Category Archives: Economics

Are Robots and AI Really Going to Displace All Workers? Probably Not, by Robert Blumen

Posted on November 13, 2022 | Leave a comment

Replacement by robots sounds plausible, until you give it a couple of minutes of thought. From Robert Blumen at mises.org:

Among the components of the World Economic Forum’s Great Reset are a drastically reduced population and the replacement of human labor with robots and artificial intelligence (AI). The question immediately comes to mind: can robots and AI really make all the stuff for the elites after they have gotten rid of the people?

Because a plan has been formulated and described does not mean that it is possible to realize. The plan may contradict laws of logic or reality, or assume the existence of resources that do not exist.

Podcaster and journalist James Delingpole, speaking to investigative journalist Whitney Webb on October 23, 2021, discussed this topic with his guest. I have transcribed several minutes from their conversation, edited for concision:

Webb: The fourth industrial revolution. One of the main pillars of that is automation and artificial intelligence. We’ve already seen that with corporate behemoths, like Amazon’s efforts to replace human workers with robots. Starbucks is piloting their AI barista with plans to have at least one in most if not all locations…. How long until humans are gone entirely? That’s in a retail setting.

In the UK Tesco recently joined the cashier less checkout. It’s all done on your phone. You scan when you enter the store. Everything is tied to you, your unique digital identifier with the corporation. You can just walk out of the store. How convenient that you didn’t have to walk by a cashier at all.

We’re going to see this happen in big ways in manufacturing. Chile is one of the biggest producers of copper in the world. In the northern part of Chile, the economy is driven by mining…. They are automating the mining here [in Chile]. Most of Chile’s middle class in the north work in the mining industry. They are about to all be cut out….

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The 3rd Largest Bond Market Is Flashing Red… Could a Financial Crisis Be Near? By Chris MacIntosh

Posted on November 11, 2022 | Leave a comment

The Japanese bond market is cracking wide open. From Chris MacIntosh at internationalman.com:

Bond Market

At a macro level it is worth understanding that for US hegemony to continue to exist it has relied on a level of global order – legal, political, and always backed up with the military.

The Mackinder Doctrine

The Mackinder doctrine essentially states that “who rules the World-Island -mainly the area ruled by Russia- commands the world”.

In order to retain this global power the US has been fueling both sides of proxy wars for decades, but these countries which have been subjugated have been relatively inconsequential in terms of global trade, like Afghanistan, Somalia, Iraq, etc. and certainly inconsequential in terms of military power.

But this has now all changed. The issue now is that the US is fighting multiple proxy wars on a much grander scale. This means that the cost of maintaining influence among all existing vassal states rises, and as this rises, the countries on that periphery (because they’re typically most heavily impacted) seek alternatives.

This is what we’re seeing with the BRICS becoming more and more emboldened. It is what we have been discussing with respect to OPEC+’s recent middle finger to the hegemon. It is much more a political statement than it is about oil. To highlight my point, consider that the US receives 7.5m barrels per day (bb/d) from OPEC+. That’s bugger all when the US is releasing 1m bb/d from the SPR right now. So clearly there is more at play than oil.

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Posted in Banking, Business, Currencies, Debt, Economics, Economy, Financial markets, Geopolitics, Governments, History, Military

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Legal definitions of money and credit, by Alasdair Macleod

Posted on November 11, 2022 | 2 comments

The title is dry but the article is not. If you don’t know the difference between money and credit, what’s happening in the world’s financial system and what’s about to happen will be incomprehensible. This is a great tutorial, from Alasdair Macleod at goldmoney.com:

At these times of growing confusion over the future of currencies’ purchasing power, it is time to remove all doubt in the definitions of the differences between money, currency, and credit. This article traces the history and legal background to these relationships.

Despite the failure of the Bretton Woods agreement in 1971 and the state propaganda that followed, the position is clear. Both historically and legally money is and remains metallic coin — principally gold — and the rest is credit. 

As a result of statist puffery of their fiat currencies, the public now wrongly believes it is fiat currencies that are money and that currencies have no price, except against each other. I show that this is factually incorrect. However, in financial markets legal money is always priced in legal tender, usually US dollar currency, when it should be the other way round. This inversion of the truth will turn out to be a costly error for those making this mistake.

In this article, I also show that the adverse consequences for prices from changes in the level of total commercial bank credit are significantly less than they are for changes in the level of central bank credit. Now that we are on the verge of a severe contraction of commercial bank credit, governments and their central banks are sure to respond by ramping up inflation of their currencies in a vain attempt to avoid deflation.

The consequences for fiat currencies are likely to be calamitous for them. 

That will be the penalty we all face for ignoring the wisdom and findings of the Roman jurors, thinking that we know better with our economic models, macroeconomic policies, and statist control of markets.

Over two millennia of their careful deliberations, it was the Roman jurors who thoroughly examined and properly defined the difference between money and credit, upon which all economics and modern banking depend. Current monetary and economic fashions are mere ephemera in that context.

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Posted in Banking, Business, Capitalism, Currencies, Debt, Economics, Economy, Financial markets, Governments, History, Money

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World Dollar Hegemony Is Ending (and That May Be a Good Thing), by Patrick Barron

Posted on November 9, 2022 | Leave a comment

The reserve currency status of the fiat dollar allows the U.S. to get a lot of something with a lot of nothing. The world has grown tired of that. From Patrick Barron at mises.org:

The end of world dollar hegemony is coming and hardly anyone in government is taking notice or even understands what this means. Since the Bretton Woods Conference in 1944, the dollar has been the only currency accepted throughout the world for settlement of international trade accounts among nations.

Prior to 1944, physical gold was used for international settlement. When an exporter in country A sold goods to an importer in country B, country B would pay with its own currency. But country A would have no interest in allowing country B’s currency to build up in its vaults beyond an amount required to settle its own importers’ needs. Thus, country A would demand that country B redeem its own currency in gold. Sometimes country B would ship physical gold to country A. Or perhaps gold held in safekeeping in a third country would be designated as now belonging to country A, a book entry transaction that is more convenient than physical movement.

The Bretton Woods Agreement and Its Demise

The Bretton Woods Agreement added the dollar as tantamount to physical gold at $35 per ounce. The reason was simple: at the end of World War II the United States had accumulated a preponderance of gold, due primarily to its role as the “arsenal of democracy.” Thus, central banks could exchange dollars for settlement rather than moving or redesignating the ownership of physical gold. The weakness of this system was that the world had to trust the USA not to create more dollars than it could redeem for gold at $35 per ounce. But central banks always had the option to demand physical gold from the USA and hence ensure that their trust in the measure of $35 per ounce was fully supported.

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Posted in Currencies, Debt, Economics, Economy, Eurasian Axis, Foreign Policy, Geopolitics, Governments, Trade

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The Housing Bubble Popped, and the Fed Can Let it Rip, by Wolf Richter

Posted on November 5, 2022 | Leave a comment

The market is going to take interest rates higher and the Fed will follow, as it always does. This is not good news for the housing market. From Wolf Richter at wolfstreet.com:

Raging inflation knocked out the “Fed put,” and banks are no longer on the hook for mortgages; taxpayers and investors are.

So we have a weird situation. Not weird actually. Just reality. After mind-boggling ridiculous spikes, home prices in most markets are dropping, and in some markets, they’re plunging at the fastest pace on record. And in some markets, they’re going down faster than they’d spiked on the way up. And it’s just the beginning. There is nothing magic about this.

The average 30-year fixed mortgage rate has more than doubled since last year, from less than 3%, to now over 7%, the highest in 20 years, the highest since 2002. But there’s a difference between 2002 and now: The magnitude of the home prices.

Home prices have shot up to ridiculous highs in the era of interest rate repression and money printing by the Federal Reserve. But that era ended earlier this year. Now we have surging interest rates and the opposite of money printing: quantitative tightening.

So now we’ve got sky-high home prices, and I mean ridiculous home prices, and mortgage rates that were normal when home prices were just a fraction of today’s prices.

Over the past two years, we’ve seen spikes of home prices of 30% to 60%. In the Miami metro and the Tampa metro, for example, home prices spiked by 60% in two years, according to the Case-Shiller index. Which is just nuts. And we know how this is going to end and it already ended:

With 7% mortgage rates after a 60% price spike in two years, sales have plunged, and those sales that are taking place are taking place at lower prices.

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Love Letter to Ireland! (and to ALL the Debt-Enslaved Nations of the World)

Posted on November 5, 2022 | Leave a comment

Ireland is in bad fiscal shape, but so are many other nations. They all have a rendezvous with pain. From David Chu at thesaker.is:

 
Love Letter to Ireland! (and to ALL the Debt-Enslaved Nations of the World)

How often have the Irish started out to achieve something and every time they have been crushed politically and industrially. By consistent oppression, they have been artificially converted into an utterly impoverished nation.

~ Friedrich Engels, 1856

Look out, Ireland!

Financial debt-bergs, dead ahead!

The Irish “external debt to GDP” ratio is currently at 609%. In December 2010, it was well over 1,000% (1,091.5% to be precise). No other nation on Earth carries this much external debt to its GDP. The United States, the world champion of all debts for sure with an official national debt reaching almost $31 Trillion, only has 104% as its external debt to GDP.

What this means is that Ireland will be fleeced once again, meaning her people will be enslaved financially and economically . . . when interest rates rise. Interest rates are rising significantly and will rise dramatically. Ireland is the poster child of nations in debt slavery and what will happen to those who borrow way beyond their means.

Before we get into the nitty gritty of this unlucky Irish story, I want to state for the record that I am not an economist. Thank God! I am a mechanical engineer by profession and I understand numbers. Numbers don’t usually lie. Well, sometimes numbers can be manipulated. But most of the times, they also can tell the truth. We are going to take a 30,000 feet overview of this increasingly hot and very dangerous situation that is not adequately covered by the mainstream or the alternative media.

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The Great Unwind II, by Alasdair Macleod

Posted on November 4, 2022 | Leave a comment

To stay solvent banks are going to have to dramatically curtail lending. Shrinking credit and central bank debt monetization will drive the world into an inflationary depression. From Alasdair Macleod at goldmoney.com:

With price inflation rising out of control and interest rates rising strongly, the trading environment for commercial banks has fundamentally changed. With bad debts looming and bond prices in entrenched downtrends, procrastination is now the enemy of bankers.

We are at the beginning of The Great Unwind, and this article elaborates on my first article for Goldmoney on the subject published here. 

The imperative for bankers to respond to these conditions overrides all other matters if their businesses are to survive these changed conditions. We are entering a cyclical downdraft of the bank credit cycle which promises to be cataclysmic. And the monetary policy planners at the central banks can do nothing to stop it.

After outlining the scale of the problems faced by each global systemically important bank, this article looks at the future for the $600 trillion derivatives mountain. It was born out of the long-term decline in interest rates from the mid-eighties, which ended last year. It is almost entirely distributed through banks and shadow banks.

The question to address is, what is the future for the derivative mountain, now that the long-term trend for falling interest rates is over? And what are the economic consequences?

If it’s you in the hot seat…

Imagine, for a moment, that you are the CEO of a commercial bank involved in lending to businesses and with profit centres acting in a range of financial activities. As CEO, you are answerable to the board of directors for the bank’s performance, and ultimately the bank’s shareholders for maintaining and advancing the value of their shares. 

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Writing as Microcosm, Part One: Publish and Perish, by John Michael Greer

Posted on November 3, 2022 | Leave a comment

It’s become very difficult to make much money as a writer, and unfortunately, that statement applies to a lot of other professions and occupations as well. From John Michael Greer at ecosophia.net:

’m not sure how many of my readers have noticed the massive realignment going on right now at the foundations of the industrial economy. Venture below the towering abstractions of notional wealth that fill business websites, all the way to the base, and you’ll find that the whole gargantuan structure rests on certain relationships between individuals and the economy. Most people in the industrial world participate in economic activities in two ways: selling their time and labor to businesses as employees, and buying goods and services from businesses as consumers. That’s the base from which the whole tottering mess rises.

What we’re seeing now is that a growing number of people have lost interest in continuing to fill those particular roles. Intractable labor shortages are becoming the norm in today’s industrial societies. Part of that is a function of the soaring number of people who are struggling with bad health just now—no, we don’t have to get into why that’s happening—but not all of it. At the same time, the consumer side of the equation is also collapsing, and stores are floundering as inventory builds up and sales slump. Quite a bit of that is a function of the wicked blend of inflation and recession that’s got the global economy in its grip, but again, that’s not all of it.

You can catch a whisper of what else is going on if you listen to the frequent rants heard from the managerial class these days about how young people just don’t want to work any more. Talk to the young people in question and you’ll find that quite a few of them are working very hard on projects of their own. What they’re not willing to do is waste their lives working in abusive and humiliating environments to make someone else rich, in exchange for rock-bottom wages, no prospect for advancement, and no benefits worth mentioning. That their reaction comes as a surprise to anyone is a good measure of just how detached our society’s comfortable classes have become from the reality their preferred policies have created.

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East vs West, ‘Stuff’ vs ‘Finance’, by Kurt Cobb

Posted on November 3, 2022 | Leave a comment

The foundation of economic progress is not debt. From Kurt Cobb at oilprice.com:

  • It seems increasingly apparent that the focus on “finance” will be less rewarding and the focus on “stuff” will become more important to the nations of the world.
  • In advanced countries, the percentage of the total economy devoted to services has long exceeded that devoted to goods.
  • All service industries remain completely dependent on the raw materials and manufactured goods sectors to function.

As a military conflict rages in Ukraine between Russia and what the Russian government calls “the West” (apparently meaning NATO allies and particularly the United States), there is a parallel economic battle between “stuff” and “finance.” Both categories are affected by economic sanction regimes imposed by each side. But there is a striking difference in what each side has to sell. In advanced countries, the percentage of the total economy devoted to services has long exceeded that devoted to goods. This is a reflection of the increasing productivity of those working in manufacturing, mining, agriculture, forestry and fishing who make it possible for so many people to work in service industries. These raw materials and goods industries provide all the stuff those of us in the service economy require to stay alive and perform our services.

It is a testament to the remarkable rise in productivity of the raw materials and goods industries that in the United States, for example, the service sector accounts for almost 77 percent of all economic activity. In France, the percentage is about 70 percent. In Russia the percentage is a little lower, about 68 percent, which may reflect Russia’s relatively large mining, forestry, and agriculture inputs to its economy.

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“We’re At The End Of A Major Era” – Von Greyerz Warns Of “$2.5 Quadrillion Disaster Waiting To Happen”, by Tyler Durden

Posted on November 3, 2022 | Leave a comment

The accident waiting to happen in the derivative market is what happens when a major counterparty fails? It’s no longer a market, it’s a daisy chain. From Tyler Durden at zerohedge.com:

Via Greg Hunter’s USAWatchdog.com

Egon von Greyerz (EvG) stores gold for clients at the biggest private gold vault in the world buried deep in the Swiss Alps. EvG is a financial and precious metals expert.  EvG is a former Swiss banker and an expert in risk.  He says the risk in the global markets has never been this high.

EvG explains, “Credit has increased dramatically through derivatives.  All instruments being issued now by banks, pension funds, stock funds, it’s all synthetic.  There is no real underlying payments in anything almost…”

” Therefore, my estimate for derivatives would be at least $2 quadrillion, and I think that is probably conservative.  Then, we have debt on top of that of $300 trillion, and we also have a couple hundred trillion dollars of unfunded liabilities.  So, we are talking about $2.5 quadrillion, and that’s with a global GDP of $80 trillion.  So, there is a disaster waiting to happen, and especially because all this created money has created no value whatsoever…

I always knew this would collapse, and it’s taken longer than I expected, but I think we are at the end of a major era…

These derivatives, at some point in the coming few years, will actually turn into debt.  Central banks will have to cover all the outstanding liabilities of the commercial banks as we are seeing now with Credit Suisse, Bank of England and etc.  This is going to happen across the board.  Whether it’s called derivatives or called debt, as far as I am concerned, it’s the same thing.  It will have the same effect on the world financial system, which will be disastrous, of course.”

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