Fed Watch is a macro podcast with a clear contrarian thesis of a deflationary breakdown of the financial system and globalization leading to bitcoin adoption. We question common narratives and schools of thought in search of new understanding. central banks and currencies.
In this episode, Nolan Bauerle and I dive into booming Japan and US GDP numbers, asking if things are really that good, and what happened to the recession? Next, we use commodity prices to see if economic activity is really booming. Lastly, we give a little color to the China economic crisis that we've been on top of for 4 years or so.
Japan Q2 GDP came in at a scorching 6%, but if dig into the numbers, you realize that it was all due to export/import numbers. Exports rebounded by 13% after falling 14% in Q1. So, basically flat all year. However, imports fell 16% after falling 9% in Q1. In other words, imports fell and exports were flat. In GDP calculus, that makes the trade component look really positive. The GDP doesn't have any way to distinguish between exports rising relative to imports or imports falling relative to exports. Without import/export numbers, Japan's GDP would have been negative!
US GDP estimates are shooting higher as well. GDPNow is estimating Q3 to be 5.8%! Again, we start with the assumption that this is GDP calculus not actual economic growth. To check that assumption we use commodity prices.
The commodities we look at are oil, gasoline, aluminum, wheat. We also look at the dollar. If our assumption were incorrect, we should see prices for these commodities rallying. A booming economy needs lots of commodities. However, we see the opposite. Commodity prices are weak and falling for the most part. This confirms our assumption that the GDP estimate is a formula problem, not an actual booming economy.
The last story we cover is China's collapse. Long-time listeners and watchers of Fed Watch will know that I have been a big China bear for years. The Chinese economic crisis is deepening, if that's possible. We look at the Chinese yuan and how all their fancy controls are failing to support the exchange rate. It is crashing versus the dollar. They have a shadow banking crisis now, on top of the real estate crisis. Things are getting bad, which is just one more huge part of the GDP story of Japan and the US. The global economy is slowing, GDP numbers are glitches in the formula.
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