STAFF NEWS & ANALYSIS
Goldman Ponders the Possibility of World Depression
By Staff News & Analysis - June 15, 2012

O'Neill's BRICs Risk Hitting Wall Threatening G-20 Growth … Even Jim O'Neill is asking whether the BRICs need reinforcing 11 years after he coined the term to describe the world's future powerhouse economies. O'Neill, chairman of Goldman Sachs Asset Management, says his thesis that Brazil, Russia, India and China would together increasingly buoy the global economy faces "a more challenging test" as investors dump the countries' stocks … Leaders attending next week's Group of 20 summit in Mexico are already expressing concern, with Brazilian President Dilma Rousseff warning June 4 that emerging markets can't carry the weight of the world on their shoulders. Rich-nation policy makers "are so wrapped up in their own problems they're praying some of this weakness is just temporary in the BRICs," London-based O'Neill, 55, said in a telephone interview. "If it's not, then it's pretty worrying." – Bloomberg

Dominant Social Theme: It's pretty bad. But maybe, somehow it will get better

Free-Market Analysis: There is surely a power elite that is trying to drive the world into depression. We would tend to believe it is succeeding. This latest squawk from Goldman Sachs is testimony to that.

Jim O'Neill, one of the founders of the BRIC paradigm, now questions whether Brazil, Russia, India and China can provide the necessary economic firepower (demand) to stave off a worldwide slump. He seems to have concluded that they will, though how he can arrive at this conclusion is a mystery to us.

Right question, wrong answer. (At least he asked the question.) It seems obvious what's going on, and O'Neill is either being stubborn or purposefully evasive. How do we know?

Well … we know the powers-that-be are driving the world into depression because of the system that has been set up! After a century of repetitive booms and busts, the impacts of monopoly fiat central banking are obvious. And as the booms and busts grow ever larger, the danger of world depression grows as well.

Finally busts predominate and the world falls into significant disrepair. Money doesn't circulate. Monopoly fiat has so distorted the larger economy that people are afraid to borrow and banks are afraid to lend. It happened in the 1930s and it is happening today.

One can argue whether the same system can be used to provide a faux resuscitation the world's economy (over time) but no matter the argument, it's not happening.

The inevitability of what's occurring is evident to anyone who wants to look. We've been predicting it, along with others – ever since the US's housing implosion was matched by European sovereign debt difficulties. Here's some more from the article:

China pared its growth target to the lowest since 2004, Standard & Poor's may cut India's investment-grade credit rating, Brazil is on pace to expand less than 3 percent for a second straight year and falling oil prices may hurt Russia. A prolonged slowdown in the four countries poses a fresh threat to a world economy suffering its weakest spell since the end of the 2009 recession, which the BRICs helped shorten by contributing about half of the international expansion since 2007.

While O'Neill is standing by his call that China will remain robust and the BRICs will together grow 7 percent this year after 7.5 percent in 2011, economists at Morgan Stanley, Bank of America Merrill Lynch and Citigroup Inc. are scaling back their forecasts for emerging markets.

In a sign of the economic threats surrounding the BRICs, Citigroup's surprise index, which measures how much data miss predictions, is at minus 81.10 for the group, down from 15.8 three months ago and the weakest of all its gauges.

There is no reason the BRICs should remain immune from the world's larger depression. Economies have not grown normally for years. They are interlinked via the false stimulation of monopoly fiat money that has distorted the entire world.

A century ago there were just a few central banks; today there are something like 150 along with the Bank for International Settlements to coordinate them. The idea that the world's centralization simply "evolved" is false.

The centralization is being driven by deliberate monetary policy. What it means is that when part of the world's economy begins to founder, the rest of the world's industrialized nations must inevitably follow suit.

With Europe and the US in a kind of ongoing contraction, there is not enough demand to drive BRIC economies. Countries like India and Brazil can continue to print money to "stimulate" but it won't help. The powers-that-be, by placing the world on fiat-monopoly money, guarantee the slow-motion debacle that is taking place.

The wheel turns, the mill grinds. In fact, as the economic debacle continues, the elites no doubt hope that the pressure will yield up additional cooperation for world government.

That is the end goal, apparently. The strategy is always the same. Create so much ruin that people are willing to accept any remedy, even world government, if it appears to hold out the possibility of a return to solvency.

Meanwhile, bought-and-paid-for monetary commentators like O'Neill will continue to deny what seems obvious.

The article (excerpted above) reports that O'Neill recently published a book entitled The Growth Map: Economic Opportunity in the BRICs and Beyond. In it he apparently reaffirms the ludicrous idea that the BRICs can continue to drive the rest of the world's economy.

He remains "relatively sanguine" that his world view is intact a decade since he and colleagues at Goldman Sachs predicted that the countries would join the U.S. and Japan as the world's biggest economies by 2050.

"The idea countries always grow at a ridiculous rate was never the case," O'Neill said. "The fact they've been disappointing for one or two quarters is neither here nor there."

But the reason the BRICs "ascended" was because of the faux-stimulation of monopoly fiat money to begin with. The same kind of monetary steroids that bloat economies also distorts them. Eventually the stimulative effect wears off and the reaction sets in.

O'Neill, like others in his profession, understands full well the impact of fiat money printing on economies. This is why he probably made his prediction about the BRICs to begin with.

It doesn't take a big brain to figure out that if you give a handful of people the ability to print endless amounts of money-from-nothing that the economies involved will expand. But O'Neill is apparently not honest enough to admit that the expansion is inevitably a phony one.

Growing economies in this way must surely lead to economic distortion and the eventual subsiding of the false boom. Whole industries – built on the euphoria of unlimited fiat – subside and collapse. This is what is happening now throughout the BRICs.

It doesn't matter then if rates are cut or not. No amount of stimulation can recreate the phony boom. It cannot be reflated, or not until the distortions are wrung out of the marketplace.

In neither the US, nor Europe – nor the BRICs, increasingly – are fiat-money distortions near being reduced. One can argue whether the elites have purposefully prolonged the current difficulties (by initiating too-big-to-fail bail-outs they surely have) but after a point the discussion becomes moot.

The world is as it is. Europe's crisis is not resolved. The US is mired in a terrible "recession" and the weakness of the BRICs shall likely only continue and expand.

Absent a tremendous reflation – that will only shove the problem down the road – the world seems headed for depression. O'Neill can continue to make the argument that the BRICs shall provide a powerful economic breakwater. We'd argue it has already sprung leaks.

After Thoughts

And unfortunately, those leaks are likely to turn into torrents.

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