Tag: economics

The global debt threat

I’ve been warning about the danger of the massive debt overhanging the global economy since 2002 to absolutely no avail. 

The problem is the giant, stagnant pool of loans that companies and people around the world are struggling to pay back. Bad debts have been a drag on economic activity ever since the financial crisis of 2008, but in recent months, the threat posed by an overhang of bad loans appears to be rising. China is the biggest source of worry. Some analysts estimate that China’s troubled credit could exceed $5 trillion, a staggering number that is equivalent to half the size of the country’s annual economic output.

Official figures show that Chinese banks pulled back on their lending in December. If such trends persist, China’s economy, the second-largest in the world behind the United States’, may then slow even more than it has, further harming the many countries that have for years relied on China for their growth.

But it’s not just China. Wherever governments and central banks
unleashed aggressive stimulus policies in recent years, a toxic debt
hangover has followed. In the United States, it took many months for
mortgage defaults to fall after the most recent housing bust — and
energy companies are struggling to pay off the cheap money that they
borrowed to pile into the shale boom.

In
Europe, analysts say bad loans total more than $1 trillion. Many large
European banks are still burdened with defaulted loans, complicating
policy makers’ efforts to revive the Continent’s economy. Italy, for
instance, announced a plan last week to clean out bad loans from its
plodding banking industry. Elsewhere,
bad loans are on the rise at Brazil’s biggest banks, as the country
grapples with the effects of an enormous credit binge.

2008 was the first stage, but instead of doing as I recommended,
permitting the bad loans to default, and allowing the banks and other
credit holders to go bankrupt, Ben Bernanke and the Republicans “saved
the economy” by kicking the can down the road just as Alan Greenspan did in 1987.

Granted, they kicked it further than I would have believed possible in 2009, but nevertheless, we’ve now reached it again, and it is bigger and heavier than it was 7 years ago. And the Fed’s metaphorical foot is broken.

Fear and fascination

Having successfully circumvented and stared down the American imperialists in both Crimea and Syria, The Saker suspects Vladimir Putin is about to purge Russia’s 5th column:

One of the possible signs of a purge to come is the fact that the Russian media, both the blogosphere and the big corporate media, is now very critical of the economic policies of the government of Prime Minister Medvedev. Most Russian economists agree that the real reason for the current economic crisis in Russia is not the falling price of oil or, even less so, the western sanctions, but the misguided decisions of the Russian Central Bank (such as floating the Ruble or keeping the interest rates high) and the lack of governmental action to support a real reform and development of the Russian economy. What is especially interesting is that vocal opponents of the current 5th column now get plenty of air time in the Russian media, including state owned VGTRK. Leading opponents of the current economic policies, such as Sergei Glazev, Mikhail Deliagin or Mikhail Khazin are now interviewed at length and given all the time needed to absolutely blast the economic policies of the Medvedev government. And yet, Putin is still taking no visible action. In fact, in his latest yearly address he as even praised the work of the Russian Central Bank. So what is going on here?

First, and to those exposed to the western propaganda, this might be difficult to imagine, but Putin is constrained simply by the rule of law. He cannot just send some special forces and have all these folks arrested on some kind of charge of corruption, malfeasance or sabotage. Many in Russia very much regret that, but this is fact of life.

In theory, Putin could simply fire the entire (or part) of the government and appoint a different Governor to the Central Bank. But the problem with that is that it would trigger an extremely violent reaction from the West. Mikhail Deliagin recently declared that if Putin did this, the West’s reaction would be even more violent than after the Crimean reunification with Russia. Is he right? Maybe. But I personally believe that Putin is not only concerned about the reaction of the West, but also from the Russian elites, particularly those well off, who generally already intensely dislike Putin and who would see such a purge as an attack on their personal and vital interests. The combination of US subversion and local big money definitely has the ability to create some kind of crisis in Russia. This is, I think, by far the biggest threat Putin his facing. But here also we can observe a paradoxical dynamic:

One one hand, Russia and the West have been in an open confrontation ever since Russian prevented the USA from attacking Syria. The Ukrainian crisis only made things worse. Add to this the dropped prices on oil and the western sanctions and you could say that Putin now, more then ever, needs to avoid anything which could make the crisis even worse.

But on the other hand, this argument can be flipped around by saying that considering how bad the tensions already are and considering that the West has already done all it can to harm Russia, is this not the perfect time to finally clean house and get right of the 5th column? Really – how much worse can things really get?

Only Putin knows the answer to this simply because only he has all the facts. All we can do is observe that the popular discontent with the “economic block” of the government and with the Central Bank is most definitely growing and growing fast, and that the Kremlin is doing nothing to inhibit or suppress such feelings. We can also notice that while most Russians are angry, disgusted and frustrated with the economic policies of the Medvedev government, Putin’s personal popularity is still sky high in spite of the fact that the Russian economy most definitely took a hit, even if it was much smaller than what the AngloZionist Empire had hoped for.

My strictly personal explanation for what is happening is this: Putin is deliberately letting things get worse because he knows that the popular anger will not be directed at him, but only at his enemies.

Vladimir Putin is a patient man, but he is also capable of acting very quickly when he senses an opportunity. And the global economic crisis combined with the European migrant crisis is going to permit him to act without fear of a coherent and effective response, particularly in light of the way in which the Trump insurgency has them far more concerned about their control over the seat of their power than about the fate of their vassals in Russia.

For five decades, the imperialist trump card has been the economy. Play along and get rich, refuse to play along and get replaced by someone else who will get rich. But the credit boom ended in 2008 and the game of musical chairs began. The imperialists are now half-occupied with making sure they have a seat; there is no room at the table for new players.

The game has changed. How the new game will take shape is, as yet, unknown, but I am certain the attempt to keep it going by banning cash and exerting total financial control will not only fail, it may take down those authorities who turn to it.

Forget “interesting”. These are frightening, but absolutely fascinating times. These are the interesting parts of history.

An avalanche of defaults

The mainstream economists are just beginning to catch up with The Return of the Great Depression, published in 2009.

The global financial system has become dangerously unstable and faces an avalanche of bankruptcies that will test social and political stability, a leading monetary theorist has warned.

“The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up,” said William White, the Swiss-based chairman of the OECD’s review committee and former chief economist of the Bank for International Settlements (BIS).

“Emerging markets were part of the solution after the Lehman crisis. Now they are part of the problem, too. Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief,” he said.

“It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something,” he told The Telegraph on the eve of the World Economic Forum in Davos.

“The only question is whether we are able to look reality in the eye and face what is coming in an orderly fashion, or whether it will be disorderly. Debt jubilees have been going on for 5,000 years, as far back as the Sumerians.”

The next task awaiting the global authorities is how to manage debt
write-offs – and therefore a massive reordering of winners and losers in
society – without setting off a political storm.

What is interesting to consider is if there is a connection between the nonsensical climate change propaganda and the coming avalanche of debt-defaults. If I were a member of the global elite who a) genuinely believed that resources like fossil fuels are limited, b) was in a position to decide how society’s winners and losers would be reordered, and c) did not subscribe to Christian morality and lacked a moral conscience, I would use the financial apocalypse and subsequent reordering to make sure that I, and my allies, held all the title to the resources necessary to ensure our control of them.

This would permit the construction of a global feudalism and extend the time in which the dwindling resources could be utilized, and would permit aristocratic resource-holders to retain a small First World technological society while the resourceless commoners are reduced to Third World technostasis.

That doesn’t even rise to the level of science fiction, of course, economics being a science only in the ancient sense of a field of knowledge, but even as pure economic imagination, it’s coherent and perhaps even worrisome in light of the present circumstances.

Already at trade war

Cuckservatives, and economically maleducated conservatives, don’t realize that the fact one is not fighting a war does not mean one is not already engaged in one:

In retort to Trump pointing out a necessary shift in trade position (a shift to put American interests first – a shift to stop the dependency on cheap import goods – a shift to use China’s dependency on access to our market to OUR advantage) Jeb Bush came back with an example of Boeing manufacturing.

Donald Trump, responding to Jeb’s Boeing example, pointed out China is forcing Boeing to open a manufacturing plant in China.  As typical from a candidate who is unfamiliar and unbriefed on the issue Jeb looked back incredulously and said:

    “C’mon man”…

There you have it.  There’s the disconnect.  Almost everyone missed it.  There, in that exact moment, is the spotlight upon all that is wrong with a professional political class; globalists dependent on Wall Street for their talking points.

Trump was 100% correct.

But the issue is bigger.

Not only is China demanding Boeing open a plant in China, the intent of such a plant provides an opportunity to explain why Trump is vitally important – and time is wasting.

China is refusing to trade with Boeing if the company does not move.  Why? It’s not about putting Chinese people to work, it’s about China importing their research and development, Boeing’s production secrets, into their country so they can learn, steal and begin to manufacture their own airliners.

This is just how China works.  In time, Comac, a state-owned, Shanghai-based aerospace company will then use the production secrets they have stolen, produce their own airliners, kick out Boeing, undercut the market, and sell cheaper manufactured airplanes to the global economy.

Boeing, the great American company that Jeb Bush thinks they are, becomes yet another notch on the Asian market belt.

All of those Boeing workers, those high-wage industrial skill jobs that support the American middle class, yeah – those jobs lost.   And the cycle continues.

Theory, logic, and fifty years of free trade experience all demonstrate the same thing: free trade impoverishes a wealthy nation and lowers its per capita wages toward the global average. And those are just the negative economic consequences. No amount of magical thinking and repeated chants of “ricardosmith ricardosmith” are going to change that.

If you want to go into more detail on the subject, read the relevant chapter of Cuckservative: How “Conservatives” Betrayed America.

THIS depression

I remember, when after publishing The Return of the Great Depression in 2009, various critics used to cite various “green shoots” reports in an attempt to taunt me for being incorrect. “What depression?” they would ask mockingly.

“Just wait,” I would tell them. “We are in the early stages of a depression that is bigger than the Great Depression.” Seven years later, even rosy-goggled mainstream economists like Brad DeLong are admitting that the situation is historically dire.

Economist Joe Stiglitz warned back in 2010 that the world risked sliding into a “Great Malaise.” This week, he followed up on that grim prediction, saying, “We didn’t do what was needed, and we have ended up precisely where I feared we would.”

Joe Stiglitz is right.

In the aftermath of 2008, Stiglitz was indeed one of those warning that I and economists like me were wrong. Without extraordinary, sustained and aggressive policies to rebalance the economy, he said, we would never get back to what before 2008 we had thought was normal.

I was wrong. He was right. Future economic historians may not call the period that began in 2007 the “Greatest Depression.” But as of now, it is highly and increasingly probable that they will call it the “Longest Depression.”

You don’t say…. Remember, while I am certainly capable of being wrong, I am well-read, well-educated, and significantly more intelligent than the norm. So, even if I am wrong, I usually have a fairly solid set of facts and logic behind the position I am expressing.

Perhaps more importantly, and unlike most of those who opine on such matters, I have no dog in the hunt. While I would very much like the economy to be booming, I am not financially dependent upon saying so.  While the measures that Stiglitz and Krugman were pushing were absolutely and utterly wrong – the “extraordinary, sustained and aggressive policies to rebalance the economy” would have only made things worse, as what was needed was a huge round of bankruptcies to clear the zombie debt – they were right to observe that the Neo-Keynesian measures utilized were doomed to be ineffective.

I wish I had been wrong about the Great Depression 2.0. But I wasn’t. And, as even Nate will likely admit now, I was also right about the global economy falling into worldwide deflation.

Unfortunately, this tends to indicate that I am likely correct about the world rapidly heading towards large-scale 4GW, including multiple civil wars, across more than one continent.

Open borders theory failed

Considering how badly mainstream economics has failed with even a partial implementation of the free movement of people, imagine how bad it would be if the globalists ever got their way and established a borderless world:

  • Immigrants make up 13 percent of the US population and 17 percent of the workforce. 
  • The number of Americans not in the labor force last month totaled 94,103,000.

It’s all there in Cuckservative, specifically, the chapter on economics and immigration. Free traders, you are wrong. There is no need to resort to quoting Smith, Ricardo, Hazlitt, or Mises. I know them better than you do.

The fact of the matter is that their theory was put to the test. And it failed. They are every bit as wrong in that particular regard as Marx and Keynes and Friedman were about the Labor Theory of Value, the General Theory, and monetary theory.

For decades, people opined about free trade and the free movement of peoples based solely on theory. Now, we have sufficient data to assess their predictions, and contrary to what many of us expected, (and I include myself in this regard), the free traders turned out to be completely wrong.

That doesn’t mean that autarky is the correct answer or that there are not significant problems with government-limited trade, but free trade has not only impoverished the nation, the free movement of people element has already put a number of nations in risk of extinction.

No, they shouldn’t have

Outsourcing your money to a self-interested outside party seldom ends well:

Finland should never have signed up to the single currency union, according to its foreign minister.

With the northernmost euro member now set to become the bloc’s weakest economy, the question of currency regime continues to resurface as Finland looks for explanations for its lost competitiveness. Timo Soini, who is also the leader of one of three members of the ruling coalition, the anti-immigration The Finns party, says the country could have resorted to devaluations had it not been for its euro membership.

The comments come as a former foreign minister gathers signatures in an effort to force the government to hold a referendum on euro membership. While polls still show most Finns don’t want to go through the process of exiting the currency bloc, there are signs that a plurality of voters think they would be better off outside the euro….

Without the option of currency devaluation, the government has calculated that Finland needs to lower its labor costs as much as 15 percent to catch up with its main trade partners, Sweden and Germany. Finland’s economy has shrunk for the past three years and Nordea, the biggest Nordic bank, predicts further contraction in 2015. Finland will be the weakest EU economy by 2017, when it will grow at less than half the pace of Greece, according to the European Commission.

Translation: when you can’t devalue your currency and share the burden equally throughout the entire nation, you have to pay all your workers less even though their expenses will remain high. So, instead of a devalued currency, you’ve lowered the quality of life of pretty much everyone who works for a living.

The sad thing is that this was all entirely obvious, and was in fact predicted, by many economists critical of the Euro. But social mood always trumps the naysayers who are battling the zeitgeist.

The Euro will fail eventually. This is not in doubt. The only question is how bad it has to get in the member nations before they reclaim their financial sovereignty.

The price of free trade

Remember when the idea was that offshoring all the manufacturing jobs would lead to better, higher-paying jobs in technology? Yeah, about that….

The IT workers at Cengage Learning in the company’s Mason, Ohio offices learned of their fates game-show style. First, they were told to gather in a large conference room. There were vague remarks from an IT executive about a “transition.” Slides were shown that listed employee names, directing them to one of three rooms where they would be told specifically what was happening to them. Some employees were cold with worry.

The biggest group, those getting pink slips, were told to remain in the large conference room. Workers directed to go through what we’ll call Door No. 2, were offered employment with IT offshore outsourcing firm Cognizant. That was the smallest group. And those sent through Door No. 3 remained employed in Cengage’s IT department. This happened in mid-October.

“I was so furious,” said one of the IT workers over what happened. It seemed “surreal,” said another. There was disbelief, but little surprise. Cengage, a major producer of educational content and services, had outsourced accounting services earlier in the year. The IT workers rightly believed they were next.

The employees were warned that speaking to the news media meant loss of severance. Despite their fears, they want their story told. They want people to know what’s happening to IT jobs in the heartland. They don’t want the offshoring of their livelihoods to pass in silence.

The Web-based workers that the Cengage employees are training to take over their jobs are believed to be in India. Cognizant applies for thousands of H-1B visas annually, and is one of
the top three users of the visa, according to government data. Cengage
employees reached for comment didn’t know what visa, if any, the
contract workers in their offices were using.

There are four things you need to keep in mind if you are an ardent free trader:

  1. The arguments justifying free trade have always been entirely theoretical, not empirical. In this way, they are no different than the incorrect pre-scientific logical conclusions that were subsequently proven to be false by modern science. At the time they were formulated, inexpensive shipping, the free movement of capital, and the mass movement of labor were unknown.
  2. The USA historically enjoyed its fastest periods of economic growth under protectionist, restricted-immigration periods.
  3. The post-WWII growth was not the result of any trade or economic policies, but a positive application of Broken Window theory. Every other industrial nation had its industrial capacity smashed, so the US benefited from an intrinsic infrastructural advantage for around 25 years.
  4. Free trade levels all prices throughout the market. That’s why a cashier in Miami gets paid about the same amount as a cashier in Portland. Even if free trade increases the overall amount of global economic growth, in doing so, it necessarily reduces wages and standards of living in the wealthier nations to bring them more in line with the wages and standards of living in the poorest nations.

Look, I was an ardent theoretical free trader for decades. I know the pro-free trade arguments better than you do; my father gave me Free to Choose to read when I was ten years old. But the fact is, the theoretical arguments are incorrect; the conclusions their logic predicted have turned out to be observably wrong.

And perhaps you remember what I wrote about how half of all young Americans will have to leave the country in order to find work under a true global free trade regime?  The stage for that is already being set.

Offshore outsourcing is having “a fairly strong impact” on IT employment, said Janulaitis. Students coming out of college are facing trouble starting a career “and a lot of that is driven by jobs that are taken by non-U.S. nationals in our economy, and a lot of that is H-1B [visa holders],” he said.

Economics and science fiction

But I repeat myself. Speaking first of the latter, all three QUANTUM MORTIS novels are now available for free for Kindle Unlimited and Amazon Prime subscribers. If you were vaguely curious about them, but not enough to actually go out and buy them, here is your chance to test drive them. I’d particularly recommend checking out QUANTUM MORTIS: A MIND PROGRAMMED, which is the literary update and remix of my all-time favorite SF novel, THE PROGRAMMED MAN.

From an Amazon review: “Space Noir. That’s what this is. It’s a classic spy vs spy tale, but this time the stakes are much higher and there are enough twists and turns to make a Finnish rally driver happy.”

QUANTUM MORTIS: A MAN DISRUPTED and QUANTUM MORTIS: GRAVITY KILLS are also available via KU.

And for those who are more interested in economics than in science fiction (to the extent that one accepts the idea that the former is not a subset of the latter), here are the first week’s readings in my draft econ curriculum. Don’t ask me where you can find the texts, if you can’t figure out how to do that, you needn’t bother with the readings.

1. What is Economics    

  • RGD Introduction
  • MURPHY Part 1 Lesson 1
  • HAZLITT Part 1-1

RGD: The Return of the Great Depression, Vox Day
MURPHY:  Lessons for the Young Economist, Robert Murphy
HAZLITT: Economics in One Lesson, Henry Hazlitt

Out of date and out of touch

For once, the Washington Post is correct about the complete cluelessness of the Republican establishment:

The dirty little secret in Republican politics these days is that the longtime pillars of the party — politicians and ex-politicians, major donors and the consultant class — are further removed from the views of the GOP base than at any time in modern memory. They simply do not understand what the heck is happening within and to their party.

John Sununu, a former New Hampshire governor and longtime GOP hand, is one of the few who is willing to admit just how clueless he is about, among other things, the rise of Donald Trump and Ben Carson. Here’s what Sununu told the New York Times’s Jonathan Martin:

    I have no feeling for the electorate anymore. It is not responding the way it used to. Their priorities are so different that if I tried to analyze it I’d be making it up.

Sununu is far from alone in GOP  ranks. Think about how most establishment Republicans saw this race playing out: Jeb Bush gets in, raises a ton of money and blows everyone else out of the water. By this point in the year, most of the consultant class would have predicted that Bush would be solidly in first place in most of the early states and simply polishing his policy résumé for the general-election fight to come.

But the truth that Martin exposes via Sununu is that the old ways of doing things in the Republican Party have changed significantly since even George W. Bush was elected in 2000 — running, it’s worth noting, essentially the same campaign his younger brother is right now. Strategies — get big (in terms of organization), tout electability and inevitability, keep yourself close enough to the center that you can be viable in a general election — that once were fail-safe just don’t work in this electoral environment where the dominant sentiment of voters is anger about everything.

The social mood has shifted. What works when the voters are generally optimistic does not work when they are increasingly fearful, angry, and desperate. It’s fun to speak knowledgeably of Ricardo and wax eloquent about how immigrants are enriching the economy when you’re pulling down six digits at the office, but the cruel realities of supply and demand are a little more likely to strike home when you’ve been out of work for 18 months and haven’t had an interview in your last ten job applications.

What we’re seeing is an establishment that is out of sync with reality because they believe the false media narrative about the state of the union, whereas the grass roots has been forced to confront it.