David Stockman Warns of Shrinking GPP (Gross Planet Product)

David Stockman warns of Shrinking GPP (Gross Planet Product):

For years now the dollar has been a “funding” currency in the global casino—-something the gamblers borrowed or effectively sold short in order to pile into higher yielding EM debt, equities and commodities until they peaked awhile back.

But the fantastic global credit bubble summarized below has now reached its apogee. China and the EM economies are rolling over into a debilitating deflation, thereby catalyzing the mother of all margins calls. This time subprime is lettered in Chinese and speaks with a Portuguese accent.

In fact, it is already happening, even by the lights of the IMF. The world’s nominal GDP has dropped 5% in dollar terms during the past year, and that’s what counts because the world’s $225 trillion tower of debt is heavily denominated in dollars, or linked to it through exchange rates, most especially the Chinese RMB.

Translation: There’s increased risk the US dollar will continue to strengthen and the US stock market crash, as well as financial sector risk.

Inventory levels are also rising, and manufacturing is down. Also, falling commodities are generally seen as a warning sign.

The recent dip in stocks (oil driven) might recover near-term. No one knows. I simply wish to post on the warning signs. Stocks are considered a relatively risky asset class.

“I’m not as concerned about the return on my money as I am the return of my money.”

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3 thoughts on “David Stockman Warns of Shrinking GPP (Gross Planet Product)

  1. weavercht Post author

    The comments under Stockman’s article are interesting. There’s an anarchist declaring all governments are bad (so who will fill the vacuum? benevolent corporations?)

    However, there’s another who warns that revolutions are dangerous, reform is better. While I don’t believe reform is possible for the US, I very much like the comment.

    The more I follow the Internet, the more I realise how completely out of sync I am with the rest of society. My focus is kin and faith. I don’t even understand the freedom vs. statism debate. Who honestly cares about such things? If it were possible to inject, into the public discourse, the values that have driven man for most of his time on Earth, the result might be interesting.

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  2. Kirt Higdon

    I’m always a bit puzzled when people consider it bad when the dollar will buy more (strong dollar and deflation) and when it will buy less (weak dollar and inflation). Stockman has said that nominal GGP has declined in terms of dollars, but has real GGP declined or is it simply that fewer but stronger dollars can buy more goods and services? If the latter is the case, is that not a good thing for holders of dollars? I guess it’s not for nothing that economics is called the dismal science. We may well be headed into a turn down or recession, but I doubt if it will be anywhere near as bad as 2008, let alone 1929.

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    1. weavercht Post author

      “but has real GGP declined or is it simply that fewer but stronger dollars can buy more goods and services?”

      Ha. That’s an excellent question!

      “If the latter is the case, is that not a good thing for holders of dollars?”

      Yes. I once read an article by Russians (likely at RT) complaining Americans would buy the world’s assets on the cheap.

      Expensive currency is bad for domestic manufacturing, but it is good for domestic importers of foreign goods. And the US imports a great deal, more than it exports.

      Cheap currency is seen as driving domestic manufacturing. I would prefer to just apply a trade tariff. A tariff on oil from Saudi Arabia might help right the current oil price war. Oil from other foreign sources would just replace it, but it might drive up the price of domestic oil slightly if enough such tariffs were applied. Why is cheap domestic oil bad? Well the goal would be independence from Middle East oil in general. Buying from Canada and Mexico, even Venezuela, is a better move.

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