To The Moon

$SPDR S&P 500 ETF Trust(SPY)$

Let's discuss Europe today because major developments are unfolding. We all know that Trump and Putin recently had a phone call, and all indications suggest that peace negotiations are moving forward—a significant shift. Trump appears committed to ending the war and securing a major peace deal with Russia, a decision that will have global repercussions, particularly for the European Union and the Eurozone.

A critical element missing from many discussions, especially among friends, is realism. Recognizing that borders will not revert to their 2014 lines is not a concession to Vladimir Putin but rather an acknowledgment of the realities of hard power after significant investment and sacrifice—first by Ukrainians and then by their allies. A negotiated settlement will ultimately establish a new demarcation, with neither side fully achieving its goals.

The new U.S. Secretary of Defense recently made it clear at a NATO defense meeting that the EU should not expect indefinite American support for "Project Ukraine." Since 2022, the EU has followed U.S. directives at every step—implementing sanctions against Russia, cutting off cheap Russian energy, and even seizing Russian assets. Now, with the U.S. moving toward serious negotiations with Russia, the Eurozone faces a harsh reality: Washington is signaling that the Western alliance, particularly Europe, has lost, and it’s time to withdraw from the geopolitical poker game.

Unlike Europe, the U.S. is geographically distant and insulated from the consequences of this conflict. With a stronger economy, control over global trade through tariffs, energy supplies, and the U.S. dollar system, Washington holds significant leverage. If necessary, the U.S. can pressure the EU into compliance. This is a major setback for the Eurozone, which has lost three critical assets over the past few years—autonomy, economic stability, and global prestige—all essential for maintaining influence on the world stage.

The U.S. has been the primary financial and military backer of Ukraine, contributing between $120 billion and $150 billion—on par with the combined aid provided by all EU nations. If Europe intends to sustain Ukraine’s defense independently, it would require an enormous military expansion, estimated at an additional $3.1 trillion. On top of that, Ukraine faces a $130 billion reconstruction funding gap, and if the U.S. withdraws financial support, who will fill the void?

Unlike the U.S., which has the advantage of borrowing in its own currency and printing money with minimal short-term inflationary consequences, the EU faces strict debt and fiscal constraints. French President Macron has already suggested exceeding the 3% deficit limit, acknowledging that rebuilding Ukraine, defending against Russia, and strengthening Europe’s military will require significantly higher spending—likely pushing EU deficit spending to 5-6% of GDP, similar to the U.S. However, raising funds will be challenging, as the global financial landscape has shifted. Many countries, particularly in the Global South, now view Western bonds with skepticism following asset confiscations and economic sanctions.

Further complicating matters, Trump has suggested reinstating Russia into the G7, arguing that excluding Moscow was a mistake. During a press conference, he openly questioned why Russia was removed in the first place, noting that keeping Putin at the table might have prevented the Ukraine crisis. While the G7 has lost much of its influence—especially with the rise of BRICS—the EU would see Russia’s return as a major betrayal.

Trump’s broader strategy appears to be driving a wedge between Russia and China while securing economic benefits for the U.S. The American economy relies on raw materials, many of which are controlled by China, while Russia is a commodities powerhouse. Trump likely hopes to reestablish trade with Russia to weaken China’s influence. However, given Russia’s recent economic growth—over 3-4% this year, with projected 2-3% annual growth in the coming years—it’s unclear whether Putin would find it beneficial to reengage with the U.S. under Trump’s terms.

For Europe, this situation is dire. The continent can no longer rely on cheap Russian gas, and reversing course would raise uncomfortable questions about past decisions. If Germany were to restart Nord Stream 2, for example, it would essentially admit that the past few years of economic warfare against Russia were a mistake. Meanwhile, EU gas prices have hit a two-year high, exacerbating economic struggles.

At the Munich Security Conference, U.S. Senator JD Vance bluntly criticized the EU’s industrial decline, particularly Germany’s deindustrialization—ironically, a direct consequence of policies the EU adopted at Washington’s urging. Once a manufacturing powerhouse, Germany now faces high energy costs and industrial decline, losing competitiveness to both China and the U.S. Meanwhile, Trump has expressed interest in securing $500 billion worth of rare earth minerals from Ukraine, which could further sideline the EU’s economic role.

Trump’s recent comments about cutting global defense spending by 50% highlight another challenge. While the U.S. faces rising debt, its military-industrial complex remains a core economic driver. If the U.S. withdraws from European defense commitments, EU nations will be forced to invest heavily in American-made weapons—making them captive customers of the U.S. defense industry. In many ways, Trump’s approach aligns with his "America First" strategy: withdrawing from costly foreign entanglements while simultaneously profiting from Europe’s security dependence.

The EU now finds itself in a no-win situation. If it continues on its current path, it faces an enormous financial burden. If it seeks to reindustrialize, it risks clashing with U.S. economic policies, including tariffs and protectionism. With 20% of EU exports dependent on the U.S. market, Washington holds significant economic leverage.

Ultimately, the U.S. and China are emerging as the biggest winners of this geopolitical shift. The U.S. benefits from a weaker EU, gaining industrial capacity, intellectual talent, and market control. China, meanwhile, continues to expand its influence, securing cheap Russian commodities and furthering de-dollarization efforts. The EU, having followed U.S. directives for years, is now facing the consequences—trapped between economic decline and the political impossibility of admitting past mistakes.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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