Faber News Flow

The year 2020 could emerge as the start of the era of relative global chaos or major upheaval. It is the era we have been anticipating, as the  impact of core population decline meets economic dislocation, and security and structural uncertainty. Changes in the fundamental sociological framework of global society, due to the end of the population growth cycle - and with it the end of the economic growth cycle based on expanding market size - were beginning to become evident by the beginning of 2020. It was apparent that 2020 was likely to see a major evolution in this transformation. The three "inevitable" trends which had been promoted in recent decades: the "inevitable" rise of the People's Republic of China; the "inevitable" decline of the United States of America; and the "inevitable" consolidation of the European Union into a strategic superpower ...had all, by 2020, retreated into the swamps of vainglory. A broad-brush landscape view of...

Was it ever plausible that China's economy could grind to a halt and there wouldn't be any consequences for the U.S. economy? No. Many commentators talk about supply chains in China, but how many have actually visited factories in China, other than carefully choreographed PR visits  to suitably high-tech facilities? I've visited many factories in China, and not with a staff of minders who swiftly guide the visitors through the  happy story  of high-tech wonderland. I've visited some high-tech facilities but also many low-tech factories, where most of the supply chain originates, usually with one or two bored local government functionaries. You get a much less distorted view of the supply chain on the ground, away from the carefully guided tours. Since we weren't important visitors, nothing was staged. Workers glanced at us, as in  what are they doing here? , but otherwise we simply observed everyday operations. As I've reported here for a decade, profit margins ...

The global economy is faced with a   synchronized slowdown   as central bank ammunition to fight the next global recession is limited.   Monetary authorities across the world have slashed interest rates 80 times over the last 12 months and printed upwards of $1 trillion over four months to counter the slowdown.  The only apparent solution central bankers have offered is a liquidity-fueled massive stock market melt-up   across the world that rivals the end years of the Dot Com bubble (and the liquidity-fueled meltup around Y2K). These unelected officials have also provided forward guidance on how an epic V-shape recovery in the real economy is imminent.  The only problem today that market watchers like ourselves have noticed – is that  traditional monetary policy has had a challenging time stimulating growth in developed and emerging economies.  Data from  Netherlands Bureau for Economic Policy Analysis  (CPB) showed Friday that  global trade volume continued to contract in November,  m...

The monetary policy guide has fundamentally changed and so to has the business cycle.  Changes in monetary policies and practices nowadays stimulate finance over spending. The power and risks of equity markets should not be overlooked as important metrics show equity valuations to be 2X times their historical norm. Monetary policy can stimulate too much finance (equities) as it did with spending (inflation). As such, the risks of business cycles have shifted toward finance and away from inflation. Here are 5 examples of how monetary policies, new tools and practices stimulate finance over spending. 1. Policy Rates : The primary tool of monetary policy is the target on the federal funds rate.  Policymakers have often struggled to find a good balance, or find a rate that was equally good for the economy and finance. Policymaker's promise to keep official rates exceptionally low in recent years, and now for the foreseeable future, clearly favor finance over spending. To be sure, inter...

Today we gasp, stagger, reel. The enormity of it all has finally overmatched our capacities. Consider… Total global debt presently piles up to 322% of GDP — a record. Total "developed world" debt piles higher yet — 383% of GDP — another record. The world's stock markets combine to $88 trillion, or 100% of global GDP. That is another record yet. Record upon record upon record has come down… as debt has gone relentlessly up. And what does the world have to show for the deluge? Little Bang for the Buck Real United States GDP growth gutters along under 2%. Fair estimates place European and Japanese 2020 growth under 1%. Interest rates, meantime, are coming down. And so the supply of "dry powder" available to the central banks is coming down. They will require heaps of it come the next crisis. Project Syndicate, in summary: The major developed economies are not only flirting with overvalued financial markets and still relying on a failed monetary-policy strategy, but...

This week's pick of energy and commodity market trends kicks off with EU biofuels demand prospects and a window of opportunity for Australian crude oil grades. US and European gas market dynamics and Brazilian corn prices are also in the sights of S&P Global Platts news editors this week. 1. Renewables goals boost global biofuels demand Goldman's Currie Is Watching Three Commodities Themes in 2020 What's happening?  In 2020, each EU member country will need to meet specific  national renewable energy targets  set by the European Commission. One route is to blend more biofuels into road fuels, with more countries adopting E10 gasoline, which contains up to 10% ethanol, twice as much as the current E5 standard. In 2019, the Netherlands became the latest European country to introduce E10 gasoline, following Finland, Belgium, France and Germany. What's next?  In France, E10 sales have now overtaken E5 deliveries. Growth of the E10 ethanol blend have been hindered in Ger...