Plenty to talk about and not enough space to cover it all today. First up, the big kingfish showed up with a spearo nailing a monster 30kg specimen off the Bondi Murk. I didn’t do as well, but I managed a 98cm specimen weighing 7 kg jigging one of the offshore reefs. I suspect it was a post-spawning fish looking to fatten up again. By this time next year, the surviving fish from this spawning cycle will have reached 3kgs. They’re here a month earlier than usual, with water temps off Sydney a degree higher than average for this time of year.

Like all things in nature, empires, economies, liquidity, and markets also have cycles. They may not exactly line up, but they’re close enough to give us a glimpse into the future, even though it might be like looking through foggy glass.

In the world of markets and finance, central banks worldwide have been cutting interest rates. The Reserve Bank of New Zealand cut interest rates again, this time by 0.5%. Markets expect another cut next month.

Canada’s CPI fell to 1.6%, the Eurozone fell to 1.8%, the UK fell to 1.7%, China fell to 0.4%, and the US fell to 2.4%. Australia is at 2.7%, and Westpac predicts that the Australian inflation rate will come in at 2.2% when the figures are released on the 30th of this month. The Melbourne Institute’s inflation gauge is plummeting.

Everyone is cutting rates except us. But this might change early next month. The CBA thinks there’s a good chance of a rate cut before the end of the year. It would be nice to see one before Christmas, especially as household savings rates are near zero now.

If we look at the unemployment rate, the jobs market is unusually strong, especially given that the GDP per capita indicates we’ve been in a recession for the last year and a half. However, a closer look reveals that all the new jobs created have been in the public sector; the private sector is dead.

Our government has basically been printing jobs to keep the employment market stable. This isn’t a sustainable way to keep the economy running, and we’re overdue for a rate cut.

Like any living organism, the government is incentivized to keep itself alive. It continues to grow until it becomes a parasite that feeds off the productive parts of the economy, continuing to add layers of administration that extract value from the country’s citizens through taxes. You even see the same thing in large private-sector organizations. So many useless jobs are created as management continually adds employees to make their department seem more important than it is.

In empires, you see the same thing: endless wars are fought as the empire stretches its army thin across the world. They needlessly expand rather than focus on making the country better. Given a long enough timeline, the number of productive members of society is outweighed by the unproductive members, and the whole thing implodes. It’s the same cycle in almost all empires: Greek, Roman, Persian, Dutch, and British, and now it is America’s turn to make the same mistake. The parasites finally begin to kill the host. The closing chapter is about endless money printing to fund these wars before other countries lose faith that the printed money is worth anything. This causes asset prices to rise as the money flows into these first.

It’s been one of the craziest years in markets in decades.

• The S&P500 has risen 22% year to date, the best performance in 27 years, and this year, it has reached 47 all-time highs.
• Gold is up 32% and on track to post its best performance in 45 years.
• Silver is up 42% to its highest level in 12 years.
• Oil prices are crashing as if a global recession is here.
• Global central banks are cutting like a recession is coming.
• China is selling down its US Treasury bonds – which helps it de-dollarize while adding stimulus to its slowing economy.
• US public debt is skyrocketing.

The BRICS Summit is tomorrow, and an ever-growing list of countries want to join as the world slowly splits into two blocs. Ten partner nations will be added tomorrow, and another 40 to 50 want to join.

Just a little explanation of BRICS (for Rhiannon):

BRICs was initially just a collection of the countries with the fastest-growing economies identified by Goldman Sachs economist Jim O’Neill in 2001. He believed that if growth continued, they could dominate the global economy in the 21^st century. Brazil, Russia, India, China… In 2010, South Africa was invited to join (to create BRICS).

In 2006, the countries began meeting informally, and it has now become an alliance of countries that want to escape the US/ NATO-led world order. It now includes Iran, Egypt, Ethiopia, and the UAE. Each year, more members apply to join BRICS as the world moves from a unipolar (US-dominated) world to a multipolar world. 

In many ways, it reflects the falling trust in the USD and pushback from expansionary ‘forever wars’, endless overt and covert regime changes in other countries, and the US-led’ rules-based order.’ Instead, it is in favour of moving towards international law. This accelerated when America cut Russia from the SWIFT global payments system and confiscated Russian assets. Other countries suddenly became afraid of the US weaponizing the USD against them. The Saudis have refused to renew the 50-year agreement to sell oil only in USD, and the ever-increasing share of trade between the BRICS countries is being conducted in local currencies rather than the USD.

BRICS countries now have a higher share of global GDP than the G7 countries and a larger population. If you take a longer view of history, it’s almost inevitable that they will overtake the US-led order since they have faster-growing economies, most of the resources, and significantly more manufacturing capability than the G7. The US has let its industrial base slide as the economy has moved away from making real things. Instead, it has increasingly become financialised and based on derivatives and leverage.

The rise of BRICS countries hasn’t been without a fight, though. We’re seeing signs of it in the current conflicts in the Middle East and Ukraine, with the Navy Seals (likely) bombing the Nordstream pipeline supplying gas from Russia to Europe. While Netanyahu probably has his own reasons for fighting, Israel is essentially a US aircraft carrier in the Middle East. Without it, BRICS would control 50% of the world’s oil production. Of course, none of this should matter to the US since it is the biggest oil producer in the world, but it is more likely about maintaining control of other countries.

It’s likely that this has been going on for some time but masked as other things. The US invaded Libya after Gaddafi announced he would be creating a new gold-backed currency called the Dinar. WMDs were miraculously ‘discovered’ in Iraq (former allies with the US) after Saddam Hussein wanted to trade oil using Euros instead of the USD. Of course, these governments were probably overthrown for the same reason.

All wars are banker’s wars.

In Australia, while we’re politically and culturally aligned with the West, we’re lucky to be insulated from much of this drama since we’re a small nation on a big island at the arse end of nowhere. Economically, China has been our largest trading partner since 2009, and before that, Japan was our largest trading partner since the early 1970s. You would have to return to the mid-1950s to find a time when the West was our biggest trading partner. None of this affects us; we’ve been lucky to have won the birth lottery by being born here.

Meanwhile, it seems clear that we’re approaching the closing stages of a long era, and a new era is struggling to be born.

It’s a very interesting time to be alive.