Europe’s Minsky Moment

The last 30 years… we’ve been living in an “unreal” world.

The wealthy, well-developed corners of the globe have outsourced the hard work of manipulating matter and energy to the strivers.

We let Russia pump the gas and China snap together the widgets…

While wealthy economies hammered on the “ones and zeros” of the ethereal realms.

This all works great as long as everyone gets along… but when things go wrong… they go wrong FAST!

Over the weekend, things got pretty darn REAL for Europe…

As Russia’s Gazprom announced that their “delay” in gas delivery would become an indefinite shutdown.

The sweltering heat of summer was uncomfortable… but the biting cold of winter will be deadly!

I sometimes wonder if the insanely stupid policy we’re seeing in wealthy economies is the result of this “era of abstractions”.

Sure, the internet and digital technology has given us tons of economic value…

But, it also leads leaders to take their eye off the ball and lose touch with what it really takes to power a modern economy.

Leaders start to care more about looking moral than crafting policy that actually leads to prosperity.

When likes and retweets in your social media feed matter more than dealing with reality… 

… you might start to think you can “virtue signal” your way out of any problem.

That’s how western political elites can convince themselves that economic sanctions will cripple Russia.

When all Putin had to do was flick a switch and shut off the gas to bring an entire continent to its knees.

Bankers can print money, but they can’t print heat, light, and food. 

You need energy for that… and Putin’s the guy who’s got it.

Of course, there was one lone “Orange Wolf” who got this call right back in 2018.

He was met with snickering laughter.

As crazy as Trump can be… it’s hard to argue with his gut instincts.

There’s one of two ways this “Minsky Moment” can end for Europe.

They can subsidize the crippling costs of energy with printed money…

Further devaluing their currencies and weighing down their economies with crushing debt.

This might curb the bleeding for a while but eventually, those chickens will come home to roost…

Europe will go into a “doom loop” where they keep pulling from the future to subsidize the present.

Eventually, their governments will begin to fail. 

Or they can wave the white flag and sue for peace in Ukraine… or get replaced in a popular uprising by leaders who will. 

Either way, it would strike a huge blow to NATO and probably signal the end of an era in Europe.

But… as one of the major economic centers of the world is seriously weakened… 

… it will prompt capital to start looking for a home elsewhere.

And the only other “elsewhere” that makes sense is between one shining sea and another.

Which might make a bullish case for US equities.

As always, the best way to find which stocks can sustain big rallies…

Is to find out what the insiders are doing. 

Since they have their finger on the pulse of their operations… when they place a bet with their own blood and sweat… 

We’d all be wise to take notice.

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