The only thing about international trade is that someone cannot have a trade surplus without another experiencing a trade deficit. We all cannot have trade surpluses simultaneously and we have to begin understanding this reality. The net capital movements around the world are showing clear signs that things will be intensifying and the net capital movement is headed for the dollar – but that does not mean day one. Sure, many will point the finger at Trump and blame him for a trade war etc., but in reality, the net capital movements are intensifying for reasons that have nothing to do with trade. Ushering in Trump will also have a profound impact upon Europe and now Merkel’s greatest challenge will be to hold the EU together for its core design was to enhance German trade by eliminating currency risk.
The insane policies of Angela Merkel combined with Mario Draghi in the ECB punish healthy companies with negative interest rates and reward companies that should be bankrupt by buying their junk bonds while trying to maintain this bail-in policy for the banks in the face of Quantitative Easing that helps bankers not the average person. This leaves one wondering whatever happened to common sense. Draghi thinks bailing out banks (depositors) is bad and buying junk bonds is a stimulus, which is beyond rational thinking even when totally drunk on New Year’s Eve. Undermining the people and allowing their money to vanish is exactly opposite of Quantitative Easing. His policy should be the exact opposite. The whole idea of insuring banks came from the Great Depression because people lost confidence in banks. Once the people lose that confidence, the entire economy will collapse and people hoard their money causing the velocity to collapse. This QE policy is only matched by the insanity of Prime Minister Narendra Damodardas Modi in India cancelling the currency overnight when India is an 80% cash economy. He never even asked the opinion of the central bank. Unbelievable! The lesson from the Great Depression was people hoarded their cash and refused to deposit into banks because they failed. The whole idea of insurance was to give the public confidence to use banks. With bail-in becoming law, from Canada to Switzerland, you really have to wonder how politicians cannot see what they are doing. The bottom-line is clear – it’s all about them and not the people.
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