Trumpian Order Sketched in Bild? Consequences/Risks for Merkel, EU, NATO, trade and Foreign Currencies.

I like Germany and what I call the German speaking countries so much so that I learned German and did forestry “apprenticeships” there including in Germany and Austria. I frequently go to German speaking cantons of Switzerland and visit German bankers.

The Germans, overall are extremely modern, thoughtful and sophisticated and highly efficient at least within their own country. I am impressed by their thriftiness, discipline and restraint in getting overly indebted. The country is also clean.

However, not everyone wants to follow their way despite their financial success that gives them enormous leverage particularly within the EU. They are not so much as bullies in Brussels but rather are just too powerful and possibly paternalistic – or is that maternalististic.

They simply more and more do not have the economic relatability with Mediterranean countries in general and much of Eastern Europe. They probably do not have sufficient cultural relatability either but so what that is par for the course.

Some of that results in pure discrimination against the Germans who are still near completely unforgiven for two Workd Wars and residual suspicions the EU is their new German hegemony through the Brussels backdoor. Very sad but has to be recognized as part of the European behavioural make-up. Even the English are very uncomfortable with Europe’s social charters that is significantly but not exclusively German inspired.

But when there are such contrasting differences between members living in the same European house, some can feel oppressed or at least lacking breathing room against the very disproportionately powerful.

Hence, my own view of a more decentralized EU with two currencies, the northern euro (neuro) and cheaper southern euro (seuro) allowing the less competitive peripheries to compete better in trade against Germany.

This would be just one element of a plan to loosen Germany’s “need” or interest in getting over involved in trying to socially and economically engineer and interfere with too many EU weaker and struggling economies and national institutions such as in Greece. It is a waste of time and unreasonable for Germany to try to make parts of Europe too much in its image.

This “interference” just poisons relations in particular given the rising new nativism and populism especially but not totally in the periphery.

Sadly, all of such above suggestions for reform or derivatives of have been ignored by Chancellor Merkel and her “subservient” acolytes in various parts of Europe, including the minimally popular and outgoing president Francois Hollande of France.

The sycophantic behaviour by some EU leaders desperate for German cash does not represent a real consensus that Merkel keeps touting exists for current EU structures with Germany the hub and the rest as spokes.

Britain realized this a long time ago and one reason it has been chased out even if the Chancellor thought she was doing differently. Realism is sufficiently lacking in Berlin about the EU project, clearly. However panic is beginning to set in with Merkel starting to run around belabouring the need for no other members to leave.

However, it may be too late. Angela Merkel has essentially taken Germans a number of bridges way too far into the European space and beyond. In President-elect Trump’s opinion, this has been catastrophic and I would second that view but possibly not quite as strongly.

I still believe a greatly reformed EU would be workable with the return of Great Britain within a generation if not before. But Merkel and those around her seem to have a Teutonic firmness in their “nein” to fundamental change, which they have mistaken for being principled in keeping the status quo. Times change and sometimes demand new constructs around a different set of principles or at least modified ones.

Trump has just solidly reinforced this point by way of European media and certainly in the past through the US election campaign and hobnobbing with the “King of Brexit”, Nigel Farage.

That view includes that Germany needs politically to focus more internally and be less involved in expanding and shaping the European Union and its powers. That a more decentralized approach to globalization and regionalization is needed with old(er) institutions needing reform especially supranational ones. A debureaucratization process is required to better ensure national democratic input and more control.

This is probably even near a majoritarian viewpoint among Germans who themselves are less and less enamoured with Brussels and involvement, for example in various bailouts to prevent bank runs on euros in the peripheries (e.g. Greece and Italy).

If this view can be argued is not held among a full German majority, then it would be certainly of great interest to a dominant number in regions like Bavaria and among right wing Conservatives and much of the left wing. This problem is so much so that it is becoming corrosive to German solidarity, if not political unity.

That is a lot of Germans are supporting President-elect Trump’s essentially anti-Brussels tone, if not his full views on key European issues be it on immigration, integration, trade, refugees, security, Russia and probably monetary policy.

That does not mean that most Germans necessarily like his personality or all his blasts against political correctness or any perceived, over interference they might see by the US incoming administration in German politics.

(I think as an aside that if President-elect Trump had maintained the German language in his family from his German immigrant grandfather and spoke it, he could have been more likeable to Germans though probably not to the hate mongers who keep trying to equate him with Hitler and Nazis.)

And now in these recent interviews with the “Times” of London and “Bild” of Germany, a prominent news magazine, Trump has been quite expressive in his support for the United Kingdom’s Brexit stance. Trump sees this as realism of national identity and security.

As a result of what he expressed in various media, it looks like the UK will be rewarded possibly with a lucrative free trade deal with the US. It is by far the most important market in the world and why the EU was anxious to have a free trade deal with the US.

However, Trump and the Congress were against it, seemingly in that order. I do not see the rejuvenation of that proposed agreement in anything near its present form. That is even if Mike Pence, the VP elect and many in Trump’s cabinet are indicating that they have been comfortable with it.

Other European nations which break away from the EU may also get more consideration by the US for a bilateral free trade agreement. After all, Trump and his people are asking which nations will be next in following the UK out of the EU. Trump though should be careful not to get labelled as the “Bobsy Twin” of Farage that broke the camel’s back of Brussels. Let the Europeans primarily work it out.

Australia, Canada and New Zealand might even join this new Trump “trade” regime along with possibly a few select European countries and Russia as an associate member.

Then, I believe other countries already feeling hamstrung by the EU, politically and economically will leave or hopefully better renegotiate very different terms with Brussels, making it unnecessary for other members to want to exit.

Faced with these growing disintegration and populist pressures, I believe the Eurocrats and their sponsors will try to reinvent a much more economically saner, more financially beneficial and freer trade oriented EU. The EU would become less of a political union with possibly a much smaller number of countries retaining the euro.

I think my double euro idea to solving monetary straighjacket issues in serious part are too imaginative and I defer on that to the experts. After all, a Canadian, Robert Mundial was the prime inventor or at least mechanic of introducing the euro. I would not want a second Canadian associated with a new EU monetary mess which may not be salvageable in even a double euro form.

Returning to the Bild interview, it is basically a warning shot to Germans to get rid of seriously or moderate Merkel’s European vision, including one producing a highly economically suffering Mediterranean zone and politically alienated Eastern European countries.

These two regions for the most part in the end are still dependent on the massive US military strength to protect or liberate them from serious invaders. The US market is fairly consequential too, existent or potentially to these more peripheral EU zones even including the Balkans. Brussels, therefore, cannot ignore the resultant leverage it gives Trump in impacting reform of the European superstructure, if he chooses to get involved in EU reform.

These facts are even to a serious degree independent of whatever happens to NATO. But after all, military alliance deals through NATO with the US, might be better for some of these smaller countries, others not so much?

So Trump despite the geopolitical consideration positives of a held together NATO and possibly reformed EU can move fairly independently of worrying too much about certain European countries perception of their national security priorities or sensitivities.

Thus the ease with which he reiterated in recent interviews that he thinks NATO is obsolete. Canada and other members would be for example too scared to say so partly in some instances due to their much smaller contributions to the alliance’s budget.

That means possibly that those who want his support must contribute sufficiently to NATO to get US protection fully based on verifiable military expenditures etc. Those who protest such standards, essentially, too bad from the Trump perspective of “America first”. And he will be likely not afraid to “out” “payment delinquents” in his tweets and well beyond. Now that is what I call pressure in the art of the deal.

Let us remember and be fair given the current context of the incoming US president. US national debt is now so overwhelming that even NATO cost savings to the US through other countries heavier lifting become supportive of US national security.

Bankrupt countries are not secure and Trump knows this. The US is the mother of indebtedness in total which makes it vulnerable internally. This could affect how strong it remains externally even on the medium term, if not shorter term.

Under this pay-up NATO scheme or leave or get less defence coverage, it does not mean NATO would have to fully disappear as countries that pay up and behave “properly” could stay in. That is if Trump is fully serious in pushing the pay up or lose benefit envelope.

One positive to his pay-up scheme might offer more flexibility including allowing certain more nationalistic countries to stay out of NATO central command or exit and forego even having any real military in the extreme example. These countries would hope for the best without a US military alliance. This could act as a major budget expenditure relief to European fiscal basket cases.

Fair enough though highly risky, possibly. Those exited or with less status would then be less of a burden to the NATO budget and in turn might allow for reduced US contributions by the resultant reducing of the frontiers and defense area NATO would have to cover.

Unfortunately, countries like Canada which spend so little relative to their GNP (over the last decade) might find that they have been kicked out of NATO at least temporarily. That would be almost fascinating if it were not so troublesome for western military solidarity, with possibly so many suspended members in military alliance limbo for not fully paying up.

But then maybe Canadians and other countries’citizens feel at ease with nearby or surrounding countries and feel there are only theoretical conventional threats from their big neighbours.

For example, they may feel the Americans will never attack them even for countries like Canada if they went outside NATO or that neither the Russians would as the Americans would not permit say Russia going into Poland and other highly strategic countries to western interests.

Canadian NATO membership under pro-peace, anti-Trump Trudeau could be scrapped under such logic especially if the Canadian PM does not like Trump’s terms to stay in or to remake NATO.

And the thinking might be that terrorists are not hell bent going after most NATO countries in a big way principally with some key exceptions.

These type of countries such as the Baltics, for example are not so much in ISIS crosshairs and could be argued thus need no NATO alliance to collectively strike back on their behalf on this score. Leaders like Trudeau could even sign his own deal with any new EU defence force if Trump’s views and pressures on NATO spending really become unsuitable to their perception of what is good for Canada.

So in theory under such a scenario, it would be Europe that would be primarily coming to Canada’s defence -or its own- if it were attacked overs its borders or experienced a 9/11 type event. Brave new world with Europe defending itself which it is capable of, given the massive collective size of its military and wealth. However, the US has shown much more will to deal with messes in Europe from Kosovo to the Ukraine and pay the price in money.

That dovetails in part with why Trump thinks NATO is obsolete with its over reliance on America. I believe to some degree his logic is impecabble about parts of Europe and Canada getting a free ride.

I would also argue many a western country in the dangerous and brutal world without a serious deterrent militarily and participating in a serious alliance with a mighty friendly country are also affected in practical ways.

A number of these countries outside of NATO are less able to influence not only mutual security but trade, finance or any major international issues including possibly climate change.

However that is but one view that is losing force as Switzerland does quite well and is outside NATO as well as Austria which I can both attest to are very workable and secure countries. I even visited an Austrian army base and was most impressed with the facilities but not my marksmanship with a magnum.

NATO has always messaged that membership brings more than military benefits. For poorer countries like in the Balkans that may be the hook to having become members especially since money bags Germany is a big NATO booster. How German taxpayers like this is another question?

Russia’s view is that it is extortion to give money to poorer eastern countries to drive an alliance into their front yard that is not always in their interest. And that much of that money goes to corrupt oligarchs and Eastern European governance who keep playing the anti-Russian card to fleece western taxpayers with no serious additional benefit to the average citizen.

In this way NATO is a further patsy while at the same time stirring up the Russians militarily by moving ever closer and in range to it through expanded NATO membership and military maneuvers on Russia’s borders

I would even argue that Russia may be more indifferent to whether the EU stays or goes but not to Merkel’s drive to push NATO expansion which even she has let up on more recently.
But I believe only temporarily.

If Russia starts cooperating with America more as Trump seems to desire as he continues to state publicly, NATO and the EU would be likely put through a transformation that would further catalyse Merkel to back off from German “expansionism.”

Back further to the EU. Even its founding member countries such as France and Italy, at least their electorates are getting sick of the way the EU integration project has mutated. More feel like it is a spreading foreign inspired weed without enough local competitors to prevent so much native values being choked out.

In this light more European military integration outside NATO might be resisted unless NATO really falls apart which I doubt that it would. The EU project is after all experiencing fatigue from so much integration it cannot digest already, never mind adding a defence force, all with potential cross-cultural and funding contribution conflicts of their own.

This Europeanization in excess makes many feel a sense of loss. Many increasingly feel culturally uprooted in their own country, even to a degree of feeling the sense of rootlessness particularly among traditional and marginalized groups and the older generations. That makes for poor solidarity.

But like a &suffocating invasive species”, the steamrolling policy of letting millions of Arab and Islamic refugees in and vastly expanding the EU including promises to let Turkey in, Merkel and her Bilderberg friends (though not all) represent a loss of the western civilization values including the security and social cohesion ones.

Immigration is fine of getting new enrichening perspectives but must be done in a balanced way that does not create real or even a perception of a broken social equilibrium. This applies to all countries.

A million Israeli immigrants going off to settle in Saudi Arabia would not be welcomed along with the overextension of Israeli settlements into Palestinian territory well beyond East Jerusalem. These are facts whether one likes them or not.

My South Korean friends told me that a one percent or even less increase in the population of foreigners in the port city of Busan would be considered a disaster by most locals. National and local identity almost everywhere matters and the politically correct should significantly get over it while still combatting real racism and ignorance.

Trump knows this and with UK Prime Minister May enough on his side, representing the second largest economy in Europe and probably the premier international banking centre. German liberal interventionist, globalists are evermore in a corner. The German capitalists know this, too and that Trump’s cabinet is full of formidable negotiating billionaires.

These German industrialists and bankers are more and more familiar with this from Trump’s media announcement in one of their prime media sources of record. Thus, I believe they will soon begin to swing over and start making their own deals with the Trump administration that represent more nativist views and structures that are helpful to those views..

These business people in the regular German way may carefully and without fanfare, do so first by bits and pieces. Then it could be a flood if Trumponomics work and Merkel loses further political ground in the next German national elections.

It is also likely that US corporate and business tax rates will go down with the US’s UK trade partner following suit or even leading changes in tax policies.

If so, there could be a draining away to some degree of continental European investments to both countries. This could solidify the UK financial centre which could further form with Wall Street a new juggernaut of a global and more competitive finance industry over Frankfurt which is much smaller anyway.

Even the Swiss might at least put one foot into this Trumpian trade regime but still retain access to European markets without serious penalties. If so, Swiss Banks could be a positive investment buy given their degree of underappreciation due to previous risks coming from the US over tax avoidance issues and litigation etc. The Swiss might be fully let into the Trump trade universe over time.

German businesses might start looking at getting the likely huge new US tax breaks in manufacturing combining with securing the US market. They could make plenty of money for their shareholders as a result. German CEOs can ill afford to ignore rate of return despite the possible “beating stick” of Merkel to avoid making Trump look good. Profits will trump Merkelian politics, I would bet.

German plants may increasingly simply end up sending their goods to the EU and possibly China and other emerging markets while US ones they own service the US and UK and possibly Australia, Canada and New Zealand.

That would be something as the distance between German plants and the UK is much shorter than between ones in America and the UK. But European politics of punishing the UK for Brexit might lead to tit-for-tat tariff wars taking place between the UK and Merkel dominated EU at least what would be left of it.

Pragmatics means this likely would not happen or at least for too long. The UK and German economies need each other given the trade and investment levels between the two.

This renaissance in US taxation and manufacturing and productivity along with free trade deals with new trade partners will raise incomes and purchasing power in the US economy. The growing wealth there will make a rush to line up for trade deals with the Trump administration over time. The US, not so much China could become the new golden boy.

Thus, more countries like France and Italy will be tempted to break away and do individual deals with the Anglo-American Managed Trade Area (AAMTA). They combined with Britain are just too big for Merkel to punish. And France under the new leader Anglophile Fillon or pro Trump Le Pen will not want to gang up against Britain because it exited the EU.

As the EU seriously starts splitting further even if not necessarily dramatically, I believe then Brussels and or/its individual constituents will join the Trump trade Order, more or less as it evolves.

However, it may be more an assembly of essentially bilateral trade deals with the United States based on common principles of decent wages, relatively similar environmental and social standards and pluralism compared to places like China. Emerging market countries even China will likely not be initially in a free trade regime – or maybe, never under Trump.

Countries like NATO member Turkey and Russia could become associate members though. That is especially as they become more fundamentally democratic and stable. Israel might be made a full member as well as Singapore.

It is unfortunate that Merkel and her Bilderberg oriented and liberal-interventionists have gone way too far with their EU project and overall globalization. They should really run to Trump and his people for new ideas to see how they can cooperate where it is possible.

Because at this rate, Trump has the A team, a much more sophisticated and practical vision for the West including Russia that remains highly underappreciated even by the many top elites at places like the Davos forum. The B teams (Bilderbergers Atlanticists and liberals) of western leaders are mostly being thrown out or retired.

Thus the Bilderbergers and those in line with their thinking may have to try and join up with China as is being done in Davos to see if there is a China-EU offset possibility to the new emerging Trumpian order.

In general, I think not at least sufficiently. They can try and even hope to put together a free trade deal with China and various Asian countries in the region. Trump believes the US cannot have a balanced free trade agreement with China and I believe he is right. A managed trade agreement could be possible. But good luck with the EU and enforcing any new free trade deal with China.

In summary, Merkel is left with few strong leadership friends in Europe still standing and is essentially (soon) down to possibly Justin Trudeau, Prime Minister of Canada in the G7. He may be the only one staying for years who is strongly supporting her vision. Trump through his recent pronouncements is not going away in terms of his overall trade ideas and dedication to inter-nationalism, a concept I explain in another article.

Other European leaders who visibly support her do so at their political electorate peril and they know so by the huge rubble left behind by Brexit, Trump’s election, the Italian PM’s resignation, German regional elections and the overall rise of populism.

However, there should not have been be a zero sum approach that put Trump politics so much on the sideline for decades and who now promises to ditch the Obama-Merkel liberal globalist order for possibly a decade or more.

Instead, I present an alternative in my blog about a synthesis between a Trump and Bilderberg vision. It may be the only way for the liberal-integrationists globalists to save their silverware. And for Trump not to have an exhausted administration having massive battles everyday, if not with Congress then major urban pro-Hillary centres that despise or greatly question him. And let us not forget China.

In the end, I suspect the Bilderbergers will just do what they want to maintain their bulk of power. They are too used to having their way, including getting many leaders appointed they like and even some marginalized they do not like.

But the fact they did not get their very favourite appointee as UN Secretary General and are faced with Trump’s and Brexit’s victories show they could suffer much more if they do not bend.

My view is there is going to be a horrific showdown between the liberal-interventionists and the Trumpians. The Bilderbergers will use the “Third Party” as I call it of the government bureaucracies, street agitators (and possibly red flagging terrorism if things really get out of hand) as well as the mainstream media to undermine the ascendancy of the new Trumpian order. Mark my words enough of these people together are capable of just about anything to maintain and even get more power.

However, Trump and his people are not the Kennedys. Trump in fact is much more sophisticated in knowing who are his “deadliest” enemies and how to compromise them. He has battled them endlessly and largely successfully through primaries and an election that was supposed to be impossible for him to win. To say the Bilderbergers and Merkel types are disappointed with this outcome is a massive understatement.

This includes Trump fighting back against those using retired MI-6 people and dark CIA subcontractors of subcontractors to smear and destroy his movement. And likely fighting against intelligence officials placing articles in newspapers under journalists names that are designed to delegitimize the Trump presidency including his views on Russia.

Thus, despite the trillions of dollars attached to liberal interventionists supporting Merkel and/or Merkel vision oriented people ready to do heavy battle against him, I give Trump at least a fifty to sixty percent chance of finishing his term in office and doing very serious damage to these people beyond belief if they show little will to cooperate.

These Bilderberg people with some exceptions really do not know the extent of the damage they have done which has deeply pervaded the sensisibilities of massive numbers of the grass roots. Again, listen to my interview at “about” on this website for better insights.

I welcome the new Trumpian order but believe it is now time for both sides to open discussions than “kill” each other politically or whatever.

The fate of the world and western civilization depends on it as groups like ISIS benefit from western disunity and excess hostility towards Russia. And it might be time for Merkel, who has done a formidable job for Germany’s economy (but not as leader of the EU and foreign policy and on immigration) to give it a rest.

She should welcome in a new German leader at least in a few years at the latest who can stand for a more flexible,and realistic Europeanism and internationalism. And one who carries much less baggage in the Trump-German chancellor relationship. Yes what relationship is there should be the question? There is none.

Investment implications: Begin buying British pounds. Hold onto US dollars. My guess is that over the next year Australian and Canadian dollars will rise against the US dollar.

The Swiss National Bank should probably sell some of its huge cache of euros so it does not lose much more on its past euro buying spree. This has badly affected its balance sheet and to some extent those of its local cantonal shareholders.

My guess is the SNB will try to do the opposite and it will fail miserably. Things are too uncertain other than saying over the medium term Swiss francs will likely be a safe if not stellar investment.

The euro will probably recover at some point but could get mightily tested if the EU further breaks apart. The euro has insufficiently suffered due to Brexit relative to the
UK pound.

Gold may not be going anywhere too much if the Trumpian order unfolds as more economic prosperity from his pro investment policy and he works it out with Russia. This could not help gold.

However, China and to some degree North Korea down the road could cause increased risk, elevating gold. Keep five percent of your portfolio in gold as insurance might be a consideration.

In summary my favourites for 2017 to 2018

UK pound sterling
Canadian dollar
Australian dollar
US dollar
Swiss franc.

Least favourite
Euro
Chinese yuan

Neutral

Gold

There could be some nice surprises among certain emerging market and other currencies like the Russian ruble, Malaysian ringgit, Indonesia rupiah and believe it or not Latin American currencies including the Brazil real and Mexico and Colombia pesos.

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