Common Cents

Bell Weather Warning

Ralph Murphy

(2/2019) Market turmoil in oft-cited indicators such as stock indexes, federal interest rates, and global trade numbers fanned recession fear in the world of federal authorities and economists who reported them. Despite their concerns, overall growth has remained steady and key indicators to include the labor and export markets continue as normal. The problem now is the recession reports themselves as the phenomenon of retracted growth in two or more quarters of production is seldom justified by demand changes or the resource scarcity implied in the downturns.

Internal markets in advanced economies are reasonably predictable as to supply and demand forces that generate wealth by exchange value. No single market could long sway the whole downturn of the national growth estimates tied to policy directives. There can be technical mistakes linked to the broad administration of governing management such as over or under printing currency, wage or price controls that don’t reflect payment interest or excessive tax policies that can curtail growth. That type of miscue could be by design or due to simple error, but the recessions in the twentieth and early twenty first centuries seem aimed at simple wealth redistribution tied to bank theft of internal markets for programs at home and abroad. No other single variable can explain the income losses in these time frames.

Rapid or advanced growth in developing regions despite little or no change in other factors should be examined to explain the sudden capacity for wealth. These factors might include training, interest or resources beyond external cash flow.

Cash flow is tied to what economists call a current account that broadly reflects trade deals hidden or declared in currency or exchanges that cross borders.

Very briefly the current account is usually cited by governing authorities to explain import or export policies tied to growth. It also includes a flow of currency traded or FDI that is a random variable. Any measurable money that is introduced into the economy can be included- not just the trade links. The current account of exports minus imports, plus foreign direct investment balance is useful but may be misleading as the deals can fall through or payments financed despite projection of immediate earnings can be based on the whole deal.

There is a capital account that is tied to contracts or other payments which do reflect actual money received that is linked to trade as a balance of payments. It is a better indicator of the exchanges as it does reflect the payments linked to the trade balance based on past, present or future foreign deals The capital account also includes a foreign direct investment balance and when tied to conventional investing linked to exchanges can be tracked. When linked to the FDI balance of imported minus exported money it could track a recession source as no return grants rather than earnings from foreign regulated investments. Much of it depends on regulatory understandings, but it does imply governing collusion for the transfers to be successful given its volume. If extended for a lengthy time frame it could be considered a depression.

That was the exact pattern of the 1929 to late 1930’s worldwide depression where a thriving west was suddenly thrust into deep poverty while a war-torn Germany still struggling to pay reparations for WWI. They had huge expenditures for a new, defense build-up as the National Socialist German Workers Party- later to become the infamous Nazis- seized power in 1933.Their platform was unabated socialism demanding "nationalization of all heavy industry, deviation of profit from industry, communization of all warehouses, and land reform or seizure without compensation." Usually socialist-governing- authority make pitches for governing control or redirects capital for philanthropic type programs as health care or welfare payments. The Nazis were unique in projecting a control authority where only they would be allowed such advantages. It doesn’t appear they could have done that without the western cash as the American Economy entered the decade-long depression while the German economy advanced. There must have been a covert FDI exchange or a remarkable coincidence that enabled World War II.

This pattern and excuse for lost investment has been the case for every economic downturn since WWII. It is tied to political change as in the late Carter administration where money was lost to bank actions and then were masked by overprinting as inflation went to double digits. The Reagan administration presided over cripplingly high interest rates to control it but there was a downturn to earnings which could have been avoided by better bank controls. It happened again as The George W. Bush administration ceded power in 2008 allowing the Open Doors policy of the Obama administration to send money almost anywhere in that troubled system

The concern is not only as to the ability to make these type transfers of stored earnings, but also their justification as linked to markets that are also tied to the banks that aren’t even noted as the problem. It appears the control group wanted to employ the same scheme claiming a downturn of stock indexes or high interest rates as justifying their losses, but won’t be able to as the Feds now seem more cognizant of the actions and capable of stopping them.

While a boon to domestic interests the transfer system has had a major impact on foreign governments who didn’t get the covert payments. But, they had counted on them for domestic programs that were tied to labor groups and are now dealing with street protests and violence to the extent that their control is jeopardized. French protestors started the "Yellow Vest" protest movement this winter demanding a tax authority fill the vacuum of American money that didn’t get received as apparently promised. While they reflect a service of questionable need that is not tied to actual sales. This group has ignited worldwide protests of similar intensity from the Balkans to Canada. They will surely continue as the recession here that would have paid it all seems curtailed.

China is another matter, but western bank money linked to their various organs such as the China Development Bank was repatriated last year. It was locked into storage beyond routine transactions, and now redistributed into smaller banks here with recent Congressional regulatory changes. These changes permit conventional community bank interest. If a major big name bank such as Well Fargo or Citibank set up retail operations in your region- it won’t last long as their efforts at branch banking have failed miserably. So did their investment interest in the Far East. Dependent links to the theft issue tied mostly to covert FDI outflows from Africa won’t be funded unless they have a viable good or overt service for conventional sale.

Market turmoil amid stable purchasing patterns seem more closely linked to policy maneuvering of control authority rather than real changes in purchasing or production patterns themselves. The speed of transfers and probability of immediate downturns linked to the arbitrary transfer of money and not mutually beneficial exchanges almost guarantees avoidable theft and turmoil. Recessions seemed to reflect those concerns, and rejuvenation efforts by the internal markets are an avoidable cost to a victimized nation. To project grants as investments flouts conventional growth understandings and should be discounted to provide sales-linked flows closer to production expertise.