Financial, Economic and Social Mood Update (January 1, 2019)
Happy New Year to all – may 2019 be a good and better year for each and every one of us, with no exceptions. I would like to follow up on some of the topics from the December 2018 blog.
It looks like we’ve finally entered a bear market. The Dow Jones 30 Industrial Index is down by 14 percent from its record high. The corresponding decline in the S&P 500 Index is 15 percent and for the NASDAQ Composite Index it is already a 19 percent loss (just a few days ago this was a 24 percent loss). The NASDAQ is by far the most “representative” of the 3 major indices because it contains 95 percent of all publicly traded companies in the USA. Even more importantly, the US Dollar value of all global debt has declined by 26 percent in the last 12 months – from USD $247 TRILLION down to USD $184 TRILLION. This means that we should soon see clear signs of asset price deflation and of financial company failures – such as banks, credit unions, brokerage houses, mortgage companies and insurance companies. The value of global financial derivatives (“contingent liabilities” which are basically very risky bets taken by commercial money center banks) has collapsed by a Fibonacci-near 63 percent in the last 2 years – down from USD $4 QUADRILLION to USD $1.5 QUADRILLION. Bankruptcies should follow in close order among major pension plans and among the unfunded liabilities of the major socialist welfare states in the industrialized countries of North America (USA and Canada), Japan and the European Union.
BEV (batter electric vehicle) sales increased at an even faster pace during the first 11 months of 2018 and even more so during November 2018. As I mentioned, the financially strongest automotive groups and many of the largest government jurisdictions on earth are on board with this, so it is likely to continue. The goal here is to reduce our negative environmental impact – to greatly reduce air pollution emissions and the negative side effects from drilling, mining, refining and producing fossil fuels such as crude oil, methane natural gas, NGL products and coal. If current growth rates continue, BEV sales will comprise all new vehicle sales in both the USA and globally by 2021 to 2022. The largest subsidiaries within the Volkswagen Group (VW and Audi) have now committed USD $66 BILLION toward reaching this goal. The last and final VW platforms with internal combustion engines will likely be introduced in 2026 – thereafter everything will be completely electric.
The forecast job cuts at the weak automotive groups are intensifying. General Motors Corporation (GM) and the Ford Motor Company (the sole large remaining US headquartered automotive groups) are planning employment reductions of 15 and 25 percent, respectively. A good deal of Ford’s North American plant capacity may be taken over by Volkswagen and Telsa may do likewise with GM plant capacity. Tata Motors (the Indian parent company of UK based Jaguar and Land-Rover) is approaching junk credit status – one step before bankruptcy. The Renault-Nissan alliance may unravel due to the arrest of their Chairman Carlos Ghosn for tax fraud in Japan. Renault includes Renault of France, Dacia of Romania, Samsung of Korea, Lada of Russia plus Nissan, Nissan Diesel, Datsun and Mitsubishi of Japan.
GE (General Electric) was also once a major manufacturing company. It transformed itself into a mostly financial company (much like a commercial bank or an insurance company). It was once one of the largest and most valuable companies in the entire world, and today it moves ever closer toward financial bankruptcy. Unlike the last time around (the most recent global economic recession or depression of 2007-2009) governments must allow weak companies to die a natural death. Socialism has never worked, it does not work and it never will work – left wing socialism (socialism, communism or Marxism) as well as right wing socialism (feudalism, fascism or national-socialism) are the worst form of governance ever devised by mankind. A free market (as opposed to crony capitalism, colonialism or imperialism) is the only good way for an economy to function.
Our world is at a crossroads. The western powers are literally dying out. The superpowers of the ancient world (most especially mainland China and India) will lead the world into the future. China and India are the most prominent of the 5 BRICS countries. Number 3 among the BRICS countries is clearly Russia but the 2 stragglers are Brazil and South Africa. Brazil recently elected a far right government. Populism does not have to be bad, but statements from Brazil with respect ignoring the rights of minority population groups are disturbing. South Africa ended Apartheid in 1994. Although South Africans elected the ANC (African National Congress, which has historical roots in socialism and Marxism), their first leader Nelson Mandela wisely chose to pursue mostly free market policies. The current South African government appears to be pursuing a policy of asset confiscation & redistribution without fair market value compensation, which would prove to be disastrous to South Africa – the result of such policies would be much like that in neighboring Zimbabwe (formerly Southern Rhodesia). Inequity suffered by certain population groups and opportunity for all must be addressed, but never by the means of socialism. The rights of every single population group must always be respected, with no exceptions. In South Africa, Bantu Black African land ownership fell from 13 percent of the total (upon the end of Apartheid) to 4 percent in 2018. European land ownership (mostly Afrikaner Cape Dutch & English) fell from 87 percent to 72 percent in the same time period. Those who have done well during the Nelson Mandela years include the Coloureds (mostly Afrikaans-speaking Cape Coloureds and Cape Malays) and Asians (mostly East Indians and Chinese) – their share rose from virtually nil to 24 percent of the pie. Africans (both Bantu and the small Khoisan minority) must have better opportunity, but socialist confiscation & so-called redistribution is not the way to reach that goal. Something should be done which also respects the uniqueness of individual ethnic groups such as the Afrikaners, Cape Coloureds, Asians, Khoisan, Zulu, Xhosa, Ndebele, Tswana, Sotho, Swazi, Venda and beyond. Apartheid paid lip service to this concept but never accomplished it in practice. All peoples must have “economic viability” – i.e. an adequate portion of the resource “pie.”
Another part of the world that must embrace universal suffrage is the Holy Land. The Golan Heights will have return to Syria and the Palestinian territories will need more equitable political representation (one person one vote) as well as better economic opportunity for their inhabitants – much like the process which began in Southern Africa after the end of minority rule in Zimbabwe-Rhodesia, the Republic of South Africa and Namibia-Southwest Africa.
Any country can be susceptible to falling into the mistake of taking the road of socialism. Formerly affluent countries which have made such a mistake include Argentina (Peronism) and Venezeula (once the most affluent country in Latin America and now the worst off). A US American road to socialism would most likely emulate the example of Venezuela, which went from prosperity to total ruin in the span of 2 decades.
Liberal style western democracy appears to be in peril, and the level of civil discourse has devolved to become uncivil, profane, disrespectful, intolerant, hostile, dysfunctional and counterproductive. The sole remaining countries with self-described liberal majorities are in the USA and the Netherlands (Holland). Similar parliamentary majorities remain in Germany, Canada and France – but current public opinion polls in these countries would not retain them if new elections were to be held today. Much of the rest of world has turned (or was already to begin with) either far left or far right. Populism of either the left or the right need not be bad, but the tendencies to find “scapegoats” must be tamed and ultimately avoided. The rights of minority groups must never be trampled upon with no exceptions.
Recent examples where leaders of national governments have made comments failing to respect the full and complete rights of demographic minorities include Brazil (Native American Indians), Spain (Catalonians and Basques), Italy (Tyroleans and Venetians), Poland (ethnic Germans, Silesians, Kashubians and Masurians), and France (the French government has failed to give ethnic minorities full language rights in places such as the Alsace-Lorraine, Flanders, Brittany, the Basque Country and in Provence).
The worldwide difficulty with mass immigration (both legal and illegal) is due to policies such as deliberate political & military destabilization perpetrated mostly by western governments against countries such as Libya, Syria, Iraq and Afghanistan. Yet another root cause is the so-called “drug war” in countries such as Mexico, Honduras and Afghanistan. Keeping drugs “illegal” attracts the attention of organized crime syndicates and violence. Mexico recently elected a “far left” government quite different from anything Mexico has seen for the last century. The frustration of Mexican electorate with respect to the drug war (even bloodier than the war in Afghanistan), with respect to extreme domestic political corruption and with respect to the lack of economic opportunity for the Mexican population is very understandable. The important aspect here is that the Mexican government be more pragmatic than dogmatic when it comes to its adherence to the principles of socialism. An example of a socialist governed country which has been far more pragmatic as opposed to dogmatic is the People’s Republic of China (PRC) since the demise of Mao Tse-Dong since 1976. Political corruption = economic decline = 164 million economic immigrants worldwide in 2018 = 700 million people homeless or “near homeless” worldwide in 2018. Eliminate the corruption, and this poverty will largely disappear. Replace corruption and government control (socialism) with a truly free market, and the poverty will largely cease to exist.
Yet another destructive policy coming from western governments is that of imposing economic “sanctions” against countries they deem to be problematic such as against Russia, Iran, Syria and North Korea. Such sanctions never affect political leaders, but they are guaranteed to severely harm the economic wellbeing of common people – which in turn can lead to the pitfalls of political extremism.
