April 19, 2016
While we focus on domestic politics, the world economy sends red light danger warnings
By Thomas Lifson
The world’s economy is in deep trouble. Those jobs that everyone, led by Donald Trump, want to bring home, are evaporating overseas. The US is far rom the only nation to use government debt to try to keep its economy afloat. In act, we’re following Japan in that path, which has been stagnating for two and half decades as its government throws borrowed money into its economy to keep total demand from crashing – as if it doesn’t matter whether spending goes to useless make-work government projects or productive investment. (Can you say “Stimulus Bill”?)
The problem with dent is that someday it has to be repaid, or else the system collapses.
Consider this from Zerohedge:
“We’re digging a great big hole that is likely to cave in on us before we manage to claw our way back out of it.”
“US nonfinancial debt rose 3.5 times faster than GDP last year. (Nonfinancial debt is the sum of household debt, business debt, federal debt, and state and local government debt.)”
“The Federal Reserve, the European Central Bank, the Bank of Japan, and the People’s Bank of China have been unable to gain traction with their monetary policies…. Excluding off balance sheet liabilities, at year-end the ratio of total public and private debt relative to GDP stood at 350%, 370%, 457% and 615%, for China, the United States, the Eurocurrency zone, and Japan, respectively…. The debt ratios of all four countries exceed the level of debt that harms economic growth. As an indication of this over-indebtedness, composite nominal GDP growth for these four countries remains subdued. The slowdown occurred in spite of numerous unprecedented monetary policy actions—quantitative easing, negative or near zero overnight rates, forward guidance and other untested techniques.”
While we are in our political silly season, the global economy is crashing. China, whose growth and sheer size has buoyed the world economy for decades, is seeing its trade collapse. This is easily shown by a key index:
China Ocean Freight Index Collapses to Record Low
“The amount it costs to ship containers from China to ports around the world, a function of the quantity of goods to be shipped and the supply of vessels to ship them, just dropped to a new historic low.
The China Containerized Freight Index (CCFI) tracks contractual and spot-market rates for shipping containers from major ports in China to 14 regions around the world. It reflects the unpolished and ugly reality of the shipping industry in an environment of deteriorating global trade....”
The presidential election of 2008 was in large part determined by a global economic crisis. Prior to the financial collapse, McCain/Ryan had pulled ahead in the polls. But after, the Democrat Barack Obama surged ahead and stayed there.
If you don’t think another potential economic crisis, perhaps even bigger, is brewing, you are kidding yourself. The timing is uncertain, but all the signs are there.
Read more:
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