2017: The Year When The World Economy Starts Coming Apart

[Lord Beria3]

http://www.zerohedge.com/news/2017-01-1 ... ming-apart

Some people would argue that 2016 was the year that the world economy started to come apart, with the passage of Brexit and the election of Donald Trump. Whether or not the “coming apart” process started in 2016, in my opinion we are going to see many more steps in this direction in 2017. Let me explain a few of the things I see.

[1] Many economies have collapsed in the past. The world economy is very close to the turning point where collapse starts in earnest.

Historically, economies have taken many years to collapse; I show a range of 20 to 50 years in Figure 1. We really don’t know if collapse would take that long now. Today, we are dependent on an international financial system, an international trade system, electricity, and the availability of oil to make our vehicles operate. It would seem as if this time collapse could come much more quickly.

With the world economy this close to collapse, some individual countries are even closer to collapse. This is why we can expect to see sharp downturns in the fortunes of some countries. If contagion is not too much of a problem, other countries may continue to do fairly well, even as individual small countries fail.

[2] Figures to be released in 2017 and future years are likely to show that the peak in world coal consumption occurred in 2014. This is important, because it means that countries that depend heavily on coal, such as China and India, can expect to see much slower economic growth, and more financial difficulties.

Interesting article. Would be interested to read the thoughts on it and whether the conclusions are correct.

[fuzzy]

9] Gov bond interest rates - is the money shot for the UK and US, when overseas buyers buy less gilts/bonds. Both govs will be bankrupt.

I agree generally with her comments

[kenneal - lagger]

Just to be pedantic, I would have said that the world economy started coming apart pre 2008. It was cobbled together post 2008 but we're still on the roller coaster ride heading generally downwards post 2008.

[raspberry-blower]

TAE: 2017: Change Can Be a Bitch

The basic issue here is not a political one. It’s economic. Our economic systems have failed, and they can’t be repaired. We should always have realized that no growth is forever, but at least we now know. Or could know, it’ll take a while to sink in.

Next up is a redo and revamp of those economic systems, but that is not going to be easy, and may not get done at all. The resistance may be too strong, warfare -economic or physical- may seem like a way out, there are many unknowns. We could, ironically, get quite far in that redo if we simply cut all the waste for our economic processes, but then again, that would have us find out that much of the system runs entirely on wasting stuff, and wasting less kills the system.

Should be a given on this forum yet most sheeple are blindfolded by the fantasy that we can go on living the good life forever. There's a rude awakening for them.

Trump and Brexit are necessary, perhaps even long overdue, in order to break the illusion that things could go on as they were. But they are not solutions. America needs a big wake-up. Trump looks likely to deliver one. That is needed for the rest of the country to wake from its slumber.

What we will see is the unravelling of the façade of everything being rosy - it never was for a large section of the populations - both in the UK & US. Trump may well be unwittingly instrumental in this - or, more accurately, the Fed may scupper everything by raising interest rates. Given the gargantuan amounts of Corporate debt that many organisations now have, any rate rise will cripple them, cause house prices to crash and annihilate the shale oil and gas sector. So it's not all bad news then

[johnhemming2]

I glanced at the article, but decided it was not worth reading because what I read was not coherent.

Resource depletion and the associated price rises in resources will hit the global economy unless we can do things like getting really good PV returns etc.

If we don't have a oil price spike we are not on the edge of a proper economic crisis apart from the issue of Brexit which remains unclear.

[snow hope]

The problem John, is that because you are part of the establishment, you are unable to read coherently as you only want to understand the way you were brought up to understand. It is called indoctrination.

But when you have been successfully indoctrinated, you cannot see it! QED It is Catch22 I am afraid and you are caught - as has been pointed out to you many times over the last year or two.

So actually your last post was incoherent and reflects more poorly on you than whatever point you were trying to make.

For what it is worth, the article on Automatic Earth, posted by raspberry blower makes a lot of sense. Click on the link folks and read it!

(If you are part of the establishment, you will have serious difficulty understanding it, as has been demonstrated by poor John Hemming.)

[woodburner]

You'll no doubt want to stick a label on me then. I glanced through it too. The first paragraph contained a sentence of twenty words. The second paragraph, though that is stretching definitions, was one sentence of 45 words. These are signs of poor writing, making comprehension difficult, as extracting the meaning is prone to errors. So John's point is valid, and if that article is an example of non-establishment writing, then the non-establishment has a problem.

[emordnilap]

that would have us find out that much of the system runs entirely on wasting stuff, and wasting less kills the system.

True. However, if we all got sensible about not wasting stuff, how different the system would be.

[raspberry-blower]

The problem John, is that because you are part of the establishment, you are unable to read coherently as you only want to understand the way you were brought up to understand. It is called indoctrination.

But when you have been successfully indoctrinated, you cannot see it! QED It is Catch22 I am afraid and you are caught - as has been pointed out to you many times over the last year or two.

So actually your last post was incoherent and reflects more poorly on you than whatever point you were trying to make.

For what it is worth, the article on Automatic Earth, posted by raspberry blower makes a lot of sense. Click on the link folks and read it!

(If you are part of the establishment, you will have serious difficulty understanding it, as has been demonstrated by poor John Hemming.)

You can add WB to that list, Snow.

Meanwhile, here is something to have a listen to: A Peak Prosperity podcast with James Howard Kunstler The World's Greatest Misallocation of Resources

[johnhemming2]

When resource depletion next kicks in we will be able to tell because the prices will spike. They are not spiking at the moment.

[raspberry-blower]

When resource depletion next kicks in we will be able to tell because the prices will spike. They are not spiking at the moment.

There is an awful amount of lag in the system - gargantuan amounts of debt, depressed economies, current oil oversupply to name three factors - that mean that we could not see the spike until well after the next crisis has kicked in. A phrase involving bolting horses and shutting stable doors comes to mind...

[raspberry-blower]

Chris Martenson interviews Nafeez Ahmed: Our Systems are Failing

[emordnilap]

It would be no surprise to learn that prices are kept artificially low partially because of the need to offload the petroleum fraction of a barrel of oil as it doesn't keep and, in effect, 'subsidises' diesel.

[johnhemming2]

It is a mistake to think there is some form of logical planning to all of this

The thing about oil and energy more generally is that if you don't have it it causes a big problem. Hence as the price goes up demand does not go down that much until the price spikes and things go haywire.

I don't personally think I know enough to predict the timing of the next spike. The last one could be seen coming from consuption exceeding production for three years. I am not going to do the research to see what is happening until the price is over USD80.

Brexit can cause some chaos and there will continue to be the issues relating to 2008 and the EURO etc. However, my guess is that any energy price spike will be in the next decade.

[raspberry-blower]

So what if the next leg down is not initiated by an oil price spike but something else? This is something that Charles Hugh-Smith discusses:

Charles Hugh-Smith The Next Domino to Fall: Commercial Real Estate

The central banks and state treasuries around the globe may be confident they can bail out the banks, but what if the next domino to fall isn't a bank? What if it is a "safe, high yield asset" held by institutional owners such as pension funds, insurance companies and REITs (real estate investment trusts)?

What if the next crisis isn't a spot of bother caused by excessive leverage, but a systemic collapse of collateral as an entire sector--retailers holding millions of square feet of bricks-and-mortar store space--falls off a cliff?

The state of play in the US is particularly perilous:

Wolf Richter: So What are we to do with Retail Malls?

Wolf Richter: The Retail Bloodletting simply does not let up

The share of loans issued by retailers (not including food and drug retailers) that are trading below 80 cents on the dollar – the benchmark for distress – has jumped from 10.5% in January to 16.6% in February. According to LCD/S&P Global Market Intelligence, that’s the highest percentage since August 2009. See the Neiman Marcus loan above, trading at 77 cents on the dollar.

The share of retail-sector loans trading below 70 cents on the dollar – an indicator of potential default – has reached the Financial-Crisis level of 9.3%, up from about 0% before June 2015