Economic crisis of corporate socialism - China and G7

 I began understanding the mechanism behind the recent world-wide disruption in the industrial supply chain and logistics. 

We are witnessing a large backup and backlog of container ships off the US west and east coast. My initial thinking was that it could be intentional, a part of some US-China trade war that Trump started 2 years ago and the current admin is just continuing.   

It turns out that as the trade disruption intensified earlier this year, it was reflected by the price of shipping containers shooting through the roof (above 10k$ per container, up from a previous cost of about 3k$).  Recently the price of the containers went back down again even though the backlog is still the same if not even greater.  What is going on? 

We are dealing with a major economic crisis in the centralized government-planned socialist economy of China!  This is causing major disruption in the Chinese manufacturing sector that is now being forced to scale down production and delivery of industrial goods due to disruption of internal logistics and the supply chain within China! 

Very soon we are about to experience an economic crash of the central-bank controlled corporate-socialist economies of the G7 countries!  For the same systemic reason as in China.  Let me explain.

Centrally controlled socialist-communist and corporate-socialist   economies are inherently prone to crashes.  Unlike the capitalist economies experiencing frequent (but localized, rarely global) disruption of trade and business due to fluctuation of consumer demand, the socialist economies are very prone to crashes caused by disruption of production and logistics.  The reason is that such economies are dominated by a small number of very large and very powerful (politically) entities that are able to lobby the authorities to allow them grab or acquire  whatever resources they want, freezing their smaller competitors out of the supply chain. Large corporations can also get rid of their smaller competitors through mergers and acquisitions that results in an even greater economic centralization, given the lack of any  effective anti-trust laws.

This mechanism operates like a positive-feedback loop amplifying even a small trend until it becomes disruptively large. So even a small trade disruption caused by a trade war or epidemics, began growing to a very large scale because the small component producers and small supply chain services have an enormously large role to play in the overall economy.  Their role is much bigger than their nominal market cap and the usual valuation methods based on stock and corporate bond values do not reflect this.  The small companies are the source of parts and services for the large manufacturing corporations and the rest of the economy, including the agriculture and mining sectors.  Once the large companies grab and utilize them internally, they are no longer able to serve other producers and fulfill their role supplying what the market needs. It causes the  ripple-effect disrupting the entire economy! 

China and the US are now in the same economic death spiral where the large and powerful corporations are cannibalizing the smaller companies in order to survive themselves, compounding the disaster. 

I lived through that in the 1970-ties and 80-ties.  I remember a socialist economic crisis in the communist-run Poland .  It begun in the 1971 by the then new communist chief Edward Gierek ordering the large manufacturing corporations to boost their production of industrial goods.  They responded by requesting to take over the local small cooperative manufacturing businesses (so called "przemysł terenowy")  from all over the country.  They got it - but the result was disastrous! It produced an acute shortages of nails, bolts, small hardware parts including machine spare parts, and worst of all, a shortage of   >>> baler twine <<< ["Sznurek do snopowiązałki"].     A lack of locally produced spare parts caused disruption of transportation due to disrepair of buses, small trucks and tractors.  The lack of harvester's twine was particularly noticeable because it resulted in harvest failures during the subsequent years and disrupted the entire food market from which the socialist economy has never recovered, until it was entirely abolished in 1989 (abolished together with the large corporations!).

------ Update 9-Nov-2021 ------

Reference article:

"Skąd się wziął nagły kryzys energetyczny?"   by  dr Piotr Syryczyński , 7 listopada 2021

Reposted and important: How to Get Rich (without getting lucky)

How to Get Rich (without getting lucky)

by @naval

Seek wealth, not money or status. Wealth is having assets that earn while you sleep. Money is how we transfer time and wealth. Status is your place in the social hierarchy.

Understand that ethical wealth creation is possible. If you secretly despise wealth, it will elude you.

Ignore people playing status games. They gain status by attacking people playing wealth creation games.

You’re not going to get rich renting out your time. You must own equity - a piece of a business - to gain your financial freedom.

You will get rich by giving society what it wants but does not yet know how to get. At scale.

Pick an industry where you can play long term games with long term people.

The Internet has massively broadened the possible space of careers. Most people haven't figured this out yet.

Play iterated games. All the returns in life, whether in wealth, relationships, or knowledge, come from compound interest.

Pick business partners with high intelligence, energy, and, above all, integrity.

Don't partner with cynics and pessimists. Their beliefs are self-fulfilling.

Learn to sell. Learn to build. If you can do both, you will be unstoppable.

Arm yourself with specific knowledge, accountability, and leverage.

Specific knowledge is knowledge that you cannot be trained for. If society can train you, it can train someone else, and replace you.

Specific knowledge is found by pursuing your genuine curiosity and passion rather than whatever is hot right now.

Building specific knowledge will feel like play to you but will look like work to others.

When specific knowledge is taught, it’s through apprenticeships, not schools.

Specific knowledge is often highly technical or creative. It cannot be outsourced or automated.

Embrace accountability, and take business risks under your own name. Society will reward you with responsibility, equity, and leverage.

The most accountable people have singular, public, and risky brands: Oprah, Trump, Kanye, Elon.

“Give me a lever long enough, and a place to stand, and I will move the earth.”
- Archimedes

Fortunes require leverage. Business leverage comes from capital, people, and products with no marginal cost of replication (code and media).

Capital means money. To raise money, apply your specific knowledge, with accountability, and show resulting good judgment.

Labor means people working for you. It's the oldest and most fought-over form of leverage. Labor leverage will impress your parents, but don’t waste your life chasing it.

Capital and labor are permissioned leverage. Everyone is chasing capital, but someone has to give it to you. Everyone is trying to lead, but someone has to follow you.

Code and media are permissionless leverage. They're the leverage behind the newly rich. You can create software and media that works for you while you sleep.

An army of robots is freely available - it's just packed in data centers for heat and space efficiency. Use it.

If you can't code, write books and blogs, record videos and podcasts.

Leverage is a force multiplier for your judgement.

Judgement requires experience, but can be built faster by learning foundational skills.

There is no skill called “business.” Avoid business magazines and business classes.

Study microeconomics, game theory, psychology, persuasion, ethics, mathematics, and computers.

Reading is faster than listening. Doing is faster than watching.

You should be too busy to “do coffee," while still keeping an uncluttered calendar.

Set and enforce an aspirational personal hourly rate. If fixing a problem will save less than your hourly rate, ignore it. If outsourcing a task will cost less than your hourly rate, outsource it.

Work as hard as you can. Even though who you work with and what you work on are more important than how hard you work.

Become the best in the world at what you do. Keep redefining what you do until this is true.

There are no get rich quick schemes. That's just someone else getting rich off you.

Apply specific knowledge, with leverage, and eventually you will get what you deserve.

When you're finally wealthy, you'll realize that it wasn't what you were seeking in the first place. But that's for another day.

Business contraction caused by government policies

MACROECONOMIC RATES OF RETURN OF PUBLIC AND PRIVATE INVESTMENT CROWDING-IN AND CROWDING-OUT EFFECTS

Deflationary recession is now increasingly probable!

US bond yield has gone up by 50% in just 2 months reversing the long term trend!  This begun before  the recent US presidential election and is rapidly rising since the election, in the last couple of weeks.

The yield increase causes the financial asset values and the value of debt held as collateral - to decrease. This is highly deflationary! It can no longer be offset by "quantitative easing"(*) and any of the recently employed financial stimulation techniques, because injecting more cash into circulation causes the interest rates to increase or to decline less rapidly, which prevents the fixed assets and bond prices to recover or to reverse the declining trend. Providing a cash stimulus may even accelerate the banking and corporate collateral collapse by raising the interest rates and yields even further! On the other hand, the recently favored method of stimulating the large corporate economy by offering them cheap low interest credit might not work anymore (**) now that the interest rates have risen and the large corporate assets that can be used as the collateral for new loans - have declined in value!

The current global corporate economy has entered a classical two "poison pills" stage (***)! One "poison pill" being the corporate "globalism" - a credit-based corporate expansion (with austerity for everybody else), while the other "poison pill" being the financial stimulus policy of expanding the monetary mass. One "poison pill" solution neutralizes the effects of the other thus compelling the ruling elites to employ both of them alternatively resulting in the slower (but surer) decline as opposed to applying any one of the "solutions" alone which would lead to a rapid economic collapse!

Stan Bleszynski

Notes:

(*) The reason monetary stimulus cannot reverse the current deflationary assets' collapse (though it may produce a localized price inflation for services, food and commodities) is that the global amount of fixed yield investment assets is about two orders of magnitude higher than the amount of monetary mass in circulation. Any increase in monetary mass attempting to push inflation and yields up would therefore be countered by strong deflationary decline of the fixed-yield assets held by corporations, investment funds and governments.

(**) Cheap credit offered at low interest rates, might still work for small property owners who unlike large corporations, are not yet fully credit-collateral-tapped-out! This would also prevent or would slow down the property collapse.

(***) I have seen this technique employed successfully for manipulating a victim into self-destruction that is very general and not limited to economy but used extensively in consumer marketing and other areas as well. It is based on promoting two equally destructive but opposing paths , products, ideologies or beliefs, with one countering the other. The victim is entrapped into pursuing them both switching alternatively from one to the other while spiraling into oblivion. To make this work, all choices other than those two have to be hidden from view or obfuscated. It is good to know about that what is hitting us, so that we can take precautions choosing something unpredictable and none of the above. 8-:)