The US media and political elites continues to debate the health of the economy and American policymakers and citizens remain fixated on inflation. For investors, however, the real story (and real risk of a recession) might be happening across the Atlantic.

The Rhine river in Germany, a subject we have written about before, continues to be exceptionally low. In fact, at several points recently, it has been completely unnavigable and though it has slightly increased its depth since then, it is very much still at crisis levels.

Here is the Kaub checkpoint:

The biggest risk might be that ships run aground and become marooned in the middle of the navigable waterway which then creates an even bigger problem if water levels rise.

​This has already happened once with a very close call.​

The Rhine isn't the only river in Europe to be in a similar situation. At the top of this newsletter you will have seen a "hunger stone" from the River Elbe that memorializes a similar time of drought and the disasters that accompany it.

This particular stone dramatically informs us that:

"Wenn du mich siehst, dann weine."

Or, "if you see me, weep" in English.

Not great.

And the stone may be sadly onto something.

• It seems highly likely that the fears of deep and real recession may come true in Europe, not the US.

Why?

Well, as we have detailed before, the low levels of the river Rhine and elsewhere are not just symbolic of the difficult straits the European economies find themselves in.

Rather, the low rivers are making everything more difficult.

• As we have detailed before, it makes it harder to transport coal that is critically required now that Europe is trying to end its reliance on Russian oil and lower its dependence on Russian natural gas.

• It also makes it challenging to harness hydropower at the normal levels that are similarly critical.

• It makes it far more costly to transport finished goods as well, hurting economic growth.

Add it all up and they are adding to the second spike of energy costs that are afflicting the European continent.

These are very serious. Gasoline may have steadily fallen here in the US as global oil prices have moderated and we have gotten lucky with no refinery outages but the inverse has been true in Europe.

We made a very big deal about major European prices spiking to between 3-400 Euros/MWh back in November and December.

You can find our older work here and here, if you are interested.

But last year's spike is nothing compared to the present grind to ever higher records:

This is bad and will mean that, in contrast to the US, French and German (and elsewhere) industrial output will NOT be setting any records any time soon.

Instead European industry will be lowering production and even shuttering plants and assembly lines because it is simply uneconomical to produce goods when energy inputs are at these levels.

And that is sort of that. The Rhine may slowly refill as the autumn rains return (we hope!) but an economic downturn will be harder to avoid.

And the Germans? The German politicians are still refusing to relent on using their nuclear energy plants and, taking them at their word, the German people are apparently furiously trying to secure firewood for the winter:

As sad as it sounds, this may be wise.

Ask yourself, would you want to risk a German winter hoping Vladimir Putin doesn't turn the taps off?

It can be hard to believe in the last, perfect days of August but Winter is coming in the Northern Hemisphere. An energy crisis may be coming with it in Europe. In many ways it already has.

It will be interesting to witness the economic and political fallout of the recession that may have been worsened by Vladimir Putin and a lack of rain but was most certainly an "own goal" caused by a sloppy energy policy and a lack of strategic thinking about what, really, being green and lowering emissions would require.

Whether Europe learns its lesson and comes back stronger and smarter rather than more populist and foolish will determine a lot.

Let us hope that the dramatic hunger stone isn't right for long.

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