Editorial: A European Super State might be on the horizon

Last year a wave of solidarity following the invasion of Ukraine brought European governments and people together in a form not seen on the continent for decades – This will not last, but is a window European leaders will seize to advance the European Integration Process to a new level.

For years I have spoken at conferences to share my non-consensus forecast that I see an unprecedented convergence of crises forcing European nations to work together .. and eventually the rise of a European Federation. In 2018 I called it the coming European Super State. I said it during the Euro debt & Greece crisis, while most experts talked about the breakdown of the EU and the end of the Integration Process.

Our proprietary analysis has been pointing for years to a powerful crisis overlap in this decade overwhelming the current EU, but in turn increasing the political will to build a new structure. This could flank President Macron’s vision of a European Army. On the other hand Berlin wants to keep America involved in Europe, because it contains France’s power and Germans don’t want to have to fully rebuild the military. WW2 still blocks them. But a lack of military deterrent is definitely one of the reasons Europe failed Ukraine.

It is in a way sad that only after the war broke out, our Western leaders began to say that values should matter. In fact we have also been walking away from our values for many years, four to five decades.

Those who follow our independent research for more than a decade know our analysis has been scoffed at, because we foresaw the supply chain will collapse and full-fledged Free Trade with autocratic nations will erode our security and possibly bring wars back to Europe. I never advocated to isolate China: China can be a blessing to America and the world economy. I encouraged German and US governments to do trade with China on reciprocal terms instead – That would have been better for America and China. Our Western oligopolies would have earned well instead of too well (i.e. becoming cash-rich and tax-dodging giants).  We should have conducted commerce, trade and bilateral relations based on reciprocity – just what common sense would have suggested. 

America – home of free competition

Although monopolies are getting bigger and the state is also growing its influence, I hold the hope that America will embrace her roots again and be once more the champion of free competition. That is what really allows America’s economy to thrive.

I have taken flak over the years here in Europe for defending America as the greatest and most benign super power the world has ever had. With Britain coming in second place. They have surely made many mistakes and abused power, but also brought much progress and prosperity to many nations. Have other powers done better? I doubt it.

We did it to ourselves

If we can oversimplify a bit: Would you willingly sacrifice manufacturing jobs in your country .. just to make your big companies richer and mass consumption-on-credit for cheap goods explode? That was not a great idea, but somehow that is what Western academia, media and investors embraced 25 years ago. Our governments, firms and households ended up indebted. As a former fund manager I can assure you: most gigantic companies have no allegiance, their shareholders force them to dodge taxes and lobby your politicians – They will seize the economic benefits while 90% of your citizens and your government will lose out. Since 1980 inflation-adjusted salaries per capita in America have basically stagnated (but now many work 2-3 jobs), while US GDP and corporate profits exploded. More recently salaries have recovered somehow, but the big picture is still the same. The economy in America and Europe has been fantastic for big corporations, but somewhat disappointing for 90% of households. This was in part the result of unrestrained Free Trade, because manufacturing was shifted to cheap locations, without any restraint whatsoever.

The dismantling of our Armed Forces alongside Free Trade with autocratic states has been one the gravest strategic errors by Europe in general since WW2. In fact this unrestrained Free Trade has rewarded the autocratic structures in geopolitically important nations and made them stronger. Their grip on their countries has grown stronger. Our political leaders, university professors and leading journalists told us that as we do more unrestrained trade with dictatorships they will open up to democracy. I have opposed this view since my years as graduate student at the economics faculty: Instead, Free Trade based on reciprocity would have benefitted the West and China. It is remarkable that the most disastrous “expert consensus” in a hundred years is being glossed over. There are no apologies, resignations, hearings, investigations .. nor TV debates about it. In fact some of the people that got the West to this place, are shaping policy. 

BRICS are overtaking the G7 – they see our asset bubbles & want to de-risk

We have to clarify that not all Emerging Nations are autocratic. Many of them are growing democracies like India, Indonesia and Brazil. These rising powers are seeing the West as a growing risk due to our asset bubbles, massive debt and overprinted currency. That is why they want to reduce their exposure to our monetary system. But some of these nations are also concerned about becoming too dependant on China – hence the multipolar goal.

In a sense we, the West, have not been a good role model over the past 30 years. The best examples of fiscal-monetary discipline are found among some Emerging Markets in Asia and Latin America, not among the leading G7 nations.

The fact that so many democratic emerging nations with healthier monetary-fiscal policies than us are rallying behind China to contain the West (USD), shows how disappointed the world has become about the West in recent decades. We have failed to reach out and have resorted to sanctions instead. In fact only 9 out of the 41 nations that want to join the BRICS currency see the West as an adversary, the others want to trade with China and the West freely – while limiting their exposure to our overprinted currencies. Here, we need to be humble and think why the rest of the world wants to decouple from the West. To simply threaten them with sanctions is proving counterproductive, because the rest of the world now has more economic weight than the West.

I’ll put it in simple terms: the BRICS with its allied Emerging Markets now have the size, trade surpluses, savings and resources to build their own currency and banking system.  The West has an overflow of knowledge, but a lack of wisdom.

Reciprocity works 

It is still my humble view that a system of open trade that is based on reciprocity is the better approach in a highly fractured world on the brink of war. It is constructive and pragmatic. It gives time and space for autocratic, but also to over-indebted democracies (G7) states to change at their own pace. 

The Win-Win was possible: If we had stuck to our values and common sense (reciprocity), I am confident that China would have developed slightly less rapidly, more sustainably environmentally and also “opened up” somewhat politically and commercially. Our democracies would be more stable and our people less impoverished. China may have developed in our direction. Having chosen a flawed path negating reciprocity for decades to maximise corporate profits and excessive consumption, the current global struggle for dominion is likely to force the West to converge towards China’s model.

As someone that has spent many years warning about these risks, allow me to say, the West is 24 years too late in realising something is wrong. This should have been spotted by our academia and economic experts. A concern remains in America and Europe: Not only have our leaders that brought us here not acknowledged their flawed strategic decisions, quite a few of them are still shaping our new policies. Having said that we cannot simply doubt our leaders as a result, they need our constructive criticism but also our support! I would rather invite you to join me in praying for our leaders. That God may give them wisdom. 

Beijing has simply done the rational thing and advanced its national interests – to some extent at our expense, but thanks to our mistakes. Once we were in the strategic dependency trap (we warned since 2010 the year 2016 would be our last chance to avert it), Beijing was able to become increasingly more assertive towards the West. 

Western economies with less free competition

Our current problems lie in part in the decline of that which used to make the West so strong in the past: our moral values and our capitalism characterised by lots of competition. It is sobering: Simply to keep up excessive pretentious consumption and to make large corporations richer & bigger .. the West sold its soul and rejected fiscal-monetary discipline. Not only have these gigantic oligopolies/monopolies decimated free competition (the very essence of capitalism), they now influence much of the political process in Washington, Strassburg and Brussels.

In a sense the West and China have been on a convergence course for years. A convergence where the state and monopolies are gaining in size – seemingly unrestrained. The invasion of Ukraine only adds momentum to this trend and to our old prediction that we shall see the rise of a European Super State in our time. Whether it shall rise from the ashes of the flawed EU bloc or not, I stick to my independent assessment from 2015 that the “European Integration Process is not over, it is actually likely to gather pace as the crises overwhelm a protectionist and over-regulated bloc”.

At Geopolitical Research we help decision makers gain insight into what is underestimated by consensus. We have a balanced approach to analysis that takes into account Western and Oriental cultures & worldviews. Shedding light on consensus-overlooked areas helps decision makers better understand other stakeholders and even so-called adversaries. We try to help reduce the risks of costly miscalculations. This also helps people discern the times we are living in. 

Old Editorial: EU to build own military & financial system ex USA

By Christian Takushi MA UZH Macro Economist – 28 Aug 2018 (delayed public release)

French President Macron has stated this week that Europe needs to build her own financial and security framework in order to be independent from the USA. He confirmed the repeated calls by German Chancellor Merkel for Europe to detach from the USA. Paris, Berlin and Brussels are now in agreement. Many are cheering that the EU is standing up to America.

The EU is on confrontation course with the USA, and the Anglo-Saxon world in a sense. This is something we have been warning of for years. Many would like to blame this on US President Trump alone  – a convenient, but somewhat misleading narrative. The USA and Europe have been on collision course for a long time. But despite the increasingly conflicting interests, political leaders on both sides of the Atlantic for over a decade continued to stress “the shared values” in public instead.

This  clash was coming. Europe has been embracing China and Iran … [Read more]

Former posts not to miss:

Geopolitical Update: A possible war with 2-3 fronts looms in the Middle East

Europe to become a Super State – More integration & power concentration is coming (Interview)

Geopolitical Update: Japan rearms and shifts to the right

Since 2016 our newsletter is consistently ranked among the 50 most reliable sources of geopolitical analysis worldwide

“After 45 years of a liberal Policy Mix, a multi-year process of Normalisation in Global Politics and Economics started in 2015. Fears of extreme isolation and protectionism by the USA and UK will prove overdone. We see rather a temporary correction towards the historical mean. This correction is unlikely to stop the secular trend of liberal globalisation and power concentration – The West is embracing a state-run economy model” By Christian Takushi MA UZH, 3 Dec 2016.

Many observers and analysts err in their view of the new US Supreme Court. Based on our independent analysis, we assess that the Supreme Court is less conservative than widely believed. On paper it is conservative, but the facto rather “centrist – conservative leaning” – often depending on the issues at stake.

LATAM – In China’s grip: Brazil, Peru and Chile

In the vacuum of US leadership in Latin America, Russia and especially China are growing their influence. The struggle between the super powers has shifted to Latin America. After consolidating her influence over Argentina, Venezuela and Bolivia, Beijing is now launching a concerted effort to bring the most capitalistic resource-rich economies (Chile, Peru etc.) under her influence. (Latest update only available to policy makers).

Eastern Europe: Turkey – Romania – Poland 

Since 2010 years we are predicting the inexorable Geopolitical rise of Turkey and the potential rise of Romania & Poland as European powers. While Turkey is rising thanks to Europe’s lack of strategic foresight, Romania could benefit greatly from strategic energy & military shifts. Takushi sees Bucharest lacking global strategic-geopolitical expertise though. In that sense, Warsaw is one step ahead. Nations will rise and fall based on their ability to capitalise on global strategic-geopolitical shifts. (Latest update only available for policy makers).

After years of researching Geopolitics and Macroeconomics, Takushi found that broadening Macro Research to include geopolitical factors improved the quality of the analysis. He thanks the many professionals and experts that are contributing to advance this research.

This new approach to Geopolitical Analysis is free of conspiracy theories, ideology and judgement: All nations pursue their national interests with all means at their disposal, just as corporations do. This is, in a way, an economist’s approach to political analysis. Applied at a global scale and aggregate levels, the Western linear-logical way of thinking is complemented by the Oriental circular worldview to improve results.

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• 13 Jun 2017  CFA Society Switzerland in Lausanne – CE approved seminary (The coming Middle East Crisis)
• 7 Mar 2018  The European Super State & Middle East War – Swiss Investment Conference, Park Hyatt Zurich
• 25 Oct 2018  Geopolitical Trends in Asia. Headquarters of the Bank for International Settlements (BIS) – Basel
• 15 Nov 2018  Geopolitical Risks & Opportunities in Eastern Europe – Zurich University for Applied Sciences’ investor conference
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