For the past few years we have warned about the growing surpluses of just about every thing we produce, farm, mine and harvest.  A few years ago these surpluses were not a big problem because China was buying it all, mostly to stockpile.  They stored iron ore, wool, cotton, oil and rare earth metals even though they have the world’s biggest reserves.  They also invested heavily in Botswana to add to their source of food.  Today, China has stockpiled so much they have no need for most goods.  The end result is that the world economy is stuck in neutral and will be for months, and maybe for years, to come.  

China has 400 years worth of natural gas but they prefer to use up everyone else’s first and keep theirs for as long as possible.  This is known as long term thinking and planning, something that is unheard of in the West.  This will one day make China self-sufficient and the economic powerhouse of the world.  

Another surplus which gets no discussion is cash.  Governments and central banks everywhere are printing money like it is going out of style.  Printing of cash by the central banks to create zero interest rates was supposed to be a quick way to create inflation and raise rates shortly thereafter.  All that has occurred are asset bubbles, such as the commodities bubble three years ago and today’s real-estate market.  

Low rates reward the borrower because it allows them to finance more debt.  This is at the expense of the saver.  The saver is the foundation of our economy since it is their cash that is needed to create the mortgage and the line-of-credits many of today’s consumers survive on in the first place.  People with cash instantly cut their spending and investing as soon as they see their returns start to shrink.  This is a slow and painful trip to the poor house.  

Japan has had zero interest rates for over 20 years.  The Japanese stock market is trading at the same level as 2006.  House prices on the landlocked nation still remain below their 1989 highs.  Now I know it this is hard for most Westerners to believe, but real estate can been a money losing venture like it has been in Japan nearing thirty years now.  Clearly, this policy has proven to be a failure.  Sadly, not one expert can see how bad this policy has been for Japan, nor conclude this is the direction we are headed. 

Until we get a complete change of economic thinking, the world is set to become poorer.  All those surpluses, including cash, will be losing value.  Soon it will be the housing market.  There is a surplus of homes around the world. Forget downtown London, Vancouver, Hong Kong, and so on, the further you get away from downtown the greater the number of homes that are available.  In many centres, like Vancouver, too many people are buying 2^nd and 3^rd homes as protection for their savings.  These people have already forgotten 2007-2009 when there was that same train of thought in the U.S. 

There is an old investment saying when everyone is jumping on the same train, get off as fast as possible.  The world economy is changing.  Sadly, most people will not realize this until it is too late.  Today, the advice is to get off the train now.