Tuesday, August 11, 2009

The ”green shoots” about to turn into tears

What people need to realize is what’s really going on out in the real world. I have written a lot about America and Sweden lately but there are many other hilarious things to keep track of.

About 6 months ago I urge you all to keep a close eye on China because I knew that fictive growth in that country sooner or later would spill over and come crashing down. Today the Telegraph has an excellent article on this topic saying, among other things, that the giant Ponzi scheme is risking to break down in the near future. What people do not realize is that China has growing GDP because of two things. The first being the massive trade surplus that accounts for 40% of the economy, the second is the credit expansion and massive injection of founds from state companies. Even if things like typhoons will help to boost the GDP numbers it isn’t enough with falling trade numbers and the fact that the Chinese need to pull back a lot of the credits in the system. Worse still is that most of those credits have ended up in equity markets which have increased the Shanghai index that is up 80% this year. In other words the Chinese stock market is in the same state as the American (and most others) and thrives upon fictive numbers that sooner or later will come crashing down. In the Telegraph article, quoting a leading financial consultant, he is saying that Chinese Equities are overvalued by 50% to 100%. I actually think this is an underestimate and that the percentage is even higher. To this we need to add that China is the main reason why the dollar hasn’t collapsed yet, buying massive amounts of US treasuries and in doing so helping the Obamination with his scheme. Although China is putting large sums to pretty good use, improving communications and investing in production capacity, which will help them out in the future, things look very grim and with the knowledge that several Chinese provinces are close to regular rebellions we have a fine little mess that will help the depressional tsunami-wave along in a nice way.

Eastern Europe has been in big trouble longer than most of the Western counterparts with mainly the Baltic States and the Balkan showing horrible numbers. In Hungary this has lead to very shady characters gaining power and the same goes for Ukraine. Now Russia is also showing massive contractions in the economy dropping almost 11% during the second quarter (9% during the first). What you need to know is that Russia has not been throwing the same massive stimulus packages into the economy like the US or China which means their economy is showing more real numbers. I do expect that the Russian leaders will do what Russian leaders always have done - increase their power to crack down on any hints of uprisings and demonstrations. However, this time around it might actually not work. The Russian people have, for the first time in history, tasted some level of freedom and I hardly see tens of millions of people bend over and take it like before.

In Africa the looming famine catastrophe is getting more imminent. In Kenya the government estimates that at least 10 million Kenyans - one third of the population - is in need of food aid. Similar numbers can be shown for several other countries in the region and this will sooner or later tip over to utter starvation because when the worldwide depression keeps rolling along aid and trade from other countries will diminish and most of the African countries are not equipped to handle such an situation. I have earlier predicted that millions of people will starve to death in western and southern Africa in the near future and I see no reason to alter that forecast.

These are just three other situations you need to keep an eye on, there are many others. All I’m waiting for now is that main trigger(s). With an absolute certainty the dollar will default and in most likelihood collapse, we have way overpriced equity markets all around the globe and the housing market in the US has yet to bottom out. In the wake of companies going bankrupt and fictively low interest rates commercial real-estate might very well also go down very soon. But the main trigger(s) might very well be another war in the Middle East or another very large company like GE or Microsoft to show high loses, so look for those kinds of signs.

All mentioned (and many more) can be linked together so when you see or read some cornflake economist or your politician stating that unemployment isn’t dropping as fast anymore, some companies are starting to show profits or that the stock market is recuperating or whatever bamboozle they are trying to sell, don’t listen. The main scam they are trying to advertise right now is that GDP is not dropping as fast or even going up - this is total madness. GDP can be improved by digging holes in the ground and filling them back up again over and over; only an insane person can regard GDP as a good measure of the economy. The only thing that has been done with all those stimulus’s and bail-outs is to temporary, and fictively “halt” the decline. Under the surface, just like a tsunami in the middle of the ocean cannot really be detected, the depression is gaining momentum now fuelled by inflation and souring debts along with way overvalued stock markets. When that tsunami hits the shoreline and all those sand-castles come crumbling down, don’t be surprised. There is enough information out there and if you are not prepared for it you deserve whatever you get.

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