In what may prove to be one of the most fateful decisions of the early 21st century, Germany’s incoming chancellor, Friedrich Merz, will ask the Bundestag this week to allow unlimited government borrowing to fund military spending. Initial reports suggest a boost of €500 billion, presumably over ten years.
In last week’s Special European Council meeting, European Commission president Ursula von der Leyen also moved to allow €800 billion in additional borrowing by EU governments to “substantially increase” military spending across the continent.
A massive European rearmament program is now underway. This is a huge win for US President Donald Trump, for Europe’s far-right parties and for the war hawks and arms contractors across the continent and the Atlantic. It comes after years of increased spending by Russia and Europe’s NATO members. For example, German spending doubled in real terms in the last decade. At least a dozen other countries have increased their outlays by even more (if you are reading this newsletter in your email, you will need to click on this map to view it properly in a web browser):
The European Union’s member states collectively increased military spending by nearly one-third in the last three years alone. Now, it will be open slather.
And Russia now reportedly devotes nearly one-third of its federal budget to military spending:
Note that different agencies and institutions measure spending in different ways. You can look for yourself at the International Institute for Strategic Studies, the Stockholm International Peace Research Institute, the European Council and the North Atlantic Treaty Organization.
Another look at the cost of living
The federal Labor government keeps crowing about its success in taming inflation. When you see a chart illustrating this, it’s usually of the red dotted line in the chart below. It shows inflation peaking at 7.8 percent in 2022 and then steadily dropping to 2.4 percent—the middle of the Reserve Bank’s target—more recently.
But if you look at the cumulative growth in prices compared to wages, it becomes clear why there is not yet much to cheer about. Overall, consumer prices are up 20 percent in five years. The cost of building a new dwelling (houses and units) is up nearly 40 percent. That’s more than two-and-a-half times wage growth over the same period.
When too much is not enough
The latest Forbes Rich List is out. It’s the usual story: the rich are very rich and the poor are … you know the line. But keep the following figures in mind when you read yet another expert commentator carrying on about how federal funding for disability support programs will probably bankrupt the government. It’s absolute bullshit: there are hundreds of billions of dollars just sitting around in the personal portfolios of the Gina Rinehart club of parasites.
One such commentator, the Australian Financial Review’s Christopher Joye, never misses an opportunity to denounce every government in the country as fiscally reckless and utterly irresponsible with taxpayers’ money. But here he is, following the German government’s rearmament announcement, talking about how the federal government should spend the money he previously said it didn’t have:
We have to be able to produce our own ballistic missiles with the ability to strike any place on the planet. We need independent nuclear power and the capacity to enrich weapons-grade uranium for strategic optionality. And we need scores of nuclear submarines that can stealthily operate undetected for months at a time with an unalloyed second-strike capability.
Expect more of this type of talk in the coming weeks from all corners of politics as the realities of the new world order begin to sink in.
