The Canadian province of Alberta held elections on April 16 and the implications of their results are anything but usual.
Alberta is an interesting place. Strong economic growth, a robust energy sector, and center-right political leanings - trends broadly disconnected from the reputation and reality of the rest of the country.
Within that disconnect lies the problem.
Alberta has long been the Canadian province suffering from the largest gap between what it pays to Ottawa compared to what it gets back in terms of federal spending.
And the rest of Canada doesn’t even use much of Alberta’s crude, opting instead for lighter imports, stymying the energy industry that forms the backbone of the Albertan economy with everything from carbon taxes to blocking transport routes for the landlocked province’s crude to reach refineries along the Gulf of Mexico.
If you think restricting a region’s economic growth while depending on its tax payments is not a promising long-term strategy, you’re not alone. While more people are aware of Quebec’s independent streak, plenty within the Albertan political mainstream have had enough. And thanks to Quebec’s long-standing desire to separate from Canada, any future Albertan separatist referendum would be perfectly legal.
The Albert’s United Conservatives now hold 62 seats in the 87-seat parliament, and, with victory cemented; many Albertans now look forward to a shift in the provinces’ fortunes.
The United Conservatives are running on public dissatisfaction against carbon taxes, a lack of pipelines, and an unequal system of taxation by a federal government. With Canada’s population aging into mass retirement, transfers from Alberta to the center can only increase in the future.
The problem is, that Canada’s provinces lack the legal standing to challenge the central government on such topics. Prime Minister Trudeau needs Alberta’s tax dollars to hold Canada together, and what Alberta is asking for is quite literally an end of Canada.
This Alberta Question has two possible outcomes.
The first is an Albertan collapse. Economically, the province’s strength is resource extraction. The Albertans inability to bring their crude to market leaves them staring down an economic depression while also facing ever higher financial demands from Ottawa.
Outcome Two requires a sharp break with convention, as it is nothing less than Albertan secession.
Alberta isn’t dependent on the federal government’s financial handouts like other provinces. It has an energy sector, public infrastructure, educational system and workforce that has drawn plenty of international investment interest on its own. Negotiating export pipelines directly with the United States would be infinitely easier than with Canadian governments, especially since the U.S. Gulf Coast is home to the only concentration of refineries in the world that can process Albertan heavy crudes.
Add to this the fact that Canadian provinces work better north south then east west. Its an unusual design of a country: Quebec and Ontario have more in common with the US East Cost than with Vancouver for example. Saskatchewan and Manitoba naturally gravitate towards the Dakotas, and British Columbia has more connections with US West Coast that with the rest of Canada. What is also resurfacing are the regional differences within Canada.
The structure of the central banks was originally intended to manage the domestic capital flows, but it doesn’t function like this anymore.
One-size-fits-all interest rate policy of central banks pits provinces against each other, because it ignores the fact that domestic economies are not the same from one province to the next. The commodity – producing provinces are booming when the financial provinces are at their lows.
Farmers, oil producers and miners in central Canada are forced to pay higher interest rates when their economies are declining because of speculative booms in Toronto and Vancouver.
Add to this the rising tide of environmentalists that has seriously impacted Alberta’s economy to the point that people no longer seek engineering degrees in energy or exploration. In Canada, the left is urging lawsuits against oil companies to force them to pay for the damage to the climate. Maybe they all should just quit, lay off workers, stop paying taxes and we go back to the campfires to survive the winter in the North.
In Alberta, none of the major parties campaigned on separation, either in 2015 or 2019, but that doesn’t mean that the topic isn’t about to show up in provincial political discussions.
For Canadians everywhere, that alone should be terrifying.
License plates on the black Cadillac parked outside the restaurant read “TRMP TRN”. And it was no surprise, Midwest is Trump’s territory, and I was in a small town in southwestern Ohio ready to order my breakfast, enjoying the sunny Saturday morning.
“I will have the kippers,” I said when the blonde waitress showed up.
“Supertramp fan?” she was quick.
“Just took a jumbo across the water,” the great song was still on my mind.
And actually I just did take a Jumbo across the Atlantic.
She laughed briefly and I wondered why a person of this mind is waiting tables.
Maybe it’s because our education is a protracted system of university entrance and the consequence is that many highly talented, brilliant, creative people think that they’re not.
Interestingly, there was no public education before the XIX century; it all came into being as a need of industrialism.
The industrialists set out to figure out how to get people to buy lots of stuff but also how to make sure that the workers were willing to be interchangeable cogs in the machine. And the solution of course was – public education.
We’re running an education system where mistakes are the worst thing you can make. The result is, that we are educating people out of their creative capacities. And creativity is as important as literacy and we should treat it with the same status, but instead we built a system that teaches people to fit in. Notice that in life, if you fit in good enough, all it means is that you’re easy to replace.
Did you know that the Icarus story was changed over the years? In the original, the young man was not supposed to fly low, where the sea moisture will get into the feathers, destroy his wings and kill him. He was told by his father to fly high.
I’m a father too, and I would never give any other advice to my kids.
Education is supposed to get us into the future that we can’t grasp, and the unpredictability is extraordinary. The kids in schools now will have their careers in full swing around 2050. We don’t know how the world is going to be in five years, so how can we know what to educate them for?
All we know is that mandatory education makes no sense – nobody ever learned anything against their will, so let’s start with the notion of meaningful work and let’s call it art.
Art is when one human being is doing something that others couldn’t do.
There is no manual how to do it and people who figure it out are worth something. These are people who take the intellectual risk instead of doing repeatable work.
Not financial risks, but emotional risks - putting something out to the world and be willing to let the world respond and react.
So I heard this great story about a girl, who was six in the drawing lesson sitting in the back of the room and the teacher said she never paid attention, and in this drawing lesson she did. The teacher walked to her and asked, “what are you drawing?”
And the girl said – “I’m drawing a picture of God.”
And the teacher said: “but nobody knows how the God looks like.”
The girl said: “they will in a minute.”
The kids will take a chance; they’re not frightened to be wrong.
It’s not that being wrong is the same as being creative, but if you’re not prepared to be wrong, you will never come up with anything original.
And by the time they become adults, most kids have lost that capacity. We got brainwashed into asking for roadmaps instead of asking for compass.
Later that weekend I drove north in a nice black Jeep from the Warren County towards Detroit.
The landscape changed, showing how globalization destroyed businesses and people’s lives like a tsunami.
What used to be the industrial heartland of America is now hollowed out and no wonder that people lost trust in career politicians who watched the destruction happening and did nothing.
We were having a dinner at the Belvedere restaurant, just south of Warsaw, in the historical complex that used to be the summer residence of Polish kings. I was having a glass of wine and the man I was talking to, a glass of orange juice.
I have known him for a long time, he is a pilot for life - I think he knew how to fly before he knew how to drive. For the last twenty something years now he flies the big airliners all over the world.
“How is the Boeing 737 Max flawed?” I asked, “it’s been grounded all over the world by now.”
“Well” he said slowly, not rushing to a judgment, “Boeing is really a big plane company, 747, 777, 787, this is what they’re good at. The smaller ones may be out of their comfort zone.”
“And why does the software to control the dive and the stall on the 737 confuse the pilots?”
“Talk to the people who found the black boxes, which are yellow actually.”
I was quiet for a while looking through the big window at the brightly lit Castle on the Isle, the center point of this area.
Think Central Park infused with beautiful history.
“It could be the lift,” said the pilot after being silent for a while.
“You get the plane to fly evenly if the center of gravity matches the center of lift, obviously. But this is far from easy, can’t predict weight distribution of the passengers or the luggage, plus the fuel burns down as you fly and then there are other variables, so you need a control system to compensate.”
“Which part of the plane does it?” I asked.
“The rear wings, they have a movement built into them, up to 20 degrees or so. But if the controls fall apart, things really fall apart.”
He got up, “talking about places where things fall apart, I’m flying to Riyadh tomorrow morning. They appointed a 30 year old prince to modernize the country and limit oil dependence. If that’s not a sign of desperation, I don’t know what is. Anyway, he said he would modernize the country within 20 years. It didn’t happen in 2000 years, so good luck with that.”
He left me thinking about the Arab peninsula and the House of Saud.
When the Middle East was stable, it was because Turkey dominated the region.
When Turkey fell in the World War I, the Europeans re-drew the borders in a way that was useful for the French and the British, but they make no sense in the Arab world. There never was a country like Iraq or Syria or Jordan, the divide is totally artificial. And everybody seems to have forgotten about it.
For many years the United States guaranteed the stability of the region, so that oil would flow. When the price of oil collapsed the importance of Middle East declined economically and U.S. willingness to support the region and the House of Saud pretty much evaporated. Nobody else from the outside has any interest to intervene, so it is going to be stabilized by one of the regional powers: Turkey, Iran, Saudi Arabia or Israel.
Israel is unlikely to make this move. Saudi Arabia has to many economic problems to even imagine it. The Iranians have internal issues too, even though they’re hungry, so it really comes down to Turkey. And they have the power, economically and militarily to do it, but the thing is – it may just not be worth doing.
The obvious question that will define the future of this region is this:
What is the future of hydrocarbons?
We’ve been using them for 200 years and this is clearly not going to go on forever in an economy that is transforming quickly. There are new energy forms that are going to come, like space based solar for example.
Energy comes from the sun, but on earth we can’t take a full advantage of it because of clouds and nights. Not so in space, it’s pure energy there and you can beam it to the earth using microwave radiation. There is no coincidence that Branson, Musk and the likes hang out in Western Texas working on their space programs. Not for space tourism, I don’t think, – there is no money in it. It’s the energy they’re after.
Whoever gets out there first will be the Saudi Arabia of the future.
It was late Saturday afternoon and I was in Lyon, France, looking for a way to detach myself from the shopping routine, park in a bar somewhere with a glass of wine and kill the time until dinner.
So, I made my way through the Place Bellecour, one of the largest open squares in Europe, with the statue of Louis XIV in the center.
The Yellow West protesters were gathering around the statue holding a big sign “La France n’est pas a vendre”, France is not for sale, and the Gendarmerie troops were taking positions in the little streets leading to the square dressed up in heavy fighting gear. Welcome to the week 20 of the protests.
A little later I was sitting in the panoramic bar on the eight floor of the hotel seeing them fighting on the Raymond Poincaré Bridge. The police tossed tear gas grenades and started moving towards the crowd. People were running away down the river, so the blues fired some more gas after them to keep things moving and suddenly that was it. Just lots of flashing blue lights and everybody went home.
In the bar on the top floor I heard only French language around me – no Russian or Chinese, which is different from just a few years ago.
Times are changing, but these people are not going anywhere, in the sense that they are a big part of reality.
Euro-Asia is the heartland of humanity – of the seven billion people alive today, five live there. What happens there defines how the international system works.
And now something extraordinary is happening - for the first time since the end of World War II the entire region is destabilizing. Whether it is the European Union, Russia, China or the Middle East, there is one important thing to understand – if this region changes, the world changes.
We’re into something unique, which is crisis of exports and exporters of everything.
In 2008 USA and Europe went simultaneously into recession. Their appetite for exports collapsed and country that took the biggest hit was China. China exists on exports, first to Europe and then to the United States. It’s domestic economy couldn’t buy, because the majority of Chinese live in poverty. The average income of a family west of the coast is about that of Bolivia. This is a poor country and if you’re earning $2 a day, you can’t buy an ipad.
As the crisis unfolded, China did what every company would do under these circumstances – it fabricated statistics. As result there was this great illusion in the West that China will soon go back to the rate of growth it had before. The one thing businessmen believe is that we can go back to the way it was. It just never happens.
We’re now in the new normal, and president Xi will rule with iron fist making use of all the power he was given.
Another export addict is Germany – it sells abroad half of its GDP. A 10% drop in exports, not something unheard of, would reduce the GDP by 5% and put at risk the German welfare social model, likely resulting in a change of power.
There is a reason why the Germans were landing money to the countries in the south of Europe – it was so the Italians, the Greeks, the Spaniards could buy more German products. And I don’t believe for a moment that the good folks at Deutsche or Comerzbank didn’t know how this is going to end. Everybody new.
So, what’s next? Germany can’t go anywhere because they need the EU and European markets for exports. The south of Europe is not going anywhere, with the youth unemployment rate of 60% they can’t even afford a bus ticket.
So who is going? Those who can, hence Brexit.
France is slowly boiling; it could be an interesting summer.
The Steingenberger hotel is located on the west shore of Bodensee in Konstanz, a German town known colloquially as the “playground for the rich”.
I walked downtown in the evening on Saturday, and it seemed to me that the standard issue car here is a dark Mercedes G-Wagen, which sounds like a jet taking off, a car that is absurd which is precisely why I love it. It’s crazy that a decades old military box could rise to prominence among the glitterati who don’t even know what a differential lock is, much less how to engage one of the G’s triumvirate of them.
It was late night when I was sitting in my room on the 4th floor of the hotel thinking about something that got my attention recently.
Here it is.
Talks about Bitcoin tend get emotional because of the highly speculative nature of it.
People often ask: “is Bitcoin money?” Well, if you even need to ask that question it means it is not.
Is it a store of value? No, because it’s price gyrates wildly.
Is it a medium of exchange? Maybe.
Then you have the blockchain, the spine of bitcoin, the technology that makes it work. Blockchain is in essence a distributed ledger with a hash function that uses compression to create a fixed length output.
Which means that it will compress what I just wrote above in the same 256 bits length output like it would do with all the volumes of Tolstoy’s “War and Peace”. That way all the entries on the ledger are in the same format, regardless of the length of information provided. Pretty neat trick, but for the last ten years that blockchain is around I have yet to see a practical application of it.
When Chicago Board Options Exchange started to let people trade Bitcoin futures on December 10, 2017, it was greeted with enthusiasm in the crypto-bedazzled media. Within 24 hours bitcoin jumped by $2,000 to $17,382.
Then the Chicago Mercantile Exchange (CME) launched Bitcoin futures on December 18, 2017. But on that day the price of Bitcoin had already begun its epic collapse.
When it comes to impeccable market timing, few events can hold a candle to those two launch dates, asfutures trading can be used to bet on rising or falling prices.
These trading platforms gave investors the opportunity to bet against the ludicrous run-up of Bitcoin and now the bearish bets were the ones that made money.
There is an interesting concern rising from the too numerous exchanges for Bitcoin. A WSJ study has revealed that the market is being manipulated to create the impression that there is a $6 billion trading volume every day. This manipulation is all about boosting the image of volume using what is known as “wash trades” where the same party is buying and selling at the very same price.
Bitcoin may be an example of “pump and dump”, which professional market players love, but there is something new on the horizon that makes way more sense.
There is increasing hype and speculation regarding a Facebook Coin which is the polar opposite of Bitcoin. It will be pegged to a fiat currency, or perhaps a basket of currencies, held in Facebook bank accounts and it will use blockchain technology. It will not be possible to invest in it so it would not be a trading vehicle like Bitcoin. That means it would be more of a store of value. Clearly, Facebook is interested in a real-world market by creating its own payment network independent of Visa and PayPal, that would compete for deposits like banks, but globally. With Facebook’s immense user base, such a payment network would be extremely competitive in the banking world.
And Facebook’s total stock has a market cap of $463 billion is closer to 4 times that of the entire crypto market cap of $130 billion, so it’s an elephant waking up.
Still a brilliant, simple idea that makes you want to ask – what took you so long?
By the time I was done typing the stars lost the war and the red sunrise took over.
The Grand Hotel was not far from the casino in the town called Divonne-les-Bains on the French side of the border. For the weekend I booked the best room they had on the menu, belle époque finishes and all.
And I invited a woman I know forever by now, and she wore a lemon skirt to colour in the cold grey night. A man likes to stare, and, as the song goes, “he turns his money into light to look for her”.
We had an excellent dinner at La Terrasse Fleurie and then a glass of Chablis wine at the hotel bar.
I wanted to make it to France for a weekend before the yellow vests really start a revolution. It’s been 18 weeks of protests now and they can only intensify as the warm weather comes.
For now, president Macron decided to wait it out.
Historically, if the disapproval rating of a government rises above 65%, there is a fertile ground for violence. At this time 71 percent of French have no confidence in Macron, as a poll shows. And he dropped 4 points from last month.
And its not all his fault, by all means – what we’re witnessing is the collapse of socialism. People are mad and out on the street because of declining living standards, as there is less disposable income left after taxes every year. And many say that capitalism is the problem, the big cash rich companies, but these are just the oligarchy. Government is the real problem.
And France is not alone in this – we have used every trick in the book to prolong this borrowing scheme: offshoring of jobs, negative interest rates, and massive government interventions in the markets. Capital controls are probably next.
Macron took a hard stand on Brexit, saying that another failure by the U.K. Parliament to back Theresa May’s proposed deal “will guide everyone to a hard exit.”
As if this was ever a surprise – a hard Brexit was backed-in from the beginning, there was never any other possibility. And it will cost the British the London financial center at a minimum.
But that weekend I was enjoying life and the things that make it special.
I’m an engineer but I think in scenes, it makes me a good storyteller sometimes.
Kurt Vonnegut was one too, I am not the first one trying to connect these two areas of life.
He was the writer I most enjoyed reading when I was growing up. He never got a Nobel Prize, possibly because he bankrupted a Saab dealership in New England, which he owned for a while, and the Swedes never forget.
He tells this story, which I like to no end. Here it is:
The last years of his life he was living in Manhattan.
So, he wrote a few new pages by hand and wanted to send it to the lady that types it for him for many years now. He leaves his apartment and walks down the street to buy an envelope. And his wife tells him that he can order envelopes and they will deliver them to the house, and that he is not a poor man so why go. And he says “shhh, shhh”.
And he goes out to this stand by the United Nations where an Indian lady runs the store, and she asks what’s new and he says that he just wrote a few pages. She has her hair done in a nice way, and he likes her smile, so they chat friendly for a bit, he mails the letter and he goes back home having the best of time.
The nice little things in life, don’t let them get away from you.
There is an ending to my French hotel story – after my wife read this text she said: “my skirt colour was sunflower not lemon!”
Perhaps love makes me color blind, or no guy can possibly tell the difference.
I am of the opinion that the world has changed.
Many of us are looking for some sort of mean reversion, but it’s not going to happen.
European Union, for one, is a wild thing.
It was originally a French project, which is what people tend to forget.
After World War II, the French looked around and said – hey, where did everybody go?
The Brits had gone home, the Spanish were languishing under their own dictatorship, Germany and Italy were divided and occupied, and the Soviets were considerate enough to drop an iron curtain, which basically blocked half of Europe from interaction, so the French realized – hey, this is a competition we can win!
So they created the Union as a platform to project political power over Europe (the initiative had a different name back then).
Well, they didn’t like 1989, when Germany reunited and quickly took control of the business.
For starters, they moved their parts suppliers to Eastern Europe, where the wages are three times lower, but competencies are not.
It’s kind of globalization, but only within the area. An excellent 8-speed automatic transmission is built in Romania and shipped to South Carolina to be bolted to a BMW assembled there, sold to American clients and still considered a German car.
If you’re in Eastern Europe or you are Germany, you’re selling to the Chinese and the Americans, and you make off like a bandit.
But when you look at France, Spain or Italy – they can’t play that game.
They’re not big export countries, they are consumption economies.
If somebody is running a surplus, then logically somebody else has to run a deficit.
Now, if you don’t allow them to run deficits, as the austerity policy requires, then the only way to react to it is to permanently constraint their economies, meaning shrinking them.
So basically the French, the Italians and the Spaniards are forced into austerity policy, so the German, the Poles or the Romanians can make money selling to the rest of the world.
Do you think that may push the National Front over the edge one day?
The big problem with Euro is that there is no unified European debt that should be a basis for the currency (the money now is debt based, not gold based, but the mechanism is the same). Each of the member countries prints their own Euros, and their national debt (bonds of each country) guarantees the currency.
Or, as they say elegantly in textbooks – the currency is guaranteed by the ability of the government to tax its citizens. And if you need a moment to regain your composure after that sentence, take your time.
Problem is, the national bonds have widely different interest, or rather they would if it wasn’t for constant interventions by the European Central Bank in the bond market. Their balance sheet now equals to 40% of GDP of the Euro zone. And there is no plan how to exit these positions without triggering a mother of a crash. This is the proof, if you still need one, how bad of a design the Euro is.
So here is a suggestion for the brave boys and girls at the ECB in Frankfurt– buy a big paper-shredding machine, put it in the basement and start trashing the bonds you sitting on.
In my view, there never will be a unified European debt - the Euro will fall first. There is a simple reason for it – unified debt will sell at interest that is some amalgamation of rates that member states get in the market.
For countries like Germany, this would mean that the cost of capital would go up, perhaps way up.
Try to sell this to the German industrial elites – good luck with that Frau Merkel.
I will slow down now.
You don’t get to replicate the past. The very thing that you lived the past means simply that the past can’t come up again. The world is always a world of becoming and you live it forward into the unknown. As humans we like to see patterns where there are none, because the world is actually much more random. And it can be brutal, I know.
Welcome to the Masterpiece, but remember - you shape it too, it will never be the same without you.
I was sitting in a fish restaurant called Iaccato, deep inside the Brindisi harbour, right where the Italian military zone starts and where a large destroyer was parked dominating the view.
To the right of me, as the harbor opened to the sea, was a number of private yachts, not quite Monaco crowd, but interesting still. I was marveling at the name of the closest one – Marietta Barreta, and you got to love Italian, it just rolls down your tongue.
“Welcome to paradise!” said the waiter.
“That’s a bit of a stretch, but I like it here.”
Brindisi is a city in southern Italy, strategically located on the coast of the Adriatic Sea. It is a major port for trade with Greece and the Middle East.
The port was inhabited since prehistoric era – archeological findings date back to at least 12’000 years ago, at least this is what the locals say. Very early on it became a major center of Roman naval power and maritime trade.
Later, with the opening of the Suez channel it became the main port of shipment and communication route between Western Europe and the East.
In 1960 a USAF base was activated in San Vito dei Normanni, just outside of Brindisi.
It’s main purpose was COMINT (communication intelligence) and it was staffed with up to 10’000 support personnel. In 1994 the base’s mission was withdrawn, but it re-opened later to support air strikes during the Bosnia and Kosovo wars. In 2000 it was officially closed, however many soldiers decided to stay in the area. I saw a couple of them riding heavy Harleys on Via Appia, the ancient Roman road – they’re easy to spot: once a soldier, always a soldier.
There is also a large British presence here – many settlers are pensioners, buying villas in the Brindisi countryside.
As I sipped red wine after the dinner, the discussion between the Brits at the bar turned into the real possibility of Italy leaving the Eurozone. Obviously, they were fueled by beer from early on, so it was impossible to miss the loud conversation.
“Third largest economy in Europe, it will be a trouble if they leave the EU, it will start a chain reaction.”
“Or even worse,” said the other one, “what if they stay?”
In the real life always the little things make the difference. There is one such problem in Italy that is potentially huge, but totally missed by the press.
The most threatening issue here is likely the attempt to raise inheritance taxes as being forced by EU in Brussels.
Culturally, Italy has the lowest inheritance tax in all of Europe.
The German inheritance tax rates range from 17% to 50%, depending on your relationship to the decedent.
In Italy, the Italian Inheritance Tax is applied to all the assets worldwide belonging to the deceased if the person is a resident of Italy ONLY. If the person lives outside of Italy, then the tax is applied only to assets in Italy. Where everyone else has generally inheritance taxes of 15% or higher for the immediate family, Italy that rate is just 4%.
Rental income in Italy is extremely low. People have plowed their savings into real estate BECAUSE of the inheritance tax.
If the inheritance tax is tripled, as Brussels wants, what you will see in Italy is the biggest crash in real estate in modern history.
Who down here in paradise has the appetite for that?
So, I had a great dish of raw seafood on ice at the Iaccato. Then, as the sunset came, I left the harbour and drove back north.
The small white-blue chopper was moving violently in the air as we flew southeast along the shore of the island.
“The wind from the ocean is bouncing off the mountains on the shore,” said the pilot through the headset, “…is why.”
“I know, I’ve been here before.”
He looked at me from behind the sunglasses. “Bienvenido de vuelta”, welcome back.
The mountains to the right of us were covered with lush tropical forest and the waves on the ocean on the left were high, breaking into white boiling foam approaching the rocks by the shore. Out on the ocean a single cargo ship was battling the long Atlantic wave as she was making her way to the harbor behind us.
The pilot found the helipad before I even saw it, and we touched down in the narrow area between the palm trees.
The resort, with about sixty custom villas and a number of restaurants, represents an interesting financing scheme with private funds coming from the upper class in the North. Someone with money prowess put this all together with mortgage bonds and a clearinghouse to handle the payments.
All this remains me of a similar set up, just on a much bigger scale, organized by possibly the best financial mind of the 20thcentury. His name was Hjalmar Schacht and he was a German economist, banker who served as the Currency Commissioner and President of the Reichsbank under the Weimar Republic, then president of the National Bank and eventually became Minister of Economics. Schacht was for a time feted for his role in Nazi Germany economic miracle, which was a fascinating event on its own. The question is – how did Germany, after losing the World War One, burdened with repatriation payments and coming out of devastating hyperinflation episode finance its ultra modern military and programs like the Autobahn project (highways)?
In essence, the Autobahn was financed with a sort of a bond. Financing of the re-armament was way less publicized, but the elaborate scheme really amounted to a giant credit card. When the cost of servicing it became unbearable, the war started.
Also, in the years leading to the war there was capital flowing to Germany from Wall Street. Prescott Bush, for example, father of the recently deceased president George H.W. Bush, was a founding member and one of the directors of the Union Banking Corporation, an investment bank that operated as a clearinghouse for many assets and enterprises held by German steel magnate Fritz Thyssen.
Towards the end of the war Hjalmar Schacht had a fall-out with the Nazis – he was even put briefly in a concentration camp. After the war he was tried at Nurnberg, but acquitted.
Bankers are usually untouchable and this tradition continues to this day.
In 1953, Schacht started a bank, Deutche Aussenhandelsbank Schacht & Co. which he led until 1963. He was organising financing for enterprises like the Onassis shipping business pulling together funds from wealthy Germans.
Getting out of the helicopter in the resort it came to my mind that there is a Hjalmar Schacht out there somewhere who made it all possible.
Got to give it to the money guys – they think big.
It was late Sunday morning when I found myself having a slow breakfast on one of the main historic streets in Warsaw. It’s called Faubourg de Cracovie and it is one of the best-known and most prestigious streets of Poland’s capital, surrounded by historic palaces, churches and manor houses.
It comprises part of the Royal Route that runs from Warsaw's Royal Castle and Old Town, south to King John III Sobieski’s 17th-century royal residence at Wilanow.
The King was an able military commander, most famous for his victory over the Turks at the 1683 Battle of Vienna, after which the Pope hailed him as the savior of Christendom.
Sobieski ruled over Poland and Lithuania for 22 years.
He had a French wife - Marie d'Arquien, known in Poland by the diminutive form "Marysieńka", which actually sounds sweet if you understand the language.
The Royal couple became famous for their love letters, written from 1665 to 1683, when they were parted either due to John III Sobieski's military engagements or her travels to Paris. The letters give insight into the authentic feelings of the loving couple and also their reflections on day-to-day decisions made by the king, as he consulted his wife about them.
That late morning I was sitting outside, having a glass of hot red wine and feeding a small bird with almonds so it stayed on my rustic wooden table and kept me company. Just up the street a young blonde woman was playing violin and she was really good at it.
It was the type of a morning that is hard to recreate anywhere else.
Warsaw suffered heavy destruction at the beginning of the Second World War, in September of 1939. Then, during the uprising in August of 1944 the town was totally leveled by the Germans. It’s a shame really, because Warsaw was of the most beautiful cities in the years leading to the war. It was known as the “Paris of the North”.
After the war the Poles rebuilt the landmarks, which simply means none of these are real, just recreated.
Interestingly, from the founding of the Poland Kingdom in 1025 through to the early years of the Polish-Lithuanian Commonwealth created in 1569, Poland was the most tolerant country in Europe, and that’s saying something given what went on in Western Europe at that time.
For centuries it became a shelter for persecuted and expelled European Jewish communities and the home to the world's largest Jewish diaspora of the time.
As Poland regained independence in the aftermath of World War I, it became one of the world's largest Jewish centers of over 3 million people.
Later, World War II and the Nazi prosecution of the Jews ended that chapter of history, as we all know. It was the worst ending imaginable.
Geopolitics is like real estate, it has three important rules: location, location, location. Poland is the bridge between Germany and Russia - with wide open planes it is the narrowest place to cross east-west between the Baltic Sea and the Tatra mountains in the south. Every major European confrontation happens here, whether fought secretly (typically) or an all out war.
This country is hard on people, I don’t live there anymore and need to learn to let it go. Maybe one day I will.