Greenland, America, and Europe, or, How Trump is Destroying the West, and America Will Pay the (Catastrophic) Price

Just another weekend at the end of the world as we know it. Go ahead and chuckle. Today we woke up to headlines telling us that Trump is going to start another trade war, with the EU, until it “gives up” Greenland. This is where we are. America making good its threats to…annex?…conquer?…seize what it likes even from its friends and allies.

This is a pivotal moment for the world, and for the West. Today we’re going to talk about what this means, geopolitically and financially, both. I’m going to teach you in hard number terms how the world will unravel next. Please read the following carefully. You will probably not learn this anywhere else.

Europe quickly rallied around Greenland. As someone intimately familiar with how power works in Europe, remember, I helped run one of Europe’s biggest companies, interfaced with its governments, etcetera, let me assure you: the idea that Europe will “give up” Greenland is somewhere between preposterous and absurd. It’s not going to happen.

And that means that if Trump is serious, as he appears to be, he’ll have to ratchet up the pressure. In the end, we may very well be looking at a military scenario. Is a war between America and Europe imaginable even at this point?

At moments of collapse, we have to expand our imaginations. The old rules no longer apply. Did you imagine that Trump would be threatening to take over parts of Europe this year? When I warned that fascism goes hand in hand with lebensraum, violent expansionism, I’d bet—and you can judge if I’m wrong—that you probably thought I was speaking theoretically. I wasn’t, and here we are. Imagination in yesterday’s terms fails when the world around us implodes. That’s the extreme scenario, but we must bear it in mind if we are to manage risk carefully.

And that is what this is about now. Risk. Europe is already saying the quiet part out loud: America elected Trump not once, but twice. Can we trust it? Meanwhile, there is a kind of American who believes that things will “go back to normal.” They imagine that an election and apologies will put the world back to normal. Is that likely?

If you’re Europe, imagine that America elects a non-lunatic, and then apologizes, not once, but several times. Would you trust it? You’d be pretty foolish to, and go ahead and ask a European, or just read the comments, because I’m sure Europeans will be happy to tell you how angry and upset this makes them.

The West has now fissured—or more accurately, shattered by Trump. This is of course what both Russia and China want, but let’s focus on the West. It’s one thing for Trump to declare a trade war on the West, as he did last year. That’s troubling enough, and it shakes the foundations of Western order. But to be serious about seizing territory?

It’s unforgivable. Especially for Europe. Because of course Europe has vivid memories of the last round of global expansionism, in the 1930s, and how it itself was torn apart by it. And it’s unforgivable because of course this is the last red line you can cross. It’s an informal declaration of war, by any other name, and make no mistake, to say that we will intimidate you into giving up your land is an obscene and ugly that shakes the foundations of any semblance of order, cooperation, or friendship. Rips them down, in fact.

The world won’t be the same after this weekend. Now we know that Trump is serious about seizing Greenland. Dictators develop such obsessions. In this case, the greater tragedy is that such an expansionist obsession is aimed at the very friends and partners America needs most.

Why?

All that’s geopolitics: this is the moment the West fractures, for good—Europe won’t, and shouldn’t trust America again after this, and for the last year, it’s leaders have been gently trying to if not appease Trump, then at least play nice with him, and now the folly of that strategy has been revealed. Trump has double-crossed them in the most spectacular way possible, short of sending paratroopers into Paris, and now Europe will be forced to begin to play hardball.

So: why is Europe the friend and partner that America needs most? Now we’re going to come to macroeconomics and finance.

The reason is very simple, and I taught it to you a few weeks ago. America is the world’s largest debtor. Who is America’s largest creditor? Not China. Not Japan. That’s what many people think, but in fact, it’s the EU.

And that’s just the beginning.

Who is the largest investor in America? This is what we call “Foreign Direct Investment” in macroeconomics, or FDI for short. Again, many people think it’s China or Japan, and they’re wrong. Badly wrong, in fact. China’s FDI in the US is just between 5-10%, given shadowy statistics. The EU’s FDI into America? It’s 45%.

So Europe is by far—by a tremendous, colossal margin—America’s largest investor. And that includes everything from stocks to bonds to property to companies and so forth. It represents nearly half of the world’s investment in America.

This is how important “the West” really is, and what it means. That the EU and America have these interlinkages which go so deep that they are genuinely foundational, in the truest sense of the word: Europe is the world’s biggest investor in America, by such a long way that it makes up half of the world’s total investment in America.

This is what is about to come undone.

Now let us think of the opposite relationship. How much does America invest in Europe? America’s FDI into Europe is about 15%. It’s much, much less than Europe’s investments in America.

Are you beginning to see the problem here? America is the one that is at risk here. It has the most to lose, by a very long way. Europe’s investment in America is three times that of America’s investment in Europe.

And that means that if Europe decides to pull the plug? Guess what happens next. You don’t have to think very hard, do you. If the largest investor in a company, city, town, or country decided to pull the plug—it would face very, very severe difficulties. Things would get catastrophic, pretty fast. Cashflows would decline, investments would destabilize, and the specter of bankruptcy would loom.

Trump doesn’t understand any of this. His team, made of amateurs and crackpots, don’t understand any of this. Even most American economist and commentators aren’t teaching you this, because they don’t look at the numbers properly either.

Trump is now playing a game of brinksmanship with Europe. The idea of brinksmanship, though, was premised on symmetry: we both have the power to blow each other up, but we don’t want to. This situation isn’t symmetrical. It is asymmetrical. Europe holds three times the cards that America does, because it is the world’s largest investor in America, to that tune.

Now. Europe does not want to pull the plug. It’s been slow to, over the last year. It has kept its investments in America relatively stable. That’s because its leaders have been a little foolish: they were betting that Trump was all talk, and things would simmer down. That’s a very European attitude, and Europeans are like that, sanity tends to prevail, but America, undergoing a fascist collapse, is emphatically not.

Europe’s leaders have just learned the hard way that trying to appease Trump was a foolish idea. He double crossed them in an almost comical way, trying to take over, LOL, Greenland, after they played nice with him, and agreed, for example, to knock tariffs on American goods down to zero. Everybody gets double crossed by Trump. And your life savings will be too.

This year, Europe will be forced to begin pulling the plug. Not all at once, at least probably not. But in a European way, which is subtly, quietly, and gently.

The effects for America will be catastrophic. The world’s largest investor in America will now have no faith or confidence in it. Or at least what little was left is rapidly bleeding out on the floor by the day. And if European leaders don’t act, then Europeans, who are deeply angry and upset over all this, are likely to make them.

What happens when the largest investor in a country rapidly loses confidence in it? All the catastrophes in financial history begin to appear on the horizon. Currency crashes, market crashes, pathways towards depression, the cratering of living standards—and by the way, this was precisely what happened to Britain after Brexit, and after Liz Truss’s disastrous attempt to make it even more severe, so it’s not as if there aren’t modern examples.

You must take all this seriously. Think about it carefully. Geopolitics and finance have always been interlinked. Now, the undoing of one will be the unraveling of the other. Many of you tell me your financial advisors basically say: ignore geopolitics! The stock market always goes up! America will always be fine! Come now. This isn’t 1988 anymore. It’s more like 1938.

This is a moment that the world has changed, profoundly, and catastrophically. Don’t imagine for a second that the consequences won’t be severe. Please keep yourselves safe. Havens as a portfolio or mini hedge fund is doing very, very well for a reason, and those of you who’ve done sessions with me know it, which is that all the above is very real. That’s not a sales pitch, it’s not a remonstration, it’s a warning, and a bit of an education, because you’re not getting much of one.

In this post, I’ve tried to teach you in hard terms about how macroeconomics and geopolitics really work, beyond the BS you hear from too many who say they know what they’re talking about, but have no real idea of the risk, figures, amounts, or relationships involved. This is as dangerous as it has gotten since the 1930s. I’ve highlighted the numbers above for you so that you know precisely how and why.

The world is now coming undone. It’s no exaggeration to put it that plainly. You must now choose how much of the price you will pay for Trump’s violence, stupidity, and folly.

Love,

Umair (and Snowy!)