Advancing Time: Iran Gambit Carries Implications Greater Than Perc...

Advancing Time: Iran Gambit Carries Implications Greater Than Perc...:   In the long run, what is happening in Iran is very important. This is something most people don't care about or understand. The force ...

Iran Gambit Carries Implications Greater Than Perceived

 

In the long run, what is happening in Iran is very important. This is something most people don't care about or understand. The force driving the situation in Iran may not be as much about Iran as it is about controlling the flow of oil to China. By controlling the flow of oil to China, the ability to "enforce or encourage" China to continue to supply the world with rare earth metals until other countries can get up to speed in producing these metals is greatly enhanced.

The military attack against Iran can be viewed as more about power and eliminating our reliance on China and its ability to hold us hostage than simple regime change. China's predatory economic system has allowed, or should we say, positioned it to refine and produce at below cost rare earth metals. A large part of this is based on ignoring the environmental costs that flow from the process. 

It is difficult to find our way through all the propaganda surrounding what is happening on the global stage. A great deal of it is being produced by pro or anti-Trump-focused individuals. Clearly, what is occurring in Iran will have a long-term impact and is not likely to play out in one day. It portends a fundamental shift in thinking and deserves far more thought than it is being given by many people across the world.

The war, or Trump's military mission, comes with both great risk and the possibility of great rewards. Initially, much of this results in a lot of short term pain from higher energy cost for much of the world, especially if the chaos drags on for an extended time. These higher energy costs tend to slow the global economy, exposing vulnerabilities in investing strategies. This adds to volatility and shifts in the value of many assets. 

This is noted by financial and economic analysts, Craig Tindale and Michael Every as they discuss the widespread implications of growing geopolitical tensions over scarce resources that are rapidly being changed by foreign policy and economic statecraft. Sadly, the fact that the average man or woman across the world has no idea, interest, or understanding of the importance of the Iranian conflict screams that we have indeed failed as a species and protectors of the planet.  

Simply ask a few of the people you meet today about something specific related to Iran and expect to be disappointed. Not long ago, Senator Ted Cruz was asked about the population of Iran, and from what I understand, he put it at around nine million rather than the ninety-plus million that live there. Actions flowing from old religious beliefs and scriptures also muddy the water, making this a very dangerous intersection.

In a video, Urban Atlas attempts to educate us, the generally ignorant masses, about the geography of Iran. In doing so, he humanizes its people and underlines the importance of Iran. This video extends far beyond what we normally see on the news and social media. There is much more to the geography, history and people than what we are constantly fedevery time we open any social media platform. This video showcases what a great country Iran is when you look past its current tragedies.

Brent Johnson, a fellow mostly known for "the dollar milkshake," a theory of why the US dollar will grow stronger before eventually failing,  also weighs in on Trump moving on Iran. Johnson points to the idea that America is likely to be hurt far less than many other countries as this unfolds. In his most recent podcast, Johnson points out that Trump, in the tweet below, is spreading the blame and positioning America "not as the bad guy," causing oil prices to rise. 

 

I agree with Johnson and others that claim that pain and chaos are part of the process we face in cleaning up a mess we have partly created. Like other commentators, Johnson keys in on the difference between hard power and soft power. And, to be quite frank, we are now in a game of hard power. Iran is pivotal in Trump's game to retain America as the world's hegemon. 

 

All this deserves far more thought than it is being given by many people across the world. Duration matters; how long chaos lasts in the Middle East underlines just how important oil and natural gas are to the economy. This is a must win, or a situation where this must end with a positive outcome, in order for Trump to do well in the midterm elections and continue to pursue his agenda. 

 

 

(Republishing this article is permitted with reference to Bruce Wilds/AdvancingTime Blog) 

Advancing Time: Low Interest Rates Do Not Guarantee Economic Growth

Advancing Time: Low Interest Rates Do Not Guarantee Economic Growth: To all those investors looking forward to the Fed dropping rates, the bad news is that lower interest rates do not guarantee economic growth...

Low Interest Rates Do Not Guarantee Economic Growth

To all those investors looking forward to the Fed dropping rates, the bad news is that lower interest rates do not guarantee economic growth. This is a fact, and what many people fail to consider is that more goes into the economic "stew" than just interest rates. In some ways, easy money policies can impair growth and the quality of growth. An example of this is that they allow zombie companies to continue operating.

While many investors talk about the link between low-interest rates driving the economy and markets ever higher, this correlation is very weak. We only need to look at Japan to understand that low interest rates do not guarantee a booming economy. For decades, Japan has pursued super-low and even negative interest rates while drifting into and out of recession. In short, other factors have been driving Japan's economy rather than simply keeping rates low.

Yes, there is a big difference between 10% and 5% interest rates, but when you are talking about a quarter of a percent, it has little bearing on the overall economy. It can be argued that the only place where rate cuts make a huge difference is when you get down near two percent. At that point, a 25 or 50 basis drop creates huge sums of "speculative" money. Growth is often more about liquidity and the availability of money than low interest rates. We should question how much a couple of quarter-point drops in interest rates will really make. This is very important considering many consumers are completely disconnected from fed rates and paying well over 20% APR on charge cards.

The Eurodollar University YouTube Channel continues to hone in on slow growth across the world, claiming the global economy is in a synchronized slowdown and recession. He does this in part by repeatedly using the line, "forgot how to grow," while pointing out that true economic growth has faltered. Part of the problem is that low interest rates tend to pull spending forward, but there is a limit as to how far this can go.

Debt Has Grown Faster Than The GDP

Over the last decade, low interest rates have contributed to increased inequality. Not all people and businesses benefit equally from low-interest policies. The Fed has fueled inequality by feeding money into a system where "the big boys" and Wall Street soak up cheap, easy money, but small businesses saw lending standards rise. This resulted in making it more difficult for many small companies to get loans and resulted in many productive small companies closing their doors forever.

The legacy of Central Banks pursuing "low rate" policies has caused debt and bad debts to explode. By not demanding the right kind of growth and simply throwing money at problems, Central banks and governments have delayed and added to a much larger crisis in the future. This is becoming apparent in central banks' limited ability to directly determine rates at the long end of the curve. 

Circling back to Japan, for years, many economists claimed that only by letting its zombie banks and industries fail could Japan clean out the system and move forward. Instead, the Government of Japan ran huge deficits and ran up massive debt. The country languished in what has become known as "the lost decades," during which it avoided disaster only by the fact that for decades it enjoyed a large trade surplus. 

At some point, both investors and the public will realize that central banks can only do so much through printing money and lowering interest rates. America continues to spend far more than it takes in, and such deficits are unsustainable. Most of this money finds its way into the economy as "poorly crafted subsidies" that push data higher, creating the false illusion that all is well. The bottom line is that much of the world may well be looking at a version of the "Japan Syndrome" with stagflation. This translates into years of slow growth coupled with a protracted period of inflation.

Low rates are also supposed to encourage business borrowing and boost employment, but often it also encourages savers to take on more risk than they should, as they search for higher yields. History shows that when rates are held at an artificially low level for too long, capital is often misallocated and flows into speculative investments. The current low rates combined with our massive government deficit are creating a false economy that is also baking in a higher overall cost structure. Want to know where the real cost of things is going? Just look at the replacement cost from recent storms and natural disasters.  

Many of those already concerned about the strength of the economy find little comfort in the argument that conditions remain too fragile to begin a return to historic norms. Lower rates have almost been guaranteed and promised; however, we should never forget that liquidity is far more important. Liquidity is the lifeblood of commerce. It is difficult to envision how the world will handle the additional debt of governments if long-term rates begin to rise. As we look back years from now, the policies of ZIRP and NIRP are likely to be considered major mistakes.  

 

FOOTNOTE: The wealth effect is most likely a far greater contributor to growth, not necessarily "good growth," than low interest rates. Click here to link to an article that highlights using the wealth effect as an economic tool.  You can let me know your thoughts in the comments section. 

(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Advancing Time: China Quietly Moving To Challenge Boeing and Airbus

Advancing Time: China Quietly Moving To Challenge Boeing and Airbus: China has proven that even a state-driven economy fosters many limitations and blind spots. State-driven economies also sport the ability to...

China Quietly Moving To Challenge Boeing and Airbus

China has proven that even a state-driven economy fosters many limitations and blind spots. State-driven economies also sport the ability to rapidly get things done. Using the power of the state, China has the ability to use its predatory economic system to ramp up production at record speed. It could be argued that it is best not to over or under-estimate China.

China Has A Predatory Economic System Able To Ramp Up Production

A recent and glaring example of how such an economic system can ramp up production is visible in how China has rapidly positioned itself as the world's low-price Electric Vehicle producer. While high tariffs and other barriers may slow the sales of China's EVs in many developed countries, it is likely they will sell well in many markets. In just a few years China has  overtaken Tesla and become the world's low-cost EV producer. Now it is poised to crush Tesla by introducing new improvements. BYD, China's largest EV producer has just announced it can, in only 5 minutes, now charge a battery to 60%. 

When we choose to ignore what is occurring we should expect to be surprised at some point. This issue is front and center in the aviation industry. Few people are paying attention to the fact that China is preparing to move up the manufacturing food chain and challenge Western aerospace giants like Boeing and Airbus. Following the commercial entry of the C919. China set its sights on developing a wide-body aircraft with a range of up to 12,000 kilometers. 

The C929 started in 2015 when Comac partnered with Russia’s United Aircraft Corporation (UAC) to develop a new aircraft. China was to bear the full development costs, and Russia agreed to provide technical support. China's large-scale manufacturing expertise and supply chain management coupled with Russia's strengths in materials, aerodynamics, and engine technology appeared to be a good match. The final assembly line was to be based in China, with the goal of targeting sales in China, Russia, and the broader Asian region. In 2022, Russia withdrew from the project after failing to meet its commitments and China continued on its own. 

Sales of Chinese Aircraft Are Gaining Traction

Little noticed or intentionally ignored by much of the Western world, and especially America, is that sales of the C909 and the C919 are gaining traction. One video explores the rise of China’s aerospace industry - it claims the overlooked C909, the C919, and now, the ultra-long-haul wide-body C939 are game changers. It then questions what this means for Boeing, Airbus, and $6 trillion of future aircraft sales. But, it doesn't stop there, above, embedded in the text is a link to a video touting the C929, here is another link to a video diving into even a larger Chinese aircraft, the COMAC C939. https://www.youtube.com/watch?v=Ynik56MdU-I   

As for the C929, while many people chose to ignore this, that did not halt its development, the C929 is now a reality  it is a long-range wide-body aircraft entirely developed by China. With a capacity of 280 passengers. The C929 puts China in a position to reshape the aviation global landscape, the plane is designed to compete directly with the Boeing 787 and the Airbus 350. How contentious will the competition be going forward? It seems that the US has already weighed in and warned Ireland not to buy China's C919 aircraft, go to,  https://youtu.be/eBCg7taEsHM?t=1409

Adding to the allure of these Chinese aircraft are a slew of avionic upgrades and improvements. These are coupled with far lower prices due to China's predatory economic system. Telling companies and even countries not to buy Chinese aircraft most likely will not be enough. To all the skeptics who immediately scream that many people have no intention and would never fly in a Chinese-made aircraft, it doesn't matter. Simply put, other people will fly in them.

The fact China is making great strides in creating a threat to the main Western aviation industry duopoly. We should not forget years ago the Chinese went into space. Just because China cranks out a lot of cheap goods for consumers does not mean they are low-tech. When it comes to economic dominance, they are playing the long game.

This article is not meant to counter the notion that China is on the edge of economic collapse. Its planned economy has a history of major blunders. China remains in some ways a paper tiger, often overestimated, however, as long as its people remain under the control of the Chinese Communist Party and its predatory economic system, China will remain a rival and global power. 

 

FOOTNOTE: This article dovetails with several others that I have written. China has exported low-cost goods to the world using the profits from these sales to target and subsidize markets aimed at expanding key industries. This underscores the need for tariffs. Below are the links to some of these articles. 

https://brucewilds.blogspot.com/2021/11/as-railroads-grow-in-importance-china.html

https://brucewilds.blogspot.com/2021/10/china-housing-market-is-on-life-support.html

https://brucewilds.blogspot.com/2024/10/tariffs-are-way-of-putting-finger-on.html

https://brucewilds.blogspot.com/2024/05/chinese-evs-are-piling-up-and-blocking.html

https://brucewilds.blogspot.com/2023/09/subsidies-corrupt-economies-china.html

https://brucewilds.blogspot.com/2023/02/chinas-first-large-homegrown-airliner.html

https://brucewilds.blogspot.com/2022/12/chinas-future-remains-cloudy-and.html

(Republishing this article is permitted with reference to Bruce Wilds/AdvancingTime Blog)   

 

Advancing Time: Waking Up To A World Done Saved, Again!

Advancing Time: Waking Up To A World Done Saved, Again!: Again this morning I find it difficult to sit down and pound out a few words when everything old is new again, it all has been said so many ...