The news that stroke me in recent days was that of Jeff and MacKenzie Bezos divorcing. It’s because their marriage was quite a story and it is sad to see a great thing go.
MacKenzie met Jeff after she graduated from Princeton and took a job at D. E. Shaw (a hedge fund), where Bezos worked. In 1993 they married, and by 1994 they were driving to Washington, with MacKenzie reportedly at the wheel of the car. The couple gave up a really comfortable lifestyle and successful careers to move across the country and start something on the internet. The only reason Jeff Bezos was able to do that is because he had an extremely supportive spouse. It was an incredible risk and one that they both took on jointly. There is a clip of the net where Bezos explains how he held over 60 meetings to try to rise the first million dollars. And he had to give up 20% of Amazon for that.
It’s interesting to try to imagine the mindset behind it.
Intel’s founder Andy Grove wrote the book “Only the paranoid survives”’ with his opinion on what it takes to make it big – one needs to be a little crazy, often antisocial, and what he meant by this is not falling into cliché thinking.
If you are antisocial by the age of 5, there isn’t an intervention that is effective, they say. Male aggression peaks around the age of 15, and then declines and normalizes around the age of 27. Basically, if you have someone who is a real trouble, throw him in the prison until he is 27. Then they age out of it. Problem is, that the worst thing you can do with anti-social people is to group them together, which is what we do in prisons.
The troubled people all show a deficit in problem solving ability, or so the thinking goes. But there is more to it – they have problems in accepting reality as they see it. They have their minds set and will not bend. Extremely successful people seem to have the same personality trait. Like a structural engineer sees his life as concrete, square walls, and everything has to fit between them. It’s for them “my way or the highway” as the American saying goes. The others will hear, and react, to what they choose and want. Which may likely define the IQ, it’s just that not everyone is comfortable with it.
If your job is simple, which means you do the same thing every day, then IQ predicts how fast you learn the job but not how well you do it. But if you job is complex, which means the demands change on a regular basis, then the best predictor of success is general cognitive ability. That’s fluid intelligence, or IQ as I understand it. Another big one is freedom from negative emotion, as is openness to experience which means creativity.
All these dynamics result in the creation of social hierarchies, which are a feature of our environment, not just purely based on social contract and this is a huge thing to understand. This is where Karl Marks and the likes of him went wrong. Our institutions may be malleable, but our biology is much less so. In every century people were surprised that the life goes on the same way – and so are many today.
Male testosterone level is about 20 times that of women, so there is no surprise that prisons are filled with mostly men. Women are wired for cooperation, men are wired for individual performance. If you find your match, you’re the luckiest guy in the world. If you don’t, life gets bumpy fast.
It’s quite possible that Bezos had his chance and just blew it big time.
There is an interesting development taking place in Eastern Europe - the Intermarium initiative, which receives US support and backing. The proposed multinational polity would extend across territories lying between the Baltic and Black Seas, hence the Latinate name, meaning “between seas”. The concept is not new – it was originally conceived in Poland in early 20th century.
It came back to life because both, Germany and Russia are weakening at the same time, opening the door for countries located between them. And while it is clear that Russia is not a major world power anymore (its defense budget is a quarter of that of China), then the statement about Germany (and EU by extension) requires some explanation.
Their large dominant corporations were modeled in the 1950’s and they never re-engineered themselves. That’s why there is no European Google. And the German welfare system ultimately depends on these corporations.
The country exports more than 50% of their GDP, which is clearly unsustainable. Half their exports go into the European free trade zone, so the Euro was priced somewhere on the borderline of preventing inflation in Germany, while facilitating German trade. Of course, southern Europe needs a much cheaper Euro, they need a mechanism to limit German exports otherwise they can’t develop. And with the introduction of the Euro they lost it. The entire periphery of Europe is not benefitting from the free trade zone and they are going to do something about it, it’s just a matter of time.
Simply put, a social catastrophe is taking place in Europe and it will result in the re-drawing of the geo-political order.
The problem is that history of Europe is solving problems by violent spasms. Between 1914 and 1945 about 100 million Europeans died in wars, conflicts and exterminations of all kinds. Things changed after 1945 – the decisions on what goes on in Europe were no longer made in London, Paris, Berlin or Rome, but in Washington and Moscow. And the Russians and Americans were more constrained facing each other, despite many reasons for an all-out war. You may call the Americans cowboys, but they kept cool heads. Just try to imagine what would happen in Europe in 1914 or 1939 if the sides of the conflict had nuclear weapons. In the battle of Somme 600 thousand men died in September of 1916 and the Europeans didn’t even blink – they continued on.
The key country in the Intermarium concept is Poland, which is now leading this multinational coalition in trying to pressure the EU into enacting pro-sovereignty reforms and decentralization, challenging the economic status quo. U.S. sponsorship, moreover, directly challenges one of Europe’s most defining institutions, NATO.
The Intermarium sets the stage of a more integrated economic drive. It will be in the EU, but it will behave differently from the EU – more entrepreneurial, more closely resembling the United States.
Poland is attempting a game-changing geostrategic pivot while technically under the boot of a foreign power, in this case Brussels (shadow-managed by Berlin) to forge a Central and Eastern European union. If it can pull it all off, then the country will once again earn its place in history as one of Europe’s Great Powers.
Gold’s price in December recorded the largest jump since January 2017.
And that’s after the last quarter of 2018 that saw investors pile into exchange-traded funds backed by bullion - the biggest increase over a comparable period in more than 18 months. The critical words here are “backed by bullion”, which is a statement that could mean anything or nothing.
Since times immemorial gold is money. Based on physical ownership, not on trust in the willingness and ability of another party to honor their promises. However, gold is not freely traded, it’s the most artificial market in the world. The daily gross trading on the LBMA (London Bullion Market Association) is about 16 times annual mine production (not the settlements but trading). So, it’s a real casino with paper claims that can never possibly be settled. The price of gold is where it is right now only because of this artificial trading.The only way the system will unravel is when people holding the paper claims will start worrying if they can take delivery. And they won’t be able to – there is just not enough physical gold to go around.
Germany has a stronger relationship with gold than most nations. The country’s experience with hyperinflation during the years of the Weimar Republic is ingrained in the national consciousness. Gold, above all, stands for stability. Today, Germany is one of the biggest holders of gold in the world: it owns 3,378 tonnes, second only to the US.
This time the critical word is “owns”.
In the times of the Cold War, the Germans, flush with cash from their export surplus, were hesitant to hold their gold in Frankfurt, which was not far from a Russian controlled part of Europe. They moved the gold west, to Paris and New York. This practice is not unusual, the Dutch, for example keep a big chunk of their gold in Ottawa. With the fall of Soviet Union and unification of Germany everything changed. When the Bundesbank first asked the New York Fed “can we please have our gold back?” they were politely told to go focus on something else. Then they requested to at least audit their gold storage but got a similar response. Eventually, in 2012 serious negotiations began with the goal to move German gold to Frankfurt. The German negotiating position was much enhanced by the leakage of a report from the German Court of Auditors, which was very critical of the conditions under which German gold was being held in New York.
Later, with big fanfare, Deutsche Bundesbank announced on February 9, 2017 that ahead of plan they had repatriated 300 tons of gold from New York. This put a positive spin on a rather disturbing fact: 1236 tons of gold that is supposed to be part of Germany’s currency reserve will continue to be kept outside of German control in New York.
Having to give a rationale for the more than 1200 tons of German gold in New York, the Bundesbank came up with the fact that it is so convenient to have it at the Fed, because many other countries have gold there. That way, you do not have to move the gold around, the logic went, if you want to sell it to some other country, you just have to re-designate it inside the Fed building.
Note, that the only situation in which it would become necessary to do this quickly and in large amounts would be when the dollar-based currency-system brakes down and countries insist on payment in gold again.
I guess the Bundesbank is keeping its options open.
I went to Geneva one last time before leaving Europe for the holidays. I took the remarkably quiet Swiss train to the central station and then walked downtown. It was a stormy evening and strong wind was blowing down the Boulevard Mont Blanc.
It was getting late, but the traffic was still heavy with screaming Ferraris and booming Bentleys, stopping and going.
A Romani woman was sitting on the sidewalk beside the entrance to the Kempinski Hotel, in the warm lights and under a brightly lit display of expensive Panerai watches. When I came closer, I realized that she was quite young, in her twenties still. She was wrapped up in warm blankets and looking at me with eyes black and deep like a diamond mine.
“Un dollar pour dire votre avenir,” she said. A dollar to tell your future.
I stopped, surprised. “How did you know that I am not from here? I don’t think I ever saw you here before.”
Her dark eyes closed for a moment. “Le plus important dans la vie est invisible,” she said with a strange accent, difficult to place. The most important in life is invisible.
Then she extended her left hand, smooth and delicate, with an ancient tattoo that was disappearing under the sleeve. I gave her a ten-dollar bill, and she took it and hid it under the blanket.
“So what is in my future?” I asked. “Now I need something back from you.”
She was quiet for a long while, looking at the dark waters across the street, and I started losing interest in the answer. The woman’s piercing black eyes were now remote, as if in a different world.
I started walking away when she said it. “Ta vie va encore changer.” Your life is about to change again.
Strangely, given the time and place, it didn’t surprise me.
“No, that’s over. I settled down here for good.”
“C’est ce que vous pensez,” she said. That’s what you think.
I was walking away when she spoke again. “Attention à vous, Mister Generous.” Be careful.
“Just tonight, or all the time?”
The voice was now very faint and far behind me, lost in the blowing wind and the traffic noise of the city. And I wasn’t even sure what it was that she said at the end.
And she said, “Tous les deux.” Both.
The next day I took a flight from Frankfurt and landed in Toronto on a crisp, sunny afternoon. As I was leaving Europe, it felt like it’s the 1848 Spring of Nations again. There are now millions of people across the continent who want to re-establish the ideals of nationhood, of national sovereignty and popular democracy, against what might be viewed as the neo-monarchical structures of 21st-century technocracy. The sustained gilets jaune revolts in France capture this mood well. In recent weeks protesters in Belgium have tried to storm the European Commission – an event, which got little media coverage – while yellow vests in the Netherlands have called for a referendum on EU membership and in Italy they have gathered to express support for their Eurosceptic government. Interesting times, these.
At the airport in Toronto, I was waiting for my luggage at the carousel when my phone rang and a voice from far away made me a proposition that will be difficult to refuse.
“This witchy woman,” I thought about the lady in Geneva, “how did she know?”
Later, it took almost an hour drive from the airport, and there I was. The warm and comfortable house set against rolling hills of the Oak Ridges moraine on the north edge of Toronto looked better than ever.
I was home for Christmas.
I was sitting comfortably in a slick new A350 flying across the world with a speed exceeding 1000 km/h at times, reading material that I downloaded in the airport lounge. It was mostly about the sad Brexit saga, which highlights the lack of leadership in a once great country. The so-called “exit negotiations” have turned into a spectacle of public humiliation for Britain.
Nelson would have been furious. Churchill would have snowballed into a spitting rage. Thatcher would have coiled to launch a counter attack.
Those were the days.
Today, premier Theresa May is making conscious efforts, the paper says, traveling to Brussels for talks but looking like a tortured person. Perhaps Britain should hire Donald Trump to run the negotiations; he would give the unelected bureaucrats in Brussels a run for the money. And fast.
It is not difficult to see that the EU needs Britain more than the Britain needs the EU. It’s a big market, biggest one for German cars in Europe, for example. It has the strongest and most battle hardened military, with natural ties to the US and the biggest financial center in Europe. It will do fine making decisions on its own.
It is ironic, that the EU, built on the promise of universal liberal values, is teetering on the verge of collapse due to the difficulties of integration. And maybe this is the last moment for Britain to leave the union before economic issues really explode. They have been “papered over” by the European Central Bank purchases of government and corporate paper. The ECB now owns 40% of investment grade debt in Europe including that of stock listed corporations, so basically they are the market.
With the Federal Reserve unwinding the Quantitative Easing and rising interest rates how long will the ECB be able to do the opposite? The giant sucking sound you hear is the capital flight from Europe. For the ECB the problem is that if they stop, or even slow down the purchases, where will the bid come from? This is the reason why it is illegal to short government bonds in Europe.
What many don’t realize is that the European Central Bank can actually go bankrupt. In contrast to the US Fed, they can’t create elastic money as needed because Germany would never allow it. They have limits set by political powers. If there is no longer a political will to create more money, then watch out below. Central banks are not all created equal, but they all share the same flaw that feeds separatist movements worldwide. They were created with the good intention to micromanage, but morphed into something really counterproductive. My home country Canada is a good example.
The separatist movements in the province of Alberta claim that the Bank of Canada manages the economy in response to stock market trends and real estate speculation in Toronto and Vancouver, but the commodity producers in central Canada are on the opposite side of the economic cycle. High commodity prices are bad for stocks and vice versa. There is lots of merit to that - in the US they call it the Houston-New York arbitrage, meaning that high oil prices are good for Texans but bad for Wall Street stock peddlers. The Federal Reserve System was originally set up in 12 regional branches, each managing interest levels independently. This set up is long gone and doesn’t exist anywhere in the developed world.
Among the options for the Brexit resolution next year is a repeat of the vote, which will be a mockery of the democratic process. Angry reactions from the Brits may be damaging.
This is not the time of the year when Europe is at its best weather-wise.
Today the evening is cold, rainy and the wind is picking up.
The political events out there have developed a new dynamic too – it’s not just the Italian budget debacle anymore. After president Macron made financial concessions to the yellow-jacketed protesters, the French budget deficit is projected to look no better than the Italian one.
Even in Germany, chancellor Merkel had to blink and allow for the shotgun wedding of Commerzbank and the troubled Deutsche Bank. Let’s stop on the latter for a moment, because it’s an interesting story on its own.
Deutsche Bank is in crisis and everyone has known that – its stock lost more than half its value in 2018 alone. This biggest European bank is in the news a lot and never in a good way - the list of criminal charges against it reads like a crime novel and the bank spends a fortune in fines and settlement.
Its derivative exposure is huge, and it is hard to quantify what is the real net bottom line, but it could well be more than 10 times the Gross Domestic Product of all Germany.
It doesn’t help the situation that the bank’s leadership is a revolving a door - it went through four CEO’s in as many years to the point that is not clear who is actually running that place.
While all this is not unusual among world biggest banks (just look at HSBC, Wells Fargo, or, for a real eye opener, at Goldman Sachs), DB seems to suffer the most. It could be that their derivatives exposure is the source of this downfall, but for a different reason than most think.
These derivatives are delicate credit instruments held in tens of trillions of dollars by major banks around the world, but it’s never clear who is on the other side of the trade. There must be a big player backing it up and it must be default free, at least for a moment. And there is only one player that fits that definition – the US Treasury, more specifically it’s Exchange Stabilization Fund.
So, how this is causing Deutsche Bank trouble? It appears that through its derivative exposure Deutsche Bank helped manipulate interest rates and propped the US dollar.
Throw in the mix the rising tensions between Germany and the US, and the bank’s situation looks terrible politically.
Enter BaFin, the German fiercely independent financial supervisory authority that appears to be calling the shots at Deutsche Bank for a while now. Specifically, it is forcing them to liquidate exposure to dollar credit swaps.
In May of this year the bank stunned the markets by suffering a staggering one-day loss that was almost 12 x VaR (value at risk), or 12 times what DB's risk officers have estimated it might lose on a typical day. And these guys are not incompetent. The only explanation is that they were forced by BaFin to close some positions in the marketplace.
The US Fed isn’t, of course, taking it on the chin with his hands down, they’re punching back like mad, prosecuting DB, damaging them publicly and forcing the bank out of lucrative markets like precious metal trading.
In a related example of the US and Germany exchanging punches, the VW concern recently built an engine plant in Russia, in Kaluga. Clearly against US interest, who want to put Russia in an economic penalty box.
The plant opened on Sept. 4th, 2015, after it took three years to finish.
On September 18th, 2015 the US Environmental Protection Agency served a Notice of Violation (NOV) to Volkswagen for emission problems and the rest is history.
And all this could be a coincidence, of course. Or my mind wandering on a cold December night.
In the movie “The Counselor” Brad Pitt says this about some serious people he deals with south of the border: “you know, they heard about coincidences, they just never saw one.”
Could be a good advice.
The title comes from a song by Gary Moore that was a hit in 1979, but was really based on the jazz standard “Blue Bossa” by Kenny Dorham, an American jazz trumpeter who never received the attention or fame he deserved.
This happens a lot in life but it’s hard to know in the real time what's important, to be fair.
The austerity measures of the EU are having a profound impact in Europe. The proof is in the news - in Paris on December 1st there was a major civil uprising, the worst France has seen in decades. Jeanne d’Hauteserre, the mayor of Paris’ 8th district, near the Arc de Triomphe told the press: “We are in a state of insurrection, I’ve never seen anything like it.” We can easily be witnessing the start of the next French Revolution and there is no solution in sight.
Still, president Macron is unrepentant and unyielding. He said he would not change his policy because of the protests of “thugs”.
By making this statement he follows the French history of misunderstanding major events, which is no different from what Marie Antoinette did.
She said back in the days of Revolution “Let them eat cake”.
It’s is not clear what she really meant – eat cake instead of bread, or crumbles from the crust of the pâté, but her words inspired a revolution nevertheless.
It is simply a wrong thing to tell people in the heat of the battle.
Revolutions always and everywhere start because of excessive oppression or excessive taxation, but those in power do their best not to understand it. To be fair, it’s very difficult to make a person understand something if her/his salary depends on them not understanding it.
And revolutions take time to clean up after - Vienna conference was called to clean up the mess in Europe after Napoleon, who was a product of the French Revolution. Another upheaval of this kind happened in Russia and it took almost a century to contain.
A brutal world war too.
Still, I have this respect for Napoleon Bonaparte, and I can’t finish without saying something about him.
He was a guy’s guy. During his wars he was right there in trenches with his soldiers, dirty with mud and smelling of gunpowder. You don’t get this type of behavior from Pentagon officials these days and it makes a huge difference.
He married Josephine de Beauharnais known as Rose, a name that he disliked. He called her "Joséphine" instead. I like that too. He divorced her eventually, so he could remarry in search of an heir. But he showed his dedication to her for the rest of his life. After they split, Napoleon was never the same - he developed health problems, gained weight. During the battle of Waterloo stomach pains paralyzed him. And then he lost everything, tough for a guy who never knew when to quit, when to stop, or when to say die.
Living his last days on the far island must have been a torture and I think he just wanted to be back with her. I think she did too because he was a unique man and they made a unique couple.
All his life standing on the ledge showing the wind how to fly. Both of them.
This is the thing about the revolutionaries – you can’t help but have a respect.
I was in Berlin again, riding in a taxi from the Brandenburg Gate west through the Tiergarten when I heard a song on the radio. It reminded me of the days when I was a teenager living in these parts.
The song starts:
“Don't think sorry is easily said.”
And it gets deeper after that, but wait a bit.
The area we drove through is likely the nicest part of Berlin, starting from the Gate, then the enormous building of Bundestag, which flies too many EU flags to be taken seriously, and going west to the golden Victory Column. The Column was erected to commemorate the victory in the Danish-Prussian war. To be fair, the Germans don’t have many wins to celebrate, so this one is as good as it gets. It features the Golden Lizzy on top, a statue weighing 35 tonnes, and I actually like the view of it.
Moving back in time a little, to earlier in the afternoon, I got into the taxi on the corner by the hotel, right by the Ku’damm. The hotel is called Berlin Bristol now, used to be Kempinsky, but they dropped the Polish name. Fine.
“Tegel flughafen bitte,” I said to the older driver in my best German, but there was no fooling him. He looked in the mirror assessing me for a second and said “mach’ ich sofort boss”.
“You take visa?”
“All taxis in Germany do,” he replied in fluent English.
Guess it’s one way to find out.
The radio in the cream colored Mercedes was spewing news about Russia blocking the strait to the Black Sea, which caused the Ukraine stand off. The narrative was simplistic, just proving that the media doesn’t have a sense of harmony or a sense of time.
We listened to it for a while before the driver turned it off.
He actually did.
“It could be,” he said casually, “that Russia and Ukraine are in cahoots. Poroshenko’s approval rating is in the single digits right before the election. And now he has introduced martial law so he can postpone election for as long as he wants, could be years. And this is actually good for everybody. The Kremlin will keep their ally in Ukraine instead of some wild extremists. Poroshenko’s company’s chocolate products sell well in Moscow, so why kill a good business? Everybody goes home happy and the rest is just talking.”
“It’s playing chess, and the Russians beat everyone at it,” I said relaxing on the back seat, “but this kind of thinking gets no traction in the media.”
He drove in silence for a while as we were passing the depressingly neglected apartment houses of the old East Berlin. They sure look better with the leaves on the trees but it was too late now. It appeared that he thought about the same thing.
“I like Africa,” he said, “the weather here kills me. Besides, Africa is where humankind started. Have you ever been there?”
“In Morocco briefly, and my wife is down there right now, in Johannesburg.”
“Moving a little north,” he said, “some believe that the Sphinx predates the Egyptians and was actually a lion. Did you know that? There appears to be water erosion marks on it,” he said. “Which means that the Sahara was once a tropical place with trees and animals. If that’s true, then the original Sphinx may have existed even as far back as 10,000BC when a Lion would have faced the constellation, Leo.”
He looked at me in the mirror.
“Because, you know, it doesn’t anymore.”
“I do know, and I know a Leo, and he’s a brilliant young man.”
“You liked the song that played before,” he said looking at me in the mirror again. “It seemed to make an impression on you.”
“Not really,” I said, “because it is about falling out of love.”
“And this bothers you?”
“Yes, it does, life is not what it used to be but I do my best to adapt.”
He looked at me long enough that someone honked at us repeatedly in the traffic, until I said: “I’m doing my best, and that’s all I want to say.”
When we arrived at Tegel, the square payment terminal in the car couldn’t connect to the network.
“It’s because of all the interferences at the airport,” he said.
“I sure hope it doesn’t affect the planes.”
He laughed silently and we settled in cash.
Deep in the Swiss Alps, close to the town of Amsteg, is an old army airstrip suitable for landing long-range jets. It is owned by a company that offers gold-storage services in the army tunnels, which are dug into the rocks. The tunnels were put up for sale after the Cold War ended and a few private companies turned them into vaults: a place for rich people to hide money. The nearby landing strip can take Gulfstream and Falcon jets from all over the world, and the service here is all cash. The Swiss gold-storage operations are independent from the banking system and don’t have the same obligation to report transactions to federal authorities. That makes them extremely attractive to the wealthy. But few of the locations match the opulence of this airstrip setup. Near the runway is a VIP lounge and a pair of luxurious apartments for clients. The lounge offers a place to sleep and eat if the clients don’t want to leave a paper trail of credit cards and passports at a hotel in town. The entrance to the office, which is protected by a guard in a bulletproof vest, is a small metal door set into a granite mountain face at the end of a narrow country lane. Behind two farther doors is a 3.5-ton metal portal and a maze of tunnels once used by the army.
Swiss gold storage operations in the Alps, like the one close to Amsteg, are prime locations for capital that wants to get off the grid. The other one is Singapore.
Most of the gold produced in the world transits physically through Switzerland. On an average year, the country refines about 70 per cent of the world’s gold, and with all the yellow metal coming and going, it’s close to impossible to say how much of it disappears during the process in these fine storage facilities in the Alps. The privacy is aided by the fact that trading in the Swiss gold market is exclusively over-the-counter, and there are no central exchanges or trading venues.
And so capital moves constantly around the world and it is driven by human nature either running into something (boom) or fleeing it (bust). No market would move without capital flows domestically or internationally.
The Swiss wisely kept their currency when the EU came about and are not exposed to the euro debacle, which is an interesting example of capital moves. The euro hit the all-time high shortly after its launch at the start of 1999, which marked the euphoria how it would crush the dollar. It began to slide shortly thereafter, falling to a record low of 82.3 US cents in October 2000. This is when the capital inflows to the USA began over fears of the euro. The capital fled Europe, and this was one of the reasons why the dot com bubble was so big.
Interestingly, history seems to repeat itself. The Eurozone is currently the number one place in the world with the greatest amount of capital fleeing than any other region worldwide. Externally, there is still a flight to the dollar-based assets globally.
The question is, why this is happening. To start with, the euro is a flawed creation with limited shelf life. And obviously capital knows that.
There is an important difference between how the EU and the US function. In the US, government bonds are the only financial instruments that bank can use as reserves (to borrow against and issue loans). The paper issued by member states doesn’t qualify. As result, Washington doesn’t really care about their finances.
In a striking contrast, there is no unified debt in Europe and so the EU in Brussels will stick its nose into budget of every country, like Italy lately. All EU members can print their own euros all right, they do not get them from the European Central Bank. It’s a local affair, limited to the credit worthiness of the particular country – and this is a crucial point to understand how the EU is different. Within Europe the capital is clearly flowing into Germany, and ultra-low yields on Bunds are the proof of that. Part of it is capital preservation – the big money knows that they will end up with deutsche marks, should the euro fold.
Maybe this is a good time to go back to gold - it is considered insurance with no credit risk attached. There is not another like it in the world. And it feels good when you hold it in your hand. You can print money as much as you like, but you can’t print gold.
The headquarter of the winery is located in the city of Épernay, Champagne country, in northern France. It's a substantial, historical complex along the Avenue de Champagne, called “the most expensive street in the world” as it houses about 200M bottles of expensive bubbly on three cellar levels underneath its surface. The main building prominently displays the statue of Dom Pérignon - a Benedictine monk who pioneered many techniques of wine making. The art of making it is very manual to this day, and, after almost 300 years of tradition, impossible to re-create anywhere else.
A guided tour of the cellars with champagne tasting at the end, and later a visit to the store, is a great way to spend Saturday afternoon. In this environment dropping a small fortune on a bottle of Dom’s finest seems like the right thing to do.
Not far from Épernay, on the same afternoon, under grey clouds and persistent drizzle, president Macron and Chancellor Merkel laid a wreath at a solemn ceremony at Compiègne as they marked the centenary of the armistice signing, which ended the Great War. In a bizarre turn of events president Macron chose this anniversary for advocating the idea of European army, claiming that NATO, for which he refuses to pay his fair share, doesn’t provide enough protection. The idea of pan-European army makes a lot of sense for Germany, and also for the EU, as it provides Brussels with more than just warnings and penalties in disciplining its members. The legal provisions for it already exist in the Lisbon Treaty, so there is more to this initiative that the young Emmanuel is willing to reveal.
It is impossible to understand European politics without realizing that the order on the continent is re-negotiated with some frequency. And as much as the Treaty of Versailles at the end of the First World War was a disastrous settlement that laid foundation for the 2nd, more bloody, war in a short time, the one before it was really good. The order negotiated at the Congress of Vienna in 1815 lasted 100 years and provided Europe with the longest period of prosperity and growth. The Congress was called by all the kings of Europe to establish long term piece plan after the Napoleonic wars, which were a product of French Revolution. What ended the arrangement, were the nationalists and liberal movements tearing Europe apart in late 19th century.
The order negotiated at the Yalta Conference at the beginning of 1945, had also more staying power than the Treaty of Versailles. It lasted 40 years until mid-1980’s, when the European countries in Russian’s sphere of influence were becoming unstable.
It was then, when the Russians suggested something extraordinary.
During a 1985 meeting in Geneva, Mikhail Gorbachev offered Ronald Reagan a proposition of a new order in Europe, which was accepted by the Americans. The proof of it were annual meetings held from 1986 to 1989, while the new deal was taking shape.
What happened next has no precedence in European history – the Russians agreed for the re-unification of Germany and removal of their army bases from Eastern European satellite countries in exchange for the guarantee that NATO will not be extended to the East. A silly promise, not taken seriously by any side of the negotiations, I am pretty sure.
So, there was likely more to it, like it is to Emmanuel Macron latest idea.
It appears that the Russians just changed their form of presence in Eastern Europe after 1989, from vertical to horizontal, so to speak. Instead of army bases they exerted their influence in the economical (and by extension political) life of the former satellite countries. It was a brilliant move by master chess players. One could say that their absence there is a higher form of presence.
Going back in time and checking into Château de Saulon in Burgundy last Friday night, the concierge asked me about plans for the weekend.
“I have a business to do with Dom Pérignon,” I said, “and it will be mutually beneficial.”