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The West Will Become The New ‘Third World’: PricewaterhouseCoopers - Jeff Nielson

The West Will Become The New ‘Third World’: PricewaterhouseCoopers - Jeff Nielson
By Jeff Nielson 8 months ago 25834 Views 8 comments

February 10, 2017

First World

The term “First World” refers to so called developed, capitalist, industrial countries, roughly, a bloc of countries aligned with the United States after word war II, with more or less common political and economic interests: North America, Western Europe, Japan and Australia.

Second World

“Second World” refers to the former communist-socialist, industrial states, (formerly the Eastern bloc, the territory and sphere of influence of the Union of Soviet Socialists Republic) today: Russia, Eastern Europe (e.g., Poland) and some of the Turk States (e.g., Kazakhstan) as well as China.

Third World

“Third World” are all the other countries, today often used to roughly describe the developing countries of Africa, Asia and Latin America. The term Third World includes as well capitalist (e.g., Venezuela) and communist (e.g., North Korea) countries as very rich (e.g., Saudi Arabia) and very poor (e.g., Mali) countries.

source

First World. What a nice euphemism. Of course depending on where a person lives in the world, they might want to attach a different label to that collection of nations, like The Conquerors, or simply The Exploiters. For many generations; the First World got fat at the expense of the other “worlds”, most notably the so-called Third World. But times have changed.

The economies of emerging market minnows Egypt and Pakistan could surpass the Canadian economy by 2050, according to a “brave” new report by management consultancy PricewaterhouseCoopers.

That report takes a particular metric and simply projects it into the future. Pure numbers. So why would the Financial Post choose to characterize an economic projection as “brave”? How can mere numbers be brave? It’s because the findings of the report are economic (and social) heresy, in our corner of the planet. The First World will no longer be first. Indeed, arguably it will no longer even be second. The economic forecast in the PWC report shows the so-called First World on a steady slide to Third World status.

“By 2050, emerging economies such as Mexico and Indonesia are likely to be larger than the UK and France, while Pakistan and Egypt could overtake Italy and Canada,” PWC said in a report published Tuesday.

However, this is not the only reason why the Financial Post chose to emphasize the word “brave” when referencing the report. Readers looking at the previous statements may not immediately see anything particularly shocking in the findings. Egypt and Pakistan have much larger populations than Canada. So why couldn’t their economies become relatively stronger, in overall terms? However, that all changes when one looks at the current differentials between these economies, using the conventional means of ranking nations economically.

The PWC forecast seems incredulous as Egypt’s GDP based on the more common market exchange rates (MER) stood at US$340 billion and Pakistan a mere US$284 billion in 2016.

By contrast, Canada’s US$1.5 trillion massive economy placed it as the 10 th largest in the world.

Now we get to the shocking part of this projection. Canada’s GDP is currently more than double that of Pakistan and Egypt combined. Yet by 2050, according to a respected Western economic consultant, both of those nations will have stronger economies than Canada.

This is also where we get to the interesting part of this report. What metric does PricewaterhouseCooper rely upon as the basis for its economic projection? It uses an economic term called “purchasing power parity”. It is the total purchasing power of that population.

PWC argues that this produces a clearer picture of actual economic strength because it cancels out price differentials between economies. In general, prices are much higher in Western economies than in the Emerging Market countries (and even BRICS nations), thus having higher nominal amounts of wealth circulating in Western economies can be deceiving, since it can buy less stuff.

What makes this metric and report so interesting is that PWC is essentially projecting the real wealth levels of these populations . This projection is about a lot more than just evening out price differentials.

Canada’s GDP is more than four times as much as that of Egypt, and more than five times as much as that of Pakistan. Even by 2050; PWC estimates that Canada will still have GDP greater than either nation. But Egypt and Pakistan will have stronger economies, because their populations will have more real wealth circulating in those economies.

We’re not dealing with a small differential here. Note that PWC is talking about Egypt and Pakistan having much stronger economies than Canada. By 2050, measured in purchasing power parity, both Egypt and Pakistan will have economies more than 1/3 stronger than Canada.

This seems to be incongruous. If Canada will still have the larger economy by 2050 (as measured in GDP), why will Egypt and Pakistan both have stronger economies, as measured in the real wealth circulating within that economy? We get a large clue by looking at a chart which is familiar to regular readers.

For the past 8+ years; the bankers of the Federal Reserve and the bankers of Wall Street have been boasting about all the “wealth” that has been created in the United States during the mythical U.S. recovery . Yes, lots and lots of wealth.

Regular readers know that B.S. Bernanke conjured more than $3 trillion of new U.S. funny-money into existence during the infamous Bernanke Helicopter Drop , quintupling the entire U.S. money supply in less than five years . And every, single dollar was handed to the Big Banks of Wall Street – for free. But that’s just the tip of the iceberg.

Thanks to the magic of “fractional-reserve banking”, where U.S. banks are allowed to lend $35 for every $1 they receive. The $3+ trillion which B.S. Bernanke handed to them became well over $100 trillion in new liquidity . That works out to more than $300,000 per American.

So why are there roughly 50 million permanently unemployed Americans? Why are more than 40 million forced to rely upon food stamps to survive? Because when the bankers conjured their $100+ trillion into existence (for free), they kept it all – kept it all for their Masters , the oligarchs. What did the oligarchs do with that extra $100+ trillion?

As the chart above clearly shows, the oligarchs stuffed most of that $100+ trillion into their own hoards, spending virtually nothing. Of course that’s not entirely true either. They gambled with much of their funny money, in the bankers’ private, unregulated, rigged casino – the derivatives market. The derivatives market is a hoard of private wealth which never circulates in the real economy that is somewhere in the magnitude of $1.5 quadrillion ($1,500 trillion).

We’re no longer sure how large the rigged casino has swollen, since in 2010 the bankers changed their “definition” of the casino, and overnight the derivatives market (supposedly) shrunk by 50%. This financial cesspool is the most gigantic repository of dark pool liquidity the world has ever seen.

The gambling done in the derivatives market is used to manipulate the real economy, but none of the “wealth” in that rigged casino ever circulates within the real economy. The chart above, the heartbeat of the U.S. economy, shows what happens when most of the wealth/liquidity in an economy is hoarded: the economy withers and dies.

Dismal holiday sales at Macy's and Kohl's cast gloom over sector

While the U.S. mainstream media were presenting their usual “visions of sugar plums” (i.e. lies) about the U.S. economy before Christmas, they couldn’t hide the truth from the bottom line.

"The strength around Thanksgiving and Christmas was insufficient to offset the sales weakness in the balance of the quarter," Stifel, Nicolaus & Co analyst Richard Jaffe wrote.

"In addition, these peak selling periods were characterized by greater promotions which contributed to weaker than anticipated gross margin as well," he said in a client note.

Translation? The only way that the U.S. retail sector was able to sell significant quantities of goods to consumers with near-empty wallets (and maxed-out credit cards) was by slashing prices to the bone – leaving little-to-nothing in profit. Does that sound like an economy that has been “recovering” for more than eight years? Does that sound like an economy literally overflowing with newly-conjured wealth? Hardly.

Why will Canada have a larger economy than either Egypt or Pakistan by 2050, while having a weaker economy than both? Because as with the United States (and the rest of the Corrupt West), most of that wealth will be hoarded – hoarded by the Oligarch Trillionaires .

Why does “sharing the wealth” automatically make an economy stronger? It’s not socialism, it’s simple economics. Just ask the IMF .

IMF study finds inequality is damaging to economic growth

The bankers would like to pretend that they are just learning this now, just learning that “trickle-down economics” was nothing more than the pablum fed by the oligarchs to their right-wing foot soldiers – and the charlatan economists who preached it. In reality, the fact that wealth equality is the foundation of economic strength is one of humanity’s oldest truths.

An imbalance between rich and poor is the oldest and most fatal ailment of all Republics.

- Plutarch (46 – 119)

According to this noted philosopher, nearly 2,000 years ago it was already old news that the fastest way to kill an economy was to let the rich people hoard all the wealth. And what have we learned in 2,000 years? As PricewaterhouseCoopers shows us, not much.



Jeff Nielson is co-founder and managing partner of Bullion Bulls Canada; a website which provides precious metals commentary, economic analysis, and mining information to readers and investors. Jeff originally came to the precious metals sector as an investor around the middle of last decade, but with a background in economics and law, he soon decided this was where he wanted to make the focus of his career. His website is www.bullionbullscanada.com.


The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

BRF 8 months ago at 12:17 PM
Excellent article to which I concur. If the goal was to in debt the world and then buy up those foreclosed upon with free money it has worked remarkably well. The only fly in the ointment being that those buying have pushed up the prices of the real assets they are buying by the virtue they are using virtually free money to do that buying. With derivatives all being based on real assets in the real economy inflation in the financilized world seems to know no bounds, some of this inflation does however trickle down. All this neo-economic policy, funneling wealth upwards is leading to a generalized globalization of poverty in the real economy for each definition of world economic status as outlined in the PWC thesis.
Jeff Nielson 7 months ago at 8:08 PM
Thanks for the support BRF! Yes, flood the world with funny-money and DILUTE all of the Peoples' wealth out of their pockets -- with the vast majority never even understanding that they were just robbed.
gerald j thompsett 8 months ago at 2:15 PM
Very powerful article, so why was this done? even with the oligarchs tremendous greed they must have realized the mess they would create. When the economy implodes will this not wipeout all the paper wealth they have accumulated? I suppose a lot of this wealth has already been converted to hard assets while the majority of people are wiped out of paper assets. Is the end game the new serfdom?
Jeff Nielson 7 months ago at 8:12 PM
Gerald, that is a question I ask myself on a regular basis, "why?" Why destroy their own power-base? An expression I use regularly is that even a dog knows better than to defecate in its own bed. The only answer that I can arrive at is "crazy".

The current generation of oligarchs has embarked upon a SERIES of the most extreme policies (and most extreme crimes) that we have ever seen in our lifetime -- most notably their totally contrived "War on Terror". I have concluded that these oligarchs are clear-and-obvious psychopaths, and like many/most psychopaths they are oblivious to the consequences of their actions.
Don 7 months ago at 9:58 AM
Excellent article and one which I also happen to agree with completely. We are witness to this happening here in the west, and 90% of the population are completely blind and/or indifferent to it. I have been screaming about this for years, NO empire lasts forever.
Jeff Nielson 7 months ago at 12:54 AM
Indeed, Don, there is a massive effort in the media to present everything as short-term/near-term events, and to never refer to events of even one or two years ago. Then the Revisionists sweep in and re-write our "history". Keep people blind and ignorant to the connection between ACTIONS and CAUSES.

"Those who cannot remember the past are doomed to repeat it."

- Santayana
Joseph 7 months ago at 12:32 PM
I dont think Mexico classifies as an "emerging" economy.

Emerging economies are those who, rich in natural resources, are able to create substantial GDP growth and in turn, develop their infrastructure and increase the middle class.

Mexico has had a strong industrial sector for a long time now, and is a has a lot natural resources (gold, silver, platinum, oil, gas, etc) to boot.

Saying that certain countries will have an economy the size of France, per se, is a dream,. Why? Because France and Canada (among others) will be reduced to Second or even Third World, since productivity is the key to sustainable growth, and not debt.

But I am not hopeful in anyway. War is coming.

And THAT is a reality.
Joseph 7 months ago at 12:33 PM
p.s. Great article. Thank you!

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