Labor Shortages, Geopolitical Chess Matches, and the Catalyst for Another Crash

Sat, Jun 21, 2014 - 10:34am

The following excerpts are from this week’s line-up of FS Insider interviews (see here for full archive).

Marc Faber says our society has become so technologically dependent that military drafts are no longer possible. Don Coxe sees recent geopolitical events as coordinated moves between China, Russia, and Iran. Eric Janszen outlines what may lead to another major crisis and, lastly, Keith Weiner explains a largely unknown driver of massive gold imports into China.

Marc Faber on a skilled labor shortage:

There's a shortage of skilled labor precisely in the manufacturing sector because you have to operate a machine or a robot do it. It needs a lot of skill. Like the Army today, they use so much technology you can't have a draft where everybody just goes for a few months into the Army—you need specialists. And then you have lots of people—and this is a big debate—that stay at home. They don't want to work; they're not looking for jobs because...you get all kinds of benefits from the government—food stamps, living allowances, and so forth—and then to go back to work you need a very high salary to make it worth it. Otherwise it all goes away in taxes...(click here to listen)

Don Coxe on the geopolitical chess match:

Our view has been that people have not noticed something that's been going on for the last few years starting in the late '90s, which is the Shanghai Cooperation Organization...originally between Russia and China and Kazakstan and all the 'stans. Recently, Iran has been added into this and you will notice that when trouble starts at one place the others move also. So I think from the standpoint of investors in the U.S., the last thing I think they should be assuming is that all this bad news is going to go away because there's no question that these three autocracies are now at least communicating with each other and you will notice that...when the Ukraine crisis was at its peak, they had just taken Crimea, and now what we get is Iraq in flames and Iran is in the position where they're being invited to send in their elite troops there, which was one of the main objectives of U.S. foreign policy—to keep Iran out of Iraq...these autocracies seem to be, in effect, working together...(click here to listen)

Eric Janszen on crash or permanently high plateau:

If the U.S. saw itself needing a few trillion dollars in support from China, as we did back in 2008, and China was not forthcoming for some reason...then the U.S. would have to finance that from itself or try to rally the usual suspects like the U.K. and so forth. If that usual process of rallying foreign creditors, pulling in favors and invoking the mutually assured destruction of monetary policy, if some of that didn't work, we would have a pretty major dislocation in the currency markets. [However]...I'm starting to develop a theory that we are—I hate to use the phrase—permanently high plateaued and will reach a certain level in the markets and then it'll trade sideways for a considerable amount of time largely due to a combination of macroeconomic effects and largely due to the need to very gradually deflate the amount of debt we have out there...and that this process could take many many years, even a decade or more...(click here to listen)

Keith Weiner on large gold imports to China:

The view of looking at Chinese central planners as being wise and perhaps not bogged down by some of the gridlock that occasionally plagues Washington that also says, “Oh, the Chinese are smart and they have their eye on the long ball and they see what is coming,” and all that—I'm not sure how you reconcile that with the abuse of their own currency, their empty cities, vast numbers of empty skyscrapers, trains to nowhere, empty airports, empty shopping malls, all of which is financed with debt…[Really] at the end of the day, they are a bunch of Keynesians that are running China's central bank and China’s monetary system, same as we have here, so I'm not sure that I accept that these Keynesians see the end of paper currencies per se...[when we look at the massive gold imports into China] it was actually large corporations and they were doing it to get around Chinese [capital controls]...to make a long story short, what they were doing was to have their offshore subsidiary borrowing dollars to buy the metals and then sell it to the onshore subsidiary; and it was a lot of smoke and mirrors to basically allow them to get yuan onshore, but which they're paying...at the [very low] dollar rate of interest globally. So the net result of this was relentless imports of copper at first, and then other metals, and then gold...(click here to listen)

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