Growing Global Social Unheaval

We are seeing a disturbing trend in the spread of social disruption around the world. We had the Arab Spring several years ago, which I think was primarily triggered by economic difficulties of the masses. Food prices had gotten very high, seemingly in response to USA economic policy.

This was followed by some years of relative social peace until Venezuela imploded. Now we see Chile, once considered an oasis of South American prosperity and peaceful stability, erupting in unrest that has destroyed numerous supermarkets and injured thousands of people, while other thousands have been arrested.

We’ve had recent riots in Iraq and in Lebanon which seem like delayed Arab Spring phenomena. South Africa is experiencing unrest born of people’s frustration with government corruption and rolling power blackouts. France is experiencing demonstrations, and so is Ecuador. Even Alberta seems to be in the beginnings of such social turmoil.

None of the foregoing have the potential for damage as does what is going on in Hong Kong. China, as I keep saying in this blog, has a major economic problem. China was able to grow capital simply by forcing people to work, but its workers have aged and its population pyramid no longer looks like a pyramid. It is more like a fire hydrant with the big bulge of 50s, and a smaller bulge of millennials. Gen X, born at the start of the one child policy, and Gen Z, born during the latter years of that foolishness, are a small percentage of the population. A workforce like that is limited by age related infirmities from providing the kind of brute production it once did. Chinese economic growth can only continue by working smarter instead of harder. This requites innovation. It is hard to induce innovation in a centrally planned economy where people labor yields fruit to be taken by the government. I think China may be in for some major social upheaval, and if so, it will likely be very bloody.

Torpedoing Alberta's Oil Industry

There is a recent interview of two experts (one of whom I know, since we both serve as advisors to the same company) on the subject of American interests conspiring to destroy Alberta’s oil industry. It’s a worthwhile listen for anyone even peripherally interested in such things.

https://omny.fm/shows/danielle-smith/capital-markets-impact-of-oilsands-reserves-strand?in_playlist=danielle-smith!podcast

Price Effects of Quantitative Easing

I’m not an economist, but I do know a few things about economics, I think. Anyone that specializes in business principles knows something about economics, particularly micro-economics. I was on a family picnic yesterday, and while being lazy in the park, I was thinking about the negative interest rates now seen in some places. For example, you can get a long-term mortgage in Europe that has you paying back less money than you borrowed. How is that possible? Probably because the supply of lendable cash exceeds the demand for it. With year after year of almost runaway quantitative easing, econo-speak for creating money, there is a surplus of money around.

Initially, the new money wasn’t going anywhere. It was parked and not lent, but more and more of it has found its way into consumer and business loans, with the result that interest rates have declined.

There is potentially another result too. Lending that money puts the money into hands that will spend it. The effect should be an increase in the velocity of money, with resulting increases in prices, unless production of desired goods and services grows more quickly, something that is unlikely to happen.

There are economists and politicians that regard humans mainly as consumers --- mouths to feed. They miss the fact that humans create wealth. Adding to a population of people should increase the wealth available to that population, unless the additions are uneducated, dull of thinking and lazy, not the norm with most people. Nonetheless, the increase in wealth that can be occasioned by a growing population cannot keep up with the rate of increase in money available to that population when money is multiplying geometrically and is being circulated.

We could easily see a major divergence between price inflation and interest rates, contrary to the old wisdom that interest rates parallel inflation rates.