Financial, Economic and Social Mood Update (September 1, 2020)
The stock market is at or near record all time nominal high values, which in no way reflects the reality of our world. In any case, the nominal value of our “fiat” paper money is falling through the floor (see my commentary related to the rise of crypto-currencies toward the end of this month’s blog).
The world economy has undergone an absolutely tremendous change since the global pandemic hit in late 2019. The pandemic surfaced in China at the end of November 2019 and it reached most of the rest of world by February or March of 2020. Much of the global economy was forcibly shut down, leading to the demise of many industry sectors, businesses and to the collapse of gainful employment. Mainland China was quick to curtail the spread of the pandemic domestically, but unfortunately most other countries have been nowhere near as disciplined or successful in doing likewise. For example, China has the 12th lowest per capita rate of infection among 285 countries & territories whereas the USA (which was far too slow to accept the gravity of the pandemic) has the highest absolute number of cases, the highest absolute number of fatalities and the 7th highest global per capita rate of infection with Covid-19. One out of every 11 people in the world have been tested for Covid-19 thus far – usually people who have shown symptoms, and people in professions where they are at much higher risk due to coming into contact with many other people. The largely worldwide martial law measures of quarantine, lock-down, social distancing and face masks show no sign of abating. These measures have crippled most of the global economy, ruined most small businesses, led to epidemics of psychological depression & suicide, and collapsed birth rates. These measures are utterly disastrous for the educational & social development of children, and are downright unhealthy for healthy people (case in point – wearing a “face mask” ensures that one does not breathe enough oxygen and breathes too much carbon dioxide, which can lead to passing out or a lack of consciousness). The disaster of this global pandemic merely highlights the need to utterly deregulate global healthcare and the pharmaceutical industry (as was done in the past with banking, telecommunications and airline travel). Without free market competition, both of these will DESTROY health.
The American economy and most of the global economy continue to collapse. Up to 28 million American families or 40 percent of the population face possible eviction from their homes due to lapsed payments for rent and mortgages. One out of every 3 Americans have lost a job since the pandemic began (58,296,000 people out of 167,000,000 in the labor force before the pandemic began = 35 percent) – worldwide, the figure is a horrific one out of every 2 people in the global work force. Due to the ongoing collapse of the value of the fiat paper US Dollar, up to 92 percent of brand new housing in the USA now falls into an officially subsidized so-called “affordable” category. Global property prices have actually plunged by 48 percent since the pandemic began less than one year ago. US Grocery prices have risen 70 percent and the overall American cost of living has soared by 40 percent in the same time period. Almost 20 percent of families in the USA do not have enough food to eat. 32 percent of American families have not paid their mortgages or rent for four (4) consecutive months. 54 percent of businesses in San Francisco, California are no longer in business. Airline travel is down by 85 percent compared to 2019; American Airlines is letting go of 19,000 employees and MGM resorts is cutting 18,000 jobs. Japan’s economy is shrinking at the rate of 28 percent per annum. Facts such as these make it mathematically certain that much of the global commercial and investment banking industry is already de facto insolvent.
The Chinese economy was globally unique in registering a positive 3.2 growth rate in the 2nd quarter of 2020, and the Chinese new auto & truck market has returned to normal health as well, with a SAAR (“seasonally adjusted annual rate” of sales) of 27 million new cars and trucks.
Total global GDP in terms of PPP (“purchasing power parity”) has fallen from USD $138 TRILLION to an estimated USD $99 TRILLION, or by 28 percent. Economies are now ranked as follows. The EU (European Union) is counted twice by the UN – once as a supra-national entity and by its individual member countries (with the largest EU member countries being Germany, France, Italy, Spain and Poland):
- China: $30 TRILLION
- European Union: $13 TRILLION
- USA: $9 TRILLION
- India: $5 TRILLION
- Japan: $4 TRILLION
- Germany: $3 TRILLION
All of the preceding & following have been rounded either up or down as required to equal whole numbers = $2 TRILLION each: Indonesia, Brazil and South Korea and $1 TRILLION each: France, Mexico, Turkey, Italy, Saudi Arabia, Canada, Spain, Egypt, Iran, Taiwan, Australia, Poland, Pakistan, Nigeria, Malaysia, the Philippines and Vietnam. The 26 largest economies thus comprise USD $87 TRILLION of the worldwide USD $99 TRILLION total.
Digital Electronic Encrypted (or Crypto) Currency
Digital electronic encrypted (or crypto) currencies are all part of the global “block-chain” technology. The Block-chain is a permanent and unalterable record or ledger of transactions. There were 6,618 such currencies in existence as of August 30, 2020, with Bitcoin being the oldest (launched in April 2010) and the largest in terms of unit value & market capitalization. Each currency attempts to have a unique quality – hence the very large number of ongoing startups by venture capitalists. The one quality which differentiates digital electronic encrypted (or crypto) currencies from the many national paper fiat currencies is the fact that fiat currencies by their very nature are inflationary. In other words, they are doomed to lose their value or their purchasing power – there is no limit to the amount of money governments can or will print. Crypto currencies are by their very nature deflationary. In other words, the supply of crypto currencies is limited to an absolutely finite amount, only a limited number of “coins” can be electronically “mined” by computers, they are not controlled by any government, they are not controlled by any bank, and they cannot be confiscated by any government or by any commercial bank. These are the very qualities which will doom all paper fiat currencies into oblivion and which ensure their replacement with digital electronic encrypted (or crypto) currencies. Encryption is of course done for the purpose of online Internet web security.
Over the weekend of August 15-16, the crypto-currency named Orchid (OXT) increased in value by almost 5-fold versus the US Dollar. This highly volatile case in point demonstrates NOT the volatility of digital electronic currencies, but of utterly worthless paper fiat currencies such as the US Dollar. “Fiat” is a Latin word meaning government “decree.” In other words, governments decree that their paper currencies have a given amount of purchasing power, but in truth they may have no value whatsoever. Another very important point is that this price movement took place on a weekend. In other words, the crypto market operates 24 hours per day, 7 days per week – it never sleeps. Welcome to the world of AI (artificial intelligence). The day of the “traditional” commercial bank, investment bank, stock market, bond market, currency market or commodity market is over and done with, never to return.
