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.”
Here is my definition of a plan A entertainment to start with: George Carlin and Robin Williams, Kurt Vonnegut and John Belushi, Rodney Dangerfield. A pattern here is that they’re not around anymore. Even Charlie Sheen is nowhere to be found these days!
Instead, in this mid-term election week in the US, I found this piece of news that goes into the “Oh Christ, please not that!” category:
“Georgia election worker Mitchell Hamlin reportedly assured a black man on Tuesday that the ballot scanner was supposed to sound like a shredder.”
That’s plan B for me, but funny still.
At a rally in Indiana just before the vote, president Trump was reminded by reporters, that if Democrats take control of the House (which they did), legislators will be empowered to do things like pursue his personal tax returns. “I don’t care,” he responded, “They can do whatever they want, and I can do whatever I want.” He actually has a point, as the majority of the real power lies in the Senate, not in the House.
Given the results of the mid-term election, the one thing that is guaranteed is that there will be zero cooperation, and everything will become even more obstructive now. The races are so razer-thin showing clearly that the nation is deeply divided
Comparing political development to markets activity, the Trump phenomenon is a counter-trend, a false move. It will by no means change the trend of endless government borrowing fueled by reckless money creation by the Federal Reserve. The “best economy ever” Donald just makes it faster, more colorful too. For me he is the Ron White of politics.
Tax cuts, entitlements and Pentagon’s spend-a-ton will force the government to borrow like never before. The Treasury Department estimates that it will issue some $1.338 trillion in debt this year—more than twice the amount as last year. Did you know that the government could soon pay more in interest than on defense? And this in the environment of rising interest rates.
From plan B entertainment to plan B career path - I read this fascinating interview with a veteran actor about life choices. He was right in saying that if you get rejected for a job there are usually factors that are not personal. The company may be pursuing different strategy; internal candidates are given the priority and so on. But if you get rejected after an actor audition it’s all about you. That’s much harder to take.
So, he said, that if you have a plan B in life, definitely pursue the plan B. Chances are it will work out better. But there is actually more to it. Your plan A and the way you make a living is typically determined by what’s expected of you and by your needs to survive. And so you go with it year after year as most of us do. But you do have a plan B deep in your mind, something you really hope to do one day before your time is out. Chances are it will work out better, because that’s where your heart is. Can’t fool it.
So I looked up walking in town the other day – it was still cloudy with bits of November sun and I thought about my red and black motorcycle parked underneath my apartment. Every morning going to work I am facing the dilemma on getting on the Bimmer instead and driving far south. Then hole up in a nice hotel with a sea view and write another book. Which simply means that it will happen one day.
On a more upbeat note, my current horoscope says this: “It’s not the hammer of life that’s going to beat you down this week, but the hammer of Gene Dubrowski, a local roofer.”
Now I have a really good reason to look up.
It was a cold and rainy October evening when I was sitting inside the “Zur Sonne” in Marburg, Hessen, Germany. It is quite possibly the oldest restaurant in town, with operations dating back to 1569.
By chance, being here the last week of October meant being witness to some big events in German politics. And you know they’re big, because people here don’t want to talk about them.
“Who is it you say?? I don’t really know. Is the speatzli good or you need more sauce?”
“More wine, maybe.”
Both ruling parties, the SPD and the CDU got hammered in the state elections last Sunday, loosing seats in the local parliament big time.
The votes went to the Greens, which really is a voter’s parking lot, waiting for something better to show up than Alternative for Germany (AfG), which is too extreme for many.
And all this comes on the hills of elections in Bavaria, just to the south of here, which was a disaster of similar proportions.
It seems that the Hessen defeat was one too many for Chancellor Merkel and she called it quits with CDU party leadership. Now she wants to retire, which really is the end of an era in Europe.
Merkel has been the face of the European Union – good, bad, or indifferent. Germany has been the biggest economy in Europe and she has been a staunch supporter of austerity, which has caused political instability on the continent and is a critical factor behind the capital flows going to America that can push the dollar to unbelievable highs.
Let’s pause for a moment and see what had happened – the economies in the south of Europe converted their debts into euros which then doubled in value against the dollar. That triggered a crisis in no time.
In contrast, the Germans carmakers had manufacturing plants coming on line in the US and the weak dollar was a blessing for them. This makes for good business, sure, but you can’t make people dummies for too long. They will revolt.
Looking from a wider perspective, the German election was on par with the global trend that is the rising up against the establishment. Nobody will dare call it “populist” in Germany, even if it would have that label in the south of Europe in every second sentence.
I was in no rush to leave after the dinner, looking though the window and finishing a glass of house white wine. Down the old cobblestone street was the Elisabethkirche, the final resting place of Field Marshal and President Paul von Hindenburg, who was a man bigger than life, a brilliant military commander and later president of the German Reich. He agreed to appoint Hitler Chancellor of Germany in January 1933 since the young man was leader of the Nazi party, which just won the largest plurality in the November 1932 elections. Can’t argue with democracy I suppose.
Now the old marshal is the honorary citizen of the town, but people still steer at their shoes when they pass the church.
There is this unique thing about German democracy – the running parties have their programs and tell you how the others don’t know what they’re doing. Then, after the vote, the results are so fragmented that it takes months to form a coalition. Worse yet, once formed, the coalition, by necessity pursues a compromise program, which nobody voted for.
It seems to me that a moment of deflection is coming in Europe.
Call it the calm before the storm.