Evolve or die

President John F. Kennedy is said to have remarked after his razor-thin victory (Kennedy 49.7 percent vs Nixon 49.6 percent): “If I see 10 people on the street, I know that five did not vote for me.”

That is how the winner-take-all presidential system works. But what some of our political pundits do not understand is this: A parliamentary/proportional representation system of government does provide an Angela Merkel and a Mahathir Mohamad. Now, say the name of the current prime ministers of Germany and Malaysia without looking it up. Hint: Olaf Scholz and Ismail Sabri Yaakob, respectively.

The UK has a new prime minister, Mary Elizabeth Truss, unelected to that position by the people but selected by her Conservative Party colleagues. Sweden just had an election. Eva Magdalena Andersson had served as prime minister for one year and her Social Democrat party received the most votes with a 30.3 percent share. But the next prime minister will be Ulf Kristersson from the third-place “Moderate Party,” which received 19.1 percent of the vote, as he forms a coalition with the opposition parties.

There is no need to revisit the last election as has been done about every 15 minutes for the past six years both here and in the US. However, casting an eye around the globe we can see that the natives are not happy with their government’s policies and with their leaders who, if not the architects, implemented those economic policies.

Boris Johnson was carrying a 24 percent approval rating when he was asked to leave 10 Downing Street in July. But his low numbers, while bad, puts him in familiar company.

Joe Biden is the “Best-Of-The-Worst” with 43 percent approval. Justin Trudeau of Canada can muster only 40 percent, while French President Emmanuel Macron barely breaks the 30 percent mark. Other global leaders can’t even get to that threshold. Kishida of Japan—28 percent, Scholz of Germany—27 percent, and Yoon Suk-yeol in South Korea with 19 percent approval should perhaps consider a career change.

Friedrich Nietzsche said, “Whoever battles monsters should see to it that in the process he does not become a monster himself. And when you look long into the abyss, the abyss also looks into you.”

Global GDP growth was 6.56 percent in 1964. Three major declines occurred with the two oil price shocks and the Global Debt Crisis. However, the trend since 1964 has been consistently lower with a pre-21st century average of 3.7 percent and year 2000 onward average—ending in 2019—of 2.9 percent.

In the process of fighting the economic decline “monster,” the policymakers have become the monsters. Economic decline is a process that takes many years. Events such as the market crashes of 1929 or 2008 are moments of panic. The trend counts and the central banks have been trying to fight the trend for decades. For the first time in those decades, central banks are tightening their monetary policy while governments continue to spend money as if nothing has changed.

The interest rate on the US 10-year bond is at a 12-year high as the Fed raises rates against a 40-year high inflation rate. However, increased expenditure by the government only fuels the inflation fire. When the money supply is completely absorbed by new government debt and public deficit spending is kept at record high levels, rate increases are insufficient because “new money” is constantly being added to the economy.

When the fundamentals of life change, every organism must evolve or die and virtually everything has changed since January 2020. “Evolution” demands/necessitates low level instability as the animal or institution adapts. You cannot make an omelet without breaking a few eggs.

The economic universe has only two options: dynamic stability—the ability of a system to return to a steady state of operation after adjusting to significant disturbances —or “Nobody saw it coming” sudden instability followed by systemic collapse.

The universe is good either way as collapse is a perfectly acceptable evolutionary solution to get rid of the “useless” and replace it with “better.” For the past 2,000 years the financial center of the world moved from China to India, then to Europe and the US and is headed back to the Chinese sphere of influence including Southeast Asia where better government policies allow for evolution. 

E-mail me at mangun@gmail.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis provided by AAA Southeast Equities Inc.