It’s a slow economic news day today so let’s discuss some interesting Tweets.
Burying the Dead in Ukraine
Leading Economic Indicators
The Leading Economic Indicator Index fell for the 16th consecutive month, its longest stretch of negative months since the Global Financial Crisis
China’s Dependency on Real Estate
Housing Affordability
Flashback Hoot of the Day on the US Dollar
March 1978, the Economist claimed the “Dollar fades as Reserve Currency”
More Gold Backed BRIC Currency Silliness on Dethroning the Dollar
I have been discussing death of the dollar nonsense since 205 or so.
For recent discussion, please see More Gold Backed BRIC Currency Silliness on Dethroning the Dollar
The sheer number of deaths in Ukraine examplifies to me the decay and rot of human society. The top of the pyramid is at peak corruption, peak dishonesty and peak incompetence. And, it’s seeping its way through the whole pyramid…social unrest, looting, decadence, status-symbol worshipping and sexual perversion to name just a few…
The media whores (especiall in the US) deserve a special place in hell. The sheer volume of lies on a daily basis is staggering. The majority of the media are just mouthpieces for their corporate masters in pharmaceuticals, arms manufacturing, hedgefunds and political party.
If you need an example of that, look at the way the Seymour Hersh pieces were spinned and how he was labelled a ‘conspiracy theorist’ hours after his pipeline story broke. Wikipedia is now weaponized as well and can no longer be trusted for accuracy.
No wonder a growing number of people are just checking out completely. No radio, no news, no television…no internet even. I can completely sympathize with that.
Thanks for these articles Mish. Short, factual and without insufferable political spins.
Amen and amen
WHEN us gov made gold illegal for us residents in 1933, the ramifications was a huge bubble up stock market for a few years, but the second plunge was even worse than the 1929 to 1932, for most people. btw, defaulting on the dollar exchange to gold was extremely inflationary in the true austrian economic debauching of a currency. without checking anything but my market memory, the 32 to 35 years was best ever bull market in stock.
In 1928 the Fed cut rates. In Oct 1929 the Dow plunged 33%. In 1930 the economy recovered and the Dow reached a lower high. To stop the bubble from moving higher the Fed hiked. When the Fed raised rate they ignited the plunge.
Sept 2023 might be green for technical reasons.
“Once markets are driven primarily by speculative buying, it becomes almost impossible to stabilize them because buyers will only buy on rising price expectations.”
Which is why the last literate to leave the government “room,” Andrew Mellon; recognised that the only; as in only for real without ANY exception; way out was, and is, and forever will be, to:
“liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system. High costs of living and high living will come down. … enterprising people will pick up the wrecks from less competent people.”
“Noone” who has any wealth, nor power, today; no different from then; have done anything to “earn it. It has ALL, to within a percent or at most three, simply been redistributed by Fed and government action.
Hence: There is no way to right the economic ship; and make America neither “great,” nor even just minimally competitive and worth-vile again; which does not include liquidating literally all of the garbage structures, institutions as well as fortunes that The Fed and activist government has handed out, entirely arbitrarily, to nothing but connected dilettantes over the past 50 to 100+ years.
If Hoover had listened to Mellon, the so called “Depression” would have been over in about no time at all. But he didn’t, since the New York “elite” that he; reliably stupid and beholden as is always the case for politicians; listened to, would have been the most thoroughly liquidated of all; seeing as even back then, most of their fortunes were tied to little more than credit expansion driven redistribution their way.
The Japanese didn’t listen neither. Choosing instead to bend over for the same “saving” of Tokyo “society” in the 80s/90s.
But illiterate idiots being illiterate idiots; no matter how many times and places over: Can never, even in the slightest, change the fundamental truth of Mellon’s advice: Things WILL ONLY get worse, until the whole, economically illiterate, s^&t-show is all, fully and completely, without exception, liquidated.
That Hoover didn’t act back then, only means the idiocy has been allowed to grow to much, much greater heights today. Such that the required liquidation is now even more immediately disruptive ($20/oz gold: Try finding the gold to pay of your $200K mortgage, or even phone bill, at that rate; when everyone else is doing the same…..).
Of course, the upside is: Houses don’t disappear. Nor do factories, nor roads, nor wheat fields, nor workers’ skills, nor oil wells. Hence, no matter the abruptness of the immediate nominal disruption: It won’t take long before it’s all back up and running. Just, as Mellon noted: Under the ownership/management of more competent people. And also without the debt, rents and other drags-on-competitiveness which is keeping American industry hamstrung in the financialised era, any longer attached.
SO TRUE. thanks for posing
This is what happened in USSR in 1990s when everyone lost their pensions.
What happened in Russia, just as is happening in America today, was rather the exact opposite: Connected dilettantes were handed everything.
The Ruble was never forced up to 1/20th of an ounce of Gold (conveniently also the Gold content of the original Gold Ruble from way back when Russia was Russia, not Soviet Union. At least for the minute or two it took before debasement began…..). Instead, it was just further devalued, facilitating transfer of whatever was left from the Soviet era, to regime-close hucksters. No different from the US.
And, just as in the US, this meant “pensions”, like most else, were debased as well. After all, printing currency doesn’t add any real value. Hence Abramovich and Goldman Sachs getting more, by arithmetic necessity (apologies to all those who struggle with elementary arithmetic…) means others are getting less.
With Evergrande filing for chapter 15 in New York on Friday with nearly $300B USD in troubled Eurobonds, the markets are going to be even more spooked than they already are. How that bankruptcy is handled is going to affect which lenders are going to find new balance sheet constraints, drive more risk adversity and counterparty fears, more credit events and bank failures, and further deflate the economy into a global recession through disappearing dollar funding. Expect the premium for liquidity to go through the roof as customers desperately try to obtain eurodollars to both continue operations and shore up balance sheets.
There is nothing central banks—who for the past 50-60 years are nothing more than symbolic entities with pop psychology as the only tool in their toolbox—can do about this. As should be evident from the past 16 years.
That there will almost certainly be a credit event or banking crisis in mid-September is one of the worst kept secrets in the marketplace. Expect bailouts/ins, the one thing central banks can do . But the bigger question should perhaps be: how severe is this recession going to be, because the deflationary winds are so strong, its looking like Depression level is possible, despite war and massive government deficits.
Know and respect your enemy : the Shi dynasty lifted hundreds of million poor
people to the middle class, built infrastructures, industries, army, air force and navy… China had no comparative dynasty for thousands of years.
NYC subway is falling apart.
… so are a lot of those new Chinese buildings.
…so are a lot of those old US bridges and water/sewer systems.
From Greenwald: “An absolute atrocity few are trying to stop.”
I find that statement to be chilling…because it’s true.
Only way to stop it is with an EARTH SHATTERING KABOOM, and nobody wants to light the fuse.
MND: 30YFRM hits 7.48%
BOOM, BABY! Keep it going. Higher for longer is our only salvation for a recession.
CME Fed Watch still has a September pause @ 86.5%. Hopefully, this will pivot to 5.75%. The economy is booming, and the Fed’s 525 basis points rise to the FFR is barely putting on the brakes. We’ve slowed down from say 70 mph to about 45 mph, MAYBE!
Savings accounts are paying all my living expenses now, with a bit left over, and I’m banking everything I earn.
This is the life.
You’re very fortunate. The other 75% of people out there, especially the bottom 25% or say are getting shellacked.
Good for you, Zardoz!
5% guaranteed looks pretty good now.
China boom and bust is more akin to USA in 1800s. Very fast hundreds of millions of subsistence farmers in wretched penury getting electricity and water and clean factories to work in. Economists think it’s sports. Winning or losing. Vapid thinking at best.
1) Wealthy foreigner investors parked their money in the Spanish and Irish RE bubble. The bubble decayed for 20 years, but nominal RE prices are higher.
2) Wealthy Chinese bought apartments for themselves and their children in the major cities, like Shanghai and Beijing. Poor speculators bought impaired apartments.
China is not falling apart.
3) Wealthy Americans annually invest trillions in the healthcare bubble, but they are sicker and fatter “hooked customers”.
4) When the dentists and med doctors bubble decay Americans will be healthier :
Dr Nathan Bryan, Dr Mark Burhenn, a dentist and Eillen Kopsaftis
Plenty of apartments in the first tier Chinese cities are falling apart. Also it isn’t just speculators who are stuck with substandard apartments as there are plenty of videos from people living in those apartments showing how they can pull apart the concrete with a buyer knife or showing where they put their leg through the floor as they walked.
And the rich Chinese buy property in other countries. I work construction and construction security and have seen the developer on one site I worked bring in a bus load of Chinese who then purchased many apartments here in Sydney. Funny part was theses apartments were selling for a million plus but the kitchen and bathroom cabinets were imported cheaply from China and the installer told me that the Chinese manufacturers had used the cheapest chipboard that would need replacing within 3 years as they would fall apart. So they are exporting tofu dregs. The buyers from China are buying insurance/bolt holes for when things go bad in China, but then again our own governments are also making a right mess of things.
I’m only keeping enough cash in the bank for upcoming bills. The rest is partly stashed and mostly invested in quality property and PMs. I could put it in term deposits but the inflation rate is double the interest rate and for one of my accounts (HSBC Egypt) I expect a bail in of the local currency as they started unofficially doing it last year with foreign currency accounts. That issue might spread worldwide.
I sincerely hope that when the time comes you can find a buyer offering a price acceptable to you for your PMs and real estate. Still, probably better than fiat.
China didn’t print money out-the-wazoo, it does adjust the reserve requirements which in the US is zero. Myopia must be a disease.
China’s biggest long term problem is demographics. That will be he hardest issue to deal with. A good video series on the from Peter Zeihan is worth watching. Also no central command controlled economy will ever prosper in the long run. Govt interference and control of the free market is doomed to failure. Just as all fiat currencies. Not one in human history has ever survived.
This time is different! (c) ™
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Looking at the chart of dependence on real estate, I can’t see Canada. It’s must be off the chart. Ditto Australia.
The simple point about the dollar is, does the world continue to buy up Treasury debt without limit? Yes or No? If yes, the facade goes on. If no, then we enter massive debt monetization – and all that follows that. I see no political will to change course on this coming disaster.
China has serious problems with real estate. There were too many speculators who thought the demand would never end. When this happens and speculators become sellers instead of buyers, things fall apart quickly. To make things worse, many of the purchased properties haven’t been built. And may never be. Banks have nothing to foreclose on.
They also had a lot of building for a shrinking population. The same thing the US housing market is going to see. Builders keep on building because that’s what they do. At the same time, the pool of buyers remains flat. Not a good long term prospect for real estate.
You are right about things falling apart quickly in relation to China. Millions of apartments and houses in China will never be occupied and not just because they overbuilt for a declining population. They are falling apart literally. Tofu dregs made with poor quality building materials, lacking proper foundations or sufficient rebars. Polystyrene used instead of concrete. If you watch YouTube videos by 2 guys (Winston and Milk) who lived in China for many years they have videos of places that they saw under construction and then 3 years later those villas are falling apart.
During a major earthquake a few years back thousands of children died in dozens of schools that collapsed due to contractors taking shortcuts to make a profit after paying bribes.
They export stainless steel that rusts, deadly dog food, baby formula with added plastic and counterfeit everything. So I won’t cry if they go into an economic bust but I worry that they will invade Taiwan to distract from the economic problems with a war, just like the US does.
China is the second largest economy in the world. If they go down, so does the global economy. China failing is bad for *everyone*.
And while one can never fully discount the stupidity of world leaders, China taking Taiwan now would make things so much worse off for them financially, I’d put the odds at less than 1%.
What I don’t discount though is the Atlanticists who forced Russia into the Ukraine not doing the same to Biden over Taiwan. If he announces missiles being stationed there for example, China goes in the next day. Biden would need global approval for such a move though and I doubt that is there. National governments are looking inwards at their crumbling economies, and not thinking of new foreign adventures, as best as I can see.
I would take any reason for countries to avoid the next invasions. I hope you are right … but I’m more pessimistic.
USD is being used less and less as a reserve currency and the trend will continue. It’s still the most widely held and will likely be for at least a decade, but it won’t be forever.
The thing about BRICS isn’t replacing the USD with a new gold backed currency. It’s trading between countries in their own currencies. They’ll hold fewer overall reserves if they can purchase using their own currency.
I agree. It’s hilarious to see all these gurus acting like nothing substantial is going to happen. That’s crazy. Death by a thousand needles. In 5-7 years time, those gurus will actually start to take notice. Now, I have no idea when the tipping point arrives, but to sit here with our heads in the sand is ludicrous. China is winning on most front right now. If they’re able to navigate their real estate bust by time we enter our own credit induced recession, they will have a period of time where they’re gaining momentum against us economically.
I have a great fear that this will bring in the CBDC (CentralBankDigitalCurrency). I’ve heard folks talking about nice UBI promise if you move to CBDC. I can see it now … “Sorry, you cannot purchase this beef unless you go delete that tweet you made yesterday.”
Nah. It will probably be simpler. “You cannot purchase any food until you change how you voted yesterday.”
Hard to believe burying the dead is a thing these days.
Mish, whatever happened to those mobile crematoriums in China you were reporting on 3 years ago?
I remember the pics of them stacked outside of funeral homes, right?
Good question for a follow up!
Thanks!