Double Whammy Eh Hoser? Part III
In the event of any slowdown, foreign demand and exports would drop off accordingly. The Malthusian Impasse on productivity gains along with any rise in foreign wages and/or pullback in demand would reduce profit margins.
Even if demand stays the same, margins will be cut through predatory pricing and merchandise dumping by unprofitable government and multi national backed Chinese based enterprises.
This deflationary pricing would make those balance sheets look not so "healthy" and could spur another serious round of treasury printing and central bank dollar debauching to shore them up.
Bare in mind that the Yen zero rate carry trade is still in full swing, so a printing press and serious lack of accountability can also keep government deficit spending the same.
Advertised inflation rates are deceptively low. Greenspans productivity miracle was a function of global outsourcing to labor at the margin, and cheap imports which masked the real 8-11% rate.
With real inflation adjusted wages declining and a negative savings rate, the term stagflation is more appropriate.
Even with artifically lower interest rates, the consumer facing higher debt to equity ratios due to falling home values , would be unable to borrow and continue their profilgate spending.
If the consumer borrows less and attempts to save (and we are being generous in assuming that their income flow stays the same and they can actually "save".) the money they "save" lies fallow in a bank account, rather than being lent out to further increase the money velocity.
Everything held the same, this forces the banks to lower rates further in an attempt to entice borrowing. This is the vortex of the multiplier effect woring in reverse . I.E. consumption & spending remained constant, yet there were no takers at a zero interest rate in Japan for over 15 years of such a deflationary cycle.
Such a deflationary cycle and its market unwind could easily pull the derivatives based global financial and corporate sector into the same decelerating income & increasing debt spiral that the consumer and federal government are already in.
The path to success entails building a solid foundation for future support. The fact remains that the impetus of the "demand" was artifical, non organic and created with smoke and mirrors.
Much like a house of cards, any component failure could lead to dire structural consequences, and the end usually justifies the means, something to ponder and hope never comes to pass.
Even if demand stays the same, margins will be cut through predatory pricing and merchandise dumping by unprofitable government and multi national backed Chinese based enterprises.
This deflationary pricing would make those balance sheets look not so "healthy" and could spur another serious round of treasury printing and central bank dollar debauching to shore them up.
Bare in mind that the Yen zero rate carry trade is still in full swing, so a printing press and serious lack of accountability can also keep government deficit spending the same.
Advertised inflation rates are deceptively low. Greenspans productivity miracle was a function of global outsourcing to labor at the margin, and cheap imports which masked the real 8-11% rate.
With real inflation adjusted wages declining and a negative savings rate, the term stagflation is more appropriate.
Even with artifically lower interest rates, the consumer facing higher debt to equity ratios due to falling home values , would be unable to borrow and continue their profilgate spending.
If the consumer borrows less and attempts to save (and we are being generous in assuming that their income flow stays the same and they can actually "save".) the money they "save" lies fallow in a bank account, rather than being lent out to further increase the money velocity.
Everything held the same, this forces the banks to lower rates further in an attempt to entice borrowing. This is the vortex of the multiplier effect woring in reverse . I.E. consumption & spending remained constant, yet there were no takers at a zero interest rate in Japan for over 15 years of such a deflationary cycle.
Such a deflationary cycle and its market unwind could easily pull the derivatives based global financial and corporate sector into the same decelerating income & increasing debt spiral that the consumer and federal government are already in.
The path to success entails building a solid foundation for future support. The fact remains that the impetus of the "demand" was artifical, non organic and created with smoke and mirrors.
Much like a house of cards, any component failure could lead to dire structural consequences, and the end usually justifies the means, something to ponder and hope never comes to pass.
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