Paul Krugman and Other Mainstream Trade “Experts” Admit They Were Wrong About Globalization (It Hurt American Workers And MZM Money Velocity)

Paul Krugman, Nobel Laureate in international trade and New York Times op-ed snarker, has finally admitted what many of his already knew: globalization hurt middle class workers more than they thought it would.

Globalization has been a hot topic in business schools since the 1980s, particularly since Bill Clinton favored the North American Free Trade Agreement. NAFTA was opposed by Presidential candidate Ross Perot who argued:

We have got to stop sending jobs overseas. It’s pretty simple: If you’re paying $12, $13, $14 an hour for factory workers and you can move your factory south of the border, pay a dollar an hour for labor, … have no health care—that’s the most expensive single element in making a car—have no environmental controls, no pollution controls and no retirement, and you don’t care about anything but making money, there will be a giant sucking sound going south. … when [Mexico’s] jobs come up from a dollar an hour to six dollars an hour, and ours go down to six dollars an hour, and then it’s leveled again. But in the meantime, you’ve wrecked the country with these kinds of deal

In addition to losing middle-class jobs to Mexico and subsequent outsourcing of jobs to China, we have seen a perpetual decline in Money Velocity (GDP/Money Stock) since 1995.

The GINI ratio of US income inequality took a jump-up under Clinton and NAFTA. Although financialization contributed to income inequality as well.

Yes, globalization has helped suck jobs and wage growth out of the USA contributing to a decline in money velocity. So when snarky NY Times op-ed writer Paul Krugman admits that globalization is harmful to American workers (and money velocity), we better rethink what we are teaching in business schools.

Including over-reliance on The Federal Reserve to bail-out flawed Federal policies.

Q3 GDP Forecast To Be 35.23% (Atl Fed), 14.07% (NY Fed), Q4 GDP Forecast To Be 4.820% (NY Fed)

The good news is that 1) Q3 GDP is forecast to be 35.23% (Atl Fed) or 14.07 (NY Fed) and 2) Q4 GDP is forecast to be 4.82%. Ok, not as YUGE as Q3 GDP growth, but still respectable.

The average QoQ Real GDP growth is 2.4% since 1984. So, 4.82% is still over 2x the average GDP since 1984.

Revival! Gold Is Rallying In Part To Never-ending Fed Stimulus (Rate Increases On Hold Until After 2023)

Gold’s rally is showing signs of a revival.

The spot metal has posted two straight weekly gains, and at least one technical signal is pointing to further increases. Bullion’s moving average convergence-divergence indicator, a gauge of price momentum, crossed above the so-called signal line last week for the first time since early August in a bullish sign for traders who follow price patterns.

Of course, never ending juice from The Federal Reserve is helping.

And the juice isn’t going away until after 2023 (according to the Fed Dots plot).

Its a shame for the people of Venezuela that they can’t pump gold instead of oil given that their 9.25% sovereign bond has fallen from over $100 in 2013 to $9.28 today.

23 European Nations Have Negative 2Y Sovereign Yields (Covid Lockdowns Strike Again!)

Things are tough in Europe. Slovakia has an even lower 2 year sovereign yield than Switzerland, the previous winner of low sovereign yields.

Even the UK has a negative 2 year sovereign yield!

Yes, that is 23 EMEA (Europe, Middle East and African) nations have negative 2 year sovereign yields.

The European Central Bank (ECB) rode to the rescue of the dissolving economic prospects of Europe.

The French Foreign Legion to the rescue … of bad EU, ECB policies. And Covid.

German, Italian Banks Versus US Banks And Their Central Banks Balance Sheets (Deutsche Bank’s 6% CoCo Bond Now Yielding 14%)

The German banks Deutshe Bank and Commerzbank along with the Italian bank Banca Monte dei Paschi di Siena crashed after the global financial crisis in 2008 despite an enormous spike in European Central Bank asset purchases.

On the other hand, US banks benefited from The Federal Reserve’s massive balance sheet expansion, at least until Covid hit in 2020.

Deutsche Bank’s 6% CoCo (Contingent Convertible) bond was issued in 2014. Contingent convertibles work in a fashion similar to traditional convertible bonds. They have a specific strike price that once breached, can convert the bond into equity or stock. The primary investors for CoCos are individual investors in Europe and Asia and private banks.

The yield on DB’s 6% CoCo bond is now 14%.

Deutsche Bank’s price is sinking like the battleship Bismarck along with its earnings per share.

Then there is the gold spoofing scandal at DB.

A photo of Deutsche Bank’s headquarters from 2005 before the financial crisis and after the financial crisis in 2008.