most probably the last term as the leader of the biggest European country and economy (even Germans might eventually grow tired of her after 16 years), there are four major topics that she will need to address actively to build a lasting legacy:
  • Co-leading together with President Macron the European Union to the next development stage, and increasing integration after Brexit will require explaining to German voters why they will have to shoulder bigger financial contributions in European solidarity and why they will have to give up more financial sovereignty to a United Europe
  • Reforming and rejuvenating the German economy, industry sectors, and infrastructure, which are currently lulled by the global success of their products and services. Drastic reforms and innovations of the car industry are needed to counter the rapid electrification and “Uberization” of the society and to avoid a coal industry deja-vu in this vital industry for Germany. Germany can and should afford to invest much more into building future options through education, IT and communication infrastructure, build-up of new industry segments. And finally, the society needs to be prepared for a rapid robotization of major production, supply, and service processes, which will lead to the disappearance of millions of jobs, while creating vast opportunities for others.
  • Promoting a more balanced distribution of benefits and wealth in a society that has seen – as most of the Western societies did – a constant financial erosion of the middle class, the perception of taxation injustice, a burn-out frenzy, the evolution of multi-class health system with limited and decreasing access of the general population to first-class services, and will see the rapid disappearance of many low-skill jobs in the future.
  • Beefing up the security and safety in a country that has welcomed more than a million new citizens in a wild process without any serious vetting. The hot refugee topic, that many domestic and foreign commentators have claimed to be her biggest political failure, will pose, absent of any ideology, a substantial security threat for Germany. To tackle the fears and concerns of the population and to counter all nationalist tendencies Merkel will have to increase spending and efforts in domestic security capabilities, including high-tech ex-post vetting, surveillance and profiling skills. All of this while transforming Germany into an open-minded, integrative society that can digest massive immigration and profit from an increase in diversity of cultures, languages, and skills.
In a world filled with war-mongering, arms and drugs proliferation, hate speeches, nationalist tendencies, extreme technological progress, and change, it would be great, if a nation, that has put the World into misery and ashes in two world wars, could act as an anchor for stability and peace. Merkel is the right person for this task. For Germany, Europe, and the World. Therefore good luck for Angela on Sunday and a lucky hand in ruling Germany for the coming four years. The World is in urgent need of stabilizing elements.
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#Fire and Fury – Does the World need a massive global armed conflict to re-orientate??

Aug
10

#Fire and Fury –
World Stability and Security have deteriorated fast over the last years. Does the World need a massive global armed conflict to re-orientate??

Trump and Kim are openly playing with fire. The President of the US is chatting with the Chinese President over a piece of „great“ chocolate cake, while the US Navy is simultaneously bombing Syrian air bases. We are watching in awe and silent admiration the explosive power of the „Mother of All Bombs“ being dropped on Afghanistan after 15 years of armed conflict as if it would be the latest release of a computer war game. Japan and Germany, who had learned their lessons from the monstrous atrocities of WW2 are asked to massively increase defense spending and armament. Even a nuclear armament of these countries is no longer taboo in the discussion. Fascist and Chauvinist elements are gaining ground fast, the growing desire for strong and full-mouthed leaders is frightening. Democratic checks and balances are replaced with dictators, authoritarian systems, or one-person centric movements.

The Nation State proclaimed with a noisy „Us First“ is celebrating an amazing comeback. There is a populist outcry by the forgotten men and women and the abandoned and exploited middle class. And all this, while the Mother of all Bubbles, the illusion of free money for all, nurtured by the Fed, the ECB and the BOJ, is granting the treasuries the comfort to continue past excesses and inefficiencies.

Unfortunately, it looks like the World needs a huge catharsis to bring us back some urgently needed (re-)orientation. A clarification of what we want to have and what not, how we want to live and how not, how we want to treat our own people and our neighbors and how not. What the basic economic agreements are between rich and poor, between old an young, between capital and labor, and between nations and neighbors. Currently, it does not look like if we would be able to obtain this clarity through the mental and political evolution of our societies, but only through a major global catastrophe, that goes beyond borders, societies, religions. There is a multitude of factors leading to global instability, to a new geo-political reality, and each one of them has the potential to unleash a global chain reaction:

  • The US, once perceived as the leader of the free world, is headed by a nationalist narcissist. Democratic principles are openly undermined and ridiculed.
  • North Korea is playing openly with fire, but unfortunately on top of a nuclear warhead.
  • The Middle East is in more chaos than ever. Syria is already a volatile, global battleground.
  • Two powerful groups are forming, heavily armed, and ready to test their arsenals in the Middle East and beyond: Iran/Iraq/Turkey/Qatar/Afghanistan – Saudi Arabia/Egypt/UAE/(Israel).
  • Old alliances break up without new ones evolving fast enough.
  • Religious and political extremists are progressing worldwide.
  • A migration iceberg is on the move.
  • Democracy is losing out against Dictators and authoritarian systems, media are under attack.
  • Fascist, Nationalist and Chauvinist Elements are growing, three generations after WW2 there is no collective memory on risks and dangers.
  • Cyber War and Cyber Crime are a direct threat to democracy and the rule of law, and can only be tackled internationally.
  • The end (if ever taking place) of cheap money will lead to global recession, in parallel to anti-globalization, protectionist trends.
  • More and more traditional workplaces will be suppressed by robots, millions of people will not be able to contribute in the next generation labor market.
  • The spiritual health of people is dying under a materialistic, ego-centric avalanche of individual self-optimization.

Unless the UNSC, i.e. the US, EU, Russia and China engage in a shared(!) control of a World in a lunatic frenzy, we are heading fast towards an unpredictable chaos, driven by selfish and authoritarian Nation States. And this will indeed cause fire and fury. Btw, a very similar situation to the pre-WW2 period. There is still hope that responsible leaders and politicians worldwide are waking up to the new geo-political reality, and give new vision and orientation to the World, but time is running out. Or humankind will have to go through the catharsis of a huge catastrophe. The good news is: artificial intelligence is advancing fast.

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DUMP DUMB TRUMP – Admittedly A European View

Jun
01
The reality show in the White House continues. Between family members selling US visas to China, Ivanka cashing in 100 Million USD for a so far unknown foundation while her husband is closing a huge arms deals with the same clients, and the President practicing sword dance, the post WW II order is eroding faster than the Larsen C Shelf in the Antarctic. In between we learn, that the Real Donald is giving away his Real Phone Number to other heads of states, talking openly about the locations of nuclear subs, handing out Israeli intelligence to the Russians (while keeping European allies in the dark) and looking for communication back channels with nations suspected of hacking and influencing US elections.
Washington rumors are spreading, that the producers of House of Cards are increasingly annoyed, as viewers get bored with second class intrigues and plays of Frank and Claire Underwood, and are demanding instead bodycams and live streams from the West Wing of the White House. Netflix would love to negotiate with the Trump family on the licensing rights, and the “Trump First – All Others are Fake” movement could make another great, fantastic deal, creating millions and millions for the family, doing such a tremendous job for the country. Future tax benefits for the ultra rich need to be good for something.
But, serious. This US presidency, which could have been indeed a great opportunity for the US, is turning into an absurd theater with collateral damage beyond any imagination. Other Western leaders are starting to move from utter disbelief into open opposition and strategic re-orientation of their countries, not willing to embark on the twitter based America Only adventure at the cost of their countries and taxpayers.

7 days in office – who will call the bluff? | alt-think.com

The RealDonald proves to be very real. 7 days in office, and the world order is already shaking. The world is paralyzed, and in utter disbelief what is happening and how fast and how un-contested. Whoever had hoped or feared that the behavior of the President is different to the behavior of the President-Elect and…

Since our last contribution on US developments „7 days in office- who will call the bluff“ the White House Adhocracy has trumped all expectations:
  • Nato has been severely weakened. Article 5 no more unanimously supported. Individual states and EU to develop parallel defense structures to NATO
  • Russia and China have gained global recognition and increased their significance as a global partner
  • The armament race in the Middle East and around the globe has gained pace
  • Already sensitive intelligence services are on alert and less inclined to share
  • Global fight against climate change is substantially weakened
  • The „Donald-gut-feeling against substance and logic” has led to firing and deliberate brain drain from the White House
  • The American torch of freedom, human rights and democratic values is fading
Well the good news is, that populist movements in Europe are losing ground fast with every statement and action of Trump. He is also the single most important factor for faster European integration. The bad news is, that we can expect more and worse statements and actions, before this chapter of American history will be closed (and do not expect it to happen fast). By scrapping international agreements and contracts and focusing on a purely competitive win-lose approach in international politics, the US will lose its credibility as a reliable partner and as a global leader, opening the field for other players to fill this void. Nobody can tell today, to what this will lead.
The probability for a (successful) impeachment is very low, given the rightful constitutional hurdles for this process in the absence of a smoking gun fired by Trump. But, the bluff will be called more and more by the press, the FBI and the intelligence services; and of course Little Marco and Johnny Walker Mc Cain are always in to start a DUMP DUMB TRUMP campaign. As this will start nagging and hurting more and more, with a tsunami of news from special investigators, senate committees and administration insiders, there might be a case for a face-saving (reason to be found) resignation of the President. Or, we might experience the Real Donald starting a Real war on the Korean peninsula. He would not be the first to cover problems at home with escalation abroad. The probability of this scenario, unfortunately, is going up. Watch out, we are moving rapidly into unknown and turbulent waters.
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Vive la France – or not?

Apr
24
The first round of the French Presidential election is finally over. International press and investors are relieved and cheering, basing their enthusiasm on the following points:
  • The worst case, a run-off between the extreme right (Le Pen) and the extreme left (Melenchon) has not materialized
  • Everybody is counting on a home-run for Macron to beat Le Pen in the run-off in two weeks
  • And, omg, the researchers have been right in their forecasts this time (btw the first time in a major election since 2015)
In reality, the situation is far worse, than it looks at first glance. This election will be a further burden on France, which has already been punished by Hollande’s Presidency for the last five years, and it is doubtful whether the French population is yet ready for any serious improvement. Here is why:
  • France for the first time since WWII has nearly half of their voters who are blinded by either nationalist or communist ideas, and are openly against membership in the European Union. They are against all long needed reforms of the French economic system, in which today the bloated civil service is acting as an iron wall against any performance oriented reforms, in which the focus would have to be more on give and do than on take. This is a bad foreboding both for up-coming parliamentary elections and any reforms that would have to be explained to the population.
  • Macron, in case that he will win the run-off, will be a President without the Parliament’s backing, and it would be a miracle if he could engineer with his new movement a solid majority in the upcoming Parliamentary elections. The Co-habitation between President and Parliament from different parties had already proven very bad for political progress in France in the past, and is very hard to imagine how major reforms in France (which always co-incide with the „Misérables“ inspired burning of tires and blocking of roads, that is unfortunately enshrined in the French genetic code) could be executed in this setting. He will be a President who can only rely on the public vote, but if nearly half of the population will be on the barricades ..?
  • It is not yet clear, whether Macron will really win so clearly in the end. The voters from the extreme left might be tempted to vote for Le Pen and also some voters from the conservative party might not be amused to vote for a Mini-Hollande. And then …, there is still the chance of foreign meddling in the election, and the uncovering of a media hyped scandal. Francois Fillon has shown how fast a leading contender can burn to ashes.
France is in urgent need of a strong President, seconded by a strong Parliamentary majority, who can re-design the French societal contract to be able to cope with the challenges of the next decades. Illusions of an endless growth of the state have to be burned, and it will hurt. It will hurt the many people who believe that it is normal to start a pension at the age of 55, after having been exploited for decades by working 35 hours per week. The longer this illusion is kept, the more radical and revolutionary the answer will be one day in the not so far future.
The election result is a drastic outcry of the population, strengthening the extreme parties and weakening the established left and right, who have led France into the current disaster. As in other countries the middle class and the working people in the private sector have been sucked out by a bloated public sector and over-spending, state regulation, over-administered social systems which are in addition strained by too high un-employment, and a growing feeling that French politicians lack the courage for real reforms. The global role and importance of „la Grande Nation“ is diminishing fast and this is hurting the French ego. Someone has to tell the French, that greater wealth, higher employment and sound state finances, will only result from hard work, more flexibility, greater innovation, attraction of the best minds and entrepreneurs, rewarding and not punishing performance; and that it will not result from ever more taxes, more state employees, higher welfare benefits, more tricolore flags, less globalization, more deficits and state spending. Imitating Trump in a „France First“ movement will work even less with a home market the size of France and the top-down, Paris-centric corporate and industrial French culture.
We will see whether Mr. Macron is up to this task. It is definitely too early to cheer.
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