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

Saturday, February 11, 2017 6:03
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by Jeff Nielson, Sprott Money:

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.

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.

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Total 3 comments
  • Bad-Clown

    Accountants–they is all simpletons! Mental cases what always steals my stuff…

  • barebones

    This article is at best misleading.

    As logical models of the human world, economically it can be divided into three tiers and intellectually into two. They work well for any level of society, from a family to a world government.

    The third-world will always be the third-world because of the quality of the humans that occupy it! What will change is the leadership that exploits these populations and their associated (virtually autonomous) territories.

    Due to the political intrigues that have dominated the first-world governments and caused their corruption and soon to be economic downfall, the second-world governments have been positioning themselves to swap world capital control with the first-world. The diminution of the influence of the first-world will be due to the lack of wealth to continue world trade and effect a quick recovery.

    In the future, once the erstwhile first-world re-establishes a viable economy, and if the new first-world becomes decadent, it will probably lead to another control inversion. If the new first-world remains hale and hearty, then an attempt at re-acquisition will most likely lead to war!

    The End.

    • Cmonsense101

      Your comment is also misleading at best, jackass. During the middle ages Europe and America used to be the barbaric superstitious third world regions. Europeans used to suffer like domesticated livestocks on their way to Asian countries via wooden ships hoping to buy spices, gold and gemstones. Your mom and dad were too pre-occupied cheating with their neighbors and did not teach you history lessons beyond world war 2. Once the Russians and Chinese are done with you, you will be glad to have even a thirld world to hold on to. Fuckin’ Amereupeans (a peculiar species indeed, too preoccupied with their pink porkipine white ass).

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