$ 4 TRILLION CRASH
It has been estimated that the collapse in global tourism from the Covid panic and fear has already cost tourist businesses over US $ 2.4 Trillion in lost revenue. This may grow to over $ 4 Trillion by the end of 2021. Many developing nations have been adversely affected as they have large and (previously) growing tourism sectors.
The worst estimate that BOOM has seen involves a 75 % drop off in tourist arrivals. Currently available data shows a 73 % decline in international tourist arrivals during 2020. Any rebound will be slow.
This is just one industry affected adversely by the Covid panic. Total global GDP is estimated to be around $ 85 Trillion. Total losses in global GDP could be in the range 5 – 10 %. One estimate seen by BOOM amounted to $ 15.6 Trillion. If so, that would approach a loss of 10 % annually for 2020 and 2021.
Covid represents a dramatic loss of economic activity and most of that will be felt in the poorer nations. Unemployment and starvation will be the result.
NZ ENDS QE
The central bank of New Zealand has ended its Quantitative Easing program of asset purchases. There are some economists who think that overnight interest rates, set by the Bank of New Zealand, will inevitably rise and perhaps very soon. BOOM is not inclined to agree.
The central bank of Australia has reduced its QE program marginally. Again, there are some economists who think that this reduction in bond purchases is the beginning of inevitable further reductions. Again BOOM is not inclined to agree.
And the central bank of Canada has reduced its bond purchase program. Some people are predicting that they will end their QE program by the end of this year. BOOM does not agree.
All of these central bank actions and all of these predictions about the future hinge on one thing — the arrival of persistent CPI inflation along with persistent economic growth beyond the end of 2021. BOOM has stated clearly that this is not likely and that current CPI surges are “transitory”. That is because the major critical input into advanced economies in regard to CPI inflation is wages growth. In economies where services are 70 – 80% of GDP, this is the key to generating CPI inflation. And, if wages do not grow significantly, then the pre-condition is not fulfilled.
Now, let’s look at why there has been enthusiasm for the argument that CPI inflation is breaking out. That enthusiasm is largely based upon commodity price rises. Let’s look at what is happening in that sphere of CPI influence. The topical price of Lumber in the US, for example, has collapsed by almost 70 % since May 10th. It is almost back to the price levels where it started its meteoric rise 12 months ago. US prices for Corn and Wheat also peaked on or about May 10th. The ETF traded in New York for Base Metals (DBB) also peaked then and so did the price for Copper. The one essential commodity price that has continued to rise over the last 3 months has been the price of oil. But that has recently hit a pocket of resistance and has fallen almost 10 % in the last 2 weeks.
Consumer sentiment in the US collapsed by 30 % in early 2020. That was a staggering drop. It has since recovered half of that fall but lately it seems to be falling again. If that trend in consumer sentiment continues to fall, then BOOM’s expectations of flat to lower GDP growth and lower CPI numbers will be re-enforced.
The US Bond markets are still in full agreement with BOOM. Bond prices continue to rise in all major sectors. Thus, low (and lower) interest rates seem to be here to stay for the foreseeable future.
A GRANDMOTHER SPEAKS
Republished with permission from BIZNEWS https://www.biznews.com/
Berendien Lubbe, Emeritus Professor at the University of Pretoria and Grandmother recently wrote this in regard to Covid 19 as reported on BizNews
Ms Lubbe writes: “I am a seventy-year-old grandmother, so yes, I am in the high-risk group. Over the last year or so, I have listened to a select number of politicians, scientists and medical doctors. I have been exposed to the eloquent views, hysteria and patronising utterances of these experts as well as the authoritarian voices of the Command Council. As each COVID-wave comes and goes, I have been told what to do, when to do it and the deadly consequences of not following the rules. I have been told my grandchildren should not hug me because they can kill me; my grandchildren have been told the same. Every day the main media has bombarded me with the same voices and the same messages. If I don’t behave, if my grandchildren don’t behave, I will die, or worse yet, I will personally be responsible for killing my neighbours. I may have already unwittingly done so because, for all I know, I may have already had COVID. I have certainly had a range of symptoms over the last year that ticks all the boxes. I did not test, so I don’t know. I may contract COVID tomorrow and die, I don’t know, but then again, I may die of cancer or a heart attack, I may die in a car accident or a violent crime; I just don’t know.
“What I do know is that my freedoms and choices have been taken away by people with whom I do not necessarily agree or even find particularly pure of motive. I want to hear views from all sides, I want discussion and debate in the main media and then I want to make my own choices. I have come to realise that debate has been stifled and that anyone holding a different view on any issue relating to COVID, be it medical, economic or social, have been silenced. The main media has taken it upon themselves to define what false news is, and debate has become the sacrificial lamb at the altar of a pre-determined COVID-agenda. Anyone wishing to enter into the debate is lumped together with some crackpot conspiracy theorist. I read voraciously, and I try to understand different views. I am not awestruck by people in authority, and I am not convinced of something simply because someone else says so, even if they are so-called experts. I believe in critical thinking. So why are we being told what to do by the same people who stifle all debate? Where is the discussion? I don’t particularly appreciate being told what to do simply because others who ostensibly know better are telling me.
“I have become more and more convinced that the reigning COVID scientists, politicians, doctors and media are each, for their own particular reason, on a mission to eradicate COVID at the expense of all else. COVID determines every move we make. I don’t think scientists and doctors have ever before had such extraordinary power over entire nations, and to “save lives”, they are now dictating public policy. Politicians are curtailing our freedoms because they have the ideal opportunity to do so. Humankind has been placed at the altar of COVID to serve these interests. Reputations are at stake here. We must endure every other illness as long as we don’t get COVID; we must lose our jobs, see our families suffer and our children fearful as long as we don’t get COVID. We must stifle independent thought and follow the rules just so that we don’t get COVID. We should stop questioning the lockdown measures because the reigning scientists, the politicians, the doctors know best. If we do, we risk being ridiculed, insulted and labelled conspiracy theorists.
“I have been fearful many times; I don’t want to get COVID, I don’t want my family, friends or neighbours to get COVID, but then again, I don’t want to get cancer, die in a car accident or be murdered. What I do want is my freedom to choose what I want to do in an imperfect world where dangers lurk and people die. My children and grandchildren’s future depend on it.”
TWENTY OBSERVATIONS ALL OVER THE NET
The UK-based rapper known as Zuby recently listed 20 observations on Twitter, and his list went viral. It has been re-published all over the Internet.
20 Things I’ve Learned (Or Had Confirmed) About Humanity During The “Pandemic”
1. Most people would rather be in the majority, than be right.
2. At least 20% of the population has strong authoritarian tendencies, which will emerge under the right conditions.
3. Fear of death is only rivaled by the fear of social disapproval. The latter could be stronger.
4. Propaganda is just as effective in the modern day as it was 100 years ago. Access to limitless information has not made the average person any wiser.
5. Anything and everything can and will be politicized by the media, government, and those who trust them.
6. Many politicians and large corporations will gladly sacrifice human lives if it is conducive to their political and financial aspirations.
7. Most people believe the government acts in the best interests of the people. Even many who are vocal critics of the government.
8. Once they have made up their mind, most people would rather to commit to being wrong, than admit they were wrong.
9. Humans can be trained and conditioned quickly and relatively easily to significantly alter their behaviors — for better or worse.
10. When sufficiently frightened, most people will not only accept authoritarianism, but demand it.
11. People who are dismissed as “conspiracy theorists” are often well researched and simply ahead of the mainstream narrative.
12. Most people value safety and security more than freedom and liberty, even if said “safety” is merely an illusion.
13. Hedonic adaptation occurs in both directions, and once inertia sets in, it is difficult to get people back to “normal.”
14. A significant % of people thoroughly enjoy being subjugated.
15. “The Science” has evolved into a secular pseudo-religion for millions of people in the West. This religion has little to do with science itself.
16. Most people care more about looking like they are doing the right thing, rather than actually doing the right thing.
17. Politics, the media, science, and the healthcare industries are all corrupt, to varying degrees. Scientists and doctors can be bought as easily as politicians.
18. If you make people comfortable enough, they will not revolt. You can keep millions docile as you strip their rights, by giving them money, food, and entertainment.
19. Modern people are overly complacent and lack vigilance when it comes to defending their own freedoms from government overreach.
20. It’s easier to fool a person than to convince them that they have been fooled.”
In economics, things work until they don’t. Until next week ………… Make your own conclusions, do your own research. BOOM does not offer investment advice.
CLICK HERE FOR PODCASTS: OUR BRAVE NEW ECONOMIC WORLD
HOW MOST MONEY IS CREATED
BANKS CREATE FRESH NEW MONEY OUT OF THIN AIR (but they always need a Borrower to do so)THERE IS NO SUCH THING AS A DEPOSIT
BANKS PURCHASE SECURITIES, THEY DON’T MAKE LOANS
BANKS DON’T TAKE DEPOSITS, THEY BORROW YOUR MONEY
Watch this short 15 minutes video and learn as Professor Richard Werner brilliantly explains how the banking system and financial sector really work.
How is Most New Money Created ?
LOANS CREATE DEPOSITS — that is how almost all new money is created in the economy (by commercial banks making loans).
From the Bank of England Quarterly Bulletin Q1 2014 —
“Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.“
“Most money in the modern economy is in the form of bank deposits, which are created by commercial banks themselves”.
Quarterly Bulletins Index
Most economists are unaware of this and even ignore the banking & finance sectors in their econometric models.
On 25th April 2017, the central bank of Germany, the Bundesbank, released a statement on this matter —
“In terms of volume, the majority of the money supply is made up of book money, which is created through transactions between banks and domestic customers. Sight deposits are an example of book money: sight deposits are created when a bank settles transactions with a customer, ie it grants a credit, say, or purchases an asset and credits the corresponding amount to the customer’s bank account in return. This means that banks can create book money just by making an accounting entry: according to the Bundesbank’s economists, “this refutes a popular misconception that banks act simply as intermediaries at the time of lending – i.e. that banks can only grant credit using funds placed with them previously as deposits by other customers”. By the same token, excess central bank reserves are not a necessary precondition for a bank to grant credit (and thus create money).”
The Reserve Bank of Australia (Australia’s central bank) has also contributed to the issue in a speech by Christopher Kent, the Assistant Governor on September 19th 2018.
“…… the vast bulk of broad money consists of bank deposits”
“Money can be created …….. when financial intermediaries make loans“
“In the first instance, the process of money creation requires a willing borrower.”
“It’s also worth emphasizing that the process of money creation is not the result of the actions of any single bank – rather, the banking system as a whole acts to create money.”
Disclaimer: All content is presented for educational and/or entertainment purposes only. Under no circumstances should it be mistaken for professional investment advice, nor is it at all intended to be taken as such. The commentary and other contents simply reflect the opinion of the authors alone on the current and future status of the markets and various economies. It is subject to error and change without notice.The presence of a link to a website does not indicate approval or endorsement of that web site or any services, products, or opinions that may be offered by them.
Neither the information nor any opinion expressed constitutes a solicitation to buy or sell any securities nor investments. Do NOT ever purchase any security or investment without doing your own and sufficient research. Neither BOOM Finance and Economics.com nor any of its principals or contributors are under any obligation to update or keep current the information contained herein. The principals and related parties may at times have positions in the securities or investments referred to and may make purchases or sales of these securities and investments while this site is live. The analysis contained is based on both technical and fundamental research.
Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.
Disclosure: We accept no advertising or compensation, and have no material connection to any products, brands, topics or companies mentioned anywhere on the site.
Fair Use Notice: This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of issues of economic and social significance. We believe this constitutes a ‘fair use’ of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.