With this article I want to conclude my series of articles, analysing the strategic circumstances of the current geopolitical events. Depending on the timeframe, one wants to consider, there could be several different “Endgames”. I have chosen to get over the next five years in my series. And within this timeframe I assume that Germany is the key to the outcome of the current struggle between Russia and the West. Of course, there is a third party, watching all this and preparing for the world after this conflict… It’s your guess, which third party this could be.
But before I start, I want to give another information. I try to keep domestic politics as far as I can out of this article. Why? Germany is the cornerstone of the American empire in Europe. It has the highest degree of occupation through all possible layers of influence, of all states in Europe. There are by far the most American soldiers present in Germany. All political parties are firmly controlled by the US. And the mainstream media openly admits that it is mainly spreading the interests of the United States (Atlantikbrücke etc.). If one mention German interests then he is instantly declared a Nazi and it is pointed to EU interests. I’ll come later back to this topic.
Well, what do I want to say with this? The stability of the German state is the top priority to the US. It is the main leverage over Europe. If one has to say anything, that could threaten this status quo, he gets immediately attacked by all soft power, the empire has at its disposal. That’s why I will try to avoid writing anything, that could be understood as problematic for the German internal policies. I’ll focus solely on economics and geopolitical topics in connection with Russia, the EU and China.
This article is a direct continuation of the “Economics and Empires” article. That’s why I suggest reading it first.
Basics about Germany
So, let’s start with economics. Economics is a difficult topic if you don’t have knowledge about it. Since most people are no economists, I’ll try to write everything as simple as possible, without using too much technical terms.
As explained in my last article, growth is everything. Especially in the West. Germany has a very special role within Europe. Its role is, to control the rest of the European states through the EU. On behalf of the United States. This is called “Single point of influence”. To be able to do this, Germany needs to have a strong economy, to be able to influence the EU in such a way, that is needed. Or in other words, to make the other states follow its lead.
One can build up a strong economy by focusing on by large on the domestic market. This is absolutely possible. See France. But it is by far not enough, if you want to assume a leading role and be greater than the other competitors. Then you will need to have both, a strong domestic market and a huge share of exports as well. Germany follows this road.
Germany is a huge exporting nation. And by exporting goods it gets a huge inflow of foreign capital. Germany is doing this for many decades and is thereby a very rich country. But this provides problems as well. Germany has a huge GDP. But approximately half of it is generated by exports. As long as it works, it is great. But there is a decisive problem inherent. Your welfare depends on geopolitics and global economics. And as long as you are no superpower, that can defend its interests worldwide, you live and prosper on the mercy of others. If the geopolitical situation changes, you might get cut off, of your vital trade relationships and face grave consequences.
Germany is not a superpower and cannot protect its interests with its military.
The situation described above, implies, that Germany’s welfare is dependent on foreign powers. But which are these dependencies? Let’s take a deeper look at how the shares are defined of Germany’s exports.
The number one export market for Germany is the European Union. By far. It is worth slightly above 600bn Euros. The European Union is a vehicle for keeping Germany economically potent and having a strong influence over the EU countries. Germany is paying a whole lot of money into the EU. Germany is by far the biggest contributor to the EU. It pays some 21bn Euro into the EU. The next contributor is France with 10bn Euro. Sounds like a disaster? Well, it isn’t.
It is an investment. Germany is paying into the EU so the EU can provide subsidies to weaker EU countries. For what? For developing the infrastructure. Why? To enable German products and commodities to better reach every inch of the territory of the EU. Germany being such a huge exporter, is able to produce huge quantities of commodities. If you produce huge amounts of quantities, you can produce very cheap. In fact, you can produce far cheaper, then all the small EU countries. Especially the new EU countries, that was aligned to the communist planned economy, which has totally broken away since the collapse of the communism.
All the factories, that were assigned to a certain purpose in the days of communism, can’t compete with the mass production of the West. And especially of Germany. In fact, Germany, through the EU, is transforming all small EU countries into perfect consumers of German goods and destroys in the process the industry of the target countries. This has worked perfectly well for some two decades.
These countries, to be able to buy German goods, needs to maintain some degree of economic strength, to be able, to buy German goods. If these countries start to struggle, they will naturally scale back the imports from Germany. If one country is scaling back, Germany wouldn’t even mention it. If all countries are scaling back, then this would lead to serious problems for Germany.
The second biggest importer of German goods are the United States. They do import goods worth some 120 billion Euros. The biggest share of it is represented by cars and car parts. Everything went very well for decades. This harmony seems to be ending as we speak. President Trump did already advocate the “America First” strategy. Which implies buying more or mainly goods, that are produced in the United States of America. Everyone in Europe and especially in Germany cheered for Joe Biden, to become president. To end this protectionist approach of the USA. Well, President Biden continued it and even increased it. He only ladled it “Green” instead of “America First”. I’m sorry, I’m laughing during I’m writing these words 😊
Well, America is re-industrialising itself, and especially the so called “Rustbelt” by using the green label. I’m struggling to stay serious, while writing these words, honestly 😊
It gets far better. By forcing the EU, and especially Germany to get green, America ensures, that Germany lose its competitiveness on the global market and thereby contributes totally to German’s deindustrialization, while sucking off its industry. At least, that’s the approach. As things unravel, as I write these words, we sill need to see, in which direction everything will eventually go.
Back to serious business. As I said, the US is the second biggest importer of German goods. Cars and machines. This will most likely decrease dramatically. Why? Well, President Biden introduced the “Inflation reduction act”. Which pays huge amount of money to companies, that are producing green technology WITHIN the United States.
I will discuss later, why production costs are going up in Germany and thereby German companies struggle to survive. But in any case, these companies might get attracted by such an offer. Come to the US, build factories there and produce green technology. You will get subsidies by the US government to realise this. At least in theory, the estimated outcome could be, that many EU, and especially German companies will move to the USA. They will get subsides for resettling and will be able to produce far more competitive then in Germany, going forward. This is currently the biggest issue between Germany and the USA. I won’t go deeper into this topic.
Well, however the outcome of this struggle might be, the number of exports to the USA will definitely diminish going forward. Why? Either because the products, that are currently produced in Germany will be produced in the USA, going forward, or because German products will be too expensive, to be able to be exported any longer. Due to the skyrocketing production prices.
China is the third biggest importer of German goods with imports worth 100 billion Euros.
Things are very difficult here. One could say, they are multi-dimensional. China has a huge interest in keeping the trade with Germany as it is. Why?
China wants to have influence over Germany, exactly as the United States does. Over Germany you can control the EU and the valuable trade with the EU. China is a trading nation. It thinks in markets not in conquest. China was for decades dependent on Germany to built up its technology and production base. I can personally confirm that China has overtaken Germany within the last few years in “everything”. In fact, China wouldn’t need to import the goods from Germany, that it does. But it does so, to have a huge leverage over Germany to be able to positively influence Chinese projects in the EU. In other words, losing China as a trade partner would kill Germany overnight. China would take some wounds away but would overcome them quickly.
At the other hand is Germany importing essential goods from China. Precious material for high tech goods and cheap preliminary goods. If Germany wants to get green and independent of foreign energy, then it will need Chinese precious materials and become dependent on Chinese imports and technology. Away from a dependency on Russian energy towards a dependency on Chinese technology and material. This is the green transition in a few words. But later more about it.
Germany needs China to sell its cars and machines. But since there is already a law, that products need to be assembled in China, to be able to be sold on the China market (I know, that is a very simplified explanation, but it would get too big here otherwise), most production is already located in China. We are talking here largely about revenue and cash flows from China, less industrial capacity in Germany.
Considering point 1 and 2, we can assume that it makes sense for both partners to continue the trade as it is.
Unfortunately, Germany’s biggest “ally”, the United States are waging an economic world war against all its competitors. Especially against China, to try to slow down or avert China, to overtake the US as the leading economic power of the planet. In real terms, China has overtaken the US long ago.
Since the EU is a big market for Chinese goods, the US tries hard, to disrupt this relationship with all means. Depriving the Chinese from the European market would weaken China. Both economically and politically. It would generate many unemployed people, since it wouldn’t be possible that easily, to replace these markets that quick. At the same time, the US could and would try to take over these markets in the EU with US goods, and by doing this, re-industrialising even more. Of course, “green” 😊
To achieve this disruption, the US are talking constantly to the EU leaders, and especially to the German leaders, that they can’t do business with the brutal communist authoritarian regime in China. Even threatening sanctions against the European “allies” in certain cases. The biggest argument currently is how bad the dependency on Russia was. And why Europe is keeping further dependencies on other authoritarian regimes like China.
Well, the trade dependencies with Russia were not that high, considering their monetary value. Indeed, they were crucial in terms of German dependencies on scarce and cheap resources from Russia, to keep up its industry running.
Let’s take a look at both, imports and exports from Russia:
Exports to Russia:
Germany exported in 2021 goods, worth 26 billion euros. 14 billion euros for cars and machines. 6 billion euros for chemicals. Goods, on which Russia has been dependent of for its own industry and military. Since Russia has started an import substitution program in 2014, in anticipation of a ceasing of its trade relationship with Germany, Russia has been well prepared for the cessation. It is not a good thing, but Russia can do without Germany. On the long term it will even strengthen Russia because it is building up own production capacities for these products. Which is strengthening its economic and industrial potential.
It remains to be seen, how much of this share will be lost due to the sanction war. I won’t do any predictions yet. The trajectory of travel can still develop in different directions.
Imports from Russia:
Germany imported goods from Russia, worth 33 billion euros. 24 billion euros for energy carriers. 5 billion for processed goods.
Well, the net worth is not overwhelming. But the product is scarce. Germany needs it, to keep its industry running. In fact, its whole economy and the private households as well. The value is small because the energy is cheap from Russia. It is cheap out of the same reasons, why the other two great powers are holding a leverage over Germany. Making Germany and its economy dependent over themselves. Each great power has one big leverage over Germany. Russia over energy.
By withdrawing from buying cheap Russian energy, Germany has chosen (was forced to), to buy expansive energy from “its allies”. Since Germany is still an industrial state, it relies heavily on energy and its prices. By buying expensive energy, ALL industrial products becoming far more expensive, then the ones of German’s competitors. German’s good won’t be competitive any longer on the world market and their share will decrease significantly.
I explained initially, what the reduction of the export share means for Germany. It is fatal since Germany is dependent on exports.
Initially I wrote that growth is everything for an economy. Especially for Western economies. And even more important, for Germany since it is relying heavily on exports.
Let’s go into some numbers. Germany’s GDP is worth some 4.3 trillion euros. Half of it comes from exports, roughly. Germany has diversified its exports very good. For the time being, Germany was able to absorb the drop of exports to a certain country, by increasing it evenly to all other countries. It was, so to say, very robust. Considering my explanations about the main trading partners of Germany, we need to assume that the exports to these countries will decrease within the next years significantly. If we take the EU, the US and China together, then we have exports worth 860 billion euros. If they contract for example 20 %, which is indeed realistic, given the facts, that I provided, then this would amount to 170 billion euros. We are talking about a GDP contraction of 4%. Which is catastrophic.
I was referring only to the three biggest trading partners. Take the others into the consideration, and this value will rise. Not tomorrow. But over a period of five years, if my estimations are right. We are talking about 4% or more, only triggered by dropping exports. What we didn’t analyse yet, at all, is the domestic consumption. This is my next topic.
Decreasing working population and skills shortages
Germany has a serious problem, of which no one wants to talk about. Not a single political party did mention this problem in the electoral program. And no one has talked about it until recently. Germany will be out of people that can work, soon. Keep in mind. Without workers there is no industry and without industry no exports. “NO workers” is exaggerated, I’m talking about far less. A drop of several millions. How will this happen? Well, Germany has a certain birth generation, that is called the “Babyboomers”. I saw many definitions of which years are considered as “Babyboomer” birth years. I will go here with 1955 to 1969. Well, this is, by numbers, the biggest worker generation. And these people will start retiring from 2023 for a few years. Millions of very good educated skilled people will retire, and by far less people will follow. A gap of a few million workers will materialise until the end of this decade.
To be straightforward. There is nothing that can be done against it. And it is a colossal problem. If the industry can’t be sustained without energy, it can’t be sustained without workers as well. I will show you a few points how to try to ease the impact a little bit:
Germany tries to reduce the impact by investing huge amounts of money into automation. If the degree of automation raises, you need less workers. But you need people with special skills to maintain the automation. Germany is pursuing the “Industry 4.0” approach, where the machines are communicating with each other and controlling each other, without human intervention. This is working less good then bad currently, if you leave the big companies aside.
If you digitize more processes, you need less people. This is true.
Germany is trying to attract skilled people from abroad. This worked not that well for the time being. In fact, it failed. Now, that the living standards in Germany are dropping significantly, this will be even less realistic.
For the work, that requires less skills, Germany is successfully collecting “refugees” from many places and is trying to integrate them very quickly. The goal is, that they DON’T go back to their home countries. They need to stay in Germany to do cheap manual work. Since 2015, Germany “collected” this way several million “new workers”. The impact on the social situation is not the very best, yet.
Raising the retirement age:
Until last week, no Germany politician spoke openly about this problem. Chancellor Scholz did it last week the first time. He said that it is a problem, that people retire to early. Valuable and skilful workers disappear to early from the market. Usually, Germans need to work until 65 or 67 depending on when you are born. But many Germans using a law, to retire with 63. Which is absolutely understandable. But of course, bad for the industry.
The German government has started to talk about raising the retirement age with the life expectancy of the people. The reaction of the people will be interesting to observe, indeed 😊
Raising the weekly working hours:
For the last decades, the worker unions achieved to bring the weakly working hours ever more down. Currently we are talking about a working week of 35 hours in companies, that are bound to the worker unions. If you have fewer working hours, you need more workers to achieve the same amount of work.
In turn it means, that the German government will try to reverse this trajectory and to raise the weekly working hours again. It could go into the direction of 48 hours per week. The reactions will be interesting to observe as well.
In Germany you have between 24 and 30 days, in some cases even more, holidays per year. Here applies the same. If you have more holidays, you can do less work. Again, the German government could try to reduce the holidays per year.
Are you a German and you never heard of this problem? I know. You never heard of the measures, mentioned above, to get over these problems? You will in the next years, I promise.
Resources, energy and social peace
Germany is a great industrial and economical power. But it highly depends on trade. Not only for export but also for import as well. There is a set of resources, on which Germany depends on, to be able to maintain its economy. I won’t go into the single resources one by one. We are talking generally about energy carriers and certain metals.
This chapter is very important. That’s why I have chosen to focus on a single red line, that I want to describe, and leave everything else out. I want to describe how the energy issue is creating problems regarding social peace in Germany and how Germany is currently handling it.
Since Germany is still an industrial nation, it highly depends on energy, to keep its industry running. The industry is also the biggest source of jobs in Germany, by far. I want to add here, that I’m considering jobs in service companies, that are only existent, because of the industry, also as “industry” jobs, for the sake of this article. These secondary jobs would also cease to exist, or would need to be transformed into other services, if the industry would cease to exist.
Again, I will keep everything, that follows not very simple. Because I want everyone to understand it very well. Germany needs competitive energy to run a competitive industry. Moreover, Germany needs energy at all. No energy = no industry. Uncompetitive (expensive) energy = deindustrialization over a period of a few years.
I will explain this, but first the social aspect. People in the West are used to having all they need for a good live. At least, if you compare it to most of the other countries worldwide. This is changing of course. The rest of the world is catching up. But we are talking particularly about Germany. If the Germans would start losing their jobs, experiencing skyrocketing (inflation) prices for basic goods and sitting in cold houses then this would certainly lead to revolutionary feelings. As long as the Germans have a warm house, something to eat and a small inflation, they will go along with everything their government is doing with regards to internal and external politics. If these things don’t apply, then there are problems.
See, you can vote in Germany (this applies for the whole of EU as well) for whatever party you want. You will never be able to influence foreign policy. It doesn’t matter, what the party initially is advertising for. Left, right middle or what have you. You can influence domestic politics but never foreign politics. If a party would attempt to do something, that is against NATO or the US, there would be first a covert intervention, then an overt, if the covert was unsuccessful. Covert means, blackmailing, media shitstorming or infiltrating a party with people that are stirring up discourse and trying to destroy the party internally.
Hence, voting or the “Western democracy” is not a threat to the people in power. Popular uprise, due to a massive drop in the living standards is an absolute threat.
Well, due to the sanction war against Russia, Germany got deprived of competitive (cheap) Russian gas and oil. The German industry is absolutely dependent on Oil and Gas. It can’t and it will not be able to exist without Oil and Gas in sufficient quantities. Not matter what paroles the government is giving out. It can’t and it won’t be able to do it, going forward. (More about it later in the “Green agenda” chapter).
Germany currently is buying energy from all kinds of sources worldwide, to replace the Russian deliveries. Unfortunately, these alternative energy sources are far more expensive. We are talking about dimensions that are reaching four-to-eight-fold higher prices. To be straightforward, energy in Germany is, as we speak, not more competitive/payable. If the people or the businesses would need to pay direct market prices, Germany would now face a disaster. The households couldn’t pay their bills any longer. The production prices of businesses, especially the energy intensive ones, would be uncompetitively high. Which means, that they would need to increase their prices at a degree, that no customer would be able/willing to pay, worldwide. In fact, Germanies competitors would take these markets/customers over, already as we speak.
At the beginning of this year and up until September, these scenarios were officially communicated and feared by the German government and media. Then Germany introduced a price cap/ceiling for the industry and for household for energy. Suddenly the situation stabilized again. Currently the situation is bad but far from, what was forecasted. There either will be a small recession in the first quarter of 2023 or simply no/little growth.
This ceiling is against EU rules. Germany is the biggest driver of EU rules, but in this case, it ignores them. Simply for the sake of not collapsing economically and by social unrest. Germany is a very rich country. This ceiling is worth 200 billion euros. When it is depleted, Germany will be able to set up another package, and another. Of course, it will bring problems because it increases the sovereign debt of Germany. But this is sustainable for at least another four to five years. If the prices of energy would be the only problem. But they are not.
Well, the next problem is the overall availability of energy (Oil/Gas). A rich country can solve many problems with money. But it can’t solve the problem if the object of desire is not available. Germany is currently trying to ensure energy deliveries from everywhere worldwide. Mainly via LNG. The big question is whether Germany will be able to ensure enough quantities, to keep its economy and industry running, not considering the souring prices. Germany was able over the course of 2022 to fill up its gas storages up to 100% with Russian gas. This option is gone. Germany will now need to fill the storages from alternative sources, if available, until the winter of 2023. This will be hard to achieve. I don’t want to try to predict something. It could succeed but maybe not… We will see.
If not, all the negative scenarios, mentioned above, will happen in the winter 2023/2024. If Germany makes it, everything will slowly unravel during a period of some five years, because the price ceiling, to keep the effects of the sanction war away from the population and economy isn’t sustainable any longer then this. According to my own calculations. And even five years will be extremely hard and long.
Of course, there are many more challenges, that I will explain in the following chapters, but it was important to me, to explain here, which consequences the energy crises will have for Germany in terms of the stability of the Government and the state as a whole.
Thanks for reading Black Mountain Analysis! Subscribe for free to receive new posts and support my work.
Most effects, explained in the previous chapter, can be explained by inflation. Which means, that you can buy less goods with the same amount of money within a certain period.
This can be caused by many different reasons. One of the reasons can be, if the supply of a good decreases sharply. If the demand is far higher than the supply, then by market logic, the prices are going up. Not everyone will be able to get the desired good and that’s why the prices go up, to regulate by market mechanisms who will be able to obtain the good and who not.
Keep in mind that this is only one, out of many reasons, for inflation. Why did I choose this example? Well, because the current crisis in Germany is caused by exactly this kind of inflation. This special kind of inflation, that is currently happening in Germany, is called “imported inflation”, in case you want to have a further reading about it. Imported, because the domestic prices rising, because of price increases of imported goods, resources and commodities.
This chapter could get huge. I want to avoid that. That’s why I will try to explain, what is going on regarding the prices in Germany, with three main imported goods. Two of them are important for the industry, energy and metals. And one is important for everyone. We are talking about food.
Energy and metals:
I won’t go here into details about what kind of energy and metals. Just consider, that Germany imported a lot of scarce and precious materials from Russia. And Russia of course was the biggest energy supplier for Germany. The most important thing here is, that Russia played the role of an “enabler” for Germany, to be able to produce at low costs huge amounts of industrial goods and export them all over the world. Such thing only works, if you can produce and sell cheaper, then your competitors. To be able to produce cheap, you need to produce huge batches of your goods, to keep your fixed costs per part low. And second, you need to have cheap production factors, to keep your variable costs low. We are talking about material. (Yes, there are others as well, like labour etc.)
Well, here we are. The cheap energy is gone. The question is whether the energy, going forward, will “only” be expensive or whether there will be enough energy at all. Let’s forget for this consideration for a moment, that the German government is currently making massive state debts to cap the prices for the German industry and households, since this will backfire badly on other occasions.
Energy and material prices increase. Which means, considering pricing mechanisms, that the produced product will be more expensive as well. For both, the domestic and the export market. Higher prices in export making you less competitive and your customers might want to choose your competitors against you. If you lose international customers, you will need less labour and the GDP will drop. Unemployed people will be very unhappy, sitting in a cold and dark flat at home. Rising prices on the domestic market, for example for cars, machines and food are causing inflation.
People will be able to buy much less goods and food with the same salary. Some people will cease to be able to get over the month at all. They will need to apply for social assistance and in this process, they are going to lose everything they possess, to be qualified, to get social assistance from the state.
Russia and Ukraine have provided a huge share of wheat/grain to Western countries. Here again, to a cheap and competitive price. Yes, not only wheat, but a huge variety of agricultural products. But wheat got very famous, due to the grain passage from Odessa to the Mediterranean Sea. Well, grain is a preliminary product of many kinds of food, that you eat today in finished packages. You wouldn’t know, where everywhere is Russian/Ukrainian grain contained.
This is the first problem. There is less grain and it will be more expensive. In some cases, even forbidden to import into the EU, due to sanctions. Here we have the same, as described before. The preliminary product gets more expensive and the energy for production as well. The product gets thereby more expensive for the end customers, as well. Inflation.
First, we talked about increasing prices for food. Now, let’s look at the general availability of it. Germany and many other EU countries are still producing a lot of own agricultural products for domestic consumption. It is being very successfully and effectively processed, because of chemical fertilizer. It increases the quotes of the harvest in the EU. Without this chemical fertilizer the EU will be able to produce far less agricultural products. Combine this, with less deliveries of agricultural products from Ukraine and Russia and you will have a shortage of food in the EU. Well, I’m still reluctant to say, this will happen. I don’t know yet whether and how long sanctions will stay in place on Russian fertilizer and grain exports. This question will be crucial. If sanctions will be further on imposed on these products, than even a famine can’t be excluded. I’m struggling to think, that the EU will let this happen. Most likely they will open up, when it gets critical.
Only for information, chemical fertilizers are being produced with natural gas. So, the option to produce it in the EU is almost impossible, due to sanctions on Russian gas.
What does that mean? You guessed it… Inflation! With all these difficulties, and I mentioned only some, which I consider as very important, the production and consumer prices for food is rising, as we speak.
The last factor regarding inflation is logistics, that I want to explain. Of course, there are far more, but again, I want to keep focused here. Germany unfortunately highly depends on logistics by trucks(lorries). They are far more flexible then transport by train. You can have a truck everywhere, whenever you want. Due to just in time (JIT) production, trucks were the only option. Trucks are consuming diesel. Due to high oil prices, the transportation costs rose. If you want to transport nowadays something by road, you will think twice, whether it needs to be JIT. Maybe you will wait, for the second batch, to ship two batches with one truck, instead to send every day one half empty truck for the same destination. I can confirm that the German government intervened here as well to cap fuel prices. It was only timely restricted. There is no cap anymore, but it is indeed no longer needed. Why? The EU economy started to contract already. If an economy contracts, then the oil and fuel prices goes down as well. In fact, the demand falls, so the prices falling as well. It is indeed a positive side effect of a shrinking economy.
Well, the last information, regarding the inflation is the following. If you can buy less with the same amount of money, and your salary isn’t increasing accordingly, then less products will be sold generally on the domestic market. Which leads to two effects. 1) Many enterprises will begin to struggle, since their sales will decrease. In worst case scenarios, they will even need to close. 2) The GDP of Germany contracts. I explained already that this is very bad for Germany.
This is a very special topic. And it is very sensitive. People are already killing each other, because some are believing in climate change (triggered by mankind) and some not. I will try to avoid entering this discussion here, as much as I can. But most likely I will fail 😊 I want to try to only explain the geopolitical part of this topic.
Let me put it that way. Without leaving the possibility excluded, that there are real climate reasons contained as well. The West needs a constant growth of the GDP. Western leaders are only thinking over the period of their legislature. How can I keep my KPI’s well, during my rule? That’s the only question. The Western economies has reached their maximum, what they could achieved with the globalisation. All markets, they conquered (yes, by military force) were well fed. Their own markets long ago. Everyone has two mobile phones, three cars and a house with a pool. Yes, this is a exaggeration, only to highlight, what I mean.
I will interpret Schumpeter here freely. He was talking about the creative destruction. You need to destroy something, to built something new and even better, afterwards. Very simply described. In fact, there is much more about it, but this is sufficient, to understand, what I want to describe.
By imposing green laws, rules and regulations over everything and over everyone, you trigger a reset of what you have reached until now. Your whole economy, and that of all other countries, needs to be redesigned. Old cars, machines and factories needs to be either scrapped and rebuild or upgraded, so that they get “green”. This is a whole new engine for the GDP, to keep it at least for another few years, of even one or two decades running. Destroying what was there and rebuilding it “green”. I won’t judge this here because I can only lose 😊
Many states are considering it as BS but going along with it, because they see the advantages for their economy. Building “green stuff” for the West, brings money. You want to trade with the West, going forward? Be Green! Well, I won’t go deeper into it. But I surely will explain some details for Germany.
The Germans, or at least their government, are the most hardcore green pushers on the planet. They are getting rid of their nuclear power plants (NPP’s), coal and gas power plants because they are dirty. Instead, they want, at least in theory, build that many windmills and solar panels, that they can produce all their energy solely with domestic green regenerative energy. Welcome to Utopia. First, that’s impossible. Second, it is most likely not needed.
As I initially explain, Germany will face serious problems with its industry. In fact, it is very likely that Germany will deindustrialize within the next ten years. There are so many reasons, that I all pointed already out. It is possible that some reasons will take place and others not, but in any case, will Germany deindustrialize within the next ten years. That would be the best-case scenario. If all or many problems apply together, then this process will take place much earlier.
Well, I think, that this fact is very well known to the German government. Even though no one is talking about it. My personal assumption and impression are, that the government is designing all its plans already for a deindustrialized Germany. It will need far less energy. It will be “green”. It will need far less workers. The problem of the retirement of the “Babyboomer” generation would be softened by this approach. Germany would be far less dependent on Russia. But far more on the United States, to get the physical products it will need, and will no longer be able to produce them on its own.
In fact, it is perfect for the United States. They are losing one of their biggest competitors for cars worldwide. Killing the dependency between Russia and Germany, and by doing this splitting the “Heartland” “Landpowers” for a long time, since no “interaction” or “trade” between Russia and Germany be needed. For now, and at least for one or two centuries we had the dependency, that Germany produces huge amounts of industrial products and Russia has been delivering the materials and the energy to enable it. Heartland! With this green agenda, this would be killed.
Well, the German green party is known to be the biggest US vassal. No wonder what is taking place.
I won’t go deeper into this…
I described already the concept “Single point of influence”. Of course, if you want to maintain an empire, you will try to manage it effectively. If you have hundreds of small countries to micromanage, you will need to employ a huge effort to do so. It is better, to form “alliances”, where the dependent states must be part of. And as soon as they are in these alliances, both economically and militarily (NATO), they will need to do, what the “single point of influence” is telling you. In the EU, this is Germany. Or it was. We will see how this will proceed. In NATO, of course the US themselves. Yes, in theory, there is a veto right. But no-one can veto anything. Turkey can, because Turkey is on a geopolitically crucial geographic position. Turkey could perhaps even attack American bases and it could maybe be tolerated with some degree. With Turkey, the US can control the Bosporus and this is far more important than anything else. For Russia as well.
Unfortunately, for Germany, everything is changing now. Germany felt very comfortable in its position as the leading power in the EU. And as the economic powerhouse. I think, it is very clear to the German leadership, what the American plan is regarding its industry. I assume, that there will be a very hard struggle over the leadership of the EU between Germany, France and Britain. Yes, you read right. Britain, which is no longer a member. I have my reasons, why I write this here. Maybe I’ll describe it another time.
In fact, if Germany deindustrializes, it won’t be the “main slave” anymore. Or the “single point of influence” or the leader of the EU. I think that the German establishment is opposing this. Not the green government, they are pushing it on the behalf of the US. But industrial leaders and other establishment members are slowly forming resistance against what is going on.
The perfect storm
The shortest chapter. What I described until here, is the perfect storm, raging over Germany.
Introduction to possible scenarios
Nevertheless, this was the actual situation. In the next chapters I will describe some scenarios, how things could develop, going forward.
Germany (EU) becomes a full US colony
The current green German government is running full steam into this direction. After deindustrialization, Germany would be made dependent on American physical products while at the same time, cut off, from Chinese supplies. The US is forcing Germany already for a long time, to break its ties with China. That would be disastrous for the German people indeed. If Germany can’t produce any longer cheap products, can’t import them from China but is dependent to buy them for a higher price from the US, then this is truly not beneficial for Germany.
Well, that’s the plan. Will it succeed? I real can’t do any estimation about it. There are so many factors, playing in it, that a prediction is impossible.
Germany experiences revolutionary changes and breaks free
If the deindustrialization is not managed properly, then there will be a revolution in Germany. As I described already, the German government tries to employ the deindustrialization slowly, so that the people don’t get shocked and start instantly with mass demonstrations. By financing the 200-billion-euro energy cap package by sovereign debt (and there will be many more) the German government tries to hide, what is going on, from the German public. So, that there won’t be any uprise or similar.
For now, it works. But, in case that energy disappears at all, there is a very high possibility that there will be an uprise. When people lose their jobs, which then would be inevitable, and sitting in the dark and cold at home, without food, then there is only one result thinkable.
This could either lead to a revolution, that is successful or to worse things.
Well, for this case, there are tens of thousands of American troops in Germany. In fact, next to every bigger industrial centre, there are American troop concentrations. In case of a revolution, it is possible that it could lead to a civil war, which would lead to a split up in Germany.
And even if the revolution would be successful, Germany would be surrounded by “hostile” nations. Provided, that the same thing doesn’t happen there as well.
I want to sum it up. If the Europeans, due to economic hardship, try to take the power and to break free, and the Americans don’t let them, then there is a very high possibility of a big civil war. Both, in the countries and a continental war within Europe as well. One EU member against another, with different kinds of alliances.
It is the worst-case scenario. To be honest, I don’t give it a high probability.
New draft treaty for European security
Here is my favourite. Which I think is the most likely and most important.
First, read this article, about the new draft treaty for European security.
It is the BRICS approach to create a multipolar world order. And Europe should be part of it. For this, Russia is currently applying the special military operation, the SMO.
The calculation is, that when Germany is economically depleted, due to “self-sanctions”, that the pressure on the German government will be that high, that it will fold, and accept the Russian terms.
The pressure would be employed by both, the people that are sitting in the dark (going forward, not now) or can’t pay for their bills, and the German establishment, that would lose a lot of power.
This applies for all EU countries. In the consequence, they would try to break free, from the American and EU dictate, as well as NATO, and try to re-establish relations with Russia. Russia is precisely saying that it is ready and waiting for this scenario.
Will there be a strong response from the US? Normally it would. But I think, the US will soon have far greater problems, then managing its empire in Europe. See the next chapter.
We can currently see a coordinated approach between the Asian powers and Russia, to bring down the American empire. We see the full depletion of weapons and economic power of the West in Ukraine. What we don’t see yet is any escalation in Asia. I could be fatally wrong here, but I am sure, that Russia, India and China are coordinating a measured increase of pressure on the US over time.
In fact, my assumption is, when the West in enough depleted in Ukraine, then the war will be concluded (2023). And then the next exogen shock for the West will be applied in Asia. Both, militarily and economically. Which will bring the West to its breaking point. Either it will fold or go down. As history shows, people will try to save their power and fold.
How could such an escalation look like? I really don’t know. I see three strategic axes, which could be somehow exploited, without triggering World War 3. Taiwan, Korea and Japan. You want to ask, how it could be done, without triggering World War 3? Well, this would go too far here.
When thinks become clearer, I will do an own article, covering the change of the strategic axis from Europe to Asia. But not now.
My opinion is, that the BRICS and SCO countries are trying hard to achieve a change of the unipolar world order into a multipolar world order without triggering World War 3. Since it would certainly end the humankind. They are doing it, by employing that much economic and military pressure on the West, that it would eventually break. Every member of the West. Even the US. And after the break, they would become normal members of the multipolar world order. Germany plays the key role in this operation, that is employed in Europe, for some 2-3 years. Counting from the beginning of 2022.
After the European operation (SMO) is concluded, things will pivot to Asia and Asia will become hot.
I certainly don’t mean, that either Russia or China will invade militarily any NATO member. That’s not what I mean by military pressure. World War 3 needs to be avoided by any cost.
Then, in theory, the transition will be concluded. I assume a total transition period of five to ten years, counting from the beginning of 2022.
This is the conclusion of my series of strategic articles.
Happy new year!
Thanks for reading Black Mountain Analysis! Subscribe for free to receive new posts and support my work.
I am German and got to tell you: all in all a good analysis. Where you are (partially) wrong is in the economics part. Yes, Germany is dependent on cheap energy but no, even with energy ten times as expensive large parts of industry would survive. Case in point is the German circuit breaker industry. You will laugh and say: what, such a low technology product. But the point is that the technology is in the production and not in the product. The big advantage of Germany is it´s tool machine industry. Easily 30 percent of the most advanced tool machines (in lasers it is more than 50% look up Trumpf) of the world is produced in Germany. They constitute a dense network of small and mdium sized companies that are usually family owned. The German circuit breaker industry is profiting from its proximity to these companies. On top they also build specialist tool machines themselves. Every new generation of tool machines hike the productivity and lower the energy use to such an extent that nobody in the world can keep up. These are companies, like Hager, ABB-Stotz or Siemens.
You will never read it in the mainstream media but for instance General Electrics production in the US of any kind of HV equipment is being phased out. Con Ed and the other big grid operators in the US are switching to ABB-Stotz. ABB-Stotz equipment with the GE logo as this part of GE was sold to ABB about 5 years ago. GE simply couldn´t keep up anymore and therefore sold the name rights before that wasn´t worth anything anymore either.
Blackrock et al know all of this very well. They know where the true strength of German industry lies. But for now they can´t get their hands on the machine tool industry as it is almost completely in private hands. Same for the big tech giants. Up to know they haven´t been able to integrate them into their platforms. There is the well founded suspicion here in Germany that part of what the US is doing is to ruin Germany to such an extent that even these jewels will be up for grasp to be either integrated into big tech or else their know-how sold to China.
I buy industrial & engineering equipment. Just ten years ago Chinese & Asian products were substandard compared to German. Now German product despite being much more expensive are no better than asian. Even German cars are getting a reputation for being unreliable.
An increase in production costs will cripple German industry.