Tag Archives: New York Stock Exchange

GLOBAL OUTLOOK BLEAK FOR 2019

There have been an increasing number of articles warning about the global economy.   The latest predicts a depression worse than the Great Depression.   None are specific, in terms of “when” but all say the signs are there.

The most common problem cited is debt.   Governmental debt is already over $22 trillion in the US.   This is the highest amount any country in history has ever owed, so it’s difficult to predict what will happen.   In addition, there’s also corporate and private debt.   The figures given do not include mortgage debt, which is also extremely high.   Nor do they include the annual commitments for Medicare, Medicaid, Social Security and other government programs, the so-called entitlements.

The 2008 financial crash started as a mortgage failure.   So did the 1873 crash.   It began in Austria-Hungary and spread around the world.   This particular crash was known as The Great Depression, more than fifty years before the depression of the thirties.   It would be a mistake to think it cannot happen again.

In fact, depressions have been a regular feature in America’s history.   There have been as many as 47 recessions and depressions since independence.   After the end of the Revolutionary War, there was a depression, in which the economy slumped by 50%.   The depression of 1873 lasted 25 years, on and off.   Unemployment was at 50% in the 1896 election, resulting in the highest turnout ever – a full 80% of voters participated that year.

Not every year saw the economy in deep depression.   It came in three waves.   It finally ended with the Spanish-American War, which got the economy moving again.

PANIC OF 1873

The 1873 depression in the US started with the collapse of Jay Cooke & Co., then a major component of the American banking establishment.   Contributory failures were the post-Civil War inflation, rampant speculative investment and losses in the Chicago and Boston fires (1871 & 1872).   Bank reserves plummeted in the first two months from $50 million to $17 million.

“The failure of the Jay Cooke bank, followed quickly by that of Henry Clews, set off a chain reaction of bank failures and temporarily closed the New York stock market.   Factories began to lay off workers as the United States slipped into depression.   The effects of the panic were quickly felt in New York, and more slowly in Chicago, Virginia City, Nevada (where silver mining was active), and San Francisco.

“The New York Stock Exchange closed for ten days starting 20 September.    By November 1873 some 55 of the nation’s railroads had failed, and another 60 went bankrupt by the first anniversary of the crisis.    Construction of new rail lines, formerly one of the backbones of the economy, plummeted from 7,500 miles (12,070 km) of track in 1872 to just 1,600 miles (2,575 km) in 1875.    18,000 businesses failed between 1873 and 1875.    Unemployment peaked in 1878 at 8.25%.    Building construction was halted, wages were cut, real estate values fell and corporate profits vanished. ”  (Panic of 1873, Wikipedia)

GRUNDERKRACH

I single out the 1873 depression because of the similarities in the global situation today.   The depression in German speaking countries is known as the Grunderkrach, or Founders Crash.   When Germany was united following the Franco-Prussian war, a lot of money flowed into the country, mostly from French war reparations. Loans were then made, mostly for mortgages.   When people couldn’t pay them, the banking system collapsed.   This spread to the US and Britain.   It was the beginning of the end of Britain’s global supremacy.

The Great Recession of 2008 began as a housing crisis.   It actually began two years earlier when housing prices started falling.   For years previously house prices had been rising fast.   Millions of people bought homes, homes they could not afford.   The banks loaned to people who should not have had loans.   It was a recipe for disaster.

The same thing is happening again.   Bad loans and speculative investments are pervasive.   Student loans are so high they could be the cause of a collapse by themselves.   Government debt is at an all-time high as are corporate debt and consumer, non-mortgage debt (credit cards).

I am reminded of what the late President of France, Charles de Gaulle, said over 50 years ago.   He did not want Britain to join the EU (he had incredible foresight!).   He dismissed the US and the UK as “the Anglo Saxon debtor nations.”   The British-American economic systems have been built on massive debt.   It works well . . . for a while!   Eventually, there comes the day of reckoning.

That may be this year.

We should never have borrowed so much money, especially after the Crash of 2008.   Often it’s been encouraged by government, when it makes little sense.   Social engineering has boosted the value of homes and increased the number of loans (more profits).   A government decree made under the last administration was that all neighborhoods should be 25% minority; the only way to achieve that was to give 100% loans to people who had never owned a house. Additionally, 100% loans have been made to immigrants, who have had little time to learn how the economy works in the US.

Remember, at stake here is America’s global leadership role.   A serious set-back for the economy would weaken the US.

It’s interesting here to note that the euro is set up very differently, with government borrowing limited to 3%.   The euro has its own problems, but could emerge as the greater currency in the event of a global depression.  It’s already used by more people than the US dollar.

Debt can mean the borrower ends up in servitude to the lender. Note the following warning from scripture:   Proverbs 22:7 7  “The rich rules over the poor, And the borrower is servant to the lender.”

This is a far cry from the promised blessings for obedience:

Deuteronomy 15:6 says:  “For the Lord your God will bless you just as He promised you; you shall lend to many nations, but you shall not borrow; you shall reign over many nations, but they shall not reign over you.”

A second cause of financial concern is impending TRADE WARS.   These will slow down the global economy.   Once again, uncertainty is an issue here.

A third reason the global economy is at risk is BREXIT, now less than two months away.   This could seriously affect inter-European trade.

A fourth factor, increasingly seen, is the economic Rule of Inequality. This is an economic law that predicts the likelihood of revolution based on the gap between the rich and the poor in any country. China is very concerned about this.   There is only one country with a greater gap and that’s the US.   Trump’s election was our “revolution” – if he is not able to deliver, there will be trouble ahead.

There are many countries around the world with a similar gap. France is going through weekly demonstrations about the rising gap between rich and poor; Venezuela and Zimbabwe are on the brink of revolution.

Other factors to watch are China’s slowdown and even the weather. Both can impact economies.

The above are all the predictables.   There may be other factors, unpredicatables, such as war, that can add to economic woes.

It remains to be seen.   But the warnings are there.   The only question is “When?”

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RUSSIA & CHINA POSE BIGGEST THREATS TO US

“Former national security adviser Zbigniew Brzezinski warned in 1997 that the greatest long-term threat to US interests would be a “grand coalition” of China and Russia, ‘”united not by ideology but by complementary grievances.”   This coalition “would be reminiscent in scale and scope of the challenge once posed by the Sino-Soviet bloc, though this time China would likely be the leader and Russia the follower.”

Nobody listened back then, but now it’s becoming clear that the two countries are cooperating to deal with what each perceives as the American threat.   The latest development is in Venezuela, where they are supporting President Maduro and condemning the US for backing the “usurper,” Juan Guaido.

In the past, the US has thought a Sino-Russian entente outlandish. Only now it’s happening.   As Mr. Brzezinski warned, it’s not that they have a lot in common, but rather they share a common enemy.

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UK TO CRASH OUT OF THE EU

Now, nothing can stop Brexit from happening.   Even many supporters of remaining in the EU see that.   The way Europe has treated the UK will make it impossible to avoid a hard Brexit.   (This assumes no change of heart in the EU.)

The facts are that British incompetence has led to Europe just wanting to get it over with.   Looking back on almost 50 years of membership there is a realization that Britain has never been a good fit, either, so why try to keep the British in?

A third reason is NATO.   Most of the other European countries sense that the US is pulling out of NATO, that it doesn’t want the responsibility or cost of defending the other members.   This is why Europe is trying to put together its own military force.   Britain, more pro-American, would only get in the way of this.

So, expect a full Brexit on March 29th.

This will not prevent Mrs. May running around Europe like a chicken with its head cut-off!

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BOOK QUOTE

“From July 1780 until the end of the year, the Catawba River Valley and the adjacent northern districts were the scenes of some of the most brutal warfare ever fought in what is now the United States.   It was a civil war, with all its horrors, as neighbors and families turned on one another with a vengeance.”   (page 140, Partisans and Redcoats, by Walter Edgar, 2001)

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SPREADING PROBLEMS

stock-market-down

So much is happening across the globe right now, it’s difficult to know where to start.

It’s Monday morning and the world news is dominated by further falls on stock markets across Asia and Europe.   China’s economy is heading south fast and is dragging other countries down with it.   As the country is the second biggest single economy in the world, it’s not surprising.

It’s not that long ago that China was a third world backwater.   Then, the communist dictatorship allowed free market reforms that led to an incredibly fast growth rate.   Too fast.   And suspiciously fast – could the numbers be trusted?   Now, we know the truth – the reality is not what we thought it was.   Millions of Chinese people are losing their life savings and are naturally angry about it.   If this continues, the Chinese people may conclude the ruling Communist party has “lost the mandate of heaven,” a precursor to significant change.

But change could also come elsewhere as a result of what’s going on.

The average American lost 6% of his retirement fund towards the end of last week.   6% isn’t too bad.   But if this fall continues, people will get more angry and frustrated.   It can only help Donald Trump’s presidential hopes.

Note the following from today’s The Daily Skimm:

“Last week, after some bad economic data from China, global stock markets completely freaked out.   US markets ended up with their worst losses in four years.    And today isn’t looking any better. China’s markets opened even weaker than yesterday, which has triggered a global domino effect.   Think:   Asian and European markets taking tumbles and oil prices way down.

“Right now, the ups and downs of global markets are hinging on two of the least transparent things ever:   the Chinese government and the Federal Reserve.”

It’s time to worry!

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It’s 8.20 AM Eastern time. I just received a news alert from the Wall Street Journal. The headline is: GLOBAL MARKET ROUT CONTINUES.   Stock markets continue to fall around the world.

It’s a good reminder that we should not put our faith in this world and particularly in this world’s money, which is, frankly, worthless paper.

In Matthew 6:19-20 Jesus Christ said the following:

19:  Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal:

20:  But lay up for yourselves treasures in heaven, where neither moth nor rust doth corrupt, and where thieves do not break through nor steal:

 

Our retirement funds are certainly set to take a big hit, though how big remains to be seen.   Christians should take encouragement from Christ’s words and not worry as we go through this market “correction.”

It’s now 9.45, the New York Stock Exchange opened a few minutes ago, and we seem to be witnessing a big crash.   The stock exchange is down over 1,000 points, heading rapidly toward a “correction,” usually defined as a drop of 10% or more.   The dollar is also falling against other currencies.   Commentators are saying that this crash started with China, but blame should also go to the high taxes and anti-business policies of the current US Administration.   One lady said:  “They’ve killed the economy!”   Meanwhile, China is using the state pension fund to buy stocks in a hope of keeping up prices, an unwise move that could wipe out pensions for decades.

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It’s really inspiring to hear that three young Americans on vacation in Europe helped save a train full of passengers from an imminent terrorist attack.   Today’s news shows them receiving the “Legion d’Honneur” from France’s President Hollande.

But, you will notice there’s another guy standing with them, an older man who was also part of the rescue.   The much-praised trio was actually a quartet.  The other man was from England.   It would be nice if just one American network would acknowledge his role along with the three Americans.   All four were very courageous and may have saved dozens of lives!

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In this age of mass murders, it’s interesting to note that America, with less than 5% of the world’s people, accounts for almost one third of all mass murders, defined as incidents where four or more people are killed.

FINANCIAL CHAOS AROUND THE WORLD

Euro crisis

Wednesday was quite a day on financial markets around the globe.

China’s stock market continued to lose considerable value, down about a third in three weeks.   Uncertainty over the future of Greece within the euro rocked European stock exchanges. And a technical glitch caused problems on the New York Stork Exchange, the world’s biggest.

The latter was resolved before the closing bell.   Greece should be resolved by the weekend.   China, the number two economic power, poses the greatest threat to the world’s economy.   There are increasing fears that the Chinese stock markets are one big giant ponzi scheme, with nothing tangible to support them.

Late Thursday Greece handed over proposals to its European partners that will, hopefully, end the crisis affecting the beleaguered country.

Greece was a member of the euro from the very beginning, using the new European banknotes and coinage from day one on January 1st, 2002.   Today, the euro is used by nineteen European countries. Euro notes are used daily by more people than the US dollar.  The two currencies are the two most important currencies in the world and are used as payment for most international trading.

When Greece joined the euro, it was suddenly able to borrow vast amounts of money, which it did. It was not all used wisely.   Following the crash of 2008, the country soon found itself unable to repay its loans. The dream currency had become a nightmare for the Greek people. Austerity was forced on the country by European bankers, making life very difficult for the average citizen.   Austerity led the country into a downward spiral, which has recently been speeding up.

In January, the left-wing Syriza party won the election, promising an end to austerity.    However, European bankers, anxious to get their money back, want to impose greater austerity as a condition for offering Greece more help.   Without help, Greece will not be able to stay in the euro.

Without a doubt, Greek governments have been reckless.   Government employees can retire at 48 on generous pensions. Corruption is rife, as also is tax avoidance.

Germany is owed 68 billion euros by Greece, France 65 billion (add 10% to get the US dollar equivalent).   Other countries have loaned lesser amounts.   Total Greek debt amounts to 323 billion euros.   Greece is asking for a further bailout of 53.5 billion.

Although there is much talk of the Greek crisis, in a sense this is not about Greece, so much as Germany.   Germany’s conservative government is taking a hard line, refusing to cancel debt or extend further loans.   The Germans want their money back, on time.   Germany’s stance is setting a precedent that will no doubt be repeated if any other country in the eurozone gets into trouble.   Many have pointed out that when Germany was suffering economically after World War II, European finance ministers, including the Greek finance minister, generously cut Germany’s debt by 50%.   If Germany would reciprocate now, Greece would be fine.

The Greek people voted in a referendum a few days ago, rejecting the austerity demands placed on them by Germany and others. However, they still want to remain in the eurozone, which is an apparent contradiction.   If they leave the eurozone, they could restore their former currency, the drachma, but this would cut them off from many of the benefits of the eurozone.   Business loans and mortgages in euros would have to be paid back in ever depreciating drachmas, leading to many foreclosures.  Importers would have to pay upfront in euros, which may be hard to get if Greece leaves the eurozone.

Nobody wants a “Grexit” (a Greek exit from the euro), but it may not be possible to avoid it if the Greeks are unwilling to make the necessary structural changes to keep them in the euro.

This crisis is not the only crisis facing Europe at this time.   The continent is having to work through a number of challenges all at once.

The migrant crisis is the second biggest issue confronting the European Union.   So many people are fleeing from the Middle East and Africa into Europe that social cohesion is becoming a serious issue.   One consequence of this massive movement of people is the rise of right-wing parties opposed to immigration.

Ukraine is a third challenge for Europe.   Russia’s invasion of parts of Ukraine threatens the peace of Europe.

The possibility of Britain leaving the EU comes in at number four.

There’s even a fifth challenge, and that’s the relationship between European countries and the United States.   France and Germany are both upset over the American NSA spying on them and their leaders, even though it’s quite likely they are doing the same to America.

Depending on how each of these issues is resolved, Europe could be very different in the near future.