By: Kent Engelke | Capitol Securities
Many times I have commented that today is tectonic. Geopolitically, I believe current events are similar to eras when the Soviet Union dissolved in 1991 or the ascension of the US as the primary global power in 1946.
The EU is in shatters. It is increasingly apparent that this grand project is failing and this uneven and over-ambitious expansion has weakened, not strengthened, the EU. The euro is potentially both an economic and political failure.
In fact, iconic globalists such as Soros, Merkel, and Macron have all lamented and warned about the potential imminent failure of the grand experiment of a common government and currency.
A major reason for the demise is unbridled immigration that has startled most voters, a bureaucratic state that is tone deaf to its constituents, and wealth inequality at levels not experienced in several generations because of the socialist dogma that surrounds policy.
Parts of the US Democratic Party are attempting to emulate the EU in its passionate view about immigration, green energy, and socialist agenda… an agenda that is manifested in the Green New Deal. The GND has been endorsed by 70 House members, eleven Senate Democrats and at least five Democratic presidential candidates; far from the amount however needed to push through the proposal.
Will this ringing endorsement be their death knell or the event that catapults them into history as ones who dramatically altered society?
It is widely accepted that Europe and the EU no longer carry the global clout that they once carried even ten years ago. The clout has shifted to India and China. The reason is simple; the lack of growth. The Eurozone 2019 growth outlook has been cut to an anemic 1.3% rate from 1.9% in December. Economic output in the Eurozone was lower in 2017 than it was in 2009 according to the WSJ.
During the same period GDP grew by 96% in India, 139% in China and 34% in the US as per the WSJ. As the EU economy lags, Europe is becoming more divided politically, enabling Brexit type events to occur.
Is this a good path to emulate?
Commenting directly about the energy aspect of the GND, currently, only 17% of US power is from renewables despite massive subsidies that make this power affordable. The WSJ writes that without these subsidies solar costs remain about 20% higher than natural gas and wind is two thirds more expensive.
The bigger problem, however, is that wind and solar do not provide reliable power so backup plants that burn fossil fuels are required, a redundancy that is expensive even with subsidies.
The WSJ writes Germany receives 29% of its power from wind and solar and 38% from coal, making Germany’s electric rates the highest in Europe thus slamming growth and its competitiveness.
The GND is radical. If passed, it will change American society, at best making it noncompetitive by soaring energy costs and massive debt to achieve such goals.
Throughout our history, socialism has entered into the narrative, only to be silenced by overwhelming electoral losses, the result of our can-do culture and society.
Will such occur again today or is the proverbial nanny state about to take upon completely new dimensions?
The above is an observation of a possible event that will forever change the markets and society.
Some write the US follows Europe. If this was indeed the case every Republican would champion the GND for as noted the European grand experiment, which the GND is partially based upon, is on the verge of a spectacular failure.
Radically changing topics, markets staged a moderate advance on hopes of a budget deal and trade optimism.
Last night the foreign markets were up. London was up 0.37%, Paris was up 0.26% and Frankfurt was up 0.16%. China was up 1.87%, Japan was up 1.34% and Hang Sang was up 1.16%.
The Dow should open flat ahead of trade optimism and the belief that the government will not be again shuttered. The 10-year is unchanged at 2.69%.
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