Bastille Day

(Any views expressed here are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.)

Want More? Follow the Author on Instagram, LinkedIn and X

Access the Korean language version here: Naver

Subscribe to see the latest Events: Calendar

Would the brave souls chanting “Liberté, Egalité, Fraternié” be proud of the Fifth French Republic they fought and died for? Or be proud to be led by a coke-up teacher fucker? Are they pleased that a crocodilian ex-con countess slithering in Frankfurt controls their monetary policy? Probably not.

As I donned my Panama hat and stunner shades while two-stepping to Rufus in St. Tropez this past Bastille Day, I briefly chuckled to myself at the irony of the fact that Bastille Day followed American independence. The broke French royalty further exacerbated the perilous state of the monarchy’s finances by supporting the tax-dodging slavers who were leading their own revolution against the English King George. Fast forward a few years, and the idea that white male property owners should follow their own and not royal edicts combined with popular discontent at the broken nature of the state boomeranged back across the Atlantic and caused the head fall of Louis‌ XVI.

It is ironic that a change in the American foreign and monetary policy will be one trigger that forces France to, in all but name, leave the euro. The euro is many things. A common currency of the unholy Roman Empire. An abomination created by those who wish to stifle local culture and the will of the people. An absolute stinking piece of shit. I write this essay with glee, for I cannot wait until Euro-poor-eans liberate themselves from its clutches and regain self-determination.

It is a bold thing to predict the end of the euro. Many commentators fell prey to false predictions of a collapse during the euro banking crisis of 2011 to 2012. But the smaller southern European nations were never large enough to break apart this devilish currency union if Germany and France, the two countries which underwrite the euro, were on board with printing the money necessary to forestall its dissolution via the European Central Bank (ECB).

This time around, Germany and France are pulling in opposite directions. And French savers know what’s up. They, not my cursory knowledge of American, European, and economic history, inform me that France will soft or possibly hard default on its obligations to the euro currency project. Behold this beautiful chart and listen to the people speak:

This is a chart of the change in TARGET balances of NCBs at the ECB from January 2020 to the present.^[1]

If you are not familiar with the TARGET system, shame on you. Here is a brief explanation from Perplexity:

● TARGET balances appear as net claims or liabilities on the balance sheets of NCBs vis-à-vis the ECB.

● A positive TARGET balance means an NCB has a net claim on the ECB, showing that more funds have flowed into its banking system than have left.

● A negative TARGET balance indicates a net liability, meaning more funds have left the country than entered, often because of payment outflows or capital flight.

● Every day, individual NCB bilateral balances are netted out to show only a single net position vis-à-vis the ECB, not with every other NCB. By design, the sum of all claims and liabilities across the Euro system (all NCBs plus the ECB) always equals zero.

The simple way to think about TARGET is that euro savers are confident their money is safe in countries that have a positive balance, and not safe in countries with a negative balance. The relevant thought experiment is to imagine if a particular country left the euro. Would their new national currency appreciate or depreciate versus the euro, and more importantly, in which country’s banking system would you feel safe leaving your funds?

Germany almost always has a positive TARGET balance because it is the largest and strongest economy in the euro. Also, the Bundesbank possesses the most inflation-fighting credibility of any European NCB. Therefore, folks with German bank euro deposits aren’t worried if Germany left the euro because the Deutsche Mark would appreciate vs. the rump euro.

But what about the country that represents that bold white line? How can we describe it? This is a country that as recently as early 2021 ran a TARGET surplus. A country with the second-largest economy in the euro. A country whose politicians have spread far and wide throughout the various unelected but supremely powerful centralized bureaucracies that de facto run Europe. This country is France. And French savers increasingly do not believe that their euros are safe within the French banking system. Therefore, they find greener pastures in places like Germany and Luxembourg.

Smart local capital tells us that something is seriously amiss. That is why France has the largest TARGET deficit of any country in the euro. If the second-largest economy in the euro with the largest debt load is experiencing a bank walk, it doesn’t bode well for the future of the common currency. The problem is that France is too big to fail, but too big to bail out as well. And this is where it becomes interesting for Satoshi’s faithful. What will the policy response be from the French politicians, the ECB, and foreign monetary authorities to the quickly deteriorating French finances?

This essay will focus on why France is fucked. Why a change in US monetary and foreign policy means German and Japanese capital can no longer finance the generous French welfare state. The variety of ways France can steal capital from domestic and foreign savers. And finally, what the policy options are for the ECB. The TLDR is that many folks will wake up one morning and understand that money in the bank is not yours and then fully comprehend why Bitcoin is so necessary. The ECB will valiantly print money to forestall the loss of its raison d’être. It shall be a glorious day for the faithful as printed euros will combine with printed dollars, yuan, yen, etc to bid up the price of Bitcoin.

Geographic Irony

The sometimes stated but mostly unstated goal of US foreign policy is to prevent integration of the Eurasian world-island. At all costs, Russia, China, and Iran cannot cooperate. These foreign policy goals lead to ironic outcomes, especially when one considers the current financial state of the two major losers of WW2.

Lay out a map of the world and look at the positioning of Germany and Japan. Between them are Pax Americana’s three main strategic rivals or enemies depending on how much Made-in-USA NeoCon cyanide consumed. Post WW2, the last thing the US political elite was going to allow was for those dirty pinko commies to change the social structure of Germany and Japan and align with Moscow. For in truth, the German and Japanese cultures produced very industrious societies. Unfortunately, this productivity made war just like every other major nation state. They just lost, so history thinks poorly of them.

The US tolerated ex-Nazis and Japanese imperialists keeping their social, political, and economic standing if only to prevent the will of the people from trying a different form of government. That meant that the German and Japanese economies must grow to prove communism was ideologically bogus and serve as the front line in containment of Soviet Russia. The easiest way to grow was to allow them to piggyback on the American economic rocket ship. America loaned capital and goods to both nations so that they could rebuild their industries and export their cheaper finished goods back to America. However, America also allowed Germany and Japan to put up stiff trade barriers to keep out stronger American companies. These trade policies, more than anything else, are the genesis of the current American trade deficit and financial capital surplus.

Another interesting fact is that even to this day, of American troops stationed in foreign countries, Japan and Germany rank number one and two, accounting for 50% of the total. That gives a new meaning to Fuck Around and Find Out if you think devilish communist thoughts.

The policy worked, and four generations on, German and Japanese elite politicians are toadies of the US. Can you believe conservative Japan even followed the US into the nihilist abyss, allowing chicks with dicks into workplace bathrooms previously only reserved for humans born with a uterus. While there is noise complaining about aggressive, ugly American foreign policy, German and Japanese politicians always do what they are told on the issues that matter. The financial result is that Germany and Japan are the richest countries in the world as measured by the net portfolio balance (NPB). To calculate NPB, subtract foreign ownership of local portfolio assets from the total ownership of foreign portfolio assets of a country but excluding its official foreign exchange reserves.^[2]

Germany NPB = $4,968bn

Japan NPB = $4,446bn

The US runs the largest NPB deficit at 58% of GDP. Guess who the number deux is? They eat baguettes, wear berets, and produce some excellent pinots … Zeeee French. Frances’ NPB deficit is 38% of GDP and is the world’s second largest. However, one of these two is not like the other. The US has the global reserve currency, the largest consumer market in the world, and is one of the three major military superpowers alongside Russia and China. France is none of those things yet has racked up a massive bill financed by the Germans and the Japanese. It’s interesting that yet again after almost two centuries of blood, sweat, white flags, and tears, France is owned by the Germans.

After eighty years, the imbalances in this system will cause severe change. The Pax Americana elite finally bankrupted their empire, and in order to rebuild strength, they must look inward. That is what America-first is all about. The plebes are restless that, for all the economic excellence of America over the last eighty years, their lives relative to their parents are less prosperous. The elite outsourced their jobs to China to dampen inflation and boost corporate profits and in the process created an America that can’t win a proxy war in Ukraine against Russia, and can’t allow its attack dog Israel to bomb Muslims with impunity in Iran because of a shortage of defensive missiles. What a shame! What kind of Christians are they if they can’t successfully win a Crusade…

If America is finally going to put up its trade barriers and use its domestic finance to rebuild its domestic industrial capacity, then Germany and Japan can’t continue their mercantilist policies. They themselves must repatriate that foreign capital and retool their economies to focus on their domestic market to compete with China as well. This is a big issue for the US, and I have written about how the US monetary authorities will replace foreign capital flows with printed money. But what about the European Union (EU)? The problem for the EU is France because its largest creditors, Germany and Japan, must repatriate their capital.

Germany and Japan got the memo, and their political leaders will repatriate their country’s assets to spur local industries. Here are some selected quotes from the leaders of Germany and Japan.

Christian Sewing, CEO of Deutsche Bank, said this about “Made in Germany”:

61 leading companies and investors have come together across industries to launch the initiative “Made for Germany”, aimed at shaping a future-proof German economy. Against the backdrop of geopolitical and economic challenges, “Made for Germany” initiates a new era of strengthened dialogue for constructive exchange between business and government, aiming to sustainably enhance Germany’s investment climate.

GZero describes former Economic Security Minister Sanae Takaichi’s platform as she campaigns to rule the Liberal Democratic Party:

Her “Japan First” policies include reviewing the US-Japan trade deal, cracking down on badly-behaving tourists, and curbing immigration.

If German and Japanese capital will not finance others any longer, why is this an acute problem for France? The French government and the banks require foreign funding. 59% of French OAT government bonds with maturity over one year are owned by foreigners. 70% of French long-term bank debt is owned by foreigners. And the biggest two foreign country holders of said debt eat sauerkraut and sushi.

Given the dire state of France’s finances, are the domestic politicians willing to curb spending? Non.

One reason Macron’s presidency is terminally ill is that the ECB opposes the increased government spending desired by the domestic politicians. Macron cannot pass a budget; two prime ministers failed to pass a budget this year. Over in Frankfurt, the crocodile ex-con countess refuses to support France’s bond market with printed euros without massive politically unfeasible budget cuts. In the end, domestic politics on both the left and right are determined that the French state should spend more rather than less money. And they will succeed if it results in Macron resigning early, then so be it.

The French budget deficit will continue to grow, but there are no willing foreigners with checkbooks large enough to finance it. And this brings us to the next section of this essay, where I shall ideate on ways in which capital controls can ameliorate the situation.

L’État C’est Moi

When faced with the intractable problem of who shall pay, politicians always start with foreigners. The Communist Party (New National Front) leader Jean-Luc Melenchon had this to say about foreign debt holders earlier this year:

Do not provoke a crisis by spreading an atmosphere of panic around France. The 3000 billion in debt is not ours. It belongs to foreign investors at 60%. Let them be cautious with the French. If they amuse themselves by trying to bankrupt France, they will pay the bill.

If you are a French government, bank, or corporate bondholder, and you say to yourself, “He’s a communist, and France is capitalist, so I have nothing to worry about.” That is the wrong answer. There is no such thing as private property when the state faces bankruptcy. Foreigners are always the first to be relieved of their capital. Therefore, I can confidently say that if you are a foreign owner of French bonds and equities, the best time to sell was yesterday and the next best is today. There is no reason to fuck around and find out if the French would rather work longer, retire later, and pay higher taxes to preserve your capital. If Macron’s raising of the retirement age by two years triggered nationwide protests in 2023 (remember the “Gillet Jaune”?) no politician will win an election advocating for austerity at this juncture. France is burning right now as protesters express their frustration at the possibility of less government spending.

Let’s first concentrate on the effect on the euro financial system if foreign holders of French assets get fucked. Remember that the fugazi financial system is a fractionalized one. What is one entity’s asset is another’s liability. And a thin veneer of equity supports all assets. Therefore, if French assets that were counted as capital at various EU financial institutions evaporate, insolvency follows.

Here are some sobering statistics about intra-EU French liabilities; let’s assume that foreigners hold 50% of this debt:

- 25% of EU-issued securities are French, 12.5% EU non-French owned

- 27% of EU bank debt issued is French, 13.5% EU non-French owned

- 39% of EU non-financial debt is French, 19.5% EU non-French owned

If we assume banks hold a mix of these assets as collateral for loans, then the average percentage is 15.17%.

If these assets get wiped out, the EU banking system is approaching insolvency on an unlevered basis. To save the EU banking system, the ECB would print EUR 5.02 trillion.

What happens when there is a whiff of systemic banking stress? The central bank in charge prints the fiat needed to keep the banking system solvent on a nominal basis. In the US, the Fed did it in 2008; in Europe, the ECB under Super Mario Draghi did it in 2012. And crocodile ex-con countess Lagarde will do it before the end of the decade.

We know the ECB will respond to French foreign bondholder appropriation by printing EUR 5.02 trillion euros to save the banking system. That is just the starting number; once you pop, you just can’t stop. The ECB, liberated from its faux austerity regarding QE and various forms of money printing, will keep going as contagion spreads throughout the EU. Which other highly indebted countries will default on foreign debt holders? I don’t know, but investors will be scared shitless and sell anything they can to get capital out of the euro.

What about non-EU foreign holders of French debt? What will they do? In the EU, the largest holder of French debt is Germany. Outside the EU, it’s Japan. The relevant question is, will the BOJ allow the financial institutions it oversees and the government itself to accept massive losses on French debt securities? Of course not. To Japanese financial institutions, losses on French assets would not be fatal but embarrassing. It’s estimated that Japan Inc. holds $200 billion worth of French financial assets, which gives us a starting point for yen printed to plug a hole.

Finally, the Fed could use the contagion risk radiating from a collapse of the euro as an excuse to accelerate its money-printing efforts.

Domestic French Capital Controls

Politicians’ theft never stops with just foreign capital because financial crises never just stop after whacking the first mole. The euro is an almost thirty-year-old ghoul. The unwind won’t be over just because the foreigners got their comeuppance. It’s time for French savers to become patriots as the state steals their capital.

French savers will rightly worry that their euro assets within the banking system and euro-denominated French equities will get re-denominated into a much weaker franc. The only option for the politicians to make good on their societal spending programs is to leave the euro and readopt the franc. Even though the French state is broke, the country is still intrinsically wealthy. France is a global tourist destination, possesses abundant fertile farmland, and low-cost nuclear energy powers the country. A limited period of autarky would not be disastrous for the French real economy. However, those locals who hold euro-denominated French assets would experience instant deflation because of re-denomination of said assets into a much weaker franc.

A much weaker franc would boost tourism, supercharge exports especially against more expensive German ones, and it would allow France to regain its sovereignty over its money supply. Both the left and the right bristle at following edicts from Frankfurt and Brussels. That is why the ECB and EU council are dead-set on preventing any “extremist” left or right leaning French politician from taking over. But the people want to be free, and shall be in short order.

French capital recognizes this is the likely endgame that is not far off. That is why the TARGET deficit is accelerating. Those with two eyes and a modicum of common sense are getting the fuck out.

Locals who still hold French financial assets still have time to get out because of the fractured political climate. There are no domestic capital controls yet. But when they come, you cannot withdraw much in the way of physical euro cash, or wire euros outside of the French banking system, or escape by buying Bitcoin and gold. Therefore, as the growth TARGET deficit of France accelerates, Bitcoin will benefit.

How much capital will leave the French banking system?

As of July 2025, domestic French banking deposits totaled EUR 2.6 tn.

Most global banking regulators do not appreciate how digital banking speeds up the transmission of a bank run. Therefore, a significant amount of the capital could leave quickly before the French banking regulators and or the ECB react and restrict movement of capital out of the French or European banking system. Putting a finger in the air, I estimate that 25% of this capital could leave within a few days before the imposition of capital controls. This amounts to EUR 650 bn.

What is the size of domestic holdings of French financial assets that could fly out of France?

Total value of French equities: $3.45 trillion

Total value of the French government bond market: $3.25 trillion

Selling these assets quickly in size is tough because who will buy them? The Germans and Japanese are no longer there bidding up the market. Non-froggies will steer clear of the French capital markets for fear of expropriation. Therefore, using the same finger in the air estimation that 25% of holders could sell and leave equates to $1.68 trillion of capital flight. $1.15 trillion could escape quickly using the current EURUSD exchange rate and adjusted by the 53% foreign ownership. Of course, this is a shitty estimate. I use this mental exercise to point out that hundreds of billions if not trillions of dollars could quickly leave France and find a home in Bitcoin and gold if domestic capital gets spooked.

Once the French capital controls become a reality, the virus will spread to the rest of the Eurozone.

Euro Contagion

If Germany and France effectively say “fuck you” to the imbeciles in Frankfurt and Brussels, why should any other euro member do what they say? Domestic politicians across Europe are populist despite the best efforts of the establishment to crush the will of the people. The plebes want the money to be printed to make their lives better, not the lives of foreign capital holders. There will be nothing stopping any euro member from running up deficits over 3% of GDP, which the Maastricht Treaty forbids.

The question then becomes, does Germany want to retain the common euro currency or not? If it does, then most of the euro members will stay so they can piggyback off of the German Bundesbank’s stellar reputation. If Germany leaves the euro, then everyone else will too. Why would a domestic politician tie their country’s future to a bunch of other middling countries with shaky finances? A euro without Germany is weaker than one that includes it, which helps exports, but foreign investors would charge much higher interest rates to finance a non-German euro. Given that most European countries currently want to run deficits for a generous welfare state and to increase defense spending to fight big bad Russia, I believe they would rather stick with Germany ‌to access cheaper foreign capital.

Regardless of what happens, there will be a period of intense uncertainty. Investors who hold euro-denominated stocks and bonds dislike this type of uncertainty. They will dump these assets indiscriminately. This euro risk-off event will bring the EU banking system to the brink of insolvency again. And again, to save the system, the ECB will print euros. These euros effectively pump Bitcoin and gold as the only two hard assets any investor with a single neuron would purchase in this situation. I guess the next best thing after Bitcoin and gold are US equities, which is a hard thing for me to say. Shortly after the ECB smashes the Brrrr button, they will impose EU-wide capital controls because they cannot allow capital to leave.

I can’t put a number on the amount of capital that will flee Europe into hard assets and the US stock market. If you believe this sequence of events is even a remote possibility, you must sell all euro-denominated assets and remove your capital from the EU banking system. What do you have to lose? Let’s look at the performance of the EU stock and bond market post-COVID to understand the opportunity cost of protecting your capital early. Remember, they who sell first, sell best.

The EuroStoxx 50 Index (white) underperformed the MSCI World Index (yellow) from 2021 to the present.

Over the same time frame, The Bloomberg EuroAgg Bond Index (white) and the EuroStoxx 50 Index (yellow) underperformed Bitcoin (magenta) and gold (green) in euro terms.

As you can see, EU stocks and bonds underperformed all major assets. In the future, the financial situation will only deteriorate further as Europe scores successive own-goals. How can you invest in an economic zone that actively purchases expensive American natural gas transported via ship rather than cheaper Russian gas transported directly via pipeline? Just get the fuck out.

Why Doesn’t the ECB Print?

None of this analysis is groundbreaking. Even the paper-pushing pillocks at the ECB know that France’s finances are figgity fucked in a world where German and Japanese capital is absent. If the euro is the sacred cow, why isn’t the ECB doing “whatever it takes” in former ECB emperor Super Mario Draghi’s words, to prevent a dissolution? The ECB should restart QE using its array of alphabet letter soup programs.

While the ECB’s goal is maximum euro, its maximum euro as long as they are in control. The ECB wants all of its member country subjects to do what they are told. They are told that yearly government deficits should not exceed 3% of GDP. They are told that domestic politicians and political parties are unacceptable if they espouse views of national sovereignty. In France’s case, the ECB opposes any party like Marine Le Pen’s very popular National Front that wishes to enact France-first policies. You might hate Le Pen or more likely, her father because they dine on Billie Holiday’s “Strange Fruits” of the Algerian flavor, but she believes in democracy more than Lagarde. And that’s a problem for Lagarde because the French public wants the government to print and spend money for the benefit of France, not unelected bureaucrats in Frankfurt and Brussels. And therefore, because the ECB’s teacher-fucker pet has lost control of the French Parliament, the ECB will exert control by withholding freshly printed euros.

In the ECB and EU council Soviet think, if France runs greater than 3% deficits to fund populist policies that benefit France domestically, what’s stopping all the other wayward European children from doing the same? Austerity and the associated costs to the populations must be enforced such that Europe™ survives. The lack of action by the ECB euro money printer scares French capital into leaving the clutches of domestic French banking regulators by moving deposits to other euro member countries.

The ECB is so focused on control of Europe™ that it’s cutting off its nose to spite its face. The ECB should telegraph to the market that it will save France and any other nation whose “free” bond market refuses to fund the government at affordable rates. Why? Because the euro needs to weaken dramatically against the dollar. As you can probably tell if you study contemporary history, the US is keen to maintain Europe as its vassal state, and various elite US politicians take a dim view of their wannabe Soviet EU Judeo-Christian cousins. Buffalo Bill Bessent plans to continue this policy by destroying Europe’s competitiveness with a strong euro vs. the dollar.

To grow US exports at the expense of mostly German and other EU countries’ exports, Bessent must weaken the dollar versus the euro dramatically. Continuing to run massive deficits, proclaiming an industrial policy and the associated explosion of bank credit generation, teasing a gold revelation, browbeating the Fed to cut rates when by all objective measures the US economy is strong to very strong, etc. are all policies which will ceteris paribus weaken the dollar vs. most other fiat currencies including the euro. While Bessent is busy trashing the dollar to supercharge Pax Americana’s manufacturing resurgence, Lagarde is busy running too tight of a monetary policy in order to discipline democratically elected politicians of member countries who want to spend money on populist policies. This is why the euro appreciated 12% vs. the dollar since Trump ascended the throne.

Bitcoin Doesn’t Care

Either the ECB presses the Brrr button now and implicitly finances the French welfare state, or it does it later when French capital controls threaten to destroy the euro. Either way, money gets printed in the trillions of euros. Bitcoin doesn’t care and will continue its inexorable rise versus the piece of trash that is the euro.

One thing we can be sure of is that EU banking regulators will attempt to close the exits regardless of which path the ECB takes. If you are a Euro-poor-ean with capital within the euro banking system, the freedom with which you can spirit your capital away into the loving arms of the one true Lord Satoshi will wane rather than wax. The slow-motion collapse of the French state is the signal that it’s time to sell euros and buy Bitcoin. If you read too much mainstream financial press and believe Bitcoin is a scam, sell euros, buy Bitcoin, and then use that Bitcoin to buy another hard asset outside of the EU. Bitcoin is the best way to preserve options on what to do with your precious capital is that it is a digital bearer asset. In a few minutes, you can convert your euro bank balance into Bitcoin using a spot exchange on the continent. And voila, you are no longer Lagarde’s bitch.

If you are not a denizen of Europe™ do not buy European financial assets under any circumstances. Instead, buy some Bitcoin, sit back and watch your sick gainz as printed euros contribute to the bull market in growth of the fiat money supply. If you want to know when the cracks in the euro will emerge, watch the trajectory of France’s TARGET deficit. Maybe, just maybe, you can flaunt your riches at next year’s Bastille Day jamboree. You too can light capital on fire by purchasing a Nebuchadnezzar of bubbly water and fist pump to Rufus in the middle of the afternoon.

Want More? Follow the Author on Instagram, LinkedIn and X

Access the Korean language version here: Naver

Subscribe to see the latest Events: Calendar

---

^[1] NCB stands for National Central Bank e.g. Bundesbank.

^[2] Thank you, Russell Napier, for this definition.