Tag: economics

World Evil Forum

I don’t often agree with Greenpeace, but they’re absolutely right to call out the massive Clown World hypocrites who are flying in hundreds of private jets to their mountain temple of evil next week in order to tell everyone else in the world to stop using heat, water, and air.

A few days ahead of the WEF’s annual meeting from January 16-20, Greenpeace has warned of the damage caused by the number of private jets shuttling to and from Davos. According to an analysis by the Dutch consulting firm CE Delft and Greenpeace, the number of private jets to and from airports serving Davos doubled during WEF 2022, which took place in May. This amounted to 1,040 private jet flights during the annual meeting week.

Whatever happened to Zoom meetings? If they can afford private jets, can’t they afford web cams? But I suppose Satan is probably a real stickler for physical attendance at the annual Black Mass.

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Germany Implodes

The economic engine of Europe is rapidly approaching crisis and economics depression:

The real estate sector in Germany dropped in the last three months of 2022 due to the surging costs of financing and to record inflation in Europe’s largest economy, a report published on Monday by BNP Paribas showed.

Investments in the country’s commercial property sector slumped by 50% from October to December, compared to the five-year average for the period, and reached just €9.9 billion ($10.6 billion).

The sector took a strong hit as investors shied away from deals due to rising interest rates and an overall worsening economic environment in Germany, the survey results revealed.

One of the fascinating things about Clown World is the way that it simultaneously manages to destroy economies while placing a nominal emphasis on economic growth uber alles. The collapse of the Germany economy should be followed, in relatively short order, by the collapse of the European Union.

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Winning by Losing

Since 2013, Russia has been keeping most of the weapons that it previously manufactured for export:

On the World Bank’s website, the data on “arms exports” show that since 2001 Russian exports in this field have not only approached those of the United States, but in some years (2002, 2013) have even exceeded the value exported by the United States.

It is not curious that the last year in which there was real value competition between the two countries was 2013. Between November 2013 and February 2014 Euromaidan took place, and in that very year a huge package of sanctions against the Russian federation (which had been in place at least since 2008) was passed, focusing especially on technologies imported by Russia for its largely public military industrial complex. As early as 2014, data from the World Bank show the sharp decline in Russian arms exports, which now account for a little more than 1/3 of US sales.

This data is not only relevant for us to understand the reason for Euromaidan, the imposition of a Russophobic regime and an entire escalation of weaponry that is well evidenced in the preparation that, for 8 years, was initiated by the neo-Nazi regime, building a totally disproportionate army and a network of fortifications in the Donbass reminiscent of Albanian bunkers. This data, together with others, confirms a number of premises that will shape our near future.

The problem is not just a “commercial substitution” problem. Not by a long shot. Martyanov explains to us, in three very important books, part of the problem. Under Putin’s reign, there was a reuse, modernization and optimization of all the installed potential left by the USSR and present in Russian society, not totally destroyed in the 90s, which allowed to offer to the world market more effective options from the military point of view, and, above all, much cheaper, considering the cost/benefit binomial. Today, the conflict between the two Slavic nations, has shown that US weaponry not only brings no substantial difference, but is outdated, especially in the field of artillery (long, short and medium distances) and air defense.

What Martyanov allowed us to foresee is that the U.S. could not allow an enormous number of world countries (from Algeria, to Saudi Arabia, to Turkey, India, Indonesia, Egypt, Venezuela, Argentina, Brazil, or even NATO countries such as Greece…) to start buying technologies superior to theirs (such as the case of the S-400 bought by Turkey, which he says is superior to any American air defense system), but which, even when they are not superior, are incompatible with the NATO standard, which in itself raises two problems: 1. If the country joins or remains in the military allies, the fact of having different weapons systems raises interconnection problems taking away defensive and offensive effectiveness; 2. If it becomes an enemy country, it will rely on offensive systems against which NATO defensive systems are not experienced or tuned, and vice versa.

Given the way in which the USA has shown itself to be a wildly untrustworthy partner, to say nothing of the way that the Russian weapons systems have generally shown themselves to be superior, I expect that the export delta is going to decrease considerably, if not disappear entirely, once the NATO-Russian war finally comes to an end.

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The Coming Big Tech Implosion

It appears that government support and near-monopolies aren’t going to be enough to keep some of the tech giants afloat when the economy collapses:

Amazon is burning billions on Alexa because voice assistants need massive infrastructure but can’t be monetized. Google Cloud is $700 million in the red as of last earnings and heading south to a state of madness like a New Jersey retiree. These are mature products in saturated markets. You don’t need an MBA to know what will happen. But even the dean of Harvard Business School can’t say when.

The big confounding factor is reputation. Take Alexa, which, as has been noted, is overwhelmingly used for a few simple tasks: playing music, setting timers, doing quick queries, switching lights. Shopping and advertising? Not so much. The issue for Amazon over those few popular use cases is that they are very popular. For some demographics among the elderly and disabled they’re now part of their daily life. Millions more are habituated, with Alexa just being quietly useful when hands are full or pulling up a calculator app is just too much hassle.

Amazon’s model was to sell the hardware at or below cost and make the revenue from content and services. It’s a perfectly good model, if those services and content are as engaging as video games, or user data can be folded into ad targeting. None of this is true for Alexa, and it never will be. But if Amazon cuts and runs, hundreds of millions of users have had an intimate part of their life ripped out. One, furthermore, they considered paid for when they bought the gadget in the first place. How badly does Amazon want not to do that? It costs billions. It can’t keep paying. But it can’t just let it go.

Google is in an even worse position, not from the amount of red ink currently bleeding from its Cloud division, but because of its room to manoeuver is far less. There are around 4 billion email accounts in the world, and around 1.8 billion of those are Gmail. When you run a service for that many users, they run you.

Amazon is also getting absolutely hammered by the increase in transportation costs. Given that its core business runs on very thin margins, there is no way it’s not running in the red now. While both companies are being propped up by the US federal government, it’s doubtful that this support will continue once WWIII begins to seriously draw down the resources available to the government.

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Predictions From the Tree of Woe

Just one prediction for 2023, but it’s a grave one about the petrodollar, its fate, and the consequences therefrom:

The petrodollar is the centerpiece of American hegemony. I predict that in 2023, at the latest 2024, that system will end. Its demise may be disguised by the mainstream and financial press, but it will be self-evident in the transactions themselves, and its aftershocks will be mighty.

Now, the end of the petrodollar system has been a long time coming, of course. It’s been a major goal of America’s strategic competitors for years. In 2017, China and Russia created the petroyuan so that its partners could trade for oil without using dollars. However, the petroyuan did not unseat the petrodollar in the six intervening years. 80% of oil transactions remained in USD. Why?

  • Saudi Arabia, the linchpin of the petrodollar system, continued to insist on using dollars in its transactions.
  • The Chinese continued to be reliant on trade with the US to fuel their economy, and thus could not risk destroying the system that made the US dollar valuable.
  • The US has a proven track record of using military force to support the petrodollar, and with Donald Trump in charge — known to Chinese citizens as “Emperor Trump” for his vigorous policies — the Chinese were reluctant to “fuck around and find out.”

Now those conditions have changed.

Read the whole thing there, keeping in mind that while timings are always uncertain, trends are often clear.

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Globalization Taketh Away

A small town in Switzerland discovers the downside of going global, as a profitable local business is shut down after more than a century in operation:

British American Tobacco (BAT) will close a cigarette manufacturing factory in north-western Switzerland next year and lay off the 220 employees working there, it has been confirmed. This decision will have a major impact on the region, the Jura government said on Wednesday. In a statement, BAT confirmed that cigarette production would be transferred from Boncourt to bigger factories in Europe and that Boncourt would be closed.

Following the closure of the factory, the commune of Boncourt (1,200 residents) will lose its biggest taxpayer – around CHF 2 million in annual tax – from its yearly budget of CHF 9 million.

The Boncourt factory was founded by the Burrus family in 1814 and was taken over by Rothmans International in 1996, before merging with tobacco multinational BAT three years later. The site has produced Parisienne cigarettes since 1887, the second best-selling brand in Switzerland.

I’m sure the little town that has lost nearly one-quarter of its tax revenue and more than half of its jobs will be reassured by the knowledge that the cigarettes that it formerly manufactured will henceforth be produced more efficiently elsewhere in Europe.

Homo economus is not human, but vampire.

Strangely enough, it may be the NFL that provides one potential solution to the economic problem of Clown World. Green Bay is one of the oldest and most successful franchises in the NFL, and it not only survives, but thrives, in a small town because it is not owned by rent-seeking pirates, but by the community. The team cannot be sold or moved without the consent of the public.

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There Are No Bank Reserves

Just a reminder that Clown World’s economy is floating on nothing more than clown gas and demon dust:

The pattern really got going with the “bailout” in 2008. Buried in a monster bill that was waived the three day lockdown on votes was a provision that allowed Ben Bernanke to set bank reserves to zero. It was one line in a monstrosity that Hank Paulson insisted on being passed after his “one page” equivalent, which gave him sole authority on $700 billion dollars of public money, went down in defeat a day earlier. I caught it and reported on it but nobody in the Legislature said a single word about it at the time, likely because they didn’t actually read the whole thing and thus other than the snake who put it in there didn’t know it existed.

So, it’s doubtful that the USA’s ability to outspend Russia is going to work the way it did when Ronald Reagan pushed a financial arms race with the Soviet Union.

The US Congress is about to send another $44 billion to Boeing, Raytheon, and the CIA “for the war in Ukraine”. That’s a total of $100 billion sent by the US in 10 months. The entire Russian military budget for the year is $65 billion.

  • Glenn Greenwald

This is the exact opposite of what Jerry Pournelle recommended back in 1986 after contemplating the problem facing the US military.

There is just no way that we’ll respond to the Soviets by building a peacetime military establishment similar to theirs. Unfortunately, although we have rejected matching the Soviet military establishment, we have not seized upon any viable alternative. Instead, we putter about, building some of this and some of that, hoping that our technological superiority will somehow do the trick even though we have no clear cut strategy of technology.

This has not always brought about good results. As Congressman Newt Gingrich, among others, has repeatedly pointed out, simply throwing money at the Pentagon is wasteful. Given money but no marching orders, the Pentagon almost always buys more M-1 tanks for the Army, more carriers for the Navy, wings of F-16’s for the Air Force. They buy “things people can ride on,” as one analyst recently put it.

Left to its own direction, the military is very conservative. Military establishments tend to keep the old, while flirting with the new and glamorous; to buy one or two armored cars, but keep horses for the cavalry. To put catapults and seaplanes on battleships, but reject aircraft carriers as not needed.

The result is a lack of direction… We end up with weapons that no one is trained to use, aircraft with no spare parts and few trained pilots, communications systems that don’t quite work, ships without trained sailors to man them, and missiles that work splendidly in test situations, but have profound problems on the battlefield.

Jerry Pournelle, The Stars At War, 1986

Although it’s even worse now. Instead of funding wasteful and ineffective weapons programs, now the money is being directed into unspeakable trafficking operations and propping up the collapsing Clown World economy.

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Another Warning Signal

A red flag in housing echoes one in the used car market.

Following yesterday’s dismal housing starts and building permits prints (which followed an ugly homebuilder sentiment signal), analysts expected US existing home sales to tumble 5.2% MoM in November. In fact, things were worse with a 7.7% MoM plunge (the biggest drop since Feb 22 and the 10th straight monthly decline). This is the biggest YoY drop since Lehman and the longest streak of sales declines since 1999… This disappointing drop in existing home sales happened despite the fact that mortgage rates have now fallen for 5 straight weeks.

The US economy is not looking great at the moment.

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Debt Bubble Close to Popping

There are serious warning signals coming from a variety of markets, including the used-car loan market.

Every Friday I conduct a team meeting to recap our week.

This morning, one of our General Managers opened up DealerTrack — a portal that dealers use to communicate with auto lenders — and highlighted something very concerning: 9 of our lending partners have started WAIVING “open auto stipulations” for consumers.

Wait, wtf does that even mean? Let me explain using a simple, hypothetical scenario:

1) Consumer takes out an auto loan in 2020/2021 on an overvalued car
2) 2022 comes around and that overvalued car is now rapidly declining in value
3) With the car declining in value, consumer now owes more on the car than it is worth
4) Consumer no longer wants the car. Maybe they outgrew it. Or maybe it keeps breaking. So consumer wants to trade it in.
5) But dealer can’t trade the car in because the consumer owes WAY too much on it.
So dealer asks consumer for lots of money down to cover the difference.
6) But of course, the consumer doesn’t have $1,000s to cover the difference between what they owe on the car and what it’s worth. And here comes the perfect storm…
7) Dealer can’t sell consumer a car, consumer can’t buy a car, and, you guessed it, lender can’t finance a car! Everybody loses! Oh no! So what happens next?
8) Lender knows that most consumers are stuck in this situation, and does the following:

WAIVES THE OPEN AUTO STIPULATION.

Meaning, the lender lets the consumer buy the car KNOWING that they already have an open auto loan with another bank!

It’s becoming apparent that 2023 has the potential to be worse than 2008. How much worse, we will have to wait and see. In the meantime, it’s a very good idea to be prepared to lower your standard of living and focus your spending on a) things you really need, b) things that will last, and c) things that provide high value for the money.

Live well within your means and you’ll be all right. This is not the time to live a champagne lifestyle on a discount beer budget.

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The Economics of Clown World

Michael Hudson explains the basic operation of what passes for Clown World’s economic system in an interview:

MEGA Radio: In your new book The Destiny of Civilization: Finance Capitalism, Industrial Capitalism, or Socialism you state that the world economy is now fracturing between two parts, the United States and Europe is the dollarized part. And this Western neoliberal unit is driving Eurasia and most of the Global South into a separate group. You just stated this in an interview from November. Could you explain this for our outlet?

Michael Hudson: The split is not only geographic but above all reflects the conflict between Western neoliberalism and the traditional logic of industrial capitalism. The West has deindustrialized its economies by replacing industrial capitalism with finance capitalism, initially in an attempt to keep its wages down by moving abroad to employ foreign labor, and then to try and establish monopoly privileges and captive markets or arms (and now oil) and high-technology essentials, becoming rentier economies.

A century ago, industrial capitalism was expected to evolve into industrial socialism, with governments providing subsidized basic infrastructure services (such as health care, education, communication, research and development) to minimize their cost of living and doing business. That is how the United States, Germany and other countries built up their industrial power, and it also is how China and other Eurasian countries have done so more recently.

But the West’s choice to privatize and financialize its basic infrastructure, dismantling the role of government and shifting planning to Wall Street, London and other financial centers, has left it with little to offer other countries – except or the promise not to bomb them or treat them as enemies if they seek to keep their wealth in their own hands instead of transferring it to U.S. investors and corporations.

The result is that when China and other countries build up their economies in the same way that the United States did from the end of its Civil War to World War II, they are treated as enemies. It is as if U.S. diplomats see that the game is lost, and that their economy has become so debt-ridden, privatized and high-cost that it cannot compete, that it simply hopes to keep making other countries dependent tributaries for as long as it can until the game finally is over.

If the U.S. succeeds in imposing financial neoliberalism on the world, then other countries will end up with the same problems that the United States is experiencing.

Read the whole thing. It’s really good and it even references Crusader Kings. And Hudson points out that the cruelest thing Russia can do to Europe is not to invade it, but rather, to abandon it to the rapacious rule of the US financial elite.

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