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Recovery, Geopolitics and Detergents
Recovery, Geopolitics and Detergents
Increasingly over the past year or so, when people ask me what I do, and that happens a lot on a trip like the one I’m currently on in the world of down under, I find myself not just stating the usual ‘I write about finance and energy’, but adding: ‘it seems to become more and more about geopolitics too’. And it’s by no means just me: a large part of the ‘alternative finance blogosphere’, or whatever you wish to call it, is shifting towards that same orientation.
Not that no-one ever wrote about geopolitics before, but it used to be far less prevalent. Much of that, I think, has to do with a growing feeling of discontent with the manner in which a number of topics are handled by the major media and the political world. Moreover, as would seem obvious, certain topics lay bare in very transparent ways how finance and geopolitics are intertwined.
In the past year, we’ve seen the crash of the oil price, which will have – financial and political – effects in the future that dwarf what we’ve seen thus far. We’ve seen Europe and its banks stepping up their efforts to wrestle Greece into – financial and political – submission. And then there’s the nigh unparalleled propaganda machine that envelops the Ukraine-Crimea-Russia issue, which has bankrupted the economy of the first and imposed heavy economic sanctions on the latter, for political reasons.
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The Global Economy’s “Impeccable Logic”
The Global Economy’s “Impeccable Logic”
Ever since the Occupy movement coined the terms “the 1%” and “the 99%” to point out disparities of wealth and power, the gap between rich and poor has received a lot of attention. In his highly-regarded 2014 book,Capital in the Twenty-first Century, for example, Thomas Piketty’s central thesis is that wealth inequality is bound to increase in modern capitalist economies. This was underscored by a recent Oxfam report, which tells us that the world’s 85 richest people now have as much wealth as the poorest 3.5 billion; that the richest 1 percent will own more than half the world’s wealth by next year; and that in the US, the wealthiest one percent captured 95 percent of income growth since 2009, leaving the bottom 90 percent even poorer. (1) There’s more, but you get the idea.
Statistics like these have led to widespread questioning of the moral underpinnings of the global economy. But does morality have any place in conventional economic thinking? While the overseers of the global economy are beginning to see problems with the wealth gap, it’s for reasons that are neither moral nor ethical, but purely practical: extreme inequality, they fear, might threaten the continuance of the system itself. Christine Lagarde, Managing Director of the IMF, worries that “excessive inequality is not good for sustainable growth [sic]”(2), while billionaire and self-described plutocrat Nick Hanauer is even more concerned: “if we don’t do something to fix the glaring inequities in our society, the pitchforks will come for us.” (3)
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Financial Kamikazes At Work——Why The End is Kind of Nigh
Financial Kamikazes At Work——Why The End is Kind of Nigh
All Good Things Must End
Today, I’m going to tell you about the end of the world. Not the end of the world exactly. But the end of the fiat money system President Nixon gave birth to in 1971… when he cut the dollar loose from gold.
And it may feel like the end of the world, because of the social chaos it will provoke. What follows is taken from a speech I gave at Doug Casey’s La Estancia de Cafayate …
Drowning in Credit
I’ve been predicting the end of the world – at least the end of the post-1971 monetary world – for a long time. I hope I’m wrong about it. But sooner or later, I’ll be right. In the meantime, I’m like a surgeon who has just botched an operation. He sees the patient stiff on the table and wonders if he should go back to the textbooks. Maybe the anklebone is not connected to the shin bone after all.
But the textbooks are hopeless. They’re written by modern economists. And they believe an economy is mechanistic, not humanistic. These folks have fixes for every problem and wrenches in both hands. They also run our central banks. And they think they know what is going on… and what they’re going to do about it.
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The American Story Is A Mystery Only to Economists
The American Story Is A Mystery Only to Economists
I think I should accept that I will never in my life cease to be amazed at the capacity of the human being to spin a story to his/her own preferences, rather than take it simply for what it is. Your run of the mill journalist is even better at this than the average person – which may be why (s)he became a journalist in the first place -, and financial journalists are by far the best spinners among their peers. That’s what I was thinking when I saw another Bloomberg headline that appealed to my more base instincts, which I blame on the fact that it shows a blatant lack of any and all brain activity (well, other than spin, that is).
Here’s what Bloomberg’s Craig Torres and Michelle Jamrisko write: “American Mystery Story: Consumers Aren’t Spending Even In a Booming Job Market”. Yes, it is a great mystery to 95% of journalists and economists. Because they have never learned to even contemplate that perhaps people can be so deep in debt that they have nothing left to spend. Instead, their knowledge base states that if people don’t spend, they must be saving. Those are the sole two options. And so if the US government reports that 863,000 underpaid new waiters have been hired, these waiters have to go out and spend all that underpayment, they must consume. And if they don’t, that becomes The American Mystery Story.
For me, the mystery lies elsewhere. I’m wondering how it ever got to this. How did the capacity for critical thinking disappear from the field of economics? And from journalism?
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And I Didn’t Even Mention Greece, the End of the Euro or Evil Russia!! Yikes!
And I Didn’t Even Mention Greece, the End of the Euro or Evil Russia!! Yikes!
This is a screen shot from my iPhone about a week ago. And really this says it all. Breaking news is highlighting the all time highs again while the underlying economic news is negative across the board. No other time in history could the economy be in such dire straits and have the market completely apathetic to it. Whether it’s total debt, Consumer debt, retail sales, housing, productivity, inventories, full time jobs, GDP, wages, just about any indicator it is negative.
And if we put it in the context of having such extreme monetary policies with the sole intent toward all of these moving in a highly positive direction the above indications aren’t just terrible they are frightening. It’s kind of like when you’re in a fight and you’ve just hit the other guy with your best punch and he doesn’t flinch. You start to think this ain’t going to end very well. I expect the Fed folks are suffering from a case of the ‘oh shit that was the best I got’ syndrome.
Our nation’s ‘best and brightest’ economists and financial ‘experts’ have created policies that are their best ideas to generate economic growth and these policies have failed completely. The only thing preventing this nation from a full on collapse is an all time high stock market. And that is the only reason the market is at all time highs. Volume is sparse, institutional money is on the sidelines and every damn metric you can think of is falling apart yet markets are at all time highs, thanks to the Fed.
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What will Germany pay for not compromising with Greece?
What will Germany pay for not compromising with Greece?
You could argue that the very public nature of the disagreement between Germany and Greece, over the terms of the latest attempt by Greece to avoid financial collapse, is good for the reputation of the eurozone.
In that at least colossal sums of taxpayer’s money aren’t being committed via murky deals in the kind of hidden-away government rooms that used to be smoke-filled.
That said, confidence that the euro will endure till the end of days is hardly instilled by the conspicuous lack of trust between Germany and Greece.
The point is that Greece swallowed its pride and finally gave up its insistence that it must have a new bridging loan, only to be immediately accused by the German finance ministry of dishonesty – of merely pretending to adhere to bail out terms in requesting an extension of the existing €172bn rescue package (which is due to expire).
So much for famous European communautaire spirit.
There is a paradox in Germany’s financial Puritanism: this theological commitment that all debts must be repaid on the originally specified terms could be much more expensive for it than cutting Greece some slack.
…click on the above link to read the rest of the article…
David Stockman Interview: The Global Economy Has Entered The Crack-Up Phase
David Stockman Interview: The Global Economy Has Entered The Crack-Up Phase
Transcript of David Stockman’s Interview By Chris Martenson at Peak Prosperity
Chris Martenson: Welcome to this Peak Prosperity podcast. I am your host, Chris Martenson. It’s a central banker world and that world is increasingly volatile, deformed, and full of risks. Today, we’re speaking with a guest I am especially keen to interview, Mr. David Stockman, economic policymaker, politician, and financier. Mr. Stockman represented Southern Michigan in the US House of Representatives from 1976 to 1981 and later served as the Director of the Office of Management and Budget in the Reagan administration and was the youngest cabinet member of the twentieth century.
Since then, he has held executive positions in many of the most influential banking, buy-out, and private equity firms including the Blackstone Group and Salomon Brothers. He is author of The Great Deformation: The Corruption of Capitalism in America, which is a blunt and sometimes delightfully and deservedly scathing examination of the various fiscal and policy blunders that have degraded our current and future hopes for prosperity. Be sure to have your blood pressure medication handy as you read it because not only does it detail a litany of regulatory and policy blunders of the recent past, it reads like it was lifted from today’s headlines.
He also runs the popular and excellent website, David Stockman’s Contra Corner, where he both blogs and assembles other excellent economic content for you to read, so be sure to visit it regularly.
Welcome, David. It’s an honor to have you as our guest.
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If You Listen Carefully, The Bankers Are Actually Telling Us What Is Going To Happen Next
If You Listen Carefully, The Bankers Are Actually Telling Us What Is Going To Happen Next
Are we on the verge of a major worldwide economic downturn? Well, if recent warnings from prominent bankers all over the world are to be believed, that may be precisely what we are facing in the months ahead. As you will read about below, the big banks are warning that the price of oil could soon drop as low as 20 dollars a barrel, that a Greek exit from the eurozone could push the EUR/USD down to 0.90, and that the global economy could shrink by more than 2 trillion dollars in 2015. Most of the time, very few people ever actually read the things that the big banks write for their clients. But in recent months, a lot of these bankers are issuing such ominous warnings that you would think that they have started to write for The Economic Collapse Blog. Of course we have seen this happen before. Just before the financial crisis of 2008, a lot of people at the big banks started to get spooked, and now we are beginning to see an atmosphere of fear spread on Wall Street once again. Nobody is quite sure what is going to happen next, but an increasing number of experts are starting to agree that it won’t be good.
Let’s start with oil. Over the past couple of weeks, we have seen a nice rally for the price of oil. It has bounced back into the low 50s, which is still a catastrophically low level, but it has many hoping for a rebound to a range that will be healthy for the global economy.
Unfortunately, many of the experts at the big banks are now anticipating that the exact opposite will happen instead. For example, Citibank says that we could see the price of oil go as low as 20 dollars this year…
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Overreliance on the Pseudo-Science of Economics
Overreliance on the Pseudo-Science of Economics
Every year a Nobel Prize in Economics is awarded when in fact there is no “Nobel Prize in Economics.” There is only a “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.” That prize, which was invented by the Swedish central bank nearly 75 years after Alfred Nobel’s death, is an annoyance to the recipients of the five actual Nobel Prizes, those scholars from excluded scientific disciplines such as astronomy, and a living descendant of the donor, Peter Nobel, who has denounced it as a “PR coup by economists.”
This raises the question: Have we given economists too much authority based on mistaken views about their scientific reputation among established scientists and the public?
When asked about the degree to which various academic fields can be considered “scientific,” the American public is decidedly more mixed toward economics, ranking it well below established scientific fields such as physics or biology, and even below sociology.
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AP Economics teachers’ discussion board: 3 latest topics of Emperor’s New Clothes facts
AP Economics teachers’ discussion board: 3 latest topics of Emperor’s New Clothes facts
Advanced Placement Macroeconomics teachers have a discussion board for questions and topics of interest. Since 2009, I’ve participated as I can imagine to catalyze awakening among ~2,000 AP Econ teachers.
Below are the latest three contributions I’ve made; the first in response to a question, and introducing the other two topics.
I don’t know the status of awakening among these teachers. I do know that the leading contributor to the discussion board attempted to deny the topics I contributed a few years ago, and withdrew into silence after I exposed him of having no data for refutation, only a threatened belief system. I do know that the usual response to my contributions is silence. I do know that ~20 teachers have voiced some form of support over the years.
I also know that I was removed from the Advanced Placement US Government discussion board after four years of contributing facts mostly regarding US wars and the US Constitution. I was informed by the listserve moderator that a Bill Tinkler of the College Board had deemed these posts “non-academic,” of “personal nature,” and “unsuitable” for consideration of teachers in a college-level course on government.
The three topics:
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Canadian Government ‘Optimistic’ Trade War With U.S. Averted
Canadian Government ‘Optimistic’ Trade War With U.S. Averted
WASHINGTON – The Canadian government is expressing optimism that a trade war might be averted with the United States in a long-standing dispute over agricultural products.
Agriculture Minister Gerry Ritz says he likes what he heard this week during a trip to Washington, and senses a willingness to adjust a U.S. regulatory policy at the heart of the dispute.
“I feel very optimistic,” Ritz said Thursday during a conference call. “Far more so after this trip than after any of the others that I’ve done.”
Tariffs are looming over a range of American agricultural products, with Canada and Mexico both planning to penalize U.S. goods including wine, orange juice, pork and beef, barring an amicable resolution.
The dispute stems from mandatory meat-labelling rules for U.S. beef, pork and chicken. Proponents believe American consumers deserve to know where their meat was born, raised and slaughtered.
…click on the above link to read the rest of the article…
Oil-led deflation can be good, bad or ugly
Not all deflation is the same. In this case, cheaper oil wears the white hat — for now
When you fill up your car with cheap gas, there’s a group of economists who just hate it. That’s because in many parts of the world the biggest worry for economic stability is the plague of falling prices.
It’s called deflation. Many economists consider it to be a dangerous disease that has spread from Japan to the heart of Europe where this week even mighty Germany has succumbed. Now central bankers are worried it could sweep the world.
Although oil prices have crossed back above $50 US, last year’s crash from over $100 is just now feeding into inflation calculations. Yesterday, central bankers in Australia and India joined thelong list trying to boost their economies and stave off deflation.
Inflation makes money worth less. Deflation has the opposite effect.
During times of, say, 10 per cent inflation, if you carry a $100 bill around in your wallet for a year, at the end of the year it will buy 10 per cent less. But during 10 per cent deflation, keeping the same $100 will buy you 10 per cent more. That sounds good.
But the reason deflation frightens economists is that falling prices go hand in hand with economic stagnation. As with many economic phenomena, it is not absolutely clear whether deflation is the cause of recession, or whether it’s the other way round.
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Is Canada Headed For Another Recession? Eight Troubling Signs
Is Canada Headed For Another Recession? Eight Troubling Signs
A string of dire economic news since the beginning of 2015 has many observers worried about whether Canada could be on the brink of another downturn, but economists say it’s too soon to mention the “R-word.”
One month in, layoffs seem to be the dominant theme — the second-largest in Canadian history at Target and many more in the battered oil sector.
The Bank of Canada shocked Canadians with a surprise interest rate cut and the loonie has fallen to levels not seen since the Great Recession of 2008-2009.
The news pouring in about the end of last year has been a bit worrisome. The economy shrank in November — and that was before oil prices reached their current lows, something the central bank has determined is decidedly bad for the Canadian economy. Job creation estimates were also revised last month, and job growth for 2014 was slashed by a third, suggesting further underlying weakness in the labour market.
Canada’s situation doesn’t appear on the path to improving any time soon, with oil prices expected to remain low for the remainder of the year. In its rate decision, the Bank of Canada said the cut was insurance — but insurance against what?
…click on the above link to read the rest of the article…
Birth Pangs Of The Coming Great Depression
Birth Pangs Of The Coming Great Depression
The signs of the times are everywhere – all you have to do is open up your eyes and look at them. When a pregnant woman first goes into labor, the birth pangs are usually fairly moderate and are not that close together. But as the time for delivery approaches, they become much more frequent and much more intense. Economically, what we are experiencing right now are birth pangs of the coming Great Depression. As we get closer to the crisis that is looming on the horizon, they will become even more powerful. This week, we learned that the Baltic Dry Index has fallen to the lowest level that we have seen in 29 years. The Baltic Dry Index also crashed during the financial collapse of 2008, but right now it is already lower than it was at any point during the last financial crisis. In addition, “Dr. Copper” and other industrial commodities continue to plunge. This almost always happens before we enter an economic downturn. Meanwhile, as I mentioned the other day, orders for durable goods are declining. This is also a traditional indicator that a recession is approaching. The warning signs are there – we just have to be open to what they are telling us.
And of course there are so many more parallels between past economic downturns and what is happening right now.
For example, volatility has returned to the markets in a big way. On Tuesday the Dow was down about 300 points, on Wednesday it was down another couple hundred points, and then on Thursday it was up a couple hundred points.
This is precisely how markets behave just before they crash. When markets are calm, they tend to go up. When markets get really choppy and start behaving erratically, that tells us that a big move down is usually coming.
At the same time, almost every major global currency is imploding. For much more on this, see the amazing charts in this article.
In particular, I am greatly concerned about the collapse of the euro. The Swiss would not have decoupled their currency from the euro if it was healthy. And political events in Greece are certainly not going to help things either. Economic conditions across Europe just continue to get worse, and the future of the eurozone itself is very much in doubt at this point. And if the eurozone does break up, a European economic depression is almost virtually assured – at least in the short term.
And I haven’t even mentioned the oil crash yet.
…click on the above link to read the rest of the article…
