ARE WE IN A GLOBAL RECESSION?
The great asset bubble during the Late-2000s recession. 1 – Central banks gold reserves (.845 trillion) 2 – M0 (paper money) ($3.9 trillion) 3 – Traditional (fractional reserve) banking assets ($39 trillion) 4 – shadow banking assets ($62 trillion) 5 – other assets ($290 trillion) 6 – Bail-out money (early 2009) ($1.9 trillion) (Photo credit: Wikipedia)
ARE WE IN A GLOBAL RECESSION? SHORT ANSWER: YES!
This question was asked by Larry Kudlow, last night, in his daily CNBC show “The Kudlow Report.”
His guests, prominent economists hesitated, and then refused to answer.
Mr. Kudlow added up the facts: Europe, as a total, was definitely in a recession, the USA had a GDP of 1.8 and mighty China was slowing down, expanding stimulus and lowering rates. Japan was in a deflationary recession for over 20 years.
The most telling point was the price of oil: It had dropped over 20 percent in the last two months. Countries did not energy for their industrial entities.
Another telling point was the fact that world wide commodity prices were dropping. People did not have enough money to buy food. There was also a surplus of food.
If you add these facts up, it looks like the world economy is slowly sliding into a deflationary economic depression.
WHAT CAN BE THE CAUSE OF A WORLD RECESSION?
There are two undeniable causes:
- There are too many humans on this planet.
The productivity of any human results in more goods than one person can consume. This results in surpluses of all types of goods.
The surpluses of goods forces prices down and therefore the GDP of countries falls. Falling GDP is the primary economic determinant of a depression.
- The Second and most important cause is the mal-distribution of profit.
Most of the profit of all productive corporations flow to the owners. The workers get such a minute quantity of profit that they must continue working full time in order to survive.
This results in two negative results:
One. A discordant society of two major classes and a minor middle class.
The working class or poorer class constantly grows larger and the richer owner class constantly grows smaller.
Two. The quantity of production always grows larger since increased quantity equals increased profit for the owners and increased work for the workers.
During periods of prosperity, these results are accepted by most workers and owners. However, if profit were divided more equitably, the workers would work less and there would be less products available.
This would prevent any surplus of products—the major cause of any recession or depression. The people of the world would work less, enjoy life more and social unrest would disappear.
World map showing GDP real growth rates for 2009. CIA world factbook estimates https://www.cia.gov/library/publications/the-world-factbook/rankorder/2003rank.html as of April 2010. (Photo credit: Wikipedia)
THE EMERGENCE OF BORROWING
Since the workers of the world are today the voters of the world, the wealthy owner class has devised a way to keep them happy for short periods of time.
The owners knew from their knowledge of what happened in the USSR and China that workers would seek a political solution to ownership if they became too dissatisfied.
This fear has been uppermost in all western countries since the political advent of communism in 1917. Wars were fought in Korea and Vietnam to prevent the spread of communism.
In the West, especially in the U.S.A., an intense and perpetual indoctrination of the entire society has been ongoing by all governments against the “Evils of Socialism and Communism.”
Fortunately for the West, the USSR collapsed economically 80 years after its inception, thereby providing proof of its evil qualities.
Unfortunately for the West, the Communist government of China was very successful, probably because it decided to blend communism with capitalism.
With all these events as common knowledge to the people of the West a solution to the unequal distribution of wealth had to be found.
This solution evolved in society, it was not decided upon by a small group of people. And it evolved throughout the world. No country, not even communist China has been immune to this solution.
The solution was “Borrow money today and repay the loan in the indefinite future.”
This solution seems innocuous. What is wrong with borrowing money in order to purchase services or products today and then repay the money in the future—with, of course, added interest?
In this way individuals or corporations or governments can improve their present situation and the repayment should not detract from the standard of living in the future.
As China’s exporters were hit by the global recession in 2008, the People’s Bank of China began stepping up her intervention programme to prevent appreciation of the Yuan. By April 2011 Chinese state controlled banks had accumulated over one trillion in US treasuries and over 1.5 trillion in other dollar assets. (Photo credit: Wikipedia)
This type of reasoning has never been seen before the history of economics.
There is an obvious flaw in this line of reasoning. The flaw lies in the assertion that the future will not be debased by the repayment of the principle borrowed plus the interest accrued. But, of course when repayment time came, the borrowers refused to debase their living style to repay their loans.
What did they do? They borrowed again to repay the old loan and make a new loan. In this way their living standard grew better. The lenders, almost always banks, looked to their governments for help.
The governments, groups of parasitic humans, took the money given them from the bankers and passed laws stating that the taxpayers would support the banks if the borrowers defaulted.
This simplistic and financially deadly agreement was ignored by the taxpayers as they were benefiting as were the banks. Both lenders and borrowers ignored the future consequences.
RESULT?
Today, in the year 2012, almost every country in the world is in debt beyond any possibility of repaying that debt! The quantities of indebtedness are phantasmagorical!
Neither the U.S.A. nor most of the countries of Europe can repay their loans.
Since the laws of every country involved require that debtors repay their loans or go bankrupt we are seeing the population reduce its spending thereby weakening or crushing business.
This weakening is manifested economically as Recession or Depression.
The few strong countries of Asia, essentially China, are seeing their markets for their products drying up. As a result China and other Asian countries of slowing down.
Oil countries are not receiving orders for their energy and oil prices are dropping.
Hot dog seller on corner of Castle St, Edinburgh This hot dog seller can be found year round on the corner of Castle Street, where it meets Princes Street. Princes Street is soon to be opened up again -on a temporary basis – for the festive season, as traders report a drop in sales of up to 75% which is mainly being attributed to the tram works combined with a global recession. (Photo credit: Wikipedia)
Agricultural prices are also dropping as people can no longer afford as much food as previously.
SUMMARY
The world is entering a global recession!
PROGNOSIS
The prognosis for the world is very poor. The countries of the West, the U.S.A. and Europe, are ruled by a small elite of intelligent and educated individuals related to each other by common values.
These people are totally disinterested in the well being of the populations they control. They are only interested in maintaining their power and their wealth.
As the Western countries descend into poverty the populations will recognize the indifference of their rulers, and, as it occurred in the Middle East, they will revolt.
Social Media will be the primary instrument that will disseminate their dissatisfaction. The results of this coming revolt are unknown.
It is unlikely to perpetuate the present process of borrowing, booming and crashing. We will see the financial system of the West change into something unrecognizable by the people of the present.
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