I don’t know if anyone was watching last week….
The American Stock Market fell….
And the currencies of MANY Emerging Nations tanked….
While the World Elite were hanging out on the slopes of Davos… listening to Goldie Hawn wax eloquent about yoga at the World Economic Summit….
So… what happened…?
America recently announced that we were going to ease up on Quantitative Easing…. Stop printing more money…. Stop artificially producing inflation…. Reign in our wantonness….
Maybe I should explain a little more…. Japan and China have been sparing recently…. Mostly about the mineral resources under the ocean in the East China Sea. Who owns them. China wants everything for themselves. Japan doesn’t think that’s fair. Neither do many of China’s other neighbors. But… the Japanese Economy has a very significant issue…. The Japanese Economy is SO safe… it has being undergoing deflation…. Prices are going down…. And that causes people not to spend because they are waiting for the prices to drop. So… Japan’s Prime Minister is attempting “Abenomics”. Printing money to induce inflation artificially. Artificially decreasing the value of the yen. Making Japanese products cheaper and foreign products more expensive….
Quantitative Easing…. China does the same thing. So does the United States. But the issue with China is that no one really knows what is happening with China’s Economy. It’s a closely guarded State Secret…. What we do know… is that the “official” National Debt of China is a mere fraction of the REAL debt, largely due to the ubiquitous practice of “Shadow Banking”… which is eerily similar to the predatory lending practices and bundling of sketchy loans that led to the Subprime Lending Crisis… only on an astronomically larger scale….
So… the rapid expansion of the Chinese Economy… that was an outgrowth of the “Shadow Banking”… will very likely reverse….
Another related factor is that the population of China is stagnant…. So the number of available workers will soon begin to limit the growth of Chinese Industry….
As Chinese Manufacturing tapers off… China buys fewer resources from Emerging Nations… such as Argentina, Venezuela, and Africa…. Many of those countries have populist leaders who have sunk more resources into creating an image of prosperity for the poor than they can actually afford…. So… they have nationalized industries…. And foreign countries no longer are willing to invest in those Economies….
So… when America is pumping… and artificially deflating the value of the American dollar… and artificially inflating the less stable currencies… those currencies look to be comparatively better investments…. But… when America stops pumping… the weaknesses of those currencies become manifest…. And the REAL values of those currencies come into play…. So… Turkey and Argentina and Venezuela all took a HUGE hit as the value of their currency plummeted. Usually… such countries would prop up their currencies… but they can’t… because they don’t have enough funds in reserve to buy up their currencies on the World Market… and pay off their short-term debt… which is denominated in dollars….
So… now… America is coming under pressure from the International Monetary Fund and other International Organizations to increase our debt… in order to protect our enemies…. This has serious implications for the American Taxpayer…. Can we really continue to bail out the American Unions… and the World… including our avowed enemies…?
Japan’s Abenomics and America’s Obamanomics have one thing in common: both are in uncharted territory. We don’t know what the final outcome will be because no one has ever tried going into such massive debt before. The typical way out of such tremendous Economic Inequality in the past has been war. World War II led us out of the Great Depression. Nothing else has ever been shown to work.
But the dwindling population of China and Russia have tremendous implications for the next few decades. China will soon cease to be the manufacturing economy that it recently has been. China will need to begin to produce high value items, or allow mass immigration of less trained and educated workers from other less developed countries. Manufacturing of lower quality items will probably shift to developing nations with higher population density. Politics will emerge as the developing nations align….
Russia has a problem. The areas with excess population tend to be Muslim. Same with China. And both China and Russia are being accused of discrimination….
Brazil is also facing significant difficulties Economically, and the poor performance of its neighbors adds a drag on that economy.
Funny…. Every other nation except America is doing what they think is best for their own well-being… and America is doing exactly the opposite of everyone… except Japan… who I think will soon be beyond recovery….