Posts by Marc Nonnenkamp

Financial, Economic and Social Mood Update (July 2, 2017) The US stock market continues to be remarkably robust – the Dow Jones 30 Industrials Index reached a new record high of 21,535 on June 20, 2017. Greece has had four (4) financial bailouts in the course of the last eleven (11) years, and in spite of this massive subsidy of a failed country, the Greek stock market has still fallen by an astounding 90 percent since 2006. They represent the future for much of the “developed” countries. As we learned last month, the U.S. Commonwealth of Puerto Rico is already de jure bankrupt. The government of the U.S. Virgin Islands and the State of Illinois are the next candidates for bankruptcy and junk debt status. The state governments of both New Jersey and Maine have shut down due to an impasse – the failure of the executive and the legislative branches of governments to agree on how to tackle a budget crisis. Ultimately, there is no such thing as a free lunch, and both taxes and welfare benefits cannot and must not be allowed to survive at current sky high levels. Socialism, communism, Marxism, etc. destroy human initiative by having “ass backwards” incentives – they reward failure and they punish success. The rest of the world is not so stupid – countries such as Mainland China and India continue to march forward with more free market reforms. Even their high performing children are crowding American children out of Ivy League, big name and even regional state colleges and universities. The only institutions of higher learning left to American high school graduates will be minor colleges and universities, community colleges, trade schools, adult education and for-profit institutions (many of which are actually going bankrupt). Lending standards (requirements) today are weaker than…

Financial, Economic and Social Mood Update (May 31, 2017) The biggest financial news this month is not the stock market, but the declaration of bankruptcy by the United States Commonwealth of Puerto Rico effective May 4, 2017. Puerto Rican government debt is now selling at just 65 cents on the Dollar. Puerto Rican debt was already yielding 10 percent interest per annum prior to the declaration of bankruptcy, roughly equivalent to that of Brazil – which itself has gone from being a member of the star “BRICS” bloc to being one of Latin America’s most troubled economies. This biggest American government entity declaration of bankruptcy (to date) is just the tip of the iceberg. The next state governments next in line to do likewise include Illinois, Arizona, Ohio and Nevada – and local government entities on the same list include the likes of Chicago, Dallas, Houston and El Paso. These 9 government entities in the USA (including Puerto Rico) have a total of 63 million inhabitants, or 19 percent of the entire population under American political jurisdiction. In last month’s blog, I once again discussed the current state of the global motor vehicle manufacturing industry. Today, that industry builds 151 million new units per year which is divided among 109 manufacturing holding companies. This pie is 67 percent Asian (i.e., built by Asian-based companies), 25 percent European and 8 percent American. In 1947, or just two years after the end of the Second World War, the global motor vehicle market was 92 percent American. Twenty years from today, the motor vehicle market is forecast to be 81 percent Asian, 15 percent European and just 4 percent American. Unit volume is forecast to increase to 425 million per year, with big gains especially among major emerging market players such as in…

Financial, Economic and Social Mood Update (May 2, 2017) The employment cuts coming to the public sector of the US economy in 2017-2021 will be even more severe than reported in last month’s update. Instead of the maximum 12 million positions to be eliminated, the figure may now go as high as 18.6 million. As said so many times, the resources to staff, maintain and fund the socialist welfare state simply no longer exist. As the late Margaret Thatcher of England once said, socialism does not work because eventually, you run out of “other peoples’” money to spend. Socialism, communism, Marxism, Leninism, Stalinism, Maoism, Fascism, religious fundamentalism, crony capitalism and feudalism are all among the WORST forms of government possible. Only the true capitalist free market as articulated so clearly by Adam Smith of England will work well. The US attack on Syria is yet another ongoing mistake of American foreign policy regardless of which of the two large political parties is “in charge” in Washington – Democratic or Republican, are equally as bad. The American government, its so-called Allies around the world and the international mainstream media all claim that the Syrian government is responsible for having used chemical weaponry on their own population – propaganda we have heard in the past with respect to Iraq before “regime change” removed the government of Saddam Hussein. Both the Syrian government and the Russian government (the Russians are allied to Syria) deny having done this. All one needs to do is to study the “fruit” of “regime change” where so-called dictators have been targeted. The removal of the Shah of Iran in 1979 produced an Islamic fundamentalist regime in Tehran. The removal of Saddam Hussein in Iraq in 2003 produced the horror of ISIL-ISIS-Daesh. The removal of strongmen in countries such…

Financial, Economic and Social Mood Update (April 2, 2017) The nominal stock market is still near record high (nominal) values, but like I said in last month’s update, the purchasing power of the American Dollar has greatly diminished. One of the most astute commentators today is Mr. David Stockman, former Budget Director under the late U.S. President Ronald Wilson Reagan. Mr. Stockman points out that regardless of which of the two large U.S. political parties has a governing majority (either the Democratic Party or the Republican Party), the USA has slid so far down with respect to its massive debt burden that we have literally passed the point of no return – as Patrick Buchanan says (he is yet another veteran of the Reagan Administration), the USA is clearly becoming a Third World Country. Mr. Stockman points out that regardless of what current U.S. President Donald J. Trump wants, there will likely be no tax cut and no massive spending on necessary American infrastructure – the USA simply no longer has the resources to do these things. Even the nominal stock market is severely over-valued, and will eventually crash to the ground. Massive cuts in employment are coming to the public sector in the USA, in particular to employment on the state, county and city government levels. These cuts and consolidation will commence around June 2017 and they will not stop for a long time. Millions of current employees will be adversely affected simple because the USA has literally run out of financial resources. Circa 12 million positions are slated for elimination or “down sizing.” Socialism has never worked, it does not work today and it will never work in the future. Plainly said, Socialism is an “ass backwards” philosophy which has all the wrong incentives – it rewards failure…

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…

The big date was January 20, 2017 – the inauguration of Donald J. Trump as the 45th President of the United States (POTUS). This marked not merely a changing of the administration in the USA, but more importantly a key element in the overturning of the existing global power structure going back at least to 1944. The main source of power in the world is the “creation” of money. The respective central or national banks of the world perform this all important function, and certain central banks are more important than others. Those which come to mind today include the central banks of the USA (the Federal Reserve System), the UK (the Bank of England), the EU (the European or German Central Bank in Frankfurt), Switzerland, Japan and the much newer BRICS bloc. “BRICS” stands for Brazil, Russia, India, China and South Africa. Above the central banking system of individual countries or “supra national” states such as the EU, NAFTA and BRICS are organizations of global reach such as the World Bank and the IMF (International Monetary Fund). The most important newer such organization is the AIIB (Asian Infrastructure Investment Bank) which is led by Mainland China. China by herself has 17.9 percent of global GDP today, but more importantly the 100 plus member countries of the AIIB (by no means confined to Asia) control almost 80 percent of global GDP in 2017. The USA has a mere 15.6 percent of global GDP today compared to 50 percent in 1945. The USA has a mere 10 percent of the global vehicle industry in 2017 compared to 92 percent 70 years ago in 1947. The USA and its closest financial allies (mainly Japan) control less than 20 percent of global GDP in 2017. These are the important numbers – almost 80…

Financial, Economic and Social Mood Update (January 1, 2017) So-called “liberal” and left-wing governments are in a broad retreat all over the world. Even Vice President Joe Biden of the USA said in December 2016 that Germany and Canada are the last two major (i.e., most powerful and most affluent) government stalwarts of this so-called grouping. The much anticipated and long awaited “Global Economic Reset” (actually a global currency reset which determines the ranking of worldwide reserve currencies held by central banks, commercial banks, investment banks, corporations and individuals) is upon us at the start of the year A.D. 2017. The baton has been held by the US Dollar since it overtook the GBP British Pound Sterling in 1944. The “Special Drawing Rights” (SDR) held by the IMF, World Bank and other supra national quasi-public sector central banks is about to shift and give the number one position to the BRICS countries (Brazil, Russia, India, China and South Africa) which have surpassed the US economy in terms of size of GDP (Gross Domestic Product). The most important of the 5 BRICS countries is Mainland China, and its new OBOR (One Belt, One Road) grouping will actually become even more important than BRICS. OBOR is comprised of 64 countries which together have 60 percent of the world population and 40 percent of global GDP……………………..much larger than the USA, NAFTA or the EU. What does this mean? As I have continually said especially when talking about “debt” (not just conventional “debt,” but unfunded liabilities and contingent liabilities as well) it will translate into relative devaluations of the Japanese Yen, the EU Euro and most especially of the US Dollar. Americans will feel this as their incomes remain frozen and as their cost of living will skyrocket many fold. The foreign exchange market…