ISMS 1: The United States Won WW2.5, but Who Lost?

By Andrew Stotz | 01/13/2023 |

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WW2.5 is what I like to call “The US against who?” You may say China or Russia. In my opinion, those are both wrong. It’s the US against Europe. And the US just won. The Russia-Ukraine conflict has encouraged US dominance over Europe. Let’s take a deeper look at this dominance.

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Military dominance

The US has more than 60,000 troops in Europe, half of which are in Germany, a third in Italy, and the UK. The US operates more than 200 military bases in Europe. People often like to say that it’s China or maybe Russia that will take over the world. But when I look at it objectively, Russia is almost a non-issue for the US. Here’s why:

Economically, it’s tinier than the US
Militarily, the US military budget is 10X the Russian budget
People worldwide are more likely to prefer the US political system over the Russian one

Almost all European countries joined NATO, and the US now controls it. NATO membership means Europeans participate as “peacekeepers” in US conflicts. In today’s world, joining NATO means getting involved in military action worldwide for Europeans.

Political dominance

In 2018, Trump raised the issue of Germany’s energy dependence on Russia in a meeting with Jens Stoltenberg, Secretary-General of NATO.

The conversation shows that back when Trump was in power, the US tried to get Germany to stop getting oil and gas from Russia. This was a move to control Russia’s dominance.

The absence of former Chancellor of Germany Angela Merkel and her coalition’s political leadership in Europe has allowed the US to fill the gap, for example, forcing Germany to cut off the Russian oil and gas supply. European political leaders will find it hard to oppose the US, thus weakening Europe politically.

Cultural dominance

I find it fascinating that the 2015 Syrian refugee crisis saw nearly 1.3 million people (Syrians, Afghans, Nigerians, and others) arrive in Europe to request asylum. This is the highest number of asylum seekers in a single year since World War II. I believe an influx of refugees into any country will cause a cultural disruption.

Of the asylum seekers from the Syrian Crisis:

51% went to Germany
10% to France
9% to Italy
7% to Sweden

I’m talking about the Syrian crisis in 2015 and the refugees because, since February 2022, more than 11 million Ukrainians have entered the European Union. In the presentation, I shared an excellent chart that shows where these people are going.

The main thing about this that is interesting is that we’re not seeing 1.3 million people as we saw in the Syrian war; we see 11 million. We could estimate that many of the 11 million will return to Ukraine after the war, and we’ll remain with about 3 or 4 million permanent refugees or political asylum seekers in Europe. That still causes disruption. Whether you’re for or against accepting political asylum seekers, the fact is that it causes disruption.

Financial dominance

When you look at the GDP of the biggest countries in the world, and I break it into three groups; the Americas, Asia, and Europe, you’ll see that the US is about 24% of the total GDP. China is about 19% of the total global GDP. So in the Americas and Asia, we have dominant players, the US and China.

But in Europe, the German GDP is only 4% of the world’s total. The UK has about 3.2%, France 2.8%, and Italy 2%. Unlike the Americas and Asia, no country is a dominant economic force in Europe. Merkel’s strong leadership is gone, with nothing to replace it. Germany’s economy is weakened from this crisis. This makes Europe ripe for the taking for the US.

Energy dominance

China, the US, and India are the top three energy consumers. China consumes about 26% of the world’s energy, the US 16%, India 6%, Russia 5%, and Japan 3%.

Now let’s look at consumption from fossil fuels, nuclear, hydro, and renewable perspectives. 82% of the world’s energy consumption comes from fossil fuels. As of 2021, Europe was at 71%. So they’re already down a lot on fossil fuel consumption. This means they also have a large amount of nuclear.

The world is still heavily reliant on fossil fuels, with 82% of total consumption. If we then look at what countries are producing the most oil and gas output, the first country is the US, with 18.5% of the total oil and gas output. Russia and Saudi Arabia are second at 12%, followed by Canada at 6%, Iraq at 4.6, and China at 4.4%. So what’s interesting here is that the US has just knocked out Russia, that’s 12.2% of total output. And now, Europe will have to get oil from the US or Saudi Arabia.

On page 25, you’ll see a map of Europe and Russia when you download my presentation. From the map, you can see that Russia is the heart of the European energy sources. There’s no denying that Russia is the closest and most efficient source for Europe to depend on. So, cutting off the Russian gas supply to Europe is no small thing.

It’s a fantastic accomplishment for the US to dominate Europe. And the beautiful thing about what the US did, in this case, is that they did it without a shot fired, and they had the Europeans cut it off themselves. The US has forced Europe to ban oil and gas imports from Iran since 2018. US sanctions, Germany succumb to pressure to cut off the Nord Stream 2 project.

Key points and the bottom line

Almost all European countries joined NATO, and the US controls NATO
The weakening of Germany leaves Europe with no dominant political power to challenge the US
The US-Russia showdown is destabilizing Europe through immigration
All EU countries exist within the US dollar framework and are unable to exit
The US cut the flow of Russian oil and gas, which weakened Europe
The United States won WW2.5, and Europe willingly lost without a drop of blood being spilled

Click here to get the PDF with all charts and graphs

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About the show & host, Andrew Stotz

Welcome to My Worst Investment Ever podcast hosted by Your Worst Podcast Host, Andrew Stotz, where you will hear stories of loss to keep you winning. In our community, we know that to win in investing you must take the risk, but to win big, you’ve got to reduce it.

Your Worst Podcast Host, Andrew Stotz, Ph.D., CFA, is also the CEO of A. Stotz Investment Research and A. Stotz Academy, which helps people create, grow, measure, and protect their wealth.

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