Below is a series of graphs and charts from the International Monetary Fund. The IMF believes that the recovery from this New Great Depression will be very swift and very powerful. To back this up, they produced a report and lots of fun information. Instead of plowing through the chit-chat, I decided to use some of their own information to see what is really going on here.
See how, for the most part, most contractions were in developing economies, not the advanced economies except for the sudden, really big spikes! These were mainly the developed, powerful nations. First there was the 1969 War of Attrition by Egypt and Israel, the Yom Kippur War oil boycott which caused a huge economic mess in 1974 and which increased hyperinflation in the US, then the next big blip on this graph was the Iranian Revolution/Iraq War and the 1990 event was Gulf War I, the 2000 event was due to Dot Com Bubble busting and now, the epic, big, big event which follows on the heels of Gulf War II and the War on Terror.
The US saw restrictions of economic activity mostly when there were disruptions in oil shipments or oil prices went up very sharply and very suddenly. This is because we are very much an oil-based economic system despite losing most of our easier to access oil reserves. We still, after 35 years, pretend that we are a major oil producing power when in fact, as a percentage of our use of oil, we are the world’s biggest net importers of oil Ergo: even the slightest glitches in the oil markets hammers the US.
A funny thing here: the top graph above, the blue line one, shows the only time the world has gone simultaneously into the negative since 1970 is this year. Yet, by next year, it will be business as usual and with a near-total recovery. Only, they show the recovery potential, in all fo these graphs, to be LESS than before. I.e.: there will be no real recovery, at least, not for the US.
The middle graphs show that INFLATION will resume. The very last graph is the scariest one. Squint your eyes and look carefully: the 1970-2000 periods, the US and other G7 nations have much of the GDP growth. But over time, the peaks decline relative to the rest of the world. And China, which is a very slender sliver under Mao and Madam Mao, suddenly takes off, after 1990, like a bullet. It’s growth values become greater and greater as the G7 decline. After 2010, most of the recovery will be China!
Economic activity in ’emerging economies’ is consistently greater than the G7. The retail sales differential is huge and even though all are falling, the G7 are falling into negative territory. And as per usual, since the US government doesn’t seem to give a shit about American workers, US job losses are much much greater than our G7 allies. And the consumer confidence graph: HAHAHA. We get ZIRP finances and consumer confidence finally reached Japanese depths of despair! Ditto, Europe. I warned everyone long ago, letting Japan run a depression during a global boom caused by Japanese lending, would end badly.
The last graph interests me. From 2000 to today, Asia and the OPEC nations saw their FOREX reserves go shooting upwards, a classic hockey stick graph. All hockey stick graphs are EVIL. They always end with really bad collapses of some sort. The middle graphs here show how, on one hand, all nominal exchanges in the floating currency vortex, are falling down, down, down. These graphs show the instability that has overwhelmed this peculiar balancing act.
During the Greenspan 1% interest regime, I loudly complained that it was way, way below the real rate of inflation. This is one reason we had such a huge bubble. The Taylor Rule chart shows clearly how many percentage points the US lending system was operating under and when Bernanke brought it in line with reality, our economy collapsed. So, to save it, he has had to drop it to zero.
The drop in credit growth in the US is nearly twice as steep as Europe’s decline. The Central Bank Assets figures are scary as hell. 100 represents the average for the previous 5 years. Suddenly, in September, 2008, it takes off like a rocket! Rising to 2750! But look at Merry England: 350! This is tripling the holdings!
What is particularly frightening about the above charts is the fact that not only has this recession been the worst depression since the Great Depression, the oil consumption negative numbers are the same as the average. And we are starting at a lower point. As I pointed out at the top, nearly all of our recessions have been fueled by failures in oil production or huge price spikes due to wars and revolutions.
The top two graphs show very clearly what I have been harping on for a long time: both Germany and Japan have had FLAT real estate markets for over a decade. During which, they both ran increasingly bigger and bigger trade surplus profits of any nations on earth. They both become huge export powerhouses. The rankings of economic power are like this: the US is #1 due to wild consuming of all imports, Japan is #2 and Germany, a very close #3 until this year when China ousted the Germans and is now already leaving Japan in the dust, too.
All the above graphs all the way to the top of this story have another important theme: both the US and UK have the exact same problems, the exact same solution and are going off the exact same financial cliffs. And both are supposedly the biggest banking powers on earth, the financial wonders, the centers of all world finance! But the trade, housing and employment numbers tell a different story.
Warnings to everyone: this graph series makes it very clear, the US will see inflation. The rulers hope it is between 1-2% but if we look at the blue areas of influence here, they have some rather hockey-stick-like characteristics when viewed from afar. Even Japan expects inflation.
Yikes…the world has gone deeper and deeper into the red on all levels. The graph expects sudden improvement in debt debilities. I seriously doubt we will see any sort of recovery in this area. Once debt is accustomed to being a percentage of the GDP, many nations decide this is normal and the bar keeps going up. The US is the prime example. The debt will grow but the hope is, the GDP will grow faster so this is OK. But note that the negative numbers keep getting greater.
That is, in 1970, it seldom was more than 1-2% of the GDP. Then, it ws 4% and never fell below that. Until this year when it is now 9% and getting worse each month. This sets a new low. And I see no political will to bring it back down to 2% or less. The bottom graph shows how cynical and greedy the G7 really is: they have created much of the rise in world debts! The world debts may have rises but barely at all or even a decline, if you exclude the G7 who control the IMF, World Bank and other major systems.
In a nutshell, the G7 are spendthrifts while the other nations are savers.
For the first time in many years, purchase of US bonds are negative. And for the first time in years, we are in a negative financial flow with the earth. Below is the most recent Treasury report about securities and derivatives held by foreigners against the US:
China now beats out Japan as our major creditor power. And the debt held is over a trillion dollars for both trade rivals. This is a sword to our throats, of course. Very little of this mass of money is in the form of ‘equities’. The UK and its pirate islands hold the next biggest amounts, nearly evenly divided between equities and debts. The whole world holds over $10 trillion in these debts/equities.
News of the return of falling prices came along with a flicker of good news about Japan’s manufacturing, a sector where slumping exports have led to stark cuts in production. The government said Thursday that industrial production expanded 1.6% in March from a month earlier, its first increase in six months. Output remains far lower than a year earlier, but the data suggest manufacturers are beginning to ease up on production cuts as their enlarged inventories slim down.
Japan’s central bank lowered its forecast for the core consumer-price index, which excludes volatile fresh food but includes energy, to a 1.5% decline for the current fiscal year ending next March, after an increase of 1.2% for the past fiscal year. For the following fiscal year, the bank predicted the index will fall another 1%. The bank said the economy will likely contract 3.1% in the current fiscal year, before expanding 1.2% in the following year. The central bank kept its key rate near zero at 0.1%.
The Japanese depression returns with a vengeance. And this is due to the cruel politics which restricts consumers there from consuming. This business isn’t changing, either. And guess what? Both China and Japan have the same goals. They have similar programs, they both buy US debts, hold immense US dollar FOREX reserves and have many interests in common. And guess what? They are getting very, very chummy, lately.
Japanese Prime Minister Taro Aso on Thursday called for Tokyo and Beijing to unite in facing the world’s environmental and economic challenges, while playing down concerns over China’s military power.
In a wide-ranging speech in Beijing, Aso floated the prospect of a bilateral free trade deal and joint peace-keeping operations, and said closer ties between the historic rivals was the only way forward.
“Cooperation between Japan and China is a pre-condition for taking advantage of Asia’s potential as the growth centre for the 21st Century,” Aso told a gathering of business leaders from both nations.
Aso, who met Chinese President Hu Jintao later Thursday for the final major engagement of his two-day trip, talked about working together to overcome the “once-in-a-century global economic and financial crisis”.
“It’s extremely important that Japan and China, the world’s second and third largest economies, keep in step with each other,” he said when talking about tackling the economic downturn.
This is the New Co-Prosperity Sphere taking shape even as we rush around the planet, protecting these same allies. China and Japan, united, will be a grave danger to US dominance. Another sign, our empire is slowly but certainly, collapsing. We can’t project power when all this does is, undermine our economy! Duh!
In my videos about strategy, all good leaders must always keep in clear view, how wars and empire impact the home industrial base. Failure to do this leads to the destruction of the empire. History tells this doleful story, over and over again.
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