Executive Summary

• Geopolitical unity is fracturing as countries are forced to compete more
• LIBOR is signaling a credit emergency in Europe
• The market is sending signs a major war and/or a major recession may be imminent
• The last remaining heroes for risk-on capital, the FANG stocks, are quickly becoming villains

If you have not yet read Part 1: The Future Ain't What It Used To Be, available free to all readers, please click here to read it first.

The central banks of the world have failed.  Colossally, completely and dangerously.  Yes, they will try to rescue the “markets” once again, as they did in 2011 and 2016 when things were similarly deteriorating.

The reason they might not be able to this time?

They are out of maneuvering room.  Nothing much will happen if interest rates are clubbed back down a percent or two. To even do that, though, would require the same sort of lock-step coordination as prior times. The ECB, BoJ and Fed would all have to operate seamlessly again.

But this time there are obvious fractures and political realities that will prevent them from doing what they did before.  Europe is fraying politically with Italy fed up and increasingly leaning towards a eurozone exit, Spain is fracturing geographically and politically with the Catalonian succession movement still in play, and Brexit and other UK shenanigans are driving a wedge between Germany and the rest of Europe. 

Germany Goes AWOL

Germany, for its part, decided to expel four Russian diplomats in the wake of the Skripal scandal (a relatively light number for a country of its size), but then just a few days later approved all of the permits for the Nordstream II gas pipeline from Russia.  Apparently, Germany’s energy future is more important than appeasing the US or the UK.

Nord Stream 2 AG Receives All Permits from Germany For Construction of Pipeline

March 27 2018

Nord Stream 2 AG, the operator of the Nord Stream 2 gas pipeline project, has received all the requisite permits from Germany for the construction of the pipeline, the company’s press service said Tuesday.

The Nord Stream 2 is a joint venture between Russia’s Gazprom, France's Engie, Austria’s OMV AG, the Anglo-Dutch company Royal Dutch Shell, and Uniper and Wintershall, both German.