Something Big is Afoot. Are You Prepared?
A Global Re-Balancing
Pastor Jesse Reddoch of First Alliance Orlando, the church we visit there, gave a great sermon. I encourage you to view it – realistic about today and hopeful as Christians. His sermon was on Ezekiel 3:17-19. Ezekiel has complained that God sent him to the Israelites to warn them like a watchman on the city wall, but they are not paying attention. God’s reply – Ezekiel is responsible for the effort of doing what God instructed, God is responsible for the result.
These are perilous times because of geo-political forces which are impacting our economy and therefore the land market. The old saying that “Land never goes down in value” is totally wrong. Our database proves the opposite. Long term, land is by far the best investment. But it is illiquid and therefore in bad times land sells for prices below its value in good times. Cash is king.
Two geopolitical events happened this month that will have immense impacts on our economy:
1. While under British control, Hong Kong prospered as is normal with the combination of democracy and capitalism. A major banking center for Asia, its wealth and access to international banking has been EXTREMELY important to economic growth in China over the last 30 years. That formally ended Tuesday, July 14, 2020.
When the Brits transferred control to China in 1998, the treaty established that Hong Kong would have a special status – two systems, one country. Dictator Xi recently violated that treaty by forcing through one system, one country. Hence the riots. Correctly, Tuesday President Trump ended Hong Kong’s special status with the USA so that the economic relationship is the same as with China. That is a huge blow to Xi’s ego and to China. The ripple effects will be immense.
Unfortunately, our “opinion media” has ignored critical elements – (a) that China felt it could violate the 1998 Treaty without consequence, and (b) the ripple effects. Based on my reading about China, here are the questions you need to answer:
a. Why is China confident that NOW is the right time to violate the 1998 Treaty?
b. Is this the second act of WW III with the Wuhan Virus being the first act toward world domination by weakening with disease their intended victims?
2. Virginia’s governor and Richmond’s mayor caved to the Protestors/ Rioters/Vandals (PRVs) and decided to take down the Confederate statues in Richmond with the help of the Richmond Association of REALTORS (via a related entity) raising the $2.9 Million to fund removal. These actions are transforming our city from a distinctive, culturally diverse, Southern city into the laughingstock of the USA and eventually a nondescript suburb of Washington DC. Only a fool thinks the PRVs care about race. Power.
Ignore the public relations campaign designed to convince “the great unwashed” that this is a positive step forward. If it was a step forward, why do they need to convince us? An obvious unanswered question – Is this the most beneficial way to invest $2.9 Million in Richmond? Failing schools come second? No leaders in big boy/girl pants were present.
But the most critical aspect has been ignored. The Democratic Party today includes:
(a) The Democratic Socialists of America (DSA) which is a communist organization.
(b) The M4BL which is BLM and whose founders’ writings and Manifesto call for:
a. The replacement of capitalism with Marxism;
b. Eliminating the traditional family because they are opposed to fatherhood.
c. Having their own community excluding whites who they consider biologically inferior.
d. Having their own M4BL armed “patrols” to combat police.
e. And eliminating “Karens” who they define as suburban, white, married, women.
So, why has the Richmond Association of REALTORS who supposedly advocate for private property rights, joined forces with Marxists and communists, which oppose private property rights, to deface Richmond? Appeasement? Dumb as a brick?
I think it is a shame that the same energy, creativity, and money did not go into accomplishing the prior consensus to keep the statues and add historical context. Democrats consistently apply Saul Alinsky’s “Never waste a crisis to achieve your objective and build your political base”.
Only a significant organization could co-ordinate the nationwide PRVs effort we have witnessed. Remember our discussion about Obama’s Organization for Action (OFA) with 30,000 employees. This week it was announced that the Trump Re-Election Campaign has expanded to a staff of 1,500. Interesting comparison. To paraphrase Sherlock Holmes “Something big is afoot”. Nervous stomach? If not, you are not paying attention.
The Stuart Family showed real class offering to take his statue to his homeplace. For fun, I propose that Stuart Circle become: The Three Stooges Circle with statues of our Governor (the pediatrician that says it is fine to kill babies), the Lt. Governor (who has admitted being immoral as a defense against charges of being a sexual predator), and our Attorney General (who by violating his oath of office before God to defend Virginia’s Constitution within 48 hours of taking the oath must have set a record). Think my suggestion has a chance? Nah, me neither.
How do these relate to the land market.? The entire world is in recession due to the Wuhan Virus. Globally, all eyes are on the USA recovery in hope we will lead the world out of the recession. PRVs damage that economic recovery. The USA is the strongest economy, the USA Dollar is the strongest currency, and the USA Federal Reserve Bank is utilizing all of its powers with Quantitative Easing (QE) that makes Dr. Ben Bernanke look like a tightfisted miser. Helicopter money for all!
The icing on that cake is the combination of the 2017 Tax Act encouraging American companies to bring to the USA the Dollars they had held overseas, important tax stimuli in that Act, the 2020 CARES Act which provided an amazing amount of stimulus, and the high probability of additional stimulus being enacted this month. The world has never before seen either a pandemic recession like this one or this amount of stimulus going into the USA economy.
Typically, this amount of stimuli applied to an economy has been in countries that ended up with hyperinflation. Think Zimbabwe, Venezuela, and Latin American countries that saw annual inflation of 1,000,000% and ultimately defaulted on their debts to extract themselves from the aftereffects. A memorable party, there will be a hangover.
With all the global dislocations this enormous liquidity is needed while the world economy rebalances. Rebalancing is already occurring. It will take more than a year but probably less than five years. Perhaps a decade for the total effects of the stimuli and global rebalancing.
China should be the big loser. Xi is not stupid, his aggression indicates that he feels this is China’s time to dominate the world. Without a military conquest, China’s economy, currency, and image in the world are trashed. I am buying NON-Chinese goods if I have a choice and willing to pay more not to buy Chinese.
Every company is feeling the pain of the global rebalancing/supply dislocations. Dislocations in supply chains increase costs and production delays adds additional cost to the final good. Consumer goods will increase in price so inflation is inevitable. I have heard some economists explain that inflation is not a risk. Ignore them, the reality is that the rate of inflation will increase. The alternative is default because the USA cannot afford its debt.
In this EXTREMELY HIGH-RISK economic period, the US Federal Reserve Bank and the USA Dollar are both wonderful assets. We could grow our way out of the problem with some inflation but we need an heroic team of expertise to maneuver our way to safety. The biggest negative forces we face in the next few years are:
1. Short Term – The election in November is a MAJOR risk. Neither political party has exercised any spending restraint for over 40 years. Biden’s idea to raise taxes plus increase spending will lead to an economic crash that makes the Great Depression look like child’s play. That is not partisan, it is based on economic history.
2. China – As its economy suffers and its global power diminishes, the risk of war increases. Failing dictatorships typically start wars. Xi has an immense ego.
3. Inflation – If the Fed loses control because of unrestrained Federal deficit spending.
4. Democratic Party – With numerous elected officials either avowed Marxists or members of the DSA, unless it purges those from its ranks the Democratic Party will become a major threat to continued American freedom and prosperity. Unbelievable, but reality.
Until the election, three segments of the land market are benefiting from the global rebalancing:
1. The most obvious segment is industrial land which is already seeing heightened activity.
2. Low interest rates are impacting the new home market and residential development land.
3. Less obvious are the rural and timber land markets impacted by a combination of forces.
“My brothers and sisters, whenever you face trials of any kind, consider it nothing but joy, because you know that the testing of your faith produces endurance; and let endurance have its full effect, so that you may be mature and complete, lacking in nothing.”
(James 1:2-5 New Revised Standard Version, Oxford University Press)
Capitalism builds wealth, socialism consumes it in self destruction. That choice is here.
I serve an awesome God. Stay healthy,