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In last week's selection you already read that France is the new problem child of Europe, this week the new government announced plans to improve the situation. Macron also spoke out in favor of Draghi's plan, taking on common debts is part of it. Furthermore, we look at the development of the oil price, and we see that TotalEnergies is making an investment in Suriname that is almost 3 times larger than the Surinamese economy. In the gold update, we can clearly see why gold is the safe haven, and not bitcoin. We conclude the weekly selection with a remarkable Turkish chart.
In the Last Week's Selection you could already read that France is the new European problem child because of its huge budget deficit and increasing public debt. Last Wednesday, the new French government of Michel Barnier announced a plan with which they can assess the situation by about €60 billion hope to improve. This will reduce the budget deficit repulse from 6.1% to 5% of GDP, which is still far too high. Part of the plan is to reduce the number of civil servants by 100,000 in the long term, something Macron failed to do earlier in 2017. Of course, it's no big surprise that this plan includes not only spending cuts but also tax increases. France is already in the top of countries with a high tax burden and now wants to 'temporarily' increase taxes by around €20 billion.
Tax as a percentage of the economy (source: OECD)
Of course, thanks to Milton Friedman, we all know that there is nothing as permanent as a temporary government measure. The new French government wants to raise the money from the richest 0.3% of French people and the largest companies with a turnover of more than €1 billion. The French stock market, which has been doing badly lately, therefore reacted negatively to the news.
French CAC 40 index against DE, IT and UK (source: Holger Zschaepitz)
The concern now is that this measure will once again have a negative impact on already very weak growth and declining competitiveness. This while Macron is still this week care commented on the fact that we in Europe are falling further and further behind China and the US: "The EU could die, we are on the verge of a very important moment". He says he fully supports Mario Draghi's plan. Earlier we wrote that Draghi is advocating for Eurobonds, joint European debts, to which the Dutch taxpayer should also contribute. Before Dutch it is to be hoped, therefore, that the French will choose to solve the problems of their government-led economy solve it yourself.
After an Iranian missile attack on Israel, the price of oil rose by as much as 7 percent in one day. Oil prices rose further after Biden comment When asked if the U.S. would support a possible Israeli retaliatory strike on Iranian oil installations, he said, "We're in discussion of that." A barrel 'Brent Crude Oil' cost $69 in September but is now sold for more than $78.
The price for a barrel of oil rose by 7% in 1 day (source: Jeroen Blokland)
Not everyone will look at this price increase in the same negative light. The French TotalEnergies announced a Giant investment in Suriname. It's already a time known that there are large Oil Fields off the coast of the country. The oil is of high quality and easy to extract. Total will now invest $10.5 billion to develop the first oil discoveries, with the aim of pumping the first oil by 2028. This amount is about 2.8 times greater than the full Surinamese economy. It GranMortu Project includes a floating production unit and can produce 220,000 barrels per day.
TotalEnergies emphasizes that significant investments are being made in local staff and employment. Paramaribo will become the main center for administrative, support and logistical activities. It is expected that from 2028 onwards, most of the net revenue will go to the Surinamese state, with potentially between $16 and $26 billion, depending on the price of oil. In addition, more than 6,000 jobs will be created in Suriname, a considerable number for a country with only 600,000 inhabitants. An interesting video analysis with a lot of background information on this topic can be found Find it here.
When the first reports of the imminent Iranian missile attack on Israel surfaced, the bitcoin price fell and the Gold price to a new record. Jeroen Blokland wrote on X: "Investors are literally selling bitcoin to buy gold as geopolitical tensions rise". Bitcoin thus looks more like a risky investment like equities than a real safe haven. If Bitcoin really were the "digital gold," you'd expect it to rise during geopolitical turmoil, but it didn't, according to Zerohedge.
Gold against Bitcoin during Iranian attack (source: Jeroen Blokland)
Furthermore, we read that this week as welldifferent Central banks continue to buy gold. The Polish central bank has bought more and now owns 420 tonnes of gold. The Gold Reserves of Poland are now larger than those of the United Kingdom. The National Bank of Poland announced plans to continue buying gold: "Our goal is for 20 percent of our foreign exchange reserves to be held in gold."
Goldman Sachs This week raised the price forecast for gold by $200 per ounce to $2900 in early 2025. They cite three main factors that play a role: lower interest rates, higher demand from central banks and gold's role as a safe haven. We have seen in previous Weekly selections that more and more is being written and talked about the Buying gold. However, according to the creators of the well-known IGWT report only a small fraction of investors are still in possession of gold.
The chart of the week comes from the Financial Times and is about Turkey. The gigantic inflation in that country has finally subsided somewhat and fallen below 50 percent. As a result, it is now lower than the central bank's 50% policy rate, meaning that real interest rates have turned positive for the first time since 2021.
Turkish real interest rates positive for the first time since 2021 (source: Financial Times)
This is good news for the country, because over the past year, consumers have tried to protect their wealth from inflation by buying goods such as appliances and cars and converting their money into dollars and euros. This widened the current account deficit and eroded the central bank's reserves. The whole Article is here to find.
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On behalf of Holland Gold, Paul Buitink interviews various economists and experts in the macroeconomic field. The aim of the podcast is to provide the viewer with a better picture and guidance in an increasingly rapidly changing macroeconomic and monetary landscape. Click here to subscribe.
