IMF & World Bank Ready Global Currency Reset 2020 »Reset Will Be Money Printing & Debt - financialanalysis

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Monday, January 6, 2020

IMF & World Bank Ready Global Currency Reset 2020 »Reset Will Be Money Printing & Debt

Debt will kill the global economy. But it seems no one cares.Warnings from the IMF and World Bank have been dismissed. But even if they are wrong, a demographic crisis looms.The warning signs are clear. Debt is rising on every continent and especially in the business sector, which has spent the past decade ramping up its borrowing to previously unheard-of levels.
Last October, the International Monetary Fund said that almost 40% of the corporate debt in eight leading countries – the US, China, Japan, Germany, Britain, France, Italy and Spain – would become so expensive during a recession that it would be impossible to service. In other words, tens of thousands of businesses, employing millions of people, would have gambled with high levels of borrowing and lost, making themselves insolvent.
Worse, the IMF said the risks were “elevated” in eight out of 10 countries that boasted systemically important financial sectors, adding that this situation was a repeat of the years running up to the last financial crisis.
Last month, the World Bank joined in. It said emerging-market and developing economies (EMDEs) had pushed their borrowing to a record $55 trillion (£42tn) in 2018.
Unlike the richer nations already mentioned, the 100 EMDEs across Africa, Asia and South America covered by the report were affected by rising private-sector debt coupled with higher government borrowing. And this extra state borrowing is not only larger, it has also changed in character. First, it has gone from being largely directed to investment spending to, more recently, being used simply to cope with the costs of health, education and welfare. Second, it is being more commonly borrowed from international investors hungry to lend developing countries cash at, relatively speaking, sky-high rates of interest.
There is little evidence that anyone is paying any attention to the dire misgivings expressed by either organisation. This year, the US S&P 500 stock market resumed its long-term (100-year) upward trend following a near 200% increase since 2010. Likewise, the German Dax has soared over the past 10 years from 5,500 to over 13,000 while the Paris CAC 40 has almost doubled to 6,000.
Britain’s main market in shares has struggled to make any headway over the past three years while Brexit uncertainty dominated. Yet the FTSE 100 shows a gain from less than 4,000 in 2009 to 7,600 today.
Some analysts have argued that the IMF and World Bank are over-cooking their analysis after missing the last financial crash – seeing danger around every corner. Others dismiss them as archaic remnants of the postwar consensus that fail to understand how the global economy has entered a new phase, one that keeps stock markets humming along and bad recessions at bay.
Without higher interest rates, everyone can keep merrily borrowing
In the short term at least, the optimists could be right. And that is largely down to the actions of the US central bank, which was on course to repeat the mistake of 2005-07, when it matched rising debt levels (especially in sub-prime mortgage loans) with rising interest rates, triggering the kind of financial crash that the IMF and World Bank now fear is around the corner. This time, the Federal Reserve retreated after pushing base rates to almost 2.5% – still well short of the pre-crash normality of 4%-5%, but higher than almost everywhere else. After three rate cuts last year, the US economy starts 2020 with the base rate back in a range between 1.5% and 1.75%.
Without higher interest rates, everyone can keep merrily borrowing. And when, for most businesses, borrowing rates remain below their potential income growth rate – even when that is lacklustre – there is not the usual imperative to boost growth through investment in order to afford higher debt repayments.
But really, this is a back-to-front way of discussing the issue. Most of the problems afflicting the global economy relate to a lack of demand for goods and services, at least on average, compared with the years prior to the 2008 crash. And much of the weak demand relates to our ageing populations, which, in the main, focus more on storing up savings for retirement than on spending.
They are also in the habit of voting for governments that promise to keep taxes low and property prices high, allowing them to accumulate even more wealth. Donald Trump and Boris Johnson fit that bill.
Through their pensions and private investments they treat companies like cash machines, demanding a higher dividend every six months. Much of the borrowing by companies has been to pay these dividends, not to invest.
Baby boomers will pretty much all have retired by the end of this new decade, so most will have stopped investing and just be withdrawing investment funds. And it is this turn of the wheel of fortune that will wreck the global economy – if the accumulation of debt and the climate crisis haven’t got there first.
Congress Has A New Year’s Resolution: Destroy Competition To The US Dollar.Are you ready for this week’s absurdity? Here’s our Friday roll-up of the most ridiculous stories from around the world that are threats to your liberty, your finances, and your prosperity.
Professor Blames Private Property for California Wildfires
A public takeover of utility companies is not enough, according to Kian Goh, Professor of Urban Development at UCLA.
In order to combat California wildfires, we need to abandon “aspirations of home ownership, and belief in the importance of private property.”
Fueled by cheap energy– and of course the ever-present racism of the white middle-class– people expanded beyond cities, building little tinder-box neighborhoods into the forests.
Goh says that, “Expansionist, individualist, and exclusionary patterns of housing became synonymous with freedom and self-sufficiency.”
Ah yes, it’s not so hard to link the desire for freedom and self-sufficiency with every known evil on earth. You’re even responsible for burning down California.
But Urban Planners like Kian Goh would be happy to step in, and tell us how our lives should be designed.
For the greater good, we must collectivize and live on communal (i.e. government controlled) land.
Just a reminder– parents across the country pay top dollar each year so people like Professor Goh can teach their children.Update: New York Man finally has his hemp back
In Early November, Oren Levy had his shipment of legal hemp confiscated by the New York Police. They even bragged about the “drug bust” on social media.
Too bad it was perfectly legal. Levy even had the documentation to prove it, included in every box of the shipment.
But police still lured Levy’s brother to the department under the guise that he could pick up the shipment, and arrested him.
After almost two months, and nearly destroying Levy’s perfectly legal CBD oil business, charges were dropped. The shipment was returned– though in a dry and deteriorated condition.
Levy is now suing the NYPD, the City of New York, and possibly FedEx for alerting the authorities in the first place.
Levy broke the good news in a Tweet and Instagram post.
Congress has a New Year’s Resolution: Destroy Facebook’s Libra Token
Two bills that the US Congress will consider this year seem aimed specifically at preventing Facebook from rolling out it’s digital token Libra.
One is called the “Keep Big Tech Out Of Finance Act.” It would ban “large platform utilities” from being, or being affiliated with, a financial institution.
It would also not allow large platforms to create or “operate a digital asset that is intended to be widely used as medium of exchange, unit of account, store of value, or any other similar function.”
Violators would be fined $1 million per day.
The other bill is called the “Managed Stable Coins are Securities Act.”
Libra is intended to be a “stable coin” which is a digital currency tied to the value of existing currencies.
This bill would make it law that Libra would be considered a security, like a stock or bond, as opposed to a currency, like the dollar or Swiss franc.
Sounds like the US government doesn’t want any competition with their Federal Reserve Notes.Gig workers’ big win in California? Being fired.
In September 2019, the media company Vox ran the headline, Gig workers’ win in California is a victory for workers everywhere.
They were referring to a new law in California which classified gig workers and contractors as employees.
The story was that by classifying workers as contractors instead of employees, companies like Uber and Lyft got away with not providing employee benefits required under California law.
Then, just before Christmas, Vox showed us what the law really meant when it fired 200 California-based freelance writers.
Vox helped sell the public the lie that laws like these force companies to absorb freelancers as employees. But in reality, it means they get fired.

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