In March, I documented how the United States suffers from the worst social and political divisions since the Civil War.
Then last week, I demonstrated how China, the world’s second-largest economy, is on the verge of a volcanic eruption due to schisms that are even more extreme.
And today, I show you how the European Union, with a total GDP that rivals ours, is now closer to internal fracture than either the United States or China.
Each of these economies is so large that domestic turmoil in just one could easily destabilize the global economy. So …
Imagine what might happen if all three, representing a whopping 62% of the world’s entire GDP, are embroiled in civil strife of some kind.
Imagine how it would impact global trade, interest rates, real estate, and gold.
Think of how deeply it would gut corporate profits, stock markets, even bonds.
Consider how you might prepare for such a cataclysm.
And then read on for the facts, the figures and my instructions on each …
|Larry Edelson with Martin Weiss, circa 2012. In that year, Larry first warned of the rising cycles of war.|
The Deep Seeds of European Conflict
Over four years ago, Money and Markets editor Larry Edelson was the first to unambiguously forecast this rising cycle of conflict and clearly delineate its investment consequences.
He was also one of the first to warn that the 28-member, 1,669,808-square-mile, European Union was doomed to collapse, dooming the euro.
Now, in “Seeds of War Are Now Everywhere,” he pulls no punches in describing the most vulnerable regions of the world, especially Europe – a “cesspool of rotten politics, inept leaders and a monetary system that was flawed from the outset.”
Indeed, like in the United States and China, Europe suffers from its worst income inequality in recent memory, especially between member nations.
This is not a new phenomenon; the income gap between richer EU nations like Germany and poorer countries like Spain, Greece, and Portugal has always been jarring.
For example, in 2009, the yearly income per capita was …
- A hefty $41,890 in Germany, compared to
- A much lower $32,412 in Spain …
- A meager $29,819 in Greece, and …
- A miserly $23,122 in Portugal.
But since the Great Debt Crisis, the gap has gotten far worse. Income per capita has …
- Risen by a hefty 13.9% in Germany, but …
- Fallen 4.2% in Portugal …
- Sunk 8.1% in Spain, and …
- Crashed by 27.6% in Greece.
|While the income Gap between Germany and Greece (shown here) is among the most striking, it’s also evident between other richer European countries and poorer countries such as Spain, Portugal, Cyprus, Romania, Bulgaria and others.|
Richer European countries managed to recover from the Great Recession. But many of the poorer countries slid further into their already-dark hole.
This megatrend is similar to the divisive, strife-generating, income-inequality stories I’ve described for the United States and China. But in the European Union, in addition to generating resentment and disdain between social classes …
It fomented envy and anger among member nations …
It drove migration from poorer to richer member nations …
And it set the stage for the future political disintegration of the European Union.
That was the kindle wood (through year 2014).
Now in 2015-16, here comes the fire …
Let’s walk step by step through the sequence of events, and you’ll see exactly what I mean.
On the outskirts of the European continent, violence and chaos engulfs seven nations — Iraq, Afghanistan, Pakistan, Iran, Syria, Yemen and Libya.
Many other countries — in Africa, the Middle East and South Asia — sink deeper into poverty, instability, terrorist attacks and sheer desperation.
Suddenly and without warning, in 2015 alone, over one million migrants and refugees pour into Europe, three to four times more than the record-breaking numbers of 2014.
Some EU leaders fling open their doors to the human tsunami. Others scramble for ways to stop it, but completely fail to stem the tide.
In either case, the refugee crisis is their political Armageddon.
All across the Continent, anti-EU political parties, already on the rise before 2015, jump on the crisis to rally mass popular support, push for greater independence, or demand a clean break from the European Union.
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In Hungary, the right-wing nationalist conservative Fidesz party enjoys an absolute majority under the leadership of Victor Orban since 2010 and then record-high voter support in 2016. Today, the party’s agenda is viewed as so extreme, says EU foreign policy chief Javier Solana, that if Hungary were applying for EU membership today, it would be flatly rejected.
In Poland, the fiercely anti-EU party, Law and Justice (PiS), gains an absolute majority with parliamentary elections in October 2015.
In France, the National Front under Marine Le Pen emerges as one of the strongest political powers, taking more votes in 2015 local elections than the Republicans or Socialists. Again, greater independence from the EU is a primary goal.
In the Netherlands, the Freedom Party under Geert Wilders, vows to immediately pull the country out of the EU. Although this platform was rejected by voters in 2014, Wilders now leads in Dutch polls ahead of elections next year, giving him the ammunition to flatly declare that the “EU is finished.”
In Austria, the Freiheitliche Partei Österreichs (FPÖ) is also staunchly anti-EU. In this year’s first-round election for president, FPÖ member Norbert Hofer wins handily with over 36% of the vote. In contrast, candidates from the two ruling centrist parties fail to even make it into the runoff election to be held this coming Sunday, May 22. Whether Hofer wins or not, for the first time since the end of World War II, Austria will definitely not have a president from one of its establishment parties.
In Germany, the newly emergent Alternative für Deutschland (AfD) now has more popular support than at any time in history, just five percentage points behind the centrist Social Democrats. Until recently, although the party was staunchly against the euro, it was ambivalent about the EU. But now, riding high on an anti-immigration platform, their new manifesto is very clear: To abolish the EU forever.
In the UK, the campaign to exit the European Union now enters its climactic phase, leading up to the June 23 vote, and anti-Brexit forces are stepping up their rhetoric:
UK Transport Secretary Patrick McLaughlin says a pro-Brexit vote could spell the end for the British agricultural and auto industries.
The Bank of England warns that a UK vote to leave the EU is likely to cost jobs, raise prices, trigger a sharp fall in the pound and cause a recession. And The Guardian says a Brexit could be a perfect gift for Vladimir Putin.
The U.S. government is trying to restrict your access to cash. But not for the reason you think… According to leaked evidence it’s much, much worse.
But despite the attacks, the pro-Brexit forces remain strong. Right now, The Financial Times tracks 43% of voters in favor of leaving the EU and 46% in favor of staying. But the sentiment is volatile and the outcome still too close to call. So a Brexit vote is still very possible.
And whether the UK decides to stay or leave, the rising tide of anti-EU sentiment sweeping across the Continent is now reaching critical mass.
Anti-EU parties are growing in national parliaments. And as you can see in the chart above, they’re even stronger in the European Parliament itself.
But what’s most dramatic of all is the fact that, right now …
The Battle Is Moving into the Streets
In prior years, the pro- and anti-EU forces were usually content to debate the future of the union in erudite seminars attended mostly by academic scholars and policy wonks. Today, the battle is on the streets, spurred by the flood of immigration and its inevitable backlash.
|German police seek to contain mass protests against Germany’s new AfD party convention last month|
Mass anti-immigrant demonstrations — along with mass demonstrations by those who oppose them — are endemic.
Worse, in Germany alone, just in the first three months of this year, the Ministry of Internal Affairs has registered 347 attacks on refugees and migrants, triple the number recorded in the first quarter of 2015 and ten times more than 2014.
And on the other side of the conflict, German authorities attribute more than 200,000 criminal acts to the 1.1 million registered refugees in the country. Most involve strictly property damage and fraud. But some include bodily damage, personal threats and coercion. And while fewer than 1% of these are sexual assaults, the popular outrage they spur — and the shift in anti-immigrant, anti-EU sentiment they create — is overwhelming.
Clearly, just as Larry warned years ago, the conflict has reached a boiling point. And barring a miracle, the days are numbered for the European Union as we know it today.
The consequences? The Bank of England’s warnings for the UK apply equally to the European continent and the United States:
- A big hit to foreign trade and corporate profits.
- A protracted bear market in stocks.
- Growing difficulties by even the richest sovereign nations to service and pay their debts.
- A chronic decline and climactic demise of the euro.
- A dramatic revaluation of the U.S. dollar, cutting even more deeply into the profits of U.S.-based multinationals.
- Rising joblessness in Europe, the U.S. and globally, leading to …
- Still more domestic conflict in Europe and beyond.
I trust that, by this time, you are prepared for this scenario — if not totally, at least partially.
I encourage you to continue on that path.
Good luck and God bless!