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How history rhymes
In effect, we are talking about Germany’s part in a broader Europe-wide trend of increased defense spending. Given the recent comments from the Trump White House on the future of key alliances such as NATO, and the need for them to uncouple themselves from the idea of the US always being there militarily, it’s no surprise.
Now, for this to reach fruition, deals needed to be made with Germany’s Green Party. This resulted in a fund specifically focused on infrastructure, including transition to more green energy projects.
The outcome was this: a plan to inject up to one trillion euros into defense and the aforementioned infrastructure programs. Even more importantly, Germany’s government decided to pass constitutional changes once thought impossible.
This was the changes to the application of the country’s debt brake (which, at approximately 0.35% of GDP, prevented all sitting German governments from going too far into deficit spending). In one fell swoop, this enabled defense spending to become unlimited, as these changes exempt such spending from this constitutional debt brake.
Such incredible sums of money printing and corresponding changes to enshrined law are certainly a very big deal for neighbouring countries.
It was no surprise to see various news articles released about Germany’s new rearmament plans. Here’s an excerpt I found:
“…a knowledge of German intentions…[then] seems essential to establish the nature of German (rearmament) plans and preparations.”
“Germany then saw herself forced to take measures for her own protection and is now publishing those measures, part of which have already been adopted…”
It all seems clear: the changes have been made to facilitate Germany protecting herself. Here, though, is the key point: this excerpt was published in….1935!
Now, let me make it perfectly clear. In no way am I implying that the German government of today like the one of 1935 is in any way, shape, or form.
But the historical resonance is quite astounding, almost exactly 90 years ago.
The way to understand this is to note that this is how history repeats according to set time frames within the context of the here and now.
Germany today is not a belligerent state actor. That baton for now has passed to Russia. Hence the context here is different. History is playing out within that context. But stop and think for a moment about the similarities playing out here.
Is there nowhere now to hide?
Conventional wisdom suggests that, because of the Ukraine/Russia war, Europe has never been at more risk of direct conflict since the end of World War 2. That same logic then suggests that, should a lasting ceasefire or peace be found between these two warring nations, that risk dissipates.
But is that really the case?
Can history provide further clues for us? Consider then back in 1935 the German government announced to the world the formation of the Luftwaffe (air force). There was also the announcement of the introduction of conscription and an expansion of the army to 500,000.
On 18 June 1935, the German government signed the Anglo-German Naval Agreement with Britain. Under this agreement, Germany could expand its navy to 35% of the size of the British Navy. Britain made this agreement to avoid a major naval arms race against Germany.
But this pact again broke the limitations on armaments set out in the Treaty of Versailles. Now, what does it take to do all this? An enormous amount of new money had to be introduced into the economy to facilitate this build up.
I see the echoes of history resonating here across Europe today. And it is here that you can start to see the evidence I spoke about at the start.
Consider our place within the overall 18.6-year Real Estate Cycle. You should know that we are but a couple of years away from the current boom in land markets becoming a bust.
This time of the cycle is referred to as the mania, or the winner’s curse, phase. It is the time when the most money is printed and used for the purposes of speculation.
That is happening globally.
And, on top of that, you now need to consider yet another cycle coming due, the Kondratieff wave (or K-wave). Should history repeat then it is due to peak at or around the same time as the current real estate cycle.
This cycle is best known for the re-ordering of society, new ways of doing business, and wars of expansion. To name but three. We’ve seen all of this in the last decade and more is to come.
It is the last of these three that is important. Because this level of rearmament needs what exactly? Incredible amounts of new money and credit. That’s right, all occurring during the final few years of both cycles.
Germany’s own rearmament push from 1935 onwards yielded a similar response too from other European countries – how could it not? It allowed a global war to rage for six straight years.
Is there a repeat occurring today here?
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