Gab@StFerdinandIII - https://unstabbinated.substack.com/
Plenty of cults exist - every cult has its 'religious dogma', its idols, its 'prophets', its 'science', its 'proof' and its intolerant liturgy of demands. Cults everywhere: Corona, 'The Science' or Scientism, Islam, the State, the cult of Gender Fascism, Marxism, Darwin and Evolution, Globaloneywarming, Changing Climate, Abortion...
Tempus Fugit Memento Mori - Time Flies Remember Death
Copied with permission. Old, indebted, state ridden Japan, US and Europe. Hungry, ambitious and energetic China, India and Brazil.
Next we have a chart shared with us by Niall Ferguson, showing how the US and Japan (and to some extent Germany) have seen their share of world GDP fall relative to China and India. He argued (as did several speakers) that the relative growth in the world is moving from Europe, Japan, and the US to the emerging markets. This is estimated data through 2016 from the IMF.
The following chart is also from Niall and shows gross government debt-to-GDP. This may be difficult if you are not looking in color, but the US (when all debt is counted) does not look all that much better than some of the problem countries in Europe.
"We are monitoring the BROAD rise in Youth Unemployment Rates, across the EU (this March, versus March of last year):
--- Bulgaria ... 32.8% ... up from 26.7%
--- Portugal ... 36.1% ... up from 27.6%
--- Denmark ... 15.1% ... up from 13.7%
--- Ireland ... 30.3% ... up from 28.7%
--- Cyprus ... 28.8% ... up from 18.8%
--- Hungary ... 28.8% ... up from 25.4%
--- Netherlands ... 9.3% ... up from 6.9%
--- Poland ... 26.7% ... up from 25.7%
--- Slovenia ... 16.5% ... up from 16.3%
"The Summer of 2012 could easily become the Summer of Social Dissent in the EU..."
The usual lament is that 'we don't build anything anymore' in advanced economies. This is not true. 15 % of GDP is in manufacturing and if one adds in software and technology development – which is a manufacturing process – the number is 30%. IT accounts for about 15% of US GDP making it the single most important industry. There are three factors about manufacturing which the mainstream media never reports.
The first is that high taxes, ridiculous regulation, labour rigidity through governmental laws and 'rights', and the total cost burden per worker have all risen by more than 50% in the past 30 years. This is a real cost solutioned in part, by offshoring some aspect of manufacturing overseas.
The second fact is that unionization has in large measure added to the problems of the above. Unions are literally forcing firms to go bankrupt. See GM, Chrysler, and now Hostess [detailed below] as prime exhibits.
Offshoring leads to Inshoring. There are over 10 million inshored jobs in North America, created in the past 15 years. The manufacturing process is not monolithic. Inshore jobs include retailing, distribution, creative design, high quality production, client management, and ancillary product creation. It is simply untrue that nothing is made in an advance economy.
If you want to increase 'Inshoring' reduce the burdens of government and of labor. Reform or eradicate unions. Hostess the maker of the Twinkie is a classic example of union created bankruptcy. Its sordid tale can be summarized: [see also the WSJ for a summation though unions are not blamed]
-2009 filed for Chapter 11
-$500 million in losses the past two years
-20.000 unionized workers
-No flexibility from the unions about the use of technology, better processes or productivity enhancing reforms.
-Post 2009 the Unions would not lessen their rules about work. Drivers could not unload their trucks. Trucks could not service more than one large store at a time. Hours and over-time, not to mention worker numbers strictly regulated.
-$100 million per annum paid out to retired workers, or even workers who did not work for the company in benefits.
-$150 million per annum in welfare state costs [health care etc.]
-High prices due to labor rigidity and costs. [Sounds like GM]
The Hostess firm made more than just the fat enhancing Twinkie. But thanks to union greed, 20.000 people will be without jobs. The only way to salvage the assets is for a private capital firm to buy Hostess, fire the union, hire non-Union labor and return the firm back to reality. But that is unlikely to happen. In 2009, the firm was bought by a venture capital firm who decided to 'play nice' and appease the unions. Within 2 years its $350 million buy-out was in ruins, the firm a shambles, and the entire workforce disbanded.
In a normal market without government and union distortion there will be a mix of offshored and inshored processes and job creation. This should be encouraged. But when governments and unions view firms, capital and humans as fodder and plunder, the result is predictable. More job losses, more laments about 'the greed of those who offshore', and more demands that 'government must do something'. It appears that government is already doing more than enough to encourage job destruction – along with their union friends.
Economist Rosenberg who has been right about a lot of things in the past gives a realistic appraisal of what he thinks is going on in the markets and in the economy. No one has any idea what is going to transpire, but some good guesses can be forwarded. Gold and silver will rocket higher. We are or soon will be in another recession. Most sovereign states are technically bankrupt which should mean more downgrades and higher future interest rates. Socialism or statism, in which all aspects of life are communalized, secured and guaranteed is an unmitigated failure and its unwinding will be very messy. Just ask the O'Bama, the greatest god in history, and one of the most ardent Marxists in recent American history. Or the Euro-zone which in all likelihood will dissolve into separate currency domains.
Summary of what Rosenberg gave in a speech recently:
Gold
Gold is also rallying hard as it becomes oh-so-painfully evident, now with the ECB joining the fray, that debt monetization by the monetary authorities globally is going to be part and parcel of the solution to this leg of the crisis. Expect gold to go much, much higher as well —just to get back to prior highs in inflation- adjusted terms would mean a test of $2,300; and normalizing by world money supply points to $3,000 an ounce.
That bullion is testing new highs today with oil getting crunched as global growth forecasts come down is testament to the view that the yellow metal is trading less as a commodity over time and more sensitively as a currency unit — a classic store of value that is as correlated with deflation as it is with inflation (and we have written on this file many times over the years).
Recession is assured
........We have been saying for some time that recession risks are on the rise; in fact, we think it is a virtual lock by next year. In a market correction during a period of economic growth, brief market pullbacks of 10% or 15% are common. But in a recession, corporate earnings and the equity market both typically go down between 25% and 35% — these are averages —which would then mean a test, and possible break, of the 2010 lows (below 1,000). An $80 EPS profile for next year and a trough 12x multiple would yield a similar result.
Debt and more debt
The problem that remains is the excessive global debt burdens that were never redressed by the Great Recession. Sure the U.S. banks took writedowns and cleaned up their balance sheets, but the problem of toxic assets and home price deflation have not disappeared. Governments around the world allowed debt- strapped private entities to ride off their AAA credit ratings and now that support is gone. Private sector largesse (banks and households) was replaced with taxpayer supported debt. The total debt pie relative to GDP has simply continued to spiral up to new and now seemingly unsustainable heights. Now the U.S. has hit the wall.
China?
Those hoping and praying for a Chinese solution do not realize how debt- burdened even the second largest economy in the world is today — total banking sector credit in China relative to GDP is now 150% (180% when off balance sheet items are included). This is a 30 percentage point surge from 2008 levels (see No Plan B Exists if Growth in China Cracks on page B16 of the weekend FT).
The above is pretty sensible. China will not save us. Debt levels will continue to rise. Downgrades and even state insolvency seem assured. Gold [and silver] should continue to rise. Incomes, jobs, and economic opportunity will continue to contract. The great recession of 2008 never ended. It was just milder for 18 months. The next phase will be worse than the last. None of the issues which caused the last grave economic contraction were dealt with, but actually intensified and worsened. Soon we will all pay the price for the incompetence of our managing elites.