Financial, Economic and Social Mood Update (August 1, 2020)
The stock market indices continue to remain near record high nominal values despite the fact of very few companies remaining profitable and GDP down by as much as 55 percent as of June 5th (per the Atlanta Federal Reserve Bank). When reality sets in, expect both the equity and real estate markets to drop to near zero. 30 percent of Americans failed to pay their monthly mortgage debt in June – which now exceeds the percentage of the US labor force laid off since the start of the pandemic (54 million Americans already having filed for first time unemployment benefits = 32 percent of the 167 million people in the US labor force at the start of the pandemic). According to a study by the University of California at Santa Cruz, up to 66 percent of businesses in the USA have shut down permanently since February 2020. 80 percent of Americans are now paying only part or none of their monthly debt servicing obligations according to the NSA (National Security Agency). 60 percent of all restaurants in the USA have shut permanently since March 2020 according to a survey done by www.yelp.com.
The largest pension fund on earth is the Japanese government pension fund, and it lost 11 percent of its value in the first quarter of 2020. Pensions worldwide (regardless of country) are in a similar predicament. Remember that most equity funds consistently UNDERPEFORM the general stock market indices – this has been the case for decades – so much for “professional” management. The German auto market was off by 35 percent in June 2020, but the Chinese auto market (the largest market on earth) has seen record sales for the past 2 months and is now selling new vehicles at an annual rate of 27 million units. The global human fertility rate (i.e., average number of children born per woman per lifetime) is down to a record low 1.7 (a rate of 2.1 is necessary just to maintain zero population growth) – all of this translates into imploding economic demand. The “high” estimate for current world population is 7.8 BILLION people (per the UN), but a current internal study done by Walmart (for the purposes of opening stores in more countries) places the current global population at just 6.5 BILLION people – 17 percent below the UN “high” estimate and an incredible 58 percent below the highest UN projection for the year 2100 of 15.6 BILLION. With current trends, it does not look like any of these high end numbers will ever materialize.
The only economy which managed positive growth for the second quarter of 2020 was that of Mainland China, which reached an annual economic growth rate of 3.2 percent – more on this in next month’s blog. The Chinese auto market is also the largest on earth, with an annual rate of sales of 27 million new units.
The first attempt at global governance or oversight was the League of Nations, which lasted from 1920-1946. Its notable failure was the occurrence of the Second World War, which for all intents and purposes lasted from 1937-1945 when one includes the Japanese invasion of China which preceded the German invasions of Austria, the former Czechoslovakia and Poland. United Nations (UN) was founded in 1945 and has 195 member states today out of as many as 285 independent nations and dependent territories (colonies) worldwide. Each member state has one (1) seat in the UN regardless of its population – a situation similar to the United States Senate, where 50 states have 2 Senators each regardless of their population. Washington, DC and the dependent territories of the USA have no voting power in either the US Senate or the US House of Representatives (the House being the Lower Chamber of American government).
The most representative trans-national legislative body is that of the European Union (EU), which traces its founding back to the European Coal and Steel Community in 1952. The European Parliament is based in the city of Strasbourg and is elected every 5 years, the most recent election having been in 2019. The population of the European Union (EU) is 447 million, making it significantly larger than the USA. The only more populous countries outside of the EU are China (22 percent of the world population) and India (20 percent of the world). The EU comprises up to 7 percent of the global human population. Mainland China is governed by a communist national front which includes both the communist party (68 percent of the total) and other parties (including the Chinese Nationalist party which today rules Taiwan). India is the world’s largest democracy, but is today ruled by a Hindu Nationalist party (56 percent of the total) which suppresses equal rights for minority groups in India such as Muslims and Christians – a very regrettable state of affairs.
Parliamentary Systems
The earliest modern constitutions (such as the “Magna Carta”) and parliaments gave representation to the upper nobility (the crown), the lesser nobility (provincial estates) and to the upper and lower clergy (the Church). The American revolution (1776) and the French revolution (1789) gave rise to most parliamentary systems we know today. The Americans followed the Anglo-Saxon British model of a “first past the post system” for the House of Representatives, where members of Congress are elected from individual districts by plurality (not necessarily majority) of popular votes. Most continental European parliaments are elected based upon “proportional” national representation, whereby political parties are awarded a percentage of seats closely resembling their share of a national popular vote. Voting electorates were initially comprised of Caucasian males with a certain amount of property or wealth (share of taxes paid). Eventually, property ownership & wealth requirements were removed, and electorates were expanded to include women, non-whites and younger voters.
“Communist” or “socialist” systems in the former Eastern Bloc, the former Soviet Union as well as modern day China are comprised of “national fronts” whereby all political parties have to vote similarly on most issues. Non-communist parties are allowed to exist, but they must operate within very limited constraints. These parties basically exist to pay lip service to different parts of the electorate. Fascist systems did not even bother to do that – they basically only allowed single national parties, such as the former National Socialist (“Nazi”) party during the time of the Third Reich (1933-1945).
Modern Germany (since 1945) has a “mixed” system whereby they do elect parliamentary representatives from individual districts such as in the USA, the UK, Canada, Australia, New Zealand and South Africa, but a party’s overall number of seats is dependent upon its performance in the national popular vote. A minimum 5 percent threshold was required to discourage tiny “splinter” parties. The bad part of this is that small democratic groups are prevented from any parliamentary representation. Perhaps a better idea would be to be stricter where parties do not respect democracy at all – in other words, to legally ban politically extremist political parties such as neo-fascist parties.
The American Electoral College
American presidents since 1789 have been indirectly elected by the “Electoral College” system. In this system, presidential candidates campaign to win individual states to acquire their electoral votes. The Electoral College system has given the USA remarkable political stability compared to many other democracies, but it is a very indirect and antiquated form of democracy which favors states with smaller populations – and often in contradiction of the overall popular vote. In only 5 national elections has a winning candidate won the American presidency with an electoral majority but not the largest percentage of the popular vote. These elections took place in 1824 (decided by the House of Representatives as no candidate even won an electoral majority), 1876, 1888, 2000 and 2016. The GOP won all 5 of these elections, as the Republican Party tends to have stronger support in states with smaller populations.
If the United Nations (UN) ever moves in the direction of establishing a lower legislative chamber below its General Assembly (which has some similarity with the US Senate), a likely choice would be modelled after the European Parliament in Strasbourg. The largest political groups in the European Parliament are the Christian Democrats (27 percent), the Social Democrats (21 percent) and the Liberals (14 percent). Greens (environmentalists) have 10 percent, the European Left has 6 percent and ultraconservative or far-right (neo-fascist) parties comprise much of the remaining 22 percent – by far the most disturbing political phenomenon in Europe since 1945.
