Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Society's Leaders Have Been Digging a Bottomless Economic Pit

Politics / Global Debt Crisis 2015 Apr 27, 2015 - 07:44 AM GMT

By: Brian_Bloom


A friend sent me the link below, which seems extraordinarily relevant in context of the fact that I once calculated the value of the Chinese ghost cities at around $6.5 trillion. The article discusses the downward pressures on China’s economy.

The chart below shows that China’s GDP was $9.24 trillion in 2013. (supposedly higher in 2014)

Assuming that these cities were built over a period of (say) ten years, and assuming that the Chinese GDP has averaged around $10 trillion p.a. since the GFC, it may have been that the building of these ghost cities is what accounted for most of China’s GDP growth since the GFC. (Very roughly: $6.5 trillion / 10 years = $650 billion a year. $650 billion divided by $10 trillion = 6.5%). In this context, and in context of Chinese belt tightening (and falling real estate prices – see chart below ) – the “forecast” of 7% growth in GDP for this coming year is very probably garbage.

Will the global economic centre of gravity shift back to the US?

Although it is argued that the US economy has been growing, here is the reality:

Labour productivity improvements have been lacklustre since the GFC “turnaround”.

In addition, jobs created have also lagged behind historical post recession numbers – see chart below

What this information implies is that Quantitative Easing cannot “buy” economic vibrancy. Despite QE, relatively fewer jobs have been created in the US (than which followed previous recessions) and, overall, productivity has remained relatively lacklustre.

Finally, here is a really chilling chart (source: ibid). What it shows is that the booming stock markets since the 1980s may well have been driven largely by the fact that corporations have been spending almost 100% of their cash flow on dividends and share buybacks. When you have fewer shares in circulation then, even if your profits remain flat, your earnings per share will continue to rise. Clearly, if corporations are applying most of their cash to this activity then they will be spending less (financed via borrowings) on capital expenditure. Importantly, corporations in general have not been positioning for vibrant growth

So all this begs the question: What is going to “drive” US economic growth? A strong dollar will negatively impact exports which, in turn, will create a drag on the economy – even as the growing volumes of cash inside the US slosh around looking for a home. The QE dollars will have come home to roost. More share buybacks? Higher share prices and P/E ratios?

To my way of thinking the “key” financial indicator remains the S&P Global 1200 Industrials Chart below:

Technically, it is hitting a long term “double top” but the short term patterns indicate the possibility of a break up which, in my view, would be false given the state of the global markets.

1. There is a rising right angled triangle – which is bullish

2. There is arguably, an inverted head and shoulders which, if broken, could see the Index rise by 150 points.

Despite the technical possibility of a break up, common sense needs to prevail. Why would the S&P 1200 break up in context of a stagnating global economy?

Well, Europe has “supposedly” turned the corner and the Indian economy is reputed to be doing okay.

Germany (a proxy for Europe?) seems to be doing okay – but we will know more on May 22nd . Q4’s buoyant numbers followed two quarters of lacklustre growth. The proximate cause of the German economy’s Q4 growth may have been as simple as a strong US dollar.

Key Economic Indicators for Germany

Latest: 0.7% for 2014Q4
Previous: 0.1% for 2014Q3
Next Release: May 22, 2015

India’s economic indicators below. GDP growth has been good, but it has had a strongly negative trade balance

Once again, keeping our feet on the ground, India’s GDP is a small fraction of the that of either the US or China.

Bottom line question:

If the S&P 1200 index breaks up, will this be a false break out or will it demonstrate optimism that the global economy is coming out of recession? Well let’s look at a summary of the facts:


The QE dollars are coming home to roost, and the US cannot “reasonably” continue with QE if dollars are flooding into the country from outside its borders because of the strong dollar. Weight of money might drive the stock market (and P/E ratios) upwards for a short while, but the strong dollar will act as a drag on the US economy which has been showing signs of stagnating via its productivity and employment numbers. China’s economy is faltering and, piercing through the veil of obfuscation, published statistics on China’s GDP growth have not represented the reality that most GDP growth since the GFC has been artificially created via ghost city construction activity. China’s economy is more likely to stagnate than to grow at the forecast 7%. Germany’s numbers appear robust but this might have been facilitated by high exports to high net worth consumers in the US because of the strong dollar. India is doing well but it’s GDP is around 3% of the global total.


Unless there is something significant brewing out of sight of the media the world’s stock markets are not representing the reality of what is happening in the world economy. The longer this disconnect continues, the more painful will be the outcome. This latest article on Greece shows just how desperate the policy makers are to continue kicking the can down the road:

Overall Conclusion

Society’s leaders have lost the plot and their policies are making things worse, not better. Its past time for some outside-the-box thinking. The world’s central banks are part of the problem, they are not part of the solution.

Brian Bloom

Author, Beyond Neanderthal and The Last Finesse

Links to Amazon reader reviews of Brian Bloom’s fact-based novels:

The Last Finesse

Beyond Neanderthal

Beyond Neanderthal and The Last Finesse are now available to purchase in e-book format, at under US$10 a copy, via almost 60 web based book retailers across the globe. In addition to Kindle, the entertaining, easy-to-read fact based adventure novels may also be downloaded on Kindle for PC, iPhone, iPod Touch, Blackberry, Nook, iPad and Adobe Digital Editions. Together, these two books offer a holistic right brain/left brain view of the current human condition, and of possibilities for a more positive future for humanity.

Copyright © 2015 Brian Bloom - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Brian Bloom Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in