An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
"Ever since 2008, the entire world economy has been kept afloat by the $25 trillion or so that China printed to build overleveraged overcapacity. And now that is gone, never to return. "
overcapacity + high leverage - effective demand = deflation (and the risk of deflationary depression)
Why? The global economy is still in the Ponzi stage of the GFC. The shakeout is yet to come and will likely happen big time unless governments step in to increase effective demand, which is unlikely as long as"austerity" and "restructuring" are the buzzwords of the day.
The most worrisome sentence: "Any government that sees its nation slide down into a deep enough pit will always consider going to war."
My take on that is that China through huge investment built up their capacity even more, but there is no real household demand for all that built capacity. In addition there was a huge real estate bubble developed over there, from all the money coming from those . All this was done through re-hypothecation, we already know how this is as same has been experienced in the West in the last decade pre-2008.
That investment was pushing earning in many industries, there is truth in that... Real estate purchases oversees in areas like London or NYC, or huge surpluses in the eurozone balance of trade from exporters in Germany going to China to build up machinery. China has been eroding it's surplus over the last 2 years and now is pretty much the USD funding the current account surpluses in the other two big monetary zones (US >> China > EU / US > EU). All that also funded all the mini-bubbles like the fracking oil bubble, the small real estate surges, the Unicorn-IPO-imaginary valuation complex over th last couple of years.
Soon the last thing remaining would be Military Monetary Theory and MIC subsidies, and all because the demand from households is not there, income is not there, and we have a built-in overcapacity, not because there is too much capacity, but because we don't ave enough demand and the private debt bubble cannot keep going on, now transfered to corporate sector with a lot of junk bonds going around (and governments are being procyclical).
2016 should be the year when we start to see corporations going down, as CEO's cannot keep pulling their tricks anymore to increase their bonuses, under global deflationary problems. This may trigger finally a push towards increasing government spending (although China has already announced they will just do that and increase spending).
6 comments:
"Ever since 2008, the entire world economy has been kept afloat by the $25 trillion or so that China printed to build overleveraged overcapacity. And now that is gone, never to return. "
What the hell does this even mean????
Beats me.
I would sum up the prognosis as:
overcapacity + high leverage - effective demand = deflation (and the risk of deflationary depression)
Why? The global economy is still in the Ponzi stage of the GFC. The shakeout is yet to come and will likely happen big time unless governments step in to increase effective demand, which is unlikely as long as"austerity" and "restructuring" are the buzzwords of the day.
The most worrisome sentence: "Any government that sees its nation slide down into a deep enough pit will always consider going to war."
The guy is impressed with Stockman?
That says it all, right there.
"What the hell does this even mean????"
My take on that is that China through huge investment built up their capacity even more, but there is no real household demand for all that built capacity. In addition there was a huge real estate bubble developed over there, from all the money coming from those . All this was done through re-hypothecation, we already know how this is as same has been experienced in the West in the last decade pre-2008.
That investment was pushing earning in many industries, there is truth in that... Real estate purchases oversees in areas like London or NYC, or huge surpluses in the eurozone balance of trade from exporters in Germany going to China to build up machinery. China has been eroding it's surplus over the last 2 years and now is pretty much the USD funding the current account surpluses in the other two big monetary zones (US >> China > EU / US > EU). All that also funded all the mini-bubbles like the fracking oil bubble, the small real estate surges, the Unicorn-IPO-imaginary valuation complex over th last couple of years.
Soon the last thing remaining would be Military Monetary Theory and MIC subsidies, and all because the demand from households is not there, income is not there, and we have a built-in overcapacity, not because there is too much capacity, but because we don't ave enough demand and the private debt bubble cannot keep going on, now transfered to corporate sector with a lot of junk bonds going around (and governments are being procyclical).
2016 should be the year when we start to see corporations going down, as CEO's cannot keep pulling their tricks anymore to increase their bonuses, under global deflationary problems. This may trigger finally a push towards increasing government spending (although China has already announced they will just do that and increase spending).
Yeah Mike he is impressed with Stockman now saying "deflation!" after he has been saying "inflation!" for 10 years...
Mike, Meanwhile prices have ALREADY collapsed... probably the commodity bottom here with this call from these people...
Post a Comment