Happy New Year! My Thoughts after Seeing “The Big Short…”

~By InsightAnalytical

Well, of course, the best time to release a movie about the 2007-8 economic crash is to release it during a holiday week at the same time the masses are being dished out “Star Wars”…again…

Being contrarian by nature, I made it over to see “The Big Short” which is based on the fantastic book of the same name by Michael Lewis.

Well, I went to the noon showing, this last day of 2015…the parking lot was full…of Star Wars fans, most likely.
I counted 20 people in for The Big Short. I was surprised there were that many…it’s only showing in one of the 3 movie complexes in town…seems it may be around for another week, but after that I bet it will be gone…

Of the 20, there were about 4 under the age of 60, probably in their 40’s/early 50’s.

Well, it was really gripping! It really was brilliantly done, esp. the asides with the “explanations.” I doubt, however, that many Selena Gomez fans will be in to see it, though.   I have to say the sleaze award goes to the guy based in New Jersey working for Merrill Lynch…figures.

After it ended I chatted with a woman who said they had lost $26 M in ethanol. Wants to get out the country (me, too!),  $300 for a visa to get out to Vietnam…or Cambodia ….or Thailand…Well, I cautioned her about a place like Vietnam being so dependent on China! Also, told her to watch “The Executioner” via MHzChoice (foreign TV series and one shot movies)….a Danish “movie” based on a true story…you will not want to go to Cambodia maybe after seeing the crap that goes on there. I also told her to read WallStreetWindow.com as well as Zero Hedge (but ignore most of the drek in the comments section…truly awful. I mean it…)
The truth is…with the global connectivity at this point, where is there anyplace “safe”??

She revealed that she had “insurance” in a safety deposit box…and I told her to get it out of that box in a bank!!!

When I got home I spotted the young man who works for Apple from home…he and his wife have just bought a house. I pulled over to say a final goodbye as he did his final move out of stuff….gave him the same info about a few sites that I gave to the woman at the movie and told him to save his money and learn what’s going on, not to keep all his retirement on one stock like Apple….exchanged phone numbers again and I gave him my email…told him I may not know all the answers, but I can figure out where to look most of the time…I’m sure I won’t hear from him again.

And then I came home. Hugged my dogs…and am checking my storage food for freshness…

***
Before going I was watching Bloomberg and the word SCARY came up twice from the anchors…the discussion has been about the 600,000 jobs gone from banking….. The site says 500,000 but they said 600,000 on air.
http://www.bloomberg.com/ne’sws/articles/2015-12-31/half-a-million-bank-jo…

They had a guy on talking about going into recession (for some reason I can’t find THAT video up on the site); the anchor brought up Marc Faber also forecasting that a day or so ago. Yesterday, I saw the mayor of Wilmington, DE talking about the loss of 1700 jobs from the DuPont-Dow deal…he was pretty grim….

Anyway, a couple of the people on air today looked pretty pale…and to hear the word ‘scary’ TWICE, no matter in what context…well, THAT was scary!!!

CNBC’s Fast Money is having a party at the moment…party hats, champagne, are they kidding me?? ….can’t even stand watching CNBC much anymore…Bloomberg seems a bit more “sober” but …where IS that video from the recession talker today??

Stay safe out there in the New Year….

Marching for Women’s Equality and Lives, Circa 1989

~~By InsightAnalytical-GRL

I’ve been busy over the last days talking to relatives and neighbors who have either lost a job or are not finding a job since graduating from college.  They seem to have a sense of inertia, without a clue as to what to do.

I give them a real pep talk, with practical suggestions. I lost a couple of  jobs due to recessions…back in 1975 and again in 1981.  I was willing to take pay cuts, start at the bottom, take courses, learn how to write several types of resumes, switch fields and move if I had to.  The people I have talked to don’t seem to have that sort of drive and I’m not sure why.  Things are worse now in term of a future which doesn’t bode well for a return to normalcy, of course, but I’m struck by the sense of disbelief that seems to be hampering these folks.  It’s crippling them and they aren’t prepared to look at themselves and be willing to alter their set-in-stone plans.

The same sort of paralysis seems to extend to women these days.  Sure, we’ve been sold out by the national organizations, but the misogyny and attack on women’s health seems to be quite acceptable these days.  I can’t quite understand this sort of thing, since I came up through the days when we were fighting for our rights.

I was rummaging through a drawer and found a button from 21 years ago nearly to the day.  It was a march on Washington, one of several I went to.  I remember riding on a bus put together by the local chapter of NOW.  Many women’s groups joined together. We were all fighting mad in 1989.

I’m still angry and now I’m also broken-hearted.  This button brings me back to a day when women were galvanized and had a voice.

I wonder if these days a march on Washington would be even able to be organized, if there would be any interest… and if it actually occurred, whether it would be ignored by the media.

Something is very wrong, very wrong indeed…

When we were marching...

China Called “The Biggest Risk to the World Economy” But History Shows that War Can Always Straighten This Sort of Situation Out (Update 1X: China Missile = “No-Go Zone” for U.S.?)

~~By InsightAnalytical-GRL

We’ve be writing later about the strength of China, but lately there has been some talk rising about a possible bubble being created in China.  In the Telegraph (U.K.),  Ambrose Evans-Pritchard has written a piece which looks at what’s going on titled China has now become the biggest risk to the world economy.

This article shed a totally different light on the views of Larry Kudlow that I wrote about in my previous post, Larry Kudlow Has a Fit as Obama the “Declinist” Opens His Mouth in Japan; Says Obama is “Not His President”.

Evans-Pritchard argues that China is not going to take over as the growth engine of the world economy.  I’ve heard quite often that China cannot pull the world out of its economic troubles.  The stats that I’ve seen indicate that China, no matter how robust, simply is still too small an economy to accomplish this.

Evans-Pritchard has concluded that China’s policies” continue to play havoc with global trade and risk tipping the world into a second leg of the Great Recession.”

Why?  According to the piece, there’s plenty of overcapacity in China.  I saw a report the other day showing empty structures, built for basically no use.  The article explains:

“The inherent problems of the international economic system have not been fully addressed,” said China’s president Hu Jintao. Indeed not. China is still exporting overcapacity to the rest of us on a grand scale, with deflationary consequences.

While some fret about liquidity-driven inflation, Justin Lin, World Bank chief economist, said the greater danger is that record levels of idle plant almost everywhere will feed a downward spiral of job cuts and corporate busts. “I’m more worried about deflation,” he said.

Paul Krugman is quoted in this piece and he explains that China’s policy to hold the value of the yuan down versus the dollar is basically “stealing American jobs” as it relies on cheap exports to stave off massive unemployment. And other Asian countries must do it, too.

Of course, our capitalists use the cheap labor in China and, as the author says, “then lobby Capitol Hill to prevent Congress doing anything about it. This is labour arbitrage.”

But, China doesn’t hold all the cards, although it seems that way.  Evans-Pritchard writes:

Washington can bring China to its knees at any time by shutting markets. There is no symmetry here. Any move by Beijing to liquidate its holdings of US Treasuries could be neutralized – in extremis – by capital controls. Well-armed sovereign states can do whatever they want.

So, what’s the situation in China?  Their much-heralded stimulus has been spent building up more capacity to ship more goods and they’ve been investing in property and stocks. There is a huge credit explosion and production is booming.  BUT, Evans-Pritchard reveals:

Once you know that Hunan authorities have torn down two miles of modern flyway so that they can soak up stimulus by building it again, or that the newly-built city of Ordos is sitting empty in Inner Mongolia, you know what must come next.

A crash, right??

The Chinese consumer is supposed to be the solution to all this overcapacity and oversupply, but it won’t happen overnight.  Meanwhile, China’s central bank is tightening and fewer loans are being issued.

Evans-Pritchard concludes:

The world economy is still skating on thin ice. The West is sated with debt, the East with plant. The crisis has been contained (or masked) by zero rates and a fiscal blast, trashing sovereign balance sheets. But the core problem remains. The Anglo-sphere and Club Med are tightening belts, yet Asia is not adding enough demand to compensate. It is adding supply.

My view is that markets are still in denial about the structural wreckage of the credit bubble. There are two more boils to lance: China’s investment bubble; and Europe’s banking cover-up. I fear that only then can we clear the rubble and, very slowly, start a fresh cycle.

In my earlier post, I included the quote by Obama that Kudlow ridiculed:

While he also talked of multilateral cooperation and human rights, he came to Asia to deliver the message that the rapidly growing export-driven economies can no longer count on the U.S. consumer to keep them afloat.

It seemed a bit arrogant, particularly because Obama hasn’t really been pushing China much:

As for Obama, during the presidential campaign Obama promised to “crack down on China” but during the primaries there was chatter: “But his commitment to that point of view was thrown into doubt during the primaries when a Canadian official said an Obama adviser had privately characterized his tough stance on the North American Free Trade Agreement as political posturing.” (As an example, see: U.S. to Impose Tariff on Tires From China, Wall Street Journal, September 12, 2009.  Detractors figure that “the tariff won’t result in more jobs. Tires will simply come in from other low-cost countries, they say, and U.S. manufacturers, keep making their cheaper tires in China.”) Of course, this is classic Obama…all that “get-tough” talk and “insisting” while we have to go “hat in hand” to China…more blowing smoke.

But Evans-Pritchard comments (above) about Washington’s ability to really shove are food for thought. To repeat, “Well-armed sovereign states can do whatever they want.”

Now, I’m not suggesting Barack Obama is going to start a “real” war with China.  I don’t even think a sane Repbulican would.  (Then again, the Chosen One may just be arrogant enough????)

But, what about an INSANE Republican or Democrat, for that matter, since the elite in Washington are all about the same?  George W. Bush and his oil buddies decided to mess around in Iraq and look what we’re stuck with.  (George and his father were too busy with their long-time ties to China, so Iraq filled the bill for George II.) Barack Obama is worrying about that pipeline in Afghanistan that’s attacked so often by the Taliban that it hasn’t even been able deliver any oil yet.

But, there are lots of INSANE Republicans and Democrats around and who can trust ANY of them?

And, there’s history which shows a link between trade and wars.

Over at the RGE Monitor, Kevin O’Rourke wrote in a 2008 piece  titled “Lessons of 1000 Years of Trade History“: (my bolding)

Even more fundamentally, the continuation of a broadly liberal international trading environment will require that the geopolitical system adapt to the rise of China, India and other ‘Third World’ giants.  In a historical context, this represents of course the restoration of the status quo ante, the end of a “Great Asymmetry” in international economic and political affairs caused by the Industrial Revolution, which was itself in large part a product of the interactions between early modern Europe and the rest of the world.  But that is not to say that such an adjustment will be easy.  The international system has historically done a pretty poor job of accommodating newcomers to the Great Power club. German unification and industrialisation during the late 19^th century led to tensions with Britain and France over colonial and armament policy, while Japan’s rise to regional prominence during the interwar period, and its search for secure sources of raw materials, ended in war against United States and its allies.  Both precedents are worrying, in that similar questions are posed today, both in terms of the rights of emerging nations to rival the established powers’ military capabilities (notably with regard to nuclear weapons), and in terms of the strategic importance to countries like China of ready access to oil supplies and other natural resources.

The last point should cause us to reflect that, Cobden and Montesquieu notwithstanding, interdependence and trade do not necessarily guarantee peace.  The world economy of the late 19^th century was extremely interdependent, to the point where Norman Angell famously felt able to pronounce, on the eve of World War I, that major conflict was now unthinkable.  Interdependence implies vulnerability, and vulnerability can lead to fear, with unpredictable consequences, as Anglo-German rivalry in the run-up to the Great War, and Japanese reactions to the Great Depression and Smoot-Hawley, both indicate.

Impermanence appears to be the most enduring feature of the human condition, and if there is one lesson which we can safely learn from history, it is that history has not ended.  Hopefully it will not repeat itself.

We know that Barack Obama knows nothing about history (in fact, dismissing the entire Viet Nam experience), and I’d bet that none of our future leaders will know it either. And, even if they DO, I doubt they’d actually pay any attention to any lessons to be learned.

***

UPDATE 1

Looks like China isn’t missing this military angle:

Related Story from Bloomberg News, November 17, 2009 (excerpt):

China’s New Missile May Create a ‘No-Go Zone’ for U.S. Fleet

China’s military is close to fielding the world’s first anti-ship ballistic missile, according to U.S. Navy intelligence.The missile, with a range of almost 900 miles (1,500 kilometers), would be fired from mobile, land-based launchers and is “specifically designed to defeat U.S. carrier strike groups,” the Office of Naval Intelligence reported.

Five of the U.S. Navy’s 11 carriers are based in the Pacific and operate freely in international waters near China. Their mission includes defending Taiwan should China seek to exercise by force its claim to the island democracy, which it considers a breakaway province.

The missile could turn this region into a “no-go zone” for U.S. carriers, said Andrew Krepinevich, president of the Center for Strategic and Budget Assessments in Washington. (MORE)

The World Bank Running Out of Money?

~~By InsightAnalytical-GRL

Well, here at home the FDIC is broke, but guess what?

The World Bank is on the verge of going broke, too…

According to the  Telegraph (U.K.):

World Bank could ‘run out of money’ within 12 months

(SNIP)

The Bank, whose job it is to support low-income countries, has had to hand out so much cash in the wake of the financial crisis that it faces a shortfall in what it can spare for new projects within 12 months.

“By the middle of next year we will face serious constraints,” said its president Robert Zoellick, as he launched a major campaign to persuade rich nations to pour more money into the Washington-based institution.

He conceded that such a task was likely to be extremely difficult, given the difficulties facing countries in the wake of the developed world’s biggest recession since the Second World War.

Although the Bank has enough cash to fund existing projects and its day-to-day operations, the demands thrown up by the global recession have meant it may need extra capital contributions from rich nations to bolster its balance sheet if it is to satisfy such needs.

Mr Zoellick, speaking at the opening of the IMF and World Bank annual meetings in Istanbul, said the Bank needed a capital increase of $3bn-$5bn, though others suspect the eventual need could be higher still.

SNIP

The money would be shared between the International Bank for Reconstruction and Development – the key part of the bank, which lends to poor nations – and the International Financial Corporation (IFC), which lends to companies.

The World Bank has pretty much screwed poorer countries with the terms of the largesse they’ve offered in the past, but, nonetheless, it’s still pretty amazing that this oufit would be afraid of  running out of cash.

What an economic cesspool we’re in…

***

By the way, Robert Zoellick is an alumnus of the George W. Bush Administration…