Tag: economy

Germany’s Municipal Financial Crisis: The Green Transformation Backfires

For years, politicians managed to hide the damage caused by the green transformation. Now, deep cracks are appearing in municipal finances amid the severe economic crisis gripping the country. Cities like Stuttgart serve as showcases for the future of the republic.

For a long time, Stuttgart’s city treasurer was more than just a steward of solid numbers. He was regarded as the uncrowned king of fiscal policy in the region—and held a position envied by many colleagues. The robust foundation of the automotive industry and its extensive supplier network funneled generous tax revenues into the city’s coffers for years, particularly from trade taxes.

As recently as 2023, Stuttgart recorded a record 1.6 billion euros in trade tax revenue—a sum that gave the city extraordinary financial leeway. Social projects, infrastructure initiatives, municipal ambitions—the local government could spend freely.

Cracks in the Model Municipality

Then came 2024. Early cracks in Germany’s economic foundation, building up over years, began to appear in Stuttgart as well. By the end of the fiscal year, the city faced a deficit of 6.8 million euros—a first warning that things might be spiraling out of control.

In green-led Baden-Württemberg, officials explained the shortfall with one-off effects and general problems in the German economy—problems they firmly believed could be managed under the state’s green transformation.

Then 2025 arrived—and with it, shock. Trade tax revenues collapsed, expected to bring only around 850 million euros into the city’s coffers for the year. The supplementary budget shows Stuttgart now faces a deficit of 890 million euros—a fiscal hammer blow, reflecting the massive collapse of Germany’s core industries, including automotive, machinery, and chemicals.

The Moment of Truth

The picture is the same across the country. For 2025, the German County Association forecasts a cumulative municipal deficit of around 35 billion euros—a historic figure unseen since World War II, and notably, for Germany, once considered a model of fiscal prudence.

The moment of truth has arrived. Ideologues have run their course. What follows are retreating maneuvers, frantic repair attempts, and the reflex to stabilize past policies artificially with ever-larger debt programs. The house of cards is stacked higher before it inevitably collapses.

Recent experiences with Berlin’s debt policies allow a fairly precise prediction of what comes next. Parts of the so-called “special fund”—new federal debt taken on outside the regular budget—will likely be repackaged into municipal aid packages to plug ever-growing budget holes.

If municipal finances worsen, the next escalation stage is already prepared: a consolidation of debt across the states, accompanied by the issuance of so-called special bonds. Initially through the federal states, guaranteed by the federal government, possibly involving the KfW Bank, labeled as infrastructure investments. Political imagination knows almost no bounds—at least until the bond market puts its foot down and abruptly ends the spree.

Germany has become, as a result of prolonged, fatal political mismanagement, a fiscal parasite. The attempt to pull tomorrow’s purchasing power into the present through debt is fundamentally flawed. It generates growing mountains of debt, forces higher levies, and gradually erodes citizens’ purchasing power through rising inflation.

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The Inevitable Decline of Developed Nations’ Fiat Money

Governments assume they can print as much currency as they like and it will be accepted by force. However, the history of fiat currencies is always the same: first governments exceed their credit limits, then ignore all the warning signs and finally see the currency collapse.

Today, we are living the decline of developed economies’ fiat currencies in real time. The global reserve system is slowly but decisively diversifying away from a pure fiat currency anchor towards a mixed regime where gold plays the dominant role, not fiat currencies.

IMF COFER data show that, while the US dollar still dominates, its share of reported reserves has drifted down towards the high 50s. Gold has overtaken the US dollar and euro as the main asset in central banks for the first time in 40 years.

There is a reason for this historic change. Developed economies have surpassed all their limits to indebtedness.

Public debt is currency issuance, and the credibility of developed nations as issuers is fading fast. It started when the ECB, the Fed and major global central banks reported large losses. Their asset base was yielding negative returns as inflation and solvency issues became evident. Mainstream economists and governments dismissed these losses as insignificant, yet they demonstrated the extreme risk associated with the asset purchases made in previous years.

Inflation is a form of de facto gradual default on issued obligations, and global central banks are avoiding the debt of developed nations because they see a deterioration in the fiscal and inflationary outlook. Sovereign debt is not a reserve asset anymore.

Global public debt has reached about 102 trillion dollars, a new historical record, well above pre‑pandemic levels and close to the peaks hit during the most aggressive monetary expansion. Sovereign debt has driven this phenomenal rise, with countries like France and the United States running enormous annual deficits in non-crisis periods. Bidenomics in the United States was the clearest evidence of imprudent fiscal policy, running record deficits and increasing spending by more than two trillion US dollars in a period of strong economic recovery.

How did this loss of confidence happen? Monetary sovereign nations do not have an unlimited ability to issue currency and debt. They have clear limits that, when surpassed, generate an immediate loss of global confidence. Developed economies have breached the three limits, especially since 2021:

The economic limit is reached when ever-higher debt leads to a decrease in marginal growth. Government spending has bloated GDP, but productivity has stalled and net real wages are stagnant or declining.

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War with Venezuela Won’t Solve America’s Economic Woes

n April 1939, American unemployment reached 20.7 percent. For Henry Morgenthau Jr., Franklin D. Roosevelt’s Secretary of the Treasury, this was bad news. In a private meeting he confessed to two senior congressmen: “We are spending more than we have ever spent before and it does not work… After eight years of this administration, we have just as much unemployment as when we started. And an enormous debt to boot.” 

Today, Americans know how the Great Depression ended. It ended with the onset of war in Europe. FDR truly believed that, if Britain and France went to war with Germany, the quagmire would make the British and French Governments heavily dependent on access to U.S. credit markets and resources, thereby ending America’s economic Depression. FDR welcomed the stimulus that war provided.

In 1939, Joseph Stalin hoped war in the West would be a quagmire fatally weakening Germany and its opponents. Stalin believed this development would open the door to a massive Soviet invasion from the East that would supplant Nazism with Communism. Thus, Stalin eagerly supplied the German war machine with the oil, iron, aluminum, grain, rubber, and other mineral resources Berlin needed to launch its war against Britain, France, and the Low Countries.

Ultimately, both FDR and Stalin miscalculated just how costly and risky the new conflict in Europe would be. War broke out in 1939, and in 1940 German military power rapidly defeated Western allies, though Britain fought on. The next year Germany invaded the Soviet Union.

Today, the Trump administration faces some conditions that FDR would recognize. Scott Bessent, President Donald Trump’s Treasury Secretary, confronts a national sovereign debt of approximately $38 trillion. Liquidity strains also persist in parts of the financial system, and the dollar’s long-term reserve status is under significant pressure and scrutiny. 

Among the ideas under discussion by Bessent is a more enthusiastic official embrace of stablecoins—cryptocurrencies deliberately engineered to remain boringly pegged one-for-one to the dollar by holding equivalent reserves of cash or high-quality cash-equivalents in regulated accounts. In plain language: digital dollars that promise never to fluctuate like Bitcoin but can circle the globe in seconds without ever touching a traditional bank. 

Bessent publicly argues that well-regulated stablecoins will also extend the dollar’s dominance into the blockchain era. Trump appears sympathetic; there is, after all, not enough gold on the planet to return to a metallic standard, and simply printing more fiat currency will further debase the dollar. Wall Street, ever helpful, is delighted to assist in kicking the can a little further—ideally down a blockchain-paved road.

Meanwhile, the Trump White House is charting a new course to war, this time in the direction of Venezuela. Has the administration concluded that the rapid conquest of Venezuela could induce the kind of economic stimulus that rescued FDR’s failed policies and restore economic prosperity inside the United States?

Compared with the Russian or Iranian armed forces, Venezuela’s military is almost Lilliputian. Nicolás Maduro presides over a hard-left, bitterly anti-American regime that is bankrupt, internationally isolated (save for Havana, Moscow, and Tehran), and yet sits atop the world’s largest proven oil reserves—303 billion barrels, according to OPEC’s latest assessment.

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Don’t Fall in the China Trap

Is the Chinese economy collapsing? Or is something worse waiting in the wings? The short answer is that we could be looking at something much worse than a crashing economy. China could be part of a collapse of the global monetary system.

We’ll begin the analysis with the latest official economic releases from China. These releases showed some of the weakest performance by the Chinese economy since the 2020 pandemic collapse.

Things Aren’t Looking Good

Industrial production growth for October declined to 4.9% (year-over-year) from a prior level of 6.5%. This was the weakest reading since August 2024. Some sectors receiving state support such as autos, computers, shipbuilding and telecommunications did better than average, but the broader manufacturing sector slowed materially, and mining output also weakened.

Retail sales in October were also fragile. There was overall growth of 2.9%, but certain sectors crashed, including household appliances (- 14.9%), building materials (- 8.3%), and automobiles (- 6.6%).

Sectors showing strength included jewelry (+37.6%, although this can be partly a proxy for buying gold in the form of jewelry) and cosmetics (+9.6%). This was the smallest increase in retail sales in years and is especially weak considering that October traditionally marks the beginning of a seasonal buying surge.

The most disastrous data came from fixed-asset investment (FAI), which showed a 1.7% year-to-date decline. This is the steepest decline since the pandemic crash year of 2020.

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The AI Economy And The Public Risk Few Are Willing To Admit

Artificial intelligence is being sold as the technology that will “change everything.” Yet while a handful of firms are profiting enormously from the AI boom, the financial risk may already be shifting to the public. The louder the promises become, the quieter another possibility seems to be:

What if AI is not accelerating the global economy – but masking its slow down?

The headlines declare that AI is transforming medicine, education, logistics, finance, and culture. But when I speak with people in ordinary jobs, a different reality emerges: wages feel sluggish, job openings are tightening, and the loudest optimism often comes from sectors most financially invested in the AI narrative.

This raises an uncomfortable question: Has AI become a true engine of prosperity — or a financial life-support system?

The Mirage of Growth

Recent economic data suggests that a significant portion of U.S. GDP growth is being driven not by broad productivity, but by AI-related infrastructure spending — especially data centers.

A study from S&P Global found that in Q2 of 2025, data center construction alone added 0.5% to U.S. GDP. That is historic. But what happens if this spending slows? Are we witnessing genuine economic expansion — or merely a short-term stimulus disguised as innovation?

This pattern is not new. In Ireland in 2008 — before the housing collapse — construction boomed, GDP rose, and skepticism was treated as pessimism. The United States experienced something similar the same year: real estate appeared to be a pillar of prosperity — until it wasn’t. On paper, economies looked strong. In reality, fragility was already setting in.

Today, echoes of that optimism are returning — except this time, the bubble may be silicon, data, and expectation.

The Productivity Paradox

AI has been presented as a labor-saving miracle. But many businesses report a different experience: “work slop” — AI-generated content that looks polished yet must be painstakingly corrected by humans. Time is not saved — it is quietly relocated.

Studies reflect the same paradox:

  • According to media coverage, MIT found that 95% of corporate AI pilot programs show no measurable ROI.
  • MIT Sloan research indicates that AI adoption can lead to initial productivity losses — and that any potential gains depend on major organizational and human adaptation.
  • Even McKinsey — one of AI’s greatest evangelists — warns that AI only produces value after major human and organizational change. “Piloting gen AI is easy, but creating value is hard.”

This suggests that AI has not removed human labor. It has hidden it — behind algorithms, interfaces, and automated output that still requires correction.

We are not replacing work. We may only be concealing it.

AI may appear efficient, but it operates strictly within the limits of its training data: it can replicate mistakes, miss what humans would notice, and often reinforce a consensus version of reality rather than reality itself. Once AI becomes an administrative layer — managing speech, research, hiring, and access to capital — it can become financially embedded into institutions, whether or not it produces measurable productivity.

As I explore in the book Staying Human in the Age of AI at that point, AI does not enhance judgment — it administers it. And then we should ask:

Is AI improving society — or merely managing and controlling it?

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Germany Has, for All Intents and Purposes, Committed Itself to An Economic Implosion Due to Its Failed Energiewende

Doug Sheridan analyzes the fall of Germany due to its Energiewende, European peer pressure and a nasty case of the green virtual signalling syndrome:

The FT writes, Germany, Europe’s largest economy, is stuck in its fourth year of stagnation. Six months after Friedrich Merz took office, “the crisis in German engineering is gaining momentum at force”, says Dirk Pfitzer at Porsche Consulting. It’s “very clear” the slump is not cyclical and “won’t just disappear” in the next upswing.

Industrial production sits at the 2005 level even after a partial rebound in Sept. “Many of Germany’s economic core strengths have turned into vulnerabilities,” says Marcus Berret of Roland Berger. Those include a large industrial base that’s hard to decarbonise, a high dependence on exports, and a mighty auto industry having to write off 140 years of internal combustion engine expertise.

Meanwhile, Trump tariffs have hit German exporters hard. Over the first nine months of the year, their US exports plunged by 7.4%. But the prospects in China are if anything even bleaker, creatinga “China shock” that is now biting into the bottom lines of globally successful German companies.

In addition, for about two decades up to the pandemic, Chinese demand for German engineering goods and cars was seemingly insatiable, fueling the Merkel-era growth in corporate profits, employment and economic activity. Since the pandemic, however, China is “increasingly beating Germany at its own game”, says Spyros Andreopoulos of Thin Ice Macroeconomics.

Germany is now running a trade deficit in capital goods with China over a rolling 12-month period—a first since records began in 2008. Chinese machinery exports to Europe roughly doubled to around €40bn in over six years and may reach €50bn this year.

While German premium car brands like AUDI AG, Porsche AG and Mercedes-Benz AG were the first to feel the pain, capital goods makers have started to get similarly pounded. “As a country, the Chinese have been in the last years much better, more proactive, more consistent in going after the big technologies and conquering them,” said Klaus Rosenfeld, CEO of Schaeffer.

Oliver Richtberg of VDMA is sceptical of improvement. “Do we really have other sectors that can pick up the slack?” he asks. Domestic politicians have not yet internalized just how bad things are, he adds. “There’s still a lingering public perception that we enjoy high margins and a strong competitive position. But we no longer have those margins.”

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“Nearly Every City in Germany Is Going Bankrupt”: How Globalist Mass Migration Policies Are Turning Germany Into a Third-World Welfare Colony

Germany’s cities are collapsing under a €30 billion deficit in 2025, and even mayors of the neoliberal, pro-mass migration, ‘center right’ party, the Christian Democratic Union, are finally admitting the globalist system they helped create has driven the Europe’s strongest economy straight into the wall.

The mayor of Essen, a large city in the western part of Germany, recently admitted that almost every single German city is on the brink of bankruptcy, with only a handful managing balanced budgets, BILD reported.

North Rhine-Westphalia, the country’s biggest state, has just 10 solvent municipalities out of 396, and the rest of Germany, tragically, looks exactly the same.

For the first time, even once-wealthy cities are imposing total spending freezes, and the era of endless Merkel-style handouts is officially dead..

Essen itself went from expecting a tiny surplus to a €123 million black hole in a single year—proof that globalist open-border policies, combined with Germany’s exceedingly generous social welfare programs, have destroyed the nation’s finances overnight.

The main culprit? The unrelenting stream migrants, the majority of whom are welfare-dependent military-aged men. So-called ‘refugee’ housing, welfare, and integration efforts alone devour at least €50 billion a year nationwide, and that’s the official low-ball figure.

Add in exploding costs for schools, hospitals, prisons, and psychiatric wards filled with foreign nationals, and the real bill is heading toward €20 trillion if the catastrophic status-quo is maintained and borders stay open.

In Essen, over a third of primary-school kids now have a migration background and require expensive extra classes that native German children pay for.

Nationwide, 63% of welfare recipients have foreign roots despite being a minority—German workers are forced to fund their own replacement.

Berlin’s “rescue package” for cities is a sick joke: Essen gets €28 million a year, barely enough for two schools while costs skyrocket.

The globalist elite in Berlin drown cities in bureaucracy and then toss crumbs, pretending they’ve solved the disaster they created.

Hardworking Germans are now drowning in personal debt too—5.7 million are over-indebted for the first time in years as rents and energy prices explode.

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Trump’s tariffs expected to bring in $1 trillion less than expected – and that could drastically change his $2,000 check plan

President Donald Trump’s aggressive tariffs program will cut the national deficit by $3 trillion over the next decade, $1 trillion less than expected, according to a new estimate from the Congressional Budget Office.

The tariffs imposed in the first year of Trump’s second term in the White House would cut primary U.S. deficits by $2.5 trillion if they are left in place as they are until 2035, by the CBO’s reckoning.

Such a reduction would also mean a massive decrease in borrowing, saving the country a further $500 billion in interest and bringing the total to $3 trillion, which is still well short of the $4 trillion the office forecast in August and would make only a relatively small dent in the total national debt, which currently stands at $38 trillion.

White House spokesman Kush Desai reacted to the downgrade in expectations by saying, “The fact of the matter is that President Trump is set to raise trillions in revenue for the federal government with tariffs – whose costs will ultimately be paid by the foreign exporters who are reliant on access to the American economy, the world’s biggest and best consumer market.”

But the revised forecast threatens to complicate the president’s plan to send out tariff dividend checks worth “at least” $2,000 to American citizens, even as the U.S. Supreme Court is still weighing up whether the tariffs are even legal in the first place.

Trump said in a Truth Social post on November 10 that only “FOOLS” opposed his tariffs and declared: “We are now the Richest, Most Respected Country In the World, With Almost No Inflation, and A Record Stock Market Price.

“We are taking in Trillions of Dollars and will soon begin paying down our ENORMOUS DEBT, $37 Trillion. Record Investment in the USA, plants and factories going up all over the place. A dividend of at least $2000 a person (not including high income people!) will be paid to everyone.”

Treasury Secretary Scott Bessent was not much clearer about the practicalities during an interview with ABC News’s This Week around the same time, saying only that the “$2,000 dividend could come in lots of forms, lots of ways.”

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Socialism Is A Political Doctrine, Not An Economic One

The doctrines of socialism have been with us for more than 150 years, but no one had really tried it in a total way until the advent of the Soviet Union from the 1920s to the early 1990s. During that period, a number of communist/socialist revolutions occurred in Asia, Cuba, and Africa, all of which provided a laboratory to observe how these socialist economies would perform.

The socialist economies failed spectacularly, as Ludwig von Mises had predicted. His works on socialism published in 1920 and in 1923 show that, as an economic system, it was doomed before it ever was implemented because it had no practical system of economic calculation. Despite the propaganda beamed at people both from socialist governments and the western media that socialist economies were lifting vast numbers of people from poverty, the reality of socialism was what Mises had predicted.

By 1989, even die-hard socialists like Robert Heilbroner had to admit that socialism had been a huge failure. Indeed, by the mid-1990s, the only countries attempting to continue with the socialist experiment were Cuba and North Korea, and neither economy was one to be envied. Heilbroner wrote in The New Yorker:

The Soviet Union, China & Eastern Europe have given us the clearest possible proof that capitalism organizes the material affairs of humankind more satisfactorily than socialism: that however inequitably or irresponsibly the marketplace may distribute goods, it does so better than the queues of a planned economy…. the great question now seems how rapid will be the transformation of socialism into capitalism, & not the other way around, as things looked only half a century ago.

Yet, Heilbroner—echoing Joseph Schumpeter’s belief that capitalism could not survive in the modern age—was not convinced that a capitalist economy would do well under the cultural and political assaults coming from academic, social, and government elites that would always demand more from it than it could produce. Heilbroner admitted that Mises was right, that a socialist economy lacked the necessary economic calculation to flourish, but he could never get himself to endorse the capitalist system itself.

Today, when we see poverty, prices of goods increasing, housing shortages in New York City, or high food prices, the usual suspects blame capitalism, and they blame what has become the overriding symbol of capitalism—the billionaire. It does not matter that the housing problems are caused by rent control and other supply-restricting government interventions, that inflation is a government-caused phenomenon, and that Federal Reserve policies of creating financial bubbles have created a lot of on-paper billionaires, as the critics will blame free markets no matter what. Their arguments do not need to be coherent or logical to have an effect. As I recently wrote, many of the most economically-illiterate people in our midst have become wealthy by making public statements on economics. In our modern media age, even the most ignorant sage is considered an “expert” if one has the “correct” politics.

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Obamacare Is A Disaster, Just As Expected

Just over 15 years ago, when the Democrat-controlled House and the Democrat-controlled Senate were debating the healthcare proposals offered by the Democrat president, nearly everyone on the political right was unified in opposition. It may well have been the last time the right was united on anything, but it was indeed unified and resolute.

Congresswoman Michelle Bachmann (MN) warned that “This monstrosity of a bill will not only destroy the private healthcare market, it will lead to massive increases in premiums and rationed care.” Congressman (and eventual vice-presidential nominee and Speaker of the House) Paul Ryan (WI) complained that “This bill is a fiscal Frankenstein. It’s a government takeover that will explode costs and kill jobs.” Senator (and Republican Leader) Mitch McConnell (KY) insisted that Americans “want reforms that lower costs, not a trillion-dollar government experiment.”

Right-leaning commentators like George Will and Charles Krauthammer agreed, not only with each other but with Republicans in Congress as well. Krauthammer, in particular, argued that President Obama’s promise to “bend the cost curve” down was pure, unadulterated, and extensively documented fantasy. National Review, much maligned among Trump supporters these days, dedicated most of an issue to exposing and forecasting Obamacare’s fiscal absurdities and the likelihood that it would result in lower quality of care, increased taxes, and exploding insurance premiums. Even the Heritage Foundation—in the news lately for purportedly exacerbating rifts in the conservative coalition—likewise agreed with everyone in the movement, insisting that Obamacare was a disaster waiting to happen and would keep none of the promises that it made, all while destroying what was good and valuable in the private insurance market.

More than a decade later, when it was clear that the system was in trouble and that only greater government intervention and spending could save it, Heritage (in the form of Robert Moffit, Edmund Haislmaier, and Nina Owcharenko Schaefer) took something of a victory lap, detailing Obamacare’s manifest failures and arguing that it was long past time to scrap the whole experiment.

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