China: More Bark Than Bite

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I’ve made many visits to China over the past thirty years and have been careful to move beyond Beijing (the political capital) and Shanghai (the financial capital) on these trips.

My visits have included Chongqing, Wuhan (the origin of the coronavirus outbreak), Xian, Nanjing, new construction sites to visit “ghost cities,” and trips to the agrarian countryside.

My trips included meetings with government and Communist Party officials and numerous conversations with everyday Chinese people.

In short, my experience with China goes well beyond media outlets and talking heads. In my extensive trips around the world, I have consistently found that first-hand visits and conversations provide insights that no amount of expert analysis can supply.

These trips have been supplemented by reading an extensive number of books on the history, culture and politics of China from 3,000 BC to the present. This background gives me a much broader perspective on current developments in China.

An objective analysis of China must begin with its enormous strengths. China has the third largest territory in the world, with the world’s largest population (although soon to be overtaken by India).

China also has the fifth largest nuclear arsenal in the world with 280 nuclear warheads, about the same as the UK and France, but well behind Russia (6,490) and the U.S. (6,450). China is the largest gold producer in the world at about 500 metric tonnes per year.

Its economy is the second largest economy in the world, behind only the U.S. China’s foreign exchange reserves (including gold) are the largest in the world.

By these diverse measures of population, territory, military strength and economic output, China is clearly a global super-power and the dominant presence in East Asia.

Yet, these blockbuster statistics hide as much as they reveal.

China’s per capita income is only $11,000 per person compared to per capita income of $65,000 in the United States. Put differently, the U.S. is only 38% richer than China on a gross basis, but it is 500% richer than China on a per capita basis (of course the massive economic fallout from the coronavirus will have an impact).

China’s military is growing stronger and more sophisticated, but it still bears no comparison to the U.S. military when it comes to aircraft carriers, nuclear warheads, submarines, fighter aircraft and strategic bombers.

Most importantly, at $11,000 per capita GDP, China is stuck squarely in the “middle income trap” as defined by development economists.

The path from low income (about $5,000 per capita) to middle-income (about $10,000 per capita) is fairly straightforward and mostly involves reduced corruption, direct foreign investment and migration from the countryside to cities to pursue assembly-style jobs.

The path from middle-income to high-income (about $20,000 per capita) is much more difficult and involves creation and deployment of high-technology and manufacture of high-value-added goods.

Among developing economies (excluding oil producers), only Taiwan, Hong Kong, Singapore and South Korea have successfully made this transition since World War II. All other developing economies in Latin America, Africa, South Asia and the Middle East including giants such as Brazil and Turkey remain stuck in the middle-income ranks.

China remains reliant on assembly-style jobs and has shown no promise of breaking into the high-income ranks.

To escape the middle income trap requires more than cheap labor and infrastructure investment. It requires applied technology to produce high-value added products. This explains why China has been so focused on stealing U.S. intellectual property.

China has not shown much capacity for developing high technology on its own, but it has been quite effective at stealing such technology from trading partners and applying it through its own system of state-owned enterprises and “national champions” such as Huawei in the telecommunications sector.

But now the U.S. and other countries are cracking down on China’s technology theft and China cannot generate the needed technology through its own R&D.

In short, and despite enormous annual growth in the past twenty years, China remains fundamentally a poor country with limited ability to improve the well-being of its citizens much beyond what has already been achieved.

And that has serious implications for China’s leadership…

China’s economy is not just about providing jobs, goods and services. It is about regime survival for a Chinese Communist Party that faces an existential crisis if it fails to deliver.

It is an illegitimate regime that will remain in power only so long as it provides jobs and a rising living standard for the Chinese people. The overriding imperative of the Chinese leadership is to avoid societal unrest.

If China’s job machine seizes, as parts of it did during the coronavirus outbreak, Beijing fears that popular unrest could emerge on a potentially scale much greater than the 1989 Tiananmen Square protests. This is an existential threat to Communist power.

President Xi Jinping could quickly lose what the Chinese call, “The Mandate of Heaven.”

That’s a term that describes the intangible goodwill and popular support needed by emperors to rule China for the past 3,000 years. If The Mandate of Heaven is lost, a ruler can fall quickly.

Even before the crisis, China has had serious structural economic problems that are finally catching up with it.

China is so heavily indebted that it is now at the point where more debt does not produce growth. Adding additional debt today slows the economy and calls into question China’s ability to service its existing debt.

Meanwhile, China’s real year-over-year growth tumbled 6.8% in the first quarter.

Besides the slowdown from the pandemic, China confronts an insolvent banking system and a real estate bubble.

Up to half of China’s investment is a complete waste. It does produce jobs and utilize inputs like cement, steel, copper and glass. But the finished product, whether a city, train station or sports arena, is often a white elephant that will remain unused. The Chinese landscape is littered with “ghost cities” that have resulted from China’s wasted investment and flawed development model.

Chinese growth has been reported in recent years as 6.5–10% but is actually closer to 5% or lower once an adjustment is made for the waste. Again, that was before the crisis.

Essentially, China is on the horns of a dilemma with no good way out. China has driven growth for the past eight years with excessive credit, wasted infrastructure investment and Ponzi schemes.

The Chinese leadership knows this, but they had to keep the growth machine in high gear to create jobs for millions of migrants coming from the countryside to the city and to maintain jobs for the millions more already in the cities.

The two ways to get rid of debt are deflation (which results in write-offs, bankruptcies and unemployment) or inflation (which results in theft of purchasing power, similar to a tax increase).

Both alternatives are unacceptable to the Communists because they lack the political legitimacy to endure either unemployment or inflation. Either policy would cause social unrest and unleash revolutionary potential.

The question is, will China pursue an aggressive posture against the U.S. to distract the people?

China does not want war at this time. But diverting the people’s attention away from domestic problems toward a foreign foe is an old trick leaders use to unite the people in times of uncertainty.

If China’s leadership decides that the risk of losing legitimacy at home outweighs the risk of conflict with the United States, the likelihood of war rises dramatically.

I’m not making a specific prediction, but wars have started over less. This is a very dangerous time.

Regards,

Jim Rickards
for The Daily Reckoning

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China, Iran Are on the March

This post China, Iran Are on the March appeared first on Daily Reckoning.

There is so much focus on the COVID-19 pandemic right now that Americans can’t be blamed if they’re not spending much time studying other developments.

That’s understandable, but inattention may be as dangerous as the virus itself. That’s because America’s adversaries are taking advantage of the situation by challenging U.S. interests in a set of geopolitical hot spots.

They believe we’re too distracted by the virus containment effort to mount a firm response.

At the same time, geopolitical confrontation is a classic way to rally a population against an outside threat, especially when they’re still hurting from the pandemic and the economic consequences. It’s one of the oldest tricks in the books to get the people behind the government.

This appears to be the case with China and Iran right now.

China in particular is trying to divert attention away from its own cover-up of the pandemic, which allowed it to spin out of control. So it’s engaging in a global propaganda campaign to try to blame the U.S. for the spread of the virus.

Both China and Iran have lied about the damage caused by the virus in their own countries. China officially reported about 4,600 fatalities and Iran officially reported about 6,200. But reliable sources suggest that the actual count of fatalities may be at least 10 times greater in both countries.

This could put actual fatalities in China and Iran about equal to the U.S. (over 70,000 dead).

Meanwhile, the U.S. has been reeling economically, and there’s no reason to believe that China and Iran are feeling any less pain. Let’s first consider China…

Not surprisingly, China has tried to take advantage of the situation by acting aggressively in the South China Sea and threatening Taiwan.

The South China Sea is a large arm of the Pacific Ocean surrounded by China, Vietnam, the Philippines, Malaysia, Brunei and Indonesia.

All six countries have claims to exclusive economic zones that extend several hundred miles from their coastlines.

Parts of the sea are international waters governed by the Law of the Sea Convention and other treaties. All of the other nations around the South China Sea have rejected China’s claims. But they’ve been pushed back to fairly narrow boundaries close to their coastlines.

China has ignored all of those claims and treaties and insists that it is in control of the entire body of water including islands, reefs and underwater natural resources such as oil, natural gas, undersea minerals and fisheries.

China has also become even more aggressive by designating the South China Sea reefs as city-level administrative units to be administered by mainland China.

And China has pumped sand onto reefs to build artificial islands that have then been fortified with airstrips, harbors, troops and missiles.

China has said it will never seek hegemony, but that’s clearly not true. It most certainly seeks hegemony in the region.

And it’s willing to enforce it. Several encounters have happened lately where Chinese coast guard vessels have rammed and sunk fishing boats from Vietnam and the Philippines.

But China’s aggression in the South China Sea can also jeopardize U.S. naval vessels.

The U.S. operates “freedom of navigation” cruises with U.S. Navy ships to demonstrate that the U.S. also rejects China’s claims. It’s not difficult to envision an incident that could rapidly escalate into something serious.

It’s also fair to assume that a weakened U.S. Navy has emboldened Chinese actions recently.

The two aircraft carriers the Navy has in the western Pacific, the Theodore Roosevelt and Ronald Reagan, were both taken out of action due to outbreaks of the coronavirus among their crews. That’s been a dramatic reduction in power projection in the region.

But neither side will back down, as neither wants to appear weak. This makes warfare a highly realistic scenario. It’s probably just a matter of time.

Meanwhile, Iran has harassed U.S. naval vessels in the Persian Gulf, launched new missiles and continued its support of terrorism in Iraq, Yemen and Lebanon.

These actions are more signs of weakness than strength, but they are dangerous nonetheless.

In the past 10 years, we’ve been through currency wars, trade wars and now pandemic.

Are shooting wars next? Pay attention to China, Iran and, yes, North Korea. They haven’t gone away either.

The world is a dangerous place — and the virus has only made it more dangerous.

Regards,

Jim Rickards
for The Daily Reckoning

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Trump!!!

This post Trump!!! appeared first on Daily Reckoning.

The president appeared before the American people last evening… and assessed the state of the American Union.

In his telling the union is in a swell and exalted state, marvelous beyond compare.

And he is eager to accept credit…

A grand fellow, by all the gods, the president has fanned a mighty cyclone of American prosperity.

The result is record-low unemployment for Americans of every model and make…

For African-Americans. For Hispanic-Americans. For Asian-Americans. For women. For veterans, the disabled, the undegreed, the young.

And Mr. Trump let us know that America’s record stock market is the world’s envy.

We can only look on in awe, eyes apop and jaw adrop. As we have written before…

We confess a sincere admiration for any man so certain of his stars, so certain of whom the angels are for… and whom they are against.

No modesty hangs about him. No self-doubt gnaws at him. No scruple enchains him.

In Trump we have the popinjay pure and perfect, the supreme chest-thumper, the peacock of peacocks.

The fellow is simply… sui generis.

We concede he may be no deeper than the skin that encases him. But intellectual depth is vastly overrated in a president.

Overrated? It is often a menace…

It is the “deep thinkers” who think the republic into its deepest fixes.

They are drunk on their thoughts… as other men are drunk on alcohol.

The “Sage of Baltimore,” H.L. Mencken, certainly hooked onto something when he wrote:

“We suffer most when the White House bursts with ideas.”

Woodrow Wilson — for example — was the only doctor of philosophy to ever seize the White House.

He presided over Princeton University before he presided over the United States.

And the nation is still afflicted with his lovely ideas…

Who signed the Federal Reserve Act into law?

The answer is Mr. Wilson.

Who signed the federal income tax into law?

The answer is Mr. Wilson.

The same Mr. Wilson ordered the doughboys “over there.” 116,000 of them will remain forever over there.

And the Versailles Treaty that closed the “war to end all wars” spawned the “peace to end all peace.”

WWI was “the Great War” until an even greater war imposed a Roman numeration upon it.

In contrast to the intellectual president, we find Wilson’s successor once removed — Calvin Coolidge.

In Mencken’s telling, Coolidge…

Slept more than any other president, whether by day or by night… There were no thrills while he reigned, but neither were there any headaches. He had no ideas, and he was not a nuisance.

Take due note of the phrasing — it was not “He had no ideas, but he was not a nuisance.” It was rather:

“He had no ideas, and he was not a nuisance.”

Loftier praise for any president is scarcely imaginable: He had no ideas and he was not a nuisance.

Being a nuisance, alas, is how presidents nudge their way onto the history pages.

Whom do historians slobber and swoon over — a Calvin Coolidge or a Franklin Roosevelt?

A Grover Cleveland — or a Theodore Roosevelt?

Both Roosevelts were colossal nuisances.

Our central criticism of Trump is not that he is a nuisance… but that he has not been nuisance enough.

Trump was elected, in fact, to be a nuisance.

Not a statesman, that is — but a demolition man.

Mr. Trump pledged to “drain the swamp.”

He would end the forever wars… and disentangle the United States from entangling alliances.

And did he not pledge to retire the debt?

Yet the United States remains entangled as ever… and more indebted than ever.

The swamp, meantime, remains as deep, as thick, as gaseous as ever.

But it is not our purpose to bring the president into contempt or ridicule. We have no heat against the fellow whatsoever.

His presidency vastly entertains us, in fact — as a circus entertains us, as a professional wrestling bout entertains us, as the sight of a man with his shirt on backward entertains us.

And his campaign rallies are the highest comedy. Nothing comes within 100 miles of it.

Besides, we never believed that Mr. Trump stood the slightest chance of emptying the swamp.

Nearly the entire governmental apparatus is against him — including much of his party.

He is simply a man out of his depth.

But a George Washington would be out of his depth today.

Even “Old Hickory” Andy Jackson would be under the presidential desk the first day on the job, sinking a bottle of Tennessee’s hardest whiskey and sobbing for his mother.

No, the national rot is too deeply advanced for any one man to turn back.

The termites have eaten too deeply into the floorboards beneath… and the rafters above.

And they are after whatever solid timber that remains…

Regards,

Brian Maher
Managing editor The Daily Reckoning

The post Trump!!! appeared first on Daily Reckoning.

Trump!!!

This post Trump!!! appeared first on Daily Reckoning.

The president appeared before the American people last evening… and assessed the state of the American Union.

In his telling the union is in a swell and exalted state, marvelous beyond compare.

And he is eager to accept credit…

A grand fellow, by all the gods, the president has fanned a mighty cyclone of American prosperity.

The result is record-low unemployment for Americans of every model and make…

For African-Americans. For Hispanic-Americans. For Asian-Americans. For women. For veterans, the disabled, the undegreed, the young.

And Mr. Trump let us know that America’s record stock market is the world’s envy.

We can only look on in awe, eyes apop and jaw adrop. As we have written before…

We confess a sincere admiration for any man so certain of his stars, so certain of whom the angels are for… and whom they are against.

No modesty hangs about him. No self-doubt gnaws at him. No scruple enchains him.

In Trump we have the popinjay pure and perfect, the supreme chest-thumper, the peacock of peacocks.

The fellow is simply… sui generis.

We concede he may be no deeper than the skin that encases him. But intellectual depth is vastly overrated in a president.

Overrated? It is often a menace…

It is the “deep thinkers” who think the republic into its deepest fixes.

They are drunk on their thoughts… as other men are drunk on alcohol.

The “Sage of Baltimore,” H.L. Mencken, certainly hooked onto something when he wrote:

“We suffer most when the White House bursts with ideas.”

Woodrow Wilson — for example — was the only doctor of philosophy to ever seize the White House.

He presided over Princeton University before he presided over the United States.

And the nation is still afflicted with his lovely ideas…

Who signed the Federal Reserve Act into law?

The answer is Mr. Wilson.

Who signed the federal income tax into law?

The answer is Mr. Wilson.

The same Mr. Wilson ordered the doughboys “over there.” 116,000 of them will remain forever over there.

And the Versailles Treaty that closed the “war to end all wars” spawned the “peace to end all peace.”

WWI was “the Great War” until an even greater war imposed a Roman numeration upon it.

In contrast to the intellectual president, we find Wilson’s successor once removed — Calvin Coolidge.

In Mencken’s telling, Coolidge…

Slept more than any other president, whether by day or by night… There were no thrills while he reigned, but neither were there any headaches. He had no ideas, and he was not a nuisance.

Take due note of the phrasing — it was not “He had no ideas, but he was not a nuisance.” It was rather:

“He had no ideas, and he was not a nuisance.”

Loftier praise for any president is scarcely imaginable: He had no ideas and he was not a nuisance.

Being a nuisance, alas, is how presidents nudge their way onto the history pages.

Whom do historians slobber and swoon over — a Calvin Coolidge or a Franklin Roosevelt?

A Grover Cleveland — or a Theodore Roosevelt?

Both Roosevelts were colossal nuisances.

Our central criticism of Trump is not that he is a nuisance… but that he has not been nuisance enough.

Trump was elected, in fact, to be a nuisance.

Not a statesman, that is — but a demolition man.

Mr. Trump pledged to “drain the swamp.”

He would end the forever wars… and disentangle the United States from entangling alliances.

And did he not pledge to retire the debt?

Yet the United States remains entangled as ever… and more indebted than ever.

The swamp, meantime, remains as deep, as thick, as gaseous as ever.

But it is not our purpose to bring the president into contempt or ridicule. We have no heat against the fellow whatsoever.

His presidency vastly entertains us, in fact — as a circus entertains us, as a professional wrestling bout entertains us, as the sight of a man with his shirt on backward entertains us.

And his campaign rallies are the highest comedy. Nothing comes within 100 miles of it.

Besides, we never believed that Mr. Trump stood the slightest chance of emptying the swamp.

Nearly the entire governmental apparatus is against him — including much of his party.

He is simply a man out of his depth.

But a George Washington would be out of his depth today.

Even “Old Hickory” Andy Jackson would be under the presidential desk the first day on the job, sinking a bottle of Tennessee’s hardest whiskey and sobbing for his mother.

No, the national rot is too deeply advanced for any one man to turn back.

The termites have eaten too deeply into the floorboards beneath… and the rafters above.

And they are after whatever solid timber that remains…

Regards,

Brian Maher
Managing editor The Daily Reckoning

The post Trump!!! appeared first on Daily Reckoning.

The Latest Government Myth

This post The Latest Government Myth appeared first on Daily Reckoning.

“Deep down, he’s shallow,” said critic Peter DeVries of one author, famously revered.

Today we submit the case that Friday’s GDP report — grand, gaudy and garish — is deeply shallow beneath the scintillated surface.

That is, the deeper numbers tell a tale 180 degrees out of joint with appearance.

And private-sector growth may actually peg along at the crawlingest rate in six years.

Let us now peek within and beneath official data…

Friday’s official 3.2% trounced all reasonable estimate, all respected opinion.

Even the Federal Reserve’s chronically cheerful Atlanta squad pegged Q1 GDP at 2.8%.

But scratch the surface and what do we find? What accounts for the screaming headline number?

Inventories.

Companies will often amass inventories to jump out ahead of expected tariffs.

Inventories have been mounting for the past year and then some… rising some 8%.

And data reveal American business piled up $32 billion of inventoried goods the first quarter — a $46.3 billion swelling over the previous quarter.

Government bean counters heap inventories into the column of business investment. Thus in the official telling, they add to the gross domestic product.

Says the Bureau of Economic Analysis, Q1 rising inventory contributed 0.65 percentage points to real GDP.

Rinse them out and we have Q1 growth of 2.55%… not 3.2%.

2.55% is still handsome. Most original Q1 estimates came in under 2%.

But Daily Reckoning affiliate Wolf Richter takes the longer view:

Rising inventories, which are considered an investment and add to GDP, are eventually followed by a decline in inventories when companies whittle them down again, and there is a price to pay for it…

Companies that sit on that inventory and have trouble selling it will at some point cut their orders to reduce their inventories. When this happens, sales drop all the way up the supply chain… when businesses whittle down their inventories by ordering less, it ripples through the economy, lowers GDP growth…

Affirms a swarm of Morgan Stanley economists:

“The buildup in inventories over the past several quarters points to a large reversal in the second quarter.”

How about the third… and the fourth?

Meantime, we are informed the false fireworks of government spending account for another portion of the final 3.2%.

But according to the ladies and gentlemen of Oxford Economics, one metric tells tell a far truer tale of GDP:

Final sales to domestic purchasers.

What if we run the blue pencil through Q1 inventory and government GDP contributions… and cleave to final sales alone?

Q1 GDP increased not 3.2% or even 2.6% after subtracting government’s “addition” — but a wilting 1.3%.

1.3% is miles and miles and miles behind the official 3.2%.

Let us peek even deeper beneath the shimmering surface…

Q1 consumer durable goods spending sank 5.3%… the steepest plunge in 10 years.

Private-sector consumption and investment — the pounding pulse of a healthful economy — trickled to a semi-comatose 1.3%.

That is the faintest increase in nearly six years.

Consumer spending overall increased a mere 1.2%… off from 2.5% the quarter previous.

And from last quarter’s 5.4%, business investment halved — to 2.7%.

MarketWatch informs us that investments in factories, offices, stores and oil wells sank for the third-straight quarter.

It further informs us that investments in equipment such as computers, aircraft and machinery overall scratched out a piddling 0.2% increase.

Is this the eight-cylinder roar of a throbbing economic engine?

“On the outside, it looks like a shiny muscle car,” writes Bernard Baumohl of the Economic Outlook Group…

“Lift the hood, however, and you see a fragile one-cylinder engine.”

Former Obama economic adviser and present Harvard grandee Jason Furman takes his own disappointing glance under the hood:

“First-quarter GDP is 3.2%, but the underlying data is much weaker and is consistent with a slowing economy.”

The aforesaid Oxford Economics affirms the economy is “undeniably cooling.”

Meantime, the Federal Reserve huddles at Washington this week.

What does Friday’s GDP report implicate for interest rates?

Despite the dazzling headline number, the Federal Reserve’s “Open Market” Committee will hold rates steady. They will certainly not raise rates.

Why are we so certain?

Official inflation data.

The Federal Reserve’s preferred inflation gauge — which excludes more fluid food and energy prices — increased not a jot last month.

And it has increased only 1.6% year over year.

So the Federal Reserve remains hopelessly asea, as far as ever from its infinitely elusive 2% target.

And it will cut rates before raising rates — depend on it.

But last week we explained why we expect inflation to menace within the foreseeable future.

Regards,

Brian Maher
Managing editor, The Daily Reckoning

The post The Latest Government Myth appeared first on Daily Reckoning.

Japan on a Larger Scale

This post Japan on a Larger Scale appeared first on Daily Reckoning.

In my 2014 book, The Death of Money, I wrote, “The United States is Japan on a larger scale.” That was five years ago.

Last week, prominent economist Mohamed A. El-Erian, formerly CEO of PIMCO and now with Allianz, wrote, “With the return of Europe’s economic doldrums and signs of a coming growth slowdown in the United States, advanced economies could be at risk of falling into the same kind of long-term rut that has captured Japan.”

Better late than never! Welcome to the club, Mohamed.

Japan started its “lost decade” in the 1990s. Now their lost decade has dragged into three lost decades. The U.S. began its first lost decade in 2009 and is now entering its second lost decade with no end in sight.

What I referred to in 2014 and what El-Erian refers to today is that central bank policy in both countries has been completely ineffective at restoring long-term trend growth or solving the steady accumulation of unsustainable debt.

In Japan this problem began in the 1990s, and in the U.S. the problem began in 2009, but it’s the same problem with no clear solution.

The irony is that in the early 2000s, former Fed Chair Ben Bernanke routinely criticized the Japanese for their inability to escape from recession, deflation and slow growth.

When the U.S. recession began during the global financial crisis of 2008, Bernanke promised that he would not make the same mistakes the Japanese made in the 1990s. Instead, he made every mistake the Japanese made, and the U.S. is stuck in the same place and will remain there until the Fed wakes up to its problems.

Bernanke thought that low interest rates and massive money printing would lead to lending and spending that would restore trend growth to 3.2% or higher.

But he ignored the role of velocity (speed of money turnover) and the unwillingness of banks to lend or individuals to borrow. When that happens, the Fed is pushing on a string — printing money with no result except asset bubbles.

The bottom line is that this extravaganza of zero rates and money printing worked to ease the panic and prop up the financial system. But it did nothing to restore growth to its long-term trend or to improve personal income at a pace that usually occurs in an economic expansion.

Now, after a 10-year expansion, policymakers are considering the implications of a new recession. There’s only one problem: Central banks have not removed the supports they put in place during the last recession.

Interest rates are up to 2.5%, but that’s far lower than the 5% rates that will be needed so the Fed can cut enough to cure the next recession. The Fed has reduced its balance sheet from $4.5 trillion to $3.8 trillion, but that’s still well above the $800 billion level that existed before QE1.

In short, the Fed (and other central banks) have only partly normalized and are far from being able to cure a new recession or panic if one arises tomorrow. It will takes years for the Fed to get interest rates and its balance sheet back to “normal.”

Until they do, the next recession may be impossible to get out of. The odds of avoiding a recession until the Fed normalizes are low.

In the meantime, get ready for more disinflation (or deflation) and slow growth. The central banks are stuck and there’s no way out.

They cannot escape the corner they have painted themselves into.

Regards,

Jim Rickards
for The Daily Reckoning

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Spending Your Golden Years in a Foreign Country

This post Spending Your Golden Years in a Foreign Country appeared first on Daily Reckoning.

I just got back from a week driving around Baja, Mexico with my wife and daughter, and we had a terrific time.

You might think it’s a little crazy to spend spring break taking a Jeep an hour off the nearest paved road just to find a secluded surf spot but it’s par for the course in our family. Heck last year we were in El Salvador – a country that has one of the highest murder rates in the world – doing pretty much the same thing.

I admit, it’s easy to let the headlines scare you off.

But for me, it is precisely that kind of sensationalism that creates opportunities for savvy travelers.

Spring Break in Baja

In Baja, we stayed in a luxurious house with a clear view of the best surf break in the area for less than I’ve paid at a budget hotel in Florida.

Tacos at the local stand ran $11 for our whole family of three.

In the Valle de Guadalupe wine area, we drank very good local Bordeaux blends for a third of what their French or California equivalents go for.

And a quick look at the local Farmacia would show you ridiculously low prices for some of the same medicines U.S. residents pay a fortune for.

I never felt threatened. It was very easy to get around and communicate with a limited amount of Spanish. The people are super friendly and helpful.

There are plenty of U.S. retirees living in Baja for precisely these reasons. You can literally move one hour across the border from San Diego and get the same basic life for a fraction of the price.

Obviously, that’s not for everyone and you do give up plenty of things in the process.

Travel Opportunities

But I’m telling you all of this because it highlights some of the opportunities that are available outside of the United States … opportunities that can be reached in less than six hours from most major U.S. cities.

So let me ask: Would you ever consider retiring to a foreign country?

I’ve been all around the world – from South Africa to India … many countries in Europe … and throughout much of Latin America. And quite frankly, I could have stayed in just about any of the places I visited for months on end.

More importantly, just about everywhere I’ve been I’ve met fellow Americans who are doing just that – living out their dreams in picturesque towns that most people only see on postcards.

Indeed, more and more U.S. citizens are choosing to live abroad – even if it’s just through VERY extended vacations – so they can stretch their retirement dollars further, gain access to affordable medical care, have new adventures, even hire personal assistants for less than a daily meal at McDonald’s.

Consider Panama, a country I visited back in 2001 …

Panama

There are spectacular and affordable beachfront condos that you can rent for a few hundred bucks a month.

And on the kind of budget that wouldn’t even cover rent here in the U.S., an expat can retire in impressive comfort in Panama, thanks in part to the country’s special Pensionado program.

You’ve probably heard of it – a special program that allows income-earning foreign retirees to obtain indefinite residence in the country plus get a whole host of other benefits including big discounts on movies, concerts, bus fares, medical services, and a whole array of other things.

Or what about Thailand, which I traveled toten years ago …

Thailand

I personally know a number of U.S. citizens who now live there at a fraction of what they spent here.

I’m talking about personal chefs, nightly massages, high-speed Internet connections, and beachfront accommodations for less than renting an apartment in Philadelphia or Kansas City.

Other Places to Consider…

And although it’s still on my “to visit” list, Ecuador also provides an attractive package for American retirees – including discounts on many services plus the ability to participate in the country’s national retirement system for about $60 a month.

I could keep going all day … Nicaragua, Costa Rica, Malaysia, and countless other places that provide bountiful benefits worth exploring.

Heck, I have one friend near retirement who plans on buying a sailboat and spending the first part of his golden years going wherever he wants!

At the end of the day, the point I’m trying to drive home is that increasing income is certainly one way to better your situation no matter what your age. But changing your perspective, cutting costs, and considering less-traveled paths is certainly another – and complementary – way to get the things you want out of life.

So get out there and do some research. You’ll be amazed at what you find. And if you’re already living your dream, don’t hesitate to write in and tell me about it!

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

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McEwen says Gold Bar will make first pour this month

Construction of the Gold Bar mine near Eureka, Nevada is on time and on budget. Owner McEwen Mining of Toronto says the first gold pour will happen this month, and the $81.4 million budget has not increased. Commercial production is expected by the end of Q1 2019.

McEwen has placed about 136,000 tonnes of ore on the leach pad, and anticipates producing 55,000 oz. of gold this year at an all-in cost of $975 per ounce. Output will average 62,800 oz. per year over a 7.4-year life.

Heavy snow and cold temperatures made December and January challenging for work at the site. Electrical work, instrumentation installation, and commissioning of the gold refinery circuit remain to be completed at the process plant.

Exploration drilling continues, and the company plans to add the resources at Gold Bar South, giving the project an extra year of life. The 2019 exploration budget is $4.4 million.

This story first appeared in Canadian Mining Journal.

 

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