Something Wicked This Way Comes

In France, the voters turned against Macron’s ruling coalition. In Germany, they turned against the centrist Social Democrats and Christian Democrats in favor of more extreme alternatives.

Anatol Lieven: Europe’s center is not holding

The collapse of the government in France and the ruling coalition in Germany spells continued crises

In America, too, voters selected the ‘insurgent’ Donald Trump over the media-approved Kamala Harris.

Something wicked this way comes?

Executive Summary:

All the world’s major nations — China, Japan, the US, France, Britain and Germany — are facing a debt crisis. Too much spending. Not enough revenue. And now, there’s about $330 trillion of debt worldwide… much of which will never be paid.

Responsible governments try to cut back. But they can’t. The primary beneficiaries — the rich — undermine them. And then, the victims — who have come to depend on handouts — abandon them.

The trend — towards more debt, bigger government, and more inflation — continues until a ‘bad thing’happens, effectively cutting off the money.

In France, the voters turned away from the center and moved towards the right and left, each one offering more radical solutions.

In Germany, too, the ‘right-wing’ Alternative for Deutschland and the ‘left-wing’ Sahra Wagenknecht Alliance have greatly weakened the more mainstream parties.

And, of course, Donald Trump’s Republican Party is not at all like the old conservative, centrist Republican Party of Robert Taft and Ronald Reagan. It is now a ‘populist’ party combining elements of dollar-store nationalism with old-fashioned sticky-fingered socialism.

The ‘bad thing’ we think these election results foretell is that post-WWII mainstream models — welfare states in Europe/a welfare-warfare state in the US — are running out of juice.

There was something fraudulent about them from the very beginning. In the welfare states, the promise was that by supporting the ruling elites, the voter would get more out of the system than he could by his own honest, cooperative efforts. This seemed to be true as long as populations were growing and technology and trade increased productivity. Richer, younger generations could afford to support their parents in grand style. Pensions, real estate values, medical coverage — all went up. But it was fake. Government was just redistributing wealth, not creating it.

And then, birth rates declined. And the benefits of the Industrial Revolution — which converted heat energy into useful kinetic energy — reached declining marginal utility (meaning… you get a big bump in productivity with your first tractor… not so much with the 10th).

Young people now struggle to match their parents’ wealth, not to surpass it. And though the internet, Facebook, Google and AI promised more wealth, in terms of useful bill-paying GDP, they delivered little. This left voters with a big gap between what they had come to expect from their governments and what they will actually get. Austerity was not what they had bargained for.

The American warfare state, meanwhile, had its own scams. It pretended that the US was in imminent danger from foreign and domestic enemies… and that it could only protect itself by transferring huge amounts of money to the firepower industry. Rather than a modest ‘defense’ budget, it insisted on ‘full spectrum dominance,’ that would allow it to meddle in whatever conflicts, wherever and whenever it wanted.

In addition to the costs of projecting armed force worldwide, the US too has an extensive welfare state at home to support. As in Europe, at current levels of expenditure, it is unsustainable.

In order to avoid financial catastrophe, the feds need to cut about $2 trillion from the annual budget. That is the goal of the new DOGE headed by Musk and Ramaswamy. But to get there, they need to cut back on both the warfare state and the welfare state — on military muscle as well as civilian fat.

It is certainly possible to do so; Milei shows us that. For the warfare state, it would mean only redirecting military spending towards protecting the homeland rather than romping all over the globe. And for the welfare state, the feds could simply subject beneficiaries to means testing, reducing support for people who don’t really need it.

Theoretically, it wouldn’t be difficult to bring the budget into balance and avoid a fiscal disaster. But can it be done without a ‘bad thing’ –war, depression, hyperinflation, revolution or a natural disaster -happening first? Can it be done before the people become desperate?

We’ll see.

Regards,

Bill Bonner

In France, the voters turned against Macron’s ruling coalition. In Germany, they turned against the centrist Social Democrats and Christian Democrats in favor of more extreme alternatives.

Anatol Lieven: Europe’s center is not holding

The collapse of the government in France and the ruling coalition in Germany spells continued crises

In America, too, voters selected the ‘insurgent’ Donald Trump over the media-approved Kamala Harris.

Something wicked this way comes?

Executive Summary:

All the world’s major nations — China, Japan, the US, France, Britain and Germany — are facing a debt crisis. Too much spending. Not enough revenue. And now, there’s about $330 trillion of debt worldwide… much of which will never be paid.

Responsible governments try to cut back. But they can’t. The primary beneficiaries — the rich — undermine them. And then, the victims — who have come to depend on handouts — abandon them.

The trend — towards more debt, bigger government, and more inflation — continues until a ‘bad thing’happens, effectively cutting off the money.

In France, the voters turned away from the center and moved towards the right and left, each one offering more radical solutions.

In Germany, too, the ‘right-wing’ Alternative for Deutschland and the ‘left-wing’ Sahra Wagenknecht Alliance have greatly weakened the more mainstream parties.

The ‘bad thing’ we think these election results foretell is that post-WWII mainstream models — welfare states in Europe/a welfare-warfare state in the US — are running out of juice.

In addition to the costs of projecting armed force worldwide, the US too has an extensive welfare state at home to support. As in Europe, at current levels of expenditure, it is unsustainable.

We’ll see.

Regards,

Bill Bonner

What we’ve seen since 2008 is nothing short of a theft of the commons. Except it happened in little pieces that seemed unrelated at the time. But if we look at the story holistically, it all comes together.

When we step back and view the entire picture, what emerges is not just a story of market excesses and economic shifts. What we see is the gutting of middle America – be it intentional or otherwise.

Now the question is – are we going to see the restoration of the American middle class in the coming years… or are we going to watch everything devolve into a modern redux of the War Between the States, more commonly but mistakenly known as the American Civil War?

Today’s Washington isn’t governed so much as stage-managed.

Politicians don’t solve problems; they perform them.

The current fixation is affordability — a word that will be repeated ad nauseam from now through the 2026 midterms, until it becomes as meaningless as “bipartisan.”

The script hasn’t changed in decades: promise relief, pass a law that raises costs, blame capitalism, hold hearings, fundraise, repeat.

Yes, Nvidia’s profits are up 500%, and its share price followed suit — a rare case where the story actually matches the math. But that’s the exception, not the rule.

Beneath the headlines, we’re starting to see the kind of financial gymnastics — circular lending, balance-sheet origami, and creative “partnerships” — that usually signal the boom is running out of breath.

If history rhymes, it looks like we’re closing in on the tail end of a mania.

As interest rates fell, investors swarmed into real estate, lured by yields and the illusion that home prices never fell. Wall Street’s private-label securitizers were soon packaging everything from pristine mortgages to what were effectively loans scribbled on napkins, thus turning them into bonds that glowed like gold — until you looked too closely.

For their part, the regulators and ratings agencies conveniently looked away and allowed the bubble to grow. Fannie Mae watched the frenzy from the sidelines at first.

The company’s mandate — written in law — was not to chase profits but to promote affordable housing. That is to say, to make sure that teachers, nurses, and other first-time buyers could own their own homes and unlock the American Dream.

But as Wall Street flooded the market with high-risk mortgage products, political pressure mounted. Congress demanded that Fannie “do its part” for low and moderate-income families.