I just came back from Europe, where the unemployment rate for the young is close to 30% in some of the continent’s most developed nations.
Spain, which is home to several large banks, such as Banco Santander, and to Inditex, the major clothing retailer, which owns Zara, Bershka, and Pull&Bear, among other highly profitable brands, is facing huge job market challenges.
Italy, which is home to Fiat, the global auto empire, among other large car manufactures, textile conglomerates, and banking giants is also ridden with youth unemployment, and their elections just ended with a populist victory.
The world is becoming frustrated with its existing leading establishment, and Europe is spearheading this movement.
We are sitting well above the 20th and 21st centuries combined average for Deutsche Bank’s proprietary Populism Index right now. In fact, the last time it was this high, WW2 followed.The way our current monetary lords have “engineered” our system has created three unheard of problems:
- Excessive Debt Levels: No matter how you look at it, the global economy is built on credit. This is how nations have designed their finances. There isn’t one major economic power, which isn’t hampered with unbelievable debt/GDP ratios.
What’s worse is that these debts have accumulated on the balance sheets of governments, central banks, credit card owners (consumers), mortgage holders (everyday people), students (the young), and corporations (businesses).
No one is exempt.
Sure, the free market, with all of its blatant manipulation and monetization, has overcome it all before. Portfolio Wealth Global sees it powering on through existing troubles once more, but not without friction.
- Wealth Inequality: While in Paris, I took a day tour with a local taxi driver.
I specifically told him to take us to see the wealthiest mansions, the middle-class residential homes, and the rough neighborhoods.
Millions of people live in Paris, which on a global map is tiny. Touring its streets, though, ignites in you the feeling that it’s a mega metropolitan center.
The differences between the rich, the middle, and the lower classes are the same as the gap between NYC and rural China – it is mind-boggling, and all are happening inside the same city.
Debt, our 1st problem, has historically been solved by inflation, default, or jubilee (a wipeout of old obligations), which is incredibly inflationary. But, wealth inequality is historically solved by class war, which means taxation of the rich and government-sponsored jobs.
Each of these is not off the table, at this point.
- Mass Unemployment: This one worries me most, since governments have no tools to tackle it.
Where debts are concerned, governments and central banks can monetize, run enormous deficits, and keep the game going for decades, but when it comes to the job market, they are powerless, unless they begin infrastructure programs.
As you can see, this is causing geopolitical pressures as well.When the country’s youngest population cannot find career opportunities, politicians begin wars to send soldiers to battle.
In today’s world, countries rarely occupy other areas, except for the U.S., but they are investing in cyber warfare, intelligence, and technology.
It wouldn’t take much for the world to be dragged down into costly conflicts, but millennials aren’t war-hungry, and they don’t believe in violence, as a whole.
As we move forward, the more logical conclusion is that governments offer-up solutions.
As investors, this means that diversification is essential, geographically and politically.
On May 6th, Portfolio Wealth Global will publish an Exclusive Report on the different ways to create optimal diversification, both between various asset classes and within various countries.