December 29, 2015

By: Kelly Diamond, Publisher

2015What a year!  This is my last installment for the year 2014. The next time you see my writing, it will be 2015.

Without question, the United States has lost its economic luster, but so have parts of the EU and Asia. Yet, there are countries who have chosen to see this as an opportunity to compete and revitalize their economies. The same can be said for individuals: while some still put their faith in the fiat currency of the US or put all their eggs into one IRS coded retirement plan, there are others who are diversifying and globalizing their assets based on the warning signs and trends they see.

We’ve seen a few things happen over this year. There is of course the slow roll out of Obamacare, the peaks and valleys of the EU and its various constituents, the Chinese making a surprising burst in the last lap of 2014 to beat out the US on nearly every front but raw GDP, and Russia and Japan flailing about monetarily to name just a few.

So, going into the new year, what is the prognosis? Well, I think if Hong Kong and Estonia just stayed their course and didn’t change a thing, they would still be poised for economic gains. There are murmurs of Hong Kong adopting a sales tax… but not in the near future given the cultural and legal hurdles entailed in such an endeavor. Come next year, I will be monitoring Hong Kong and Estonia’s standings in worldwide economic freedom.

As for China, we have not seen the last of the great dragon. If anything, their resolve just kicked into overdrive. The press coverage of China’s economic gains, especially pitted against the US means not just a happy new YEAR for China, but a happy new GEAR as well. They have always played the long game. I don’t expect any sloppy play from them next year whatsoever, but I do expect some new benchmarks and more shaming of the U.S.

One of the things we are losing to China, as is the EU, is lending power. Several countries are looking to China for no other reason than to avoid the US and her allies. And who could blame them? Dare I call this the closest we’ve seen of free market anarchism in our lifetimes? There is no “world government” (yet) that dictates how each country engages in commerce with another country… and China just stepped up as the latest and greatest benefactor for countries such as Argentina, Russia, and Venezuela. It all but hip-checked Japan to the curb as being the largest benefactor to the Asian Infrastructure Investment Bank.

The EU is a tough call. I look at countries like Estonia and Ireland and I get hopeful. Then I see how the EU frowns upon rugged competition (for instance how it put the kibosh on the Double Irish), and wonder if it will even allow its struggling members to scrape out of their respective economic holes. My eye will be on Germany, and how it shoulders the crumbling areas of the EU economy. My eye will also be on Switzerland, Austria, and Luxembourg and how they field the U.S. FATCA policies, or if Americans will just be black listed from their banks altogether to spare them the hassle?

Russia has issues. Long standing issues that are deeply seated in cronyism. I don’t see that changing, but I will be watching their relationship with China, and the energy markets for sure in 2015.

2015 is the year when the ACA mandate chickens come home to roost. Up to now, we’ve seen a few things happen under the Affordable Care Act:

Earlier this year, two judges ruled to defund Obamacare (Woops!):

Their opinion relies on seven words in the Obamacare statute — ‘through an Exchange established by the State’ — which, if read out of context, suggest that the tax credits are not available in up to three dozen states where health exchanges are run by the federal government.” Source: Think Progress (I know! Slanted as this source is, the ruling did happen, and it was in fact predicated on these seven words.)

So while nearly one fifth of the U.S. economy looks like it’s going to hell in a hand basket, and one fifth of junk bonds is tied up in energy which is also taking a beating, the US dollar looks untouched. Or at least to the average evolutionary dead end who believes all’s well. US purchasing power is lost to China and/or the Fed (you choose, both are correct):

china purchasing power

value dollar the fed

I realize that a lot of what I cover can be seen as gloom and doom. My articles are little weekly warning signs on your path of life. And what do we do when we see warning signs? Panic? Certainly not. Some pull off the road for a bit to look for all the alternate routes. Others tough it out and stay their course, but are braced for the rough patches. But the journey doesn’t stop, does it?

Have a safe and joyous New Year! May your resolve and vigilance grow stronger, and here’s to all the detours that will lead you and yours to enjoy even more freedom!

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