Let’s talk about this post from the President of the United States this morning:

The United States has been informed by most of our NATO ‘Allies’ that they don’t want to get involved with our Military Operation against the Terrorist Regime of Iran…despite the fact that almost every Country strongly agreed with what we are doing…I always considered NATO, where we spend Hundreds of Billions of Dollars per year protecting these same Countries, to be a one way street…We no longer ‘need,’ or desire, the NATO Countries’ assistance…”

We’ve talked about the U.S. plan to restructure global trade and realign the world (away from China, back toward the U.S.), which has been anchored by “burden sharing” — where allies and trading partners pay for access to safety (U.S. security guarantees), stability (the dollar and U.S. capital markets), and markets (U.S. consumers).

This post Trump made this morning is not a negotiating position on burden sharing.

This is the President of the United States publicly repudiating the security architecture that has underpinned European stability for 75 years.

It’s a big deal. 

Europe’s stability has been built on a set of assumptions that the U.S. would provide security, that energy would be affordable, that the ECB could backstop sovereign debt, and that dollar funding (access to U.S. dollars) would flow freely.

All four have been under pressure.  And this statement (“allies”, in quotes) may have just ended it all. Everything now should be seen as conditional, not automatic.

That means those assumptions that hold Europe together (security, financial and economic stability) no longer hold, unless/until conditions are met.

This, as European markets, are already beginning to price in risk of the energy price shock becoming more of a structural crisis (spreads widening, euro down, European stocks down).

As we’ve discussed the past two weeks, higher energy costs in Europe squeeze the budgets of the more fiscally fragile countries.

Meanwhile, the interest rate outlook in Europe has swung from prospects of a cut to 33 basis points of tightening by year end.

Higher rates increase debt service costs on countries like Italy (137% debt-to-GDP).

That threatens solvency, which pressures bank balance sheets, which tightens credit, which weakens the economy, which can push the fiscally fragile to the fiscally broken. 

It’s a self-reinforcing loop — a “doom loop.”

The big question is, does the ECB have the firepower to contain another sovereign debt flare up, IF the U.S./a Trump-led Fed isn’t there to back them up (answer: not likely).

Meanwhile, yesterday we talked about the self-reinforcing loop that Jensen Huang described at GTC — compute generates revenue, revenue funds more compute, constrained only by power.

This “boom loop” is being built in the United States.

It’s powered by $650+ billion of private AI capex this year ($1 trillion next year) and an industrial mobilization.

So, we have a European “doom loop” and an American “boom loop.”  

As we’ve been discussing past two weeks, this divergence sets up for more pain in Europe (markets, economy). 

And that could be the catalyst for political change in Europe — a populist shakeup, trading diluted sovereignty, slow-to-no growth and excessive regulation for pro-sovereignty, pro-growth and deregulation.