Three Uneducated Contrarian Economic Predictions

Blog economic expert Boy

Bringing Catallaxy back to it’s origin as an economics blog, I court derision by putting forth the following uneducated economic predictions:

  1. Stimulus will stop having any effect, but that won’t stop further stimulus.
  2. Interest rates will rocket skywards sometime before 2027.
  3. Our china problem will have the opposite of the expected effect, in that Western investment in China will increase in the years to come.

“You’re no economist Arky, what do you base these stupid contrarian predictions upon”?

I base them on the following reasons:

  1. A hunch that as debt increases the portion of it going towards doing anything much productive declines, and as productive activity is skewed towards stupid things, more debt is required. I have no evidence for this except my observation that lately we seem to be spending increasing amounts of money on utter rubbish.
  2. My predictions on interest rates rest on some fiddling around with some charts on the long term debt cycle I did about with a year or two ago.
  3. I base my china prediction upon the loss of a further huge chunk of US manufacturing over the course of the covid stupidity, and the fact that history proves that in these things the opposite of what one expects usually happens.

Actual experts in the mysteries of the exchange of goods and services and the divination thereof are invited to comment and give this topic some real expertise.

17 thoughts on “Three Uneducated Contrarian Economic Predictions”

  1. I think you’re pretty much correct.

    1. Stimulus never “works”.
    2. Probable, but predicting the end of QE is difficult. Also keep in mind the cost of credit is not necessarily the “risk free” rate plus a small markup. Credit may be scarce even if money is cheap.
    3. I can’t see how that is wrong, but I think Mexico will benefit greatly.


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  2. Hey, Arky,

    Aside from running a cattle place (Methane R Us) and banging around between the city and the bush, I’m actually an economist (trust me here) who spent the past 30 years seated in front of a Bloomberg screen (trading in anger, sometimes lots).

    Risking similar derision, on points one and two I’m with you 100%, except that I could not describe the debt build-up under Morrison as being even of diminishing value, since it had to have a positive value to start with. It’s just one of the burgeoning catalogue of reasons I’m dedicating the next stage of my life to seeing off he and his team. Hopefully they’re sin-binned well and truly into opposition. On your estimate of higher rates, I would also suggest you’re too lagged. The underlying inflation data (nobody in markets worries about headline CPI) released this morning shows that even in trimmed-data settings inflation is stirring, and 3-year govvies (ACG Securities) have just passed above 1% in morning trade.

    On China, I’m not sure it’s easy to predict as you have. If advances in 3d and robotics is as those who know better than me say it is there’s not much reason to produce everything in China aswe currently do. My guess is that costs of transport become a more prominent feature in where manufacturing is sited, which could play more to US and European manufacturing gaining a larger share of the global savings pool.

    Kind regards
    Tex


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  3. The government can’t increase the interest rates, the reposition of all the $400,000 houses now with $1,500,000 mortgages would collapse the economy. This place is stuffed.

    China understands the west is corrupt and weak and will continue to bribe business leaders to invest there, and if they do not they will be disappeared, till a more compliant CEO makes the rights decision.

    I have no idea what the answer is. Sell up and move, but as asked in a previous post to where?

    Am no economist just a dumb miner.


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  4. Interest rates will rocket skywards sometime before 2027.

    Well before then, Arks. Increases in interest rates are driven by real inflation. Inflation is largely driven by constrained supply. The inflation we’re seeing in the US (thanks entirely to that illegitimate syphilitic geriatric and his Mos Eisley cantina dwelling sidekicks) is looking ominous, to say the least. Inflation locally will be driven by supply chain shocks. We’re already seeing massive price increases in a range of imported (and some domestic) goods, which is likely to worsen if demand for them recovers over the next twelve months. As for the RBA kicking this poop filled can down the road, something will have to give eventually. Again, I think it will be sooner rather than later.

    As for obscenely indebted homeowners suddenly realising they can no longer afford to pay their mortgages, get ready for the mother of all domestic economic meltdowns. Which if you’re the chinese, I would have thought was the entire point.

    As for “stimulus” it’s never produced any positive outcomes whatsoever. But hey, next time they’ll do it right, I’m sure. As for the third point, I’ll pass.

    I’ve made all these observations above with the disclaimer that predicting anything is difficult, even more so if it’s about the future.


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  5. China is undergoing a a hard left turn under Xi.

    That increases the risk to foreign investment.

    And given supply chain issues and China’s military posturing, I agree with dot, Mexico is likely to benefit from any further off-shoring of American manufacturing.


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  6. Someone’s doing their best to rock the Chicom economy .. last three items I’ve bought on Ebay from China …… haven’t turned up! …… duuuuuuuuuh!


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  7. Interest rates will rocket skywards sometime before 2027.

    Not going to happen. Government right now finances itself by keeping interest rates as low as possible. If Treasuries ever rose to say 5% the US and all other Western countries would collapse into insolvency.

    Inflation will rise of course, since if inflation is higher than interest rates government get its money for free.

    Lira Crashes To All Time Low After Turkey Shocks With 200bps Rate Cut Despite Soaring Inflation (21 Oct)

    To be fair, the writing has been on the wall for the past three years, ever since Turkey’s authoritarian ruler and de facto central bank head Erdogan started firing Central Bank governors any time they refused to cut rates to fight inflation in compliance with Erdoganomic, a reminder of which we got just last week when Erdogan fired three more Turkish central bankers, sending the lira plunging.

    The Left in the US is no different to Turkey, and just as fascist. But they’re a bit more sly and organized about their ways of doing the same thing. In their case they appoint a lefty deep state comrade to do the deed “independently”. Hence Yellen for example.


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  8. We have had a rerun of the roaring twenties and are now entering the middle thirties except that the Celestials have replaced the Nazi’s so yr first two are spot on but the Celestials have to either pull their heads in or continue to expand by employing another Great Asian co-prosperity type scheme that should bring them undone. They are getting desperate and have doubled the price of their export steel so hang on tight.
    moderated

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  9. 1. Stimulus has never worked.
    2. Maybe rates will rise a tad next year?
    3. Could China suddenly implode like the USSR did in the late ’80’s? Massive military spending and the economy based on fantasy.


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  10. There won’t be an economy. You will own nothing. You may be allowed a modest income if you’ve been good but you won’t have any spending power. And there may be a vastly reduced population. Unless…


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  11. 1. Stimulus has never worked.

    works for the banks and the big asset holders

    2. Maybe rates will rise a tad next year?

    yep, right along with taxes and inflation.

    3. Could China suddenly implode like the USSR did in the late ’80’s? Massive military spending and the economy based on fantasy.

    china has done its homework to ensure it does not follow in the USSR footsteps, it has made itself the world’s factory. We are entirely dependent on china for pretty much all basic goods and many rare resources.

    Well done kleptocrats and other cadre of useful idiots, china dangled dollars in front of your greedy noses and you led us into the colosseum of communism.


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  12. china has done its homework to ensure it does not follow in the USSR footsteps, it has made itself the world’s factory. We are entirely dependent on china for pretty much all basic goods and many rare resources.

    First, China is not the sole manufacturer, other Asian countries have industrialised recently and are giving them stiff competition.

    Second, China is depopulating fast due to the flow-on effects of the one child policy. That’s why they are enslaving the Muslim Uyghurs and Christians in their factories. The ghost towns are another indicator of weakness, not strength.

    Third, they are banging the war drums over Taiwan to distract from the above and to deflect opprobrium over their human rights abuses. A secure and confident regime does not do what they are doing.

    Sadly Biden’s administration is their accomplice rather than a deterrent and a counterweight. Dangerous times between now and 2024. Xi knows he only has until then and is rushing to change the world in his favour.


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  13. “The inflation we’re seeing in the US (thanks entirely to that illegitimate syphilitic geriatric and his Mos Eisley cantina dwelling sidekicks) is looking ominous,…”

    You think it’s bad now? If they (US) pass the new tax laws that tax you on unrealised capital gains, they will crash the housing market as people sell in order to avoid/pay taxes, and no-one will want to buy. Bitcoin will go ballistic, maybe even US$1M by end of 2022.

    “If Trump does a phoenix in 2024…”
    If Virginia and/or Vermont Governorship goes republican, the Dems will panic and backpedal like you’ve never seen before – and in VA, some polls already have the R in front by a significant margin (56 – 34, IRRC). But even that won’t save Dems in 2022 – the every-decade “re-districting” is almost certainly going to disadvantage them in the house, and that’s even before the usual “mid-term backlash”. With all the “Let’s go Brandon!” chants going on, it looks like a huge loss, and maybe even lose control of the senate too. Providing the voters “primary” out the establishment RINO’s and put populists in their place, it might turn around faster than anyone thinks possible – we’ll see.


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  14. “Someone’s doing their best to rock the Chicom economy…”

    They are doing it to themselves, no assistance required.
    They NEED a war to distract the population from their own housing bubble, where there are quite literally ghost cities, where no-one lives but plenty have “invested” into. If that goes under and millions of the plebs lose everything…

    Insufficient electricity also leaves them between a rock and a hard place – save it for industry to pay the bills, and the peasants will revolt. Give it to the peasants, and there will be no jobs and no cash. It’s lose-lose, unless they can start a “patriotic war” over, say, Taiwan. Oh, lookie…


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