Financial, Economic and Social Mood Update (November 1, 2016)
The Dow Jones 30 Industrials Index reached a new nominal high value on August 15, 2016 and this record is still in place – the index remains about 800 points below the record as of November 1, 2016.
There is a need to rise above the chatter and the nonsense of the body politic in much of the world and assess where we now are and where we are going in the near future. Much (but not all) of the formerly industrialized world is in decline – this is evident in the per capita GDP rankings which I discussed in last month’s update. The USA is on the cusp of becoming a de facto Third World country. The overwhelming majority of Americans are recipients or so-called “beneficiaries” of a massive socialist welfare state. They are being supported or held up by a tiny minority of Americans who still support the US economy financially, by artificially low interest rates, by artificially high bond prices, by artificially high corporate stock prices, and by an artificially highly valued US Dollar which is still the number one global reserve currency since 1944. None of this will endure much longer. Most of the inland US states already resemble a Third World country – income levels, demographic implosion and real property values (or the lack thereof) reflect this fact. Canada is considerably more affluent and better off than the USA on a per capita basis. Much of Latin America is something of a global backwater – it does not partake in the economic boom currently enveloping much of Asia and Africa. Mainland China has become and will continue to become the ancient global superpower which she used to be. Much of Asia, Africa, the former USSR, Europe and the Pacific Island realm is now anchored to her massive economy, massive population and rapid economic growth. Japan continues to be in the midst of a massive demographic collapse, which is reflected in collapsing income, dying mid and small sized cities (even the world’s largest urban area of Tokyo-Yokohama is now in population decline) and in the fact that within a decade fully one-third of Japanese residences will be vacant. Russia and the former USSR continue to be under harsh economic sanctions mostly influenced by the USA and by the EU – this is reflected in Russia’s conflicting status as both the number one military nuclear power on earth and as a virtual Third World Country in terms of per capita GDP. Needless to say, this is an extremely dangerous situation which threatens world peace, prosperity and stability.
The declining empire of the USA maintains a highly hostile foreign policy which places a declining US military in well over 100 countries all over the globe. The USA seeks to antagonize the likes of Mainland China, Russia, former Soviet Central Asia, Iran, North Korea, Syria, Afghanistan and Iraq. This could well lead to the USA and Russia coming to military blows against each other in theaters of war such as Syria – something which the controlled American media has virtually kept silent from the American public. 52 percent of the Russian population believes that a war with America is coming.
The European Union (EU) is fighting for its very existence due to a backlash against overly intrusive, socialistic and culturally dis-respectful central rule from Brussels. This has been witnessed in the UK decision to exit the European Union, in the overwhelming Hungarian rejection of the EU open door immigration policy toward the Middle East & North Africa (95 percent of the Hungarian electorate voted against the EU and in favor of their right wing government in Budapest), and it will likely continue in Austria, where an ultra-conservative right wing party may succeed in toppling the current left wing Social Democratic & Green presidential coalition government.
Much of Central Africa remains the most impoverished corner of the world, but this may not continue due to the emerging economic relationship with Mainland China. North Africa is more similar to the Middle East and to Central Asia (it is majority Islamic), and Southern Africa is considerably more affluent when compared to Central Africa. Much of South Africa, Namibia, Botswana and even Angola now approach “First World” economic development status.
US policy in the Philippines (in place since the USA took the Philippines, Guam and the island states of Micronesia & Palau away from Spain by armed force in 1898 – the very same year that the USA annexed by force Hawaii, Puerto Rico and Guantanamo Bay) is now at risk due to the Philippines finally asserting its political and economic independence and a political “tilt” toward both Mainland China and Russia. The sole remaining lackey states of the USA in East Asia and the Pacific island realm are now Japan, Australia, Guam, American Samoa and the Commonwealth of the Northern Mariana Islands.
In past monthly financial updates, I have written about the ongoing decline of the fossil fuel industry (coal, crude oil and natural gas products), the rise of renewal energy (nuclear, bio fuels, geothermal, wind turbine and solar panel power). Many countries around the world (including very large countries) have converted and are in the active process of converting their national power grids over to the latter alternatives. Norway, the Netherlands and now Germany have finally introduced parliamentary legislation to eliminate all brand new gasoline & diesel motor vehicles and ships by the year 2030 (new article from the German media): http://www.spiegel.de/auto/aktuell/verbot-von-benzin-autos-und-diesel-autos-ausgebrannt-kommentar-a-1115707.html. Even if one does not read & understand German, you can copy and paste the article into one of the very many free “translate” pages on the Internet. Norway is a small, highly affluent country with 5.2 million people (there are 12 million Norwegians worldwide) and it is a long standing member of the EFTA (the non-EU part of Western Europe). Norway has already used much of its crude oil & natural gas wealth to convert to non-fossil fuels. Germany and the Netherlands are two highly affluent Germanic member states of the European Union. Germany has 82.2 million inhabitants (there are 210 million Germans & German-speaking people worldwide) and the Netherlands has 17.1 million inhabitants and there are 29 million Dutch people worldwide. The German and the Dutch languages are very closely related – modern Dutch (which includes Flemish from Belgium and Afrikaans from Southern Africa) is very similar to modern Low German or “Plattdeutsch” which is spoken in parts of Northern Germany, Southern Denmark, East Prussia (Polish Masuria), Russia (the Volga Germans) and Mexico (German Mennonites). In any case, the future of fossil fuels will become ever more limited. Regions which remain overly dependent upon them for both economic activity and government revenue (in particular Russia, the USA, Mexico, Venezuela, Nigeria, the Middle East and North Africa) will continue to experience economic despair and decline.
Another important topic discussed in previous monthly financial updates is that of debt, and how grossly elevated levels of debt (which includes conventional debt, unfunded liabilities and contingent liabilities) will necessitate massive currency devaluation in the USA, the EU and Japan – there is simply no other way to eliminate the debt, because it cannot and will never be paid off. We are starting to see the ramifications of this once more in pending money center bank failures (example = Deutsche Bank of Germany), public sector government bankruptcy (Greece, Cyprus, the US Commonwealth of Puerto Rico) and in likely bankruptcies (State of Illinois, City of Dallas in Texas). Contingent liabilities will be the downfall of money center banks, whereas unfunded liabilities will be the downfall of the socialist welfare state. The USA, the EU and Japan will likely have to devaluate their fiat currencies to put them on par with the much more normal level of debt in the rest of the world. In order to do this, the US Dollar will have to be devalued by 1,957.4 fold (the USA owes 97.87 percent of the world’s debt), the Euro will have to be devalued by 32.8 fold (the EU owes 1.64 percent of the world’s debt) and the Yen will have to be devalued by 8.8 fold (Japan owes 0.44 percent of the world’s debt). The rest of the world combined owes just 0.05 percent of the world’s debt. This will turn the USA, the EU and Japan into de facto Third World countries. Back on July 23, 2013 Safe Wealth Group of Switzerland (an affiliate company of Elliott Wave International) forecast that gold bullion would eventually rise to US $32,000 per ounce by 2019. On October 10, 2016 they updated this forecast for gold to increase up to US $40,000 per ounce by 2018 – in other words, a higher target within a shorter span of time. The only reason for this is the deteriorating political, economic, financial and social situation in the USA. This would equal a 31.8 fold devaluation of the US Dollar by 2018. I am already seeing a 2.1-fold devaluation in the US Dollar by sometime in 2017 based upon the daily currency futures market. What does this mean? Pretend that your income remains constant from now until 2017, but that by 2017 everything you buy (all goods and services) will be 2.1 times as expensive. The 1,957.4 fold devaluation of which I speak of would be an all-time historical worldwide record – worse than the current records (in order of magnitude) of Hungary (1946), Mainland China (1949), Zimbabwe (2008), the Free city of Danzig (1923), Yugoslavia (1994), Mexico (1993), Weimar Germany (1923), Greece (1944), Armenia (1993), Turkmenistan (1993), Taiwan (1948), Peru (1990), Bosnia-Herzegovina (1992), France (1796), Ukraine (1992), Poland (1923), Nicaragua (1991), the Congo-Zaire (1993), Russia (1992), former Soviet Georgia (1994), Tajikistan (1992), Argentina (1990), Bolivia (1985), Belarus (1992), Kyrgyzstan (1992), Kazakhstan (1992), Austria (1922), Bulgaria (1997), Azerbaijan (1992), Uzbekistan (1992), Chile (1973), Estonia (1992), Angola (1996), Brazil (1990) and Vietnam (1998). These were hyperinflations of between 774 percent (Vietnam in 1998) and 75,624 percent per annum (Hungary in 1946).
A Third World War in 2016 or 2017?
Unfortunately most of the media in the west is not telling us about this. The USA and Russia could soon come to armed blows over the war in Syria. Syria is an ally of Russia, and has been so since 1956. The USA and its allies (NATO, the EU, Australia and the Persian Gulf states of Saudi Arabia, Jordan the UAE and Qatar) have been attempting yet another “change of regime” to topple the pro-Russian government since 2011. Casualties to date include 470,000 dead and 12.4 million refugees out of a total population of just 17.1 million. Since the fall of the former Soviet Union in 1991, the USA and its allies have “taken over” 22 countries which were formerly part of the Soviet bloc. Russia and its main global military allies (Belarus, China, North Korea and Iran) have in turn “taken over” (or are attempting to convert) 12 countries. Recent advances include Chinese port facilities in Greece, a Chinese airbase in the Azores Islands (part of Portugal), Philippine government tilt toward China and Russia, a 95 percent popular rejection of EU refugee policy by the voters of Hungary, Turkey & Iraq making common cause with Russia in terms of Middle Eastern policy, and Russian food shipments to the starving population of Venezuela. In spite of these recent Russian successes, Russia has been losing the post-Cold War competition with the USA and the EU since 1991.
Russia has now appeared to draw the line. The Russian government has told the world that any American or NATO attacks on Russian or Syrian forces in Syria will be considered as an act of war against Russia. Russia recently told its global diplomats and businessmen to send their school aged children back home to Russia immediately. Russia recently held nuclear air raid drills in which 40 million people from her larger cities partook. Russia has moved more anti-ballistic missile defenses to her westernmost bases in East Prussia. She is also sending her sole aircraft carrier battle group to Syria via the English Channel, the North Atlantic and the Mediterranean Sea.
If Hillary Rodham Clinton is elected President of the USA on November 8, it is very likely that a Third World War will erupt between the USA and Russia over Syria. Donald Trump (Republican Party), Gary Johnson (Libertarian Party) and Jill Stein (Green Party) have all said that they do not want war with Russia. Hillary Clinton and her fellow hawks within both the Democratic and the Republican Parties (such as Senator John McCain of Arizona) have stated that they want to enforce a “no fly” zone over Syria, which will directly confront the air forces of Russia, Syria, Iran and Iraq – Iraq has since become an ally of Russia in Syria.
The Russian armed forces have 1 million active personnel, 2 million active reservists and 20 million inactive reservists. The main nuclear military powers in the world (in terms of strategic yield in mega-tonnage) are Russia, the USA, China, the UK, France and North Korea. Russia and her allies have 61 percent of the world’s explosive nuclear arsenal. The combined nuclear arsenals of all countries have more than enough explosive and radioactive power to wipe out all life on earth.
The very negative social mood in the world today can be explained through the depressed global stock market. In the largest market of the USA, the Dow has made no net gain in real money terms (Dow/Gold Value) since 1996 or 20 long years. In Japan (which had the largest global stock market in 1989), there has been no net gain in nominal value since 1985 or 31 years ago. Average stock markets throughout both Europe and Asia are even more depressed than in the USA, and we have not yet seen the “real” global crash.
The US Presidential election scheduled for November 8 appears to have become very close – perhaps too close to call. Clinton is running perhaps one percentage point ahead of Trump based upon all national polls in which the media is overwhelming slanted in favor of the Democratic Party side. Assuming no toss-up states, Trump has something like 259 of the 270 Electoral College votes necessary to win the American Presidency. One or perhaps 2 additional US states (such as Nevada and Colorado) would tip the scale in his favor. Gary Johnson (Libertarian Party) is running at about 5 percent and Jill Stein (Green Party) is running at about one percent of the popular vote – historically very high numbers for both small parties. The Senate looks to split 50-50 for each major party, but the House of Representatives will likely be 54 percent Republican compared to 57 percent today.
