The Overlooked Role of the Financial Crisis in the Subjugation of Europe

After the US and Europe launched their joint “shock and awe” sanctions against Russia, Michael Hudson was quick to point out that a major target of the US campaign was the EU, and that Europe was committing economic suicide. Indeed, Hudson argued just before the war began that America’s Real Adversaries Are Its European and Other Allies, which gave prominent play to US opposition to the Nord Stream 2 pipeline. Hudson argued:

The only way left for U.S. diplomats to block European purchases is to goad Russia into a military response and then claim that avenging this response outweighs any purely national economic interest.

This may have seemed to be an extreme view then but the attack on the Nord Stream 2 pipelines, whether instigated or merely approved by the US,1 plus the acceleration of the Europe’s economic decline, appears to have focused some minds.

I must confess not to having yet subscribed to Thomas Fazi’s site to access his new article on Europe’s tsuris, but he provides a thesis statement on Twitter:

The opening section of Fazi’s article, available in Compact Magazine, triggered a line of thought I wish had occurred to me a long time ago:

For decades, the European Union was regarded as an emerging counterweight to US geopolitical hegemony that would accord its member states greater autonomy from the superpower across the Atlantic. The Russia-Ukraine conflict has revealed the emptiness of this promise. Today, Europe’s “vassalization” (in the words of an analyst for the European Council on Foreign Relations) is arguably more pronounced than at any time since the middle of the 20th century. On geopolitical questions, as the current war has made clear, Brussels has no meaningful independence from Washington. In the economic sphere, Europe’s relative decline and growing dependency on America—which predate the Ukraine conflict but have been exacerbated by it—are if anything even more evident.

In 2008, the European Union’s economy was slightly larger than America’s; America’s economy in 2023 is one-third larger than those of the European Union and Britain combined, and 50 percent larger than that of the European Union without the United Kingdom. To put it differently, the eurozone’s economy has grown about 6 percent over the past 15 years, compared with 82 percent for the United States, according to data from the International Monetary Fund.

The economic fortunes of the European Union and the United States had already started to diverge well before the Ukraine conflict for several reasons, not least Europe’s post-2008 suicidal austerity policies, which led to a continent-wide demand and investment collapse. Over the past year and a half, however, this process has undergone a dramatic acceleration. Unlike America, Europe has suffered a huge economic blowback from the conflict—or more precisely, from the West’s response, especially its decoupling from Russian gas, which before the war accounted for almost half of the bloc’s demand. This drastic move led to a “massive and historic energy shock,” as the Organization for Economic Cooperation and Development put it, exacerbated by speculation on the part of the big energy companies, which crippled industry and households alike.

This is the money quote:

The economic fortunes of the European Union and the United States had already started to diverge well before the Ukraine conflict for several reasons, not least Europe’s post-2008 suicidal austerity policies…

Economists, particularly non-neoliberal European economists, correctly point out the considerable flaws in Eurozone design (the budget deficit restrictions on member states, the lack of meaningful Eurozone level spending to reduce differences in growth levels among states, the northern countries perverse stance of wanting to run trade surpluses with other members, the so-called PIIGS, but not wanting to lend or otherwise provide capital to them, which is inherit in this sort of arrangement, the lack of adequate deposit guarantees).

However, why did Europe suffer this shock in the first place? The global financial crisis, despite the label, was substantially a US creation. Whether you believe the conventional narrative (that it the result of a US housing bubble, and housing bubbles in Ireland, Spain and the UK also went into reverse.2) or our version, that it was a derivatives crisis which greatly amplified real economy exposures and concentrated them at over-leveraged, systemically important financial institutions, the US was the prime culprit.

First, European financial institutions, particularly German ones like its Landesbanken, bought a lot of US subprime mortgage related paper (including CDOs) which blew big holes in their balance sheets, leading to bank failures and emergency rescues.

And in what amounts to an admission of US culpability, the US opened up dollar swap lines. These were holes in Eurobank dollar books that needed to be plugged. But the ECB, which was the party responsible for salvaging up Euro-based institutions, could not create dollars, only Euros. So it had to swap its Euros to dollars to rescue these institutions.

That is not to say that European institutions did not get sick on their own cooking, like German Hypo Bank buying Irish highflier (read huge Irish mortgage lender) Depfa, and then at an eyebrow-raising price too. However, even the New York Times cites the subprime bust as a force multiplier for unwind of European housing market bubbles. From an April 2008 story:

The collapse of the housing bubble in the United States is mutating into a global phenomenon, with real estate prices down from the Irish countryside and the Spanish coast to Baltic seaports and even in parts of northern India…

In Ireland, Spain, Britain and elsewhere, housing markets that soared over the past decade are falling back to earth. Experts predict that some countries, like Ireland, will face an even more wrenching adjustment than the United States, with the possibility that the downturn could turn into wholesale collapse.

To some extent, the world’s problems are a result of American contagion. As home financing and credit tighten in response to the crisis that began in the U.S. subprime market, analysts worry that other countries could suffer the mortgage defaults and foreclosures that have afflicted California, Florida and other states…

“The problems in the U.S. are being transmitted to Europe,” said Michael Ball, professor of urban and property economics at the University of Reading in England, who studies housing prices. “What’s happening now is an awful lot more grief than we expected.”

Without relitigating the entire financial crisis, there are plenty of other ways to point to US culpability in housing bubbles outside the US. Most go back to Alan Greenspan. For instance, in the dot-bomb era, Greenspan dropped policy rates into negative real interest rate terrain for an unprecedented nine quarters (previously the Fed would drop rates that far for only a quarter).

Those sustained low US rates led many countries to drop their interest rates too to keep their currencies from appreciating too much against the dollar and making exports uncompetitive. Unnaturally low policy rates are a subsidy to leveraged investment like housing as well as financial speculation.

So it should come as no surprise that when BIS economists William White and Claudio Borio started to show research as early as 2003 that housing bubbles were well underway in some (and then many) advanced economies, Greenspan pooh-poohed it. And he had the stature to be able to swat these findings off in front of other central bankers.

Second, if you accept our version, US financial system deregulation plays a central role, both directly (the disastrous decision not to put curbs on the unregulated insurance called credit default swaps) and indirectly (evangelizing by US officials and banks around the world in the name of “innovation”; cognitive capture among orthodox economist who dominated policy-making).

So why does this history matter?

The Europeans should have been screaming bloody murder about how they nearly died from bad US financial cooking. That would have given the EU moral standing in policy debates and should have helped jaundice EU officials about blindly following every clever US fad.

Now I was admittedly busy in the post-crisis period documenting inadequate US policy responses, our foreclosure crisis, and then the second stealth US bank bailout, of liability for near-pervasive failure to convey private mortgage loans to mortgage securitizations as their rigid contracts required. This misconduct gave the Obama Administration leverage to cudgel bank servicers into offering principal modifications on many mortgages. But the Team Obama never missed an opportunity to enrich banks as opposed to rescue ordinary Americans.

So this domestic focus, plus the fact that it was painful to watch EU leaders make the likes of Timothy Geithner look good by comparison, meant I am not as conversant with EU post-crisis debates as I might be. However, I have the strong impression that no strong recriminations were directed at the US by anyone authoritative in policy or pundit circles (or if that critique did occurs, it was quickly memory-holed). There should have at least been angry arguments behind closed doors and leaks about them. But I have the strong impression that did not happen either.

And why not? Europeans who know the ways of major government institutions can likely provide much better answers, but here are some starters:

Among economists, suffering from the same cognitive capture as their American counterparts, resulting in undue deference to bankers and fealty to incoherent ideas about free markets. Questioning that would be an admission of personal failure as well as career-limiting.

Among policy-makers, valuing personal and institutional connections to America. Recall how the US dominates advanced education. Many of the highly credentialed Europeans studies in the US. They also likely see participation in various US run forums and NGOs as important to their stature. Unless a large enough group was willing to rock the boat with the US by engaging in fierce criticism and post-mortems to firm up where culpability lay, it would be way too risky to be a lone voice in the wilderness.

Among the European elites generally, possibly a thin bench. The fact that Christine Lagarde went from the IMF to the ECB, that Jens Stoltenberg has been held over as NATO chief, and that the likes of Ursula von der Leyen is European Commission chair suggests that Europe is not long on actual or purported “talent” at top bureaucratic levels. So even if a post-crisis purge might have been possible, a second-order problem may have been lack of enough seasoned people to be credible-seeming replacements.

Sanity checks, particularly from long-standing readers of the European press, very much appreciated.


1 The Baltic is a NATO lake. It is inconceivable that an operation of this sort would have gone unnoticed.

2 Note that the very lofty Canadian and Australian housing markets suffered comparatively little damage.

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  1. Winston S

    Typo in the first sentence, should be “against Russia”, not “Europe”.

    Also, right below the embedded tweet: the magazine Fazi writes for is named “Compact”, not “Covert”.

    A magazine I otherwise can warmly recommend!

    1. Winston S

      Also, right below the embedded tweet, the name of the magazine Fazi writes for is “Compact”, not “Covert”.

      A magazine I’ve subscribed to a few months now, and it is very good.

      1. Yves Smith Post author

        Thanks. Rushing to get done before Links launched, and it shows. I should have at least rechecked pronto. Giving the rest a second look.

  2. Michaelmas

    Yves S: The Europeans should have been screaming bloody murder about how they nearly died from bad US financial cooking.

    Sure. Since you mention T. Geithner —

    [1] Anybody reading Adam Tooze and his fell*tio of Geithner for Tooze’s book CRASHED noted its emphasis on the central role of that credit swap lines the Fed established after 2008. That was very likely going to play out in the subjugation of Europe and indeed was the reason we saw no replay in 2022-23 of the EU’s resistance twenty years earlier to being dragged into Iraq 2.

    In a way, 2008 it was second iteration of 1971 when Nixon closed the gold window because of US financial irresponsibility (“it’s our dollar but your problem”) and the result was as Michael Hudson predicted in his SUPER IMPERIALISM — increased US power and privilege.

    2020-21 saw a third iteration of this, not incidentally.

    [2] 2008, when it was clear the US wouldn’t clean up its act, when Putin made the clear break with the US-led West. China, too, prepared to start drawing away.

  3. Irrational

    I would add to your “why nots” that the EU countries were simply too busy with internal fighting.
    On a more general note, while I do not dispute the general tendency in growth rates, when I first saw 6% versus 82% I did wonder
    1) Which GDP numbers are being quoted (I’ll keep googling for the source article). EUR-USD was at around 1.60 in 2008 and has now recovered to 1.10 after having dipped well below 1 last September, so obviously depending on your dates and data, this could be massively distortive
    2) Are some components of US GDP, ahem, overvalued like those F35s and the old junk that is being shipping to Ukraine? By the way, if there are similar/other flaws to EU data, I am equally curious.

    1. Joe Well

      Re: 2, my first thought was that a lot of that GDP increase was just the Everything Bubble, especially National Housing Bubble 2, corporate valuations, and rising healthcare costs.

  4. DJG, Reality Czar

    From Yves Smith: “Among policy-makers, valuing personal and institutional connections to America. … Unless a large enough group was willing to rock the boat with the US by engaging in fierce criticism and post-mortems to firm up where culpability lay, it would be way too risky to be a lone voice in the wilderness.”

    The first sentence makes it look as if these connections to U.S. power are somehow benign. They aren’t. The U.S. meddles freely and often in the Italian politics, something that the Italians note regularly.

    This lefty site puts the number of U.S. military bases and installations at 113:

    Hey, it isn’t an occupation!

    Meanwhile, the Italian Partito Democratico is consciously modeled after the Dems of the U S of A. The right-wing parties send people to the Conservative Political Action Conference-a-ganza. Salvini has gone (hence the Lega and its dopey adherence to the flat tax) as has Meloni (when she wasn’t haranguing Vox). The U.S.-dominated status quo is in only slight danger.

    It’s good to be a collaborator.

    Meanwhile, there is opposition, and it comes from people who aren’t completely American-trussed-up. Giuseppe Conte. Beppe Grillo (of all people). In the last couple of days, people have groused that Nicola Fratoianni of Sinistra Italiana (with about 3 percent of the vote) is setting the agenda for the opposition with regard to the bill for a salario minimo (minimum wage). Good for him.

  5. Colonel Smithers

    Thank you, Yves.

    I would like to highlight: “The Europeans should have been screaming bloody murder about how they nearly died from bad US financial cooking. That would have given the EU moral standing in policy debates and should have helped jaundice EU officials about blindly following every clever US fad.”

    One wonders if readers are aware how embedded USians, US educated people and US firm employed people are embedded in the EU and UK. There was the recent controversy about a US economist and former government official and private sector lobbyist at the European Commission’s Competition Directorate.

    A woman from BlackRock advises the German government. The Greens brough her in. BlackRock and McKinsey advise France on retirement reform.

    In June 2020, as the first wave of the pandemic receded, the Commission invited financial institutions to brainstorm a reboot, aka a “reboost” in EU anglolingo, of the EU economy. US firms outnumbered EU ones at the round table.

    McKinsey advised and audited the EU’s bail out of its member states and their bombed out banks. McKinsey’s investments in financial services and assets sold by troubled financial institutions were not declared.

    Ben Bernanke has just been hired by the Bank of England to review its forecasts. In the past generation, the Bank has employed Donald Kohn, Randall Kroszner and Deanne Julius amongst others and considered Alan Greenspan to succeed Eddie George and Stanley Fischer to succeed Mervyn King and Mark Carney as governor. A dozen years ago, I asked if the US government employs British officials. The person assumed the USA does, so I asked for names and positions. There weren’t any, unless one counts triple national Fischer.

    1. Ignacio

      The US has several ways of penetration. Another one is control of MSM as in, for instance El País in Spain.

  6. The Rev Kev

    As the Colonel points out above, Americans have thoroughly penetrated the financial decision making centers of power in the EU and I refuse to believe that this was all just a matter of happenstance. In the short term the US “wins” because they have removed a possible competitor from the board and are now in the process of trying to cannibalize the EU by enticing their firms to move their operations to the US. If there was a secret name for the later, I would guess it to be Operation Rust Belt. Perhaps the calculation was that once Russia fell and China not that long after, they wanted to be the only power on the block and that meant that the EU had to be knackered as well.

    Well it didn’t work out that way. Russia is surging ahead and the Chinese are digging in. So not only will the US be facing both Russia and China by themselves, they have weakened all the countries in the Collective west, especially that of the EU, that are their allies. Who will support the US? The Global Majority? They are staying out of the current mess any any future ones. If the US had kept the EU strong, not only would they have had 30 strong allies to help them but the competition with the EU would have forced them to up their game commercially. The US tried to isolate the Russian Federation but it looks like their actions are actually isolating themselves. But the EU is not off the hook because they were and are a willing accomplice to all of this happening too.

    1. Colonel Smithers

      Thank you for the shout-out, Rev.

      The US penetration is helped by the EU and UK PMC and their wannabes, typically BTL commentators at the Guardian, Independent and Le Monde and those sporting FBPE (follow back, pro EU) and Ukrainian and EU flags on their Twitter handles, having their own reasons to hate Russia and China and their own people / masses. However, US firms and their think tank proxies, such as the European Council on Foreign Relations, Atlantic Council and German Marshall Fund plus the think tanks affiliated to the big German and British political parties, make that existing hatred highly remunerative. It’s a deracinated elite. Its money is often not derived from the territory whence it operates and managed by US firms.

      1. vao

        The penetration is now so deep that Margrethe Vestager tried to hire a Chief Economist at the Directorate-General for Competition who was a US citizen, had worked for the US government, and had worked for the giant US firms she was supposed now to control.

        But let us shift the perspective: post-Maidan, the EU and allied countries dispatched technocrats who then became ministers of the Ukraine government (after expedited naturalization procedures): Natalie Jaresko (USA, executive of a PE firm, State Department); Aivaras Abromavicius (Lithuania, PE firm); Aleksander Kvitashvili (Georgia, minister in Georgia government). Plus of course, Mikheil Saakashvili (Georgia, former president) who became governor in Ukraine.

        Then there is Bosnia-Herzegovina, where the EU has a “High Representative” with wide-ranging powers, and a whole “Office of the High Representative” — whose members supervise Bosnian ministers, central bank and districts. While the High Representative is an EU citizen, the “Deputy of the High Representative” is a US citizen…

        In other words: there is an entrenched mentality of being subjects of an empire, with a pecking order amongst nations part of it, sending legates and proconsuls and obeing those legates and proconsuls is perfectly natural, independence and sovereignty being either an eccentric pose or an unacceptably rebellious attitude — but never something reasonable and worthwhile.

        So why would anyone expect the EU to push back against the policies of their North American overlords? If they are good for the empire, then they must ultimately, in a roundabout way, be good for Europe too.

  7. eg

    I have heard Michael Hudson grouse on several occasions that the European political class are wholly corrupt — either bought or subject to American kompromat such that their foreign policy behaviour is tightly controlled.

    Is there anything about their behaviour which suggests that he is wrong? Not that I can see.

    1. Yves Smith Post author

      That is a strong claim and I would like to see evidence. How about Michel Barnier? Competition minister Margrethe Vestager?

      We saw similar corrupt-looking behavior among monetary economists at the Fed and other policy experts, not just the top level who could expect to get board seats and big ticket speaking gigs if they behaved, but also the rank and file who had no such possible perks at risk.

      In other words, you can’t readily pick apart actual corruption, cognitive capture, and personal cowardice. Many have dependents and feel they can’t risk their career, particularly if any fight or noisemaking is unlikely to change things. Willem Buiter, himself a central banker, coined the term cognitive capture in 2007 (sadly his blog from back then is no longer up). As he wrote in a 2012 paper:

      Regulatory capture can be direct or cognitive. Whatever the incidence of direct capture (inducing regulators and supervisors to act in the interest of the industry they supervise or regulate rather than in the public interest they are committed to serve, by offering financial or positional rewards or by creating the expectation that such rewards may be forthcoming in the future), cognitive capture is the rule rather than the exception. In this crisis blind faith in the self‐regulating properties of financial markets played a major role, with Alan Greenspan as the prophet of socially beneficial self‐ regulation and Ben Bernanke and many others providing the scholarly underpinnings. It was the triumph of market fundamentalist religion over science.

      I have a friend who has known Bernanke through the Princeton econ department for many years. Said friend has been very deeply involved in politics and is very cynical. He says Bernanke is not personally corrupt, just not a great economist and temperamentally agreeable, as in not a rock the boat sort.

      Yes, Bernanke went and did his first post-Fed chair gig as an adviser to to hedge fund Citadel and some were harshly critical (, but I assume his rationalization was that it is perfectly normal for people like him to get attractive offers after they leave the Fed, particularly since the Fed did not regulate Citadel and Citadel was not a primary dealer (it is only in 2022 said it is interested in becoming a primary dealer and it is the New York Fed, not the Board of Governors, that faces off with primary dealers. In other words, to the extent having Bernanke around helps with this new initiative, it looks to be mainly optical).

      1. JonnyJames

        Bernanke may not be personally corrupt (depending on definition), but participates in an institutionally corrupt system. Can people who willingly participate in corrupt institutions not be personally corrupt? This question deals with philosophical and psychological issues that are not my field, so I don’t have a definitive answer.

        (I was just following orders…)

        Direct, documented evidence of Euro political class compromise by the US is tricky: the so-called intelligence services (CIA etc.) probably don’t leave smoking gun evidence. I can imagine the use of threats of violence and bribery (carrot and stick methods)

        So, we can only analyze circumstantial and anecdotal evidence, also analyze power and interests: which interests are served? Who benefits?

        1. Jams O'Donnell

          In any rational analysis, these people, whether corrupt or not, or merely naive, or self-interested, from the standpoint of the populations of the EU and UK are traitors to their countries. It should be obvious that the best interests of Europe would be served by maintaining an independent stance towards all matters which affect the national economies. This mad subservience to the US will only lead to impoverishment for the masses and anger towards the elites. Invest in guillotines now. :-(

          1. JonnyJames

            In short, I generally agree. The questions I have: are European politicians and technocrats bribed, threatened or otherwise coerced to act against national interests?
            Or: do their actions benefit a small group of national actors at the expense of the majority? Or is it a combination?

            I have heard anecdotal and circumstantial evidence that bribery and threats are indeed a big factor, but as Yves points out, hard evidence is needed. Regardless, as you say this will end badly.

            In addition:Thanks to Ed Snowden and Wilileaks/Julian Assange, we do have documented evidence that the NSA tapped Angela Merkel’s phones for many years. The German BND knew about it, yet did not inform her. Her own intelligence services did not inform her a foreign power (or imperial overlord) was illegally spying on her.

            The BND is wholly owned by the CIA. These example speaks volumes, and we can only guess that is the tip of the iceberg. One could argue that Germany, the most powerful EU country, is not a truly sovereign nation.

            The UK is a bit different: to be crude, they are the jr. partner in crime, the US is the senior partner

        2. Smith W

          May 2011 like 12 years ago, but only suspicious DSK was likely to be French presidental candidate

          Ladies and Gentlemen of the Board: It is with infinite sadness that I feel compelled today to present to the Executive Board my resignation from my post of Managing Director of the IMF. I think at this time first of my wife—whom I love more than anything—of my children, of my family, of my friends. I think also of my colleagues at the Fund; together we have accomplished such great things over the last three years and more. To all, I want to say that I deny with the greatest possible firmness all of the allegations that have been made against me. I want to protect this institution which I have served with honor and devotion, and especially—especially—I want to devote all my strength, all my time, and all my energy to proving my innocence. Dominique Strauss-Kahn The Fund will communicate in the near future on the Executive Board’s process of selecting a new Managing Director. Meanwhile, Mr. John Lipsky remains Acting Managing Director.

        3. Yves Smith Post author

          There is a difference between soft corruption and hard corruption. Soft corruption = you rock the boat, you are out of the club, you lose lots of bennies. Hard corruption = overt threats and payoffs.

          We have pervasive soft corruption. Look at how Obama and the Clintons got ridiculously large advances for books guaranteed not to sell enough to justify the $. And no one even raises an eyebrow over that.

          I am not keen about allegations of hard corruption with no evidence.

      2. Sushi

        “or subject to American kompromat such that their foreign policy behaviour is tightly controlled.”

        “That is a strong claim and I would like to see evidence.”

        Who was Jeffrey Epstein? Strauss-Kahn? According to The Washington Post, “Without Strauss-Kahn at the helm, Europe is at risk of losing a key source of financial support in its efforts to contain the debt crisis buffeting the continent”, including potential financial bailouts for nations such as Greece and Portugal.

        1. Yves Smith Post author

          Please provide evidence that Epstein engaged in kompromat. His big clients were all personal friends, including Leon Black. You don’t pal around with an extortionist. And were Epstein to use any damaging evidence, he would reveal even worse conduct on his behalf, as in sex trafficking, prostitution, and many many instances of pedophelia.

          And when Black finally broke with Epstein (as in stopped using his tax advice, meaning no more money to Epstein), Epstein did not retaliate. Similarly, when Trump severed relations with Epstein after Epstein hit on Ivanka at Mar a Lago, Epstein didn’t try to extort Trump.

          Extortion is very dangerous business, particularly with powerful people.

          And rich men are careful about obvious honeypots. There’s a great scene from Barbarians at the Gate where Drexel hosted a famed party for its billionaires. Full of, erm, models. The book describes in amusing detail how the men huddled well away from them, they absolutely did not want to partake or even get near.

          The far more plausible explanations for Epstein’s wealth are money laundering and facilitating tax evasion (there’s evidence of that with Leon Black, for starters) and being an arms dealer (which is extremely lucrative too). That could make his sex trafficking ring was a useful hobby to cover for his real business (and would cover for his private jet making repeat trips to otherwise hard to explain places).

          As for Dominique Strauss-Kahn, it was a new sexual assault of a maid and the hotel acted quickly to inform the authorities and cooperate with them. Kompromat = existing evidence held in reserve as a threat. DSK was NOT that.

          1. Bugs

            After his arrest in NYC and return to France, DSK also went on trial in a very sordid affair for sexual solicitation involving a sex club he part managed just over the Belgian border. His insanely misogynistic behavior and obsessions were a well known secret sur la place de Paris, including Fabius and Hollande. He also raped Tristane Banon, a young author whom he lured to an empty apartment with the promise of an interview for a book she was writing. A detestable person.

            1. Yves Smith Post author

              Oh I don’t disagree. Later stories of how predatory he was, oogling women and aggressively propositioning them and not readily taking “no” for an answer. (these at conferences and whatnot, as in supposedly somewhat protected from such overt behavior by the setting and their status). But he operated before the “Me Too” which gave him a very big measure of undeserved protection. The fact that the hotel backed the maid (I think she was greatly helped by on-scene witnesses of her fresh injuries) is likely due to pretty much toute France knowing what a goon DSK was and thus management having zero reason to think the maid was in any way complicit.

              Also less brutal versions of this probably happened too often to room cleaners. They may also have wanted to put a stop to that as best they could.

    2. Colonel Smithers

      Thank you.

      How about Foxcote House, in Shakespeare Country and owned by Les Wexner since the late 1990s? Soon after London Fashion Week pre-covid, Wexner would invite US and other politicians etc. to the manor and allow them to pretend to be English country gentlemen, shoot even (grouse, partridge, peasants etc.). Models and wannabes fresh from sashaying down the M40 in London would provide personal services to the wannabe Brideshead types. Quieter Birmingham, Oxford and East Midlands airports nearby made for discrete arrivals and departures.

    3. Feral Finster

      I am sure that there is ample kompromat, but it probably isn’t necessary to ensure compliance. Europeans do that on their own.

      Among the European political class, questioning American hegemony in general or the war on Ukraine in particular is a faux pas on the level of interrupting a High Papal Mass to demand that the person who just farted please identify himself. You Just Don’t Do That.

      Even more than Americans, Europeans are all about The Done Thing, the Conventional Wisdom, the Social Compact. You can commit whatever crimes you want, as long as its comme il faut.

  8. Michael Johnson

    Love reading the comments from all of NC articles and the overall conversation. Just as a point of reflection, does the deindustrialization of Europe explain the U.S.’s unusually restrained behaviour regarding the coup in Niger, even to the point of not calling it a coup? Does the U.S. want to see France capped off at the knees, by them losing their access to the uranium and thus, make them dependent on the U.S. for their energy needs? Please be gentle in replies, one’s British…

    1. Colonel Smithers

      Thank you, MJ.

      One’s also British. Methinks Brexitannia, Albion perfide as she is known across the Channel, would also love to knee cap France.

    2. digi_owl

      My personal impression that there has been a long, drawn out proxy war going on between France and USA in Africa. I think i first ran into the idea in relation to why DRC seem eternally stuck in a simmering civil war.

  9. ChrisRUEcon

    Oh my, Yves … I regret that I can only offer a virtual ::chef’s kiss:: to this amazing exploration of the topic. Once again, this family blog excels … ::applause::

    I love this bit:

    “Without relitigating the entire financial crisis, there are plenty of other ways to point to US culpability in housing bubbles outside the US. Most go back to Alan Greenspan. For instance, in the dot-bomb era, Greenspan dropped policy rates into negative real interest rate terrain for an unprecedented nine quarters (previously the Fed would drop rates that far for only a quarter).

    Those sustained low US rates led many countries to drop their interest rates too to keep their currencies from appreciating too much against the dollar and making exports uncompetitive. Unnaturally low policy rates are a subsidy to leveraged investment like housing as well as financial speculation.”

    This is the kind of insight that most people outside (and inside) finance and econ’ benefit from having. Money follows interest rates, and currency markets dictate that currencies in “higher demand” will appreciate against those in “lesser demand”. A strong currency doesn’t benefit countries that have to export their way out of deficit (EZ countries).

    I must confess, I’ve been wondering if the recent Fitch faux pas is an attempt to (subtly) engineer exactly this situation over again to US benefit. With J Pizzle and the Fed intent on keeping their foot planted on the i-celerator, drawing money to US markets in the process, perhaps the rating downgrade is a not-so-veiled attempt at a “shoo! shoo!”

    “Go over there! Go kill their exports!”

    Thanks again for this write-up!

  10. digi_owl

    Another thing is the effect US institutional investors have on European business decisions.

    Over the years as i have read recaps of the Elop tenure at Nokia, it stuck with me that is was those that pushed to get him, a Canadian with a long history working for US tech corporations, rather than another Finn to replace the CEO.

    Who then goes on to scuttle all in house OS work at Nokia, and instead bring in his old employer Microsoft. And subsequently sell of the whole phone division to them.

    1. vao

      Also noteworthy: how the USA took over French Gemplus (smart-cards) via first a PE firm and then a CIA-funded VC firm, resulting in all the much-coveted security-related intellectual property being siphoned off to the USA.

      1. digi_owl

        Unless i am reading wikipedia wrong, they seem to be part of Thales Group now.

        Who in turn are responsible for supplying, among others, Norway with passports and id cards…

        1. vao

          The history with the Americans is older. First Texas Pacific Group acquired a decisive portion of the capital in 2000. After stuffing the management board, TPG called Alex J. Mandl, from the CIA-funded In-Q-Tel, to take over as CEO in 2002 while the French founders of Gemplus were ejected.

          The fusion with Axalto took place in 2006, which became Gemalto, before being acquired by Thales in 2019.

    2. Bugs

      And then the rump Nokia acquired Alcatel-Lucent, once the flower of French network technology, and of course Lucent included Bell Labs, a place where genuine geniuses invented real things that changed the world. It’s all gone now and the Alcatel name sullied by being stamped on cheap rebranded Android phones.

  11. Pirx

    Great piece, Yves. I was back then following the disastrous EU response as a German living in Spain. A pivotal moment was an early EU crisis meeting where Merkel and her finance minister Schäuble forced the individual EU countries to (1) rescue their banks rather than let any of them fail, (2) put that on their national debt rather than having EU or ECB absorb the cost. Several EU countries had their national debt roughly double over night. This then layed the ground work for the sovereign debt crisis following a bit later, which in turn triggered several rounds of counterproductive austerity programs and brutal EU-internal structural adjustments. The strictly national bank rescues destroyed any assumptions that there would be a EU-level (or German) guarantee for Euro bonds of, e.g. Greece or Spain — contrary to promises made by Schäuble and others in the years before. The reasons for this move were ideological and political — Merkel & Schäuble were under pressure (from their conservative party and almost the entirety of the German ordoliberal economist establishment) *not* to accept any responsibility for debt from those “lazy” or “undisciplined” southern Europeans.

    The austerity orgy then was a heavenly gift to the neoliberal ideologs such as Dutch finance minister Dijsselbloem, British Gordon Brown and again Schäuble who could now impose their own western European economic model on the Southern Europeans. As a consequence of the ongoing crisis, Germany benefitted enormously from a weak Euro and negative real interest rates which (along with stagnating real wages thanks to deregulation and labor market reforms introduced by the previous Schröder government) were fuelling its export boom while other Euro countries were forced into deflation. They were eventually forced to create EU-level rescue instruments and some joint debt (all nicely paired up with IMF-style structural adjustment obligations). This, BTW, scandalized parts of the conservative / economist establishment enough to split off from Merkels party and found the “Alternative für Deutschland” (AfD) as a “no money for lazy Greeks” anti-Euro party.

    The amazing thing to watch was how the EU leadership was completely unable to admit to the evident failure of their austerity policies imposed on the “periphery countries”. I remember Paul Krugman covered this in detail from the outset and pointed out that the EU economy was falling behind the US economy. Instead, EU leaders doubled down year after year with even harsher measures — I think a typical sign they were driven by ideology rather than rational policy. Based on this experience, I knew that this same bunch of EU leaders would never be able to extract themselves from their suicidal anti-Russia sanctions and pro-war policies because they seem inherently unable to admit and rectify mistakes. If something doesn’t work, it can only mean you didn’t go far enough with the idea…

    One last note about Merkel and US influence. That’s certainly a factor as well. The previous Schröder government was pursuing an increasingly “sovereign” EU policy and famously rejected G. W. Bush’s Iraq invasion. While German-US tensions on this topic were at their peak pre-invasion, opposition leader Merkel went to visit Bush to swear her fealty to the US and publicly support the Iraq war. From her upbringing within a moderately supressed conservative / religious minority in Eastern Germany, her default assumption was always to adore anything “Western” and that matched well with the old cold-war ideologs dominating her conservative party.

  12. Susan the other

    If it is true, as it seems, that America’s adversaries are its allied competition -in a world dedicated to capitalist democratic prosperity- it makes perfectly good illogical sense. Because we maintained our very expensive supreme military and its industrial complex for 70 long years, at the expense of social and environmental progress. All that neoliberal global exploitation was the only way we could maintain it all. How did we ever expect to compete economically except in high-tech spin-off technology which we could not stay ahead of because of (drumroll) capitalist competition. Did we think we could keep progress under lockdown? It’s good to at least know that much of that hubris has floated down the river, along with some seriously diminished resources. The amazing thing imo is that we still seem to think that we can put up some kind of barrier between the EU and the rest of Eurasia. We can’t. But maybe we can buy a little more time, maybe enough to salvage our own dysfunctional economy. Salvage seems to be the driver of this new Iron Curtain – to separate our financial system from direct competition – which means we will ring-fence the EU financially. But will it work if we no longer run that whole racket? Does Macron know this yet?

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