Wednesday, 7 May 2025

BRUSSELS IS USING RUSSIA AND TRUMP TO CENTRALISE POWER

7 May 2025
 

A clueless EU whose only thought is how to hang on to power and get rich with manipulative stories about forces ranged against Europe.
No positive vision, no realistic solutions. It's classic losers' politics.

SUMMARY

1. Introduction

1.1 Trump as a Useful Enemy


Trump is the boogeyman the EU loves to hate.

He’s used as a cover story to justify just about anything - militarisation, power centralisation, and defeating democracy.

If it’s not Trump, it’s Russia. The narrative writes itself.

1.2 The Distraction Game


Citizens are told the US is no longer reliable - defensively or economically.

The solution? Shift more power to Brussels, slash social spending, and pour billions into weapons and finance.

2. Hypocrisy in EU Strategy

2.1 Talking Independence, Acting Dependency

The EU says it's becoming “independent” from the US.

Yet it:

Continues to buy US arms and energy,

Aligns with US foreign policy goals.

2.2 Brexit Theatre

Even Brexit is being spun as a pro-EU triumph.

London and Brussels now talk of “free and open trade”—including defence cooperation. So much for sovereignty.

3. Militarisation by Decree

3.1 Article 122—The Loophole

The European Commission is using Article 122 emergency powers.

This bypasses normal parliamentary checks.

Only a qualified majority vote is needed—no need for full consensus.

3.2 SAFE: The EU’s New War Fund

March 2025: The Commission unveils “SAFE”—Security Action for Europe.

It’s a €150bn opening shot in a planned €900bn rearmament fund.

Parliament's role? Reduced to mere suggestions and symbolic protest.

4. Who’s Really Opposing This?

4.1 Not the Peoples' Champions

The EU Parliament’s legal committee objected - unanimously.

But this wasn’t about democracy or peace.

It was about dividing the pie - who gets which contracts.

4.2 The Lure of Lobby Money

EU arms industry lobbyists are swarming Brussels.

Opposition revolves around “Buy European” clauses—not peace or public interest.

The current SAFE clause allows 65% of purchases from the EU, Ukraine, or EFTA states.

5. Manufactured Consent

5.1 The Justifications

Russia’s aggression is framed as existential.

The US is seen as retreating.

These are used to justify the €900bn war fund.

5.2 But Are These Threats Real?

Why ignore diplomacy?

Why sabotage Kiev-Moscow peace talks?

Why escalate when Europe benefits more from peace with Russia than war and sanctions and acts of sabotage?

6. The Jazz Band Metaphor

6.1 Carnegie’s Rose-Tinted View

Rosa Balfour (Carnegie Europe) describes the EU’s reaction to Trump as a “jazz band” in creative chaos.

Her metaphor is meant to inspire - but it reveals chaos and improvisation at the top.

6.2 What’s Missing?

Curiosity - a core jazz value - is absent.

No one’s asking the real questions:

Is this the best use of €900bn?

Could peace bring more security than tanks?

Why build a war economy rather than a welfare economy?

7. Economic Fallout for Citizens

7.1 Social Austerity Persists

Sixteen EU states want fiscal leeway, but only for defence, never for healthcare or pensions.

The public is told: this is necessary for competitiveness.

7.2 Declining Living Standards

Expect living standards to keep falling.

But don’t worry as more EU enlargement and defence spending will fix it.

8. Conclusion

8.1 The Real Agenda

Trump is the excuse, not the cause.

Brussels wants centralised power and a permanent war economy.

Parliament and voters just get in the way.

8.2 A Wake-Up Call

Gallagher’s piece is a rebellion against passive acceptance.

He challenges us to ask why the EU elite want war so badly.

And whether democracy is just a performance piece in the Brussels theatre.

9. References and Further Reading

Carnegie Europe – Rosa Balfour: “Europe Tried to Trump-Proof Itself”

EU Commission SAFE Proposal – Official documents on Article 122 and defence funding

ARTICLE


The EU Zombie uses Trump as Cover to Further Feed on Citizens 

Donald Trump is the gift that keeps on giving for the western misleadership class. Any anti-democratic swindle on the EU wish list is now being sold as a remedy to the Orange Man. (And if it’s not Trump, it’s Russia).

The US is no longer a reliable defense partner, they say. We must give more power to Brussels and send untold billions to weapons companies.

The US is no longer a reliable economic partner, they say. We must increase competitiveness by weakening labor and empowering finance.

The UK voters may have opted for Brexit, but London and Brussels are “defying Trump” with a “free and open trade” declaration that includes negotiations ‘on defense and security, fishing and energy, as well as a “common understanding” of which topics will be covered by intensive Brexit reset negotiations this year.’

The strange thing about these plans, however, is that they include reliance on US weapons and energy and alignment with US geopolitical and geoeconomic goals.

Let’s focus here on how the EU is pressing ahead with plans to dramatically increase defense spending due to Trump Abandonment Syndrome.

The EU Jazz Band 

Recent commentary by Rosa Balfour, director of Carnegie Europe, perfectly sums up these arguments. In a piece titled “Europe Tried to Trump-Proof Itself. Now It’s Crafting a Plan B” she explains why the EU has no choice but to redirect social spending towards the arms industry.

Balfour’s romantic version of recent history starts on February 28. That’s when “the televised humiliation of Ukrainian President Vladimir Zelensky” took place, and “Europe realized it could no longer rely on its longtime ally, the United States.” And here she is on the jazzy wreckage:

The shocking depth and breadth of this realization cannot be overemphasized. Political leaders in European states, the European Union, and NATO displayed composure and coordination, but behind the scenes, the soundtrack was a frantic free jazz jam session with dramatic thuds and a long pause—the silence at the realization that the European comfort zone was over.

And now, what are these composed and coordinated “political leaders” doing? They announce that Ukraine is Europe’s first line of defense, make grand plans for a “coalition of the willing,” and declare that Ukraine will become a “steel porcupine

The coalition of the willing has fallen apart. The steel porcupine was ridiculed.  And while those in the Kremlin likely aren’t losing any sleep, Europeans should be. That’s because, as Balfour writes, the European Commission “can play supporting roles by mobilizing financial resources and handling complicated in-house horse trading.”

That’s one way of putting it.

The Commission is inching its way towards invoking emergency powers to push through parts of its rearmament slush fund. It’s getting pushback from the European Parliament, but the fact is Ursula can do it anyways with minimal support from EU governments. She’s likely just waiting for the right moment. Let’s look at the status of the European militarization billions.

On March 19, the Commission introduced a 150 billion euro proposal — a first installment of what’s to be at least $900 billion— for establishing the Security Action for Europe (SAFE) through the reinforcement of European defence industry Instrument.

It wants to move forward with it under Article 122 emergency powers which need only a qualified majority in the Council —as opposed to the usual consensus— which allows Ursula and friends to get around pesky vetoes from member countries. The procedure for 122 is as follows:

1) the Commission proposes a Council measure; following which 2) the Council adopts the measure in line with [qualified majority voting]. No additional elements or participants are envisaged.

This article allows the proposal to bypass parliamentary negotiations and go straight to the Council for negotiation and adoption. The Parliament’s role is reduced to submitting suggestions and requesting debates.

How’s that for your democratic rules-based order?

In an April 23 secret vote, the European Parliament’s Committee on Legal Affair unanimously backed a legal opinion rejecting the Commission’s attempt to bypass it on a 150 billion euro rearmament fund.

While it is a non-binding vote, it does signal opposition to Ursula’s plan, but it’s not some principled stand for the will of the people or any romantic notion like that.

No, it’s more about dividing up slices of the pie as European weapons industry lobbyists are increasingly active in Brussels and are trying to make sure their clients are rewarded. And so much of the feeble opposition is over getting a stronger “buy European” clause in SAFE (it currently requires 65 percent of war consumables and complex systems to come from within the EU, Ukraine, or EEA/EFTA states, which includes Turkiye and Norway.

Why must Ursula’s commission sideline the Parliament and some member states in order to spend 900 billion on military purchases? They lay it out in their proposal. There’s the usual nonsense about Russia:

The EU and its Member States now face an intensifying Russian aggression against Ukraine and a growing security threat from Russia. It is also now clear that this threat will persist in the foreseeable future, considering that Russia has shifted to a war-time economy enabling a rapid scaleup of its military capabilities and replenishment of its stocks. The European Council therefore underlined, in its conclusions of 6 March 2025, that “Russia’s war of aggression against Ukraine and its repercussions for European and global security in a changing environment constitute an existential challenge for the European Union”.

There’s also the Trump abandonment syndrome:

At the same time, the United States, traditionally a strong ally, is clear that it believes it is over-committed in Europe and needs to rebalance, reducing its historical role as a primary security guarantor.

One itching question is what happens to this latter selling point now that the Trump administration has tied itself to Ukraine through the so-called minerals deal, but surely if the European powers have made it this far on manufactured crises, they’ll be able to overcome that hurdle by pointing to Trump’s insistence on what they call an unjust peace for Ukraine.

And so “rearmament” by supranational emergency decree it must be—with Balfour from Carnegie and all the other plutocrat court jesters at the transatlantic think tanks cheering this on as a victory against the autocratic hordes outside the garden walls. Here’s Balfour again summarizing the mood among this crowd:

…a trajectory of change has been charted, and it has transformative potential—not just for the European continent, but also for the global reordering of post-American international relations. The jazz band has picked up rhythm, even if the melody is not fully harmonic.

I’m not sure if that’s music Balfour is listening to or the jangle of gold and silver. While it can be difficult to hear anything over the din coming from the elite ‘Spirit of 1914,’ there’s always one chord missing from the militarization genre. Surely Balfour, the jazz aficionado, must know that curiosity was considered one of the essential ingredients to the music. If we apply that to her extended jazz metaphor we might start asking some questions like:

  • Why does the EU need to perform this whole militarization song and dance routine at all?
  • Why can’t there be peace with Russia?
  • Why did European nations help sabotage past Kiev-Moscow peace negotiations?
  • Why did the EU help the US overthrow the government of Ukraine and use the country as a battering ram against Russia?
  • Why does the EU elite so crave war with Russia?
  • Is the EU not more secure and prosperous through friendly ties and trade with Russia?

And why must the EU, which collectively already ranks second in the world in defense expenditures, spend boatloads more? How much will make it safe, competitive, and independent?

These questions are never addressed. It’s simply treated as the natural order of things that Russia is the EU’s enemy and it must get big expensive weapons because Trump bad. The sad thing is, this relentless messaging pumped out of European media is working — at least according to the EU’s own polls. That wouldn’t be entirely surprising considering this message is endlessly pumped out of EU media.

Either way, European governments are running with it. Sixteen countries are asking the EU for fiscal leeway to spend big on defense — requests that are never made during the endless social austerity.

Yes, the citizens of the bloc will continue to see their standard of living fall, but don’t worry, EU enlargement and spending more on militarisation will lead to more “competitiveness.” Can’t you feel it already...

Tuesday, 6 May 2025

WORLD BANK DEFINES POVERTY

Poverty thresholds

The definition of poverty depends on a country’s income classification. The World Bank applies different daily poverty thresholds according to income level:

  • $2.15/day – for low-income countries
  • $3.65/day – for lower-middle-income countries
  • $6.85/day – for upper-middle-income countries

Upper-middle-income countries like Indonesia are nations with a gross national annual income (GNI) per capita between US$4,046 and US$12,535.

The latest figures are for 2024 and are used in the chart. But the full report, which I’ve read, still uses the lower, out-of-date, threshold of $3.65/day that applied before Indonesia was moved into the upper-middle-income bracket in 2023.

So the chart is saying that 60% of the population live on less than $6.85 a day. That’s approximately 171.9 million Indonesians living on less than US$6.85 per day.

That is the World Bank's official national poverty rate for Indonesia (at the upper-middle-income level).

My Conclusions

  1. Whoever produced that chart has updated it with the correct figures. (The full report on which it is based uses the older, out-of-date threshold.)

  2. But really, the main conclusion from that chart is that although Indonesia has moved into the upper-middle-income bracket, 60% of its population lives below the World Bank's definition of poverty. This says in ordinary-speak that Indonesia is a very corrupt country, or at least strongly unequal, with a very uneven spread of the benefits of the economic growth it’s been enjoying since globalisation.
  3. She Was Poor But She Was Honest

    "It's the same the whole world over
    It's the poor what gets the blame
    It's the rich what gets the pleasure.
    Ain't it a blooming shame?

    ...No matter where you look, the top few percent own almost everything, and the bottom half have only debts.

  4. In summary, the chart speaks to the WEF prediction for 2030 that “you will own nothing and you will be happy.” (Incidentally, it was a prediction — not a policy statement!)


 

Monday, 5 May 2025

FLOURISHING IN INDONESIA

5 May 2025

https://fortune.com/2025/05/02/indonesia-flourish-study/

1. Reflections on Flourishing: What Makes a Life Truly Good?

1.1. A Fresh Perspective from the Global Study

A new five-year study by Harvard and Baylor finds that Indonesia tops the global chart for “flourishing”.

That’s not about wealth — it’s about a full, good life: purpose, health, social ties, meaning.

In fact, countries with strong religious and community life beat wealthier, secular nations.

1.2. The UK: Wealth Without Warmth?

Yes, rich nations rank well for financial security.

But the UK example hits home:

Middle class, with income — yet stressed, anxious, cramped, often isolated.

High mobility means people live far from their roots.

Public spaces can feel hostile.

A lack of spirituality or shared cultural rituals leaves people adrift.

Many young people, struggling to find accommodation and start a family, feel the pressure — financial strain is real, even when incomes look decent on paper.

1.3. Indonesia’s Secret: Faith and Fellowship

Indonesia’s top score wasn’t due to GDP — but because three-quarters of people attend religious services weekly.

That’s a stunning level of regular, community-based meaning.

Faith gives rhythm, connection, and purpose — something missing in many Western societies.

1.4. The Age Factor in Flourishing

The study also found that happiness follows a kind of age curve:

Young adults and older people report more flourishing.

Middle-aged working adults often report less.

Makes sense:

Long hours.
Family pressures.
Moving away from your roots for work.
Not much time or space to reflect or connect.

1.5. Faith-Filled Nations Flourish

The top-ranking countries were all high in religiosity.

That may be the real driver behind the numbers:

Faith brings structure, meaning, community.

It also helps people find dignity in hardship — not just comfort in wealth.

2. Final Thought

This study reminds us to ask: what really matters in life?

If the goal is not just to live, but to flourish, then wealth alone won’t get us there.

Perhaps it’s time we in the West rediscovered a bit more faith — in each other, in community, and connect with something higher.



Saturday, 3 May 2025

HYPER-FINANCIALISATION OF THE AMERICAN ECONOMY - SYMPTOMS, CAUSES, CONSEQUENCES, KEY ISSUES

Preparation

Worth reading "the balancing mechanism" first to make sense of this article. 

This article gives the symptoms, causes and consequences; and explains why hyper-financialisation is important in the lives of people, rich and poor. It doesn't suggest any remedies, other than recommending we all take to the streets in protest - what better time for a Revolution?. That will be for a future article.

Meanwhile, we will finish on a lively discussion and recap of this article.



Hyperfinancialisation of the American Economy

This post summarises the above Youtube video.

1. The symptoms

This post explores the hyperfinancialisation of the American economy, a condition in which Wall Street's gains have vastly outstripped Main Street's wages. Here are the symptoms - what "hyper-financialisation" means in practical terms.

1. Several metrics are used to illustrate this divergence between Wall St and Main St:

  • The hours of labour required to buy one share of the S&P 500 has increased from 25 hours in the 1960s–1990s to a peak of 200 hours after 2008.

  • A comparison of the S&P 500 to personal income shows capital (the stock market) pulling away from labour (wages), a reversal of the mid-20th century trend.

  • The Buffett Indicator (S&P 500 vs GDP) reflects the same imbalance: GDP has grown 970% since 1980, while the stock market has risen over 5,000%.

  • Meanwhile, wages relative to GDP show that the average worker’s income has stagnated or declined in real terms.

  • The S&P 500 has grown by 6,876% versus 800% for hourly wages over the same timeframe.

  • The Price-to-Earnings ratio has surged, indicating people are paying more for the same future returns.



2. The causes

  • Post-2008 monetary policy: QE, ZIRP, and fiscal deficits inflated asset prices. QE alone involved trillions of dollars created to buy treasuries, corporate debt, and mortgage-backed securities.

  • Trade policy and globalisation: Agreements like NAFTA hollowed out domestic manufacturing and led to persistent trade deficits.

  • International finance mechanics: The trade deficit must be matched by capital inflows — currently ~$130 billion/month — into U.S. assets, pushing up valuations and creating artificial demand.



3. The Consequences

  • A stark wealth divide: The top 1% own 50% of equities; the top 10% own 93%.

  • Labour’s shrinking share of income and declining wage power.

  • Asset unaffordability: Housing has become increasingly out of reach, especially single-family homes.

  • Government dependency on market performance: Capital gains tax (now 9% of revenue) ties fiscal health to asset bubbles.

  • The rise of populism, which stems from this capital–labour divide and contributes to political and social polarisation.



4. Why this is important

These economic imbalances are the “core issues” in U.S. society, driving everything from rising suicide rates and antidepressant use to deepening political dysfunction.

What to do? The bottom 95% of Americans to unite around economic reform — to reject partisan distractions and tackle the deeper forces of hyperfinancialisation, overvalued currency, and hyperglobalism.

The real divide is not left versus right, but the top 1% versus the bottom 95%.



Hyperfinancialisation of the American Economy

5. Listen to a lively discussion 

Aimed at raising awareness of the crisis and human suffering facing ordinary people due to hyper financialisation:



ACCOUNTING FOR AMERICA'S TWIN DEFICITS

Why the U.S. Trade Deficit Must Always Be Balanced - And What Happens When It Isn’t

"The balancing principle". Not everyone will be able to stay awake till the end of this article, but everyone is capable of understanding this simple double-entry bookkeeping principle, as applied to international finance, called "the structural mechanism". It is fundamental to understanding "hyper-financialisation", that we shall look at in the next post....

03 May 2025

At the heart of international finance lies a simple accounting principle:

The current account and the capital account must balance.

It’s not ideology. It’s not economic theory. It’s just double-entry bookkeeping on a global scale. You cannot get away from the fact that differences between your income and expenditure are stored away on your balance sheet - your net worth. Same for countries' accounts.

If a country runs a trade deficit (it's called a current account deficit, it means the country is importing more than it exports), it must run a capital account surplus. Why? Because the money that flows out to pay for imports must flow back in somehow to balance the books. That "somehow" is when foreigners invest back into the exconomy they soild to, or when the importer country borrows from the rest-of-the-world ie lending, or the importer country dips into its balance sheet reserves, or, if necessary, meaning if noone wants to lend to it or if interest rates are more than it can afford, by recourse to the printing press - creating new money out of thin air, expanding the money supply.

This is why the U.S. trade deficit is always matched by strong capital inflows (or printing). For decades, the rest of the world was happy to sell the goods it manufactures to the U.S. and then recycle those dollars back into U.S. assets: government bonds (treasuries), corporate debt (lending to private corporations), equities (eg the S&P 500), property (buying up real estate in foreign capitols, but above all into U.S. Treasuries.

This process has often been described, rather vaguely, as a “structural mechanism” of global finance. But let’s call it what it is: a global settlement cycle anchored in the U.S. dollar.

The U.S. runs a current account deficit. Foreigners receive dollars. They return those dollars to the U.S. by buying dollar assets. The loop closes. The books balance.

Diagram showing
trade deficit →
balance of payments deficit

capital inflow to balance the capital account

But what happens when the world no longer wants to hold U.S. assets? This is where the Federal Reserve steps in.

If foreign central banks or institutions stop recycling their dollars back into U.S. debt — or if they even start selling the US debt they hold — then someone has to plug the gap. That someone is the Fed. It buys the debt via Quantitative Easing (QE), creating dollars out of thin air. In effect, the U.S. borrows from itself (the government borrows from the Fed). The balance still holds, but confidence in the system gives way to fears of inflation and currency debasement.

Foreigners don't want US debt - Fed QE cycle filling gap left by foreign capital

This pressure is amplified by a deeper fiscal dilemma. The U.S. government faces mounting obligations — welfare, pensions, and defence — that it cannot politically cut. As debt rises, so do fears of inflation and currency debasement. Foreign investors begin to demand higher yields to compensate for the risk of holding dollar-denominated assets.

But the U.S. government cannot afford high interest rates. A rising cost of debt would crowd out spending and destabilise public finances. The solution? The Fed prints the money — buying Treasuries to suppress yields and keep government borrowing costs down.

Fiscal loop - overspending market doubtFed printing

This creates a circular dependency: the government spends, the market doubts, the Fed prints. Byspending, the Fed creates demand for US bonds. Result: Bond prices rise. As prices rise, yields fall, but confidence in and demand for the dollar weakens and in this way, the system edges just a little bit closer to a crisis of confidence.

This is the danger Brent Johnson highlights in the Dollar Milkshake Theory - and that Ray Dalio uses to explain why the U.S.-led global order is in its late cycle....fewer and fewer want US debt.

The accounting identity works, but the participants are changing. The Fed is buyer of last resort. And if trust in U.S. assets continues to weaken, we may find that the world's capital account surplus returns not to US Treasuries, but to gold, commodities, and hard assets. It's happening, perhaps provoked by Trump's Tariffs, but that could be just a surface explanation....we have to wait and see, there is so much uncertainty! (Wait on the sidelines?)

If confidene is lost, the books will still balance, but the system will not look the same.

Friday, 2 May 2025

ARE MIDDLE EAST POLITICS DRIVEN BY ANCIENT APOCALYPTIC NARRATIVES

2 May 2025

The idea that Netanyahu's vision of a Greater Israel is driven by ancient Jewish apocalyptic texts promising death and destruction before salvation seems a bit mad... is there any evidence? Netanyahu seems bent on creating WW3, but is there any evidence that this threat has roots in eschatological beliefs?


Ancient Roots: Apocalyptic Texts and the Vision of a Greater Israel

The concept of a "Greater Israel" has its origins in biblical promises made to the patriarchs. In Genesis 15:18, God promises Abraham land stretching "from the river of Egypt to the great river, the Euphrates", a chant we often hear these days. This expansive vision encompasses territories beyond the (undefined) borders of modern Israel, including parts of modern-day Egypt, Jordan, Lebanon, Syria, and Iraq.

While mainstream Jewish thought often views these passages as symbolic or future-oriented, certain religious Zionist groups have taken them more literally, advancing policies that align with this vision of a vastly expanded territory, giving Israel dominance over the entire West Asia.


Netanyahu's Political Alliances and Messianic Influences

Prime Minister Netanyahu's political trajectory these last thirty years has seen alliances with parties that espouse religious nationalist ideologies. Notably, his coalition includes factions like the Religious Zionist Party and Otzma Yehudit, which have roots in movements advocating for Jewish sovereignty over all biblically promised lands. So, a political environment where ancient religious visions decide contemporary policy decisions.

Moreover, Netanyahu's rhetoric is often intertwined with themes in Christian Zionist circles, emphasising Israel's role in fulfilling biblical prophecies. This alignment has bolstered support from evangelical groups, particularly in the United States, who view modern Israel as central to eschatological narratives.

A moot point - is the Israeli tail wagging the American foreign policy dog? Is the Israel lobby and this vision of a Greater Israel controlling America's foreign policy? Or is the American foreign policy establishment instrumentalising Israel to control oil and trade routes in the Middle East (as it has done with Ukraine in its not-so-proxy war with Russia)?


Eschatological Beliefs and Modern Governance

There is evidence for the integration of eschatological beliefs into modern state policy:

  • Settlement Expansion: policies promoting settlements in the West Bank are often justified by religious claims to the land of Judea and Sumeria - this is  Netanyahu's name for the West Bank.

  • Legislative Initiatives: laws and discriminatory practices that prioritise Jewish religious education and values, and exclude Palestinian, reflect a governance model coming out of religious ideology.

  • Judicial Reforms: Moves to alter the judiciary, where Ashkenazi Jews, largely from Europe, hold all but one of the seats, have been interpreted by some as attempts to align state laws more closely with religious principles supported by the strongly idelogical Miserati Jews of Middle Eastern and North African origin. This pushes israel to civil war: deep state in the military and judiciary and civil service v. Miserati, who are the populists.

Conclusion

These policy directions shape contemporary political visions and decisions. This is evidence of an approach to governance where ancient religious narratives and eschatological expectations play the dominant role.


References


Bizarre as it may seem to modern minds, that tend to seek truth in logic and data, we have seen that ancient apocalyptic visions are being used to justify modern political strategies in Israel. We are told that Israeli interests dominate America's foreign policy establishment, but it could be that Israel is being used to further American interests in just the same way as Ukraine is being used in a war against russia

So this extremely cynical interpretation of American foreign policy has to be included in making sense of all the complexities of Middle Eastern geopolitics today.

It's an interesting topic and one of that is explored in some earlier posts:


The Middle East is primed for war. This post shows how we got here, what’s coming, and what you can do about it.


The Four Horsemen are riding again bringing war, collapse, chaos and climate change.

How political ideologies, taken to extremes, can lead to planet-wide destructive outcomes. This post argues for a balanced and rational governance based on national interests and human rights. 


[End]



DOLLAR MILKSHAKE PART III

 1 May 2025

 

 

The business cycle for investors

TA, Gold, and the Last Man Standing

Technical analysis (TA) cannot predict the future, and doesn’t pretend to understand the economy. All it does is track price action, look for repeating patterns and try to spot momentum. You might say it is as useful as astrology. It correlates with the economy, but investors are always ahead, on a parallel wave.


Worth listeing to Chris Vermeulen of TechnicalTraders, who does a short daily market recap. His style is relaxed tailor’s dummy more than showman. He reads the runes in technical charts. While TA has its limits, what Chris does well is to spot the rotations between asset classes. Money seems to be flowing out of stocks, but where is it flow to? Treasuries? Gold? Defensive safe ETFs like XLP (consumer staples) or XLU (utilities)?

His point right now is that money is quietly flowing out of equities. The pro.s are selling into every rally, the smart money is getting out and rotating onto safer ground.

Why into TLT? That’s where the Dollar Milkshake Theory comes in.

Generally speaking, if you expect interest rates to rise, it is best to avoid long-term bonds like those tracked by the TLT, because if that happens, you're locking in a lower interest rate. If you believe interest rates will fall, it makes sense to invest in a long-term bond fund like TLT. TLT tracks the Barclays U.S. 20+ Year Treasury Bond Index.

Most commentators expect the dollar to weaken under the weight of US debt. There will be less and less demand for the dollar as there is more and more dollar-printing. Makes sense, but Brent Johnson disagrees. His theory is that years of global monetary expansion have created a “milkshake” of liquidity. So first of all. let us examine how all this liquidity is created and where it is held.

The "milkshake" in the Dollar Milkshake Theory refers to the vast pool of global dollar liquidity, the dollars that have flooded the world economy since 2008, although not held exclusively in Europe, this pile of US dollars outside the US is called the Eurodollar market.


 


How the milkshake forms (monetary expansion):

  1. Quantitative Easing (QE):
    The Fed created trillions of dollars to buy US Treasury bonds and mortgage-backed securities — injecting USD into the banking system.

  2. Low interest rates:
    Cheap borrowing made USD attractive to global investors, corporations, and governments.

  3. Global demand for USD:
    The US dollar is the world’s reserve currency. Most international trade, lending, and commodities (like oil) are priced in USD.

  4. Eurodollar system:
    Non-US banks create "dollar credit" outside US regulatory oversight — more dollar-like assets circulate globally than exist inside the US.


Where the milkshake “sits”:

The dollar liquidity is held across:

  • Foreign central banks’ reserves

  • Sovereign wealth funds and pension funds

  • Global trade finance (e.g., letters of credit in USD)

  • Foreign dollar-denominated debt

  • Offshore (Eurodollar) banking systems

  • Dollar-based assets (e.g., US Treasuries held abroad)

The milkshake is not just inside the US — it’s a vast global ocean of dollar obligations and instruments, mostly outside US borders.


 

 

Flow diagram showing how the Fed creates liquidity
and how it flows offshore to become the “milkshake”

  - . When the Fed tightens, it draws that liquidity back in. Investors crowd into the dollar. That strengthens the dollar, sucks capital into the US, and causes immense pressure on foreign economies with dollar-denominated debt as repayments must be made in the now-more-expensive dollar.

In time, the dollar breaks too. Too much demand becomes unsustainable. The US buckles under its own interest burden, foreign trust in fiat evaporates, and the last man standing is gold.

 

Dollar Milkshake Theory schematic – capital flows

Brent Johnson says gold will rise when everything else fails. That’s the idea. It's not just about price movement. It's about trust. Fiat currency is not a promise in which one can have confidence. Gold is.

Chris Vermeulen thinks we could see a 20–30% drop in markets after the next bounce. He’s watching the rotations. Gold might be going retail now. Maybe even bubble territory. Maybe gold will collapse with the main indices. Or he says wait for a correction, maybe to 3145, and could buy in then.

David Lin, meanwhile, is the brisk counterpart. He interviews big names in economics, sometimes sharply. He and Chris recently sat down for a good discussion: negative growth, volatility, distrust in banks, everyone seeking a hedge.

Gold is the refuge. For now.

Gold price trend vs VIX vs SPY

Eventually, though, even gold may sell off in a global fire sale. But you will have sold and will be in mountains of cash, possibly a new currency. The trick then will be to buy the surviving companies from out of the ashes.

If we live that long.

Interview with Chris Vermeulen and David Lin
Dollar Milkshake Theory primer

Thursday, 1 May 2025

THE DOLLAR MILKSHAKE THEORY - PART II

Dollar Milkshake – The Theory


1. INTRODUCTION: A NEW MONETARY WORLD ORDER?

  • Where are we with markets and the US dollar?
  • Currencies are under pressure, debt is mounting, and monetary orthodoxy is breaking down
  • Brent Johnson’s Dollar Milkshake Theory offers a good if contested framework to understand what is happening and what may come next
  • This piece examines the mechanics, the risks, and the long-term investor implications of a global system that appears to be slowly unravelling
  • The Dollar Milkshake Theory is not the only framework for understanding the macroeconomics of where we are - we will finish with a reference section.

2. HOW THE CURRENT SYSTEM WORKS: THE DOLLAR AT THE CORE

  • Most global trade and finance still flows through the US dollar. It is the world’s reserve currency
  • Many countries borrow in dollars, but only the US can print US dollars
  • Example, look at the Asian Financial Crisis, the Tom Yum Gung crisis of 1997
  • In times of global crisis, liquidity (which is the ability to buy and sell an asset without changing its price) dries up, and everyone scrambles for dollars
  • The US Federal Reserve, the Fed, the US central bank, has the unique power to “unclog” the system by creating and distributing dollars via swap lines (agreements between central banks to exchange currencies temporarily, to provide its local banks with foreign currency, usually dollars) to ease liquidity shortages during financial stress, ie international lending.

3. WHY THIS CREATES A STRUCTURAL IMBALANCE

  • When the Fed prints to support the system, non-US countries receive short-term relief but accumulate long-term dollar-denominated debt
  • Over time, this debt becomes unpayable, especially if their own currencies weaken
  • The irony is that the Fed solves today’s crisis, but seeds tomorrow’s debt trap
  • And only the US, not China, not the IMF, nor any other body, can inject true base-money (real dollars) liquidity into the dollar system.

4. WHY GOLD AND ALTERNATIVE CURRENCIES ARE BACK IN FOCUS

  • Countries like China, Russia and BRICS allies are quietly building gold reserves
  • Why? Because a gold-backed or commodity-linked currency would offer insulation from the dollar
  • But creating such a system requires trust, convertibility, and scale
  • It also comes with a trade-off: less ability to manipulate monetary policy - Gold-backing constrains monetary expansion because of the promise to repay in gold, and limits fiscal over-spendng.

5. WHAT HAPPENS WHEN DEBTS CAN’T BE REPAID?

  • If emerging economies default on dollar debts, they may face capital flight, inflation, or a currency crisis
  • The Fed and IMF can intervene, but only if there is the political will, and only if all the players remains cooperative
  • Defaults or restructurings harm US banks, bondholders, and the Fed itself, so there's a limit to indifference
  • But each bailout weakens confidence in the dollar as a neutral global asset.

6. WHAT HAPPENS IF THE SYSTEM BREAKS FOR GOOD?

  • A terminal crisis would see countries move away from the dollar system altogether, as might be happening at the moment
  • China could offer loans in yuan, gold, or in dollars from its own holding of dollars (it cannot really leverage them, it relies on reserves and swap lines) or a new synthetic currency backed by commodities, which seems unlikely
  • But this transition would be slow, fragmented, and fraught with geopolitical tension – even war
  • A breakdown of US dollar dominance could disrupt trade routes, supply chains, and global capital flows.

7. WHAT TO WATCH FOR: SIGNALS OF AN APPROACHING SHIFT

  • Rising gold purchases by central banks, especially BRICS
  • Growth in bilateral trade bypassing the dollar
  • Use of gold or oil to settle trade (e.g. Russia, Iran, China deals)
  • Expansion of CBDCs (Central Bank Digital Currencies) outside the Western system
  • US sanctions being countered with alternative financial payment systems & infrastructure (e.g. China’s CIPS, Russia's MIR vs SWIFT).

8. LONG-TERM INVESTOR STRATEGIES

A. Core Protection:

  • Hard Assets: Physical gold (better than silver ), precious metal ETFs like SGLN or GDX
  • Resilient currencies: Swiss franc, Singapore dollar, Norwegian krone
  • TIPS and other inflation-linked bonds in developed markets.

B. Asymmetric Bets:

  • Exposure to gold miners g GJGB and commodity producers
  • Selective exposure to emerging markets with commodity surpluses and stable monetary regimes (currency weakening would halt), such as:
    • Chile (copper, lithium)
    • Indonesia (nickel) - currency continually weakening
    • UAE (petrodollars)
    • Brazil (soy, iron ore)
    • Singapore (financial services hub, sound monetary base).

C. Diversify Across Jurisdictions:

  • Reduce reliance on any single currency or country
  • Use multi-currency bank accounts, and if feasible, store wealth across legal jurisdictions.

9. CAVEATS AND RISKS

  • Moving away from the dollar is not easy. Dollar liquidity is still essential.
  • Gold-backed currencies offer stability but limit monetary and fiscal flexibility – which can be fatal in downturns
  • The transition, if it happens, will be disorderly
  • War, capital controls, sanctions / tariffs, or expropriations will likely accompany the change.

10. CONCLUSION: THE ROAD AHEAD

  • The Dollar Milkshake Theory is not prophecy, but it exposes real fault lines in the global financial system
  • As the dollar pulls in liquidity during crises, other countries are left increasingly vulnerable each time
  • Eventually, the world may tire of this asymmetry, but replacing it will take a great deal of trust, time, and great coordination
  • A smart investor watches the signs – and diversifies away, building their choices.

REFERENCES & MACROECONOMISTS:

  • Brent Johnson (Dollar Milkshake Theory)
  • Luke Gromen (forestfortrees.substack.com)
  • Zoltan Pozsar (Ex-Credit Suisse strategist on post-dollar systems)
  • Joseph Wang (Fed Guy – liquidity dynamics and Treasury markets)
  • James Rickards (Currency wars, gold and geopolitical finance)
  • Lyn Alden (Macro strategy and monetary policy)
  • Russell Napier (Financial repression and capital controls)