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There are two converging underlying problems that face Western Europe. Money and politics. Unfortunately, they turn into one big problem because the money has been politicised, and the political class barely has one brain cell shared amongst the whole lot of them.

In previous blogs we have discussed the problems concerning debt and too much leverage, but what is the next move?

In purely financial terms, interest rates need to rise to balance the loss of purchasing power due to the debasements of currencies. In political terms that is a disastrous situation because it increases the cost of debt, and every political institution is already drowning in debt, and unfortunately so are most businesses and households.

If interest rates don't rise, inflation will, and we will all be poorer. If interest rates rise, our daily costs will rise for a different reason, and we will all be poorer. Damned if they rise, damned if they dont. Wonderful! It may take some time, but ultimately interest rates have to rise to a realistic level. If they dont, all that will happen is that things will get worse and worse, and in the end they will be forced up whether it is politically expedient or not. This, of course, is not good for house prices. I have repeatedly warned that this will happed evntually, and will be to the detriment of people who have recently been tempted into the housing market.

Sadly, the political classes seem unable to do the most simple things to guarantee the population the most important resources; food and energy. That is unnecessarily tangled up with American political interference in the affairs of European supposedly sovereign states.

We all know that the US is obsessive about Russia, but that shouldn't mean that Western Europe has to be in the front line of that hate relationship. The first thing that needs to be done to help get social stability in Europe is to get rid of NATO. Russia pulled back out of COMECON countries 30 years ago, and NATO was supposed to pull back as well, but marched forward instead. Naturally that has created a severe un-balance of power to the detriment of the continent. It is utterly absurd that Western Europe should be disadvantaged because the Kiev government is not keen on its eastern provinces seeking independence. Why shouldn't they? And why should we suffer because the US wants a puppet government in Ukraine?

I dont see why my petrol price should double because the Yanks want control in Ukraine. Ukraine has been Russian for centuries. What does it matter to someone living in Kentucky, or Portland? Unfortunately it matters to rather a lot of people who depend upon the wheat Ukraine grows and exports, among other things.

It is also politics that is directing the way 27 totally different economies share the euro, usually to their detriment. You can't have one interest rate, and a T2 system that crosses so many diverse economic systems.

For years I have been suggesting the EU use a system much like that in Central America, where each country has it's own currency, but also accepts the US$. What's wrong with Germany having its DM, and the Italians their lira, but them all using a euro for cross border trade?

Of course, I may be wrong in thinking the German public are the real lynch-pin in all this. How much more of this nonsense are they going to put up with? Inflation is through the roof there. Their economy is in the process of being shut down, they are owed 1.2 trillion under the T2 system, which they will never recover, and if I was a German citizen I would be standing up and screaming about how much more of this I was expected to put up with.

When are the Germans going to say 'enough is enough'? Can they hold out another six months? Somehow I doubt it. I wouldn't be at all surprised if a few more political assassinations are in the offing. It would be so much nicer if some common sense could prevail before that happens. Meanwhile I am preparing my escape routes from a continent that looks hell-bent on committing suicide, egged on by brainless politicians.

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