global economy

The Economy is Tanking? And we’re debating Trump?

Posted on by Helena

Ukraine is mired in corruption, fraud, strife, a failed economy, war, hatred and poverty. So what are they doing about it? They are passing a bill lickety split that says it is a crime to call Russia – Russia. The sanction? A fine of nearly $3000. With the average wage in Ukraine coming in at a measly $200 per month, the fine would not be remotely collectible and result in the creation of ‘debtors prison’. Remember the British? What an imbecilic waste of time and energy.

The media continues to blame Russia for all of Ukraine’s problems including their economic woes, their internal corruption, their inability to forge anything worthy of acknowledgment. Blame is the new agenda. It has blossomed into a global thorny bush that has no flower to soften its prick. It was the Obama agenda the moment he began his initial campaign. It is the GOP agenda, the Hillary agenda, the UK, the German, the Canadian fallback for all things less than wonderful.

Ukraine’s Poroschenko has asked for the resignation of the Prime Minister, Yatsenyuk, but he has apparently refused and powers forward with the cure all formula to the Ukraine crisis – make the word Russia – a criminal act.

In our own lands of freedom we see Obama hailing the heroine author of To Kill A Mockingbird, while simultaneously snubbing the funeral of one of our Chief Justices, Scalia.

We watch as Turkey invades Syria and say nothing. We give the Hillary corruption a green light as she forges forward in her bid to become President while knowingly falsifying information, data, records, taxes, Foundation policies, etc… and these boots they keep on walking – walkin’ all over you…

Obama has managed to create the worst cooperative atmosphere in the US in history, the worst foreign relations, the most rhetoric, and a division within the population reminiscent of the Civil War!

And within this midst of madness, we are not paying attention to the economy.

The demand for large and medium sized industrial and commercial loans has plunged into negative territory. Manufacturing is contracting and the wealthy are dumping their real estate. The outlook for growth in the EU is feeble and we still blame the fall on China. China propped us up!

So while we are distracted with rambling politics in the US, refugee crises in the EU, energy prices in the proverbial twalette, and fabled vaccine crises, we have failed to pay attention to the picture at large – the economy. In all, Germany, France, Canada, the US, the UK, Brazil, Italy and Japan have all had their economic outlook downgraded by the OECD for 2016.  That is not a good thing!

With zero interest rates, low inflation, a crumbling market, consumer confidence tanking, and faith taking a dive, insurance companies have quietly upped their cost for bank defaults implying that anticipation of more bailouts is rising.

Austerity programs have proven less than fruitful as they are continually adjusted and readjusted as countries slide and the mark is passed. Instead of informing us of our circumstances, the media is filled to the brim with stories about entertainers, who said what when, who showed a lot of skin, and a smörgåsbord of banal information to keep us in the dark.

In 2014 when oil began its perilistic descent, the Wall Street Journal was quick to claim that the trough would be good for the global economy. Obviously, that has not been the case.

What can be done?

The UN and OECD believe that greater government intervention into the economy is necessary in order to boost the stagnant to declining growth. They state that more investment in infrastructure, education and social sectors is the ticket. And while private equities did take advantage of the low interest rates, instead of using the funds to grow and expand, they used the money to buy back shares of stock, further contracting growth.

But does that work in actuality? The IMF approved over $15 billion in loans to Ukraine, and ‘forgave’ its debt to Russia. Nothing changed. In fact the economy of Ukraine is worse than ever. The IMF’s largest outstanding committed loans are for; Portugal, Greece, Ireland and Ukraine. Portugal and Greece remain in austerity with little positive change in their economic outlook and actually some expanding negative.

So maybe, just maybe the theory behind the OECD, the UN and the IMF is simply – wrong. From a simplistic standpoint if an individual were in debt and default and they went to a financial advisor, I doubt the advice would be to simply borrow a whole lot more…and that would solve the problem. The advice is and always has been – cut costs, reduce debt, create a budget that is balanced and attainable, and expand spending gradually commensurate with income. While it is simplistic, the incentive for individuals is high while the incentive for businesses and government to abide by these same rules is unfortunately low.

And so we are left with one word – incentivize. Providing incentives, as well as consequences. What is the carrot? Because right now – there is nothing.

China Devaluation – a global savior?

Posted on by Helena

The Chinese cut the valuation of the Yuan. It was devalued by 1.9% yesterday and 1% today. So, why is this important, are they a demon or savior?

The yuan spiked in 1994 at 8.73 and remained level for about eleven years until 2005. Since then, the government has used devaluation to stabilize it’s market and stimulate growth. And by all accounts, it has worked. China’s economy has burgeoned, and investors around the world have reaped the rewards. So why all the hubbub? It’s certainly not the first time…

The US has placed pressure on China numerous times when the threat of a currency war seemed real. From 2009 through 2010, China allowed appreciation, allowed depreciation, and then agreed on a settlement value. But in 2013, a new player in the war emerged as Japan sought to devalue its currency in order to encourage a better export market. In 2014 it was Germany and in 2015 it was the European Central Bank.

Each time, the rhetoric surrounding the devaluation depends on the global reputation of the country (friend or foe) more than anything relevant. China is perceived as a bad guy and thus when they commit the same move in the currency game, the world cries foul!

But someone was playing the China market, there were rumors of manipulation, then the gold market was hit, again rumors of manipulation given China is heavily invested in gold. Were there forces trying to bring down China’s economy? Perhaps. And perhaps the government saw the next play as a potential Soros styled currency devaluation. Maintaining control would then be imperative. A controlled devaluation cut Soros out of the picture – quickly and succinctly. Baddaboom!

In addition, there are a multitude of outside factors to consider: the decision by China to allow Russia to trade in rubles instead of dollars, the collaboration of Russia, India, China and most of South America, the demand that China be placed in the monetary basket of currencies with US, Japan, Korea and Euro. Add to the mix reports of high supply of oil, more to come as Iran sanctions are lifted, hence lower oil prices, and you have a country that is adjusting to the new global economy.

While the dollar has been strong, US exports have fallen sharply in the last year and could see even greater pressure with the devaluation of the Yuan. So what are we doing?

In a Whitehouse report submitted December 9, 2010, Obama stated that he will achieve the goal of, “Creating Jobs and Growth by Doubling Exports by the End of 2014: Already, the Obama Administration’s efforts to boost trade and exports are producing results. The U.S. remains on pace to double exports, continuing to exceed the 15% annual growth rate required to reach the President’s goal by 2014.”

So let’s take a looksee:

united-states-exports

Nope. October 2014 to March 2015 saw a rollercoaster downhill ride. And our current account to GDP is -2.4%.

So why are we upset? Because the China move will not help elevate Obama out of the rut and in fact may deepen it. What is the US doing to increase exports? They are using as a time frame the low point in the curve compared to the slight increase to create a statistical sample. The same statistical manipulation we continually see as time frames are utilized to create a false truth.

As in the White House report, if exports create jobs, declining exports cost jobs. Who is laying off? Chevron, Disney, Shell, A&P, AmericanExpress, Amazon, BP, Royal Dutch Shell, Microsoft, Intel, Novant Health, Blue Cross, to name just a few.  Who stands to lose most from the devaluation? Automobile makers and chip makers.

But in the greater picture is China’s move a bad one? No. China’s export and import markets had both declined by over 8%. Their role in the global economy is a link to stability.  If their economy were to track down, we would all likely follow. And then we’d be blaming them for not doing something proactive…