The U.S. stock market is in the biggest bubble in history, putting the entire economy at risk. (Why Warren Buffett holds cash, how economy really works and why Trump’s plan will not work.)

This is a great episode describing the biggest economic bubble in history – the U.S. stock market. It also uses the example of Tesla, which I personally consider the biggest bubble and scam in history. While I agree with almost everything said in this video, I previously called out this author in one of my recent posts, referring to him as a “mouthpiece of China.” While he is willing to highlight Western economic problems, he remains completely silent about China’s economic issues, which, in my opinion, makes him biased. That is why I have called him a “mouthpiece of China.”

While I agree with almost everything regarding the stock market bubble in Western economies, unlike him, I also acknowledge China’s economic problems because I strive to be objective. In my opinion, being objective requires recognizing problems on both sides.

Here is a video discussing the Evergrande company in China, which is just one part of the country’s housing market, illustrating China’s economic struggles – issues that the author of the main video chooses to ignore.

Funny enough, the best and most objective analysis of the global economy I have seen was done by the YouTube channel Revolutionary Communist Party. Interestingly, this channel’s videos cannot be played on the WordPress website where this forum is hosted.

Maybe I just don’t know how to make videos from this channel work in my posts. I’ve tried everything, but for some reason, it’s not possible to embed videos from this channel and make them playable on this site.

Here is a post containing the video I’m referring to, along with a transcript of part of the video.

Capitalism Today: Debt, Inequality, and Trade Wars (Marxist analysis of economy/my view on Communism)

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24:41

“The crisis is expressing itself in similar ways in which it has done in the West. They tried to recover from the 2008 crisis basically in the same way that the West had tried to recover from the crisis of the 1970s. There was a massive ballooning of debt everywhere and a massive real estate bubble.

In 10 to 14 years, they managed to achieve what the Europeans and Americans—the West—had done in the whole period between 1980 and 2008. Debt in China during this period went from 130% to 300% of GDP. This is worth considering for a moment. By this massive expansion of credit, they created the conditions for a tremendous housing bubble, which is also one of the crucial aspects of the present crisis.

This created a source of revenue for local councils, who were selling off land to developers and using this to fund their budgets. This was a completely unsustainable way of funding local government, but it worked for a good 10 or 20 years. Now that the real estate bubble is bursting, this entire funding source for local governments has completely dried up. Local governments are now sitting on something to the tune of $6 trillion worth of debt—an immense amount of money. This is just an estimate; no one really knows for sure how much they owe because the debt has been hidden in many different ways.

For a number of years, this real estate boom soaked up a lot of the excess capacity in Chinese industries. Demand for cement, steel, and other materials absorbed the extra production that had built up in the economy. Housing construction requires a lot of raw materials, and it also employs a large workforce, reducing unemployment. But now the situation has changed. In China, there are an estimated 60 to 90 million unsold apartments—an astonishing number. That’s enough housing for about one-sixth of the population, based on a rough calculation.

These unsold apartments, if completed, would be worth somewhere between $13 trillion and $18 trillion. This gives an idea of the scale of the housing bubble and the crisis that has built up in China. Housing consumption growth has started to slow down, now estimated to be around 3-4%, whereas previously it was 6-8%. The growth rate of the Chinese economy as a whole has also started to slow.

President Xi has doubled down on exports as his way of solving this crisis. Additionally, the government has taken on some of the debt from local governments, offering them $1.4 trillion—a huge amount of money, larger than Obama’s rescue package in 2008. Remarkably, this barely made a difference to the markets. In fact, they were somewhat disappointed with the level of spending, as they were hoping for an even bigger package. The reaction in the stock exchanges reflected this disappointment, as investors realized the scale of the problem was far greater than what the government’s measures could solve.

What the West would prefer is something entirely different. They would like China to focus on internal consumption, effectively reshaping its economy to be less reliant on exports. This would involve giving more money to workers in China so they could buy more products, both from Chinese industries and from the West. This would help rebalance China’s economy.

If China had a left-reformist government, it might lean in that direction. But Xi’s government, despite the name of the Communist Party, is not communist in any meaningful sense. Instead, its main goal is to protect the profits of big Chinese corporations and the wealth of the bureaucracy. Their response to the crisis is not to redistribute wealth from the richest to the poorest, but rather the opposite—seeking to expand profits and export their way out of the crisis.

The inequality and uneven distribution of wealth is, at its core, a class issue. The strategy that the Chinese bourgeoisie has pursued for the past two decades (or more) is now reaching its limits, and this is becoming increasingly obvious. The key issue now is the struggle between the United States and China. It is no longer possible for China to export its way out of the crisis. There will not be an increase in its market share in the U.S. or Europe—those possibilities have been shut down. China is now locked in a fierce battle with U.S. and European capitalists over existing markets, rather than expanding into new ones.

But, of course, this does not stop them from trying. Their current strategy is to push ahead with exports despite these limitations. The rise of China raises the prospect of a new trade war. In fact, the rise of Trump can be understood against this backdrop—China was able to export far more to the U.S. than the U.S. could export to China, creating an imbalance.

Trump’s primary economic goal is to eliminate the trade deficit. He wants to abolish the trade deficit between China and the United States, as well as between China and Europe. His strategy for achieving this is to introduce tariffs—a massive program of tariffs. The difference between Trump and the Democrats is not whether to engage in protectionism, but rather who to target with protectionist measures.

Both Trump and the Democrats agree that China must be targeted, but they differ on the details. The Democrats believe that the U.S. should work to keep Europe on its side in the economic struggle with China, whereas Trump is more aggressive, willing to impose tariffs indiscriminately. Trump’s proposal is to introduce 20% tariffs on all imports. How far he will go and how quickly remains uncertain.

He has also proposed a 60% tariff on Chinese goods specifically, as well as a 200% tariff on cars imported from Mexico. These kinds of measures would completely disrupt the global trade system. Some of these ideas were already attempted during Trump’s first term, but this time, judging by his appointments and rhetoric, he seems intent on going much further.

The consequences of this would be profound. A former chief economist at the IMF has warned that universal tariffs, as Trump is proposing, would be like throwing a grenade into the heart of the global economic system. This is why the capitalist class—both in Europe and the United States—is panicking about the potential fallout.”

The transcript above describes economic issues in China that are omitted from the main video in this post. Because the author of the main video is completely silent on the issue discussed in the transcript, I refer to them as a mouthpiece of China.

If you highlight problems on one side while pretending the issues on the other side don’t exist, you stop being objective and become a mouthpiece for one side. In the comments of one of my latest posts, I was attacked as someone who "doesn’t know anything" and "doesn’t do research." I was also provided with links to other YouTubers who, in my opinion, are also mouthpieces of China. To those people, I would argue that they are the ones who are uninformed and fail to do their own research, as they rely on sources that only criticize one side while ignoring the other.

I was accused of not doing research. You can accuse me of many things, but not doing research is not one of them. My question to those people is: Were they aware of the Chinese economic issues described above? I respect sources that maintain objectivity, such as the Revolutionary Communist Party or economists like Michael Hudson, who, while critical of Western economies, also acknowledge China’s economic problems.

To those accusing me in the comments of being uninformed and not doing research, I would ask: Are they truly informed? Have they done their own research, or did they simply find someone who supports their side and only provides criticism of the side they dislike - while ignoring the issues of the side they support? In my opinion, such sources become mouthpieces for one side.

Now, I will provide another part of the transcript from the video, which discusses the overall issues of a capitalist, free market, profit-driven economy. This fragment mentions a planned economy, which I know will be immediately attacked because of so-called “common knowledge” which claims planned economies don’t work. However, in my opinion, that belief is simply propaganda.

For those who argue that a planned economy doesn’t work, I recommend looking into the Japanese economic miracle, which was actually built on a war-planned economy - something few people know about. I’d also like to point out that only two strong economies with large industries, such as the automotive sector, were built from scratch: South Korea and China. Both followed five-year plans, meaning they used a planned economy.

Neither South Korea nor China had strong economies or major industries before World War II, yet they were able to develop them through protectionist policies, tariffs, and five-year plans. If a planned economy supposedly doesn’t work and free markets are superior, then why is it that the only two countries able to build strong economies and major industries followed a planned economy? Why has no country with a free-market system, without economic planning, been able to achieve the same success?

Additionally, the Japanese economic miracle, which nearly led Japan to overtake the U.S. in GDP during the 1970s, was based on a war-planned economy. Since Japan transitioned to a free-market economy and moved away from its planned economy, it has experienced what is now called the “three lost decades.” If the free market is truly superior, why has Japan struggled so much since abandoning economic planning?

This contradiction between historical evidence and the so-called “common knowledge” that planned economies don’t work is why I call this belief propaganda. Unfortunately, most people don’t know history at all. Instead, they blindly trust so-called authorities and dogmas that tell them something completely different.

Anyway, here is the second excerpt from the lecture that discusses the problems of free markets:

5:00

“This morning he spoke about the crisis of the 1970s and the way in which they began to reestablish a capitalist equilibrium after the crisis of the 1970s. This has an important bearing on the situation we faced in 2008. The way they got out of the crisis of the 1970s was by attacking the working class and at the same time massively increasing the amount of debt in the economy—expanding credit, releasing limitations that had previously been there on lending to people who couldn't afford to pay it back, and increasing how much money banks could lend overall.

These two things are related. Total debt now is 238% of GDP on a world scale. The debt is equivalent to 238% of everything that’s produced in the world in a year. If you include financial corporations, banks, and so on, it's 330%. This is a big increase from 2007, but more importantly, it's a doubling since the 1970s. And this is despite the fact that the world economy today is five times the size it was in 1970. So, they doubled the debt even though the economy has grown by five times. Really, if you think about it, it's like unfolding the debt since the 1970s, and this weighs like a heavy blanket on the world economy.

What this really shows is that in the past period, capitalism could only grow as long as it was constantly accumulating more and more debt in one way or another. This begs the question—how come this is the case? This is one of the consequences of the crisis of overproduction: the working class cannot buy back all the products they produce. This is linked very much to how they came out of the crisis in the 1970s.

If they attacked the working class, you could see the consequences clearly. Antonio’s session yesterday showed a graph of how labor productivity was increasing, yet wages were not increasing at the same rate—only a little bit. Productivity shot up, but this was a change from the 1950s and 60s, where wages and productivity had followed each other in tandem. Suddenly, this gap opened up. Obviously, this gap had to be filled somehow. Workers needed to buy the new products being produced at a higher rate due to increased productivity. But if the workers couldn’t buy them, then who would?

Capitalists don’t produce to satisfy needs—they produce to make profits. If they can’t sell the products they make, they won’t make a profit. This contradiction opened up. To resolve this problem, rather than raising wages, they expanded credit. Instead of workers receiving money through their paychecks, they got it in the form of loans. This led to a massive expansion of loans for housing, creating a housing bubble. Consumer credit exploded as well.

In the 1950s and 60s, workers would buy houses, TVs, and cars largely with saved money. Today, hardly anyone buys these products with savings—they buy them on credit. Direct consumer loans became commonplace. Car companies not only sell cars but also offer loans to finance them. Credit cards became widespread, creating massive amounts of credit card debt, which didn’t exist on the same scale before. Now, almost everything can be bought on credit.

The emergence of companies like Klarna, a Swedish company, exemplifies this. Klarna and similar businesses thrive by offering credit for even the smallest purchases through the internet. Of course, this credit comes at high interest rates. The system has found countless ways to keep people spending money they don’t have, keeping the economy going through artificial means.

After attacks on the working class, the situation worsened. In the U.S., the ILO (International Labour Organization) reported that since 1999, labor productivity in 52 high-income countries grew by 27%, while wages grew by only 14%. In the richest countries in the world, productivity grew twice as fast as wages. This gap continues to widen across advanced capitalist economies.

Initially, some of this gap could be covered by investment. Capitalists took extra profits and reinvested them into production. However, this only increased productivity further, exacerbating the very problem they were trying to solve. Throughout the 1990s and 2000s, they kept things going by expanding credit and reinvesting surplus capital into production. But at a certain point, contradictions became too wide—on one hand, workers couldn’t buy back what was produced; on the other, capitalist production capabilities far exceeded demand.

Hypothetically, capitalists could all agree to raise workers’ wages, which some Keynesian economists proposed. About 10 years ago, Joseph Stiglitz argued that what was needed was to raise wages to help solve the crisis. But no capitalist is going to willingly increase wages for the benefit of the entire system. They operate on the basis of maximizing profits for their company. If managers don’t follow this principle, shareholders will quickly replace them with someone who will. Capitalists don’t make decisions based on the health of the system as a whole; they make decisions based on their individual business interests.

This is a fundamental flaw of the capitalist system—it is anarchic and unplanned. Each company looks at its own figures, not at the system as a whole. In contrast, a planned economy would consider the entire system when making decisions.

Another way they’ve kept the economy going—especially since 2008—is through massive government borrowing. In recent years, there was a surge in government spending during the COVID-19 pandemic when governments handed out money on a large scale. Trump’s tax cuts before the pandemic were another example—these were not funded by spending cuts elsewhere. Biden’s Inflation Reduction Act was another large government spending program financed by borrowing.

This is a key way in which capitalism overcomes the crisis of overproduction—by making the government the "borrower of last resort." Governments continue to borrow money to keep the system afloat.

Debt remains one of the fundamental contradictions of the world economy today. It’s not the only one, but it looms over everything, constantly overhanging the global economy.”

Now, I have described this issue in two comments on a YouTube video, using my own words to make the concept easier to understand:

“The issue is that rich people don’t spend their money the way poor people do. If you reduce taxes for the rich, they will spend it on stocks or assets like houses, which will only increase housing prices. Meanwhile, if you reduce taxes for poor people, they will spend the money—whether on extra bread, a new TV, or a computer. Even if they spend it on alcohol, which isn’t good overall, it still stimulates the economy by increasing demand.

For example, a bakery that produces bread will see higher demand, leading to increased production and possibly hiring more workers. The same applies to TV or computer manufacturers. Marx explained that recessions are normal in capitalism. One of the problems with capitalism is that employers want to pay the lowest wages possible, but this eventually leads to people earning too little to afford the very products they produce.

To simplify, imagine a bakery owner who wants to pay his workers as little as possible to maximize profits. However, his workers are also his customers. If he keeps lowering their wages to increase profits, those workers will go from buying two loaves of bread to only one. This reduced demand will, in turn, lower his profits.

So, while the goal of this bakery owner was to increase profits by reducing labor costs, the result was the opposite. By lowering wages, he also lowered demand, which ultimately reduced his profits.

Instead of what I just wrote, people are told the neoliberal myth of trickle-down economics. This myth claims that the rich are job creators, so we should reduce their taxes, allowing them to use that money to increase production, invest in new companies, and create jobs—because they are supposedly the "job creators."

However, this myth completely ignores the supply-demand equation. Jobs are not created by the rich simply because they have more money; they are created by the demand of the poor. The rich do not create jobs out of excess wealth—they create jobs in response to demand. If the poor are too poor to create demand, the rich will not create jobs for which there is no demand.

In reality, if you want to create more jobs, you need to ensure that the poor have enough money to generate demand. When demand increases, the rich will create businesses and jobs to meet it. The truth is that the poor—not the rich—are the real job creators because they drive demand.

Because people believe in this myth, the rich now pay little to no taxes while the poor get poorer, which only reduces demand and weakens the economy. Reducing taxes for the rich did not create jobs—it only increased asset prices and further weakened the economy.”

“Houses and stocks go up in price because the rich pay fewer taxes than the poor. As I mentioned in other comments, the rich do not spend the money they earn; instead, they invest it in stocks and assets. Since we live in the imaginary world of neoliberalism, which created the myth of trickle-down economics, we see stocks and assets—like houses—rising in price. This is not just a question of inflation.

Inflation does increase prices, but first of all, most money is created by private banks, not the Fed. Secondly, the issue is largely due to a flawed taxation system. Elon Musk, for example, pays an average of only 3% in taxes on his income, and sometimes he pays nothing at all. This happens because of the myth of trickle-down economics, which I explained in my earlier comment. Trickle-down economics ignores supply and demand in this equation. The rich do not create jobs—rather, the poor create jobs by generating demand.

You can lower taxes for the rich, but they still won’t create more jobs if the poor are heavily taxed because jobs are only created when there is demand. The West, especially the U.S., does the opposite of what is healthy for the economy. Instead of taxing the rich and lowering taxes for the poor, they do the reverse. But it’s the poor, not the rich, who are the true job creators because they drive demand.

If you want to help the economy, increase taxes on the rich and reduce taxes on the poor. When the poor have more money, they spend it, creating demand. In response, the rich will create jobs to meet that demand, and the economy will grow. However, if you reduce taxes for the rich, as the U.S. is doing, but do not lower taxes for the poor, the poor won’t have enough money to spend and generate demand. As a result, the rich won’t create jobs because there’s no demand for new goods or services.

How many times have you heard that the rich create jobs? This is complete nonsense. No matter how much money you give to the rich, if the poor don’t have money to buy things and create demand, the rich won’t create jobs. But people continue to believe this myth of trickle-down economics, allowing tax cuts for the wealthy while the poor stay poor. And what’s the result? A struggling economy while stock and asset prices continue to rise.”

Now, Trump is pushing this trickle-down economics and neoliberal nonsense by lowering taxes for the rich, and we have already seen the results of this in the past. Not only that, but AfD—which is supported by Elon Musk and therefore also by Trump—has the same trickle-down economic plan, believing that reducing taxes for the rich will somehow work.

All of this is an attempt to create structural change in Europe, similar to what happened in Japan in the 1970s and 1980s, which I also described in one of my previous posts:

How Central Banks Have Seized Power Over Our Societies (The Story of Japan and What I Think Will Happen in Europe)

This was the war economy system, adapted to the production of consumer goods. The 95 million people of Japan now enjoy a national income second only to the United States and the more prosperous nations of Western Europe. It’s not a good system for capitalists, you know, shareholders, but for the population, it created a lot of wealth, very even income and wealth distribution, very high growth, and very rapidly raised quality of life and standards of living. In 1959 alone, the economy expanded by 17%.

But a result of the war economy system was that entire industrial sectors would compete not for profit but for market share. Companies would fight until bankruptcy to gain market share. This phenomenon was soon recognized and called “excess competition.” The solution was the creation of explicit, or implicit, cartels.

In the banking sector, window guidance acted as the cartel control mechanism because the Bank of Japan could dictate the number and value of loans that banks issued. As a result, bank rankings never changed during the postwar era except after mergers. According to one banker, “If it were not for window guidance, we would compete until Harakiri.”

The U.S. current account deficit surged to its highest level in nine years. The size of the increase took many economists by surprise. While cartels controlled competition within Japan, there were no such limits when it came to international markets. Japanese corporations soon became dominant in many markets in the world. In America, formal congressional hearings were held under the title “Japanese Productivity Lessons For America.”

This also highlights the problem with free-market, profit-driven systems - not just overproduction, but excessive competition. As it was stated:

“If it were not for window guidance, we would compete until harakiri.”

Instead of Americans learning from "Japanese Productivity Lessons for America," they imposed structural changes on Japan, introducing free-market neoliberal trickle-down economics. This led to three lost decades in Japan. I have written before that the same approach is now being pushed onto the EU, represented by parties like AfD in Germany - which is why Elon Musk supports AfD.

Now, let’s move on to Trump’s plan, as described by Yanis Varoufakis in my other post:

Trump, Europe’s Collapse & Why Liberals Keep Losing, with Yanis Varoufakis (Trump Tariffs, Economic Harakiri, What Happened to Japan, and Gold)

As Yanis Varoufakis explained in the video I shared in my post, Trump planned to devalue the USD relative to the rest of the world. Essentially, he wants to do to the global economy what was done to Japan in the 1980s, as I described in one of my previous posts.

In the 1980s, the U.S. imposed 100% tariffs on Japanese electronics, forcing Japan to make a deal and commit harakiri by adopting neoliberalism, embracing free-market policies, and increasing the value of the yen. This made Japan uncompetitive, and combined with neoliberalism, free-market policies, and trickle-down economics, it resulted in three lost decades for Japan. Today, Trump is attempting to do the same to the rest of the world.

However, there is a major issue with this plan, which Yanis Varoufakis explains: in order to even attempt to make the U.S. competitive - which, in my opinion, is impossible - it would require reducing trade deficits, which in turn would require the devaluation of the USD.

This devaluation, combined with tariffs that disrupt global trade, would be catastrophic. As previously quoted:

“A former chief economist at the IMF has warned that universal tariffs, as Trump is proposing, would be like throwing a grenade into the heart of the global economic system.”

So, Trump is essentially attempting to throw a grenade into the global economy, which is already on shaky ground due to two massive bubbles: The credit and housing bubble in China and The Western (mostly U.S.) stock market bubble.

I have said before that I dislike the current economic system and believe it must be changed - otherwise, we are doomed. But Trump doesn’t realize the full consequences of his actions. His policies could trigger a Great Depression, which in turn could lead to another Great War.

For now, my prediction about the Americanization of the EU, which I described in one of my earlier posts, is coming true. I said that Thatcherism and neoliberalism would spread to the EU, led by groups like AfD in Germany, which is why they are supported by figures like Elon Musk.

Another clear example of the Americanization of the EU is the increase in military spending, despite the fact that the EU is not under any real military threat. Thatcherism and neoliberalism are evident in the push to cut social programs, making Europe more like the U.S., while increased military spending also represent Americanization of the EU.

This proves that my prediction about the Americanization of the EU is becoming a reality. However, most people don’t understand what’s happening and will cheer it on, as it will be disguised under slogans like “Fighting the migrant crisis” - the very crisis that was intentionally created to push people into supporting policies they wouldn’t normally vote for.

As I’ve mentioned before, if you have left-leaning economic views in Germany but acknowledge the migrant crisis and want to address it, you are essentially forced to vote for AfD. This, in turn, brings Thatcherism and neoliberalism, leading to the structural changes needed for the full Americanization of the EU - something I have warned about before.

“Knowledge will make you be free.”

― Socrates

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“Knowledge isn’t free. You have to pay attention.”

― Richard P. Feynman

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“Freedom is not free, you need to pay attention.”

― Grzegorz Ochman

Please pay enough attention, or we will all be screwed. God bless you all.

“At that time, for the first time, I came across Polish socialist pamphlets—Młot's Who Lives Off Whom and Liebknecht's In Defense of Truth. I liked them much more and found them more convincing than the related publications of Narodnaya Volya I had read up to that point. So I decided to acquaint myself more closely with socialism itself, and I read the first volume of Marx's Capital in Russian. I can’t say that this reading left a strong impression on me. Although Russian influence was minimal, it did manage to sow some anarchistic confusion in my head. Marx's abstract logic and the dominance of commodities over people didn’t sit well with my mind. In any case, this reading significantly deepened my views on society, and unconsciously, I began to yield to the influence of Marx's logically constructed concept.”

— Józef Piłsudski “How I Became a Socialist”