This article was published by The McAlvany Intelligence Advisor on Tuesday, December 22, 2015:
Every year about this time the Copenhagen-based Saxo Bank offers up its most outrageous predictions for the coming year. Some of them are doozies:
This article was published by The McAlvany Intelligence Advisor on Monday, September 14, 2015:
Collection of Chinese renminbi yuan banknotes.
In his 2001 paper “Building Better Global Economic BRICs,” chairman of Goldman Sachs Asset Management Jim O’Neill developed the acronym for Brazil, Russia, India and China. He made the case that the BRICs symbolized the shift of global economic power away from developed nations, estimating that they might overtake the G7 nations – Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States – as early as 2027.
Modifications were necessary to dampen O’Neill’s enthusiasm, with GS recalculating that it wouldn’t happen before 2050. By December 2012 the Council on Foreign Relations, in itsForeign Affairs publication, was forced to refute even that modest projection:
This article appeared online at TheNewAmerican.com on Monday, September 14, 2015:
News that China has offloaded more than $100 billion of U.S. Treasuries in August to support its currency and its cratering stock market caused many observers to raise concerns about China waging an “economic war” against the United States. It’s a threat the Chinese last expressed during the 2012 presidential election, that Beijing would “use its financial weapon to teach the U.S. a lesson” if it insisted on flouting Chinese interests, i.e., by selling arms to Taiwan, for example.
It now appears that the shoe is on the other foot. The Asian tiger is now a pussy cat, as its economy continues to crater and the Chinese central bank moves to weaken its currency and shore up its stock markets.
In the days following Beijing’s surprise announcement on August 11 that it was devaluing its currency by two percent, the yield on the U.S. 10-year Treasury note jumped 10 percent, from
This article appeared online at TheNewAmerican.com on Wednesday, August 12, 2015:
In an interview at CNN, Republican presidential candidate and billionaire businessman Donald Trump was aghast at the decision by China’s central bank to allow the country’s currency to more closely reflect its real value by letting it drop by more than two percent:
They’re destroying us! They keep devaluing their currency until they get it right. They doing a big cut in the yuan, and that’s going to be devastating for us.
This was echoed by Thomas Gibson, head of the American Iron and Steel Institute: “Our government must address the massive damage that China’s undervalued currency is causing to our nation’s manufacturing sector, especially the steel industry.”
Trump failed to make clear exactly who “us” is. By allowing the yuan to be valued daily as the market deems it, rather than having it arbitrarily pegged loosely to the value of the dollar, every consumer at Walmart is going shortly to see a sign in their window:
This article was published by The McAlvany Intelligence Advisor on Wednesday, July 8, 2015:
Nigel Farage, named “Briton of the Year” in 2014 by the London Times, has finally found his voice. He noisily departed the Conservative Party in 1992 after the signing of the treaty that created the European Union to start his own UK Independence Party (UKIP). His criticism of the EU has been steady ever since, culminating in his eulogy on Monday: “The European Union is Dying Before our Eyes.”
According to Farage, Sunday’s referendum in Greece sealed its death warrant, even if somehow the Greek PM Alexis Tsipras is able to come to terms with the troika and have them turn on the financial spigot once again: “It [was] a crushing defeat for those Eurocrats who believe that you can simply bulldoze public opinion.” He added,
This article first appeared at The McAlvany Intelligence Advisor on Wednesday, May 20, 2015:
It’s no surprise, really. Most mainstream economists look at the world through Keynesian lenses, they attend the same conferences, read the same reports, are employed by companies in the same industry, hold degrees from the same universities, and are rewarded for having a view that doesn’t stray from the norm, even if that view is wrong. It’s a perfect reflection of the herd mentality: the impulse or tendency toward “clustering,” reflecting the need for conformity. It’s how economists make weathermen look good.
If their view turns out to be wrong, they adjust, slowly. If they are challenged or threatened,
This article was first published by The McAlvany Intelligence Advisor on Friday, May 8, 2015:
Wolf Richter is one observer of the present world economic scene who hasn’t had his mind altered by drinking the Kool-Aid ladled out in Washington and in the economics departments of so many colleges and universities. After holding a number of C-level positions (CEO, COO, etc.) in large and successful private companies, he chucked it and went to live for a while in Switzerland. He started a blog with the ghastly name of Testosterone Pit, which he thankfully changed to Wolf Street last summer.
He has been watching economic events unfold (and unravel) in China for some time, but the latest from the Shanghai Containerized Freight Index (SCFI) so startled him two weeks ago that he thought it was either a misprint, or that the index would bounce right back from its precipitous fall.
This article first appeared online at TheNewAmerican.com on Thursday, May 7, 2015:
Two weeks ago the Shanghai Containerized Freight Index (SCFI), which tracks shipping rates from Shanghai to the world, fell off a cliff: down a breath-taking 67 percent from a year ago. Wolf Richter thought it was a statistical fluke.
It was no fluke. In the next two weeks the SCFI for Northern Europe fell another 14 percent, an all-time low. Wrote Richter: “Something big is going on in the China-Europe trade.”
The collapse is being echoed by other indexes reflecting the breathtaking decline in China’s exports. For example
This article first appeared online at TheNewAmerican.com on Monday, May 4, 2015:
Last Thursday the London Daily Telegraph’s assistant editor, Jeremy Warner, reported an astonishing statistic: Almost a third of all government debt in the eurozone is paying negative interest rates. That’s more than $2 trillion in government bonds, and, it appears, investors are happy that they aren’t paying even more.
Fifty percent of French bonds now trade with a negative yield, while 70 percent of Germany’s bonds trade at a negative yield. More remarkably, in Spain, which was on the verge of insolvency just a few years ago, 17 percent of its government bonds now trade with a negative yield.
This is counterintuitive, which explains why Keynesians, those who believe that “demand” in an economy can be artificially increased by manipulating taxes and the money supply, have no explanation for it. In theory,
This article first appeared at The McAlvany Intelligence Advisor on Monday, May 4, 2015:
There’s a corollary to the insanity rule. It’s called the Keynesian Corollary: When something doesn’t work, do more of it. When history is written about the coming Second Great Recession, historians will likely note July 2012 as the turning point. That was when Mario Draghi, head of the European Central Bank (ECB) said during a panel discussion that the ECB “is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”
Other historians might list that as one of the top ten “famous last words” ever issued by a human being. Since that moment bond yields across the world have dropped, and dropped, and dropped. On Thursday Jeremy Warner, the London Daily Telegraph’s assistant editor, announced that
This article first appeared online at TheNewAmerican.com on Friday, March 13, 2015:
The latest numbers out of China no longer mask its economic decline. Chinese industrial production “slowed at its sharpest rate in the first two months of the year since the global financial crisis” shouted the Financial Times on Wednesday.
Wang Tao, UBS’ chief economist on the Chinese economy, was dour: “Today’s disappointing data release highlights just how quickly domestic demand is deteriorating as the ongoing [real estate] downturn continues to spread its negative impact through the economy.”
In China that impact is huge,
This article first appeared online at TheNewAmerican.com on Monday, February 9, 2015:
The China bubble is imploding at an accelerating rate and has caught Wall Street economists off guard, according to the Wall Street Journal on Sunday.
Why they should be surprised is hard to fathom, given the predictions offered for months on end about the ending of the great Chinese economic “miracle.” As recently as three weeks ago, Minxin Pei, professor at Claremont McKenna College and professional observer of the Chinese economy, said, “If the official Chinese data should be believed at all … China’s GDP growth at 7.4% in 2014 … could have been worse.”
Indeed, it probably was.
This article first appeared at The McAlvany Intelligence Advisor on Monday, February 9, 2015:
Nearly everyone has an opinion about forecasting and its dangers. Some, like Yogi Berra, will tell you, “It’s tough to make predictions, especially about the future.” Others, like John Kenneth Galbraith, will say, “The only function of economic forecasting is to make astrology look respectable.” Still others will warn about setting either the exact event, or its timing. Do either one, they say, but not both.
Apparently the forecasters enlisted by the Wall Street Journal last week to give their best estimates of growth in China weren’t listening, or didn’t care. Or perhaps they believe in Keynesian miracles alongside those of the Tooth Fairy.
Nevertheless, when asked about import and export growth in China for the month of January, they missed reality by a country mile. The Journal tallied up the results and their seers and prognosticators concluded that
This article first appeared online at TheNewAmerican.com on Thursday, December 4, 2014:
Banknotes of the Swiss franc
The Swiss voted down the initiative “Save Our Swiss Gold” on Sunday, November 30, by a margin of three to one, rejecting efforts to shore up the Swiss National Bank’s (SNB) balance sheet. Switzerland, a direct democracy, entertains an average of five such referendums every year, and most of them fail. This initiative would have required the SNB to boost its gold bullion holdings from its current eight percent level to 20 percent over the next five years. It would also have required the central bank to repatriate its foreign-held gold reserves, while prohibiting it from ever selling any of those reserves in the future.
When first proposed, speculators bought the Swiss franc cheap, hoping to sell it dear if the initiative passed. Investors in gold were holding their breaths as well, noting that
This article first appeared at The McAlvany Intelligence Advisor on Wednesday, December 3, 2014:
Ali Al Naimi
One of the most famous homespun quotes Warren Buffett ever uttered is this: “Only when the tide goes out do you discover who’s been swimming naked.” With the decline in crude oil prices of nearly 50 percent since June, more and more people are finding themselves swimming naked, or they’re about to.
Consider the formerly invincible oil cartel, OPEC, which seems to be suffering from delusions of its former glory by taking on oil producers in America. Instead of cutting production in order to “stabilize” oil prices, the cartel, led by the aging big kahuna, Saudi Arabia, has decided to
This article first appeared at TheNewAmerican.com on Thursday, Thanksgiving Day, November 27, 2014:
When news from Vienna arrived on Wall Street early Thanksgiving morning that OPEC wasn’t going to cut its production quotas to stabilize crude oil prices, those prices immediately fell even further, touching lows not seen in four years. West Texas Intermediate briefly touched $70 a barrel while Brent crude was close behind, at $73.
Oil hit a high of $147 a barrel in July 2008, so Thursday’s drop represents an astonishing 52-percent decline in just over six years. This coincides with an 80-percent increase in crude oil production by the United States over that same period. As economies around the world struggle to regain their footing, thanks to failing Keynesian policies, the demand for crude remains about where it was 10 years ago. With flat demand and increasing supply, it was only a matter of time before prices started to fall.
American consumers are benefitting enormously,
This article was first published at The McAlvany Intelligence Advisor on Monday, September 8, 2014:
In her promo for her article titled “America’s Car Capital Will Soon Be … Mexico,” which appeared in Forbes on Monday, Joann Muller claimed that “wise trade policies south of the border have quickly created the global auto industry’s factory floor” and wondered rhetorically if Washington was listening or watching to learn Mexico’s lesson. She wrote:
Seemingly overnight, Mexico’s automotive output has soared, bolstered by a flood of investment from foreign-based carmakers, including Nissan, Honda, Volkswagen, and Mazda. With $19 billion in new investment, production has doubled in the past five years to an estimated 3.2 million vehicles in 2014.
And it’s all because of NAFTA, she claims:
This article first appeared at the McAlvany Intelligence Advisor on Friday, August 29, 2014:
What happens when a college professor meets up with a graduate student from Oxford University, intending to solve the world’s economic problems? What happens when they consider that the previous attempts to revive the economy have failed and their recommendation is to do more of the same?
The title of their resultant article in Foreign Affairs – the premier publication of the Council on Foreign Relations – explains it all:
This article first appeared at TheNewAmerican.com on Thursday, August 28, 2014:
Mark Blythe, a professor at Brown University, and Eric Lonergan, a hedge fund manager living in London, have conjured the ultimate solution to a stagnant economy: Central banks should give away free money.
These two authors of a lengthy and allegedly erudite article in the September/October 2014 issue of Foreign Affairs, published by the Council on Foreign Relations (CFR), appear to be living in an alternate universe, as their suggestion, if it were fully implemented, would push the world’s economy back to the Dark Ages.
The article, entitled “Print Less but Transfer More: Why Central Banks Should Give Money Directly to the People,” rests on the false assumption that
This article was first published at TheNewAmerican.com on Monday, July 14, 2014:
Kansas City, Missouri’s Skyline
When Kansas Governor Sam Brownback signed into law the first of several reductions in his state’s income taxes back in May 2012, he wrote:
Our new pro-growth tax policy will be like a shot of adrenaline into the heart of the Kansas economy. It will pave the way to the creation of tens of thousands of new jobs, bring tens of thousands of people to Kansas, and help make our state the best place in America to start and grow a small business.
By cutting the top tax bracket by 25 percent and eliminating taxes on small businesses altogether, he expected great things to happen:
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