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- Recessions, China, and the Germans are Still Stupid
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Let’s dive in…
Ben Carlson points out: “In 15 years, the U.S. economy has been in a recession for just two months!
That’s roughly 1% of the time, meaning that since July 2009, the United States has avoided a recession 99% of the time.”
Incredible stat.
He also shows us that many tried and true recession indicators have failed in the last few years including the inverted yield curve, Sahm Rule, leading economic indicators, etc. Seems like something might be going on here.
WSJ points out that, “China spends about 4.9% of its gross domestic product on nurturing industries—several times higher than the U.S., Germany and Japan, according to Scott Kennedy, a China expert at the Center for Strategic and International Studies in Washington.”
“The People’s Bank of China in April said it set up a new facility with roughly $70 billion to help bank lending to tech firms. In May, a national fund aimed at financing semiconductor production raised $48 billion from state-owned banks and other government-linked investment vehicles.”
The US spent $52 billion on the CHIPS Act. It feels like China is doing multiple CHIPS Acts a year. This situation is unsustainable for China, the US, and the world. While we can and need respond in kind, the result will be massive worldwide overproduction in the industries we target. I’ll be writing more on my favored way to respond: capital controls.
Noah Smith on German stupidity: “I argued that by allowing itself to become dependent on Russia and China, destroying its nuclear power plants, not spending enough on its military, and failing to address its chronic issues of NIMBYism and red tape, Germany was putting not only its own economy and physical security in danger, but that of all of Europe as well.
A year later, I fear that the situation I described has worsened on all fronts. The screenshot at the top of this post is from a video of Germany demolishing its nuclear plant at Grafenrheinfeld — a perfectly good zero-carbon energy source that had already been paid for and that didn’t make Germany dependent on Russia. Demolishing this nuclear plant and others like it was an extraordinary act of national stupidity. The result is that Germany is now going to spend a whole lot of money to build new carbon-emitting natural gas plants to replace the lost nuclear energy.”
Noah’s piece speaks for itself. I don’t understand what Germany is up to.
Keep growing,
Alan
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