Mounting negative data suggests it’s nearly over for the neoliberal nonsense; Greek crisis gets closer to Call My Bluff.
Hopes that UK growth would rebound strongly in Q2 2015 were crushed today after new data showed Britain’s manufacturing sector growing more slowly “than expected”. I’d still like to know who these expectant folks are, but either way it’s just another piece slotting into the jigsaw I call Osborne’s Little Con.
More of these little signs contradicting the Big Lies have been leaking out over the last few days. For example, US wages are up more than expected month on month: but spending is less than expected. This tells us that the American consumer remains wary of the hype. And we also read that MOM price indices there show a drop from 0.2% to 0.0%. And what do two noughts mean? Two noughts mean deflation’s just around the corner.
Across the Pacific, these data are uncannily reflected by those from Japan. QE on amphetamines isn’t cutting it for the land of the Rising Sun: last Friday’s consumption data showed household spending slumped in April – and consumer inflation was roughly flat, casting doubt on the central bank’s forecast for a slow but steady economic recovery.
But other bigger signs are at the barrage-balloon Dayglo typeface size compared to such stuff. Activity in China’s manufacturing sector shrank for a third consecutive month as today’s latest data showed Beijing unable to break out of deceleration. In particular, the new exports index fell to 46.7, a low unseen since mid 2013….and way below April’s 50.3.
Qu Hongbin, an economist at HSBC in Hong Kong, said the data called for “more stimulus measures to stoke domestic demand and economic growth”. Qu must be another blind believer in QE. Maybe he should change his name by deed-poll to Qe Hongkong.
The fact is that China’s slowdown reflects the West’s still unexited slump. And in the West, the Greek debt saga remains the Cup Final with 22 replays. In the last 24 hours, however, my view is that this particular situation has worsened quite considerably….for the euro.
Out of his self-locked closet at last, Greek Prime Minister Alexis Tsipras is showing genuine signs of really wanting to tell it like it is. In a Le Monde article yesterday, no punches were pulled….as this extract shows:
‘The lack of agreement so far is not due to an alleged inexorable, intransigent and incomprehensible attitude from Greece but rather the persistence of certain institutional actors in continuing to submit absurd proposals showing no awareness of the recent democratic choice of the Greek people….this suggests a complete abolition of democracy in Europe. It means ultimately the authority to create a technocratic monster, leading to a Europe totally alien to its founding values….For those countries that refuse to bow to the new power the solution is simple: Harsh punishment. Mandatory austerity, even more restrictions on the movement of capital, disciplinary sanctions, fines, and even parallel currency. A new European power will be built at the expense of member States, and the first victim is to be Greece. If, however, anyone imagines that this decision concerns only Greece, they’re making a massive error. I would suggest such people reread Hemingway’s masterpiece: “For whom the bell tolls”’.
I agree with every word. We shall now see whether the Troikanauts will cave….or resort to some major calumny as per the Soviets in 1968 against Dubcek’s Czechoslovakia.
And talking of Russians, at 6.40 am CET today, the Russian Central Bank announced that it had decided to stop holding its one-year foreign exchange repo auctions. The Rouble slumped on the news – prety much what Moscow wanted, given that its policymakers have been concerned not to let the Rouble get out of control, and thus damage Russian exports.
With any currency, there’s a need to support it when its core credibility is in doubt, but then let it do its own thing once the crisis has passed in order to remain export-competitive.
But for me, there is a salutory tale for the West in this. Cast your minds back to a month ago, and the concerted effort by Anglo-Saxon media to suggest that Russia was about to buckle, and Putin’s position as its leader was in doubt. It simply didn’t happen: the US attempt to destroy Russia through oil-price manipulation has failed, its arms supplies to anti-Russian Ukraine forces have failed to stop a rout there, and the Rouble has come through without having to call upon Chinese support. The Russian economy is still far from healthy….but then, one can say the same about that of the eurozone.
The next step in the US/State Department/CIA/Pentagon destabilisation process may well come in Macedonia, where both European and Russian leaders are monitoring ongoing American interference very closely. And the reasoning behind such a move remains the same: to break any chance of Russian oil pipelines holding Western Europe to ransom. Once again, the geopolitics of energy remain paramount in the Washington mindset.