China Has Fifty Million Empty Apartments

November 9th, 2018 Comments off

While economists have been focusing on signs that GDP growth in the Chinese economy is slowing, and the escalating  trade war with President Trump’s America, Bloomberg has reported on another potential  pitfall in the world’s second largest economy.

According to Bloomberg, China has fifty million unoccupied apartments. This represent 22 percent  – more than a fifth – of the nation’s housing stock. This clearly reflects the speculative character of much of China’s housing  construction, and in both raw numbers  and percentage terms is the highest vacancy rate in the world.

As noted in Bloomberg, should  any  negative economic development precipitate a massive sell-off of these fifty million unoccupied apartments homes,  the result would be a catastrophic deflationary spiral in the Chinese real estate market. As with the U.S. subprime crisis of 2007, such a scenario would have global economic consequences of the most dire character.


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Nouriel Roubini – “Dr. Doom” – Predicts Major Financial Crisis In 2020

September 17th, 2018 Comments off

Economist  Nouriel Roubini famously predicted the Global Financial Crisis of 2008. His forecast was so accurate, he was dubbed “Dr. Doom” by pundits, though Roubini rejects that term, preferring he be dubbed “Dr. Realist.” And it is that sense of realism, and his track record as a highly professional economist analysts, that  led him to predict, in an article published by Project Syndicate,  that a major financial crisis will arise in 202o, leading to a severe global recession.

The first cause of the 2020 crisis, according to Roubini, is “the fiscal-stimulus policies that are currently pushing the annual U.S. growth rate above its 2% potential are unsustainable. By 2020, the stimulus will run out, and a modest fiscal drag will pull growth from 3% to slightly below 2%.”

The poor timing of U.S. stimulus spending will contribute to inflation, compelling the Federal Reserve to continue increasing its interest rates. These inflationary trends will occur in other major economies, with other central banks accordingly replicating the actions of the U.S. Federal Reserve.

Additional factors adding to the toxic fiscal and economic mix are the policies of the Trump administration leading to a major global trades war,  interdiction of global supply chains and immigration policies that restrict growth and investment.  Parallel to this, fiscal and monetary policies in Europe will slow down European economies.

Roubini adds that leverage in emerging markets and several advanced economies is overly excessive, real estate too expensive, leading to a major correction if over-valued equities. In particular, fixed income assets will be highly vulnerable, and the correction, exacerbated by high frequency/algorithmic trading, will create flash crashes.   In this scenario, a backstop by central banks will not be accessible, as these institutions pursue normalized interest rates  and policies in an environment of rising inflation.

With a presidential election looming in 2020, Roubini believes the Trump administration may pursue  a “wag the dog” scenario, such as a military conflict with Iran, as a distraction in the face of a deteriorating economy,  triggering “a stagflationary geopolitical shock not unlike the oil-price spikes of 1973, 1979, and 1990. Needless to say, that would make the oncoming global recession even more severe.”

The global economic crisis  Nouriel Roubini believes will occur in 2020 will like be more severe than 2008. The noted economist write in his article, ” once the perfect storm outlined above occurs, the policy tools for addressing it will be sorely lacking. The space for fiscal stimulus is already limited by massive public debt. The possibility for more unconventional monetary policies will be limited by bloated balance sheets and the lack of headroom to cut policy rates. And financial-sector bailouts will be intolerable in countries with resurgent populist movements and near-insolvent governments…when it comes, the next crisis and recession could be even more severe and prolonged than the last.”

The dark economic forecast offered by Nouriel Roubini  may revive the earlier moniker of “Dr. Doom.” however, as with his prediction made prior to the 2008 Global Financial Crisis, it has the ring of analytical realism and unassailable logic. On that basis, 2008 may very well bring the onset of a global economic crisis so severe it may lead, unlike the crisis of 2008, into a prolonged economic depression that threatens geopolitical stability as well and economic and financial equilibrium.


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Turkish Lira Is Imploding – – Economy Of Erdogan About To Go Cold Turkey

August 13th, 2018 Comments off

When the aspiring Sultan of neo-Ottoman Turkey, Erdogan, called early presidential elections, nuanced observers pointed out he probably knew in advance that the Turkish economy was about to enter a severe recession, and he wanted to secure his near-dictatorial presidential  powers before the deluge set it. It is now setting in , with a vengeance. The country’s  fragile currency, the Lira, continues to erode at breakneck speed. On August 12, it plummeted to just above 7 to one U.S.  dollar.

Turkey’s high growth rates under Erdogan were illusory; they were fed by massive borrowing from foreign banks, the  loans denominated in dollars and euros. The collapse of the Turkish Lira leaves open the probability that foreign credit  will disappear, battering the Turkish economy with severity.

Turkey’s looming economic and financial collapse cannot be easily contained. Many banks, especially in Europe, hold Turkish debt in large quantities. An economic collapse in Turkey will have highly negative ramification in Europe, and   likely globally.

Trump Global Trade War Could Bring Economic Catastrophe

July 10th, 2018 Comments off

The  core supporters of President Donald Trump maintain that despite the at times troublesome tweets and verbal coarseness, this is trivial compared to the tangible economic results achieved during the first year-and-a-half of his administration. The relatively high GDP growth rates and low official unemployment rates are heralded by his adherents as signposts on the road of making America “great again.”

I am not as sanguine. In  the first place, based on the pattern of economic cycles in the last hundred years, the American economy is overdue for a severe  recession. It has not happened yet due to the monetary alchemy of the U.S. Federal Reserve, in lockstep with other central banks across the globe.

Secondly, and more importantly, Trump has now unleashed a trade war. It is the economic equivalent of an economic world war, as President Trump is targeting friend and foe alike;   China, Canada   and the European Union have been hit with sizeable tariffs; these countries have responded with retaliatory tariffs, matching America’s in scope and severity.

Many scholars of the Great Depression have argued that this worldwide economic calamity was not driven by the Wall Street crash of 1929, buy by a massive wave of protectionism in the early 1930s, characterized by a wave of tariffs and quotas.

Has President Donald Trump opened a Pandora’s box that may unleash a massive global economic crisis?

Turkish Economy Under Threat As Currency Plummets

May 27th, 2018 Comments off

The Turkish currency, the Lira, has lost significant value in a only a few months, reflecting the overall vulnerability of Turkey’s economy, which is plagued with corporate debt and a massive current account deficit.

The mercurial and authoritarian president of Turkey, Erdogan, is facing an election in which he hopes to further enhance his already powerful political grip. His strategy  is to play the populism card, and lash out at foreigners, including the United States, European Union and Israel. Part of this approach is blaming the “interest lobby,” and in a shocking display of bad economic sense, Erdogan, while on a visit to London, told foreign investors that after the election, he would subvert the independence of Turkey’s central bank.

The moves by Erdogan spooked global investors, leading to further erosion of the Lira. Reality briefly surfaced in Ankara, with even the Erdogan regime conceding that the central bank had to rush in an emergency interest hike of 300 basis points. This led to a temporary stabilization of the Lira.

After the election  Turkey faces political and economic uncertainty. The growing authoritarianism of Erdogan threatens the  foundation of Turkey’s economy, and there exists a major danger that after the election, the Lira will go into free-fall as foreign and domestic investors flee Turkey’s increasingly fragile currency.

Wall Street Lays A Big Egg – -Dow Jones in Record One-Day Loss – – Down 1175 Points on Black Monday

February 6th, 2018 Comments off

The Dow Jones Industrial Index was the one shining light in President Donald Trump’s unconventional administration. No matter how perplexing his tweets were, there was no denying that Wall Street investors loved his pro-business posture. That is until now.

The massacre that occurred on Wall Street on Black Monday, February 5, 2018 was the largest one -day loss on  the New York Stock exchange. This comes after a bad week on Wall Street, meaning all of the gains trumpeted by Trump have been erased. Of course, there will be pundits claiming that this is just a temporary correction. But is it?

After a decade of money printing and near zero interest rates undertaken by central banks around the world, but especially by America’s Federal Reserve, inflation  fears are returning with a vengeance

It must be recalled that a major reason the world supposedly escaped a massive economic depression following the global economic crisis of 2008 has been  money printing by central banks and massive borrowing by sovereigns. This borrowing binge continues to the present day.  Up till now, zero interest rates have enabled major sovereign borrowers, especially the United States, to service its growing government debt. However, should interest rates return to anything approaching normal historical levels, then many countries, the USA being in the lead, face the prospect of a massive insolvency crisis. Fear of this approaching fiscal Armageddon may be what is animating the growing  fear among Wall Street investors.

Black Monday may very well be  a sign of much worse to come.

Is North Korea Planning A Nuclear Pearl Harbor For America?

September 14th, 2017 Comments off

In response to the new sanctions imposed upon North Korea by the United Nations Security Council, the official  external news agency of the DPRK (Democratic People’s Republic of Korea),  which goes by the surreal  name of “Korea Asia-Pacific Peace Committee,” issued the following statement:

Let’s reduce the U.S. mainland into ashes and darkness. Let’s vent our spite with mobilization of all retaliation means which have been prepared till now.

The implication is clear; Pyongyang is threatening to unleash a salvo of long-range ballistic missiles tipped with thermonuclear warheads at America’s largest cities. This call for nuclear genocide is not only aimed at the United States. The same statement also included this apocalyptic message for Japan:

The four islands of the archipelago should be sunken into the sea by the nuclear bomb of Juche. Japan is no longer needed to exist near us

There is a tendency by foreign observers, including in the U.S., to dismiss North Korean threats to annihilate the United States and its population as typical bellicosity that periodically emanates from Pyongyang, not to be taken seriously. At one time, many American experts also claimed that North Korea’s boasts of nuclear weapons advancement were highly exaggerated. However, the latest nuclear test detonation and ICBM launch proves that the reclusive nation’s ability to launch a nuclear attack on the continental United States has advanced far more rapidly than they had originally forecasted. For that reason alone, a warning by Pyongyang that it seeks the genocidal annihilation of America, along with Japan, should not be frivolously ignored and treated as propaganda.

There is an historical parallel to what is unfolding in North Korea. In 1941 the U.S. sought to pressure Imperial Japan to end its war of conquest in China and expansionism in Southeast Asia through the application of economic sanctions. As the sanctions became increasingly severe, the Japanese press warned through statements by authoritative sources that their nation would be forced to strike back militarily at the U.S. and its allies to break the economic stranglehold being imposed on them.

The reaction of Pyongyang to the most recent U.N. sanctions has disturbing parallels with Japan’s threats in late 1941. However, there is one essential difference. When Japan decided to attack the U.S. it dispatched a naval armada that took eleven days to reach its target, which were battleships and airfields. If North Korea unleashes an attack on America, it will take half an hour for its nuclear-tipped ballistic missiles to reach their targets, which will be the nation’s largest population centers.


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Chris Matthews, Mussolini And Praising Murder: MSNBC Host Travels The Low Road

July 1st, 2017 Comments off

Since 1999, Chris Mathews has hosted “Hardball with Chris Matthews”  on MSNBC. All those years as a centerpiece of the liberal-leaning cable news network have, however, left Mr. Matthews none the wiser when it comes to historical reality. A recent comment on-air by Mr. Matthews is a glaring example of this.

In the  June 29 airing of “Hardball with Chris Matthews,” the host pursued one of his favorite themes since Donald Trump was sworn in as America’s 45th president; nepotism and allegations that Trump is creating a family dynasty akin to the Romanovs of Imperial Russia. However, in pursuing his obsession, particularly in relation to the president’s  son-in-law Jared Kushner, Mr. Matthews’  words ran way ahead of him. Referring to Kushner, Mr. Matthews said, “So the son-in-law, you know, one good thing Mussolini did was execute his son-in-law.”


Putting aside the poor taste of at least creating the impression that Mr. Matthews thinks it might be doing “one good thing” for President Trump to have his son-in-law executed, the comment reveals a dismal lack of historical knowledge, particularly for a long-time political commentator who has built a reputation for sophisticated insights.

 Regarding the “one good thing” Mussolini did, here is the historical context. The son-in-law in question was Count Galeazzo Ciano, who married Mussolini’s daughter Edda. In 1936, he was appointed foreign minister of Fascist Italy by his father-in-law.

Ciano was initially an ardent fascist, and supported Mussolini’s worst excesses, such as the invasion of Ethiopia and support of Franco in the Spanish Civil War. However, when Ciano was assigned the role of representing Mussolini  in negotiations with Hitler over the developing Axis alliance between the two totalitarian states, the young foreign minister  (he was only 33 years  old when appointed  to his post) began to change his views. Over time, he came to see the evil in Hitler, and when Nazi Germany invaded  Poland, he did everything humanly possible to keep his country out of the Second World War. He argued vociferously with his father-in-law that entering the war would be a disaster for Italy, and for nine months succeeded in at least delaying Mussolini’s declaration of war.

We know a great deal about Ciano’s transformation in his attitude towards Mussolini and his Nazi allies because he kept a detailed diary recording his candid observations, especially about the leaders of Nazi Germany and the warmongers in his own country. The Ciano diaries would become an important source document for historians of the Second World War. On the day Mussolini overruled his son-in-law and decided to enter the war as Nazi Germany’s ally, Ciano wrote  in his diary, “I am sad, very sad. The  adventure begins. May God help Italy!”

As far as the execution  Mussolini  ordered for his son-in-law, the act that Chris Matthews highlighted as the “one good thing” Mussolini did, here are the facts. In mid-1943, Ciano was one of the members of the Fascist Grand Council who voted to depose Mussolini,  believing only through the dictator’s removal could Italy be spared from becoming a bloody battlefield. Unfortunately, German military intervention rescued Mussolini, and ensured that Italy would become a major battlefield in the Second World War. Ciano was taken into custody by Mussolini’s rump fascist state and its German protectors. Seeking revenge, Mussolini arranged for a show trial that would condemn to death all the members of the Fascist Grand Council who voted for his removal. Ciano was at the top of the list of “traitors,” not only for his opposition to Mussolini, but also because the Nazi leadership knew Ciano was an enemy, and encouraged Mussolini to have his son-in-law killed.

In prison awaiting death, Ciano arranged with his wife  having his diaries smuggled out of Italy. The last entry of the diary is deeply moving. Ciano condemns Mussolini, marking his final break with the fascist regime, then writes, “Within a few days  a sham tribunal will make public a sentence which has already been decided by Mussolini…It is hard to think that I shall not be able to gaze into the eyes of my three children or to press my mother to my heart, or my wife, who in my hours of sorrow has revealed herself a strong, sure, and faithful companion. But I must bow to the will of God, and a great calm is descending upon my soul. I am preparing myself for the Supreme Judgment.”

And so, Mr. Matthews, explain again how the execution of this man was the one good thing Mussolini did, and why this is an example that President Donald Trump should emulate?




Trump and Xi Jinping Summit Will Impact Global Economy

April 10th, 2017 Comments off

The introductory summit meeting between Chinese president Xi Jinping and President Donald Trump at the latter’s estate in Mar-a-Lago, Florida will ultimately have the most significant implications for the global economy. If Trump sticks to his campaign rhetoric, China and the United States are headed for a trade war, with dire effect for those two countries and the entire world economy. The atmospherics that  emerged at Mar-a-Lago, give cause for cautious optimism.

Undoubtedly, Trump and his Chinese counterpart know the risks of a full-fledged trade war between the two largest economies on the planet. The positive atmosphere that emerged from the summit points to a recognition that hard bargaining is pending, but ultimately a stable bilateral economic relationship between Washington and Beijing is in everyone’s best interests.

The wild card will be if external issues, particularly North Korea’s nuclear  and ballistic missile program, as well as Chinese assertiveness in the South China Sea, will undercut rational economic calculations.




Trump And Global Economy

January 3rd, 2017 Comments off


What will 2017 bring for the global economy? Since the global economic crisis and financial meltdown of 2007-08, the world’s economy has been on life support, unsolved problems papered over by massive liquidity injections and zero-interest rates by a multitude of central banks. This monetary chemotherapy cannot be sustained indefinitely, and by the pattern of normal business cycles, the world is overdue for another recession.

Added to all the uncertainties, we now have the shock election victory of Donald Trump in the 2016 U.S. presidential election. Trump ran as an economic nationalist. Will he bring about a trade war with China, the world’s number 2 economic power?

For better or for worse, Trump will have the most important impact on the 2017 global economy.

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