Asia – The Coming New Financial Capital of the World
“The Rediscovery of the Business Cycle – is a sign of the times. Not much more than a decade ago, in what now seems a more innocent age, the ‘New Economics’ had become orthodoxy. Its basic tenet, repeated in similar words in speech after speech, in article after article, was described by one of its leaders as ‘the conviction that business cycles were not inevitable, that government policy could and should keep the economy close to a path of steady real growth at a constant target rate of unemployment.’
“Of course, some minor fluctuations in economic activity were not ruled out. But the impression was conveyed that they were more the consequence of misguided political judgments, of practical men beguiled by the mythology of the old orthodoxy of balanced budgets, and of occasional errors in forecasting than of deficiency in our basic knowledge of how the economy worked, or in the adequacy of the tools of policy. The avant-garde of the profession began to look elsewhere – to problems of welfare economics and income distribution – for new challenges.
“Of course, the handling of the economic consequences of the Vietnam War was an obvious blot on the record – but that, after all, reflected more political than economic judgments. By the early 1970s, the persistence of inflationary pressures, even in the face of mild recession, began to flash some danger signals; the responses of the economy to the twisting of the dials of monetary and fiscal policy no longer seemed quite so predictable. But it was not until the events of 1974 and 1975, when a recession sprung on an unsuspecting world with an intensity unmatched in the post-World War II period, that the lessons of the ‘New Economics’ were seriously challenged.”
That idea first emerged with Karl Marx who advocated the denial of personal property from the individual to eliminate greed and exploitation of the worker. Marx attributed all value to labor and ignored ingenuity, creation, and the free spirit of man. While his idea may have been noble from a humanitarian perspective, they have nonetheless proved absurd and unworkable. Marx took the power from the people and handed it in a form of a golden scepter of authority to government. Unfortunately, Marx did not fully comprehend human nature. John Maynard Keynes was not much better. He still adopted the Marxist philosophy at its core that government was capable to unbiased management of the affairs of men. In the aftermath, this idea that government is capable of altering the direction of society by regulation has still proved totally worthless. Whatever the policy governments have followed postwar, followed society has only led to massive debt structures that threaten to bring down Western Civilization as it has destroyed every empire, nation, and city state since the dawn of society with no exception.
The greatest hidden secret from traditional economic theory is that a cycle exists. Asia rose to the Financial Capital of the World after the fall of Rome and Constantinople. Asia became rich on the exportation of spices and silk. From the earliest times, we know that there was even diplomatic relations between Rome and China around 180AD. After the fall of Rome and then Constantinople, the Financial Capital of the World moved to India. After that, Indian religion infiltrated China and the Financial Capital of the World moved to China. This is why there was such a great interest to get to India and China from Europe that made the voyage of Columbus even a fundable venture capital deal on the part of Ferdinand and Isabella of Spain.
The Rise of Asia
The United States has succumbed to the very same patterns that marked the decline and fall of Rome. The United States was virtually bankrupt and required a bailout loan from Europe managed by J.P. Morgan in 1896. However, it was the political instability within Europe that caused World War I and that marked the peak in the British Empire – 1914. From that point onward, international capital flowed to the United States and that created the Roaring ‘20s. There were massive capital inflows as the United States became the next boom as an emerging market.
Asia has been following that same path of development. The 1997 Asian Currency Crisis was painful, but this is what put Asia on the map beyond Japan. That event brought Asia to the attention of capital, even though it was by far a more difficult period for Asia as a whole. Nonetheless, as we can see from the global comparison, the countries will the strongest growth are Asian followed by India. This is the new trend. We are looking at a massive shift in capital from the West to Asia in spite of the Draconian tax reduction.
Everything around us beats to the rhythm of a Complex Dynamic Nonlinear System. We are facing a real Global Meltdown that is brewing far beyond anything that is being traditionally covered in the general press, academia, and analytical circles. Modern man is as arrogant as his historical ancestors who always believed that somehow they were different. Debt today threatens to wipe out the entire social safety net including funded pensions. Greece was just the tip of the iceberg. Governments are imploding around the globe and there is no comprehension of what in truly unfolding.
It is the Sovereign Debt Crisis that is rippling through the global economy which is profoundly affecting everything we see from investment to simply surviving our own future and trading decisions. Governments everywhere are clueless. They seek only to maintain power and pray at the foot of their bed that they will wake up and everything will be back as it was. They try to create fake bailouts while never fixing the problems. We are on the verge of such a profound event, that the outcome will not be hyperinflation, but catastrophic deflation as government become more Draconian and seek to confiscate all wealth.
The United States is hunting down Americans on a global scale assuming that any account outside the United States is to hide money not for international business causing a complete reversal in world trade as the velocity of money declines. Where in the 1930s it was protectionism that shrunk the economy, today the United States is destroying itself and employment potential for the youth. In Switzerland, the record fine for speeding is 300,000SF as fines are determined according to one’s net worth. Japan is also turning against its own people doubling the sales tax as its national debt will exceed $12 trillion dollars next year – not far behind the USA. Spain is in a really dire financial position. Capital is pouring out of the country equivalent to more than 50% of the annual GDP as wealth has taken flight fearing the worst lies ahead. Unemployment among the youth in Spain has exceeded 50% as civil unrest rises in the face of stupid economic policies that are driving the global economy to the brink of collapse and possibly war. Once Spain goes, there goes the EU. The Spanish banking system is on the verge of systemic complete failure. So much capital has been fleeing Spain the ECB is now pouring in on average, more than €300 billion on a monthly basis to meet liquidity needs. Since the total Spanish banking system is about €3 trillion in size, the financial crisis brewing is amounting to almost 10% of total banking assets on a monthly basis. This is simply unsustainable. Civil unrest is breakout out against austerity throughout Southern Europe and this contagion will soon affect the United States by 2014.
Governments worldwide are in crisis. There is a great disparity between the state and local governments where the latter cannot manufacture money at will as the sovereign national governments. This is a predominant source of deflation as bondholders demand higher taxes and austerity be imposed at the sovereign government levels to prevent hyperinflation and the devaluation of bond holdings. Of course bondholders will lose everything as they always do historically. Nonetheless, in the immediate term, they will demand their pound of flesh and government will respond by extracting that from the people destroying the global economy in the process.
If you think for one moment that sovereign government bonds are the flight to safety, you better wake up before it is too late. In the United States, government is about to cut spending and raise taxes sharply in 2013. The rhetoric of the Democrats is only watering the seeds of social warfare just to win an election. Outside the United States, the “rich” are also being hunted down like animals. In France, the dramatic rise to 75% taxation upon the rich is leading to massive capital flight. The French left-wing newspaper the Libération carried a headline when France’s richest man, Bernard Arnault abandoned France for Belgium and the newspaper insulted him with the headline “Casse-toi riche con!” (Get lost, rich asshole). In the United States, Obama chastised the “rich” saying they created noting on their own and they owed everything to the state and the people. This rising tide against anyone who has more money than the next guy is threatening the collapse of Western Society and all democratic ideals. Governments everywhere are pointing to the “rich” to blame for their own fiscal irresponsibility. They are targeting even the gold dealers making it illegal to deal in cash trying to assault the growing underground economy.
Local governments are in dire fiscal condition worldwide. The City of Philadelphia has chased out the “rich” and those left behind are the unproductive with their hands out demanding more. Governments are turning to property taxes that are not tied to income. Even in Greece they are now retroactively collecting property taxes from 2008. Regardless what you have in income, you owe taxes on the property irrespective of your current employment or income.
The city of Scranton, Pennsylvania reduced all government wages to minimum wage. In Spain, Catalonia, Spain’s most indebted region, announced it could no longer pay subsides in July to hospitals, old age homes and other social services.
In South America, Argentina is also in economic decline thanks to debt and there too we see local governments imploding. Normally, the provincial cities receive funding from the provincial governments. However, this has dried up in some areas turning cities into cash-strapped debtors who cannot pay their bills or even their own employees. They have turned to trying a raffle to determine which civil servants will receive their pay first. Employees will queue up to get paid and when the money runs out, those in the end of the line are out of luck. The first draw for the raffle took place on Friday, July 20th. Only 23 of the town’s 92 employees received their pay.
The mainstream press is simply not covering these issues. National governments continue to suppress free elections and free speech. In Spain, watch this one closely. Right now 6 out of 17 Spanish regional provinces are is serious budgetary crises. Since the federal Spanish government is itself in bankruptcy, there will be no white knight on the horizon.
Capital is fleeing everywhere, as it rightly should. Governments are in hot pursuit determined to destroy Western Civilization as they try to confiscate every scrap of wealth from the private sector as if this will somehow miraculously save the world and maintain the power. The only outcome is revolution or total dictatorial forms of government subordinating all human rights to the pleasure of the bureaucracy. Capital outflows from Spain have been more than €41.3 billion ($50.7 billion) in May, quadrupled compared to the outflow one year ago according to figures released by the Spanish central bank. For the first five months of 2012, a total capital outflow has been about €163.
This massive capital outflow is the same pattern we saw when our computer forecast the collapse of Russia that created the Long-Term Capital Management debacle in September 1998. This capital outflow is stripping banks of deposits and was the reason behind the banking conglomerate, Bankia, having requested a bailout in May. The Spanish government’s response has been to try to punish capital leaving.
Governments are out of control around the globe. This is the worst possible outcome we face globally. The United States has lowered the $10,000 reporting on the movement of cash to $3,000 at the bank level. They are going to cause a worldwide economic implosion of untold proportion. They are now trying to criminalize natural human behavior of protection one’s economic self-interest. Governments simply take no responsibility for their own actions. This is similar to a landlord renting you an apartment and saying that at any time he can raise the rent because he needs more money because he spent too much money having a good time.
The individual is always screwed. In Iceland, mortgages are adjusted according to the currency fluctuations. If you borrow 1 million Icelandic króna and the currency declines by 50%, you now owe 2 million. Banks have transferred the risk to the average person. People now owe more than what they paid for the house while wages do not fluctuate in such a manner.
The European crisis is spiraling down a debt vortex and the politicians simply refuse to reform. Germany is being dragged down the rabbit hole for the Debt to GDP ratio is up to 90% thanks to all these EU bailouts. In reality, Moody’s has put the Germany on a negative watch and it could lose its AAA credit rating as was the case with France last year. The IMF is simply dead in the water.
The Sovereign Debt Crisis is brewing. We will present the only possible solution at the at the World Economic Conference along with how to shelter your net worth and survive what could become the fall of Western Society because governments everywhere simply refuse to live within their means and stop this crazy borrowing with no intention of ever paying anything back.
The Rise of Anti-Westernism
Singapore just passed on Friday, October 5th, 2012 the most interesting deleveraging Act targeting the housing market of any country in history. In a move that took the world by surprise, the Government of Singapore has introduced new measures as of Friday designed to deleverage the property market and stop home buyers from over-extending themselves to temper and control a real estate bubble. This of course is coming in the wake of a rising anti-Western attitude. It is widely seen as inflation being introduced by the import of foreign capital.
The Monetary Authority of Singapore (MAS) will now restrict all home loans to a maximum of 35 years. Home buyers, who take a loan that lasts more than 30 years, or extends past their retirement age of 65, will now have to pay out significantly more in cash curtailing the leverage available by lending. The long-term loans can now only be up to 60 per cent of the property’s value if this is the buyer’s first mortgage. This will result in requiring the borrower must pay 40 per cent of the price upfront, in cash. This is in response to the influx of foreign investors that has been seen locally as fueling inflation. The number of working permits for foreigners is being reduced by 2/3rds. The government has CORRECTLY distinguished “currency inflation” that is driven by foreign capital inflows irrespective of domestic policy objectives.
The new rules are:
1) All residential property loans capped at a tenure of 35 years.
2) Tighter limits for home loans longer than 30 years or which extend past age 65.
3) If the borrower has no other home loan, he can now borrow only 60 per cent of the property’s value (down from 80 per cent).
4) If the borrower has other existing home loans, he can borrow only 40 per cent (down from 60%).
NOTE: Same rules apply for refinancing loans.
Non-individual borrowers now subject to 40 per cent loan limit (down from 50%).
The Most Important Forecasting Session for Asia
Bangkok November 2nd & 3rd
The Asian World Economic Conference
November 2nd & 3rd, 2012
Grand Hyatt Erawan Bangkok
494 Rajdamri Road, Bangkok, Thailand 10330
The Coming of Age for Asia the New Financial Capital of the World
Global Correlation of Worldwide Economic Trends & Investments Covering:
Australia, China, Hong Kong, India, Indonesia, Japan, Philippines, Malaysia, New Zealand, Singapore, South Korea, Taiwan, and Thailand
How to Survive the Sovereign Debt Crisis, the rise of Draconian Monitoring and Restrictions upon Capital, the coming rise in Inflation, Droughts, Agriculture & Global Warming, and the Final Collapse of Marxism & it Impact Upon All Financial Markets
With a Special Review of Asia for 2013
One Day Sunday only $750
Two Days $1,500 or $2,000 Including 6 month Subscription to the Global Market Watch Needed to Survive & Alert Updates