Financial, Economic and Social Mood Update (March 1, 2017)
The nominal stock market is demonstrating amazing robustness. The Dow Jones 30 Industrials Index hit an all-time record high value of 21,162 on March 1, 2017. The Wilshire 5000 Index (which includes all publicly listed corporations in the USA) hit an all-time record high value of 25,009 on the same date. But the “real” value of money is much more significant than its nominal value or denomination. In terms of the value of gold bullion (the only true global “currency” or medium of financial exchange), the US Dollar has lost a whopping 64 percent of its purchasing power since 1999 or 18 years ago. By comparison, one of the worst economies on earth today (Venezuela) has seen the “real” value of its national stock market crash by 76 percent in the 10 years since 2007. By this assessment, the USA is not that much ahead of Venezuela.
The US Dollar will have to be devalued in the very near future. The USA is seeking a more level playing field especially with regard to both Mainland China and Japan, and the USA will have to become more competitive vis-a-vis exporter nations if good manufacturing jobs are to return to the USA. The rumored near term devaluation of the US Dollar will be in the neighborhood of 2 or 3 to one. In other words, the nominal cost of imported goods and services in the USA will increase by two to three fold compared to now.
What is today the USA reached the relative height of its per capita prosperity in the year 1739, or 278 years ago. After the American Revolutionary War ended in 1783, the 13 American states were among the wealthiest political jurisdictions in the entire world – equivalent to countries such as Monaco, Liechtenstein, Luxembourg, Norway and Qatar today. As of 2013, there were already 106 independent nations and dependent territories worldwide with a higher per capita GDP compared to the USA. Since then, the relative standing of the USA has deteriorated further.
The USA desperately needs to regain its lost manufacturing base. The American Dollar must be devalued not merely to make the USA more competitive in terms of wage cost, but also in order to address the massive American problem of debt, of unfunded liabilities and of contingent liabilities. Taxes must also be reduced in a very significant way. The American public sector of government and so-called “nonprofit” healthcare has become a horrific albatross around America’s neck. Top rates for mandatory taxes and insurance in the USA now stand at an unacceptable 90 percent of income – these include income taxes, social insurance taxes, payroll taxes and mandatory health insurance.
A very good example of a country where socialism-communism has destroyed that country in today’s world is Venezuela. As recently as 1995 Venezuela had one of the most prosperous economies in Latin America, and the city of Caracas was one of the top Spanish-speaking commercial & investment banking cities in the Western Hemisphere alongside Miami, Florida. Today, Venezuela is among the most impoverished countries on earth. Here is a new article on conditions in Venezuela by the “Socio-economist” magazine, published by Elliott Wave International: http://www.socionomics.net/2017/02/article-negative-social-mood-wreaks-havoc-on-venezuela/.
The European Union (EU)
On the opposite side of the Atlantic Ocean, the European Union (EU) is facing the most serious crisis of confidence in Europe since the end of the Second World War in May 1945. The majority of the people in many key European countries no longer have a positive view of the government of the EU. This includes 70 percent of Greeks, 61 percent of Cypriots, 60 percent of the British, 59 percent of the French, 58 percent of the Italians, 52 percent of the Austrians, 51 percent of the Swiss and the Czechs and even 50 percent of the Germans. These key European countries are those in which public sector “bailouts” have decimated savings through the near bankruptcy of commercial banks (such as Greece and Cyprus) and in more affluent countries where taxpayers have been hit the hardest to pay for the costly European social welfare state (such as in the UK, France, Italy, Austria, the Czech Republic and Germany). The most important national elections within the EU countries in 2017 will take place in France, the Netherlands and Germany. It is 100 percent certain that France will turn markedly to the right, and very likely that the Netherlands will do the same. In Germany, there is a real possibility that the 12 year administration of Chancellor Angela Merkel may finally come to an end. The Social Democratic Party of Germany (SPD) has made Martin Schulz, the former President of the European Parliament in Strassburg, Alsace their Chancellor Candidate. The three parties of Germany’s left wing including the SPD, the Greens (Environmentalists) and the Left Party (the former ruling communist party of Eastern Germany from 1945 to 1990), will attempt to join forces in order to oust the Angela Merkel’s centrist Christian Democratic Union (CDU) and the Christian Social Union (CSU) of Bavaria from national power in Berlin. The right wing parties in Germany include the free market Free Democratic Party (FDP), the nationalist Alternative for Germany (AfD) and the Free Voters (FW) of Bavaria. The only ethnic minority party of significance in Germany is the SSW of Schleswig-Holstein which represents the ethnic Danish and ethnic Frisian minorities of northern Germany – this party organizes with the SPD in parliament.
Adam Opel-Vauxhall sale to Peugeot-Citroën of France
General Motors Corporation is in talks to sell their German-British subsidiary (all of GM’s European operations) to the Peugeot Group of France by March 9, 2017. GM is the largest automaker in the USA and ranks number 6 in the world in terms of annual new unit sales. Adam Opel AG is a German company founded in Rüsselsheim (Hessen) in 1862 as a manufacturer of sewing machines. They made their first bicycle in 1886 and their first automobile in 1899. GM purchased a majority stake in Opel in 1929 and assumed full ownership of Opel in 1931. Vauxhall was founded in London, England in 1857 as a manufacturer of pumps and marine engines. They became an iron works company in 1897 and they made their first car in 1903. Vauxhall was purchased by General Motors in 1925.
Peugeot of France is the 2nd largest automaker in Europe after Volkswagen AG of Germany. Fiat Chrysler Auto of Italy is a larger company compared to Peugeot, but much of their operations are in the USA as opposed to Italy. Peugeot was founded in the Free County of Burgundy in 1810 as a manufacturer of coffee mills and bicycles. They made a steam-powered tricycle in 1889 and a gasoline-powered car in 1890. Peugeot was bailed out of financial insolvency in 2014 when the French government purchased a 14 percent equity stake in the company and when Dongfeng Motors of China purchased an additional 14 percent equity stake in Peugeot. The Peugeot family still owns 14 percent of the company as well, with the remaining 58 percent being listed on the French stock exchange. Dongfeng is 55 percent owned by the Chinese government and 45 percent owned by the Swedish Truck maker Volvo AB (Volvo cars is entirely separate from Volvo AB and it is owned by Geely of China). Geely is listed on the Hong Kong Stock Exchange (the Hang Seng Index).
Citroën is another French automotive brand owned by Peugeot. Citroën was founded in 1919. Due to the financial insolvency of Citroën, their fellow French company Peugeot purchased 38 percent of Citroën in 1974. This equity stake had to increase to 90 percent by 1976 due to continuing financial problems at Citroën. In 2009 Citroën launched a new upscale brand called “DS.” The original Citroën DS luxury car of 1955-1975 was the first production car in the world to be equipped with disc brakes.
The sale of Opel & Vauxhall to Peugeot should be complete by March 9, 2017 for the sum of US $2 BILLION. Opel makes almost 900,000 vehicles per year and will increase the worldwide annual unit sales rank of PSA Peugeot-Citroën to number 15 out of 109 vehicle manufacturers.
General Motors will keep its global rank of number 6, but it will have withdrawn from the European market. The new and somewhat smaller GM will be left with the American brands of Buick, Cadillac, Chevrolet & GMC plus the Australian brand of Holden and the Chinese brand of Wuling.
China has the largest auto market in the world. Volkswagen ranks number one in China, followed by GM-Wuling of the USA, Hyundai of South Korea, Changan of China, Toyota of Japan, Buick (GM), Nissan, Ford, Honda, Chevrolet (GM), Kia, Dongfeng, Audi (VW), Chery, BYD, Haval (Great Wall), Geely, Peugeot, Citroën, BAIC, Skoda (VW), BMW, Suzuki, Mazda, JAC, Great Wall, Baojun, Haima, Besturn, Lifan, Zotye, Mercedes-Benz, Brilliance, Roewe (formerly Rover of the UK now owned by SAIC of China), Trumpchi and Venucia. All of these brands sold at least 100,000 new cars in China in one calendar year. They ranged from 2,710,504 for Volkswagen to 114,035 for Venucia, a brand owned by both Dongfeng and Nissan. The VW Group brands of VW, Audi and Skoda sold 3,749,760 new cars and trucks in China.
