In the words of 19th-century philosopher Ralph Waldo Emerson, “Every man is a consumer, and ought to be a producer. He is by constitution expensive and needs to be rich.” This observation, once relevant in its simplicity, now feels drastically turned on its head.
In 2015, both producers and consumers find themselves tightly wedged in a financial vise. Escalating debts, coupled with stagnant wages, have tightened this grip, leaving the average worker feeling overwhelmed and vulnerable.
Emerson, had he lived through the past few decades, would likely be horrified by the current economic landscape. The disconnect between the stock market and the real economy appears to have reached unprecedented levels.
In his time, currency was grounded in tangible assets, free from the manipulations of central banks. Modern practices such as printing money to purchase stocks and bonds would have been viewed with skepticism and disdain, seen as nothing short of trickery.
Today, however, such actions are lauded as progressive central banking strategies. Central bankers focus on managing inflation, stimulating aggregate demand, and addressing unemployment—issues that shape today’s economic policies.Continue reading
A significant market panic is currently unfolding in the Far East, where buyers of Chinese stocks have become increasingly scarce. Even the heavy-handed intervention of the Chinese government has failed to arrest the sharp decline in stock values.
On Monday alone, the Shanghai Composite Index plummeted nearly 9 percent, despite government-imposed restrictions on selling shares and directives for state-sponsored stock purchases. Many astute investors chose to sell, undeterred by official threats against them.
Government initiatives aimed at stabilizing the market have proven futile; they do not address the underlying economic imbalances. Past years of easy credit have created market distortions and misallocations of resources, leading to an inevitable confrontation with reality.
According to a report by CNN, “The Chinese economic boom since the global financial crisis in 2008 has largely been fueled by debt—with total debt levels now exceeding those of the United States.” This rising tide of debt has been deeply intertwined with stock market growth, leading to unsustainable conditions.Continue reading
Last week’s downturn wasn’t limited to currency; commodities were hit hard as well. On Thursday, copper prices dropped by nearly 2 percent, hitting their lowest mark since 2009.
Iron ore values also fell sharply, as did oil prices, which dipped below $50 a barrel. Analysts warn that commodities might continue to face further declines.
According to Morgan Stanley, the current oil slump could end up being the most severe in over 45 years. The rationale behind this prediction is straightforward: by this stage in the oil price decline cycle, one typically expects to see a reduction in production, leading to a decrease in supply.
However, despite declining prices, oil supply has inexplicably increased. Following an earlier collapse in prices, U.S. production has stabilized—this aligns with historical trends. Yet OPEC production has seen a rise, going from about 30.5 million barrels per day in January to over 32 million by June. The question remains: why? Continue reading
The world of modern money is fraught with fantasies, failures, and deception. As we strive to make sense of today’s monetary systems, we often find ourselves grappling with concepts that feel elusive and perplexing.
The journey could very well start with President Nixon’s controversial decision in 1971. This pivotal moment saw the dismantling of the Bretton Woods system, during which Nixon severed the last links between gold-backed currency and paper money.
From that moment onward, foreign governments could no longer trade their U.S. dollars for gold. Currencies around the globe became mere fiat representations—paper currency issued by governments without tangible backing. Since then, these fiat currencies have floated unpredictably, influenced by myriad market forces.
This lack of restraint has led to bizarre market phenomena and outcomes. Continue reading
