Period: 19 – 25 December 2020
Top news story: Technically, what I consider to be the headlines of this week happened last week. But the true meaning of this news came only now, but the impact of this event will continue for many months, possibly years. This is about the Holding Foreign Companies Accountable Act, which the President of the United States D. Trump signed into a law on 18.12.2020. The Act requires United States stock companies to comply with all standards of internal reporting by United States companies and to confirm that they are not controlled by foreign authorities.
In fact, the law restricts the ability of Chinese companies in the first place to earn their share of the profits generated by the issue of the dollar. The modern Chinese economy, and indeed the economies of all export countries, including Germany, are not viable without this emission gain. Enforcement of this law will inevitably lead to economic collapse. How and when exactly this will happen remains an open question, but there is no doubt that China will retaliate when modern Germany is unable to do so.
To understand the scale of this emission income, I recall the FED’s official M1 monetary data, which we have previously published several times.
The situation in 2020 illustrates how much this income has increased and how important it is for any player to have access to it. Of course, if it is a question of preserving the Bretton Woods system itself, which, in the view of the Michael Khazin Foundation, is far from certain.
In fact, this means that due to the actions of D. Trump, D. Biden, if he becomes President of the US, which is highly controversial today, will not be able to return to friendly relations with China. Especially since the law passed through the House of Representatives in early December, which is dominated by members of the Democratic Party. Moreover, it casts doubt on Biden’s publicly announced plans to return at least partially to the logic of deals with China of the 1980s and 1990s.
It’s a holiday week, so the statistics are scarce. The statistics, however, still confirm the beginning of the autumn trend of the continuing decline of the world economy. Britain’s GDP in the third quarter has been revised upwards but the annual recession is strong (-8,6%):
Spain’s GDP -9,0% per year:
US GDP 7,5% per quarter and -2,8% per year; -3.5% of the peak of the end of 2019. Since the situation in the US appears to be the most important for understanding global economic trends, we show both graphs:
In fact, these figures show the recovery of the US economy, but in the third quarter, which ended in October. The previous review showed that the US recession resumed in November even before GDP showed positive year-on-year growth. This is exactly what we predicted at the beginning of the summer.
United States Chicago FED National Activity Index was the worst in seven months in November, mirroring figures from other counties in the previous review:
The largest number of active crude oil rigs in the United States in six months shows that the OPEC+ deal has benefited the American oil industry:
Existing home sales in the United States are -2,5% per month, but +25,8% per year; median price is +14,6% per year. Decrease in the mortgage rate (which is still at a record low; 2,86% for a 30-year fixed-rate loan) is still sizeable, although it cannot be ruled out that this is the effect of rising unemployment by the end of the year:
United States New Home Sales are -11,0% per month, but still 20,8% per year:
Argentina’s annual GDP decline accelerated:
CPI (consumer price index) Tokyo (-1,3% per year) is the weakest since spring 2010.
Britain’s state budget deficit is the worst in five months, peaking in November in 28 years of observation, and public debt has almost reached 100% of GDP – a record 59 years of observation:
In such a situation, the imposition of a lockdown related to quarantine measures is quite understandable. Prime Minister A.B. Johnson is not eager to quietly explain the real picture and, especially, to answer questions about the details of the breakup deal with the EU.
Personal income in the US is -1,1% a month after -0,6% a month earlier – without the growth of government incentives, income does not increase:
United States personal spending also went into monthly negative (-0,4%):
Let me remind you, this is November’s statistics, which confirms the disappointing conclusion that the US economy is still in recession.
Market sentiment in Germany is the worst in 5 months:
Retail in Japan slumped by 2,0% per month in November, and its annual growth dropped sharply (+0,7%).
The Central Bank of Turkey raised the interest rate by another 2,00% (after 4,75% in November) to 17,00%, the highest since August 2019:
Summary: Some of the findings have already been made and are reflected in the previous section of the review. After a relative recovery in the third quarter, the global economic downturn continued, with the peak of this recovery not reaching the beginning of the year. This is despite the absolutely huge increase in the money supply (cf. the graph by reference at the beginning of the review).
Given last week’s US law mentioned in Section One, it is clear that the American elite realized that the former dollar-dominated model of the world economy (the Bretton Woods model) could not be sustained. A few weeks ago, the leaders of the major Bretton Woods institutions (IMF and FED) hinted at this, and we wrote about it, but it is now clear that concrete decisions are made on the basis of these considerations. And decisions equally approved by the Democratic Party and the Republican Party.
Undoubtedly, the differences in Trump’s and Biden’s policies are obvious (see our report; English translation). But in any case, the Global Dollar World must cease to exist. Let me remind you that the Foundation’s main authors predicted this outcome back in 2003.
Given that this is the last review in 2020, we wish our readers a happy New Year, and hope that the new year, 2021, will bring them less worries. But, since we are responsible to you, it is our duty to report that in order to achieve this result, real economic trends will have to be monitored very carefully. Including reading our reviews. Trying to make decisions based on information from unreliable or even propaganda sources will be very costly in the new year. We hope that our work, which started last spring of outgoing year, has satisfied you and hope to meet with us again! And in the first review of the new year, we will give a brief forecast for the future.
Happy New Year!