Global denial of the mess we’re in has reached new heights. They’re called Davos.
At the start of the year, I wrote a long and heavily-evidenced piece suggesting that ‘recovery’ isn’t really the word I’d use to describe the US at the moment. In fact, I don’t think the recovery is real at all. My hunch is that Obama’s creeping all-media spin machine is pumping up the expectations just in time for him to get re-elected. I also think the Fed is looking for an alibi, which is why taxpayer money is funding this Ministry of Truth campaign: “We were doing just fine til you Europeans screwed up”. All very predictably Obama, who truly is an African American: put it like this, he sure as hell isn’t a europhile.
For example, Caterpillar US wrote this in its outlook brochure yesterday: ‘We are expecting housing starts of at least 700 thousand units in 2012, up from 607 thousand units in 2011’. It’s a boom! Except that Caterpillar produced not a shred of evidence to support this ‘strong outlook’. Disturbingly, the management added: ‘In our opinion, the risk of a worldwide recession has diminished significantly over the past quarter’. Right then. Still, the shares went up 3% within seconds.
‘Consumers are spending again’ said CNN two days ago. Not true: in what Reuters last week called ‘an ominous sign for America’s economic growth prospects’, the news source confirmed that growing numbers are borrowing from their retirement accounts. More and more of the evidence available on renewed credit card usage, in fact, suggests that the recent upweight really means that people, many of whom are struggling on low incomes, are taking out new debt just to meet the costs of day-to-day living.
I stick with my commonsense view of three weeks ago: even without QE, the US government is still pumping more than a trillion dollars a year into the economy….and borrowing has never been cheaper. If there was no sign at all of some improvement in that context, then we really would be on Dead End Street.
But the clincher for me was Wednesday’s barely reported statement from Ben Bernanke that he was increasingly minded to go for QE3. As Ben won Optimist of the Decade in three straight years 2008-10, if he’s worried, then now we should worry. He told a press conference, “I don’t think we’re ready to declare that we’ve entered a new, stronger phase at this point. If the situation continues with inflation below target and unemployment declining at a rate which is very, very slow, then … the logic of our framework says we should be looking for ways to do more.”
So I’m still very Bearish about the US. But this lack of reality thing displayed by Obama, Merkel et al is increasingly apparent around the globe: even China is now up to jiggery-pokery with its numbers.
As the German Chancellor brought forth more vapid bollocks at the Davos Conference, I was left wondering if she maybe had need of more oxygen: it was very much Alles in Ordnung and what fun we are having all working so well together. Except that it’s all gone ominously quiet down in Athens, and Portugal is increasingly obviously about to tip over the edge. Perhaps the strangest rearrangement of reality is in Italy.
You wouldn’t know it from reading the Anglo-Saxon media, but transport, schools, post offices, and public buildings in Italy are all closed today as part of an openly General Strike. Militant farmers have formed the ‘Revolt of the Pitchforks’ in Sicily and Sardinia. Several national titles talk plainly about ‘riots’, and the occupation of Siliqua, in the province of Cagliari, by protesters. Food supplies to major towns in the north and midlands of the country are being interrupted by the rioters; panic buying has begun, and racketeers are racking prices up in some cases by as much as 200%.
In the Sicilian town of Amia, the waste collectors are also on strike, with no sign of a return to work. Elsewhere in the region, pensioners have been staging sit-ins across the major town and city link roads of Palermo in protest at the reduction in their pensions. You’d have thought all this chaos was worth at least a mention on BBCNews, but apparently not.
Yesterday in the Telegraph, Ambrose Evans Pritchard wrote a well-informed piece casting doubt on the economic numbers coming out of China. He’s right to: they don’t add up…raw material imports from Taiwan, Japan (and, I hear, Australia) tailed off dramatically during 2011’s fourth quarter, but Beijing insists that growth continued. Australia – 83% of whose raw materials are exported to China – is suddenly going to become an aeroplane without engines if that trend solidifies.
You may have seen the post from earlier this month about Recep Erdogan’s mad economic policies. Yesterday, the Ankara government slashed the growth forecast by 50%. The EU got the blame of course, but as I wrote in that post, ‘Erdogan’s economic growth is just a Muslim version of the US after 2004: cheap money that should’ve been capped and cooled down has been allowed to rip ahead in order to enable re-election.
I will leave the final word to Der Spiegel, a publication which has become virtually the CDU’s inhouse magazine in recent months. Just in case La Merkel hadn’t made herself entirely clear in Davos, the magazine this morning summarises her ramblings as follows:
‘Meanwhile, European leaders and the International Monetary Fund want Germany to increase its contribution to the European Stability Mechanism, the recently finalized permanent euro bailout which is already worth some €500 billion. Merkel refused this repeatedly. She has also rejected two other suggestions which others think might ease the crisis, now moving into its third year. Neither jointly backed eurobonds nor more stimuli that would see the European Central Bank print more money are acceptable options for Berlin.’
How many Germans does it take to change a lightbulb? None, because ve are not changink ze lightbulb.
The Slog 