Friday thoughts, War, Debt, money.

WILL WAR SOLVE FINANCIAL CRISIS? 

FEAR OF EXCHANGING ASSET PROFITS FOR DEVALUING CURRENCY

The adedge that war is a great stimulus to a struggling economy may no longer apply. France, Uk and Germany all have Debt to GDP ratios over 100%, the U.S. is 125%. In former wars, money was borrowed to finance the war and then stimulated the economy from the increase in deficit spending. Most western countries are already in serious debt problems, they would have to attempt to confiscate assets to fund a war. The head of the EU has suggested using the EXCESS savings of citizens to fund war. I suspect such attempts to fund more war will be resisted very strongly. By the way, Russia has a 19% debt to GDP ratio.

BRICS countries average around a 50% Debt to GDP ratio.

In former wars these countries had extensive manufacturing capacity, no more, it is unlikely they could produce enough for a long war. Leaving only resorting to nuclear weapons as a strategy.

We see all markets at record highs, and without the underlying real value, this would indicate that it would be good time to take profits. Problem is, it feels uncomfortable to take profits, pay taxes and exchange these assets for dollars with an uncertain future. I suspect this is, at least for now, keeping these markets up.

Central banks, on average,  now have the majority of their reserves in gold and not treasury bonds.

It is being reported that the U.S. is withdrawing troops from Iraq, Russia has quietly evacuated its diplomats from Israel. Large amounts of weapons and supplies are being accumulated. Iran is feverishly preparing its defense. Some believe that another Israel/Iran engagement is imminent. Is this why Trump has handed management of the Ukraine conflict over to the EU?

Just a few things to think about over the weekend.