Then one would expect the bond rate to climb, but it is staying relatively constant between 4% and 5%, When it comes to paying for imports of American product, that interest cushions the blow. We end up buying American product with their own money.
Your focus on the current bond overlooks the market’s forward looking nature. Yields are stable because they reflect a consensus that the Fed will eventually cut rates to avoid a recession which is a precarious assumption. The moment inflation proves stickier than expected or the US debt trajectory worsens, we could see a violent repricing happening. It would lead to a bond vigilante reaction where yields spike suddenly and crater the value of existing holdings.
The whole idea that interest payments cushion import costs only works if the Canadian dollar doesn’t weaken alongside or faster than the USD in a crisis, and that is not at all guaranteed. When a crisis hits, all assets correlated with the US including our bond portfolio would suffer together. Meanwhile, the only sector of the US economy that’s doing well are the tech stocks, and that’s just a handful of companies passing IOU notes around in a circle. The rest of the economy is showing deep imbalances with weak consumer savings, shrinking industrial output, and persistent inflation in services.
The US is funding massive deficits in a high interest rate environment, and that can’t go on forever. The war on Iran could act as a catalyst for the whole house of cards to come crashing down because it’s driving the price of energy through the roof. The resulting economic crash in the US could be far worse than 2008, and at that point we’d be left holding the bag.
I am not sure who ‘we’ is that is ‘holding the bag’. And I am not sure that you are not still stuck in the last century.
Most knowledgeable people acknowledge that the Chinese economy is closing in, if not already passing, the American economy. But then they assume it is somewhere around a 50-50 split of the world economy. Well, it is not a 50-50 split, it is not even a 40-40 split. It is more like a 25-25 split, with the other 50% divided among, as Carney called them, middle economies. But those middle economies, as Carney also pointed out, (although not directly) control around half of the global GDP, twice as large as either the American or the Chinese economy individually. That is the New World Order. At the end of last century, all of the economic indicator pie charts had America with 80% or better of the charts, the rest of the world 20% or less. Now, America has 30% or less of the same charts, rest of the world 70% or better. The previous ‘Rules’ were all about keeping America on top. Those rules are no longer keeping America on top, so America is ignoring them. America is trying to make the new rules, in order to stay on top, without realizing that America is now far, far from the top, and just is not in any position to enforce these new rules. The rest of the world is ignoring these new American rules just like America is ignoring the old rules. The more they ignore America’s rules and make their own, the more America suffers by the non-enforcement of the American rules. Americans absolutely refuse to play by anyone else’s rules, and so they are just being left out of the game. The rest of the world is getting away with it today, when they could not get away with it last century, because of that 70-30 reversal. America just does not have the economic clout it had last century. Instead, the rest of the world now has that clout. And it is not just about China, it is about every other country. America has no hope of ever being on top again… The house of cards has been tumbling down in America for decades, it was just covered up by false propaganda while the really big money fled the US for greater pastures.
I am not sure if you are following what China is doing, but it is a lesson for all nations. Just a little while ago (20120-2016), it had around $1.3 trillion in American treasury bills. Now it has around half of that. Even Japan has more American debt that China does. In other words, China cashed in the debt holdings as it came due without buying more. That is a lot of money that America gave to China, that China used to offset the impact of American tariffs. Instead of Americans buying Chinese goods and sending money to China, Americans just sent China the money instead, no purchase necessary.
So as America falls, those countries that have driven up their share of the US debt can now follow China’s lead. Take their money out of America by cashing in the bonds without buying more. That is around $3.8 trillion that is flowing out of America without them buying a single thing. At the turn of the century, Americans not buying anything from the rest of the world would have caused economic collapse in those countries. Today, those countries can sell to the rest of the 75% of world GDP without selling a thing to America. That is some cushion.
Carney was not the first, but he was certainly arguably the most influential, world statesman that finally pronounced ‘The King has no Clothes’. When the dust settles, I suspect America will end up splitting in at least two, if not three or more, parts, if history has anything to say about it. Failed states inevitably end up in pieces. Then, countries that are holding US debt can take payment in assets (land), not money. After all, it is these other countries that are now making the rules.
We as in the working class in Canada. That’s who always pays the bill when there’s an economic crash.
I generally agree with what you’re saying regarding the US and China. However, I’d note that the actual split is between G7 and BRICS, and BRICS have already surpassed G7 in terms of PPP measure. BRICS represents the Global South, and it happens to be where majority of human population is, where the resources are, and where most of the industry is. Majority of Global South economies economies are aligned with China now.
What Carney appears to be focusing on are former vassal states that were under the tutelage of the US. Now that the hegemon is fading, the vassals are in trouble. What Carney seems to be trying to do is to rally Europe and Australia to form a bloc without the US, but one that’s not directly aligned with the Global South.
And of course GDP alone is not useful measure of anything. The quality of development matters. Western economies are focused on stuff like software industry and service economy. They’re not producing things people actually need to live. China is where all the manufacturing happens. They’re the ones who build solar panels, EVs, and high speed rail that developing world needs. That’s what makes China such a key economy for the world.
I also expect that the US is headed for collapse, and it’s likely going to be far worse than what happened to USSR. That said, it’s not at all clear that countries that hold US debt will be able to claw anything back once that happens. For one, the US is still full of nukes, so whatever states emerge out of it eventually will be nuclear powers.
The problem for Canada is more immediate though. Our economy is heavily dependent on the US right now. And unless we diversify and become more self sufficient, then we will be dragged down along with the US. Unless Canada takes steps to insulate itself then it will become one of these failed states itself when the western order finally collapses.
BRICS is more showmanship than substance. A photo op. India doesn’t have its own act together, never mind trying to work with another country. Frankly, India appears to want to be enemies with other countries, ANY other country, than to work co-cooperatively. Brazil and Saudi Arabia will go whichever direction the wind blows. And speaking of India, I think the nukes in India and Pakistan will prove to be the most unstabling.
I think the Venezuela situation will finally convince Brazil that it needs to start taking a proactive stance in South American politics, and not just stand by and watch America slowly creep southwards.
But my attention is all on Europe. The EU seems to be finally coming together, and the European Union nations can no longer be treated as separate entities, any more than California (same GDP as France) can be considered a separate entity. Actually, is is more likely that California WILL become a separate entity, while France becomes more integrated into the EU. Europe is finally getting over their collective PTSD from the two wars, and is now starting to think about living in the world again, instead of depending on the US for subsistence.
Yeah, that’s just completely false. The whole point of BRICS, and what actually makes it effective unlike G7, is that it’s not an ideological alliance. It’s a framework for countries to do trade. And trade within BRICS has been exploding.
Meanwhile, the EU is very clearly dying at this point. Energy prices were already sending European industry into a terminal decline, and Iran war has put the whole thing into an overdrive. Not to mention the fertilizer crisis during the planting season which could easily result in food shortages by fall. GDP is a completely meaningless metric because the quality of development is what matters. European countries do not produce things their people need to live. And what’s actually happening in Europe right now is that nationalist parties like AfD, RN, and Reform are dominating their politics. All these parties are extremely nationalist, and they are openly hostile to the whole idea of EU. The liberal center in Europe is collapsing along with the standard of living.
An interesting take on Europe. The up-and-down manufacturing statistics are almost exclusively in the automotive sector, which has experienced a lot of turmoil related to the supply of fuel. But what will change that is the rail line between China and Europe. This transportation route makes China far more important to Europe for trade than America. And the Nationalist/populist parties in Europe are tame compared to the Republicans in America. They may be dominating the news cycle, but not the direction Europe is going in. Russia pretty much threw cold water on any notion of Europe becoming less integrated. Once they get their energy sector under control, Europe will be okay.
The only thing the BRICS members have in common is their opposition to America as the dominant factor in global economics, and as the decline in America accelerates, the cohesiveness of BRICS will follow.
It’s very much not exclusively in automotive sector. Chemical industry, steel production, and all other sectors are affected. The reality is that manufacturing require energy as input, and with higher energy costs manufacturing in EU becomes uncompetitive compared to China because China is getting cheap energy from Russia. Europe basically made itself entirely dependent on American energy now, and that’s only getting more expensive for them. The US is also actively trying to poach European industry to boost their own economy.
China would be the natural trading partner for Europe, but Europe is still unable to break from the US and act in its own interest. Before the war in Ukraine started, Europe was becoming increasingly integrated with the east economically. They were getting cheap energy from Russia, and manufacturing from China. This allowed European economies to thrive. Now that relations with Russia are broken, and relations with China are now tense.
And you continue to misunderstand the nature of BRICS. As I already explained above, their interests are economic. It has little to do with politics or America. Countries in BRICS see mutual win-win trade relations that boost their economies. That’s why India does a huge amount of trade with China while having little in common politically. As the US continues to decline, more and more countries will necessarily flock to BRICS because that’s where economic development is happening right now. And China is at the centre of it all because they’re the world’s factory building things everyone needs. They help countries build infrastructure like ports, high speed rail, and clean energy production. They supply cars, phones, and other electronics. And as the Global Majority develops, the demand for the things China produces will continue to grow. That’s the real glue that holds BRICS together.
Here are the statistics for Europe since 2014, Almost all sectors except automotive are pretty flat. Chemicals were hit by the Russian invasion of Ukraine, but are recovering. The EU is definitely in recovery.
Actually, China was getting cheap oil from Iran, but that just changed dramatically. Now, Europe is looking at Canada for future off-oil energy supplies. and is returning to nuclear, but using small scale nuclear reactors. I would hardly say the European relations with China in economics are tense. Human rights, maybe, but Europe has never fallen for the myth of the Chinese abuse of human rights that the Americans have. Europeans are much closer to the source, and can see for themselves.
Unfortunately, the Chinese diaspora to America was made up mostly of dissidents, and they carried a very biased message with them. They are, after all, well, dissidents. There is a far greater flow of average Chinese citizens to Europe, with a very different viewpoint. Italy, for instance.
No, I am not misrepresenting BRICS. It is now a photo-op setup designed to offset the publicity that the G7 gets. In the beginning, it had a purpose - to establish the renminbi as a global currency. That has pretty much fallen by the wayside, as the individual countries proved to be far more loyal to their own currency. and did not want to give up the control of currency from America to China. It also had the purpose of diverting control of other world economic institutions away from America, as you stated, and to alter the global rules to be more favorable to them. Now that America has pretty much abandoned these rules, this purpose has also been met. America has pretty much lost control of the greenback, and I expect within a year or so there will be a greenback exchange outside of America, controlled perhaps by Geneva or even the Cayman Islands, as American money gets very much afraid of the instability in money markets that America presents. World American money wants the greenback to be worth a dollar, not a value negotiable IOU that may or may not be honored that the Republicans are trying to make it.
My bet is on the Euro or some offspring as becoming the next global currency. I think the world now trusts Europe more than they trust America or China, now that Europe is ‘coming of age’ again.
China is quickly losing the reputation of the world manufacturer. China is instead turning to domestic markets. It wants to export high value products like automobiles, airplanes, ships, and machinery. Remember the movie “I, Robot” and the NS5? China is now mass producing the 1.0 version, with legs that work like human legs.
It is actually other East Asian countries that are now the world manufacturer for low to mid value goods. Vietnam is rapidly developing an export market for manufactured goods, in part replacing Chinese goods in our marketplace. Look carefully at the ‘Made in’ notations of current products - they are no longer almost exclusively Chinese.
Then one would expect the bond rate to climb, but it is staying relatively constant between 4% and 5%, When it comes to paying for imports of American product, that interest cushions the blow. We end up buying American product with their own money.
Your focus on the current bond overlooks the market’s forward looking nature. Yields are stable because they reflect a consensus that the Fed will eventually cut rates to avoid a recession which is a precarious assumption. The moment inflation proves stickier than expected or the US debt trajectory worsens, we could see a violent repricing happening. It would lead to a bond vigilante reaction where yields spike suddenly and crater the value of existing holdings.
The whole idea that interest payments cushion import costs only works if the Canadian dollar doesn’t weaken alongside or faster than the USD in a crisis, and that is not at all guaranteed. When a crisis hits, all assets correlated with the US including our bond portfolio would suffer together. Meanwhile, the only sector of the US economy that’s doing well are the tech stocks, and that’s just a handful of companies passing IOU notes around in a circle. The rest of the economy is showing deep imbalances with weak consumer savings, shrinking industrial output, and persistent inflation in services.
The US is funding massive deficits in a high interest rate environment, and that can’t go on forever. The war on Iran could act as a catalyst for the whole house of cards to come crashing down because it’s driving the price of energy through the roof. The resulting economic crash in the US could be far worse than 2008, and at that point we’d be left holding the bag.
I am not sure who ‘we’ is that is ‘holding the bag’. And I am not sure that you are not still stuck in the last century.
Most knowledgeable people acknowledge that the Chinese economy is closing in, if not already passing, the American economy. But then they assume it is somewhere around a 50-50 split of the world economy. Well, it is not a 50-50 split, it is not even a 40-40 split. It is more like a 25-25 split, with the other 50% divided among, as Carney called them, middle economies. But those middle economies, as Carney also pointed out, (although not directly) control around half of the global GDP, twice as large as either the American or the Chinese economy individually. That is the New World Order. At the end of last century, all of the economic indicator pie charts had America with 80% or better of the charts, the rest of the world 20% or less. Now, America has 30% or less of the same charts, rest of the world 70% or better. The previous ‘Rules’ were all about keeping America on top. Those rules are no longer keeping America on top, so America is ignoring them. America is trying to make the new rules, in order to stay on top, without realizing that America is now far, far from the top, and just is not in any position to enforce these new rules. The rest of the world is ignoring these new American rules just like America is ignoring the old rules. The more they ignore America’s rules and make their own, the more America suffers by the non-enforcement of the American rules. Americans absolutely refuse to play by anyone else’s rules, and so they are just being left out of the game. The rest of the world is getting away with it today, when they could not get away with it last century, because of that 70-30 reversal. America just does not have the economic clout it had last century. Instead, the rest of the world now has that clout. And it is not just about China, it is about every other country. America has no hope of ever being on top again… The house of cards has been tumbling down in America for decades, it was just covered up by false propaganda while the really big money fled the US for greater pastures.
I am not sure if you are following what China is doing, but it is a lesson for all nations. Just a little while ago (20120-2016), it had around $1.3 trillion in American treasury bills. Now it has around half of that. Even Japan has more American debt that China does. In other words, China cashed in the debt holdings as it came due without buying more. That is a lot of money that America gave to China, that China used to offset the impact of American tariffs. Instead of Americans buying Chinese goods and sending money to China, Americans just sent China the money instead, no purchase necessary.
So as America falls, those countries that have driven up their share of the US debt can now follow China’s lead. Take their money out of America by cashing in the bonds without buying more. That is around $3.8 trillion that is flowing out of America without them buying a single thing. At the turn of the century, Americans not buying anything from the rest of the world would have caused economic collapse in those countries. Today, those countries can sell to the rest of the 75% of world GDP without selling a thing to America. That is some cushion.
Carney was not the first, but he was certainly arguably the most influential, world statesman that finally pronounced ‘The King has no Clothes’. When the dust settles, I suspect America will end up splitting in at least two, if not three or more, parts, if history has anything to say about it. Failed states inevitably end up in pieces. Then, countries that are holding US debt can take payment in assets (land), not money. After all, it is these other countries that are now making the rules.
We as in the working class in Canada. That’s who always pays the bill when there’s an economic crash.
I generally agree with what you’re saying regarding the US and China. However, I’d note that the actual split is between G7 and BRICS, and BRICS have already surpassed G7 in terms of PPP measure. BRICS represents the Global South, and it happens to be where majority of human population is, where the resources are, and where most of the industry is. Majority of Global South economies economies are aligned with China now.
What Carney appears to be focusing on are former vassal states that were under the tutelage of the US. Now that the hegemon is fading, the vassals are in trouble. What Carney seems to be trying to do is to rally Europe and Australia to form a bloc without the US, but one that’s not directly aligned with the Global South.
And of course GDP alone is not useful measure of anything. The quality of development matters. Western economies are focused on stuff like software industry and service economy. They’re not producing things people actually need to live. China is where all the manufacturing happens. They’re the ones who build solar panels, EVs, and high speed rail that developing world needs. That’s what makes China such a key economy for the world.
I also expect that the US is headed for collapse, and it’s likely going to be far worse than what happened to USSR. That said, it’s not at all clear that countries that hold US debt will be able to claw anything back once that happens. For one, the US is still full of nukes, so whatever states emerge out of it eventually will be nuclear powers.
The problem for Canada is more immediate though. Our economy is heavily dependent on the US right now. And unless we diversify and become more self sufficient, then we will be dragged down along with the US. Unless Canada takes steps to insulate itself then it will become one of these failed states itself when the western order finally collapses.
BRICS is more showmanship than substance. A photo op. India doesn’t have its own act together, never mind trying to work with another country. Frankly, India appears to want to be enemies with other countries, ANY other country, than to work co-cooperatively. Brazil and Saudi Arabia will go whichever direction the wind blows. And speaking of India, I think the nukes in India and Pakistan will prove to be the most unstabling.
I think the Venezuela situation will finally convince Brazil that it needs to start taking a proactive stance in South American politics, and not just stand by and watch America slowly creep southwards.
But my attention is all on Europe. The EU seems to be finally coming together, and the European Union nations can no longer be treated as separate entities, any more than California (same GDP as France) can be considered a separate entity. Actually, is is more likely that California WILL become a separate entity, while France becomes more integrated into the EU. Europe is finally getting over their collective PTSD from the two wars, and is now starting to think about living in the world again, instead of depending on the US for subsistence.
Yeah, that’s just completely false. The whole point of BRICS, and what actually makes it effective unlike G7, is that it’s not an ideological alliance. It’s a framework for countries to do trade. And trade within BRICS has been exploding.
Meanwhile, the EU is very clearly dying at this point. Energy prices were already sending European industry into a terminal decline, and Iran war has put the whole thing into an overdrive. Not to mention the fertilizer crisis during the planting season which could easily result in food shortages by fall. GDP is a completely meaningless metric because the quality of development is what matters. European countries do not produce things their people need to live. And what’s actually happening in Europe right now is that nationalist parties like AfD, RN, and Reform are dominating their politics. All these parties are extremely nationalist, and they are openly hostile to the whole idea of EU. The liberal center in Europe is collapsing along with the standard of living.
An interesting take on Europe. The up-and-down manufacturing statistics are almost exclusively in the automotive sector, which has experienced a lot of turmoil related to the supply of fuel. But what will change that is the rail line between China and Europe. This transportation route makes China far more important to Europe for trade than America. And the Nationalist/populist parties in Europe are tame compared to the Republicans in America. They may be dominating the news cycle, but not the direction Europe is going in. Russia pretty much threw cold water on any notion of Europe becoming less integrated. Once they get their energy sector under control, Europe will be okay.
The only thing the BRICS members have in common is their opposition to America as the dominant factor in global economics, and as the decline in America accelerates, the cohesiveness of BRICS will follow.
It’s very much not exclusively in automotive sector. Chemical industry, steel production, and all other sectors are affected. The reality is that manufacturing require energy as input, and with higher energy costs manufacturing in EU becomes uncompetitive compared to China because China is getting cheap energy from Russia. Europe basically made itself entirely dependent on American energy now, and that’s only getting more expensive for them. The US is also actively trying to poach European industry to boost their own economy.
China would be the natural trading partner for Europe, but Europe is still unable to break from the US and act in its own interest. Before the war in Ukraine started, Europe was becoming increasingly integrated with the east economically. They were getting cheap energy from Russia, and manufacturing from China. This allowed European economies to thrive. Now that relations with Russia are broken, and relations with China are now tense.
And you continue to misunderstand the nature of BRICS. As I already explained above, their interests are economic. It has little to do with politics or America. Countries in BRICS see mutual win-win trade relations that boost their economies. That’s why India does a huge amount of trade with China while having little in common politically. As the US continues to decline, more and more countries will necessarily flock to BRICS because that’s where economic development is happening right now. And China is at the centre of it all because they’re the world’s factory building things everyone needs. They help countries build infrastructure like ports, high speed rail, and clean energy production. They supply cars, phones, and other electronics. And as the Global Majority develops, the demand for the things China produces will continue to grow. That’s the real glue that holds BRICS together.
Here are the statistics for Europe since 2014, Almost all sectors except automotive are pretty flat. Chemicals were hit by the Russian invasion of Ukraine, but are recovering. The EU is definitely in recovery.
https://www.globaltimes.cn/page/202508/1340956.shtml
Actually, China was getting cheap oil from Iran, but that just changed dramatically. Now, Europe is looking at Canada for future off-oil energy supplies. and is returning to nuclear, but using small scale nuclear reactors. I would hardly say the European relations with China in economics are tense. Human rights, maybe, but Europe has never fallen for the myth of the Chinese abuse of human rights that the Americans have. Europeans are much closer to the source, and can see for themselves.
Unfortunately, the Chinese diaspora to America was made up mostly of dissidents, and they carried a very biased message with them. They are, after all, well, dissidents. There is a far greater flow of average Chinese citizens to Europe, with a very different viewpoint. Italy, for instance.
https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Industrial_production_statistics
And the regularly scheduled trains between China and Europe are expanding.
https://english.www.gov.cn/archive/statistics/202506/21/content_WS6856a81cc6d0868f4e8f384f.html
No, I am not misrepresenting BRICS. It is now a photo-op setup designed to offset the publicity that the G7 gets. In the beginning, it had a purpose - to establish the renminbi as a global currency. That has pretty much fallen by the wayside, as the individual countries proved to be far more loyal to their own currency. and did not want to give up the control of currency from America to China. It also had the purpose of diverting control of other world economic institutions away from America, as you stated, and to alter the global rules to be more favorable to them. Now that America has pretty much abandoned these rules, this purpose has also been met. America has pretty much lost control of the greenback, and I expect within a year or so there will be a greenback exchange outside of America, controlled perhaps by Geneva or even the Cayman Islands, as American money gets very much afraid of the instability in money markets that America presents. World American money wants the greenback to be worth a dollar, not a value negotiable IOU that may or may not be honored that the Republicans are trying to make it.
My bet is on the Euro or some offspring as becoming the next global currency. I think the world now trusts Europe more than they trust America or China, now that Europe is ‘coming of age’ again.
China is quickly losing the reputation of the world manufacturer. China is instead turning to domestic markets. It wants to export high value products like automobiles, airplanes, ships, and machinery. Remember the movie “I, Robot” and the NS5? China is now mass producing the 1.0 version, with legs that work like human legs.
It is actually other East Asian countries that are now the world manufacturer for low to mid value goods. Vietnam is rapidly developing an export market for manufactured goods, in part replacing Chinese goods in our marketplace. Look carefully at the ‘Made in’ notations of current products - they are no longer almost exclusively Chinese.