PIMS Syndrome

Doctors Warn of Illness in Children Triggered By COVID-19

A new syndrome is striking children and adolescents who have been infected with SARS-CoV-2. It causes the immune system to go haywire and can be life-threatening. Doctors are trying to find patterns in who falls ill.

By Johann Grolle

Intensive care physician Christian Dohna-Schwake Foto: Insa Hagemann / DER SPIEGEL


By now, Christian Dohna-Schwake knows a thing or two about these children – some as young as 5, others up to 17 years old – who are transferred to the intensive care unit where he works at the University Hospital in Essen because of high fevers and unstable circulation. 

He also knows that starting in around mid-April, their numbers will increase.

Pinpointing who will fall ill is, of course, impossible. But one thing can be said with certainty: The patients will have previously been infected with SARS-CoV-2. 

Indeed, those who will show up in April are contracting the coronavirus right about now.

Dohna-Schwake is closely monitoring the growing third wave of the coronavirus pandemic in Germany. 

This time around, the proportion of children contracting the infection is higher than in the first and second waves. 

The numbers are rising "very rapidly " among young people under 15, Lothar Wieler, the head of the Robert Koch Institute, Germany’s center for disease control, said last week. 

And that means more patients suffering from Pediatric Inflammatory Multisystem Syndrome for Dohna-Schwake.


Nineteen cases of PIMS have been treated in Essen so far, a higher number than in any other German hospital. One year ago, this illness was unknown to the medical world. 

Now, though, it is understood that PIMS is a rare, but particularly insidious, late consequence of a coronavirus infection. "We have learned a lot, " says Dohna-Schwake, "and we’re still learning. "

None of his PIMS patients has died. That, he says, is partially the product of luck, since some of the cases have been quite critical. The condition of one six-year-old, for example, was "definitely life-threatening, " 

Dohna-Schwake recalls. A smaller hospital nearby had initially provided treatment for the boy in October, just as Germany's second coronavirus wave was swelling.

The boy was feverish, his eyes were inflamed, his body was covered with a rash. But worst of all, he suffered from severe abdominal pain. He was given antibiotics, but the treatment didn’t work. The fever just wouldn’t go down.


The doctors were puzzled. Ultimately, though, they began wondering: Could this possibly be the novel syndrome they had read about in the medical journals? 

Doctors in Essen shared their suspicions. 

There was no evidence that the boy had come into contact with the coronavirus, but that doesn’t necessarily mean anything. 

"Often, the infection itself goes unnoticed, " Dohna-Schwake says. Serious symptoms don’t appear until the virus is long gone.

The intensive care unit for children at the University Hospital in Essen Foto: Insa Hagemann / DER SPIEGEL


The patient was transferred to the University Hospital in Essen, where his condition worsened. 

His blood vessels dilated and an increasing amount of fluid leaked through the vessel walls into the surrounding tissue, and his blood pressure fell. 

"We had to counteract with drugs, " Dohna-Schwake says, "with amounts of circulatory stabilizing medication that I have rarely seen. "

Then the boy’s lungs began collecting water as well. 

The boy suffered from shortness of breath and the oxygen saturation in his blood decreased. 

"We had to put him in an artificial coma so we could ventilate him, " Dohna-Schwake says. 

His condition only began to improve after he was given high doses of cortisone. 

After four or five days, the doctors were able to bring their patient out of the coma.




By now, every doctor working in pediatric intensive care has heard of cases like this. 

The doctors now know that the syndrome is the result of a dysregulated immune system response that can lead to inflammatory processes in various organs and in the blood vessels.

PIMS appears to occur in about one out of a thousand children who have been infected with SARS-CoV-2 in Germany. 

The factors that determine when an outbreak will occur are still unknown.

The German Society for Pediatric Infectious Diseases (DGPI) has asked all hospitals in Germany and Austria to report any PIMS cases that are diagnosed to Dresden’s University Hospital.

Setting Up a Registry

The registry there is being maintained by two pediatricians, Reinhard Berner and Jakob Armann. 

Recalling its launch, Armann says, "it was about a year ago. 

Like everyone else, DGPI had also largely switched to Zoom meetings." 

The subject of the first meeting was the role pediatricians would play in the pandemic.

At the time, hospitals across Germany were preparing for the expected surge of patients. 

Any non-critical operations were canceled and entire wards were cleared for COVID-19 patients. 

But children’s hospitals were largely unaffected. 

It became apparent that children only rarely fell ill; and when they did, it usually wasn’t severe. 

But would that mean that pediatricians would just sit idly on the sidelines during the pandemic?



Children, the DGPI quickly agreed, need to be given special attention in any type of epidemic. 

Even if they didn’t show any symptoms, they could still be transmitters of the disease. 

It is also important to understand why the virus largely spares children and when there are exceptions to this rule.

They resolved to keep as close an eye on the situation as possible. Because the number of COVID-19 cases among children was so low, it would be necessary to pool all the observations centrally. 

"The task of creating such a registry fell to us,” Armann says.

When the first reports of PIMS cases arrived from Britain and America in April, it was clear to the Dresden-based doctors that the registry had been set up to deal with exactly this kind of phenomenon. 

It quickly became clear that children can also fall severely ill from the effects of the coronavirus, although the symptoms look a lot different than COVID-19.

At the time, PIMS didn't yet have a name. 

It was described as a new type of inflammatory condition that was strikingly similar to an illness known as Kawasaki syndrome, which was first identified around 50 years ago. 

It primarily affects infants and preschool children and is more common in Japan.

Severe Abdominal Pain

Over the course of a year of clinical experience with SARS-CoV-2, striking differences have now emerged between PIMS and Kawasaki syndrome. 

One significant difference is the age group most commonly affected. 

Although young children can also contract PIMS, the majority of patients are much older, typically between 7 and 10 years old, but 13-, 16- or even 20-year-olds are sometimes admitted to hospitals with PIMS.

The symptoms of PIMS and Kawasaki syndrome also differ. 

"What is striking is how often the stomach and intestines are involved with PIMS,” says Dohna-Schwake, the intensive care physician in Essen. 

Around a third of the patients he has treated have complained of severe abdominal pain. 

In some cases, doctors feared appendicitis and opened the abdomen only to find that there was nothing to operate on.

Doctors opened the abdomen only to find that there was nothing to operate on.

Despite all the differences, what both syndromes have in common is that they are rooted in an overreaction of the immune system. 

"What makes PIMS so fascinating is that we know what triggers it,” says Armann. 

This also allows for some conclusions to be drawn for the classic Kawasaki syndrome: The epidemiological data suggests that a viral infection could be responsible for triggering that illness as well.

The clue: In parallel with the uptick in cases of PIMS, the number of cases of Kawasaki has decreased. 

Doctors believe the reason for that decrease are the measures aimed at containing the coronavirus: Social distancing has ensured that there has been less spread than usual of the pathogens that cause flu and colds. 

Because such viruses are hardly being spread any longer, the secondary complications they can have aren’t appearing as often either.

A total of 238 cases of PIMS have now been recorded in the Dresden registry. 

The occurrences follow the course of the COVID-19 curve, though with a delay of a few weeks. 

Medical records reflect different progressions of the disease depending on which organs are affected. In every fourth case, the inflammation spreads to the nervous system, which can lead to seizures. In every fifth case, the kidneys or liver are affected.

Disturbing News from America

Of the cases documented in Dresden, 59 percent ended up in intensive care, mostly because the patients’ circulation could no longer be stabilized without medical support. 

None of the children died.

Meanwhile, doctors are reporting disturbing news from the United States. 

They suggest that PIMS is becoming increasingly aggressive there, without any explanation for why that might be happening. 

America’s Centers for Disease Control (CDC) has already reported 33 deaths. "I exchange information with a colleague in New York,” Dohna-Schwake says. "

He told me that almost all PIMS patients there now require intensive care.” 

Six months ago, the rate was still only 40 percent.

Fortunately, such a trend hasn’t yet developed in Germany. 

Nor is there any evidence so far that the new variants of the SARS-CoV-2 virus will worsen the progression of PIMS.

According to reports from German hospitals, PIMS is quite treatable. 

"That standard treatment for Kawasaki syndrome is working, " Armann states. 

Rebellious immune systems can be calmed with the help of cortisone. 

Immunoglobulins obtained from donor blood plasma are also effective. 

It’s unclear why a mix of non-specific antibodies is capable of regulating the body’s defenses. 

But Dohna-Schwake offers confirmation: "It’s very impressive. 

Immunoglobulins, high doses of cortisone and, after 48 hours, the nightmare is over. "

The Dresden PIMS register shows that almost half of the patients were discharged in healthy condition.

In almost one in 10 cases, however, the children have been left with long-term problems. 

Fifteen of the children and adolescents suffered lasting damage to their hearts and will have to be monitored by doctors in the long term.

The spectrum of often subtle long-term effects is wide and still far from being fully understood, says Dohna-Schwake. 

For example, two of the girls he treated in Essen complained of problems with their periods after they were discharged. 

The six-year-old he discharged last autumn still suffers from muscular weakness today.

After his release from the university hospital in Essen, he first had to be sent to physical rehabilitation, where he had to learn how to walk again. 

The strength in his arms still hasn’t completely returned – a striking testament to how mistaken it would be to believe that the coronavirus isn't particularly dangerous for children. 

Joe Biden and the new era of big government

Passage of stimulus bill affords White House its biggest role in solving problems in society for decades

James Politi and Lauren Fedor in Washington and Taylor Nicole Rogers in Chattanooga

         © FT montage


This is the first part in an FT series on the domestic and international implications of America’s $1.9tn stimulus plan. 

As a Republican mayor in the deeply conservative southern state of Louisiana, Nic Hunter may seem like an unlikely champion for President Joe Biden’s $1.9tn stimulus plan.

But during the past year Lake Charles, the city near the Gulf coast that he runs, has been battered by the pandemic, the fallout on the casino-driven local economy and hurricanes within six weeks of each other. 

The experience has led Hunter to embrace a new, massive dose of government help to give respite to his community — and to the nation.

“I do believe that the average American on the street needs help right now,” Hunter says. 

“If this is going to help them feed their kids, if this is going to help them with childcare, if this is going to hold them over until their full employment is restored . . . then I think it’s warranted.”

Biden on Thursday signed the stimulus bill — known as the American Rescue Plan — into law, in the hope that it will rapidly deliver a jolt to the US recovery, aid to cities like Lake Charles, and possibly the strongest year of economic growth since the early 1980s.

Franklin Delano Roosevelt pictured in the 1930s. Joe Biden’s huge fiscal intervention carries echoes of Roosevelt’s New Deal during the Depression © Library of Congress/Corbis/VCG/Getty


The passage of the bill in a deeply divided Congress this week has a much broader significance. 

It cements a leftward shift in US politics and economics that has gained traction during the coronavirus crisis, affording government a far bigger role in solving problems in society than it has enjoyed in recent decades.

Biden’s huge fiscal intervention comes at the same time as the government is also conducting a speedy campaign to roll out Covid vaccinations — the US is now on the cusp of delivering 100m doses. 

Taken together, this burst of government activism carries echoes of Franklin Delano Roosevelt’s New Deal during the Depression, and Lyndon Johnson’s Great Society reforms of the 1960s.

The US president and many Democrats also hope it can become a powerful rebuttal to Ronald Reagan’s totemic comment in August 1986 that “the nine most terrifying words in the English language are: ‘I’m from the government and I’m here to help’.”

That mantra ushered in a period of deregulation, low taxes, limited domestic spending and a belief in free markets as the main pillars of American economic policymaking. 

Those recipes began to be seriously challenged in the aftermath of the global financial crisis, although they were partly revived during Donald Trump’s administration. 

Yet they could not cope with the onslaught of the pandemic, which left Americans yearning for greater involvement from Washington, offering Biden a chance to fill the void.
People wait in cars at a Covid-19 mass vaccination site at Dodger Stadium in Los Angeles, California. The US is on the cusp of delivering 100m doses © Bing Guan/Bloomberg


“Joe Biden has a very professional team behind him, he’s in excellent shape with the country at large, he’s riding the crest of the wave out to the left, and he can get big things done,” says David Gergen, a professor at the Harvard Kennedy School and a former adviser to four US presidents of both parties.

But he adds. “There’s going to come a day when the pendulum will probably swing back the other way.”

Country-building

Joe Biden’s stimulus plan is designed to boost America’s social safety net, with the goal of giving every low and middle-income household enough protection so they can make it to the end of the crisis without suffering lasting damage.

Among the key provisions are a new round of direct cheques worth $1,400 each to individuals earning up to $75,000 per year, an extension of federal jobless benefits until early September, an increase in the tax credit for children, and additional funds to help bolster vaccinations, reopen schools and give assistance to state and local governments.



“We need to remember the government isn’t some foreign force in a distant capital. 

No, it’s us. All of us,” Biden said during his first primetime televised address to the nation on Thursday night, on the first anniversary of the initial pandemic lockdowns.

Janet Yellen, the US Treasury secretary, cited the plight of disaster-stricken Lake Charles on Tuesday as a reason for the legislation to be approved.

“The passage of the American Rescue Plan will finally allow us to do what most of us came to government for — not simply to fight fires and resolve crises, but to build a better country,” she told the National League of Cities.

One of the most striking aspects of the debate around the bill in recent weeks is the extent to which it is broadly supported among Americans, highlighting their desire for a stronger federal crutch during the emergency.

According to a Pew Research Centre poll released this week, 70 per cent of American adults said they favour the bill, compared with 28 per cent who said they opposed it. Although not one Republican senator voted for the bill, 41 per cent of Republican voters say they support it.

“People have seen the power of government,” says one Biden administration official.

Joe Biden sits at the head of the table with Janet Yellen to his left. The US Treasury secretary said: 'I think that the passage of the American Rescue Plan will finally allow us to do what most of us came to government for . . .  to build a better country’ © Tom Brenner/Reuters


During 2020, as the pandemic engulfed the country, the US spent more than $3tn in fiscal support for the economy, including two rounds of direct payments and several extensions of jobless benefits.

But the Biden team’s push for even greater government assistance is partly rooted in the experience of Barack Obama’s presidency. 

The stimulus bill he passed in his first year is now faulted by many Democrats for being too small rather than excessive. 

At the same time, Obama’s other signature reforms that expanded government intervention, including the Affordable Care Act and the Dodd-Frank Wall Street reform, were fiercely controversial at the beginning, but have since been broadly embraced.

“The ACA is now popular. It was unpopular, it was tested and everyone loved it,” says the Biden administration official. 

“Dodd Frank is sitting in the back of people’s minds, one thing we didn’t have this year was a financial crisis.”

Matt Bennett, co-founder of the centrist Democratic think-tank Third Way and a former Clinton administration official, says US policymakers have “learned the lessons of 2009 well” — that limiting the stimulus was “more dangerous” than going big.

House Speaker Nancy Pelosi and Senate majority leader Chuck Schumer sign the American Rescue Plan bill in Washington. The Democrats could face opposition from recalcitrant Republicans over renewing the extra tax credit for children, or the additional jobless benefits, among other things © Samuel Corum/Bloomberg


“It is vitally important that a country that has suffered so dramatically through this year be given a huge shot in the arm, and we think it is going to yield a recovery that is robust and sustainable,” he adds.

Mike Konczal, director of progressive thought at the Roosevelt Institute think-tank, says it is premature to determine whether a full rejection of Reaganism is unfolding in America, but he believes it is on the cards.

“There is real potential for a new kind of political economy that I think would really change the nature of government and what people can expect from it,” he says.

Tough decisions ahead

The determination of Biden and Democratic lawmakers to press ahead with even more expansive governmental intervention in the economy and society will be tested in the coming months. 

During the 2020 campaign, the president laid out a plan called Build Back Better — a string of federal investments which could cost more than $3tn in areas ranging from infrastructure and climate change, to childcare, healthcare and education — to be partially funded by higher taxes on the very wealthy and on corporations.

People walk past a boarded up business in New York. Biden’s stimulus plan is designed to boost America’s social safety net and ensure low and middle-income households can make it to the end of the Coronavirus crisis without suffering lasting damage © Getty


In the coming weeks, Biden is expected to lay out more details about his specific intentions. 

Meanwhile, his administration and lawmakers will have to decide whether to extend certain provisions in the stimulus bill so that its impact lasts more than two years. 

But renewing the extra tax credit for children, or the additional jobless benefits, for instance, could result in a stalemate with recalcitrant Republicans, and would add to soaring US budget deficits.

“The thing that's not resolved about the [stimulus] is: is it just temporary relief or help and, how many of those things that are in this bill are they wanting to be permanent policy?” says Austan Goolsbee, a University of Chicago economist and former top aide to Obama. 

“If they turn that into permanent policy, is it going to be at the expense of something else? 

Does that mean that they have to do less infrastructure, or are they going to raise taxes more? 

I just think they have yet to make some tougher decisions.”

Students practice welding at a school in Louisville, Kentucky. Biden's Build Back Better plan could cost more than $3tn in areas ranging from infrastructure and climate change, to childcare, healthcare and education © Luke Sharratt/Bloomberg


Kathleen McKiernan, an economist at Vanderbilt University in Nashville, adds: “It’s a little bit hard and possibly a little bit too soon to say this is a new era of responses, as much as this is a unique situation that we are responding to.”

For now, deficit concerns have not played a big role in the debate around Biden’s economic plans, but if inflation or long-term interest rates begin to rise, the president may be forced to limit his spending ambitions. 

A fresh bout of selling hit US Treasuries on Friday, sending the 10-year yield to its highest level since last February. 

But Maya MacGuineas, president of the Committee for a Responsible Federal Budget, says many lawmakers have grown “almost numb” to budgetary considerations.

“A trillion here, a trillion there, people are just tossing them on to the pile with no regard for the consequences because they have become so used to being able to borrow through this crisis, when it was the right thing to do,” she says. 

“If you dangle big cheques or free things in front of anybody, of course they want it.”

And if there are any signs that Biden’s stimulus is not being implemented properly, fails to deliver the expected bump in growth or backfires with higher consumer prices, Republicans who have opposed the bill are sure to pounce and burst the enthusiasm for more active government.

President Ronald Reagan signs the 1986 Tax Reform Bill in a ceremony on the South Lawn of the White House © Bettmann Archive


But in many communities across America, including in traditionally red states, the stimulus is viewed as a real saviour.

“People have been knocking on our doors asking for affordable housing, job training and enhanced transit,” says Andy Berke, the mayor of Chattanooga, a midsized city in Tennessee. 

“To some extent the federal government here is catching up . . . [and] the public is excited to see the federal government taking action after way too many years of dysfunction.”

In Lake Charles, Hunter, the mayor, says there is still plenty of mistrust of government: a statewide mask mandate was so controversial that he brought in a group of physicians to explain it to people, rather than make the case himself as a public official.

“Everyone has their own definition of what Reaganism means, I could not comment as to whether I think it's coming to an end or not,” he says. 

“But I will just say that it’s appropriate for government to work with the private sector and especially the medical sector, in times like this.”

Credit-Rating Agencies Could Derail Economic Recovery

The world's three major private credit-rating agencies are using their power to prevent low-income countries from restructuring their debts and stimulating their economies. The case for an independent public ratings agency has never been stronger.

Jayati Ghosh


NEW DELHI – On March 10, the credit-rating agency Moody’s placed Ethiopia on review for a downgrade. 

The problem isn’t violence and repression in Ethiopia’s embattled Tigray region. 

Rather, Moody’s has concluded that the Ethiopian government’s commitment to engage with private creditors, as part of the G20 Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative, raises the risk that those creditors will incur losses. 

For that, the country apparently must be punished.

Whereas the DSSI aims to provide immediate relief to low-income countries during the pandemic, the Common Framework was designed to help debt-distressed sovereigns reschedule or reduce their liabilities. 

For many countries, it offers the best chance of making their debt burdens sustainable. 

But now, the threat of ratings downgrades is casting a shadow over these countries’ prospects.

This points to a systemic problem in international finance: the extraordinary – and undeserved – power wielded by a few private credit-rating agencies. 

Just three – Moody’s, S&P Global Ratings, and Fitch Ratings – control more than 94% of outstanding credit ratings. 

And there is significant cross-shareholding among them.

These oligopolistic firms are market movers and makers, influencing financial portfolio allocations, the pricing of debt and other financial instruments, and the cost of capital. 

Bolstering their authority, the US Securities and Exchange Commission has recognized them as official statistical rating organizations. 

And many institutional investors, required by law to hold only “investment-grade” assets in their portfolios, must abide by the rating agencies’ verdicts.

Concerns about ratings agencies were first widely expressed during the Enron scandal in 2001. 

Enron, an energy-trading company, had been using accounting tricks and complex financial instruments to mislead investors, creditors, and regulators about its value. 

The ratings agencies were certainly fooled: The Big Three all issued Enron investment-grade ratings just days before the company collapsed.

Credit-rating agencies have also been accused of enabling the United States’ subprime-mortgage bubble, which triggered the global financial crisis when it burst in 2008, and of exacerbating the bust through rapid reversals and downgrades. 

And they have been known to adjust ratings in ways that seem to reflect ideological positions, such as a commitment to fiscal austerity.

And yet, as Yuefen Li, the United Nations Independent Expert on Foreign Debt and Human Rights, points out in a new report, ratings agencies face no accountability for their mistakes or damaging behavior. 

Their ratings are legally described as “opinions,” which are protected under free-speech laws, and they do not disclose their methodology. In short, ratings agencies do not bear appropriate responsibility for the enormous power they wield.

Moreover, as Li also notes, conflicts of interest abound. Ratings agencies are private businesses, funded largely by the institutions they rate. 

And they are players in the markets they purportedly assess, meaning that self-interest inevitably shapes their decision-making. 

Ratings agencies have, for example, been involved in the creation of financial products that they were then responsible for rating – including the mortgage-backed securities that, flush with AAA ratings, helped bring about the 2008 crisis.

And yet, even as regulators work to limit conflicts of interest among most financial-market players, they seem content to leave credit-rating agencies to police themselves. 

The lack of regulatory action partly reflects the lobbying power of the Big Three. And it is generating serious risks, which the coronavirus pandemic has intensified.

For example, procyclicality in rating – another issue Li highlights in her report – is making financial-market conditions inhospitable for developing countries whose economic prospects have been undermined by the COVID-19 crisis. 

Furthermore, the threat of a ratings downgrade is preventing many governments from pursuing sufficient fiscal expenditure. 

Now, with the latest move from Moody’s, developing-country governments must fear entering into debt-restructuring negotiations with private creditors, even as part of multilateral programs aimed at providing debt relief.

If the G20 countries are serious about improving developing countries’ debt positions during the COVID-19 crisis, they should begin by supporting the temporary suspension of credit ratings. 

In the medium term, regulators must take action to ensure that rating agencies are fulfilling their intended market-stabilizing role. Tackling conflicts of interest – such as by limiting agencies’ dependence on payments from those they rate – is essential.

But regulating private ratings agencies may not be enough. 

The UN Conference on Trade and Development has long argued that the world needs an independent public ratings agency to conduct objective evaluations of the creditworthiness of sovereigns and companies. 

Such an agency is also necessary to assess the instruments used to finance new public investment, which will be in high demand in the coming years.

A global agency makes sense, because credit ratings, especially for sovereign debt, are international in scope. 

Perhaps more important, it would provide a much-needed counterbalance to unaccountable private agencies. 

It might even force the Big Three to embrace reforms that they have long resisted.


Jayati Ghosh, Executive Secretary of International Development Economics Associates, is Professor of Economics at the University of Massachusetts Amherst and a member of the Independent Commission for the Reform of International Corporate Taxation.

No, Russia and Ukraine Are Not About to Come to Blows

Rumors to the contrary ignore what is in the best interest of everyone involved. 

By: Ekaterina Zolotova


Fighting has resumed between the Ukrainian military and Russian-backed rebels in Donbass who accused the government in Kyiv of preparing for a large-scale offensive. 

Troops in the region were, indeed, put on high alert, and when asked, a representative to the peace talks said Kyiv would not rule out the possibility of war. 

To be clear, Ukraine has reason to want to provoke Russia. Doing so would perhaps breathe life back into the talks for implementing the Minsk Agreement, which was signed back in 2015. Kyiv wants to bring the United States into the talks, and Russia's participation in some kinetic activity in Donbass, Kyiv figures, might do the trick. 

After all, the events in southeastern Ukraine are not just a Ukrainian problem or even a European problem but a truly global problem, or so argues Ukraine.

What’s more, the government there is extremely unstable. 

President Volodymyr Zelensky’s popularity is falling. 

Only about 22 percent of Ukrainians said they would vote for him in 2021. Pandemic-induced economic damage only makes matters worse. 

Demonizing Russia – even potentially drawing it into a conflict in which Kyiv can accuse it of being the aggressor – would be a welcome distraction. 

Ukraine hopes that this, too, might tempt Washington to insert itself more into the conflict. 

It would need to be a short and decisive conflict, but played the right way it could really benefit Kyiv.

And yet, war is very unlikely to break out. 

Rumors that Ukraine wants revenge for Donbass have circulated for years, but even now a full-fledged war there is unlikely. 

A successful operation would need to be sudden and would need to take place before or after the spring thaw. 

It would also require a substantial number of ground forces supported by a substantial number of bases supplied by substantial amounts of food, weapons, etc. 

The events of the past week were hardly a secret, and there’s no evidence that a large number of troops or tanks is being massed near the region as you’d expected them to be. 

According to the self-proclaimed Donetsk People's Republic, Ukraine has deployed a total of 33 units of military equipment and weapons near residential buildings and municipal facilities in the area of Donbass controlled by Kyiv, but this is not enough to win a war. 

Moreover, rebels in Donbass are well provisioned and practice constant combat readiness, so there’s no reason to believe a conflict would be short-lived.


Geopolitically, a war is a tough sell too because the balance of power in the region hasn’t changed much. 

Yes, there’s been a lot of additional training and equipment in Ukraine courtesy of the U.S. and NATO, and yes, Ukraine is trying to improve its combat readiness, including the planned construction of two military bases according to NATO standards in Severodonetsk, the center of the Luhansk region, and in Mariupol in the Donetsk region. 

But the United States is happy with the status quo, which allows Washington to be present without spending too much and without locking horns directly with Russia.

Russia, however, is in a tougher position. 

President Vladimir Putin has said that Russia will not abandon Donbass easily, even if it prefers to observe and take action only when absolutely necessary – i.e. the beginning of a military operation. 

It’s why Russia recently issued hundreds of passports to residents there, and it’s why it has such a robust military presence in its Southern and Western Military Districts. 

And make no mistake: Militarily, Moscow could easily take direct possession of Donbass if it wanted to. 

Not only does it have troops and bases near the Ukraine border, but it is building more. 

The Ministry of Defense is constructing a base for military equipment and more than 5,000 people in the city of Boguchar, 45 kilometers (30 miles) from the Ukrainian border. Another base is being built near the town of Valuiki. 

The nearest bases to Donbass, which would be the first to join the battle, are about 50 kilometers away, so the troops can be transferred to Donetsk and Luhansk pretty quickly.

But formally annexing another of 50-150 kilometers of territory wouldn’t really add to its strategic depth – keeping the conflict frozen accomplishes that already. 

Hence why Moscow doesn’t object to recognizing Donetsk and Luhansk as part of Ukraine, albeit as autonomous regions, under the Minsk Agreement. 

Donbass is important to Russia only as a buffer zone.

Ukraine, on the other hand, is much more important. 

Moscow sees it as the demarcation between Russia and NATO countries. 

It’s a former Soviet republic with close cultural ties, one that has continued to serve as a transit hub for energy, Russia’s economic cash cow, to European markets. 

All a military operation would do is push Ukraine to NATO more quickly and invite a military response. 

At the very least, it would warrant additional sanctions that Moscow simply cannot afford.

Even so, the Kremlin realizes that the Donbass issue must be resolved as soon as possible, since Ukraine continues to build up its military forces while falling further into political instability. 

It is much more profitable for Kyiv to simply heat up the situation without starting a war, which it could very well lose Everyone stands a better chance of strengthening their positions through protests, provocations and politicking through the Normandy talks.

Getting Ready for Gold’s Golden Era

By Matthew Piepenburg



Worried about gold sentiment? 

Don’t be.

The mainstream view of gold right now is an open yawn, and sentiment indicators for this precious metal are now at 3-year lows despite the gold highs of last August.

Is this cause for genuine concern?

Not at all.

In fact, quite the opposite.

Most investors are totally wrong about gold, and below we show rather than argue why they are missing the forest for the trees.

Unlike trend chasers, speculating gamblers and gold bears, sophisticated precious metal professionals and historically (as well as mathematically) conscious investors are not only calm right now, they are biding their time for what is about to become gold’s perfect backdrop and, pardon the pun, golden era.

Understanding the Current Gold Price

As for the current doldrums in the gold scene, explaining the same is neither difficult nor a surprise for those who understand history, debt, rates, inflation and Fed-speak, all highly correlated themes we have addressed separately and carefully in prior reports.

“Rising Rates”

For now, the simplest explanation (beyond just the common price manipulation and short-covering) for the current gold yawn comes down to this: Rates are rising and gold typically underperforms in environments where interest rates outpace inflation rates.

Looking, for example, at rates measured by the yield on the U.S. 10-Year Treasury, they have climbed dramatically from the .4% range to well above the 1.5% range in just under a year.

Again, hardly a tailwind for gold.

But here’s the good (yet painfully ignored) news: Rates won’t be rising much higher and inflation is on its way—big time.

Of course, many will say this is just the wishful (and biased) thinking of two Swiss-based precious metal executives.

That’s fair.

But neither Egon nor I have ever been one to use hope or wishful thinking to guide our views (or advice) on money or our convictions on wealth enhancement and, most importantly, wealth preservation.

Instead, our thinking, which is always blunt, long-term and respectful of unemotional math and the cycles of history (and historically bad policy making) is oh-so confident these days.

Why Rates Will Be Suppressed

So, let’s start with rates and why they can’t get much higher (near-term) and hence pose a long-term threat to gold’s much higher price rise down the road.

Using the U.S. Fed as the perfect proxy for delusional as well as desperate central bankers around the world, we can do some quick math to see a very clear path ahead for gold.

As the Biden administration adds another $1.9T of “stimulus” debt to an already historically toxic debt pile, the U.S. will be sitting upon over $30T in government debt before Q1 of this year.

With its economy on its knees and tax revenues dwindling, this debt, and hence U.S. deficits, will only get higher, much higher by year end.

Now, let’s compare this current reality to the pre-pandemic math of 2019 when the over-stimulated (i.e. artificial) economy was running hot.

It’s Simple Math

During that time, the U.S. was spending $4T per year and taking in $3T in taxpayer revenue. 

The net result was around $1T in annual deficits.

Again: This deficit was in a “strong” environment wherein interest expense on U.S. debt for 2019 was around $400B—roughly 10% of total spending.

But if we fast forward (calculator in hand) to 2021, the picture (and the math) turns very dark, very quick

At $30T of total debt and counting, if rates were allowed to rise much higher to anywhere near the historically normal range of 5%, that would mean $1.5T in annual interest expense for Uncle Sam, which would equate to 50% of national revenues rather than 10%.

Such a scenario of rising rates would mathematically make the U.S. insolvent.

By the way, such a rising rate scenario would be equally true in Asia, the EU, the UK, Canada, Australia etc.

In simple terms then, rates will not go much higher for the blunt reason that countries (and hence central bankers) can’t afford them to go much higher.

As a result, central banks have no choice but to cap and repress rates for as long as they can until the whole system implodes and rates, yields and inflation skyrocket.

For now, however, repressed rates are inevitable: It’s a simple matter of natural math and artificial survival.

Inflation Expectations

As for inflation, that too is as plain to see coming as a cavity is to a dentist.

Right now, rates are going up because investors and markets anticipate that inflation is going up, which is true, but the Realpolitik most gold-bears are forgetting is that rates won’t go too high for the simple reason, again, that the Fed can’t afford or allow them to.

Let me repeat: In order to pay the bills, the Fed MUST suppress rates going forward (especially on the 10Y Treasury, and possibly the 30Y) while simultaneously pursuing a deliberate policy of inflation and currency debasement to “inflate away” some of Uncle Sam’s debt obligations.

This setup, as explained elsewhere, is in fact a perfect scenario for gold, namely 1) inflation running hot (despite the CPI lie) and 2) artificially repressed yields and rates kept low.

The net result, of course, is a world of negative real rates, which is the most bullish backdrop for gold, one which is completely ignored by the markets and 99% of most investors right now.

The Fed’s Linguistic Struggle with Transparency

Last week, Powell announced that he expects inflation to pick up, though he did not expect it “to be a persistent long-term force.”

That’s rich…Much like Bernanke promising the post-08 money printing would end by 2010…

Folks, the Fed will and can never admit that their text book plan is to create as much inflation as possible to solve Uncle Sam’s debt problem.

But that’s the reality. 

Every sophisticated policy watcher knows this.

Nor will you ever see or hear the Fed go the extra step and publicly announce that they will do their best to create more inflation while simultaneously seek to dishonestly mis-report inflation levels on that openly bogus scale known as the CPI.

Like every desperate central bank in the world today, the Fed’s text book debt solution is to allow inflation to run much higher than nominal rates so that they can pay back their fixed debt holders with dollars that are worth ever-less in the future.

But again: That will never be admitted publicly by central bankers, for do so would be to confess that their currency is on death row.

Such bi-polar dysfunction of double-speak from the Fed is nothing new.

The Fed’s public messaging and its real agenda are entirely opposed, and entirely the norm for central bankers caught in a debt trap of their own design.

Powell, by the way, also said that money supply has no economic impact on inflation, despite the fact that rising money supply is the very definition of inflation.

But as we’ve warned so many times: Don’t trust the experts…

Other Temporary Gold Headwinds

In addition to the temporary but real headwind-fear of rising rates, there are other forces at play taking flows out of gold and into other dangerous yet real directions.

Wild Speculation in Risk Assets

Toward this end, one key culprit is the delusional, yet for now quite profitable, degree of rising and wild speculation in risk assets like tech stocks and cryptos.

Such speculative euphoria, which, by the way, always ends in disaster and always peaks before it tanks, is always equally bad for gold, which is a safe-haven rather than speculative asset. That’s why I and other informed contrarians favor it.

Needless to say, when uninformed retail investors can make 200% on GameStop or dream about Tesla and other balance-sheet-challenged stocks with their fingers on the trigger of an openly discredited Robinhood app, gold will look and perform quite “boring” during such times of unstoppable fantasy.

In short, speculative fever, along with the perception of rising rates and a rising dollar, takes money out of gold. 

But rising rates and a rising dollar are just flash headlines not long-term realities, for all the reasons discussed above.

But the farsighted smart money doesn’t invest, or preserve wealth, based upon headlines or fantasy; instead, they look to hard math.

Keep the Bubble Alive—Repress Rates

Furthermore, the Fed also knows that in addition to making sovereign debt unpayable, rising rates crush its precious stock bubble, just about the only thing working in the U.S.

When the discount rate is 0%, the bubble stays alive, but if the Fed were to allow that rate to rise to 4%, then every company on the U.S. stock exchanges would have to run that 4% rate through their discounted cash flow and valuation models.

The moment they did so, companies now trading at 40 to 50 times sales would tank in valuation.

Markets would implode.

Do you see now why the Fed will have to cap rates? And remember: Repressed rates and rising inflation will be music to gold’s ears.

More Currency Debasement

And as all sophisticated gold investors understood long ago, the continued central bank intervention (i.e. money printing) necessary to keep rates low means one thing: More currency creation and hence more currency destruction.

Gold, of course, is the ultimate dollar and inflation hedge, but unlike most other commodities and metals (like copper etc.), it has the added attribute of not being economic sensitive.

That is, gold doesn’t require a booming economy to rise in price.

Instead, gold serves as a safe haven hedge against tanking currencies and rising inflation, which is precisely where this broke and broken world is now clearly (rather than theoretically) heading.

Vaccine Miracle Ahead?

Of course, we can also expect some new headline “miracle” and speculative tailwind once vaccines allow pent-up demand to send the pundits and markets promising a new post-Covid Nirvana, which could send gold lower for a brief window.

But such “euphoria” will be short-lived for the simple reason (and fact) that the forever-growing debt time bomb ticking beneath such euphoria will blow such illusions to shreds.

The debt facts and numbers facing the central bankers and broken economies are now incontrovertible.

Again: The easiest and most simple way out of this debt morass is inflation—namely, policy makers deliberating inflating their way out of debt.

Such policies point in only one direction: The purchasing power of global currencies will tank as gold’s power and role skyrockets in the years ahead.

Measuring True Rather than Speculative Wealth

Despite the current confluence of factors (“rising” rates, dollars, wild speculation and post-Covid “normalcy”) pulling money out of gold, the long game toward which history is marching boils down to this: More inflation, more money printing and more currency devaluation is ahead of us.

This means those who measure their wealth in dollars, Euro’s, Sterling, Yen etc. will be measuring shadows rather than substance.

As for the sane measuring and preserving of wealth, gold is the number-one asset to which informed and prepared investors can turn.

For now, this key asset is undervalued and provides a massive opportunity not only as a catch-up trade poised for inevitably much higher valuations, but far, far more importantly, gold will triumph in its critical role of preserving capital in a debt-sick world marked by dangerous speculation and openly dying currencies.