The Great Depression Of The 2020's by Simon Dixon

This was published in 2011 - Simon Dixon goes through the action taken in the latest financial crisis and how it will lead to the great depression of the 2020's if we do not undertake banking reform and monetary reform - no real reform hence current crisis.

'The Euro is a suicide pact' Economist Prof. Steve Keen on Brexit and the European Central Bank

Richard Wolff: We Need a More Humane Economic System—Not One That Only Benefits the Rich

Free Market Fundamentalists are theologians for Capitalism - Marxist Socialists like Richard Wolff are the real and rational Political Economists of 21st Century - reality will expose the capitalist theologians in 2019 - the real world will break through and the true ugliness of capitalism will be evident to all.

Why China Is so Good at Building Railways

September 2018 transformation of Chinese Railways

Wall Street Has WORST Month Since Great Depression

Ray Dalio: Capitalism, China and Financial Crisis (2018)

History is Marching into 2019 - Socialism or Barbarism ?

Wolff on Boom Bust: One Year of the "Tax Cuts and Jobs Act"

Richard Wolff on Capitalist Crash 2019 ?

War Against Huawei by Chris Griffith

Meng Wanzhou Arrest - It Gets Personal - Trump opens Pandora's Box

Kidnap and Ransom new Trump Mafia Policy

Stock Buybacks: Free-Market Ideology's License to Loot

Crazy uncertainty’ good politics for Trump but bad for US – Richard Wolff

Global and UK Economy hits Storm - Just not looking at right indicators - market fundamentalist political ideology destroys rationality

Our Political Economy Research Unit and Blog has been forecasting a new recession and we are in the early stages of entering - it will reach its bottom by 2020.

The Trump Presidency Crisis of 2019 and Brexit and China Trade make the perfect global economic storm even before we look at debt explosion.

Also the U.S. Treasury yield curve just inverted for the first time in more than a decade.
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The Upcoming Economic Crash That Will Dwarf the 2008 Financial Crisis

Trump's Fantasy World is Coming to an End - not even the dead cat will bounce !

Deutsche Bank Raided

Is the market an efficient distributor of goods and services? Richard Wolff says 'No'

Cryptocurrency ‘not rooted in the real economy’: Coriolis’ Harding

Economic Update by Richard Wolff - Interview with David Harvey

Peter Schiff interviewed by Joe Rogan - Trump hoisted by his own fake economic success petard

A Mixed Bag - Schiff captures large part of reality but only part because he is also a right wing gold nut.

The Reality of Obama was no real recovery despite the fake numbers and why Trump won.

Trump's name is on the economic bubble but Schiff is locked into the Gold Delusion.

Trump is hoisted on his own fake economic success petard

Why Capitalism Demonizes Government

Bank of Zigong in Southwestern China. - What happened ?

Spinning a story from nothing the Falung Gong Epoch News Way   - propaganda from right wing economic illiterates usually based in Taiwan.

Local Public banks in China are part of the reason for Chinese economic success - private capitalist ones are dubious as they have profit rather than public service mandates.

Crypto Currency is not a alternative it is jumping from Capitalist Banksters to Criminal Crypto Gangs.

Real alternative Local Community Banks  and Regional Public Banks democratically owned and controlled. 

Taking the money power back is part of struggle for democracy and socialism the free market creates the capitalist oligarchy.

EXPOSE THE RIGHT WING LIES OF CAPITALIST FREE MARKET APOLOGISTS

Criminality: Out of the Bankster Frying Pan into the Crypto Currency Flames

Cryptojacking attacks are continuing to to rise, says Europol, the EU's law enforcement intelligence agency. 

Such illicit cryptomining involves attackers exploiting computer users' bandwidth and processing power to "mine" for cryptocurrency, solving mathematical problems that build the cryptocurrency's blockchain. 

In return, participants can receive cryptocurrency as a reward.

"While it is not illegal in some cases, it nonetheless creates additional revenue streams and therefore motivation for attackers to hack legitimate websites to exploit their visitor's systems," 

Europol says in its recently released Internet Organized Crime Threat Assessment for 2018. "Actual cryptomining malware works to the same effect, but can cripple a victim's system by monopolizing their processing power."

Indeed, security firm Crowdstrike notes in a new report that it "has observed cryptomining dramatically impacting business operations in some organizations - impeding their ability to conduct business as usual for days or weeks at a time."

Cryptomining malware continues to grow more prevalent. "Cryptocurrency mining detections have increased sharply between 2017 and 2018," the Cyber Threat Alliance says in a recently released report.

"Combined data from several CTA members shows a 459 percent increase in illicit cryptocurrency mining malware detections since 2017, and recent quarterly trend reports from CTA members show that this rapid growth shows no signs of slowing down," it says.

Europol predicts that cryptojacking will continue to serve as "a regular, low-risk revenue stream for cybercriminals" (see Cybercrime: 15 Top Threats and Trends).

Rik Ferguson, vice president of security research at Trend Micro, says one of the dominant, recurring themes in this year's IOCTA report is the degree to which "cryptocurrency in many ways could be said to shaping today's threat environment."

Those findings parallel Trend Micro's own first half of 2018 security roundup report, Ferguson notes. Trend Micro and other security firms shared attack and trend data with Europol that fed into the IOCTA report. Ferguson is also a cybersecurity adviser to Europol's EC3 European Cybercrime Center.

"With the increasing, malicious focus on cryptocurrency-related threats, attacks and exploits, it is clear that criminal innovation in this space continues unabated," Ferguson tells Information Security Media Group.

"Starting from attacks targeting cryptocurrency wallets on individual users' machines - either directly or as an add-on to some widespread ransomware variants - attackers have rapidly diversified into direct breaches of cryptocurrency exchanges, malware for mining on traditional, mobile and even IoT devices, and developed attack methodologies specifically designed to target the mechanics of blockchain-based transactions, such as the 51 percent attack."

The 51 percent attack gives attackers who can control more than 50 percent of a network's hash rate - or computing power - the power to reverse transactions on the blockchain or double-spend coins.

The first half of this year saw five successful 51 percent attacks leading to "direct financial losses ranging from $0.55 million to $18 million," Moscow-based cybersecurity firm Group-IB says in a recently released cybercrime trends report.

Mining via Malvertising

Criminals continue to attempt to acquire cryptocurrencies via all possible means, as well as to conduct business using them to help obscure the flow of funds.

For example, attackers are increasingly sneaking cryptomining software into online advertisements, says Christopher Boyd, lead malware intelligence analyst at security firm Malwarebytes.

 "While ransomware declines, certain forms of ad-based cryptomining have become very popular and we'd expect to see that trend continue," he tells ISMG.

Such cryptomining software is easily available, sometimes in a legitimate, open source form that attackers may use in an illicit manner.

"After the launch of Coinhive - hidden mining software - seven more similar software programs have come out," Group-IB says in its report.

Target: Cryptocurrency

Criminals are also targeting individuals and organizations that handle cryptocurrency. "Attacks that had previously targeted financial institutions such as banks are finding much easier targets in organizations dealing with cryptocurrencies; it's not surprising then that the criminals are moving to where there are easier pickings," 

Alan Woodward, a visiting professor at the University of Surrey's department of computer science, tells ISMG.

"Currency exchangers, mining services and other wallet holders are facing hacking attempts as well as extortion of personal data and theft," Europol's report notes.

Since 2017, "a total of 14 cryptocurrency exchanges have been robbed, suffering a total loss of $882 million," Group-IB says. "

At least five attacks have been linked to the North Korean hackers from [the] Lazarus state-sponsored group. Their victims were mainly located in South Korea."

Beyond Lazarus, Group-IB says the most prominent cryptocurrency exchange hackers appear to be Russia's three most active cybercrime groups: Silence, MoneyTaker and Cobalt.

Initial coin offerings have also been under fire from hackers (see How Hackers Are Targeting Initial Coin Offerings). 

"Approximately 56 percent of all money siphoned off from ICOs were stolen through phishing attacks," Group-IB says.

Bitcoin Still King

Despite the increased criminal interest in virtual currencies such as monero and dash, which promise greater privacy and can be mined - including on malware victims' systems - without having to use highly specialized equipment, Europol says bitcoin "remains the predominant cryptocurrency encountered in cybercrime investigations" (see Criminals Hide 'Billions' in Cryptocurrency, Europol Warns).

"Bitcoin is still the cryptocurrency of choice for criminals, despite other cryptocurrencies gaining market share," Woodward says.

Users of bitcoin who want to make it difficult for investigators to "follow the money" have sometimes relied on tumbling services designed to transfer cryptocurrencies between many different accounts to obscure their origin and destination.

But the latest generations of cryptocurrencies are designed with these types of capabilities built in. "It is likely that high-privacy cryptocurrencies will make the current mixing services and tumblers obsolete," Europol says.

Is Deutsche Bank CRASHING?! - Bank Is Not Long For This World

Fragile Banking System ? We do not agree that crypto is the answer like psuedo leftists and rightists - what about community banks ? Deutsche Bank can go but there are a 1000 Volksbanks that support productive investment  and are not extractive like the Megabanks !

Capitalist Banks must be replaced by Community Banks and Regional  Public Banks with Public Service mandates.

The nearer banks are to their local communities the better they can serve them - especially when the local community controls the bank.

‘China’s Economy Is a House of Cards,’ Will Collapse on Its Own

A debate that shows the political illiteracy of the interviewer - Stockman has some intelligence but that is limited by his anti communist paradigm.

Peter Schiff - Market Madness: Dow Jones Downturn! The Crisis will End Worse than It Began

Rational Thought on the Crisis not just a correction

Stock Market Outlook - Day or Days of the Dead Cat Bounce

Nearing The Pause That Will Not Refresh? by Danielle Park

Each business cycle, central banks optimistically hike rates with the stated goal of slowing the economy enough to prevent it from overheating and not so much as to trigger a recession. They have failed in this goal 12 of the last 13 tightening cycles, with a recession and stock market swoon following all but one in the mid-1990s.

After the last two recessions in 2001 and 2008, the US Fed left rates successively lower for longer which enabled debt and financial leverage to balloon to record levels. This has made the economy and financial system less stable and more vulnerable to steeper correction phases than historical average. We are now facing the third 'correction' phase of the past 20 years, and it is set up to be the most extreme yet, just as the largest population of asset owners are tumbling into the over age 65 category in record numbers. Baby boomers were gifted with fortuitous timing through most of their lives; this next phase will be a harsh payback period for many.

With the global economy already slowing and stock and corporate debt markets already swooning, it is likely that the US Fed will once more signal a 'surprise' pause in its rate-hiking plans in 2019. In Canada, with slumping home prices, stocks and oil already spreading financial distress, it is likely that the Bank of Canada will pause in its tightening cycle even sooner than the US Fed. But this will be no magic fix.

As shown in the above the chart of Fed tightening and easing cycles since 1998 from my partner Cory Venable, by the time central banks pause, a recession is already likely to be imminent and the stock market already in the throes of a deep bear market. By the time policymakers move to ease once more, financial damage will already be far and wide.

SOURCE:
https://seekingalpha.com/article/4223861-nearing-pause-will-refresh

The Market Bear Masha will Smash Ya

BEWARE THE FULL BLOWN BEAR 

The Facebook Crisis ?

The Market Is 'Full Blown Bear,' Says Jim Cramer

While the market can go up or down - we are in a new period of slow descent into full blown recession by 2020

Recent Scholarship on Eric Williams’ Capitalism and Slavery by Teresa Frizell

   
In 1944, Eric Williams wrote a book that was either quickly praised or quickly dismissed.  However, initial reaction underestimated the impact of the text.  50 years later, the assertions presented in Capitalism and Slavery are still debated by historians when discussing the impact of slavery on the Industrial Revolution.

   In one of two main theses, “Capitalism and Slavery” asserted that triangular trade was instrumental in developing the capital used in launching Britain’s industrial revolution.  In 1975, Roger Anstey refuted that premise and, in fact, felt that the Williams text had been unequivocally disproved.  Yet in 1997, Robin Blackburn published a text supporting Williams.  The question of slavery’s impact on the industrial revolution is still at large and, in the words of one wise professor, “It won’t be solved with numbers.”  Nonetheless, it is worthwhile to examine some of the writings on the topic in an attempt to elucidate to the reader some of the main points of the debate.

   Williams gave as his evidence connections between slave traders or West Indian sugar planters and three economic sectors crucial to the industrial revolution: banking, heavy industry, and insurance.  In Liverpool especially, slave traders founded major banks or those associated with the trade.  Men who had accumulated their capital in the African trade in 1753 founded Heywood Bank. The Leylands were another family of slave traders turned bankers.  The Barclays traded slaves in 1756 before establishing their bank, one of the largest in Britain today.  Banks were also established in Manchester and Glasgow, both closely connected with the cotton trade, and hence with slavery, and in Bristol and London, both competing with Liverpool before the 1770’s for control of the slave trade.

   In heavy industry, some of the capital, which supported metallurgical industries, came directly from the triangular trade. The team of Boulton and Watt is a well-known example, receiving advances from Lowe, Vere, Williams, and Jennings.  These men had ships trading with the West Indies and used the profits to invest in the steam engine; their desire was to have it speed up sugar processing. 
   Triangular trade was also associated with insurance companies.   The famous Lloyds of London started as a coffee shop where escaped slaves could be returned and claimed; Lloyds also offered insurance against fires in the West Indies from the early days of insurance.

Williams’ style and loose connections have been widely condemned as anecdotal by economic historians. In 1972, Roger Anstey published a response to Capitalism and Slavery in his book, The Slave Trade and British Abolition. Anstey makes extensive use of economic calculations in order to prove his argument that the slave trade did not have a major impact on the industrial revolution. Anstey calculates that profits from the slave trade came to about nine percent of the amount invested.  In real money terms, this would be slightly over nine million pounds total profit in the second half of the 17th century.  The annual average came to about 200,000 pounds.  By 1800, the national ratio of investment to national income was about seven percent; national income was about 180 million pounds, so national investment was 12.6 million pounds per year.  If slave-trading profits followed other investment tendencies, meaning seven percent was invested, the slave trade profits that were invested totaled 14,000 pounds per year, which is 0.11% of the total national investment.  In the unlikely situation that all slave trade profits were invested, they would account for 1.59% of total national investment.

      Anstey continued by focusing in on industrial investments.  Industrial investments accounted for about 20% of total national investments at this time; slave trade investments would have accounted for .56% of all industrial investments.  If you assume that all slave trade profits were invested directly into industrialism, they would have accounted for 7.94% of the total.  According to Anstey, these numbers soundly disprove Williams’ thesis that the triangular trade was the springboard to industrialism.

      Williams’ thesis did not rest solely on the contribution of slave trade capital. Other major contributors of the triangular trade (now broadened and more often known as the Atlantic System) were the sugar colonies of the West Indies.  According to Williams, mercantilism stimulated industrial development. Drescher, in his reassessment of Capitalism and Slavery, does not agree with the slave trade’s premier importance in accumulating industrial capital.  He does however state that among historians there is a “broadening consensus on slavery’s decisive role in the creation of the Atlantic economic system.”  Without slavery, there would have been few to no sugar plantations.  These plantations were a vital part of Britain’s industrialization by providing an outlet for manufactured goods, as there was little to no manufacturing on the islands.

      In The Problem of Slavery in the Age of Revolution Davis writes that 60-70 percent of all slaves who survived the middle passage toiled in the sugar plantations of the West Indies.   These societies had very unbalanced economies, with few people interested in the islands’ long-term welfare. West India had extremely high absentee rates, and most white men who lived there did so with a hope to leave rich after 20 years. There was no real development of resources other than sugar, tobacco, and indigo because the residents were not trying to create a society; they were merely trying to make money.  By the turn of the 19th century, the West Indies were a sinking ship; a Parliamentary protection hid the problems of increasing costs, over-investment in slaves, and high debt.  According to Davis, this society was supported by and supported the Industrial Revolution.

      Joseph Inikori in “Slavery and the Development of Industrial Capitalism in England,” argued that from the mid-fourteenth through the mid-fifteenth centuries, population growth was rapid enough that Britain could move towards a capitalist economy: not all workers were needed to grow food to sustain the population. By 1650, the still-rapid population growth demanded employment outside of agriculture.  The growth of overseas trade provided that employment. Exports soon became the largest contributors to the move towards a capitalist England.  Inikori gives as an example the change in manufactured exports from 1700 to 1811. In 1700 manufacturing, mining, and building made 18.5 million pounds, of which 3.8 million were exports and 14.7 million were consumed at home. In 1811, the same three industries made 62.5 million pounds, of which 28.2 million were exports and 34.3 million were for home consumption.  This means that the percentage of mining, manufactured, and building products that was exported rose from 20 percent to 45 percent in the course of the 18th century.  These exports largely went to the West Indian colonies.  Without such a high rate of exports, industrialization would have been considerably slower.

      Recent studies have begun to look at the Atlantic system as a whole, and how it contributed to the rise of industrialization in Britain.  To those unfamiliar, the Atlantic system is the integration of the African and Atlantic slave trades, all Atlantic colonies (including British, Dutch, Portuguese, and Spanish colonies), and Europe, remembering that capital traveled freely through trade among all parts of the system.  Williams alluded to this when he spoke of “triangular trade.”  Recent scholars have elaborated on the concept of triangular trade; hence the new name, the Atlantic System.

      Using new numbers computed by Thomas and Ward, along with Anstey’s percentages, Robin Blackburn has recently re-computed the likely contribution of Atlantic system capital to the Industrial Revolution. He calculates the figures for basic profits from the Atlantic system in 1770 as follows (in pounds):

Thomas/Ward plantation profits: 1,307,000
Anstey slave trade profits: 115,000
West Indian trade: 1,075,000
African Trade: 300,000
Total: 2,797,000

      Blackburn calculates that the total profits earned from the Atlantic system are almost three million pounds.  His upper estimate is 4,336,000 pounds.  Blackburn goes on to say that there is reason to believe that re-investment of these profits was quite high, between 30 and 50 percent.  This means that Atlantic System profits could account for one-half to four-fifths of the gross fixed capital needed to finance a major industrial undertaking.  One major undertaking in this time was canal building; merchants and bankers and manufacturers contributed 36 percent of the finances used to build canals in 18th century.  Those are the very people involved in trade within the Atlantic. Even following Anstey’s figures, Blackburn has shown that the Atlantic system did have a likely impact on financing the industrial revolution.  It is not as high as Williams claimed, nor was it as low as Anstey rebutted.

      Blackburn used the framework of primitive accumulation to prove the import of the Atlantic system to the Industrial Revolution.  According to Marx, capitalism first required a phase of “primitive accumulation,” a period in which people acquired capital, which they were then able to invest.  Adam Smith called this phase “previous accumulation.”  Blackburn believes the West Indies provided a state of “extended primitive accumulation,” meaning the West Indies offered an opportunity to constantly acquire capital to invest.  This allowed Britain to produce more than its mainland population and agricultural capabilities would allow. Blackburn cites Davis’ figures on exports by location, finding that exports to the Atlantic colonies were 43 percent from 1784-86 and 57 percent from 1806-08. To further his argument, he cites Crafts’ newest numbers, which show that the rise of exports contributed 56.3 percent of the total rise in industrial output from 1700-60, and 46.2 percent from 1780-1800.  This offers convincing evidence of the importance of the Atlantic system in promoting the Industrial Revolution.

      Hobsbawm extends the import of trade to include Asian trade.  His “dependent” economies consist of formal colonies -- such as the West Indies, points of trade that were dominated by Western Europe -- such as China or Japan, and advancing economies -- such as Eastern Europe.  Hobsbawm goes beyond the Atlantic system, but still includes it in his research.  According to Hobsbawm, these dependent economies offered the “spark” needed to ignite the Industrial Revolution.  He offers figures for the increase in output for home and export industries.  While home industries increased by seven percent between 1700-1750 and eight percent between 1750-1770, export industries increased by 77 and 80 percent in those time periods respectively. According to Hobsbawn, export industries were able to surge ahead of domestic industries because of their tendencies to capture foreign markets and destroy foreign competition.  Therefore, these numbers are not completely accurate, as some of them include goods manufactured in other countries that have been taken over.

      In his recent book, Pomerantz supports the conclusion that colonies were a vital ingredient in the Industrial Revolution.  He compares European economies to those of China and Japan. In the mid-18th century, the economies were very similar. Europe was able to surge ahead industrially not through internal advantages but through external ones. According to Pomerantz, these were the extra markets and “ghost acreage” provided by Atlantic colonies.

   Prior to and since the publication of Capitalism and Slavery, historians have given many arguments for the uniqueness of Britain’s Industrial Revolution.  Many of these are linked to the sometimes-called Agricultural Revolution, which started earlier and exponentially increased, the food available in Britain at a lower labor cost.  Others feel it was the abundance of coal that gave Britain’s its edge.  Still others would look to the growth of home markets to explain.  It is impractical to ignore this matter of slavery; British colonies were an obvious source of wealth at this time, and slaves made the wealth in many of those colonies.  We may never have the exact figures, nor may we see the intricate linkages, but it is obvious that, without slavery, the Industrial Revolution would not have been the British advantage it was.

Works cited:

Anstey, Roger.  The Atlantic Slave Trade and British Abolition.  Macmillan, 1975.
Blackburn, Robin. The Making of New World Slavery.  Verso Press, 1997.
Clemens, Paul.  “The Rise of Liverpool,” Economic History Review, Vol. 29 No. 2 (May 1976) pp. 211-225.
Davis, David. The Problem of Slavery in the Age of Revolution.   Cornell University Press, 1975.
Drescher, Seymour. Econocide: British Slavery in the Era of Abolition. University of Pittsburgh Press, 1977.
Drescher, Seymour. “Capitalism and Slavery after 50 years.” From Slavery to Freedom.  New York University Press, 1997.
Inkori, Joseph.  “Slavery and the development of Industrial Capitalism in England.” Journal of Interdisciplinary History, Vol. 17 No 4 (Spring 1987) 771-793.
William, Eric.  Capitalism and Slavery.  University of North Carolina Press, 1944.

George Soros 10 Years after the Crash

George Soros has become demonized to such an extent that hearing him speak here is a very necessary corrective - and why we publish him   - we fundamentally disagree with his liberal politics based on Karl Popper and the book Open society and it Enemies (It is a factually bad book on both Hegel and Marx)  but we do not agree with the right who just see him as some mastermind of all evil - he is a reformist capitalist who wants to save the system these right wing people cherish - we do not want to save capitalism but prepare the transition to socialism and George Soros opposes us in that aim and funds reformist leftists to prevent that transition.

We are particularly interested in his comments on China and Zhu Rongji and his criticism of Xi Xingping which does not surprise us but certainly was not public information.

Zhu Rongji was the practitioner par excellence of Deng Xiaoping Economic Thought and maybe found Xi Xingping Thought a bit much to swallow.

How Economics Became a Cult

Hyman Minsky - Minskyan Economist Steve Keen .

World Dumping US Debt & Hoarding Gold: De-dollarization Explained

Political Economy Research says the Trump Administration is contributing to the speed up of De- dollarization by its Sanctions and Trade War policies - Trump is making the dollar symbol of US power less great - so making US less great should be Trump slogan not MAGA.

All of this de-dollarization is taking place with confidence in US markets collapsing under the rising debt.

External and internal dynamics are pushing US Economy in a depression the bottom of which will be reached in 2020.

Trump Tanks the market with New China 257 billion of Tariffs in December

The Smart Money goes for the Exit - The Dumb Guy is President

A Deeping Crisis of Capitalism by Richard D Wolff

US market meltdown wipes out 2018 gains as Trump trade wars take toll on stocks - Beyond the Crisis is Beyond Capitalism

POLITICAL ECONOMY RESEARCH says were are entering the next major economic downturn since 2008 it will be long and drawn out reaching the bottom by 2020.

Interesting that JP Morgan Chase see the economic depression by 2020 but cannot see we are already entering into it now.

The options of capitalism in this crisis are very limited and we do not expect a re- run of post 2008 fixes - so the crisis will be deeper and more long lasting.

The political consequences of this crisis will be in inability of capitalism to make any democratic concessions in fact as we have pointed out capitalism and democracy can no longer co-exist and mythology of the market will be brutally exposed.

Hence fascism in its new 21st century forms will be capitalism's "last ditch". ( "last ditch" was Marx on Henry George)

It is the inability of capitalism to be managed by the liberal bourgeoisie that leads to fascism in this century and not the threat of socialism like in 20th century.

THE IMPORTANCE OF THE POLITICAL ECONOMY OF A POST CAPITALIST - SOCIALIST WORLD HAS NEVER BEEN MORE  IMPORTANT AND ITS FURTHER DEVELOPMENT AN URGENT NECESSITY - IF WE ARE TO GET TO A WORLD BEYOND THIS CRISIS.


American equities faced another major selloff on Wednesday. It was one of the worst trading sessions for US stocks in years, erasing all gains seen in 2018. Analysts name President Donald Trump’s trade wars as one of the reasons.

The Dow Jones Industrial Average fell 608 points, or 2.4 percent, to 24,583.42. The S&P 500 plunged 84.59 points, or 3.1 percent, to 2,656.10, marking sixth straight losing session.
Meanwhile, the Nasdaq Composite Index dipped 329.14 points, or 4.4 percent, to 7108.4.

US economy about to collapse, taking down dollar & American standard of living – Peter Schiff

The tech-heavy index is more than 10 percent below its August 29 all-time high, entering the correction territory. Wednesday was the worst day for the Nasdaq since August 18, 2011.

“What is happening on Wall Street is hardly surprising. The US is implementing a sharp monetary policy and is waging foreign trade wars against everyone. In such conditions it becomes harder and harder to grow. 

There is still room for correction in the US, so we are waiting for the development of the situation,” Roman Blinov, head of analytical department at International Financial Center said in an email to RT.

The analyst also noted corporate earnings disappointment in the US, a growing conflict over budget spending between Italy and the European Union, and growing crisis around oil power Saudi Arabia over the killing of journalist Jamal Khashoggi.

The selloff on Wall Street dragged down some global markets as well. The standout loser, Thursday, was Japan’s Nikkei index, which lost 3.72 percent. 

In China, Shanghai composite traded slightly higher at 0.5 percent, while stock indices in Europe were either trading flat or showing modest gains.

SOURCE : RT

Lewis Lapham: Can America Survive the Rule of a “Stupified Plutocracy”?

A critical look at China’s One Belt, One Road initiative by Martin Hart-Lansberg

A critical look at China’s One Belt, One Road initiative
Sunday 21 October 2018, by Martin Hart-Landsberg

China’s growth rate remains impressive, even if on the decline. The country’s continuing economic gains owe much to the Chinese state’s (1) still considerable ability to direct the activity of critical economic enterprises and sectors such as finance, (2) commitment to policies of economic expansion, and (3) flexibility in economic strategy. It appears that China’s leaders view their recently adopted One Belt, One Road Initiative as key to the country’s future economic vitality. However, there are reasons to believe that this strategy is seriously flawed, with working people, including in China, destined to pay a high price for its shortcomings.

Chinese growth trends downward

China grew rapidly over the decades of the 1980s, 1990s, and 2000s with production and investment increasingly powered by the country’s growing integration into regional cross-border production networks. By 2002 China had become the world’s biggest recipient of foreign direct investment and by 2009 it had overtaken Germany to become the world’s biggest exporter.

Not surprisingly, the Great Recession and the decline in world trade that followed represented a major challenge to the county’s export-oriented growth strategy. [1]

The government’s response was to counter the effects of declining external demand with a major investment program financed by massive money creation and low interest rates. Investment as a share of GDP rose to an all-time high of 48 percent in December 2011 and remains at over 44 percent of GDP. [2]

But, despite the government’s efforts, growth steadily declined, from 10.6% in 2010 to 6.7% in 2016, before registering an increase of 6.9% in 2017. See the chart below. [3] Current predictions are for a further decline in 2018. [4]

Beginning in 2012, the Chinese government began promoting the idea of a “new normal”—centered around a target rate of growth of 6.5%. The government claimed that the benefits of this new normal growth rate would include greater stability and a more domestically-oriented growth process that would benefit Chinese workers.

However, in contrast to its rhetoric, the state continued to pursue a high grow rate by promoting a massive state-supported construction boom tied to a policy of expanded urbanization. New roads, railways, airports, shopping centers, and apartment complexes were built.

As might be expected, such a big construction push has left the country with excess facilities and infrastructure, highlighted by a growing number of ghost towns. As the South China Morning Post describes: [5]

Six skyscrapers overlooking a huge, man-made lake once seemed like a dazzling illustration of a city’s ambition, the transformation of desert on the edge of Ordos in Inner Mongolia into a gleaming residential and commercial complex to help secure its future prosperity.

At noon on a cold winter’s day the reality seemed rather different.

Only a handful of people could be seen entering or exiting the buildings, with hardly a trace of activity in the 42-storey skyscrapers.

The complex opened five years ago, but just three of its buildings have been sold to the city government and another is occupied by its developer, a bank and an energy company. The remaining two are empty–gates blocked and dust piled on the ground.

Ordos, however, was just one project in China’s rush to urbanize. The nation used more cement in the three years from 2011 to 2013 than the United States used in the entire 20th century. .
 . .
Other mostly empty ghost towns can be found across China, including the Yujiapu financial district in Tianjin, the Chenggong district in Kunming in Yunnan and Yingkou in Liaoning province.

This building boom was financed by a rapid increase in debt, creating repayment concerns. Corporate debt in particular soared, as shown below, but local government and household debt also grew substantially.

The boom also caused several industries to dramatically increase their scale of production, creating serious overcapacity problems. As the researcher Xin Zhang points out:

Over the past decade, scholars and government officials have held a stable consensus that “nine traditional industries” in China are most severely exposed to the excess capacity problem: steel, cement, plate glass, electrolytic aluminium, coal, ship-building, solar energy, wind energy and petrochemical. All of these nine sectors are related to energy, infrastructural construction and real estate development, reflecting the nature of a heavily investment-driven economy for China. [6]
Not surprisingly, this situation has also led to a significant decline in economy-wide rates of return. According to Xin Zhang:

despite strong overall growth performance, the capital return rate of the Chinese economy has started to be on a sharp decline recently. Although the results vary by different estimation methods, research in and outside China points out a recent downward trend. For example, two economists show that all through the 1980s and the first half of the 1990s, the capital return rate of the Chinese economy had been relatively stable at about 0.22, much higher than the U.S. counterpart.

However, since the mid-1990s, the capital return rate experienced more ups and downs, until the dramatic drop to about 0.14 in 2013. Since then, the return to capital within Chinese economy has decreased even further, creating the phenomenon of a “capital glut”.

In other words, it was becoming increasingly unlikely that the Chinese state could stabilize growth pursuing its existing strategy. [7] In fact, it appears that many wealthy Chinese have decided that their best play is to move their money out of the country. A China Economic Review article highlights this development:

Since 2015, the specter of capital flight has been haunting the Chinese economy. In that year, faced with the threat of a currency devaluation and an aggressive anti-corruption campaign, investors and savers began moving their wealth out of China. The outflow was so large that the central bank was forced to spend more than $1 trillion of its foreign exchange reserves to defend the exchange rate. [8]


The Chinese government was eventually able to dam up the flow of capital out of its borders by imposing strict capital controls, and China’s balance of payments, exchange rate and foreign currency reserves have all stabilized. But even the largest dam cannot stop the rain; it can only keep water from flowing further downstream. There are now several signs that the conditions that originally led to the first massive wave of capital flight have returned. The strength of China’s capital controls might soon be put to the test.

Chinese leaders were not blind to the mounting economic difficulties. Limits to domestic construction were apparent, as was the danger that unused buildings and factories coupled with excess capacity in key industries could easily trigger widespread defaults on the part of borrowers and threaten the stability of the financial sector. Growing labor activism on the part of workers struggling with low salaries and dangerous working conditions added to their concern.

However, despite earlier voiced support for the notion of a “new normal” growth tied to slower but more worker-friendly and domestically-oriented economic activity, the party leadership appears to have chosen a new strategy, one that seeks to maintain the existing growth process by expanding it beyond China’s national borders: its One Belt and One Road Initiative.

The One Belt, One Road Initiative

Xi Jinping was elected President by the National People’s Congress in 2013. And soon after his election, he announced his support for perhaps the world’s largest economic project, the One Belt, One Road Initiative (BRI).

However, it was not until 2015, after consultations between various commissions and Ministries, that an action plan was published and the state aggressively moved forward with the initiative.

The initial aim of the BRI was to link China with 70 other countries across Asia, Africa, Europe, and Oceania. There are two parts to the initial BRI vision: The “Belt”, which seeks to recreate the old Silk Road land trade route, and the “Road,” which is not actually a road, but a series of ports creating a sea-based trade route spanning several oceans.

The initiative was to be given form through a number of separate but linked investments in large-scale gas and oil pipelines, roads, railroads, and ports as well as connecting “economic corridors.” Although there is no official BRI map, the following provides an illustration of its proposed territorial reach.

One reason that there is yet no official BRI map is that the initiative has continued to evolve. In addition to infrastructure it now includes efforts at “financial integration,” “cooperation in science and technology,”, “cultural and academic exchanges,” and the establishment of trade “cooperation mechanisms.”

Moreover, its geographic focus has also expanded. For example, in September 2018, Venezuela announced that the country “will now join China’s ambitious New Silk Road commercial plan which is allegedly worth U.S. $900 billion.” Venezuela follows Uruguay, which was the first South American country to receive BRI funds. [9]

Xi’s initiative did not come out of the blue. As noted above, Chinese economic growth had become ever more reliant on foreign investment and exports. And, in support of the process, the Chinese government had used its own foreign investment and loans to secure markets and the raw materials needed to support its export activity. In fact, Chinese official aid to developing countries in 2010 and 2011 surpassed the value of all World Bank loans to these countries.

 China’s leading role in the creation of the BRICs New Development Bank, Asia Infrastructural Investment Bank and the proposed Shanghai Cooperation Organization Bank demonstrates the importance Chinese leaders place on having a more active role in shaping regional and international economic activity.

But, the BRI, if one is to take Chinese state pronouncements at their word, appears to have the highest priority of all these efforts and in fact serves as the “umbrella project” for all of China’s growing external initiatives. In brief, the BRI appears to represent nothing less than an attempt to solve China’s problems of overcapacity and surplus capital, declining trade opportunities, growing debt, and falling rates of profit through a geographic expansion of China’s economic activity and processes.

Sadly this effort to sustain the basic core of the existing Chinese growth model is far from worker friendly. The same year that the BRI action plan was published, the Chinese government began a massive crackdown on labor activism. For example, in 2015 the government launched an unprecedented crackdown on several worker-centers operating in the southern part of the country, placing a number of its worker-activists in detention centers. [10]

This move coincided with renewed repression of the work of worker-friendly journalists and activist lawyers. The Financial Times noted that these actions may well represent “the harshest crackdown against organized labor by the Chinese authorities in two decades.”

And attacks against workers and those who support them continue. A case in point: in August of this year, police in riot gear broke into a house in Huizhou occupied by recent graduates from some of China’s top universities who had come to the city to support worker organizing efforts. Some 50 people were detained; 14 remain in custody or under house arrest. [11] [12]

A flawed strategy

To achieve its aims, the BRI has largely involved the promotion of projects that mandate the use of Chinese enterprises and workers, are financed by loans that host countries must repay, and either by necessity or design lead to direct Chinese ownership of strategic infrastructure. For example, the Center for Strategic Studies recently calculated that approximately 90% of Belt and Road projects are being built by Chinese companies. [13]

While BRI investments might temporarily help sustain key Chinese industries suffering from overcapacity, absorb surplus capital, and boost enterprise profit margins, they are unlikely to serve as a permanent fix for China’s growing economic challenges; they will only push off the day of reckoning.

One reason for this negative view is that in the rush to generate projects, many are not financially viable. Andreea Brinza, writing in Foreign Policy, illustrates this problem with an examination of European railway projects:

If one image has come to define the Belt and Road Initiative (BRI), China’s ambitious, amorphous project of overseas investment, it’s the railway. Every few months or so, the media praises a new line that will supposedly connect a Chinese city with a European capital. Today it’s Budapest. Yesterday it was London. They are the newest additions to China’s iron network of transcontinental railway routes spanning Eurasia. But the vast majority of these routes are economically pointless, unlikely to operate at a profit, and driven far more by political need than market demand. . . . [14]

Chongqing-Duisburg, Yiwu-London, Yiwu-Madrid, Zhengzhou-Hamburg, Suzhou-Warsaw, and Xi’an-Budapest are among the more than 40 routes that now connect China with Europe. Yet out of all these, only Chongqing-Duisburg, connecting China with Germany, was created out of a genuine market need. The other routes are political creations by Beijing to nourish its relations with European states like Poland, Hungary, and Britain.

The Chongqing-Duisburg route has been described as a benchmark for the “Belt,” the part of the project that crosses Eurasia by land. (The “Road” is a series of nominally linked ports with little coherence.) But paradoxically enough, the Chongqing-Duisburg route was created before Chinese President Xi Jinping announced what has become his flagship project, then “One Belt, One Road” and now the BRI. It was an existing route reused and redeveloped by Hewlett-Packard and launched in 2011 to halve the time it took for the computing firm’s laptops to reach Europe from China by sea. . . .
Unlike the HP route, in which trains arrived in Europe full of laptops and other gadgets, the containers on the new routes come to Europe full of low-tech Chinese products—but they leave empty, as there’s little worth transporting by rail that Chinese consumers want. With only half the route effectively being used, the whole trip often loses money. For Chinese companies that export toys, home products, or decorations, the maritime route is far more profitable, because it comes at half the price tag even though it’s slower.

The Europe-China railroads are unproductive not only because of the transportation price, as each container needs to be insulated to withstand huge temperature differences, but also because Russia has imposed a ban on both the import and the transport of European food through its territory. Food is one of the product categories that can actually turn a profit on a Europe-China land run—without it, filling China-bound containers isn’t an easy job.

For example, it took more than three months to refill and resend to China a train that came to London from Yiwu, although the route was heavily promoted by both a British government desperate for post-Brexit trade and a Chinese one determined to talk up the BRI.

Today, most of the BRI’s rail routes function only thanks to Chinese government subsidies. The average subsidy per trip for a 20-foot container is between $3,500 and $4,000, depending on the local government. For example, Chinese cities like Wuhan and Zhengzhou offer almost $30 million in subsidies every year to cargo companies. Thanks to this financial assistance, Chinese and Western companies can pay a more affordable price per container.

Without subsidies, it would cost around $9,000 to send a 20-foot container by railway, compared with $5,000 after subsidies. Although the Chinese government is losing money on each trip, it plans to increase the yearly number of trips from around 1,900 in 2016 to 5,000 cargo trains in 2020.

Another reason to doubt the viability of the BRI is that a growing number of countries are becoming reluctant to participate because it means that they will have to borrow funds for projects that may or may not benefit the country and/or generate the foreign exchange necessary to repay the loans. As a result, the actual value of projects is far less than reported in the media. Thomas S. Eder and Jacob Mardell make this point in their discussion of BRI activities with 16 Central and Eastern European countries (the 16+1):

Numbers on Chinese investment connected to the Belt and Road Initiative tend to be inflated and misleading. Only a fraction of the reported sums is connected to actual infrastructure projects on the ground. And most of the projects that are underway are financed by Chinese loans, exposing debt-ridden governments to additional risks. . . . [15]

Depending on the source, BRI is called either a 900 billion USD or an up to 8 trillion USD global initiative. Yet only a fraction of the lower number is backed up by actual projects on the ground. BRI investments in 16+1 countries are similarly plagued by confusion over figures and a tendency towards inflation.

Media reports often arrive at their figures for the sum of “deals announced” by collating planned projects based on vague Memoranda of Understanding (MoUs) and expressions of interest by Chinese companies. Many parties share an interest to push Belt and Road-related figures upwards: local officials in BRI target countries like to impress constituencies, journalists like to capture readers, and Chinese officials are keen to cultivate the hype surrounding BRI.

The Banja Luka–Mlinište Highway in Bosnia Herzegovina, for example, is strongly associated with 16+1 investment. Sinohydro signed a preliminary agreement on implementing the project in 2014, for 1.4 billion USD, and this figure was then widely reported in English-language media.

Four years later, though, final approval for an Export-Import Bank loan financing the highway section was still pending. This highway is actually one of the projects emerging in the region that we have fairly good information on, but the preliminary nature of the agreement is not reflected in media reports on the project.

Also in 2014, China Huadian signed an agreement on the construction of a 500MW power station in Romania, reportedly for 1 billion USD. Talks faltered, appeared to resume in 2017, and there has been no progress reported since. It is unclear whether and when this project will materialize, but it is the sort of “deal” counted by those totting up the value of Chinese investment in 16+1 countries.

 An even larger figure–1.3 billion–was reported in connection with Kolubara B, though it was later claimed that a cooperation agreement with Italian company Edison had already been signed, three years prior to the expression of interest by Sinomach.

Another important point is that Chinese “investment” in the region–and this very clearly emerges from the MERICS database–often refers to concessional loans from Chinese policy banks. This is financing that needs to be paid back, with interest, whether the project delivers commensurate economic benefits or not.

As with Belt and Road projects elsewhere in the world, loans made by Beijing to CEE countries create potential for financial instability. Smaller countries, which might lack the institutional capacity to assess agreements (such as risks associated with currency fluctuation), are particularly vulnerable.
The Bar-Boljare motorway in Montenegro illustrates this point. It is being built by the China Road and Bridge Corporation (CRBC) with an 809 million EUR loan from Exim Bank. The IMF claims that, without construction of the highway, Montenegro’s debt would have declined to 59% of GDP, rather than rising to 78% of GDP in 2019. It warns that continued construction of the highway “would again endanger debt sustainability.”

The motorway is typical of many BRI projects in that it is being built by a Chinese state-owned company, using mostly Chinese workers and materials, and with a loan that the Montenegrin government must pay back, but which a Chinese policy bank will earn interest on. On top of this, Chinese contractors working on the highway are exempt from paying VAT or customs duties on imported materials.

Because of these investment requirements, many countries are either canceling or scaling back their BRI projects. The South China Morning Post recently reported that the Malaysian government decided to:

Cancel two China-financed mega projects in the country, the US$20 billion East Coast Rail Link and two gas pipeline projects worth US$2.3 billion. Malaysian Prime Minister said his country could not afford those projects and they were not needed at the moment. . . . [16]

Indeed, Mahathir’s decision is just the latest setback for the plan, as politicians and economists in an increasing number of countries that once courted Chinese investments have now publicly expressed fears that some of the projects are too costly and would saddle them with too much debt.
Myanmar is, as Reuters reports, one of those countries:

Myanmar has scaled back plans for a Chinese-backed port on its western coast, sharply reducing the cost of the project after concerns it could leave the Southeast Asian nation heavily indebted, a top government official and an advisor told Reuters.

The initial $7.3 billion price tag on the Kyauk Pyu deepwater port, on the western tip of Myanmar’s conflict-torn Rakhine state, set off alarm bells due to reports of troubled Chinese-backed projects in Sri Lanka and Pakistan, the official and the advisor said. [17]

Deputy Finance Minister Set Aung, who was appointed to lead project negotiations in May, told Reuters the “project size has been tremendously scaled down”
.
The revised cost would be “around $1.3 billion, something that’s much more plausible for Myanmar’s use”, said Sean Turnell, economic advisor to Myanmar’s civilian leader, Aung San Suu Kyi.

A third reason for doubting the viability of the BRI to solve Chinese economic problems is the building political blowback from China’s growing ownership position of key infrastructure that is either the result of, or built into, the terms of its BRI investment activity.

An example of the former outcome: the Sri Lankan government was forced to hand over the strategic port of Hambantota to China on a 99-year lease after it could not repay its more than $8 billion in loans from Chinese firms.

Unfortunately, Africa offers many examples of both outcomes, as described in a policy brief survey of China-Africa BRI activities:

In BRI projects, Chinese SOEs overseas are moving away from ‘turnkey’ engineering, procurement, and construction (EPC) projects, towards longer term Chinese participation as managers and stakeholders in running projects. China Merchants Holding, which constructed the new multipurpose port and industrial zone complex in Djibouti, is also a stakeholder and will be jointly managing the zone, in a consortium with Djiboutian port authorities, for ten years.

Likewise, SOE contractors for new standard gauge railway projects in Ethiopia and Kenya will also be tasked with railway maintenance and operations for five to ten years after construction is completed. . . . [18]

Beyond transportation, the BRI is spurring expansion of digital infrastructure through an “information silk road”. This is an extension of the ‘going out’ of China’s telecommunications companies, including private mobile giants Huawei and ZTE, who have constructed a number of telecommunications infrastructure projects in Africa, but also the expansion of large SOEs such as China Telecoms. China Telecoms has established a new data center in Djibouti that will connect it to the company’s other regional hubs in Asia, Europe, and to China, and potentially facilitate the development of submarine fibre cable networks in East Africa. . .
.
Countries linked to the BRI, including Morocco, Egypt, and Ethiopia, have also been singled out [as] ‘industrial cooperation demonstration and pioneering countries’ and ‘priority partners for production capacity cooperation countries’; these countries have seen a rapid expansion of Chinese-built industrial zones, presaging not only greater trade but also industrial investment from China. . . .

However, the rapid expansion in infrastructure credit that the BRI offers also brings significant risks. Many of these large infrastructure projects are supported through debt -based finance, raising questions over African economies’ rising debt levels and its sustainability. For resource-rich economies, low commodity values have strained government revenues and precipitated exchange rate crises—both of which constrain a government’s ability to repay external borrowing.

In Tanzania, the BRI-associated Bagamoyo Deepwater Port was suspended by the government in 2016 due to lack of funds. The port was originally a joint investment between Tanzanian and Chinese partners China Merchants Holding, which would construct the port and road infrastructure, along with a special economic zone.

While project construction has continued, funding constraints have meant that the government has had to forego its equity stake. This represents a case where African governments may risk losing ownership of projects, as well as the long-term revenues they bring.

Adding to political tensions is the fact that many BRI projects “displace or disrupt existing

communities or sensitive ecological areas.” It is no wonder that China has seen a rapid growth in the number of private security companies that serve Chinese companies participating in BRI projects. In the words of the Asia Times, these firms are:

Described as China’s ‘Private Army.’ Fueled by growing demand from domestic companies involved in the multi-trillion-dollar Belt and Road Initiative, independent security groups are expanding in the country. [19]

In 2013, there were 4,000-registered firms, employing more than 4.3 million personnel. By 2017, the figure had jumped to 5,000 with staff numbers hovering around the five-million mark.

What lies ahead?

The reasons highlighted above make it highly unlikely that the BRI will significantly improve Chinese long-term economic prospects. Thus, it seems likely that Chinese growth will continue to decline, leading to new internal tensions as the government’s response to the BRI’s limitations will likely include new efforts to constrain labor activism and repress wages. Hopefully, the strength of Chinese resistance to this repression will create the space for meaningful public discussion of new options that truly are responsive to majority needs.

Reports from the Economic Front

Footnotes
[1] https://economicfront.wordpress.com/2017/01/09/asias-economic-future/
[2] https://www.nytimes.com/2008/11/09/business/worldbusiness/09iht-yuan.4.17664544.html
[3] https://dailyshotbrief.com/the-daily-shot-brief-august23rd-2018/
[4] https://www.reuters.com/article/us-china-imf/imf-maintains-chinas-2018-gdp-growth-forecast-at-6-6-percent-idUSKCN1IV0I3
[5] https://www.scmp.com/news/china/policies-politics/article/2076346/why-chinas-rush-urbanise-created-slew-ghost-towns
[6] https://www.tandfonline.com/doi/abs/10.1080/14650045.2017.1289371
[7] https://economicfront.wordpress.com/2018/06/05/the-chinese-economy-problems-and-prospects/
[8] https://chinaeconomicreview.com/for-china-the-risk-of-a-second-wave-of-capital-flight-is-now-severe/
[9] https://mronline.org/2018/09/24/venezuelas-maduro-secures-5bn-chinese-loan-joins-beijings-new-silk-road-initiative/#lightbox/0/
[10] https://www.thenation.com/article/chinas-latest-crackdown-on-workers-is-unprecedented/
[11] https://www.ft.com/content/7ae19510-b85e-11e5-b151-8e15c9a029fb
[12] https://www.nytimes.com/2018/09/28/world/asia/china-maoists-xi-protests.html
[13] https://www.merics.org/en/blog/dispute-settlement-chinas-terms-beijings-new-belt-and-road-courts
[14] https://foreignpolicy.com/2017/06/05/chinas-continent-spanning-trains-are-running-half-empty-one-belt-one-road-bri/
[15] https://www.merics.org/en/blog/belt-and-road-reality-check-how-assess-chinas-investment-eastern-europe
[16] https://www.scmp.com/week-asia/opinion/article/2161069/mahathirs-pushback-against-chinese-deals-shows-belt-and-road-plan
[17] https://uk.reuters.com/article/us-myanmar-china-port-exclusive/exclusive-myanmar-scales-back-chinese-backed-port-project-due-to-debt-fears-official-idUKKBN1KN106
[18] https://mronline.org/wp-content/uploads/2018/10/56e44-yunnanbeltandroad-finalversion.pdf
[19] http://www.atimes.com/article/chinas-private-army-prowls-the-new-silk-road/

SOURCE:
https://mronline.org/2018/10/05/a-critical-look-at-chinas-one-belt-one-road-initiative/

http://www.internationalviewpoint.org/spip.php?article5754

Destroying the Myths of Market Fundamentalism

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