Trump Tax Cuts – The Spark That Burns Down The EU

Authored by Tom Luongo,
For most of this year I’ve been wondering what would the spark that would set off a banking panic in the European Union.
I know, but what do I do for fun, right?
I’ve chronicled the political breakdown of the EU, from Brexit to Catalonia to Germany’s bitch-slapping Angela Merkel at the ballot box. All of these things have been open rebukes of EU leadership and it’s insane neoliberal push towards the destruction of national sovereignty and identity.
And what has propped up this slow train-wreck to this point has been the world’s financial markets inherent need to believe in the relative infallibility of its central bankers.
Because without competent people operating the levers of monetary policy, this whole thing loses confidence faster than you can say, ‘Bank run.’
The confluence of these things with the big changes happening politically here at home with President Trump are creating the environment for big trend changes to begin unfolding.
And, as always, you have to look to the sovereign bond and credit markets to see what’s coming.

This post was published at Zero Hedge on Thu, 12/28/2017 –.

Where European Populism Will Be Strongest In 2018

While the establishment may breathe a sigh of relief looking back at political developments and events in Europe – which was spared some of the supposedly “worst-case scenarios” including a Marine le Pen presidency, a Merkel loss and a Geert Wilders victory – in 2017, any victory laps will have to be indefinitely postponed because as Goldman writes in its “Top of Mind” peek at 2018, Europe’s nationalist and populist tide was just resting, and as Pascal Lamy, the former Chief of Staff to the President of the European Commission admitted earlier this year, “Euroskeptic politicians are largely following the pulse of domestic sentiment. The fact is that the public is less enthusiastic about Europe than it once was.”
Echoing the sentiment by the europhile, Goldman’s Allison Nathan writes that while the Euro area’s most immediate political risks – i.e., populist or euroskeptic parties winning key elections this year – did not materialize, these movements have continued to gain traction.
In the Dutch elections in March, the far-right Party for Freedom performed worse than polls had once predicted, but still increased its share of the vote relative to the 2012 elections. It remains the second-largest party in parliament. In France, concerns about the prospect of Marine Le Pen winning the presidency gave way to optimism over Emmanuel Macron’s reform agenda; nonetheless, Le Pen posted the best-ever showing for her party in a presidential race. In Germany, Chancellor Angela Merkel’s CDU-CSU retained the largest number of seats in the Bundestag, but the far-right Alternative fr Deutschland (AfD) entered it for the first time with 13% of the vote. And elsewhere in Europe, populist parties on various parts of the political spectrum performed well enough to participate in government coalitions; indeed, an anti-establishment candidate in the Czech Republic recently became prime minister Some other observations and lessons from recent European events in the twilight days of 2017:

This post was published at Zero Hedge on Dec 26, 2017.

Bill Blain: “Germany Is On Fire: How Long Until Bundesbank Demands Rate Hikes To Cool It?”

Blain’s Morning Porridge – November 27th 2017, submitted by Bill Blain of Mint Partners
Germany – not solved and likely to prove an even larger problem..
‘El castillo, le torre yo soy, le espada que guarda el caudal.
Another massive shopping day – Cyber Monday. Let’s see if the declining footprint into US malls confirms the end of retail and tomorrow belongs to Amazon, Ebay and Tencent? Suspect so… (Personally, I’m furious as I bought a new evening suit recently and picked it up Friday to discover even a proper West-end tailor was having a ‘black Friday sale’. I won’t be going back there again!)
Looks like I got Germany wrong.
My predictions Angela Merkel would find herself trapped into a difficult minority or a convention defying second election look increasing unlikely as she is now threshing out a ‘Grand Coalition’ CDU deal with the SDP. My ‘bad’. The membership of both parties apparently support it. I read a single member of her own party who dared to call for her resignation was subsequently booed down by the mob of enthusiastic Merkelistas.
The market is welcoming the news as far more positive for Germany than the earlier Jamaica Coalition, and positive for Europe as a reinvigorated Merkel will re-engage with Macron’s France to solve Europe’s many problems with sprinklings of German good-fairy dust.

This post was published at Zero Hedge on Nov 27, 2017.

In Dramatic Rebound, Euro, DAX Recover All Losses; “Is Strong Government Overrated?” SocGen Asks

Having tumbled 80 pips to a one week low in kneejerk response to the late Sunday news that Angela Merkel had failed to form a government following the collapse of the “Jamaica Coalition” talks – when the Free Democratic Party walked out, saying the differences with the Green party were too great to bridge – both the Euro and European stocks have staged an impressive rebound, and the entire gap lower in the FX pair has now been, well, pared.

Alongside the rebound in the EURSD, the German DAX, which earlier fell as much as 0.5% at the open (and whose futures at one point overnight looked set for a 1% drop), trims early losses and briefly even turns positive, on what some have speculated was another round of central bank intervention.
As Bloomberg notes, while analysts contemplated possible scenarios of Merkel setting up a minority government headed by her Christian Democratic-led bloc or asking President Frank-Walter Steinmeier to order a fresh national election, “leveraged and interbank names were quick to fade the euro’s dip that stretched as much as 0.6% to 1.1722.”

This post was published at Zero Hedge on Nov 20, 2017.

“Worst Case Scenario” Looms As Merkel’s “Jamaica Coalition” Collapses; EUR Sinks

We warned on Friday that German Chancellor Angela Merkel faced a ‘night of the long knives’ in her efforts to bring together the co-called ‘Jamaica’ coalition of four parties and after a desperate weekend of talks, Bloomberg reports Merkel’s efforts at forming a coalition have failed meaning a second election looms and sending the euro sliding.
As Bloomberg reports, talks on forming German Chancellor Angela Merkel’s next government collapsed, throwing the future of Europe’s longest-serving leader into doubt and potentially pointing the world’s fourth-biggest economy toward new elections.
After a 12-hour negotiating session that ended shortly before midnight Sunday, the Free Democratic Party walked out of the exploratory talks, saying the differences with the Green party were too great to bridge.
Merkel has sought for four weeks to enlist the two smaller parties for her fourth-term coalition.

This post was published at Zero Hedge on Nov 19, 2017.

Schuble: Another Financial Crisis Is Coming Due To Spiraling Global Debt, “New Bubbles”

Following the disappointing for Angela Merkel and her CDU German election results, which propelled the populist AfD into Germany’s political establishment with 92 members of parliament, the first casualty was Germany’s finance minister, Wolfgang Schuble, who in a few days will relinquish his long-held post and move on to the ceremonial role of Bundestag president. As part of his farewell tour, Schuble – like so many other former members of the establishment- took a parting shot at the system he helped create and warned that “spiraling levels of global debt and liquidity”, as well as “new bubbles” present a major risk to the world economy.
Speaking to the FT, the Europhile beloved in Germany for successfully steering one of the world’s largest economies for the past eight years, and who nearly led to Grexit in the summer of 2005, said there was a danger of ‘new bubbles’ forming due to the trillions of dollars that central banks have pumped into markets. Confirming another fear widely propagated by the Putin propaganda alternative media, Schuble also warned of risks to stability in the eurozone, particularly those posed by bank balance sheets burdened by the post-crisis legacy of non-performing loans, something we have warned about since 2012, and an issue which remains largely unresolved.
A strong advocate of fiscal rectitude and debt reduction, Mr Schuble dominated Europe’s policy response to the eurozone debt crisis and has been vilified in countries such as Greece as an architect of austerity. But he will mainly be remembered as the most ardently pro-European politician in German chancellor Angela Merkel’s cabinet, skilled at selling the benefits of the euro and of deeper European integration to an often sceptical German public.

This post was published at Zero Hedge on Oct 8, 2017.

German Establishment Routed: AfD Second In Former East Germany; Result “Less Market Friendly Than Expected”

The first sellside comments on today’s German elections – which as a reminder was a disaster for the German establishment, following the worst showing for the CDU/CSU since 1949 and the worst result for the SPD since 1945 with support for both parties tumbling since the 2013 elections…
… have started to trickle, in and according to SEB, the result is ‘less market-friendly’ than expected.
Quoted by Bloomberg, SEB cross-asset strategist Thomas Thygesen said that the result is a victory for Angela Merkel as expected, but her mandate going into negotiations about deeper euro integration does not look quite as strong.
“It looks like marginally less market-friendly than expected,’ Thygesen said adding that ‘I’d say this is in line with our expectation that the euro would pause around $1.20 vs dollar and then maybe retrace a couple of percent over the autumn.’
‘The AFD above 10% suggests that even here the stakes are high: if the European project doesn’t fly this time in a way that voters like, Germany could look less politically stable in a few years.’
A note from Pantheon’s Claus Vistesen is similarly concerned about the election outcome and the viability of the upcoming coalition:

This post was published at Zero Hedge on Sep 24, 2017.

Germany’s New Political Party Is Just Another Big-Government Party

The German election is a month away and with that also from a real rarity: a party getting into parliament which is on the “right” of Angela Merkel’s CDU and its Bavarian partner, the CSU. Over the last decades, this has been a no-go zone in German politics, too severe were the memories of the Nazi era. But come September, the Alternative fr Deutschland (Alternative for Germany), or AfD, will set a landmark, beating the five percent threshold to get into parliament in all likelihood (currently they are polling between seven and ten percent).
As we have seen throughout the years, those considered as ‘right-wing populists’ in the mainstream are by no means a homogeneous group, from Brexiteers in the UKIP and on the fringe of the Tories as somewhat favorable examples to more frightening ones like Marine Le Pen in France. But what kind of party is the AfD?
The AfD was founded in 2013 by a bunch of economics professors – at first they were mockingly called’Professorenpartei’ (‘professor’s party’) – who were fed up by the crisis in Greece and demanded a German exit from the Eurozone. Among them were economists like Joachim Starbatty and Roland Vaubel, known in Germany for their free-market ideas. The goal was to found a party which would reconcile the cultural conservatism that was lost in the conservative CDU and the liberal economic policies that were lost in the classical-liberal party, the FDP. However, the AfD focused increasingly on refugees instead of the euro, which led to the departure of many of its founding members in 2015, including the leader up to that point, Bernd Lucke.

This post was published at Ludwig von Mises Institute on August 30, 2017.

Europe’s Unsustainable Welfare State

Angela Merkel used to say that ‘the European Union is about 5% of the world’s population, about 25% of its GDP, and about 50% of global welfare spending’:
The real data is more concerning.
The European Union is:
7.2% of the World Population.
23.8% of the World’s GDP.
58% of the World’s Welfare Spending.
Something has to give.
The EU average tax burden on workers is 44.9%. The average worker in the EU spends half a year working for the tax man.
Taxation accounts for 41% of the euro area GDP.
Ease of doing business remains below the leading economies of the world.
Bureaucracy is asphyxiating. The EU approves on average 80 directives, 1,200 regulations and 700 decisions per year.
The main EU economies remain significantly below the leaders in economic freedom.

This post was published at Ludwig von Mises Institute on 07/14/2017.

The German problem: Why Germany’s current-account surplus is bad for the world economy

The battle-lines are drawn. When the world’s big trading nations convene this week at a G20 summit in Hamburg, the stage is set for a clash between a protectionist America and a free-trading Germany.
President Donald Trump has already pulled out of one trade pact, the Trans-Pacific Partnership, and demanded the renegotiation of another, the North American Free-Trade Agreement. He is weighing whether to impose tariffs on steel imports into America, a move that would almost certainly provoke retaliation. The threat of a trade war has hung over the Trump presidency since January. In contrast, Angela Merkel, Germany’s chancellor and the summit’s host, will bang the drum for free trade. In a thinly veiled attack on Mr Trump, she delivered a speech on June 29th condemning the forces of protectionism and isolationism. An imminent free-trade deal between Japan and the European Union will add substance to her rhetoric.
There is no question who has the better of this argument. Mr Trump’s doctrine that trade must be balanced to be fair is economically illiterate. His belief that tariffs will level the playing field is naive and dangerous: they would shrink prosperity for all. But in one respect, at least, Mr Trump has grasped an inconvenient truth. He has admonished Germany for its trade surplus, which stood at almost $300bn last year, the world’s largest (China’s hoard was a mere $200bn). His threatened solution – to put a stop to sales of German cars – may be self-defeating, but the fact is that Germany saves too much and spends too little. And the size and persistence of Germany’s savings hoard makes it an awkward defender of free trade.
At bottom, a trade surplus is an excess of national saving over domestic investment. In Germany’s case, this is not the result of a mercantilist government policy, as some foreigners complain. Nor, as German officials often insist, does it reflect the urgent need for an ageing society to save more. The rate of household saving has been stable, if high, for years; the increase in national saving has come from firms and the government.
Underlying Germany’s surplus is a decades-old accord between business and unions in favour of wage restraint to keep export industries competitive. Such moderation served Germany’s export-led economy well through its postwar recovery and beyond. It is an instinct that helps explain Germany’s transformation since the late 1990s from Europe’s sick man to today’s muscle-bound champion.

This post was published at The Economist

Merkel Wants G20 Global Taxation of Internet

Markel is calling upon the G20 to regulate the internet. While she if pretending to be concerned about cyberattacks, which no regulator can prevent, you have to look into the finer details. Chancellor Angela Merkel called for a global regulation sayying: ‘Industry 4.0 will have to go through the process that we have already gone through at the World Trade Organization (WTO) with real trading operations that we have gone through in the G20 process with financial market regulation.’
She noted that the ‘concerns’ include ‘cyberattacks, the responsibility of social platforms to tax issues in international trade, and growing concern in the world Of policy. ‘

This post was published at Armstrong Economics on Jun 15, 2017.

Stocks Jump As Dollar Dumps And Bitcoin Explodes To Record Highs

Just because it made us laugh…
As Bloomberg notes, the S&P 500 climbed for the third consecutive session as President Donald Trump’s trip to Saudi Arabia netted deals that lifted defense shares. The euro remains firm having pared gains from Chancellor Angela Merkel’s comment referring to the single currency as ‘too weak.’ The 10-year Treasury yield climbed above 2.25% while gold rose and crude climbed to the highest in a month as Saudi Arabia said all producers agree on extending output cuts. Brazil’s real trimmed losses after the top court suspended its ruling on President Temer, while Mexico’s peso gained as interest rate differentials temporarily overshadow NAFTA concerns.

This post was published at Zero Hedge on May 22, 2017.

Euro Surges After Merkel Says Euro Is “Too Weak”, Blames ECB

In the early days of the Trump administration, when the world was still worried – unnecessarily – that Trump would single out Europe, and especially Germany, as an unfair trading partner, slamming the Euro as too weak, Germany’s fallback response was to say the currency is where it is due to the ECB’s monetary policy, oh and that the Euro wasn’t weak, but merely reflecting fundamentals. Well, moments ago the conventional narrative appears to have shifted once again after Angela Merkel herself took on the role of chief Euro critic, saying the common currency is “too weak” and blaming the ECB for the record German trade surplus, accusing Draghi’s policies for the weak euro.

This post was published at Zero Hedge on May 22, 2017.

Macron’s Victory May Be Disaster for Merkel

Angela Merkel was the first phone Emmanuel Macron made after the election. My point about the election for Macron was the worst possible outcome for the Euro was not just reflected in yesterday’s outside reversal to the downside. Merkel has already made it clear that she will not relax Eurozone spending rules to help Macron. The defeat of Le Pen has sealed the fate of Europe because there will be no reflection upon how to reform the EU to save Europe.
Only a sublime idiot would now think everything in Europe will be just great. We are looking at a major hard landing for Europe. Keep in mind that local governments even in the USA are doomed for all they can do is raise taxes further crushing their population and destroying their own economy.

This post was published at Armstrong Economics on May 9, 2017.

Gold Price Stuck Below 200-Day MA as Merkel Snubs May, China ‘Tries to Curb Bubbles’

Gold prices again dipped and rallied back above $1250 per ounce in Asian and early London trade Thursday, unchanged from the end of last week with analysts continuing to point to the metal’s 200-day moving average at $1260 as strong resistance to the first quarter’s 8.6% gain.
Asian stock markets closed lower but European shares held flat overall.
The British Pound meantime held sharply below this week’s near 8-week highs on the FX market after German Chancellor Angela Merkel rejected the central proposal in UK Prime Minister Theresa May’s formal Brexit letter – handed to the European Council yesterday – for negotiations on both the UK leaving and its then-relationship with the European Union to start now and run together.
While the giant GLD gold ETF ended Wednesday unchanged in size, the SLV silver trust shrank 0.8% as shareholders liquidated stock, forcing an 85-tonne outflow – equal to more than 1 days’ global silver mine output – and taking the fund’s bullion holdings back to mid-March’s 12-month lows at 10,291 tonnes.
Trading at $18.16 per ounce, silver prices held a 2.1% gain for the week so far Thursday morning in London.
“Resistance remains firm at $1259.40 – the 200 day Moving Average,” says the daily technical analysis of gold prices from bullion clearing and market-making bank Scotia Mocatta’s New York office.

This post was published at FinancialSense on 03/30/2017.

Why Angela Merkel Hates Tax Competition

European political leaders gathered in Malta last month to discuss the future of the European Union. During the meeting, German Chancellor Angela Merkel made sure to denounce any post-Brexit move on the part of the United Kingdom to lower corporate taxes. (Merkel condemned efforts by the US to cut corporate taxes as well.) Merkel called any such move a “race to the bottom.”
With these comments, Merkel; was echoing earlier comments by German Finance Minister Wolfgang Schuble who in January employed the same “race to the bottom” phrase and harangued the UK on the matter, claiming that any attempt to lower taxes would be in violation of international agreements. Besides, lowering taxes is retrograde and non-progressive thinking, Schuble noted, stating that “A truly global economy must think of global governance.”
This controversy helps to reveal how the European Union has been a useful tool in preventing tax competition between member states.
By threatening retaliation from EU institutions, and by resorting to claims that international agreements cancel out national policy, EU bureaucrats have long used the EU as a stick to beat potential tax-cutters into submission.

This post was published at Ludwig von Mises Institute on March 28, 2017.

Are We About to See a ‘European Monetary Fund?’

There’s an air of furtive desperation about the proceedings.
As debates rage in Europe over whether or not to take a two-speed or multi-speed approach to post-Brexit integration, Germany rekindled interest in the creation of a European Monetary Fund.
Chancellor Angela Merkel and Finance Minister Wolfgang Schuble both want to upgrade the grossly unaccountable Luxembourg-based European Stability Mechanism (ESM) into an IMF-style rescue fund that will ‘be granted the authority to monitor the finances of all eurozone countries,’ reports Der Tagesspiegel.
EU Monetary Commissioner (and former French finance minister) Pierre Moscovici is against it, for a simple reason: monitoring budgetary policy in the euro area is, for the moment, the responsibility of the EU Commission.
This is not the first time the idea of a European Monetary Fund has been explored. Ever since the Eurozone’s sovereign debt crisis threatened to rip Europe’s fragile union apart, rumors have periodically surfaced about the possible creation of a fund capable of taking over the IMF’s role as a major source of emergency funding. In 2010 The Economist magazine organized a roundtable debate on the issue, with Daniel Gros, of the Centre for European Policy Studies and Thomas Mayer, then chief economist of Deutsche Bank, both singing its praises:

This post was published at Wolf Street on Mar 9, 2017.

Global Stocks Rise, S&P Futures Hit New Record High Despite US Market Closure

Despite US markets being closed in observance of Washington’s birthday, S&P futures spiked during overnight trading, reaching new all time highs before fading some of the gains. Both Asian and European markets traded modestly higher after paring early gains. The U. S. dollar traded in a tight range ahead of a busy week for Federal Reserve events, while the pound rallied the most in more than two weeks ahead of a House of Lords Brexit debate, while South Africa’s rand fell on political turmoil. Oil advanced for a third day and spot gold rose for the fourth session in five.
The relatively benign moves this morning follow what was also a fairly tepid end to the week on Friday in markets. Equity markets in the US did however manage to eke out another small gain with the S&P 500 finishing 0.17% following a late bounce into the close. That means it has closed up in 11 of the last 13 trading sessions although at the same time has now gone 49 consecutive sessions without closing with a move up or down by more than 1%.
Global volumes have been light with U. S. markets closed for the Presidents Day holiday. MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.1 percent and back toward a 19-month peak reached last week. Shanghai stocks added 0.9% and expectations of solid economic growth in China kept commodities such as copper and iron ore well bid. Japan’s Nikkei closed flat after domestic data showed exports disappointed in January even as imports outpaced forecasts.
With U. S. bond and stock markets shut on Monday for Presidents’ Day, investors are watching developments in Europe. Political risk is in focus after a poll showed public approval for German Chancellor Angela Merkel’s ruling party fell behind the Social Democrats for the first time under her leadership. And in the U. K., some members of the parliament’s upper chamber will seek changes to the draft law that will allow the government to trigger a departure from the EU when it is discussed by the Lords on Monday, Bloomberg reported.
The Stoxx Europ 600 rose and U. S. futures pointed higher even as Unilever slumped after Kraft Heinz withdrew a $143 billion takeover bid. Shares in Unilever fell 6.7 percent; stock remains above level from before Kraft offer was revealed last week. Trading in Kraft and its erstwhile target remains in focus on the back of Friday’s surge in both stocks. People familiar with the talks at the weekend said 3G Capital and Warren Buffett’s Berkshire Hathaway Inc. decided Unilever’s negative response made a friendly transaction impossible.

This post was published at Zero Hedge on Feb 20, 2017.

Merkel Says There Is A “Problem” With The Euro, Blames Mario Draghi

Two weeks ago, German finance minister Wolfgang Schauble confirmed Donald Trump’s charge that the Euro is far “too low” for Germany, but said he is unable to do anything about it and instead blamed Mario Draghi. ‘The euro exchange rate is, strictly speaking, too low for the German economy’s competitive position,’ he told Tagesspiegel on February 5. ‘When ECB chief Mario Draghi embarked on the expansive monetary policy, I told him he would drive up Germany’s export surplus’.’.’.’I promised then not to publicly criticise this [policy] course. But then I don’t want to be criticized for the consequences of this policy.’
Then, on Saturday, his boss German Chancellor Angela Merkel echoed her finance minister, and also admitted that the euro is indeed “too low” for Germany, but once again made clear that Berlin had no power to address this “problem” because monetary policy was set by the independent European Central Bank.
“We have at the moment in the euro zone of course a problem with the
value of the euro,” Merkel said in an unusual foray into foreign
exchange rate policy.
Merkel also confirmed that Germany benefits from not having the Deutsche Mark, whose value would be far higher, and instead piggybacks on the weakness of other European nations, implicitly confirming recurring allegations that Germany benefits from the misery of Europe’s periphery.
“The ECB has a monetary policy that is not geared to Germany, rather it is tailored (to countries) from Portugal to Slovenia or Slovakia. If we still had the (German) D-Mark it would surely have a different value than the euro does at the moment. But this is an independent monetary policy over which I have no influence as German chancellor.”

This post was published at Zero Hedge on Feb 18, 2017.

Greece said considering ditching euro in favor of U.S. dollar

Greece is said to be considering ditching the euro in favour of the U.S. dollar in a devastating move that would humiliate Brussels.
Donald Trump’s pick for E.U. ambassador Ted Malloch claimed senior Greek economists are looking into taking on the American banknotes if the country turns its back on the European currency.
Due to Greece’s crippling financial crisis, officials are said to be desperately searching for an alternative to the Eurozone, which would “freak out” Angela Merkel, according to Malloch.
Professor Malloch was interviewed on Greek TV, where he said Greece leaving the E.U. would be the best option for residents, and added the current situation is “simply unsustainable.”

This post was published at Daily Mail