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 ever before. Prior to the most recent financial crisis in 2007, so-called “covenant lite” loans comprised 25 percent of institutional loan issuance. Today, that figure is a frightening 70 percent of all new loans. These risky loans require far less documentation and thresholds for credit worthiness. In many cases, all the borrower needs is a pulse – i.e., that they are alive. This is of course setting the world up for the impending financial crash.
Bitcoin Exchanges
Fiat currencies originating from countries with the most massive debt (this debt being comprised of “normal” debt plus unfunded liabilities plus derivative financial instruments) such as the USA, the EU bloc plus Japan will eventually collapse the hardest. They will likely be replaced by national and regional currencies backed by precious metals (mostly gold bullion) and by very new digital and crypto currencies such as Bitcoin. I have been trying to establish a relationship with the largest Bitcoin exchanges in the USA. My initial search was for Circle Bitcoin, but I was unable to locate them on the Internet. My second search was with Kraken Bitcoin, which is based in San Francisco, California. I opened an account and verified myself up to Tier 2 status (the first status is Tier 0 and the second is Tier 1). In order to fund an account via your bank, you must be verified up to Tier 3 status, which requires giving your SSN. Their customer service is extremely slow to respond (I am guessing that they simply do not have enough staff due to the extreme growth in trading) and they submit encrypted Adobe Acrobat PDF documents which are impossible to open – extremely frustrating to deal with to say the very least. The 3rd largest American Bitcoin exchange is Gemini – their customer reviews on the Internet are somewhat better than those of Kraken Bitcoin, but not by much.
The major investment banks and trading houses need to step up to the plate, so to speak, and start trading in these electronic currencies of the future. Many online businesses are already eliminating traditional commercial banking services by accepting direct end customer payment for their goods and services in the form of crypto currencies such as Bitcoin – Elliott Wave International, Amazon, E-Bay and PayPal to name a few. The retail sector of the economy is the major sector of the global economy, comprising circa 70 percent of worldwide GDP. Amazon is already the number one retail player in the USA, with a 20 percent retail sector market share. Other online companies (such as E-Bay, PayPal, Craig’s List and the like) have another 18 percent of the retail market in the USA. Walmart (the largest “brick and mortar” store in the USA) has a 10 percent market share. Unlike most other “dying” brick and mortar retailers, Walmart is aggressively entering the online retail business – a very smart and necessary move to stay alive in today’s world.
