The Duran Podcast - Bidenomics imbalances. China and Russia, industrial surge

Episode Date: May 7, 2024

Bidenomics imbalances. China and Russia, industrial surge

All right, Alexander, let's talk about the global economic situation, or maybe we can focus in on the economic situation in the U.S., maybe discuss the economic situation in China and maybe even talk a bit about what's happening with the economic situation in Russia as well. But let's start things off with the U.S. and what's happening in the United States. Well, what we are seeing play out, it seems to me, in this election year, is that the cost of binomics, if one can dignify the policy of the administration by word, that the costs of Bidenomics are increasingly starting to show. Now, from the moment this presidency was elected, came to office back in January 2021, we had been discussing on the Duran, the fact that it has enormous tendency to overspend. And it keeps the economy floating on a vast amount of spending. And we said back in 2021 that that was going to cause inflation problems, which it did.

And then when the Biden administration decided to launch an economic war against Russia, disrupting energy supplies in Europe and all that, we said that that was going to cause inflation to go up still further, which it did. And the administration has since then continued in its overspending ways. It's running massive budget deficits. It's putting up debt at the rate of a trillion dollars every three months, apparently. And the result, surprise, surprise, is that inflation is turning out higher than everyone had predicted that it would at this point in the economic cycle.

Everybody except us, by the way, just to make that point. And this is what happens. If you go on spending money in this kind of way, at this kind of rate, spending money beyond the capacity of the capacity of the, economy to absorb that money, you are going to get higher inflation. Now, that has all kinds of consequences. The way the administration is spending money, many people have been talking about the fact that it's trying to achieve some great industrial rebound in the United States. In fact, as we've seen, industrial production has been either flat or contracting at various points, over the last 12 months, it is not creating an industrial rebound.

What it is doing is it is sustaining some parts of the asset structure. It's led to a runaway boom in AI, you know, a bubble in the AI technology sector. But it's not actually addressing the underlying economic problems of the United States. and the people of the United States, what they're having to face is that they're paying more for the goods they buy in their shops, which is what ultimately inflation is. It is also means that the Federal Reserve Board has had to put off its plan apparently to cut interest rates because you can't cut interest rates aggressively when inflation appears to be rising.

And of course, the combination of rising inflation, high interest rates, stagnant or falling production is not a good one in an economy in the run-up to the election. And already some people are talking about stagflation again in the United States. But it was completely predictable. What all this spending has done, even as living standards have either fallen or failed to increase for most people, because prices are so high and mortgage costs and other debt costs are so high. What it has done is that despite all of that, is that it has gused up the GDP figures, which is probably what a lot of this was intended to do. do because if you spend so much money and have it sloshing around the economy and you start

getting booms, you know, in certain assets like AI stocks and that kind of thing, well, then you're able to say that your economy is growing and you're able to, you know, bring out claims that, you know, you achieve 2.7% GDP growth in one particular year. But if you look behind that and look at what is going on in the actual economy, you could see that Bidenomics is creating more imbalances within the US economy all the time and more stresses. And you remember last year we had a crisis in the regional bank system. Three regional banks failed, one after the other. That crisis, it seems, has never fully gone away with interest rates remaining higher for longer than many people had expected. Apparently, the stresses are starting to grow. And one admittedly small bank in Philadelphia

Republic Bank there has just failed. So, you know, it's, I'm not suggesting, by the way, that that's necessarily a precursor to a major banking crisis, but you never know. But the point is that we're seeing the signs of stress begin to increase. And it's entirely predictable. It's what you get if you run the economy hot continuously in the way in which the Biden administration has been seeking to do. Yeah. How about the economies of China and Russia? Because they are indeed showing quite rapid growth. Indeed.

What's going on there. Well, this is what's so interesting because, of course, they are actually showing growth. But of course, it's. growth, which has been completely different, the growth that we have been hearing so much about in the United States. As I said, in the US, GDP growth with either stagnant or falling actual output in the real economy. In China and Russia, we are seeing growth, but it's mostly happening in the actual, in the real economy, the part of the economy that actually makes things. So we're seeing a major industrial surge in Russia. This is based on a big investment boom.

We've had comments about this over the last couple of days from the central bank chair, Elvira Nabilina. She's just been talking about this, that there is a major investment boom going on in Russia. There is also, we've had more comments also about from Putin. Putin is already saying that Russian GDP figures are going to be revised upwards this year, in other words, that the economy is surpassing its targets. But this is a proper, actual, genuine industrial surge. And, well, we've discussed the reasons for it many times. Military production undoubtedly plays apart. Mostly, however, it's been caused by the way in which the economy is adjusting and responding to the sanctions challenge and the way in which the decoupling has actually facilitated growth

in parts of the economy and the fact also that with the opportunity to take money out of Russia now foreclosed. There is more money in Russia to invest. So that's why we're seeing a growth there. Now, in China, we're also seeing growth. And again, it's in manufacturing. And this is a product of policy decisions that the Chinese government took, which are massively criticized by all sorts of people, George Soros, for example, that the Chinese government wasn't bailing out the real estate market, where there had been a bubble, the Chinese government let that bubble run its course, ensuring that investments started to flow back into manufacturing and industry, and we're seeing industrial growth return and return strongly. And the result is, again,

a leap in manufacturing. And of course, that's leading to complaints from the United States that the Chinese are now engaging in overcapacity. They're, they're, they're, they're, because their manufacturing growth is so strong, this is supposedly creating overcapacity. And that's going to affect the economic position, not just of the US, but apparently the whole world. The whole world is going to suffer as a result of Chinese overcapacity. But, you know, it's, it's, it is the mirror image.

of what you see in the United States. In the United States, it's growth without development. In China and Russia, it is development growth. It is actual development growth based on strengthening the actual productive sides of the economy. It is most astonishing. And to those of us who have studied economic history, the Chinese and the Russians, especially the Russians, perhaps, are looking increasingly like they're running their economy,

the way the Americans used to do once upon the time, in the period when I studied the American, the period when I studied the American economy from the middle of the 19th century until the middle of the 20th. Whereas the Americans are running the economy in a completely different way, in a way that from my vantage point in Britain is looking very much like the way the economy has been run for the last 50, 70 years in Britain.

And it's, it's, it's astonishing contrast. And, you know, it shows how imperialist, imperialist, imperial policies, foreign policies lead to imperial economic policies. And as far as I can see, the outcome of the moment doesn't look good in both respects. And instead of the U.S. trying to take a step back, the Biden White House taking a step back and trying to fix beginning, starting to fix, because it could be a long road, but starting to fix the problems that the economy does have, they said yell into China and blink into China to try and tell China to stop. stop producing so much China because that's not looking good for us. I mean, it's instead of trying to fix their own problems, they go off to China to try and get China to stop its progress. That's a strategy. It's an absurd one. It shows again a fundamental failure to understand how an economy can be turned.

and be made to work. And what is utterly exasperating is that the ability, the potential to turn the US economy around is absolutely there. There is still the engineering and technological strengths that used to exist. They're still just about there. There are major problems now on the production side. but the way you address those is by addressing the problems of the financial system and doing what the Chinese and by the Russians have recently done and which the US in the days of say J.P. Morgan, you know, the original J.P. Morgan, Mr. J.P. Morgan also used to do, which is used the financial system to support the real economy. rather than to have it engage in bubble generation,

as it is increasingly doing. You could probably do that as well. And I suspect that if you went about doing it purposefully in the way that the Chinese and the Russians have done, you could probably turn it around. But no, that's not what this bunch in the White House are doing. They don't understand these things. think that if you set up an inflation reduction act, give yourself, which is, as you notice,

not reducing inflation, just as we said it wouldn't. It's in fact creating inflation. And, you know, start giving all sorts of, you know, tax advantages and handouts to companies to develop green technologies and that kind of thing. But that in itself is enough to create re-industrialization. And of course it isn't. I mean, what you need to do is to create a situation where it is advantageous to people to invest properly in the real economy. And that's not what's happening in the United States. And we did that program some time ago, that immensely interesting live stream with David Sachs. And he talked about the entrepreneurial culture in the United States, which absolutely still exists.

If that was used properly, again, you would see the results very fast, but of course it's not. And this administration just doesn't have a clue how to do that. And of course, what they're doing at the moment with a high inflation, high interest rate, before long, by the way, high tax, because that's coming, approach. Well, that's going to be entirely negative for all of these things. The high taxes are definitely coming if the administration. is re-elected in November. Just saying. Not only high tax, but high taxes on capital gains. Yeah, absolutely. Just talking about investing. Absolutely. High taxes on capital gains, that's going to hurt. Absolutely. It's going to hurt a lot. The investment side of things.

Absolutely. Absolutely. And by the way, we talked about the U.S. Of course, in Europe, things are even worse. We've talked about that long a lot. The inflation is higher here, also, which should surprise no one, and the manufacturing PMI numbers that are coming out are terrible. I think in Germany is 42. I mean, anything under 50 points to a contraction. In Germany, it is 42, even as the German government has been trying to stimulate the economy to some extent, which has resulted in a little small uptick in services and consumer spending. But in fact, as we see the German industrial, the mighty German industrial machine is continuing its contraction.

And that's going to continue when it's affecting all of Europe as well. But again, don't look for a way out. Do the opposite in some ways of what Yellen and the administration did. The Americans went to China and said, you know, stop doing what you're doing. You've got overcapacity. We must, your, your economy is too big. Your industry is too big. The Germans, the Germans, Schultz went to China and said, yeah, no, no, we were all these problems. Please come and help us. Develop our economy instead. I mean, you know, completely contradictory messages. But in neither case, looking at what is causing

the problems domestically and trying to fix them. Neither the Germans, the German government, nor the U.S. government at the moment seems to know how to do those things. Well, Schultz went to China and he was asking for China's help, but then a couple of weeks later, they're arresting Chinese spies. And they're saying that China is spying on Germany. So, I mean, you know, industrial espionage and stuff like that. And Schultz tells the German people that all of the economic problems that Germany has are all because Putin decided to turn off the gas.

Yeah, I mean, it's incredible that he says this. He says this over and over again, yeah. I mean, you know, it is a good example, you know, the way in which if you repeat a lie often enough, it starts to be accepted as the truth. That seems to be the tactic that he's taking on. I mean, it is astonishing that he says that. And it, you know, it tells you,

an awful lot about the state of things in the West, that that lie basically is going on challenged. Well, it doesn't only go on challenge, but when you have political parties starting to gain ground, like the Aevde, you throw a couple of China spy scandals in the mix, and there you go. Absolutely, exactly. All right. We'll leave it there.

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