utopian Posted February 13, 2016 Posted February 13, 2016 https://socioecohistory.wordpress.com/2014/07/26/flashback-1988-get-ready-for-a-world-currency-by-2018%E2%80%B3-the-economist-magazine/ I bought this book two years ago in 2014. It was a great read, touching on some aspects on the history of money before going on to outline some problems of the modern American system, as well as giving me another well researched source on modern and historical economic events. Towards the end it focuses on three main points that, while not exactly perfectly correct today, did indeed get it mostly right. The first three factors I will discuss today are from the book, as well as from other sources. Factor 1; China http://www.msn.com/en-us/money/markets/chinas-stock-meltdown-is-now-becoming-our-problem/ar-AAcI1Fr?ocid=mailsignout The Chinese and US economies are fatally linked. China could dump it's ties with the US, but then they would have no one to sell their products to, and damage their economy. The US could default on it's obligations to China, but then it would have no one to buy cheap and necessary products from. There are several products and corporations that come to the US from China, but none is so prominent as Walmart. Look at all the products that come from China the next time you go to Walmart, and you might develop an understanding of just how important it is that America maintain its relation to China. If products from China suddenly ceased to become available on shelves such as Walmarts, the value of such supplies could easily go up 1000% or more, as all of our industry has been outsourced to countries like China, and we have no established means of producing these items ourselves. China is in turmoil, and its problems are beginning to burst at the seams, as will be described in more detail later. Factor 2; Oil http://www.msn.com/en-us/money/markets/opec-unity-shattered-as-saudi-led-policy-leads-to-no-limits/ar-AAg24DU?li=BBnbfcL&ocid=mailsignout A couple few years ago, gas was as high as 5.50 a gallon in California. Prior to such prices, it was not worth America's while to tap it's oil sources on its own land, because the oil that was left was mostly under shale rock that required expensive machinery to harvest. With gas prices so high, however, it suddenly became worth it to purchase and develop the infrastructure required, and corporations took out loans to purchase everything. Unfortunately for the oil companies of the world, the US never joined OPEC, but only ever agreed to use its military industrial complex to provide its military as mercenaries to protect their infrastructure. With America now drilling its own oil outside the oil cartel, OPEC has a new competitor, and has decided to sell its oil for cheaper than what the US sells it for. OPEC hopes that by doing so, it will prevent American oil companies from being able to service the interest payments on the loans they took out to purchase its oil infrastructure, bankrupting them and returning control of the oil market to OPEC. I thought for a while that they would indeed succeed. However, some interesting new information has become available; http://www.zerohedge.com/news/2016-01-16/exclusive-dallas-fed-quietly-suspends-energy-mark-market-tells-banks-not-force-shale When the US banks were about to go under, the government used its citizens tax dollars (and unborn children) to bail out the banks. This time around, it seems the plan is to use taxes and unborn babies to bail out the oil companies. Without doing so, gas will one day pop back up into about 6 dollars a gallon, maybe more, as US oil companies go under. If they do in fact use our tax dollars for a bailout, gas will stay low, but Americans will be gouged in their taxes and slavery. Factor 3; US housing http://www.msn.com/en-us/money/realestate/brace-for-a-flood-of-foreclosures-when-boom-era-helocs-turn-10/ar-AAbDeGu?ocid=mailsignout Beginning in 2005 and during the crash throughout 2008, Americans were finding they were unable to service their housing payments as the system began to collapse. So in order to sustain their loans, many citizens took out HELOCs, or Home Equity Line of Credit. These loans allowed borrowers to take out a loan against the equity already in their housing, and only have to pay interest in 10 years. After those 10 years, however, borrowers would have to pay interest AND principle, effectively doubling a borrower's payment. As we head into the second year of the end of the 10 year period in which an explosion of these HELOCs were taken out, more and more borrowers will find themselves unable to maintain payments, and the housing market, which is widely recognized to be overvalued, will plunge back down into severely depressed valuations. Factor 4; The Actions of the Federal Reserve http://www.msn.com/en-us/money/markets/the-feds-dilemma-is-the-economy-slowing-or-surging/ar-BBpbboc?li=BBnb7Kz&ocid=mailsignout The US Federal Reserve is in a tough spot. It began it's quantitative easing programs around 2008 at somewhat higher percents of interest. The benchmark 10 year bond will be coming due soon, and the Federal Reserve has kept it's interest rate at 0 for many years now. It has not generated any money outside printing more dollars for a long time, and a large portion of these 10 year bonds will have to be paid off at 100% plus interest. Usually, the Fed would do what it has always done, and sell more bonds at a higher interest rate to kick the can down the road further. Unfortunately, the Fed has been backed into a corner. The economy depends on free money in order to sustain itself these days, and a raising of interest rates can trigger a selloff of many things. Loans across the board will suddenly find themselves having to pay their original interest plus whatever the Fed hikes interest to, and debtors may default on their loans. Additionally, as the Fed has raised interest rates beginning in December last year, China has responded by selling off portions of it's Wall Street Market share, sending the DOW from its peak of 18k last year, to bouncing around under 16k this year. So the choice for the Fed is tough; either keep interest at 0%, and service returning bonds by printing more dollars and inflating the money supply (thereby causing recession),or raise interest rates, service old bonds with new bonds, and deal with the fallout caused by China and debtors selling out. There seems to be no clear answer, except perhaps, to wait and see what happens. There is indeed an advantage to this option; other countries could take actions that prop up the US dollar. In fact it has already happened; Japan has taken their bonds into negative interest rates, triggering a selloff in Japanese markets, and a buy up of American markets that saw the DOW go from under 16k to over 16k. It will be interesting to see how this plays out. Most interesting to me, I think, is seeing how much attention is being given in the media to the Federal Reserve actually going into negative interest rates itself. Factor 5; Minimum Wage http://www.msn.com/en-us/money/companies/wal-mart-pulls-plug-on-smallest-store-format-shuts-269-stores/ar-BBoeOI6?li=BBnb7Kz&ocid=mailsignout In 2015, at least here in California, minimum wage was 9 dollars an hour. Beginning this year it is now 10. In some cities, like LA, it's 15. Walmart has notoriously been closing stores over the minimum wage hike, even though they have been one of the main lobbyists for keeping minimum wage down. I have read that, if wages had kept up with inflation over the dollar's history, minimum wage would have been 22 dollars an hour a while ago, if not for lobbies like Walmart. Regardless, corporations across the board are being effected by the wage hike, as they suddenly find themselves paying today's wages while selling products at yesterdays prices. In order to stay afloat and make a proper return, they will have to adjust prices to an appropriate level, causing inflation. Many business, like Walmart, have chosen to cease hiring and producing jobs in the face of raised minimum wage, and the result is more people will be out of work and money and homelessness will become more common. As if this were not enough, this comes at a time when the market is in turmoil, the Fed does not know what to do, and oil is ready to crash one way or another. We have had a brief period of economic success, and citizens have had some time to acquire some savings. As business adjust to the new minimum wage, first people will find themselves out of work and unable to find a job. Then they will draw upon their savings. Then they will depend upon credit. Then they won't have anything, as another recession sets in. Factor 6; Potential government shutdown http://www.msn.com/en-us/money/markets/spending-showdown-looms-as-national-debt-hits-dollar19-trillion/ar-BBp7sRg?li=BBnb7Kv&ocid=mailsignout In 2013, the US government shut down, causing several unobvious events including the EPA preventing Chinese goods to enter the US, causing a delay in revenue that pissed the Chinese off enough for them to make a statement confirming that they will not be investing in America again. While it likely means they will not be purchasing Federal Reserve bonds again the next time they become due, it also meant they will be offloading American stocks, and they have been. A simple look at the DOW's history will show there we several days in which the DOW began with a sharp drop, as China has opened the market with selloffs. As I write this, the DOW is back under 16k. And though a spending budget was approved last year that was supposed to see the government fund itself through next year, politicians are beginning to regret their decision and call for a spending reform as the national debt breaks 19 trillion. It could cause another shutdown, or at least a stagnation and maybe a selloff in markets as investors watch and wait to see what happens. Factor 7; The Presidential Election After studying everything relating to my article in my signature, it is my educated guess that the 1% in control of the global economy strive to create these chaotic situations in economies in order to tell the presidential hopefuls "do what we say or we are going to leave you stranded with this gigantic shit sandwich". Things are already getting crazy in China, Europe, the Middle East, and everywhere. America is still in charge, and only the executive actions of the president are capable of making any real difference. That is, if a president even knew what was going on or how to fix anything. Most presidents, like Obama, would just play along until the elites were satisfied enough to make things marginally better for people. Regardless, before the presidential election, bets are being made on wall street. Each candidate comes with different sets of agendas, and that means different investments which can boom or bust depending on which candidate wins. Before the election, investors are buying certain stocks, assuming one candidate or the other will win. They will settle into the trenches in an already tumultuous market, further stagnating the economy and making things worse, but not that much worse... not yet. Then, a candidate will be elected, and investors will know what to expect. There will be booms and sell offs as investors realize X will happen with one candidate, or Y will happen with another. Then with the candidate in office, he or she will take actions, and it can be anyone's guess whether they were right or wrong. There will be winners, and there will be losers, and the only thing that will be certain is uncertainty. My personal speculation is this; it will come down to Donald and Hillary. Sanders has a good heart; some of my favorite videos are of him sticking it to Ben Bernanke during the recession, trying to figure out what is going on. Unfortunately, he has no idea what he is doing, and would likely make things a lot worse. I think he would be better than Hillary, however, because I know she is bought and paid for by the Saudis, and a member of the Council of Foreign Relations, a group cited to be the the people actually in control of the US government. Donald Trump could certainly win, and I have seen articles providing evidence that wall street is interested in voting republican. My concern with Trump is, he IS a corporate kingpin. Though I know he knows about money, and how to fix America's economy, I have to wonder if he will indeed make life better for citizens, or just for himself. 2016 will certainly be a very interesting year.
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