Major Fluctuations in the World Financial Markets, Disturbing!
For some time now, I have been writing about the possibility of a major deflationary cycle spanning the world markets. Many of you have already predicted that possibility quite a long time ago. However, the recent Chinese devaluation in January of this year, on top of their other economic problems, has been quite disconcerting to me. I have repeatedly mentioned that President Xi Jipeng is not deliberately entering into an economic war with the highly pegged US Dollar. He has a real problem managing a system rife with corruption, false evaluations, and massive speculations. In part, I attribute these aberrations to the Chinese national character which, by nature, has been and will continue to be speculative because there may be no more possibility for real growth in the Chinese GDP.
Equally disturbing are the economic problems in Russia, Turkey, Ukraine; all related to the decreasing price of oil which I believe will remain low because of a massive glut in the world markets [including Brent, Sweet oil, et.al]. On top of these problems, we have the failing nation states of Venezuela, Argentina, Brazil, Bolivia , et. al. Interestingly enough, the American dollar keeps climbing higher and higher until we will not be able to export much of anything other than the over-valued, cash-strapped hi-tech companies which are valued in the billions while exhibiting negative cash flows. This bizarre phenomena will mandate a new type of math calculations which I have yet to comprehend.
Next we must consider the increase rate hike by the Feds which will choke off some of the necessary liquidity to sustain a minimal growth of at least 2 % per year. While the price of gas is dropping, the price of basic foods have increased somewhere around 6-10%. This means we will be able to drive more cheaply to a fast food restaurant and spend the difference we saved in gas on the increased price of the burger/fries and a coke.The USG optimistic statistics of increased employment is flawed because, as most of you know by now, it’s based on part-time jobs with minimum labor costs which will have to be subsidized by the feds, one way or another [EBT cards, Social Security, etc].
These aforementioned trends are the ones that appear somewhat apparent today. However, there are other hidden political/banking movements that are not so obvious. Switzerland, a wealthy country with possibly the highest currency value [the Swiss Franc], is now in a process of initiating a referendum that might change the banking system that we have been used to for the past 300 years. The Swiss want to eliminate the banks’ capacity to make money. They will force Swiss Banks to maintain currency reserves of 100% in order for them to be considered a ‘bank’. Loans, as we know them now, will be relegated to other sectors of the economy—private lenders—and the Central Banks, thereby, bypassing the need for local or regional banks. These new currencies will not be paper money any more but bitcoins of electronic transfers of binary numbers as in Pay-Pal or the Lending Club.
This all amounts to is a very great uncertainty as to which way our world finances will go. Wars can no longer pull out a country from a deflationary spiral as WWII did for the USA. Manufacturing will become a smaller segment of the world markets as people train for more hi-tech, process-oriented jobs.
We are in a time of major change. Adaptation and ingenuity will become paramount, if we are still able to maintain a wisp of hope.
As Charles Dickens wrote in the Tale of Two Cities:
“These were the best of times; and the worst of times.”
Let us approach this dichotomy with quiet resolve and pragmatism; and not bemoan our newly undefined fate.