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 is the biggest financial market on earth – larger than the bond market, the stock market, or the commodities market. As with any other market, the futures market gives us much more insight compared to just the daily cash market. This is where one can see the eventual collapse of the American Dollar. It is necessary to study futures currency cross rates with many currencies, not merely with the so-called major currencies. In the short term, the market appears ready to accept up to a three-fold devaluation of the American Dollar – this from looking at futures currency cross rates going back 4 weeks. Over the longer term, the market appears ready to tolerate as much as a 29-fold devaluation of the American Dollar – this from studying futures currency cross rates going back 3 months.
All of these phenomena are related – i.e. the collapse of the equity market, the bond market, the commodities market and the currency market. As stated so often in the past, the level of debt (which includes conventional debt, unfunded liabilities and contingent liabilities) is far too high and cannot be paid off. The USA is the “mother of all debtor nations,” so to speak, with a whopping 97.87 percent of the global debt total either owned by entities in the USA or in debt denominated in US Dollars. Unfunded liabilities are owed mostly by government entities (the bulk of this is for social welfare programs) and contingent liabilities are mostly “bets” made by money center banks. Almost 290 million Americans are so-called “beneficiaries” of so-called government welfare benefit programs. Most of these people are no longer gainfully employed, and even those who are employed can no longer pay their own way, so to speak. In other words, their wages are so low that they cannot support themselves financially. And their skill set is so low that they cannot earn higher wages. A similar situation exists but to a lesser degree in both the European Union (EU) and Japan – the other two “debtor” regions in the world. The only way to solve this massive problem is to eliminate the public sector (i.e. government) as much as possible. Only the free market can solve this problem, and the massive social and economic crash is the manifestation of this powerful free market. The whole racket of government “social welfare entitlements” must come to an end – the political class has successfully used this scheme over the course of multiple generations to dumb down the masses, to make them willingly dependent upon the government and to thereby destroy modern democracy.
The crash will move the balance of power away from the Americas, Europe and Japan and it will move this balance of power toward Asia and Africa…………………especially toward East Asia, Mainland China, South Asia, India, Central Asia, the former Soviet Union and Sub-Saharan Africa.
The prognosis for the stock market remains the same. The Dow Jones 30 Industrial Average will likely rise to about 20,000 and collapse thereafter – no temporal political party in any country on earth has control over this. One interesting part of the equity market is that of privately held companies, i.e. those not listed on any public stock exchange. In the USA the most vibrant part of this market exists in the Silicon Valley of the San Francisco – San Jose Bay Area due to the information technology and high technology sector. The term “Unicorn” refers to privately held corporations in the USA with an estimated fair market value of US $1 BILLION or more. In January 2016 there were 229 such corporations but by May 2016 this had fallen to just 160 companies. The forecast for September 2016 would be 112 corporations and that for January 2017 would be merely 78 companies. This foretells the collapse in not just American but in global stock market indices. A level of ZERO would be reached by January of 2022 or just five years from today.
The USA must peacefully adjust to its new status of no longer being a so-called “superpower.” President-elect Donald J. Trump of the USA has already stated his desire for the USA to join China in the OBOR initiative – disagreements over trade, the South China Sea and Taiwan aside. Trump has also stated his desire to cease the insane NATO confrontation and attempted geographic encirclement of Russia – and for Russia and the USA to join forces with Mainland China (a new “Triple Alliance” or “Triple Entente”) to defeat ISIS-ISIL-Daesh. It is very high time for all of this to become a reality.
The future of China is not merely as an economic superpower. The political changes enacted in Mainland China since 1976 have in effect given the Chinese people their economic freedom much more so than during the dictatorship of Mao. Today, fully 60 percent of the Chinese economy is private sector – the public sector still comprises 40 percent of GDP, which in any case is much less than in many western countries. On the political front, the Chinese people can already vote for different candidates on the provincial and local level (but not yet on the national level). In terms of religious freedom, many major eastern and western faiths already thrive in China, but unfortunately much of this is still heavily regulated by the national government in Beijing. The future of Mainland China should follow that which has already taken place in jurisdictions such as Macao (the former Portuguese colony), in Hong Kong (the former British colony) and on Taiwan (governed by the Chinese Republican Nationalists who also governed Mainland China from 1911 until the Communist revolution of 1949). The government in Beijing needs to give complete freedom to the major religious faiths operating in Mainland China, they need to adopt a uniquely “Chinese” form of democracy as is seen on Taiwan, and they need to end any remaining restrictions on family size………………..the so-called one and two child policy which exists in Mainland China today. China and much of mainland East Asia is facing a demographic collapse similar to that facing North America, Europe and the former Soviet Union. Even Latin America, the Middle East and South Asia have natural population growth rates which are now only slightly positive. Africa remains the sole continent with population growth comparable to that which the entire human race enjoyed until a generation or so ago – a growth rate absolutely necessary to ensure a healthy economy and pension system.
