John Rubino of DollarCollapse.com and FRA Co-founder, Gordon T. Long discuss
the effects of the rise in eCommerce along with the rise of technology and
the consequences we are facing from flawed perceptions of financial authorities.
John Rubino is author of Clean Money: Picking Winners in the Green Tech Boom
(Wiley, December 2008), co-author, with GoldMoney's James Turk, of The Collapse
of the Dollar and How to Profit From It (Doubleday, January 2008), and author
of How to Profit from the Coming Real Estate Bust (Rodale, 2003). After earning
a Finance MBA from New York University, he spent the 1980s on Wall Street,
as a currency trader, equity analyst and junk bond analyst. During the 1990s
he was a featured columnist with TheStreet.com and a frequent contributor to
Individual Investor, Online Investor, and Consumers Digest, among many other
publications. He now writes for CFA Magazine and edits DollarCollapse.com and
GreenStockInvesting.com.
The big retail chains are generally seen as pretty good barometers of the
health of "the consumer." And since -- in today's late-cycle debt-binge pseudo-capitalism
-- the consumer drives the economy, the numbers coming out of the aforementioned
retail chains should be cause for worry. Ecommerce companies like amazon are
making it easier and easier to stay at home. Women now are more and more buying
their clothes from the comfort of their homes which will soon make the need
for malls obsolete.
Furthermore by increasing the minimum wage rate in America, all of the fast
food chains have begun automating cashiers with kiosks. McDonalds' has already
begun doing this and this new direction has highlighted the lesser need for
human labor within the retail sector. Warehouses and factories used to employ
many people throughout the world, now with the rise of technology, and particularly
in America these places have become vastly automated. In many cases you do
not need bartenders, waiters, and cashiers. All of these tasks can be automated
through technology.
"I hate to be apocalyptic but the fact of the matter is we have multiple
storms that are all playing in the same direction and they are feeding
on each other as a link. To link monetary policy and cheap money to robotics.
If you are a CEO and money is this cheap, you are going to invest into
robotics. These trends have accelerated the shift to robotics and this
wave is going to shock people and leave many without jobs."
Monetary Policy
When interest rates are low it is a signal to the market to borrow lots of
money. Over the past couple of decades due to these low interest rates, the
businesses of the world have begun mass borrowing of money to build factories.
This mass overcapacity in turn leads to deflation. for example when you build
too much steel you cannot just stop operations at the given plant; the plant
must continue to run to at least break the variable cost, which in the long
run drops the price of steel.
"Deflation is a direct result of our attempts to create inflation through
easy money."
Cheap money was not going to bring demand forward any more than two years,
but what it would do is create a dramatic over supply. We have had $9 trillion
leveraged into the emerging markets that basically went into fueling overcapacity
for the past several years. When you get overcapacity you lose price power
and then cash flows begin to be depleted. This was easily predictable, there
was no economist that would say otherwise, however the mistake was that they
thought we had some sort of recovery happening or they ignored that and thought
Japan had the right approach.
"The people making high level financial decisions the past decade are
clueless. They have no idea what the consequences of their decisions are.
The people in charge now are getting exactly the opposite of what their
predecessors expected when they implemented QE, and ran massive government
deficits."
This is going to force another wave of major layoffs. We already have a gutted
middle class; we are killing the golden goose that actually buys consumer products.
Maybe what was really missed is that all of this economics was based on a standalone
country. We live in a globalized economy now that has labor arbitrage, and
the central banks have underestimated the global impacts of these policies.
"We are at the point where there are no more options. Anything we do
from now on will have some sort of unintended consequences that will come
back to bite us."
The Japanese Central Bank and the ECB both took steps to devalue their currencies
and they got the opposite result; the currencies went up. If we have gotten
to the point where all the emergency measures central banks implement do not
seem to work then it can't be interpreted as a sign that we are coming or have
come to the end of this process.
The New Narrative
"The narrative has now been shifted to a massive move of increasing central
banks' balance sheets that will be based on fiscal spending of infrastructure."
James Rickards in his new book, 'The New Case for Gold' argues that to get
the dollar down and force inflation into the system a way to do it is for the
government to drive up the price of the gold. The enemy of the government has
been gold, but it can also be the friend of the government in a crisis situation.
Similarly, Catherine Austin Fitts argues the 1% has sucking wealth out of the
US society for the past few decades and they have basically stolen just about
as much as they think they can steal. Now it is in their interest to go back
to sound money to protect what they have stolen. This is another reason for
the gold standard to eventually look useful to the people in charge.
Abstract by: Karan
Singh
Video Editor: Sarah
Tung
