The rest of the world is in a recession that pundits and the media refuse to admit. Globalists caused it. Interdependency between countries instead of self-sufficient, independent nations caused it. Low birth rates in industrialized countries for the last 50 years caused it.
The demographic problems from low birth rates will affect everything in the U.S., from solvency of Social Security to students enrolling for college to how many cars and shoes are sold in 10 years. The number of graduates from high schools will have decreased by 15 percent in 12 years, and the economy will follow suit within another 12 years after that.
Look closely. More than 25 countries now have zero or negative interest rates, which includes the Central Bank of Europe, Japan, Sweden, Denmark, Switzerland and France because of their weak economies. While the American economy remains strong because of actions taken by President Trump, those foreign countries are holding down the profits of U.S. companies that sell products to them. That is driving down stock prices in the U.S. just as has been the case for foreign stocks for the last two years. Foreign economies will eventually affect America’s economy as foreigners buy less from U.S. companies because of those nations’ weak economies.
Today, the short term rates set by the Fed are 2.25 percent, while the market short term rates for bonds are at 1.6 percent. Yields (interest rates) on 10-year bonds are now lower than 5-year bonds (inverted). Why are market bonds less than government issued Treasuries? It should be the other way around. Because there is more money to purchase bonds and to place into savings than the money being requested for loans to buy products. At the current pace, mortgage rates will soon be near zero. Therefore, investors almost have to pay institutions to take their money (negative interest rates).
As interest rates decrease, stock prices should increase as they did 100 percent while Barack Obama was president. So why are stock prices decreasing now? Because the rest of the world is in a recession, which affects U.S. globalist companies.
Where is the money coming from? Europe and China. America is still a better place for investors than foreign markets – so foreigners are pumping tons of money into U.S. Treasuries and bonds, which drives down interest rates despite actions by the Fed.
What can the Fed do? Can it lower interest rates, buy Treasuries and print money now as it did to drive up stock prices more than 100 percent for Obama? No. Fed rates are already higher than market bond prices. The Fed will be forced to lower interest rates just to keep up, not to invigorate markets and the economy. The Fed is now following, not leading. The Fed almost looks helpless.
Europe and China are trying to devaluate their currencies, manipulate their currencies, in order to sell more products to the USA to offset their shrinking internal markets. Trump gets it. According to the latest survey by Fortune of the 500 CEOs in the Fortune 500, 80 percent of them agree with what Trump is doing to fight back against China, to fight back against currency manipulation. Yes, tariffs might hurt their companies, but overall, they agree with what Trump is doing. That was not a poll. It was a survey. Eighty percent of the CEOs of the 500 largest companies in the U.S. agree with how Trump is handling China. They see it up close and personal.
So what is the answer? Corporations in the United States are lobbying for more and more immigrants just as they have done since 1980, instead of implementing programs to increase the citizen birthrate and instead of forcing the U.S. government to do the same. Europe turned off the immigration machine as nationalism is sweeping across the world, e.g., the U.K. with Brexit. They are all learning that immigration costs more than it is worth; it costs more in government-provided benefits, depressed wages for citizens, increased crime, and destruction of cultures. Theresa May is gone. Angela Merkel is gone. Both replaced by nationalists. Both France’s Macron and Canada’s Trudeau now sound like nationalists. Unless the birthrate issues are solved, all of the Western world will suffer – either from more and more immigration that destroys countries and cultures, or from decreasing demand for products as societies age and die.
The trade war between the U.S. and China is minor, less than 0.3 percent impact to overall prices as stated by the Fed. America will win that battle as China needs access to the U.S. market more than the U.S. needs products from China – which has a $500 billion trade surplus – and as competitive product substitution replaces products made in China.
These unnatural negative interest rates in foreign countries are the wake-up call. Can you hear the alarm ringing? Wall Street hears it. Look at stock prices and bond prices. Do you hear the alarm?