There are two countries that matter: the US and China.

This may not be a popular opinion, especially among the leaders at Davos. It is amazing the hubris that many of them exemplified.

A number of years ago I wrote an article about how Western Europe is cooked. The EU is a dying animal. We are in the last stages of this failed experiment.

My forecast was the euro would basically be a dead currency by 2030. As for the union, it will split apart. There might be some remnants by 2035 but not many.

This is not a political forecast. It is simply an analysis based upon the trends in place of where things are heading. When it comes to these, only the US and China are in the game.

In this article I will go through some of the issues the rest of the world is facing and why it is impossible to catch up.

It Is The US Versus China

Some might have observed that AI is an important topic. Whether one believes we are in a bubble or not, what cannot be disputed is the fact this technology is going to change the world. Are we getting ahead of ourselves with valuations? That is possible. However, the impact of AI is already being felt.

It will only grow from here.

Here is the deal for Europe: where are they in the AI game? How many companies are leading the race?

This is a two pony show. The US and China are the only ones really involved.

In fact, this is in keeping with the technological developments of the last 30 years. I have asked, who is Europe's largest technology company? Where is their version of Amazon, Alibaba, Tencent, Google, or Meta?

People often said the US innovates, China copies, and Europe regulates. This is the case with technology. The regulation related to AI is destroying any hope the area has on being a player.

That means they are at the mercy of either the US or China.

The Space Race

Space is another frontier that we are embarking upon. Naturally, this one is a bit further out but we are looking at some cutting edge ideas already emerging.

One is data centers in space. This seems to be gaining traction as more companies are embracing this concept.

The news comes from the US but it is safe to say that China is also thinking in this direction. There is little innovation coming from the Eurozone, meaning this is another area they will be left behind.

We saw what happened for the United States due to the fact the Internet was its baby. The country had a multi-decade lead before the rest of the world caught up.

What happens when we are dealing with not only AI but also all the space related industries. In addition to data centers, we could be looking at asteroid mining, space manufacturing and tourism.

Entire industries will spring up which Europe will not be a part of.

Upcoming Collapse

A major problem that the EU is facing is the fact that the set up was doomed. I state this based upon the fact that debts were not consolidated.

When the EU was originated, a common currency was designed. In addition, a central bank was created to set a single interest rate across the region.

The problem was the debts were not consolidated. That means that each country is responsible for their own debt load yet fail to have the tools to battle averse conditions. It is a problem that is compounded by the onerous promises made by politicians. The benefit packages alone are going to doom a number of countries.

If we arrive at a sovereign debt crisis, contagion will spread like wildfire. We are going to see the national bond markets blow up one after another. The question "who is next" will be on everyone's tongue.

People often think bank runs are a major problem. They are not. Central banks (and government Treasuries) can do things to fend this off. What it is powerless against is a sovereign debt crisis.

What happens when you cannot sell your debt?

This is a problem that the European countries will face. They will not be the only ones to experience this (Japan might be in that boat also) but it is going to be fierce. This will remove the EU from the board as a significant player.

A sovereign debt crisis is a game of who is left standing. Nobody is going to come out of it well but there are some who could fare better.

The EU will not be one of them.

Posted Using INLEO