32. When Dementia Replaces Meritocracy – Who is more Desperate?
This week it was demonstrated by the FBI that the safest way to store documents is to save them on a laptop and leave them at a computer repair shop.
China: If you have not seen it in the so-called major media, Chinese Evergrande is indeed the Chinese Lehman Bros. It is continuing to collapse taking most of the Chinese real estate development community with it. Home prices are collapsing. Home buyers that have been paying for unbuilt homes are refusing to continue to pay thereby putting the Chinese banking system in jeopardy. President Xi cannot allow the Chinese central government to accept the blame for this unfolding economic disaster because of his concern about his re-election.
Therefore, the central government has instructed the local governments to “fix the problem”. I wonder how President Xi expects the local governments to shove the genie back in the bottle. Never mind, it is not going to happen because the ripple effects have been unleashed.
Economically, China is currently toast. Xi and his princelings must be desperate as they stationed Peoples Liberation Army tanks at banks to prevent depositors from rioting over not being able to withdraw their money. More intense agony ahead.
Europe: The same legislators that laughed at Trump when he warned them about depending on Putin for natural gas, are now debating how to live without it. Their alternatives:
- Redefine nuclear as “green” and not shut down the few remaining nuclear reactors they have online. Perhaps this winter when they are freezing, the Greenies will decide nuclear energy is better than cold.
- Reopen coal mines and reactivate or build new some coal fired electric generators.
- Buy liquefied gas from the US and ship it across the ocean. From an American inflation perspective, watch this unfold because the current natural gas price in the USA is less than $10 and the current natural gas price in Europe is about $60. As winter approaches, European natural gas prices will soar taking American gas prices higher.
- Give residential users preference for the available electricity and then ration other users.
- This winter European manufacturers may have to go to working only at night.
- The resulting European recession will be extremely painful.
- I admire their determination for freedom which their previous unrealistic focus on unreliable wind and solar has made extremely expensive.
- You can feel the desperation pulsing though Europe.
The two items above represent perhaps 50% or more of the world GDP being in recession. The other big player is the USA, the largest economy in the world.
USA: We have serious economic and political problems as well. Employment is a lagging indicator, but the talking heads and Democrats are saying we are not in recession based on employment. The financial markets are clearly of the opinion that The Fed has destroyed enough demand so that petroleum and commodity prices have declined signaling the approaching end of inflation.
Here is the truth –
- The world economy is slowing…dramatically, because of rising interest rates and the combination economic turmoil in Europe and China described above.
- American economic growth is declining. We are already in recession. Done.
- In the midst of recession and stagflation, the Democrats just passed a bill that
- raises taxes on the middle class thus reducing their future ability to by food, gas, and services.
- ensures increased prices via the minimum corporate tax rate of 15% thus demonstrating the Democrats know absolution nothing about economics.
- Gave the EPA a blank check for attacking fossil fuels actually powering our economy.
- And the icing on the cake is the 87,000 additional armed IRS agents to be unleased on small businesses and middle-class taxpayers.
Do not be fooled by the financial markets. Their focus is on short term trading and they are using the price of a barrel of oil as a proxy for the economy. The recent reduction in price of a barrel of oil has them convinced the rate of inflation will decline to around 4% by the end of this calendar year. Hence, they expect The Fed to raise the Fed Funds Rates to 4.5% with mortgage rates to be somewhere in that range as well and then declare victory and cut interest rates.
But the reduction in the price of oil is NOT due to increased supply but rather demand that was destroyed by the dramatically higher prices. Now the oil market is trying to rediscover what is the value of a barrel of oil in this global recession. Any reduction in oil prices will be offset by the coming dramatic increases in food prices. Furthermore, I expect the oil prices to rebound when China begins another massive public work program to head off civil unrest. When that program is announced, commodity prices including oil will soar. So will inflation.
With the American consumer already having to prioritize food and gas over other goods, the retailers are in the tank and so is our economy. The next leg down is higher unemployment, then the housing market correction. This fall the financial markets will be choppy and at some point, they will realize The Fed’s “Soft Landing” is actually going to be a thud.
The confluence of these forces will be the genesis of the real crisis. My educated guess is the apex of the crisis will be next year.
Meantime, the FBI raid on Trump’s Florida compound is horrendous. It appears to be another escalation of the contest between Trump led conservatives and the self-identified “progressives” using a weaponized federal bureaucracy. If what I am reading about the cast of characters that undertook this action is correct, the stench is equivalent to a three-day old fish. Simply put, this is a dangerous contrast with the USA’s former world image of being “A shiny city on a hill”.
It seems to me there are two key questions –
- What have the self-identified Elites done they are so afraid a second Trump Administration will unearth?
- “Did desperation over the economy relative to the approaching midterm elections lead to the FBI raid on Trump?” It looks like the weaponization of the Department of Justice over a political issue because of:
- Marc Elias, the uber Democratic Party attorney, quickly bragged how the raid would eliminate Trump’s chance to run for President.
- Reportedly, a former Epstein attorney that got appointed to a federal judgeship was the one that signed the search warrant.
My perspective is that the USA is in the middle of a swirling maelstrom of multiple existential crises. Remember my description of heading into the Bermuda Triangle during a category 5 hurricane on a little sailboat with a senile captain? I was optimistic.
Grant Massie Land Company has had a fantastic year despite the number of tracts of land on the market being approximately 30% of normal but there is reasonable demand. Commercial banks are getting cautious which is creating serious cross currents in the residential land development market. Retail land is recovering from the pandemic, but buyers are value hunting. No one is inquiring about office zoned land. The Industrial Market is driven by land zoned for distribution centers – primarily 50-150 acres sites but even here we are finding caution as investors becoming wary of a severe recession.
Please pray:
- That God exercises his control over our government at all levels.
- For the “Forgotten 599” surviving Americans being held as political prisoners by Biden and the Demented Marxists in hell hole conditions in the DC Gulag.
- For honest elections because without them we are not free.
- For the valiant Ukrainians.
Let’s Go Brandon!
(John16:20) New Revised Standard Version, Oxford University Press)
Stay healthy,
Ned
August 10, 2022
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