In the last 10 years three billion people have started to climb the first rungs of the Global economic ladder and are lifted out of poverty and ignorance. The shift of wealth is set to accelerate as the “sea change” of prosperity and economic growth swing from the developed world shift to the emerging economies. These people are working 60 hours a week, saving and investing, and going to school a recipe for success wherever you reside.
The west will continue to grow but is in a general decline that is well entrenched and gaining momentum on the downside, and as any trend follower knows it is a big opportunity to identify an established trend early and ride it for all its worth for a long period of time, they generally go farther and last longer than anyone can imagine.
Well, I believe the world is going to continue to grow, both in developed and emerging economies. But because of Globalization, trade liberalization, modern communications and transportation the trends are entrenched and rapidly accelerating. Take a look at this chart, given to me by Clyde Harrison of Brookshire raw materials (www.brookshirerawmaterials.com ). Clyde neatly sums up that the world is not going to end because of what’s unfolding globally in a fiat money and credit world. It will continue to grow and grow quite nicely, but the west is going to revert downward to the natural growth rate as illustrated and that the emerging world will revert upward as illustrated. It reflects a lower standard of living for the people who don’t wish to compete in life and markets and a higher one for people who do.
When you look at the next chart the centerline represents the linear regression of total world GDP of all countries (we’ll say for this exercise it is 4.5% all countries combined) the notice how the momentum of the western economies is carrying the developed world beneath the average with strong momentum to the downside. Then look at the emerging BRICs (Brazil, Russia, India China, etc.) have now gone above the trend and the momentum has now carried them solidly above average world growth rates. The growth really accelerated after the Asian and Russian debt crisis flushed out the system of poorly underpinned foreign debt obligations and previous bouts of international theft in the bond and lending markets. After that they never looked back, the total collapse of the marketplace gave them the courage to reform their corrupt financial systems and let people make money rather than the state.
Since we drew this chart ourselves, let’s look at a couple of charts from recent missive from the widely admired Martin Wolfe of the financial times. They illustrate the message of our chart quite nicely using historical numbers…
Notice the steady deterioration of the western economies since the early 1960’s as the welfare state programs took hold and the “something for nothing” mentalities started building? WOW, this is a shocking testimony to the past 45 years. This is the price the west pays for its “Social Safety net” and welfare programs, as in all socialist or left leaning/drifting countries there is always increasing misery, as instead of an expanding income pie, you have everyone trying to grab a peace of shinking one as more and more people climb on the wagon and less and less pull it. The hard workers quit or vote with their feet as increased efforts don’t pay, they are always taxed away in ever increasing amounts. The the western politicians solution for this tendency of voting with your feet is shackling its citizens on their worldwide earnings, not just domestic ones. The founding fathers of the United States are rolling over in their graves, as this is why they fled Europe in the first place. To be able to keep the fruits of their own labors. It is enshrined in the american constitution, but eviserated by the corrupt leaders of our country. Absolute power corrupts absolutely as it always has, the elites have banded together to the detriment of the general public. It was communicated to us in the federalist papers which no one reads or knows anymore. History of our forefathers be damned.
This chart clearly shows purchasing power of the worlds economy’s rotating from India and china to the US from 1820 up to 1980 then now back to China and India more recently. India, China, Russia are coming on strong while the west is now declining steadily. This is what the first chart above illustrates written from history. Just as Chinese income has quadrupled in 15 years, and Russias has doubled in 6. The US and Europe’s incomes have gone sideways to down during the same period. Many will say our incomes have increased in the west, but if you look at the chart from shadow stats using real inflation numbers that is a lie. Just as real income growth (growth after inflation) is a lie in the developed world.
Many people in New York and London are postulating that as the US sinks in recession the BRIC’s (Brazil, Russia, India and China, and the emerging world in general) will follow. Well think again, Domestic consumer demand in China is up 20% year over year, as it is in India, and Russia etc. If inflation and the world economy are in decline why are raw materials on their highs? If demand declines from the United States, their domestic markets are ready to absorb the production, and increase their own demand. These nations have healthy reserves and savings. They have savings for a rainy day as they know governments are good for nothing, they can’t be relied on for security, food or health care. They have learned the virtues of hard work, education and saving to prepare for these needs as they arise. There are no social safety nets in these or other emerging economies, none that work in any event. It a great motivator for the laziest in their societies.
So they save save save for a rainy day. And those savings in a fractional banking system are the seed corn of future factories, Jobs, production and infrastructure projects in these emerging blooming CAPITALIST economies. They are determined not to go back to where they came from; “poverty and ignorance” and dependence on socialism and communism. For people ready to embrace change can grow from it, those that run from natures laws are doomed to decline. While the developed world encourages the “something for nothing” or “depend on government to protect you” mentality. It is Weakness encouraged!!!
Now lets take a look at a video I received over the internet called “shift happens.”. It is a 6 minute video and you can access it at; http://www.scottmcleod.org/didyouknow.wmv It is profound, and true! If you think you or anybody can avoid this by refusing to compete in the global economy, well watch this video. It holds hope for us all that things will continue to grow because of the wonderful technologies that have entered our lives such as the Internet, personal computers, modern transportation. It is moores law ( Moores law is the the general understanding that the computing power of modern microchips double in speed and power every 18 months) written broadly in the world economy courtesy of modern communications, computers and the internet . But the wave emerging from the developing world as it steps onto the global stage is unstoppable. Globalization is unstoppable. The US school system is in shambles and collapsing by the day, how long will our leaders feed their political goals and let their teachers unions continue to fail us? Dumb down our future generations? Be unaccountable for their work product? The answer is; till it’s too late…
The only thing that can create a prosperous future is by embracing it. Encouraging good character traits such as hard work, excellence in education, saving and investing (there is no constituency for this in the western developed world). Politicians do this by rewarding this behavior, not by punishing and destroying it as they now do. You do this through understanding the sources that created the wealth we now have and encouraging us to return to the roots of our previous successes, not by implementing the policies which caused to emerging world to fail before it learned the benefits of capitalism… Socialism, fascism and communism have shown their failings over and over in history, why are our leaders embracing it? Answer to serve the public, the public that believes in something for nothing, who then elect them to try and deliver on this impossible promise!!!!
In conclusion, The opportunities are enormous, as are the pitfalls. For the smart money it will be challenging but very very rewarding. The economies of the world will continue to grow (or boom) as at this time they are well funded into the forseeable future. There is more money than is imaginable sitting in the worldwide banking systems chasing any opportunity and the markets in general will rise, but suffer unbelievable setbacks as markets crash after getting ahead of their fundamentals. When they become bubblicious from the firehoses of hot money that races to them chasing them as they emerge. Plunge protection teams stand at the ready throughout the world to address the “Fingers of instability” such as housing, mortgages, and Nasdaq 2000 to name a few. You can invest in these broad social and economic trends or be killed by them (If you wish to invest in them contact me www.traderview.com ). In the next Tedbits “fingers of instability” series we will cover several challenging mental exercises, such as ‘All currencies decline”, some just do it faster than others, “Here comes the bidders” the wind at the back of asset backed economies, and “hedge fund” households, and return of the “ECONOMY KILLERS”. LOL. Don’t miss it!!! If you are looking for some smart thinking in capturing these opportunities as they echo through the markets then give me a call or contact me through the website at www.TraderView.com
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Tedbits is authored by Theodore “Ty” Andros, and is registered with TraderView, a registered CTA (Commodity Trading Advisor) and Global Asset Advisors (Introducing Broker). TraderView is a managed futures and alternative investment boutique. Mr. Andros began his commodity career in the early 1980’s and became a managed futures specialist beginning in 1985. Mr. Andros duties include marketing, sales, and portfolio selection and monitoring, customer relations and all aspects required in building a successful managed futures and alternative investment brokerage service. Mr. Andros attended the University of San Diego, and the University of Miami, majoring in Marketing, Economics and Business Administration. He began his career as a broker in 1983, and has worked his way to the creation of TraderView. Mr. Andros is active in Economic analysis and brings this information and analysis to his clients on a regular basis, creating investment portfolios designed to capture these unfolding opportunities as the emerge. Ty prides himself on his personal preparation for the markets as they unfold and his ability to take this information and build professionally managed portfolios. Developing a loyal clientele.
This report may include information obtained from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made to ensure its accuracy or completeness. Opinions expressed are subject to change without notice. This report is not a request to engage in any transaction involving the purchase or sale of futures contracts or options on futures. There is a substantial risk of loss associated with trading futures, foreign exchange, and options on futures. This letter is not intended as investment advice, and its use in any respect is entirely the responsibility of the user. Past performance is never a guarantee of future results.
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