The way is defined.

July 20-26, 2024

Big news. It’s hard to argue with the political news from the US. Biden’s withdrawal from the election campaign, rumors of his incapacity, Kamala Harris’s emergence as a candidate, and Obama’s (forced?) consent to her candidacy… Such Shakespearean passions in economics are extremely rare. And good!

However, there is one very important economic consequence of this whole story, and this is the main news this week. It consists in the fact that financial markets have hardly reacted to these phenomenal events. A small correction in the middle of the week cannot be considered something serious.

The conclusion from this is clear: no matter how wild and strange these events may look from the point of view of an outsider who does not have insider information, they did not come as a surprise to the main market players. No, this does not mean that someone planned everything in advance, rather, it means that the main market players, who control its overwhelming volume, took an active part in the behind-the-scenes discussions of the events that followed.

From a formal point of view, this means that the market has ceased to be a market and is almost completely manipulated. No, this does not mean that it cannot collapse, but objective prerequisites must mature for this to happen, namely, a severe shortage of money must arise, including among the main players mentioned above.

Since they are simultaneously the beneficiaries of the Bretton Woods system (and the controllers of the Federal Reserve System), and the US political leadership has not been involved in the activities of this structure in recent years, as recently admitted by the head of the Federal Reserve System Powell, they have complete freedom. And for this reason, we can make a plausible conclusion about the development of the situation in the US in the coming months.

There will be no collapse of the markets, at least until January 2025, the inauguration of the new president, whoever he may be. But the Federal Reserve System will begin by the end of the summer, when the free money runs out completely, active work on issuing money. Which will be necessary to support the debt pyramid of the budget (that is, the demand of citizens) and financial markets. The elite of the “Western” global project, transnational bankers, will not allow the collapse of financial markets.

Then, when the consequences of high inflation become fully apparent, the new US political leaders will be able to do something. Unless, of course, it is Kamala Harris, since neither her personal qualities (she does not understand economics and finances), nor her team, which will be completely controlled by these financiers, will simply do nothing special. And it is possible that this will correspond to their strategic plans.

Macroeconomics: UK industrial orders balance in negative territory for 24 months in a row:

The PMI (an expert index of the state of the industry; its value below 50 means stagnation and decline) of the German industry has been in recession for 25 months in a row, which is much longer than in 2019/20 (18 months) and in 2008/09 (14 months):

US manufacturing PMI back in recession zone, at 7-month low:

Note that experts are based on nominal production values ​​with official inflation data; if we use the real value, the picture will be much worse.

The Richmond Fed Manufacturing Index in the US is the weakest since 2009 (excluding Covid):

The Kansas Fed Composite Index has failed to return to positive territory for 22 straight months:

And its component of assessing the current situation is only 0.1% of the 14-year low (excluding Covid):

US existing home sales have returned to a 14-year low after a slight rebound:

US consumers’ assessment of the current situation is the weakest since late 2022; excluding 2020/22 fluctuations, it is the weakest since 2008:

The number of registered unemployed in France is the highest in 20 months:

Sweden’s unemployment rate (9.4%) is at its highest in 14 years (ignoring the brief Covid surge):

Norway’s retail sales are down 5.1% m/m, not counting the Covid dip, the worst performance in 36 years:

China’s central bank cut its rate by 0.10% to a record low of 3.35%; interest rates on 5-year loans and 7-day reverse repos were reduced (there are hints that the latter will soon become the key rate in China):

After which, at an emergency meeting, he also reduced the rate on medium-term (annual) loans by 0.2% to 2.3%; and immediately pumped 435 billion yuan into the financial system:

This is a clear response to the issues we noted in our previous review.

The Bank of Canada cut its rate for the second time in a row by 0.25% to 4.50%. In contrast, the Bank of Nigeria raised its rate by 0.50% to a record high of 26.75%.

Main conclusions. Some of it have already been made. Financial markets are under complete control and the only thing that can shake them is the lack of money. This means that there will be no lack of money, especially since the US political leadership is in complete prostration. And there is no certainty that if Trump comes to power (quickly) the situation will improve.

The general situation in the economy is characterized by a structural crisis, developing against the backdrop of yet another PEC crisis (the fourth crisis of falling capital efficiency):

There is no need to even comment on anything here, the added value created for each subsequent dollar of debt is falling. And without a radical change in the economic model with debt write-offs, it is impossible to get out of this situation. The problem is that debts are assets of the financial system and its beneficiaries will not voluntarily agree to cleanse the system.

Thus, the development of the economic situation for the coming months has been more or less determined: the Fed will begin to soften monetary policy and print money in the volumes necessary to support demand and financial markets.

And we wish our readers the most effective use of the information received from the reviews and pleasant upcoming holidays!