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Here’s The Problem: The Pie Is Shrinking

March 12, 2019

Here’s The Problem: The Pie Is Shrinking

At that point, the only way to enable debt-serfs to service their debts is too give them free money, i.e. Universal Basic Income (UBI).

Scrape away the churn and distraction and the problem is simple: the pie of prosperity is shrinking, and the “fixes” are failing. The status quo arrangement is based on the endless expansion of “growth” and debt, which is the monetary fuel of more, more, more of everything: money, energy, resources, goods, services, jobs, wealth and income, all of which make up the elixir of prosperity.

Prosperity is shorthand for a positive return on investment (ROI), a.k.a. primary surplus. Prosperity is the result of there being a surplus which can be distributed after capital, resources and labor are put to work.

The higher the return on investment, the more surplus there is to distribute.When the surplus is bountiful, there’s enough to go around for everyone to feel that life is getting better.

But all systems eventually track an S-Curve of rapid growth, maturation and depletion/decline, and surpluses diminish: the pie stops expanding and starts shrinking. There’s less to go around, and suddenly the political squabbling intensifies as every elite and every constituency seeks to preserve their slice of the pie at the expense of others.

This means shifting the losses of purchasing power and prosperity onto others without appearing to do so. Openly ripping a slice from the grasping hands of another elite or constituency will launch a protracted political battle, as every group will fight to the death to keep its share untouched.

By far the best ways to shift the losses to others are 1) inflation (reducing the purchasing power of their income) and 2) creating phantom wealth that can be used to buy up all the income-producing assets. Unsurprisingly, this is precisely what we see happening globally.

 …click on the above link to read the rest of the article…

U.S. Gold Market Switches From A Surplus In 2016 To Deficit In 2017

January 6, 2018

U.S. Gold Market Switches From A Surplus In 2016 To Deficit In 2017

The U.S. gold market suffered a net deficit this year compared to a small surplus in 2016.  This was quite interesting because U.S. physical gold demand will be down considerably this year.  In 2016, total U.S. gold demand was 212 metric tons versus an estimated 150 metric tons this year.  The majority of the decline in U.S. gold demand is from the physical bar and coin sector that is down 56% in the first three quarters of 2017 compared to the same period last year.

So, why will the U.S. gold market suffer a deficit if gold demand is down sharply this year?  Well, it seems as if the culprit is the huge increase in net gold exports.  Last year, the U.S. imported 374 metric tons (mt) of gold and exported 398 mt for a net 24 mt deficit.  However, this year, estimates for U.S. gold imports will fall to 250 mt while exports increase to 475 mt.  Thus, the U.S. net export deficit will be 225 mt in 2017:

However, if we look at all the data in the chart above, the U.S. gold market will experience a net 76 mt deficit in 2017 versus a 44 mt surplus last year (bars right-hand side of chart).  Again, we can see that U.S. gold imports are estimated to decline significantly this year to 250 mt compared to 374 mt in 2016.  Furthermore, total U.S. gold exports are forecasted to increase to 475 mt this year versus 398 mt in 2016.

When we factor in U.S. gold mine supply, domestic consumption, and gold scrap supply, the market will go from a small 44 mt surplus in 2016 to a 76 net deficit this year.

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Surplus or Stimulus

April 25, 2017

Surplus or Stimulus

René Magritte Le Cri du Coeur 1960

Austerity is over, proclaimed the IMF this week. And no doubt attributed that to the ‘successful’ period of ‘five years of belt tightening’ a.k.a. ‘gradual fiscal consolidation’ it has, along with its econo-religious ilk, imposed on many of the world’s people. Only, it’s not true of course. Austerity is not over. You can ask many of those same people about that. It’s certainly not true in Greece.

IMF Says Austerity Is Over

Austerity is over as governments across the rich world increased spending last year and plan to keep their wallets open for the foreseeable future. After five years of belt tightening, the IMF says the era of spending cuts that followed the financial crisis is now at an end. “Advanced economies eased their fiscal stance by one-fifth of 1pc of GDP in 2016, breaking a five-year trend of gradual fiscal consolidation,” said the IMF in its fiscal monitor.

In Greece, the government did not increase spending in 2016. Nor is the country’s era of spending cuts at an end. So did the IMF ‘forget’ about Greece? Or does it not count it as part of the rich world? Greece is a member of the EU, and the EU is absolutely part of the rich world, so that can’t be it. Something Freudian, wishful thinking perhaps?

However this may be, it’s obvious the IMF are not done with Greece yet. And neither are the rest of the Troika. They are still demanding measures that are dead certain to plunge the Greeks much further into their abyss in the future. As my friend Steve Keen put it to me recently: “Dreadful. It will become Europe’s Somalia.”

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Austrians vs. The World On Canadian Fiscal Austerity

August 14, 2015

Austrians vs. The World On Canadian Fiscal Austerity

I don’t know whether this is something the average Canadian discusses over coffee, but the sharp fiscal turnaround in the mid-1990s is still providing fodder for today’s economists to argue. In September 2014, I summarized the Canadian budget triumph, in which the federal government turned its deficit into a surplus largely through spending cuts, with the economy suffering no ill effects.

But I also explained that it’s crucial for Keynesians like Paul Krugman to explain away the success of this so-called austerity by pointing to falling interest rates. Thus, Krugman argued, it’s not that cutting government spending actually helps an economy, but rather it’s that looser monetary policy can pick up the gaping hole in Aggregate Demand.

In my first Mises CA post and then a follow-up, I gave various arguments and evidence to say that the Bank of Canada did not appear to have loosened policy. For example, the growth in the Bank of Canada’s assets almost came to a halt in 1996, and it was no higher in subsequent years than it had been earlier in the decade. Furthermore, CPI inflation showed no signs of heating up during the period when Krugman must claim that monetary policy loosened.

The one metric that lines up with Krugman’s story is that Canadian interest rates fell. But, I pointed out that this is exactly what we would expect to happen naturally, as the federal government greatly reduced its borrowing and fears of a bond crisis evaporated. After all, this was just the mirror image of what happens in a situation of high government deficits, when “crowding out” and fears of a default go hand in hand with high interest rates.

The debate flared up once again last month, prompted by another Krugman post in which he (again) said that the Canadian experience in the 1990s showed the importance of loose money to offset budget cuts. This time, Market Monetarist David Beckworth jumped into the fray, taking the Keynesian position.

…click on the above link to read the rest of the article…

How Harper Put Canada Massively in the Red

June 14, 2015

How Harper Put Canada Massively in the Red

He ate up a huge federal surplus, piled up six deficits. This PM wants to run on fiscal smarts? Last in series

In the run up to the 2015 federal election, the Harper government will try to convince Canadians that the prime minister and his crew have been excellent managers of the Canadian economy and that only they are capable of delivering the same stellar results in the future. Heading into this election, they had intended to present a balanced federal budget as proof of their sound stewardship. But as I write this in spring 2015, the latest projections are that the Harper government will have difficulty delivering the long-promised surplus this year. Thanks to the precipitous fall in oil prices and revenues, the government’s budgetary watchdog, Mostafa Askari, estimated a deficit as high as $1.2 billion for this year, and as much as $400 million the year following.

However, if the government is determined, Askari said, a balanced budget is still feasible should they choose to slow spending or delay capital projects. With the government’s earlier forecasts in a tailspin, the budget for the current fiscal year was delayed, no doubt to allow time for a wizard to conjure new numbers that will allow Harper to pull a triumphant, balanced budget out of the proverbial hat.

But Harper’s fiscal management is a tale of reversal and failure, not triumph. Department of Finance Fiscal Reference Tables reveal that in the years before Harper became prime minister, there were nine consecutive years of budgetary surpluses, from 1997 to 2007. In eight of those years, Ottawa amassed a surplus of over $79 billion. Yet In Harper’s first eight years as prime minister, he managed to produce a deficit of almost $127 billion.

 

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Potemkin on the Pacific—–Abenomics Is Still Failing

April 23, 2015

Potemkin on the Pacific—–Abenomics Is Still Failing

For the first time since June 2012 Japan has attained a trade surplus. It is, however, premature to interpret that as an end to the impoverishment the island has undertaken these past three years, the last two under QQE. There are various reasons for the end of the negative trade imbalance, but the most significant surround the Chinese New Year.

China’s annual holiday plays havoc with any number of economic accounts of its own, but it should not be surprising to see its closest trade partners under the same difficulties in measurement. Unfortunately for Japan, as QQE was intended to foster trade in the other direction, China remains the most visible and deepest supplier for Japanese industry. As such, the level of activity from China is the largest single source in variability – with crude oil imports now a distant second, contrary to expectations.

ABOOK April 2015 Japan Trade Def

The overall March surplus for Japan was just under ¥230 billion, but imports from China fell 19.4% in March. That was undoubtedly an adjustment for activity in February, as imports from China surged almost 40% that month. This exchange in monthly trade balance with China more than accounts for the Japanese surplus: February’s deficit with China was ¥769 billion on that surge in imports, while March’s deficit came in at only ¥174 billion. Thus without the China’s variability there would still be a serious trade deficit in March for Japan overall.

 

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Brazil’s Economy Just Imploded | Zero Hedge

December 29, 2014

Brazil’s Economy Just Imploded | Zero Hedge.

China may have mastered the art of fabricating economic data to a level unmatched by anyone except the US Department of Labor, but its derivative countries have much to learn. And none other more so than one of China’s favorite sources of commodities over the past decade: Brazil. It is here that things are going from worse to catastrophic, as disclosed in today’s update of Brazil’s fiscal picture.

Here are the disturbing facts showing that behind the world’s propaganda growth facade, it is all hollow: Brazil’s consolidated public sector primary fiscal balance, which posted a significantly worse than expected R$8.1bn primary deficit in November driven by the R$6.7bn deficit of the Central Government, dipped into negative territory: -0.18% of GDP, driven by the significant deterioration of the Central Government finances.

This is the worst fiscal outturn since November 1998. Furthermore, the primary surplus of subnational government (States and Municipalities) has also been eroding, a reflection of the authorizations given by the Treasury since 2011 for increased borrowing by the States. For instance, the States and Municipalities posted a negligible 0.08% of GDP surplus during Jan-Nov 2014, down from 0.46% of GDP during Jan-Nov 2013.

…click on the above link to read the rest of the article…

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