These Two 'Old Codgers' Must Surely Expire...

The world's economy is a fraud. The two big players are stimulating as much as they can to prevent collapse. We know it won't end well.

When it comes to China…

It's hard to know what's real and what's fake.

The exports are fake, the production is fake, and the wealth is fake.

But just because something is fake, it doesn't mean those things aren't there.

We're not saying the exports, production, and wealth are non-existent.

That would be different.

When we say ‘fake’, we mean they aren’t what they seem to be…

They aren't examples or reflections of true and meaningful economic activity.

We say the exports are fake because China is exporting goods to economies that are stimulating their own economies.

We say the production is fake because of the previous point, and because China is stimulating it's economy.

And we say the wealth is fake because it's generation is the result of the two previous points.

It is a macroeconomic fraud.

For evidence, exhibit A, from Bloomberg:¹

‘Investors and analysts are expecting China to deploy as much as 2 trillion yuan [US$283 billion] in fresh fiscal stimulus as Beijing seeks to shore up the world’s No. 2 economy and boost confidence.

‘That’s why they hope the country's finance minister will announce at a highly anticipated briefing on Saturday, according to a majority of 23 market participants surveyed by Bloomberg. Most of the respondents expect the funding to come in the form of government bonds.’

Your editor will never claim to be the world’s best economist.

We’ll never even claim to be any kind of economist.

But we do know this - we know when something just doesn't make sense.

If the world’s two biggest economies (US and China) are so strong, why do they both need to stimulate themselves and each other to stay alive?

The US stimulates its own economy, which helps consumers buy, which helps China’s exports.

And China stimulates its economy, which helps it's consumers to buy, and more importantly, helps them produce.

But if the world's economy was so strong, it wouldn't need the stimulus.

The best analogy we can apply here is that it's like two dying patients trying to give each other CPR and mouth-to-mouth resuscitation.

At some point at least one of them will expire… which means the other won't be far behind.

So where does this all lead?

Inflation of course. Not that it will cure anything. It will only make things worse.

But the governments don't care… as long as the two dying and breathless old codgers don't expire on their watch.

We look forward to seeing you back here tomorrow.

Kris Sayce

Editor, Crack of Doom

Issue 45 of 10,000

(We believe in the importance of setting goals. And we figure what better way than to set a big goal from the beginning. If all goes to plan, our final issue of Crack of Doom will be sometime in the 2060’s!)

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1. ‘Cina Investors Expect $283 Billion of New Stimulus This Weekend', Bloomberg (11 October 2024).