globalresearch--2019-01-23--Global Economy on the Brink as Davos Crowd Parties On

At Davos, Switzerland every year the global capitalist elite gather to party…and to prepare for the year ahead. This year more than 1500 private jets will reportedly fly in. Thousands more of their underling staff will travel via business class to handle their personal, and corporate, logistics. Shielded from the media and the pubic, the big capitalists share views in back rooms and listen to experts on finance, government policy, technology, and the economy. The experts are especially probed to identify and explain the next ‘black swan’ or ‘gray rhino’ event about to erupt. Wealthy celebrities are invited to entertain them as well after evening dinner and cocktails. But the real networking goes on privately afterwards, in small groups or one on one, among the big capitalists themselves or in private meetings with heads of state, finance ministers, and central bank chairmen.  Typically each annual meeting has a theme. This year there are several: the slowing global economy, the fracturing of the international trade system, the growing levels of unsustainable debt everywhere, volatile financial asset markets with asset bubbles beginning to deflate, rising political instability and autocratic drift in both the advanced and emerging economies, accelerating income inequality worldwide—to mention just a short list.  On the eve of this year’s World Economic Forum gathering, some of the most powerful, wealthy, and more prescient capitalists have begun to speak out to their capitalist cousins, raising red flags about what they believe is an approaching crisis.  Ray Dalio, the billionaire who found and manages the world’s biggest hedge fund, Bridgewater Associates, warned that he and other investors had squeezed financial markets to such “levels where it is difficult to see where you can squeeze” further.  He publicly admitted in a Bloomberg News interview that, in the future profits will be low “for a very very long time”. The era of central banks providing free money, low rates, and excess liquidity have run their course, according to Dalio. He added the global economy is mired in dangerously high levels of debt, comparing it to the 1930s.  Paul Tudor Jones, another big finance capitalist, similarly warned of unsustainable debt levels—created by companies binging on cheap credit since 2009—that “could be systemically threatening”. Not just government debt. But especially corporate debt, where levels in the US alone have doubled to more than $9 trillion since 2009 (most of it high risk ‘junk bond’ and nearly as risky ‘BBB’ investment grade corporate bond debt).  Almost as worrisome, one might add, is the now more than $1 trillion leverage loan market debt in the US (i.e. loan equivalent of junk bonds). US household debt is also now approaching $15 trillion. And US national government debt, at $21 trillion, is about to surge over the next decade to $33 trillion due to the Trump 2018 tax cuts. And that’s not counting trillions more in US state and local government debt; or the tens of trillions of new dollarized debt undertaken by emerging market economies since 2010; or the $5 trillion in non-performing bank loans in Europe and Japan; or the even more private sector debt escalation in China.  Corporate debt levels are not alone the problem, however. Debt can rise so long as  financial asset prices and real profits do so—i.e. provide the cash flow available to service the debt. But when profits and asset prices (of stocks, bonds, derivatives, currency exchange rates, commodity futures, etc.) no longer rise, or start to turn down, then debt service (principal & interest) cannot be repaid. Defaults often follow, causing & investor confidence to slide. Real investment, employment, and household incomes thereafter collapse, and the real economy is dragged down in turn. The real decline further exacerbates the collapse of financial asset prices, and precipitates a mutual feedback of financial and real economic collapse.  And financial markets began to deflate in 2018; and it is now becoming increasingly clear that the real side of the global economy is slowing rapidly as well.  In February 2018 the first early warning appeared for financial markets. Stocks plunged in the US, Europe and even China. They temporarily recovered—a ‘dead cat bounce’ as they say before an even deeper decline in the fall. Then oil and commodity futures prices collapsed by 40% or more in late summer-early fall 2018. Stock markets followed again in October-December 2018 by 30-40% in US, China, Europe, and key emerging markets. Key merging market currencies—Argentina, Turkey, Indonesia, Brazil, South Africa—all fell precipitously as well. And housing prices from the UK to Australia to China to New York began to implode as the year ended.  In January 2019 stock markets recovered—i.e. a classic, short term, bull market recovery in what is today’s fundamentally long term global bear market.  Dalio’s and Jones’ worries by unsustainable debt and pending crisis have started to become real, in other words.  Becoming real as well is evidence of emerging defaults, a critical phase that typically follows asset markets’ decline and slowing profits. In the US there’s the Sears default, with JCPenney in the wings. And the giant corporation, once the largest in the world, the General Electric Corp., slouching toward default. Its global profits slowing and stock price imploding, GE is now desperately selling off its best assets to raise cash to pay its excess debt. It’s not alone. Scores of energy companies involved in US shale oil and gas production are teetering on the brink.  In Europe, there’s deepening troubles at Deutschebank, and just about all the Italian banks, and UBS in Switzerland, and the Greek banks.  In Japan, there’s trillions of dollars in non-performing bank loans as well, which Japan’s central bank continues to cover up. And then there’s China, with more than $5 trillion in bad loans held by local governments, by shadow bankers, and by its state owned enterprises that the China central bank and government keep bailing out by issuing ‘trusted loans’ (i.e. equivalent of junk bonds in US).  Default cracks have begun to appear everywhere in the global economy, in other words, major indicators that the excess debt accumulation and financial bubbles of the past decade cannot be ‘serviced’ (principal-interest paid) and have begun to negatively impact the global economy.  What’s becoming clear is that the next crisis will not emerge from the housing sector with excess debt and price bubbles driven by subprime mortgage loans and related financial derivatives.  What’s more likely is that the next crisis will emerge from debt defaults and collapsing real investment by non-financial corporations.  Moreover, the tipping point is nearer than most in business or media will admit.  Trump’s 2018 tax cuts simply threw a veil over the real condition of corporate performance in the US this past year. The tax cuts provided a windfall, one time subsidy to corporations’ bottom line. It is estimated that US S&P 500 corporations’ profits were boosted 22% by the Trump windfall tax cuts alone. Since S&P 500 profits for 2018 were roughly 27%, it means actual profits were barely 5%.  That’s the real situation going into 2019—a condition that assures US stock markets, junk bond markets, and leveraged loan markets in particular will experience even greater contraction in 2019 than they did in 2018. The bubbles will continue to pop.  In the global economy, it is even more evident that by the end of 2019 it is likely there will be  recession in wide sectors of the real global economy amidst further asset markets’ price declines.  In Europe, the growth engine of Germany is showing sure signs of slowing. Manufacturing and industrial production in the closing months of 2018 fell by 1.9%. After a GDP decline in the third quarter 2018, another fourth quarter 2018 German contraction will mean a technical recession. Equal to at least a third of all the Eurozone economy, as goes Germany goes Europe. France and Italy manufacturing are also contracting. Nearly having stagnated at 0.2% in the third quarter, the Europe economy in general may have slipped into recession already. And all that before the negative effects of a UK Brexit or an Italian banks’ implosion or deepening protests in France are further felt.  In emerging market economies, the steady rise of the US dollar in 2018 (driven by rising US central bank interest rates) devastated emerging market economies across the board. Rising dollar values translated into corresponding emerging market currency collapse. That triggered capital flight out of these economies, and their falling stock and bond markets in turn. To stem the outflow, their central banks raised interest rates, which precipitated deep recession in the real economy, while their collapsing currencies generated higher import prices and general inflation in their economies as well. That was the story from Argentina to Brazil to Turkey to South Africa and even to Asia in places.  The US halting of interest rate hikes in 2019 may relieve pressure on emerging market economies somewhat in 2019. But that easing will be more than offset by China’s 2019 economic slowdown now underway. In the second half of 2018 investment, consumer spending, and manufacturing all slowed markedly in China.  Officially at 6.6% for 2018, according to China statistics, China’s real economy is no doubt growing less than 6% due to the methods used to estimate growth in China. Its manufacturing began to contract in late 2018, and with it a significant slowdown in private investment and even consumer spending on autos and other durable goods.  China’s slowing will mean less demand for emerging market economies’ products and commodities, including oil and industrial metals. A respite for emerging market economies from the US dollar rising will thus be offset by China slowing.  When both financial asset markets and the real economy are together slowing it is a particularly strong ‘red flag’ warning for the economic road ahead.  And more contractions in stocks and other financial assets, together with slowing of manufacturing, housing, and GDP in Europe, US, and Japan in 2019, are likely which means trouble ahead in 2019.  Along with all the data increasingly pointing to financial asset deflation gaining a longer term foothold—and with real economy indicators like manufacturing, housing, GDP, exports as well now flashing red—there is also a growing list of political hotspots and potential ‘tail risks’ emerging in the global economy. Some of the ‘black swans’ are identifiable; some yet to be.  In the US, the government shutdown and the prospect of policy deadlock between the parties for two more years could qualify as a source of further economic disruption. In Europe, there are several ‘tail risks’: the Brexit situation coming to a head in April, the challenge to the Eurozone by the new Italian populist government, the chronic and deep street protests continuing in France, and the general rightward social and political drift throughout eastern Europe. In Latin America there’s the extremely repressive policies of Bolsonaro in Brazil and Macri in Argentina, which could end in mass public uprisings at some point.  In Asia, there’s corruption and scandals in Malaysia and India. And then there’s the US-trade war with China, which some factions in the US are trying to leverage to launch a new Cold War. Not least, there’s the potential collapse of negotiations between the US and North Korea that could lead to renewed threats of military conflict.  All these ‘political instabilities’ , given their number and scope, if left unresolved, or allowed to worsen, will have a further negative effect on business and consumer confidence—now already slowing rapidly—and in turn investment and therefore economic growth.  Ray Dalio’s and Tudor Jones’ warnings on the eve of Davos have been echoed by a growing list of capitalist notables and their government servants and echoes. IMF chairperson, Christine Lagarde, has been repeatedly declaring publicly that global trade and the economy are slowing.  Reflecting Europe in particular, where exports are even more critical to the economy, she has especially been warning about a potential severe US-China trade war disrupting the global trading system—and global economy in turn. The IMF has been issuing repeated downward adjustments of its global economic forecasts. So too has the World Bank. As have a growing number of big bank research departments, from Nomura Bank in Japan to UBS bank in Europe. Former US central bank chairs, Janet Yellen and Ben Bernanke, have also jumped in and have been raising red flags about the course of the US and global economies. Former Fed chair, Greenspan, has even declared the US is already on a recession path from which it can’t now extricate itself.  Given all the emerging corroborating data, the red flags and warnings about the current state of the global economy, and the growing global political uncertainties, the Dalios, the Jones, and others among the Davos crowd are especially worried this year.  On the eve of the Forum’s first day on January 23, 2019, a leading discussion topic among the cocktail parties is the buzz about the just leaked private newsletter from billionaire Seth Klarman, who heads one of the world’s biggest funds, the Baupost Group.  In his newsletter leaked to the New York Times, and widely circulated among early Davos crowd attendees, Klarman reportedly chides his readers-investors about not paying more attention to the social and political instabilities growing worldwide, about Trump’s direction which is “quite dangerous”, and the US in effect retreating from global leadership, leaving a dangerous vacuum behind. Investors have also become too complacent about global debt and risk levels now rising dangerously, he argues. It could all very well lead to a financial panic, he adds. The US in particular is at an ‘inflection point’. He ominously concludes, “By the time such a crisis hits, it will likely be too late to get our house in order”.  The recent statements by Dalio, Tudor Jones, Klarman, and the others reminds one of the last crisis and crash of 2008. When Charlie Prince, CEO of Citigroup, the biggest bank at the time, was asked after the crisis why he didn’t see it coming and do something to avoid the toxic mortgage-derivatives bomb and protect his investors and customers, Prince replied he did see it coming but could do nothing to stop it. His investors and customers demanded his bank continue—like the other banks were—investing in subprime mortgages, lending to shadow banks, selling risky derivatives and thereby continuing to make money for them, just as the other banks were doing. Charlie’s response why he did nothing to stop it or prepare was, ‘when you come to the dance, you have to dance’.  No doubt the Davos crowd will be partying and dancing over the next several days in their securely gated, posh Switzerland retreat. After all, the last ten years has increased their capital incomes by literally tens of trillions of dollars. And capitalists are driven by a mindless herd mentality once they’ve made money. They believe they can continue doing so forever. They believe the money music will never stop. One can only wonder, if they’ll be dancing later this year to the same song as Charlie’s in 2008.  Note to readers: please click the share buttons above. Forward this article to your email lists. Crosspost on your blog site, internet forums. etc.  Dr. Rasmus is author of the book, ‘Central Bankers at the End of Their Ropes: Monetary Policy and the Coming Depression’, Clarity Press, August 2017, and the forthcoming ‘The Scourge of Neoliberalism: US Policy from Reagan to Trump’, 2019. Jack hosts the Alternative Visions radio show on the Progressive Radio Network. He blogs at jackrasmus.com and his twitter handle is @drjackrasmus.com. He is a frequent contributor to Global Research.


globalresearch--2019-02-10--Save Venezuelan Sovereignty Oil Economy Destabilized Peace-keeping Role by Russia China Non-alli

Save Venezuelan Sovereignty: Oil Economy Destabilized. Peace-keeping Role by Russia, China, Non-alligned Nations?

A previous article touched on the issue. Preserving and protecting the sovereignty of any nation from internal conflict or the threat of foreign takeover is what peacekeeping is supposed to be all about.  Russia, China, and other countries supporting Venezuelan sovereignty, opposing the Trump regime’s coup attempt, should mobilize and deploy peacemaking forces to defend the country’s freedom in its time of need.  The UN defines the mission of  peacekeepers as “a way to help countries torn by conflict create conditions for sustainable peace” under UN Charter provisions. More on this below and why peacekeepers may be the most effective way to defeat the Trump regime’s coup attempt.  Washington wants Venezuela transformed into another US vassal state.  The imperial prize is gaining control over its and other valued resources, including timber, iron ore, copper, diamonds, lead, zinc, bauxite, nickel, tin, mercury, gold, silver, manganese, chromium, platinum, titanium, tungsten, and phosphates.  USGS Survey of oil resources in the Orinoco Oil Belt  The rage of hardliners in charge of Trump’s geopolitical agenda to replace democratically elected President Nicolas Maduro with US-controlled puppet governance gravely threatens Venezuelan sovereignty and social democracy.  Republicans and Dems reject government of, by, and for everyone equitably, including at home.  Sovereign independent Venezuela, its model social democracy under higher, more normalized, oil prices and stable conditions, free from US political, economic, and sanctions war, is able to provide everyone in the country with vital social services – today a shadow of earlier times because of what’s going on.  During Hugo Chavez’s first three years as Venezuelan president, annual oil production, the country’s key revenue source, was around three million barrels a day (bpd).  From 2013 – 2015 under Nicolas Maduro, it was 2.5 million bpd. In January 2018, production was 1.65 million bpd, slumping during year to 1.25 million bpd, lower still to 1.15 million bpd by yearend.  It’s currently at 1.1 million bpd, likely to fall to 900,000 bpd or lower in 2019 as long as US sanctions war continues, supported by the EU, other countries, and many foreign enterprises.  Reuters reported that European buyers are sharply cutting purchases – pressured by the Trump regime the news service failed to explain.  Two of the world’s largest oil traders, Vitol and Trafigura, said that they would observe US sanctions – no matter their illegality.  The Wall Street Journal reported that oil storage is “filling up” in Venezuela because of a lack of buyers. The Trump regime threatened to severely punish nations and entities circumventing its sanctions to conduct normal business with Maduro.  Venezuelan oil union leader Luis Hernandez called what’s going on “an absolute disaster,” adding (t)here’s almost no way to move the oil.”  Tankers are delayed, redirected elsewhere, or positioned offshore because of fear of US sanctions. If unable to sell enough oil, Maduro’s government will run out of cash, Venezuela’s economy to crash more than already, an untenable situation.  It’s precisely what Trump regime hardliners want, hoping to switch the allegiance of Venezuela’s military from Maduro to usurper in waiting Guaido, a US creation with no legitimacy, a nobody elevated from obscurity to prominence, a figure to be used and discarded if and when no longer needed.  If the Trump regime’s plan fails, plan B may be military intervention for the first time regionally since Franklin Roosevelt withdrew US forces from Haiti in 1934.  Meanwhile, millions of Venezuelans are suffering hugely under severe hyperinflation and economic Depression conditions. Maduro is clinging to power tenuously.  Around 40 nations, most EU, Latin and Central American ones plus Canada publicly declared support for right-wing extremist/US-designated puppet Guaido – barely over one-fifth of UN member states.  At the same time, the Trump regime faces significant world community opposition to its attempted coup d’etat.  Half or more of EU member states have not publicly endorsed Guaido so far. Through his spokesman, UN Secretary-General Antonio Guterres has not recognized his legitimacy, saying “recognizing governments is not a function for the secretary but for member states.”  The African Union expressed “solidarity with the people of Venezuela and…support for constitutional president Nicolas Maduro.”  The largely US-controlled Organization of American States (OAS) got only 16 out of 34 member states to express support for Guaido, short of the required number needed for its endorsement.  The UN Charter empowers Security Council member states to take collective action for maintaining international peace, stability and security.  When deployed, the stated mission of Blue Helmets includes restoring and maintaining peace, upholding the rule of law, maintaining order, along with pursuing economic and social development initiatives.  Far too often, things don’t turn out this way. Peacekeepers end up either creating more conflict than resolving it or being counterproductive and ineffective.  That aside, US, UK, and French veto power prevents Security Council authorization for peacekeepers to Venezuela other than under their control – why it’s essential for nations supporting its sovereignty and democratically elected Maduro to act on their own with consent from his government, a mission led by Russia and China.  Both nations have large investments in Venezuela to protect, especially China. Trump regime hardliners want their regional presence and influence countered and squeezed, ideally eliminated.  If their coup succeeds, Sino/Russian investments could be lost entirely or in part. If gotten, US control over Venezuelan oil can decide which foreign buyers it’ll be sold to, which others shut out.  The same hold true for Iranian oil reserves, the region’s largest after Saudi Arabia’s. Henry Kissinger earlier explained that controlling oil permits controlling nations – why the US seeks control over as much of the world’s supply as possible.  Preserving and protecting Venezuelan (and Iranian) sovereignty should be a red line for Beijing and Moscow.  A Sino/Russian peacekeeping mission to Venezuela, together with contingents from other nations supporting Maduro’s legitimacy as Venezuelan president, may be key to preventing the US attempted takeover of the country.  Diplomatic outreach to Washington is a waste of time, accomplishing nothing. Time and again, the US flagrantly breaches international treaties, conventions and agreements, along with Security Council resolutions and its own Constitution.  The only language Washington understands is toughness. International action to preserve and protect Venezuelan sovereign independence is the only effective strategy to challenge Washington’s destructive imperial agenda.  There are times when action is the only option. This is one of those times, a key moment in history when it’s vital for China and Russia to step up to the plate and do the right thing!  Note to readers: please click the share buttons below. Forward this article to your email lists. Crosspost on your blog site, internet forums. etc.  Award-winning author Stephen Lendman lives in Chicago. He can be reached at [email protected]. He is a Research Associate of the Centre for Research on Globalization (CRG)  His new book as editor and contributor is titled “Flashpoint in Ukraine: US Drive for Hegemony Risks WW III.”


globalresearch--2019-02-14--Cuba The Equilibrium of the World and Economy of Resistance

Cuba – “The Equilibrium of the World” – and Economy of Resistance

The Fourth International Conference for “The Equilibrium of the World” took place in Havana, Cuba from 28 to 31 January 2019. The Conference, organized by the José Marti Project of International Solidarity, was sponsored by UNESCO and a number of local and international organizations and NGOs. It coincided with the 60thAnniversary of the Cuban Revolution and as such was also a celebration of that successful demonstration to the world that socialism, solidarity and love for life can actually survive against all odds – and, yes, Cuba, has faced more hardship than any other country in recent history, through boycotts, embargoes and all sorts of economic sanctions, heinous military infiltrations and assassination attempts, initiated by the United States and followed, largely under threats from Washington, by most of the western world.  Viva Cuba! – A celebration well deserved – and in the name of José Marti, who was born 166 years ago, but whose thoughts and spiritual thinking for a new world are as valid today as they were then. They may perhaps best be summarized as love, solidarity, justice, living well for all and in peace. These principles were taken over by Fidel and Raul Castro, the Che and Hugo Chávez. They transcend current generations and reach far beyond Latin America.  The conference had many highlights; brilliant speakers; a torch march was organized at the University of Havana in honor of José Marti; and the organizers offered the participants an extraordinary music and modern ballet performance at the National Theater.  From my point of view some of the important messages came from the representative of China, who talked about the New Silk Road, or the Belt and Road Initiative (BRI), of building bridges and connecting countries and people, whereas the west was building walls. A Russian speaker sadly admitted that it took his government a long time and relentless trying to build alliances with the west – until they realized, relatively recently, that the west could not be trusted. Professor Adan Chavez Frias Chavez, Hugo’s brother, described an invasive history over the past 100 years by the United States of Latin America and called upon the brother nations of the Americas and the world to bond together in solidarity to resist the empire’s infringement and steady attempts to subjugate sovereign nations – with a vision towards a multipolar world of equals, of sovereign nations living together in peaceful relations.  My own presentation focused on Economy of Resistance. And what a better place than Cuba to talk about economy of resistance! Impossible. Cuba has a 60-year history of successful resistance against a massive embargo, ordered by Washington and followed by almost the entire western world, thus demonstrating that the west has been reduced to a US colony. This was true already during the Cold War, but became even clearer when the Soviet Union “fell”. Here too, the west, led by Washington, was instrumental in the collapse of the USSR – but that’s another story – and the US grabbed the opportunity to become the emperor of a unipolar world. Cuban troops also resisted and conquered the attempted US Bay of Pigs (Playa Girón) invasion launched by President Kennedy in 1961 – and not least, Fidel Castro survived more than 600 CIA initiated assassination attempts.  The principles of Economy of Resistance cover a vast domain of topics with many ramifications. This presentation focused on four key areas:  On food, health and education sovereignty– Cuba is 100% autonomous, as far health and education go.  However, Cuba imports more than 70% of the food her citizens consume and that, at present, mostly from the European Union. Cuba has the capacity and agricultural potential to become not only fully self-sufficient, but to develop and process agricultural produce into an agricultural industry and become a net exporter of agricultural goods.  This process might be addressed as a priority policy issue. However, it will take some time to fully implement. Meanwhile, it may be wise to diversify imports from other parts of the world than the EU – i.e. Russia, China, Central Asia, friendly ALBA countries – because Europe is not trustworthy. They tell you today, they will always honor your purchasing contracts, but if the empire strikes down with sanctions – as they did recently for anyone doing business with Iran, Cuba may be “cooked”.  Spineless Europe will bend to the orders of Washington. They have demonstrated this time and again, not least with Iran, despite the fact that they signed the so-called Nuclear Deal, the Joint Comprehensive Plan of Action, or JCPOA, on 14 July 2015 (the permanent members of the United Nations Security Council – the United States, UK, Russia, France, and China—plus Germany and the EU – and Iran), after which Obama lifted all sanctions with Iran – only to have Trump break the agreement and reimpose the most draconian sanctions on Iran and on enterprises doing business with Iran. The US government, and by association Europe, does not adhere to any agreement, or any international law, for that matter, when it doesn’t suit them. There are plenty of indications – Venezuela today, to be followed by Nicaragua and Cuba. These should be valid signals for Cuba to diversify her food imports until full self-sufficiency is achieved.  Already in 2014, Mr. Putin said the ‘sanctions’ were the best thing that could have happened to Russia. It forced her to revamp her agriculture and rebuild her industrial parks with the latest technology – to become fully independent from imports. Today, sanctions are a mere propaganda tool of the west, but they have hardly an impact on Russia. Russia has become the largest wheat exporter in the world. – Cuba could do likewise. She has the agricultural potential to become fully food-autonomous.  On Economic and financial sovereignty– four facets are being addressed. The first one, foreign investments, Cuba may want to focus on (i) technology; (ii) assuring that a majority of the investment shares remains Cuban; (iii) using to the extent possible Cuba’s own capital (reserves) for investments. Foreign capital is bound to certain conditionalities imposed by foreign investors, thus, it bears exchange rate and other risks, to the point where potential profits from foreign assets are usually discounted by between 10% and 20%; and (iv) last but not least, Cuba ought to decide on the sectors for foreign investors – NOT the foreign investor.  As the hegemony of the US dollar is used to strangle any country that refuses to bend to the empire, a progressive dedollarization is of the order, meaning, in addition to the US dollar itself, move progressively away from all currencies that are intimately linked to the US dollar, i.e. Canadian and Australian dollars, Euro, Yen, Pound Sterling – and more. This is a strategy to be pursued in the short- and medium term, for the protection against more sanctions dished out by the US and its spineless allies.  Simultaneously, a rapprochement towards other monetary systems, for example in the east, especially based on the Chinese gold-convertible Petro-Yuan, may be seriously considered. Russia and China, and in fact the entire SCO (Shanghai Cooperation Organization), have already designed a monetary transfer system circumventing the western SWIFT system, which has every transaction channeled through and controlled by a US bank. This is the key motive for economic and financial sanctions. There is no reason why Cuba could not (gradually but pointedly) join such an alternative system, to move out of the western claws of embargo. The SCO members today encompass about half of the world population and control one third of the globe’s GDP.  Drawbacks would be that the import markets would have to be revisited and diversified, unless western suppliers would accept to be paid in CUC, or Yuan through a system different from SWIFT. Moving away from the western monetary transfer system may also impact remittances from Cubans living in the US and elsewhere in the west (about US$ 3.4 billion – 2017 – less than 4% of GDP). It would mean departing from monetary transactions in the Euro and European monetary zones.  Be aware – the future is in the East. The West is committing slowly but steadily suicide.  Another crucial advice is – stay away from IMF, World Bank, Inter-American Development Bank (IDB), World Trade Organization (WTO) – and the like. They are so-called international financial and trade organizations, all controlled by the US and her western “allies” – and tend to enslave their clients with debt.  The CUC versus the Peso, a dual monetary system (CUC 1 = CuP 25.75), has also been used by China up to the mid-80s and by Germany after WWI, to develop export / import markets. However, there comes a time when the system could divide the population between those who have access to foreign currencies (CUC-convertible), and those who have no such access.  Also, the convertibility of the CUC with the Euro, Swiss franc, Pound Sterling and Yen, make the CUC, de facto, convertible with the dollar – hence, the CUC is dollarized. This is what Washington likes, to keep Cuba’s economy, despite the embargo, in the orbit of the dollar hegemony which will be used in an attempt to gradually integrate Cuba into the western, capitalist economy. – However, Washington will not succeed. Cuba is alert and has been resisting for the last 60 years.  The Fifth Column – refers to clandestine and / or overt infiltration of opposing and enemy elements into the government. They come in the form of NGOs, US-CIA trained local or foreigners to destabilize a country – and especially a country’s economy – from inside.  There are ever more countries that do not bend to the dictate of the empire and are targets for Fifth Columns – Russia, China, Iran, Syria, Venezuela, Pakistan and more – and Cuba?  The process of “infiltration” is becoming ever more sophisticated, bolder and acting with total impunity. Perhaps the most (in)famous organization to foment Fifth Columns around the world, among many others, is the National Endowment for Democracy (NED), the extended arm of the CIA. It goes as a so-called NGO, or ‘foreign policy thinktank’ which receives hundreds of millions of dollars from the State Department to subvert non-obedient countries’ governments, bringing about regime change through infiltration of foreign trained, funded and armed disruptive forces, sowing social unrest and even “civil wars”. Cases in point are Ukraine, Syria, Afghanistan, Sudan, Somalia, Libya – and more – and now they attempt to topple Venezuela’s legitimate, democratically elected Government of Nicolás Maduro.  They work through national and international NGOs and even universities in the countries to be ‘regime changed’. Part of this ‘Infiltration” is a massive propaganda campaign and intimidation on so-called allies, or client states. The process to reach regime change may take years and billions of dollars. In the case of Ukraine, it took at least 5 years and 5 billion dollars. In Venezuela, the process towards regime change started some 20 years ago, as soon as Hugo Chavez was elected President in 1998. It brought about a failed coup in 2002 and was followed by ever increasing economic sanctions and physical military threats. Earlier this year, Washington was able to intimidating almost all of Europe and a large proportion of Latin America into accepting a US-trained implant, a Trump puppet, Juan Guaidó, as the interim president, attempting to push the true legitimate Maduro Government aside.  To put impunity to its crest, the Trump Government blocked 12 billion dollars of Venezuela’s foreign reserves in NY bank accounts and transferred the authority of access to the money to the illegitimate self-appointed interim president, Juan Guaidó. Along the same lines, the UK refused to return 1.2 billion dollars-worth of Venezuelan gold to Caracas. All these criminal acts would not be possible without the inside help, i.e. the “Fifth Column”, the members of which are often not readily identifiable.  It is not known, how often the empire attempted ‘regime change’ in Cuba. However, none of these attempts were successful. The Cuban Revolution will not be broken.  Water resources – is a Human Right and a vital component of an economy of resistance.  Water resources will be more precious in the future than petrol. The twin satellites GRACE (Gravity Recovery and Climate Experiment) discovered the systematic depletion of groundwater resources throughout the world, due to over-exploitation and massive contamination from agriculture and industrial waste. Examples, among many, are the northern Punjab region in India with massive, inefficient irrigation; and in Peru the Pacific coastal region, due to inefficient irrigation, unretained runoff rain- and river water into the Pacific Ocean, and destruction of entire watersheds through mining.  Privatization of water resources, not only of drinking water and water for irrigation, but of entire aquifers, is becoming an increasing calamity for the peoples of our planet. Again, with impunity, giant water corporations, led by France, the UK and the US are gradually and quietly encroaching on the diminishing fresh water resources, by privatizing them, so as to make water a commodity to be sold at “market prices”, manipulated by the water giants, hence, depriving ready access to drinking water to an ever-growing mass of increasingly impoverished populations, victims of globalized neoliberal economies. For example, Nestlé and Coca Cola have negotiated with former Brazilian President Temer, and now with Bolsonaro, a 100-year concession over the Guaraní aquiver, the largest known, renewable freshwater underground resource, 74% of which is under Brazil. Bolsonaro has already said, he would open up the Amazon area for private investors. That could mean privatization of the world’s largest pool of fresh water – the Amazon basin.  Economic Resistance means – Water is a Human Right and is part of a country’s sovereignty; water should NEVER be privatized.  For Cuba rainwater – on average about 1,300 mm / year – is the only resource of fresh water. Cuba, like most islands, is vulnerable to rainwater runoff, estimated at up to 80%. There are already water shortages during certain times of the year, resulting in droughts in specific regions. Small retention walls may help infiltrate rainwater into the ground, and at the same time regulate irrigation, provide drinking water and possibly generate electricity for local use through small hydroelectric plants.  The National Water Resources Institute (INRH – Instituto Nacional de Recursos Hidráulicos), is aware of this issue and is formulating a forward-looking water strategy and planning the construction of infrastructure works to secure a countrywide water balance.  Other challenges include the hygienic reuse and evacuation of waste water, as well as in the medium to long run an island-wide Integrated Water Resources Management (IWRM).  In Conclusion, Economic Resistance might be summarized as follows:  Note to readers: please click the share buttons below. Forward this article to your email lists. Crosspost on your blog site, internet forums. etc.  Peter Koenig is an economist and geopolitical analyst. He is also a water resources and environmental specialist. He worked for over 30 years with the World Bank and the World Health Organization around the world in the fields of environment and water. He lectures at universities in the US, Europe and South America. He writes regularly for Global Research; ICH; RT; Sputnik; PressTV; The 21st Century; TeleSUR; The Vineyard of The Saker Blog, the New Eastern Outlook (NEO); and other internet sites. He is the author of Implosion – An Economic Thriller about War, Environmental Destruction and Corporate Greed – fiction based on facts and on 30 years of World Bank experience around the globe. He is also a co-author of The World Order and Revolution! – Essays from the Resistance. He is a Research Associate of the Centre for Research on Globalization.


globalresearch--2019-05-05--19 Facts About Current US Economic Performance I Dare You to Tell Me the Economy Is Booming

19 Facts About Current US Economic Performance: I Dare You to Tell Me the Economy Is “Booming”

As I discussed yesterday, nobody should be using the term “booming” to describe the state of the U.S. economy until we have a full year when GDP growth is 3 percent or better, and at this point we haven’t had that since the middle of the Bush administration.  And as you will see below, the latest numbers are clearly telling us that the U.S. economy is not even moving in the right direction.  Economic conditions are getting worse, and they weren’t that great to begin with.  According to the calculations that John Williams has made over at shadowstats.com, the U.S. economy is already in a recession, but of course the Federal Reserve will continue to tell us that everything is just fine for as long as they possibly can.  Unfortunately for them, they can’t hide the depressingly bad numbers that are coming in from all over the economy, and those numbers are all telling us the same thing.  The following are 19 facts about our current economic performance that should deeply disturb all of us…  But at least the stock market has been doing well, right?  Actually, the Dow Jones Industrial Average has been down for two days in a row, and investors are getting kind of antsy.  Hopes of a trade deal with China had been propping up stocks in recent weeks, but it looks like negotiations may have hit “an impasse”…  I warned my readers repeatedly that this would happen.  The Chinese are going to negotiate, but they are going to drag their feet for as long as possible in hopes that the U.S. will free Meng Wanzhou.  Of course that isn’t going to happen, and so at some point the Chinese will have to decide if they are willing to move forward with a trade deal anyway.  But if the Chinese drag their feet for too long, Trump administration officials may lose patience and take their ball and go home.  In any event, the truth is that the U.S. economy is really slowing down, and no trade deal is going to magically change that.  And a lot of other pundits are also pointing out that a substantial economic slowdown has now begun.  For example, the following comes from Brandon Smith’s latest article…  The bottom line is, the next crash has already begun. It started at the end of 2018, and is only becoming more pervasive with each passing month. This is not “doom and gloom” or “doom porn”, this is simply the facts on the ground. While stock markets are still holding (for now), the rest of the system is breaking down right on schedule. The question now is, when will the mainstream media and the Fed finally acknowledge this is happening? I suspect, as in 2008, they will openly admit to the danger only when it is far too late for people to prepare for it.  Hopefully things will remain relatively stable for as long as possible, because nobody should want to see a repeat of 2008 (or worse).  Unfortunately, we can’t stop the clock.  We are already more than a third of the way through 2019, and we will be into 2020 before we know it.  It has been an unusual year so far, but I have a feeling that it is about to get much, much more interesting.  Note to readers: please click the share buttons below. Forward this article to your email lists. Crosspost on your blog site, internet forums. etc.  Michael Snyder is a nationally-syndicated writer, media personality and political activist. He is the author of four books including Get Prepared Now, The Beginning Of The End and Living A Life That Really Matters. His articles are originally published on The Economic Collapse Blog, End Of The American Dream and The Most Important News. From there, his articles are republished on dozens of other prominent websites. If you would like to republish his articles, please feel free to do so. The more people that see this information the better, and we need to wake more people up while there is still time.  Featured image is from The Economic Collapse


globalresearch--2019-08-01--Erdogans Risky Geopolitical Pirouette Turkeys Economy in Troubled Waters

Erdogan’s Risky Geopolitical Pirouette. Turkey’s Economy in “Troubled Waters”

Turkey’s economy has been in increasingly difficult straits for months, especially since the failed July 2016 coup attempt. The latest move by President Recep Tayyip Erdoğan to fire his central bank head and replace him with a more amenable loyalist has already resulted in the largest one-time interest rate cut in the bank’s history. Will this be enough to revive growth in the troubled economy in time for the next national elections in 18 months? What seems to be Erdogan’s overall economic strategy as he tries to balance Washington, Beijing, Moscow and even Brussels? And does it have a chance to revive economic growth?  On July 25, Turkey’s new central bank governor, Murat Uysal, cut the bank’s main interest rate by an eye-popping 4.25%, from 24% to 19.75%. It took place three weeks after Erdogan sacked the previous governor for refusing to cut the economy-killing high rates, even after the lira had long passed out of the 2018 crisis. It was the first rate cut in three years and followed the firing of a central bank head who followed the economic orthodoxy that high interest rates are needed to kill inflation, another fraudulent modern economic myth made popular in the 1970’s by Fed chief Paul Volcker.  At 24%, Turkey had the highest interest rate of any major economy. Notably, the lira barely reacted to the big cut, leading Erdogan to demand that Uysal continue with further cuts. In doing so the Turkish president demonstrated his lack of reverence for one of the most powerful mandates of world finance, namely that politicians have no right to interfere in the sacred business of the “gods of money” controlling the world central banks.  Ever since the Basle Bank for International Settlements was created in 1930 by Bank of England Governor Montagu Norman, with help from the US bankers, nominally to deal with German World War I reparations payments under the Young Plan, but as it soon became clear, to serve as a politically independent world central bank monetary cartel, central bank independence has become dogma. The BIS helped create the devastating myth that central bankers independent of any elected political influence, guided by their superior wisdom, would manage economies far better than central banks that were subject to political pressure, or, god forbid that were actually state or public banks.  As has been demonstrated by many economic historians and detailed in my book, The Gods of Money: Wall Street and the Death of the American Century, every major financial boom and subsequent crash since creation of the US Federal Reserve in 2013 in a Wall Street bankers’ coup, has been created by central bank interventions, usually using interest rates. The bogus “business cycle” theory is little more than an elaborate smoke screen to conceal the role of the Fed or the ECB in the EU in controlling the economy in the interests of what US Congressman Charles Lindbergh and other Wall Street critics in the 1920’s called the Money Trust.  What Erdogan has done by firing Murat Cetinkaya as governor and putting a political crony in his place has set off alarm bells among western central bankers. Erdogan followed the rate cut news by declaring,  The lira even rose after the rate cut, emboldening Erdogan. The question is whether the Turkish economy and Erdogan will succeed in reviving the troubled Turkish economy in time to improve his electoral chances in coming months before next national elections following the political defeat in the key municipal elections in both Ankara and Istanbul.  The high rates were imposed by the former central bank governor to halt a free-fall of the Lira in 2018 that Erdogan blamed on foreign interference. In effect Erdogan was right to the extent that the US Fed had begun a major series of its own rate increases “to normal,” whatever that means, and Quantitative Tightening that was sending shock waves around the world. However, the Fed actions were clearly not specifically aimed at Turkey.  For the previous ten years Erdogan and the Turkish economy had taken advantage of almost a decade of historically low global interest rates following the 2008 financial crash.  During the economic boom, cheap credit flowed into construction of hotels, apartments, bridges, railways and other projects creating a huge economic boom, but mostly on money borrowed from abroad in dollars or Japanese Yen or Euros. By 2018 Turkish corporations held some $200 billion in foreign loans. When the Fed began its reversal, foreign lenders to high-profit markets like Turkey began to exit, fearing the worst, leading to a Lira collapse.  From January 2018 to the present the lira lost a staggering 37% against the dollar as Turkish and foreign investors fled the falling lira, making it nearly impossible to repay the foreign loans from earnings. Companies went bankrupt, unemployment rose to 15% officially, and inflation near 25% by October, 2018 as the price of imports soared. With an economic boom financed with foreign loans for projects that earned in lira, the economy went into free-fall during 2018, a major reason for Erdogan’s poor election results this year.  Clearly reacting to the economic collapse and the negative impact of 24% central bank rates, Erdogan went so far as to oppose central bank dogma and propose that interest rates outside his political control were “the mother and father of all evil,” telling Bloomberg in a May 14 2018 interview that, “the central bank can’t take this independence and set aside the signals given by the president.”  Now Erdogan clearly feels able to act on that by getting a political crony to head the central bank. However with such a high level of foreign currency corporate debt, it is clear that 19.75% interest rates or even zero or negative rates as in the EU will not be enough to create a new prosperity in Turkey.  Interesting enough, in 2018 Erdogan began to suggest, according to close business allies, that the 2008 Lehman Bros global financial collapse had led him to lose faith in western capitalism.  All of this takes place amid a turbulent geopolitical backdrop. Turkey’s ongoing attempts to create its own “buffer zone” against the Syrian Kurds on his borders, his growing ties to Teheran, Moscow and Beijing, and the growing tensions with NATO partners over Turkish drilling ships offshore Cyprus are leading some commentators to predict that Erdogan plans to take Turkey out of NATO and to join with China and Russia and other Eurasian states in an alliance around the Shanghai Cooperation Organization where Turkey is presently a “dialogue partner.”  Erdogan’s refusal to back down to Washington pressure on purchase of Russian advanced S-400 anti-missile defense systems, said to be the world’s most advanced, has heightened such speculation of an Erdogan geopolitical “pivot east.”  Moreover, on July 2, following the Japan G20 meeting, Erdogan was in Beijing as official guest of China President Xi Jinping. There Erdogan dropped earlier sharp criticism of what have been described as “re-education camps” where a reported 1 million ethnic Uyghur Muslims are interned. Turkey historically considers the Turkic Uyghurs to be related, and refer to China’s Xinjiang Uyghur Autonomous Province as East Turkestan.  This time Erdogan pragmatically dropped critique of Beijing’s Muslim policies and focused on what he considered more crucial—money: credits and loans from China and Chinese companies for infrastructure projects in Turkey as part of the China Belt and Road Initiative. While in Beijing the Turkish president stated to the press that it was, “uncontested that all ethnic groups living in Chinese Xinjiang live happily in the conditions of development and prosperity of China.” Just four months earlier Erdogan’s Foreign Ministry had declared the situation of the Uyghurs in Xinjiang, “a great embarrassment for humanity.” Quite a shift.  In 2018 Turkish-Chinese bilateral trade was $23 billion, according to the Turkish Statistics Office, making China Turkey’s third largest trading partner. Most of that, some $18 billion is China export to Turkey. Erdogan is clearly eager to change that more to Turkey’s favor. There was no grand announcement after the Xi-Erdogan talks of new Chinese investments in Turkey.  Will the growing tensions of Erdogan with Washington, and now increasingly with Germany and other EU states, lead to a break with NATO? At this point it is highly unlikely. The EU, especially Germany, UK and Italy are far the largest importers of Turkish products.  China is not in a position with its rapidly slowing economy and declining trade surpluses to cushion the economic blow of a Turkey pivot out of NATO and the West to the East and the SCO. The financial panic resulting would plunge Turkey into deep depression so long as Turkey abides by the rules, still, of Anglo-American central banking and financial markets. Ironically, Erdogan has made tiny gestures towards a non-western model, but to date with little effect beyond the 4.25% interest rate cut from his hand-picked new central bank chief. He is not ready to risk all in an economic and political alliance with the SCO or with Iran. The result is that rather than an Erdogan “geopolitical pivot” to the east, we see an Erdogan “pirouette” to east, the west, even north and south, trying a delicate balancing act to gain most from all. The risk is he could end up displeasing all.  Note to readers: please click the share buttons above or below. Forward this article to your email lists. Crosspost on your blog site, internet forums. etc.  F. William Engdahl is strategic risk consultant and lecturer, he holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics, exclusively for the online magazine “New Eastern Outlook” where this article was originally published. He is a frequent contributor to Global Research.  This skilfully researched book focuses on how a small socio-political American elite seeks to establish control over the very basis of human survival: the provision of our daily bread. “Control the food and you control the people.”  This is no ordinary book about the perils of GMO. Engdahl takes the reader inside the corridors of power, into the backrooms of the science labs, behind closed doors in the corporate boardrooms.  The author cogently reveals a diabolical world of profit-driven political intrigue, government corruption and coercion, where genetic manipulation and the patenting of life forms are used to gain worldwide control over food production. If the book often reads as a crime story, that should come as no surprise. For that is what it is.


globalresearch--2019-08-21--What Globalism Did Was to Transfer the US Economy to China

The main problem with the US economy is that globalism has been deconstructing it. The offshoring of US jobs has reduced US manufacturing and industrial capability and associated innovation, research, development, supply chains, consumer purchasing power, and tax base of state and local governments. Corporations have increased short-term profits at the expense of these long-term costs. In effect, the US economy is being moved out of the First World into the Third World.  Tariffs are not a solution. The Trump administration says that the tariffs are paid by China, but unless Apple, Nike, Levi, and all of the offshoring companies got an exemption from the tariffs, the tariffs fall on the offshored production of US firms that are sold to US consumers. The tariffs will either reduce the profits of the US firms or be paid by US purchasers of the products in higher prices. The tariffs will hurt China only by reducing Chinese employment in the production of US goods for US markets.  The financial media is full of dire predictions of the consequences of a US/China “trade war.” There is no trade war. A trade war is when countries try to protect their industries by placing tariff barriers on the import of cheaper products from foreign countries. But half or more of the imports from China are imports from US companies. Trump’s tariffs, or a large part of them, fall on US corporations or US consumers.  One has to wonder that there is not a single economist anywhere in the Trump administration, the Federal Reserve, or anywhere else in Washington capable of comprehending the situation and conveying an understanding to President Trump.  One consequence of Washington’s universal economic ignorance is that the financial media has concocted the story that “Trump’s tariffs” are not only driving Americans into recession but also the entire world. Somehow tariffs on Apple computers and iPhones, Nike footwear, and Levi jeans are sending the world into recession or worse. This is an extraordinary economic conclusion, but the capacity for thought has pretty much disappeared in the United States.  In the financial media the question is: Will the Trump tariffs cause a US/world recession that costs Trump his reelection? This is a very stupid question. The US has been in a recession for two or more decades as its manufacturing/industrial/engineering capability has been transferred abroad. The US recession has been very good for the Asian part of the world. Indeed, China owes its faster than expected rise as a world power to the transfer of American jobs, capital, technology, and business know-how to China simply in order that US shareholders could receive capital gains and US executives could receive bonus pay for producing them by lowering labor costs.  Apparently, neoliberal economists, an oxymoron, cannot comprehend that if US corporations produce the goods and services that they market to Americans offshore, it is the offshore locations that benefit from the economic activity.  Offshore production started in earnest with the Soviet collapse as India and China opened their economies to the West. Globalism means that US corporations can make more money by abandoning their American work force. But what is true for the individual company is not true for the aggregate. Why? The answer is that when many corporations move their production for US markets offshore, Americans, unemployed or employed in lower paying jobs, lose the power to purchase the offshored goods.  I have reported for years that US jobs are no longer middle class jobs. The jobs have been declining for years in terms of value-added and pay. With this decline, aggregate demand declines. We have proof of this in the fact that for years US corporations have been using their profits not for investment in new plant and equipment, but to buy back their own shares. Any economist worthy of the name should instantly recognize that when corporations repurchase their shares rather than invest, they see no demand for increased output. Therefore, they loot their corporations for bonuses, decapitalizing the companies in the process. There is perfect knowledge that this is what is going on, and it is totally inconsistent with a growing economy.  As is the labor force participation rate. Normally, economic growth results in a rising labor force participation rate as people enter the work force to take advantage of the jobs. But throughout the alleged economic boom, the participation rate has been falling, because there are no jobs to be had.  In the 21st century the US has been decapitalized and living standards have declined. For a while the process was kept going by the expansion of debt, but consumer income has not kept place and consumer debt expansion has reached its limits.  The Fed/Treasury “plunge protection team” can keep the stock market up by purchasing S&P futures. The Fed can pump out more money to drive up financial asset prices. But the money doesn’t drive up production, because the jobs and the economic activity that jobs represent have been sent abroad. What globalism did was to transfer the US economy to China.  Real statistical analysis, as contrasted with the official propaganda, shows that the happy picture of a booming economy is an illusion created by statistical deception. Inflation is undermeasured, so when nominal GDP is deflated, the result is to count higher prices as an increase in real output, that is, inflation becomes real economic growth. Unemployment is not counted. If you have not searched for a job in the past 4 weeks, you are officially not a part of the work force and your unemployment is not counted. The way the government counts unemployment is so extradinary that I am surpised the US does not have a zero rate of unemployment.  How does a country recover when it has given its economy away to a foreign country that it now demonizes as an enemy? What better example is there of a ruling class that is totally incompetent than one that gives its economy bound and gagged to an enemy so that its corporate friends can pocket short-term riches?  We can’t blame this on Trump. He inherited the problem, and he has no advisers who can help him understand the problem and find a solution. No such advisers exist among neoliberal economists. I can only think of four economists who could help Trump, and one of them is a Russian.  The conclusion is that the United States is locked on a path that leads directly to the Third World of 60 years ago. President Trump is helpless to do anything about it.  Note to readers: please click the share buttons above or below. Forward this article to your email lists. Crosspost on your blog site, internet forums. etc.  Dr. Paul Craig Roberts writes on his blog, Paul Craig Roberts Institute for Political Economy, where this article was originally published. He is a frequent contributor to Global Research.


globalresearch--2019-10-09--Will the Federal Reserve Make Trump a New Herbert Hoover? Is the US Economy Primed for a 1929-style

Will the Federal Reserve Make Trump a New Herbert Hoover? Is the US Economy Primed for a 1929-style Shock?

In recent months US President Trump has pointed repeatedly to his role in making the American economy the “best ever.” But behind the extreme highs of the stock market and the official government unemployment data, the US economy is primed for a 1929-style shock, a financial Tsunami that is more influenced by independent Fed actions than by anything that the White House has done since January 2017. At this point the parallels between one-time Republican President Herbert Hoover who presided over the great stock crash and economic depression that was created then by the Fed policies, and Trump in 2019 are looking ominously similar. It underscores that the real power lies with those who control our money, not elected politicians.  Despite proclamations to the contrary, the true state of the US economy is getting more precarious by the day. The Fed policies of Quantitative Easing and Zero Interest Rate Policy (ZIRP) implemented after the 2008 crash, contrary to claims, did little to directly rebuild the real US economy. Instead it funneled trillions to the very banks responsible for the 2007-8 real estate bubble. That “cheap money” in turn flowed to speculative high-return investment around the world. It created speculative bubbles in emerging market debt in countries like Turkey, Argentina, Brazil and even China. It created huge investment in high-risk debt, so called junk bonds, in the US corporate sector in areas like shale oil ventures or companies like Tesla. The Trump campaign promise of rebuilding America’s decaying infrastructure has gone nowhere and a divided Congress is not about to unite for the good of the nation at this point. The real indicator of the health of the real economy where real people struggle to make ends meet lies in the record levels of debt.  Today, fully a decade after the unprecedented actions of three presidents, the US economy is deeper in debt than ever in its history. And debt is controlled by interest rates, interest rates ultimately in the hands of the Fed. Let’s look at some signs of serious trouble which could easily put the economy in a severe recession by this time in 2020.  On September 25 the corporate bond debt of Ford Motor Co., which unlike GM refused government nationalization in 2008, has just been downgraded to “junk” status by Moody’s, who said Ford faces “considerable operating and market challenges…” It affects $84 billion in company debt.  Junk rating means than most insurance companies or pension funds are banned from holding the risky debt and must sell. Before Moody’s rated Ford bonds at the lowest just prior to junk, BBB. The problem is that over a decade of Fed low interest rates, corporations have taken greater debt risks than ever, and the share of BBB-rated or “at risk of junk” bonds today has risen to more than 50% of all US corporate bonds outstanding. At the start of the crisis in 2008 BBB-rated bonds were only a third of the total. That amounts to more than $3 trillion of corporate debt at risk of downgrade to junk should the economy worsen, up from only $800 billion a decade ago. Ten years of unprecedented ultra-low fed interest rates are responsible. Moody’s estimates that at least 47 other multi-billion US corporations are vulnerable to junk downgrades in a sharp economic downturn or with rising interest rates. The most mentioned are the aerospace and electrical conglomerate GE which among other things makes jet engines for troubled Boeing.  Corporate debt in the USA today is a ticking time bomb, and the Fed controls the clock. Today total corporate debt exceeds $9 trillion, an all-time high, a rise of 40% or $2.5 trillion since 2008 according to the St. Louis Fed. With the ultra-low Fed interest rates since 2008, companies have doubled the debt outstanding but debt cost has risen only 40%. Now in recent months the Fed has been raising interest rates directly and indirectly via Quantitative Tightening. The most recent token .25% rate cut does little to change the grim outlook for the US bond market, the heart of the financial system.  Ford among other problems is being hit hard by the global downturn in the auto sector. In the USA car dealers have become so desperate to sell cars as consumers are choking on record levels of personal debt that they have recently offered 8-year car loans. For the past two years the Fed has been slowly ratcheting interest rates higher. The predictable result has been rising default on household debts, especially car loans. As of April, 2019 a record 7 million Americans were 90-days or more behind in car loans, some 6.5% of all auto loans. More than 107 million Americans have car loans today, up from 80 million in 2008 and an historic record. The rise in defaults parallels the Fed monetary tightening graph.  Both Ford and GM are announcing thousands of job layoffs as the economy slows and consumer debt reaches dangerous levels. Ford is cutting at least 5,000 jobs and GM 4,400 in US operations. Tens of thousands more layoffs are deemed likely in coming months if the economy worsens.  Then the private US Institute for Supply Management just reported that its index of manufacturing industry contracted to the weakest since June 2009, the depth of the economic crisis a decade ago. In the survey companies cited uncertainties related to the China trade war of Trump as the major factor behind depressed hiring and business activity. Trump then attacked the Fed for not moving fast enough to lower rates.  One indicator of the precarious state of the USA real manufacturing economy is the deepening recession this year in the trucking industry, the sector that moves goods through the country. In September 4,200 truck drivers lost their jobs as freight rates plunged owing to lack of goods traffic. In the first six months of 2019 around 640 trucking companies went bankrupt, three times the number a year before when Fed rate impacts were still low and trade war consequences far less clear. In June trucking loads were down more than 50% in June compared with June 2018 in the trucking spot market. Rates also dipped by as much as 18.5% over that same period.  The volume of freight shipped by all modes in the US has been sinking dramatically. Freight shipments within the US by truck, rail, air, and barge fell 5.9% in July 2019, compared to July 2018, the eighth month in a row of year-over-year declines, according to the Cass Freight Index for Shipments, which excludes bulk commodities such as grains. This decline, along with the 6.0% drop in May, were the steepest year-over-year declines in freight shipments since the Financial Crisis of 2008.  Far from realizing the lessons of the US sub-prime housing debt crisis leading to the global crisis of 2007-2008, the banks have quietly moved back into making dodgy loans. Moreover, the two quasi-government mortgage lending guarantee agencies, Fannie Mae and Freddie Mac are in worse shape than during the 2007 sub-prime real estate crisis.  Nonetheless in March, 2019 the President signed a Memorandum calling for steps to end the ten-year Government conservatorship of the two agencies. However, as several officials recently testified, “The U.S. housing finance system is…Worse off today than it was on the cusp of the 2008 financial crisis.” That, despite $190 billion of taxpayer bailout to the two agencies. By a Congressional directive Fannie Mae and Freddie Mac are allowed to hold a loss buffer capital reserve of combined $6 billion. However they own or guarantee almost $5 trillion in mortgage securities. Many of those mortgages are of dubious or dodgy credit quality like before 2007, as banks look for higher interest rate yields. If the overall economy worsens in the coming year in the run-up to November 2020 elections, home mortgage defaults could soar. It has been estimated that  The key to the US economy is debt and debt is at an all-time high for US Government, whose deficit is rising annually at more than $1 trillion, for corporations with record debt and for private households where home mortgage debt, student loan debt and car loan debt all are at record high levels. Student loan debt reached $1.46 trillion by January 2019, with serious delinquency rates much higher than any other debt type. Mortgage debt accounted for $9.12 trillion. Total private household debt was a record $13.5 trillion. If we add to this precarious economic debt the situation in American agriculture where farmers face the worst crisis since the early 1980’s, it is clear that the economic miracle of the Trump era is far from stable.  To wit, one of the most noted features of recent US economic growth, the US shale oil recovery of 2018 that made America the world’s largest oil producer, has all but flattened out this year as world oil prices fall sharply. The fall is threatening many US shale oil producers many of whom borrowed by issuing blow investment of high interest yield junk bonds in hopes of a recovery from the price collapse after 2014. Even an attack on Saudi oil infrastructure and threats of war in Iran and Venezuela have not stopped the price slide in oil in recent weeks. If oil prices continue to fall below $55 a barrel a new wave of bankruptcies and closings in the US energy sector will follow, most likely in 2020 just in time for the US elections.  From 1927 to 1929 the Fed deliberately created then burst a stock bubble using interest rates. Republican President Hoover signed the Smoot-Hawley Tariff act in 1930 to defend American industry, resulting in a trade war that was blamed along with Hoover for the Great Depression that was brought on by an economy bloated with debt and easy money during the Roarin’ Twenties boom. Hoover was blamed and lost re-election to Democrat FDR with his New Deal. Behind all were the actions of the Federal Reserve, the real power. Soon it will be clear if 2020 will be a modern era repeat of the Hoover script, this time with a Democrat whose “New Deal” will likely be green.  Note to readers: please click the share buttons above or below. Forward this article to your email lists. Crosspost on your blog site, internet forums. etc.  F. William Engdahl is strategic risk consultant and lecturer, he holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics, exclusively for the online magazine “New Eastern Outlook” where this article was originally published. He is a Research Associate of the Centre for Research on Globalization (CRG)  This skilfully researched book focuses on how a small socio-political American elite seeks to establish control over the very basis of human survival: the provision of our daily bread. “Control the food and you control the people.”  This is no ordinary book about the perils of GMO. Engdahl takes the reader inside the corridors of power, into the backrooms of the science labs, behind closed doors in the corporate boardrooms.  The author cogently reveals a diabolical world of profit-driven political intrigue, government corruption and coercion, where genetic manipulation and the patenting of life forms are used to gain worldwide control over food production. If the book often reads as a crime story, that should come as no surprise. For that is what it is.


globalresearch--2019-10-31--US Equities Soar While Real Economy Plummets. Deep Recession Ahead?

On Wednesday, the S&P 500 closed at a record high, the Dow and Nasdaq just shy of record territory.  Yet according to economist John Williams, noted for reengineering official data to how it was accurately calculated decades earlier, the “US economy remains in intensifying downturn.”  Year-over-year payroll growth is at a level “last seen going into and coming out of the great recession,” indicating significant economic weakness.  A “confluence of unusual risk factors (are) developing or already in play.”  New and existing home sales are declining. Inflation adjusted durable goods orders are down. Non-annualized Q III GDP growth “was not meaningfully different from zero.”  “September 2019 manufacturing remained 4.8% (-4.8%) shy of ever having recovered its pre-recession peak activity.”  “In the 101-year history of industrial production, that reflects a record 142 consecutive months of economic non-expansion, as measured by the Federal Reserve Board’s monthly surveying.”  So why are US equities at or near record highs?  Money printing madness (quantitative easing – QE) is back with a vengeance, along with three cuts this year in the fed funds rate.  It’s the interest rate banks and other depository institutions charge when lending money to each other, most often on an overnight basis, the lower the rate, the cheaper the borrowing cost.  Interest rate cuts and QE don’t stimulate economic growth or create jobs. Money created flows to bank balance sheets for speculation, high salaries and bonuses for corporate executives, stock buybacks, along with mergers and acquisitions for reducing competition by consolidating to greater size.  Money dropped on Wall Street facilitating all of the above fuels higher asset prices.  From 2006 until December 2015, the fed funds rate was zero. During this decade, QE created $3.5 trillion in virtually free money for corporate America and speculators, fueling the longest bull market in US history.  As much as $23.7 trillion went for bailout funding, according to former Troubled Asset Relief Program (TARP) administrator Neil Barofsky, the greatest of grand theft.  In October 2018, Project Censored reported that “the Department of Defense and the Department of Housing and Urban Development (HUD) may have accumulated as much as $21 trillion in undocumented (unaccounted for) expenses between 1998 and 2015.”  All of the above grand theft came and continues to come at the expense of eroding social justice and other vital homeland needs.  The greatest US wealth disparity was created and now exists since the late 19th/early 20th century robber barons age.  According to Wall Street on Parade, the “Fed up(ped) its Wall Street bailout to $690 billion a week” in late October.  The “giant money spigot” began flowing freely in mid-September, “growing exponentially” at present, adding:  “The New York Fed will now be lavishing up to $120 billion a day in cheap overnight loans to Wall Street securities trading firms, a daily increase of $45 billion from its previously announced $75 billion a day.”  Benefitting firms are getting cheap money “continuously rolled over,” effectively making funds “permanent loans…exactly what happened during the 2007-2010 Wall Street collapse…without the authorization or even awareness of Congress or the American people.”  Citigroup alone got over $2.5 trillion in near-free money. What the mother-bank New York Fed is now doing “is unprecedented in US history.”  Yet establishment media aren’t reporting what should be regular headline news.  No Wall Street or economic crisis was declared by the Fed. No congressional hearings were held on what’s going on.  No one authorized what’s happening. Loans are going “to the New York Fed’s primary dealers, which are stock and bond trading houses on Wall Street who count hedge funds among their largest borrowers,” Wall Street on Parade explained.  Dodd-Frank financial reform was supposed to prevent what’s going on. Yet it’s happening with a vengeance, fueling speculative excess and the great wealth disparity.  The Federal Reserve isn’t federal. It’s owned and controlled by major Wall Street banks, serving their interests, not the economy or public welfare.  According to the Economic Collapse Blog (ECB), 14 signs show economic weakness — what money printing madness isn’t addressing.  “Not since the last recession have we seen numbers this bad. The ‘mini-boom’ that we witnessed for several years has now turned into a ‘bust,’ and very tough times are ahead,” said ECB, listing the signs it sees as follows:  “#1 US business hiring has fallen to a 7 year low. #2 Consumer confidence in the United States has now declined for 3 months in a row. #3 Defaults on ‘subprime’ auto loans are happening at the fastest pace that we have seen since 2008. #4 The percentage of ‘subprime’ auto loans that are at least 60 days delinquent is now higher than it was at any point during the last recession. #5 Vacancies at US shopping malls have hit the highest level since the last recession. #6 Destination Maternity has announced that they will be closing 183 stores as the worst year for store closings in US history just continues to get worse. #7 The Cass Freight Index has now fallen for 10 months in a row. #8 US rail carload volumes have plunged to the lowest level in 3 years. #9 In September, orders for class 8 heavy duty trucks were down 71 percent. #10 Tesla’s US sales were down a whopping 39 percent during the third quarter of 2019. #11 The bad news just keeps rolling in for the real estate industry. Last month, existing home sales in the United States declined by another 2.2 percent. #12 New home prices have fallen to the lowest level in almost 3 years. #13 According to one recent report, 44 percent of all Americans don’t make enough money to cover their monthly expenses. #14 A recent survey found that more than two-thirds of all US households ‘are preparing for a possible recession.’ ”  Small businesses are being hit hardnest by economic weakness. ECB quoted investor Michael Pento saying:  “When this thing implodes, we are all screwed. On a global scale, we have never before created such a magnificent bubble.”  “These central bankers are clueless, and they have proven that beyond a doubt. All they can do is to try to keep the bubble going.”  What can’t go on forever, won’t. An eventual day of reckoning is inevitable. When arrives it won’t be pretty.  Like always before, ordinary people will be hit hardest.  Note to readers: please click the share buttons below. Forward this article to your email lists. Crosspost on your blog site, internet forums. etc.  Award-winning author Stephen Lendman lives in Chicago. He can be reached at [email protected]. He is a Research Associate of the Centre for Research on Globalization (CRG)  His new book as editor and contributor is titled “Flashpoint in Ukraine: US Drive for Hegemony Risks WW III.”