Submitted by Tyler Durden on 05/29/2016 07:20 -0400

Authored by Andy Xie, the former Morgan Stanley chief Asia-Pacific economist, originally posted Op-Ed at The South China Morning Post,

Andy Xie says the world’s elite that are attending the G7, G20, Davos and other wasteful meetings are wrong to try to pin the blame for the turmoil on people’s psychology; all signs point to a prolonged period of global stagnation and instability.

Before the current G7 meetings waste of time, The G20 working group meeting in Shanghai didn’t come up with any constructive proposals for reviving the global economy and, instead, complained that the recent market turmoil didn’t reflect the “underlying fundamentals of the global economy”. The oil price has declined by 70 per cent since June 2014, while the Brazilian real has halved, and the Russian rouble is down by 60 per cent. The global economy is on the cusp of another recession, and these important people blamed it all on some sort of psychological problem of the people.

Over the past two decades, the global economy has been blessed with the entry and participation of 800 million hard-working Chinese, plus the information revolution. The pie should have increased enough in size to make most people happier. Yet, the opposite has happened. The world has gone from one crisis to another. People are complaining everywhere. This is due to mismanagement by the very people who attend the G20 meetings, the Davos boondoggle, and so many other global meetings that waste taxpayers’ money and put inept leaders in the limelight.

One major complaint that people have is that the system is rigged – that is, the rising income concentration is not due to free market competition, but a rigged system that favours the politically powerful. This is largely true. The new billionaires over the past two decades have come mostly from finance and property. Few made it the way Steve Jobs or Bill Gates did, creating something that makes people more productive.

II Timothy 3:1-9 – Even in gospel times there would be perilous times; on account of persecution from without, still more on account of corruptions within. Men love to gratify their own lusts, more than to please God and do their duty. When every man is eager for what he can get, and anxious to keep what he has, this makes men dangerous to one another. When men do not fear God, they will not regard man. When children are disobedient to their parents, that makes the times perilous. Men are unholy and without the fear of God, because unthankful for the mercies of God. We abuse God’s gifts, if we make them the food and fuel of our lusts. Times are perilous also, when parents are without natural affection to children. And when men have no rule over their own spirits, but despise that which is good and to be honoured. God is to be loved above all; but a carnal mind, full of enmity against him, prefers any thing before him, especially carnal pleasure. A form of godliness is very different from the power; from such as are found to be hypocrites, real Christians must withdraw. Such persons have been found within the outward church, in every place, and at all times. There ever have been artful men, who, by pretences and flatteries, creep into the favour and confidence of those who are too easy of belief, ignorant, and fanciful. All must be ever learning to know the Lord; but these follow every new notion, yet never seek the truth as it is in Jesus. Like the Egyptian magicians, these were men of corrupt minds, prejudiced against the truth, and found to be quite without faith. Yet though the spirit of error may be let loose for a time, Satan can deceive the nations and the churches no further, and no longer, than God will permit.

The most important factor in the rigged system is monetary policy being used to pump up financial markets in the name of stimulating growth for people’s benefit. This is essentially the trickle-down wealth effect, that is, making some people in the financial food chain rich while the spillover gives people a few crumbs. Yet, instead of crumbs, the wealth effect has pumped up property prices in Manhattan, London and Hong Kong, as well as the price of modern art. Essentially, the wealth effect has stayed within the small circle of the wealthy. And these people show up at Davos to congratulate policymakers on their “successes”.

Wasting resources is an equally important factor in making the global economy weak and prone to crisis. After the 2008 financial crisis, the US government and Federal Reserve spent trillions of dollars to bail out the people who created the crisis. Instead of facing bankruptcy and jail, these people have become richer than ever. Predictably, they have used their resources to rig the system further.

After 2008, when Beijing launched a massive investment push, the global ruling elite all praised China for saving the global economy. China has increased credit by over US$20 trillion to finance the construction of factories and homes. However, investment does not guarantee final demand.The process of building up a factory creates demand. But, when it is completed, it needs to sell its goods to someone. What China did was build even more factories to keep this factory occupied. This Ponzi scheme couldn’t last long. We are just seeing the beginning of its devastating consequences.

The world economy historically, experiences cycles of ups and downs. But we are living in the last days and that means world economies are going to experience a continuous down cycle and will never bounce back. The economies of the world will continue to go from bad to worse. Prophetically, that is what we can expect to happen in the last days.

China’s overinvestment has pumped up commodity prices, which has led to another Ponzi scheme. As major central banks cut interest rates to zero, credit demand didn’t respond in general, as businesses didn’t see growing demand from people who were suffering income erosion. The commodity boom justified credit demand for the time being. Trillions of dollars were poured into the energy sector, and trillions more into other commodity industries. Businesses in emerging economies that were pumped up by rising commodity prices borrowed US$9 trillion. This mountain of debt is floating on a commodity Ponzi scheme that is floating on China’s investment Ponzi scheme. Its bursting is just the beginning. Its impact on the global financial system could be bigger than the 2008 financial crisis.

We are warned that money will fail and that there will be widespread hunger, political chaos, and rampant inflation. These conditions are inevitable because they will usher in the antichrist who will rise to power and be welcomed as the savior of the world.

Before all this happens, God is going to send His people out to influence every nation and to preach the gospel to everyone. Each and every person on earth will have the opportunity to accept or reject Jesus before He returns.

This kind of influence will take huge amounts of resources and God’s plan is to transfer great wealth into the hands of His end-time evangelists. The needs for the coming harvest are such that functionally they can be expected to manifest more strongly in the community and economic arenas, as the church begins operating with a greater unity and singleness of purpose. Ministries will make the biggest impact in the last days and they will touch entire communities and nations.

In addition to the bursting of the global commodity bubble, China’s overcapacity bubble will kill global capital expenditure for many years to come. Even though Chinese investment isn’t growing like before, investment at half of gross domestic product is still adding overcapacity by over US$1 trillion per year – the problem is getting bigger.

All indications are that China wants to export the overcapacity. And why not? China overinvested to bail out the global economy. It shouldn’t pay the whole price for the mistake.

China’s strategy would lead to de-industrialisation in most of the world, in particular middle-income emerging economies. Weak capital expenditure would lead to weak employment and labour income. The resulting bankruptcies may further weaken the global credit system.

The global economy is facing years of stagnation, deflation and financial crises. The current economic managers will resort to the same tricks of pumping up the financial markets with liquidity, to no avail. In the meantime, political instability will spread around the world. It will take a long time for the right leaders to emerge.

Initially, populists will win. Their policies, unfortunately, will focus on protectionism and rolling back the World Trade Organisation system. That will lead to further economic turmoil in the global economy. Protectionism may suddenly jump-start inflation that will quickly become hyperinflation, which would certainly lead to violent revolutions.

The world is on the cusp of a prolonged period of stagnation and instability. Our ruling elite is blaming it on people seeing things. Their strategy is to change people’s psychology. Unfortunately for them, the world is catching fire and that fire will eventually reach their Davos chalets.

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