Greenland rhymes

The Greenland episode continues to unfold with economic consequences for Europe. The tariffs announced by Trump can cost the EU around 1.5% of GDP, which is a lot considering the Euro area is barely growing. You can see it on the chart below. European stock indices are down around 1%, gold is up 1.6% and the dollar is slightly weaker. At this point it’s important to remember that Europe holds $3.6Tn is US government bonds. They don’t have many options, but they can divest or simply let the portfolio run off and invest in gold, like China and other central banks are doing, and the U.S. could end up having a serious economic problem, similar to the Roman or the Spanish empires at their respective dusks. Wars are expensive, are typically financed with debt, and those debts need to be repaid, typically at a higher rate than initially thought. History rhymes.

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