Due to the ever shrinking margin on consumer goods, more and more redundancies are taking place at multi-nationals. In order to keep their financial balance sheet in blue and not to disappoint their shareholders, extreme measures are taken. Less experienced and inexperienced investors are sucked in its trail during the sinking of the ship, to a point where huge losses will be made again.
The economy (Wall Street) is artificially kept alive by recurring positive reports of imminent new talks about the trade war.
It seems to be forgotten that these are only conversations and that a solution is not yet on the table.
Even if positive progress were to be made, it is questionable whether all the parties involved are complying with their agreements. All too often in the past, China has shown that it does not take agreements so seriously.
Chinese government subsidies cause companies to go into overproduction and flood the world with goods that are offered at dumping prices. Needles to say that these put a lot of pressure on the global economy..
Subsidised mining companies dump raw materials at prices that are so low, it makes the entire commodity sector groan. This will benefit the consumer in the short term, but in the long term we might very well experience the titel of this article.
Natural resources are again traded at prices similar to those of 20 years ago.
Through subsidies and manipulation, China has brought the commodity sector close to its death.
Non-subsidized mining companies are forced by low prices to put projects in maintenance mode, forcing investors to try to make a profit elswhere.
The negative interest rates imposed by the ECB and followed by the other central banks have caused raw material prices to fall even further than they were in 1999. The final sacraments are given to all climate activists who leave school and the workplace to hold climate demonstrations.
With a recession ahead, governments and companies will remain in what they know, which will bring climate measures to a hold for a while.
Due to the contraction in the car industry, there is less and less demand for battery metals for electric vehicles, same with solar and wind energy.
By putting projects in maintenance mode, mining companies try to create a scarcity in order to raise the prices of raw materials again.
Commodity producers and industry have been manipulated by governments and central banks into a vicious circle from which it is difficult to escape.
The EU is forcing its members to take action in favour of the climate, but has not yet itself have the backbone to stand up to a dominant China.
As my blog post on European steel previously has shown, Arcelor Mittal has already made it clear that their steel production within the EU will decrease by 1% to 2%.
If the demand for new cars continues to fall, the steel and automotive industries will face huge redundancies in 2020. Even more so when President Trump will put his tariffs on European cars and parts.
European countries that want all cars to be powered by electricity by 2030 are fooling themselves.
We are on the brink of a recession that we have not yet experienced. In my opinion, I expect an increase in demand for raw materials after the next recession. When the industry will start to pick up again after the sledgehammer of the upcoming recession.
Concerns about the Australian labour market have prompted the RBA (Reserve Bank of Australia) to take measures. A further reduction in interest rates is more than likely.
The Australian dollar has already reached its lowest level of the last 10 years and could fall even further to revive the economy. Measures like this are putting the welfare and pensions of the population at risk while the government can continue to collect taxes and fees from a manipulated economy. The potential disaster for the population is of secondary importance.
The low interest rate and currency values of the Australian dollar give the real estate sector a strong boost, allowing construction and renovation companies to fill their order books. The real estate sector is booming and preparing for the next bubble and subsequent real estate crisis. As interest rates rise, many will again be forced to sell their properties at heavy losses, as happened relatively recently on the same continent.
Virtually every nation is now doing everything in its power to reduce its currency in order to promote exports. Due to falling currencies, there is a risk that, just like Zimbabwe, Argentina and Venezuela, we will have to contend with inflations that are difficult to control.
With the trade war between the United States and China, the latter is losing a large market for cheap consumer goods. The Chinese government realizes that manipulating and subsidizing their economy has had its hay days and soon will be a thing of the past. Consumer prices in China itself have fallen to such an extent that further manipulation and subsidies are a great danger to their already declining industry.
In order to create growth again, the Chinese government has set out to provide every Chinese citizen with a free disposable income by 2020. Once again, this signals a further disruption of the world economy. It is therefore quite realistic that solutions to the trade war are far from being in sight.
A Chinese complaint about the United States to the World Trade Organisation is like an offender reporting that his victim did not cooperate. What is appalling is that the World Trade Organization considers such an indictment to be acceptable.
Mrs Lagarde of the ECB has already shed light on this, and we can expect further ominous news from the ECB and the IMF.
Imperfect job creation in the United States keeps unemployment rates low but does not bring prosperity. In the EU, the Netherlands is one of those countries where the economy is doing well, much better than in other EU countries. Nevertheless, the two-income earner in the Netherlands finds it difficult to make ends meet. The impoverishment of the low and middle classes is increasing.
Unfortunately, the large budget surplus in the Netherlands is not partly spent on combating this phenomenon. Consumption behaviour will change in downward direction and will result in the stagnation of the Dutch economy in the long term.
In the United Kingdom, the first changes in consumption behaviour are already noticeable.
Renting an outfit is sold as a statement on current consumption behaviour.
The real underlying cause, however, is the lack of means of subsistence. Renting an outfit would cost about a fifth of the new value of the outfit. Those who can do a bit of math will pierce the sales pitch with a wink.
In Zimbabwe, a country that was milked by kleptocrat Mugabe and where his successor has not yet shown any improvement, according to the UN World Food Programme, half of the population is in need of food by 2020.
Electricity shortages are squeezing up factories and food producers, making it impossible for them to produce. Electricity is scarce in most places.
Zimbabwe is undergoing another crisis like the one they experienced in 2008 - 2009, when President Mugabe unlocked the money press.
Mugabe's successor, Mnangagwa, has continued to plunder the country with an equal motivation. The regime continues to plunder the people's money from their bank accounts.
The dumping of their own currency and the use of the American dollar could have been a rescue. Kleptocracy, however, thought differently. The Zimbabwean government has enacted a law that obliges businesses to accept payments with funny muney (funny money). Funny Money are payments with electronic, digital money. Money that doesn't exist.
Inflation already rises to over 500%.
Since Mrs Lagarde took up a new position at the ECB, she has indicated that she is in favour of abolishing cash money and replacing it entirely with digital money. If you do not understand the irony of it, please read the funny money problem again carefully.
The EU has already played with the idea of making a basic income available to the population, just like China. Those who are familiar with the history of the world and follow the geo-political and monetary scheming probably do not need any further information about the future expectations.
It is therefore more than logical that investors should once again look for security in gold on a large scale.
August was good for trading 100 tons of bullion-supported ETFs. Physical bullion also saw a significant increase in sales.
The offer of the Hong Kong Stock Exchange (HKEX) on the London Stock Exchange (LSE) could redefine the capital markets for the future. According to some newspapers, the East and West would be better connected. At least that's how the story is sold. Isn't it possible that a merger of the two should be an obstacle for the anexamination of Hong Kong by China?
It seems the whole world's politics is reminiscent of the quote in the film Saving Private Ryan, "Fucked Up Beyond All Recognition" (FUBAR).
By EEJ Convens, 17 september 2019.