Yes, yes, yes hand-wringers…but apart from the addiction to credit, reappearance of subprime, collapse in commodities, manipulation of gold prices and slumping trade measures, why are you so pessimistic about the global economy?

nocrisis

There are times when norms and a facility with numbers can disguise the sound of San Andreas going for a walk

You may be wondering how US car sales are so good if the American recovery is so shakey, and the answer is simple: credit. In the US neoliberal world of Pay Later, credit is the driver without which the edifice would crumble into dust. Again. Household debt there is $12.1 trillion – around 70% of gdp – and guess what? Sub prime is growing like topsy again…as it is in mortgages. Again. You thought the US housing market was in recovery? Nope, it’s just hucksters selling mortgages to those who can’t afford them. Again.

So the average American is a long way from being in the black; and he or she needs to avoid illness, because the average annual retail cost of speciality drugs used to treat complex diseases such as cancer, rheumatoid arthritis and multiple sclerosis is bigger than the median U.S. household income. That sum is double the median income of Medicare beneficiaries, and more than three times as much as the average retiree’s Social Security benefit in the same year.

You may think that consumer household budgets, market liquidity, and the Government’s inability to wipe out the deficit as the overall debt gets higher, are unrelated. But you would be wrong, says Catherine Austin Fitts, who has been talking about

“….the dawning realization that we are not only going to have to reengineer and cut the federal budget, but we are talking about reinventing the U.S. economy. Why is this relevant? All the markets globally work off the federal budget. It is extraordinary the amount of cash flows and credit that work off the federal budget. The credit and cash flows coming out of that budget are enormous. The reality is it is going to have to be reengineered. That’s going to be a very shocking experience for many people.”

In short, the neoliberal consumption model is going to have its crack withdrawn rather suddenly. The Day the Credit Dried Up would make a marvellous title for the  eventual book about how things went tits up in the end – as of course they were always going to do.

The Saudi Riyal is mirroring the price of oil, adding one more element of uncertainty to the energy sector. The number of jobs chopped by the oil and gas companies around the world is over 250,000, with still more to come, according to industry consultant Graves & Co. Anyone see any signs of demand rising? Ambrose Evans-Pritchard does, but The Association of American Railroads (AAR) doesn’t: the latest data on  U.S. rail freight traffic shows a 4.7% YOY falloff.

So Bloomberg reckons that in 2016, the Saudis will face The Big Choice: cut production to help boost prices or adjust the riyal’s rate to stem the decline in foreign reserves. I’m not sure they’ll have a choice unless they get a move on: this feels to me more and more like trying to kill a rival via the medium of suicide. Fine for Kamikazes and Jiahdists to do that, because such cultures have an inexhaustible supply of idiots prepared to do it. But not even the Saudis have an infinite supply of money….especially if its value is being continuously damaged at the same time.

As with negative interest rates, QE and central bank purchases of junk in general, I still find the idea of pumping out oil in the context of falling demand a deranged policy in search of a miracle. I get the strategy, but I can’t get beyond the words ‘zero sum game’. Either way, more than 10 million barrels of oil a day in each of the past eight months have been produced by Saudi Arabia.

But they mustn’t despair, because there’s always somebody worse off than oneself: the Saudis could be trying to sell copper, which at the moment is like trying to sell premium-priced begels in Tehran. The Bloomberg Commodity index has been measuring the price of manufacturing materials for 22 years, and in real terms that index is now at an all-time low. Nickel has slumped, and Copper finally dipped under $4500 a tonne. If this lack of resistance continues for too much longer, a lot of companies are going to be in serious trouble. And Australia is going to have more logistical problems than a Jihadist Quaker.

$40.67 for a barrel of oil, under $4472 for a tonne of copper, and soya beans are at a six-year low. Now, go back to what Catherine Austin Fitts said above, and then think it through on a comparatvive basis: people who’ve been round the block a few times would rather invest their funds in the QE-buggered fiat currency of the world’s most indebted nation than place their confidence in the outlook for the global economy.

Then read Ambrose Evans-Pritchard’s trumpeting of this latest piece of ‘advice’ from Barclays Bank group:

AEPbarclays231115Well, one of us is very badly and catastrophically wrong. And I don’t think it’s my common-sense antennae that have gone doolally.

There is no sign of reality anywhere in the above prediction, because QE has been ignored as a factor – as have debt, the collapse of markets for Chinese goods, the erosion of real Western consumer purchasing power, the effect of an FOMC rate rise on the Brics, the contrarian nature of gold prices, the escalating debt of the eurozone, and the continuing fall in trade, manufacturing, distribution and commodity measures across the world. This is not just any old fourth US tightening in a row…and I’d have thought that Ambrose of all people could see that.

But as always, on verra.

 

23 thoughts on “Yes, yes, yes hand-wringers…but apart from the addiction to credit, reappearance of subprime, collapse in commodities, manipulation of gold prices and slumping trade measures, why are you so pessimistic about the global economy?

  1. And the Baltic Dry Index is below 500 at 498…Still, worrying about reality has never bothered the ‘elites’ before eh? And will interest rates really go up in December? I bet a pound to a pinch of s…. they won’t, there will be another excuse from Yellen as to why it’s the wrong time to raise rates, no, more QE, much more QE will be forthcoming because, well, it has worked so well in the past hasn’t it? Hate to say it but, it’s the same old same old once again..

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  2. Ambrose is employed by the Telegraph which has been demonstrated – by JW and others to have specific agendas, the neoliberal status quo being one of their core mantras. JW writes for no one except himself and I know who I’d rather believe.

    KFC makes a useful note of the Baltic Dry index, additional to this I saw an interesting documentary recently about the success of the diesel engine, the largest of which power today’s modern bulk carriers and container ships. According to this documentary the shipping cost of goods from China to the UK is less than from the port to the UK destination. This pretty much destroys the case for UK industry and given the huge overcapacity in the Chinese manufacturing sector. Unless you are producing goods that the Chinese can’t copy you’d better look out.

    We’d better start innovating pretty damn quick otherwise we truly will be dependent upon Boris Johnson’s square mile for our economic output – a concept that sickens me.

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  3. I read on ZH that US car sales are responding to finance deals spread over 8 years to make the monthly payments look smaller (the downside risk being the car will no longer be functioning before the expiry of the finance term…..)

    A long, long time ago
    I can still remember how that credit used to make me smile
    And I knew if I took a chance
    That I could use that cheap finance
    And maybe I’d be happy for a while

    But AEP gave me shivers
    With every paper he delivered
    And bad news on the doorstep
    I couldn’t take one more step

    I can’t remember if I cried
    When I read about the crunch world-wide
    But something touched me deep inside
    The day the credit died….

    Singing bye,bye Miss American Pie….etc
    (With Apols to Don McLean)

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  4. IP That’s an interesting point . By how much should the BDI and the HARPEX be adjusted to allow for lower fuel consumption and fuel cost.Still doesn’t account for where it’s at now .

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  5. I just saw half a dozen of our local contingent of asylum seekers down the local German Aldi. I can suss out body language quite well having had to in the East as a matter of survival, and I don’t honestly think they look like trouble.

    Someone is manipulating our mass media to scare people.

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  6. @Jeremy Stocks: This is the way it works.
    As long as the Muslim population remains around or under 2% in any given country, they will be for the most part be regarded as a peace-loving minority, and not as a threat to other citizens.
    This is the case in:
    United States — Muslim 0.6%
    Australia — Muslim 1.5%
    Canada — Muslim 1.9%
    China — Muslim 1.8%
    Italy — Muslim 1.5%
    Norway — Muslim 1.8%

    At 2% to 5%, they begin to proselytize from other ethnic minorities and disaffected groups, often with major recruiting from the jails and among street gangs.
    This is happening in:
    Denmark — Muslim 2%
    Germany — Muslim 3.7%
    United Kingdom — Muslim 2.7%
    Spain — Muslim 4%
    Thailand — Muslim 4.6%

    From 5% on, they exercise an inordinate influence in proportion to their percentage of the population. For example, they will push for the introduction of halal (clean by Islamic standards) food, thereby securing food preparation jobs for Muslims. They will increase pressure on supermarket chains to feature halal on their shelves — along with threats for failure to comply.
    This is occurring in:
    France — Muslim 8%
    Philippines — 5%
    Sweden — Muslim 5%
    Switzerland — Muslim 4.3%
    The Netherlands — Muslim 5.5%
    Trinidad & Tobago — Muslim 5.8%

    At this point, they will work to get the ruling government to allow them to rule themselves (within their ghettos) under Sharia, the Islamic Law. The ultimate goal of Islamists is to establish Sharia law over the entire world.When Muslims approach 10% of the population, they tend to increase lawlessness as a means of complaint about their conditions. In Paris , we are already seeing car-burnings. Any non-Muslim action offends Islam, and results in uprisings and threats, such as in Amsterdam , with opposition to Mohammed cartoons and films about Islam. Such tensions are seen daily, particularly in Muslim sections, in:
    Guyana — Muslim 10%
    India — Muslim 13.4%
    Israel — Muslim 16%
    Kenya — Muslim 10%
    Russia — Muslim 15%

    After reaching 20%, nations can expect hair-trigger rioting, jihad militia formations, sporadic killings, and the burnings of Christian churches and Jewish synagogues, such as in:
    Ethiopia — Muslim 32.8%

    At 40%, nations experience widespread massacres, chronic terror attacks, and ongoing militia warfare, such as in:
    Bosnia — Muslim 40%
    Chad — Muslim 53.1%
    Lebanon — Muslim 59.7%

    From 60%, nations experience unfettered persecution of non-believers of all other religions (including non-conforming Muslims), sporadic ethnic cleansing (genocide), use of Sharia Law as a weapon, and ***ya, the tax placed on infidels, such as in:
    Albania — Muslim 70%
    Malaysia — Muslim 60.4%
    Qatar — Muslim 77.5%
    Sudan — Muslim 70%

    After 80%, expect daily intimidation and violent jihad, some State-run ethnic cleansing, and even some genocide, as these nations drive out the infidels, and move toward 100% Muslim, such as has been experienced and in some ways is on-going in:
    Bangladesh — Muslim 83%
    Egypt — Muslim 90%
    Gaza — Muslim 98.7%
    Indonesia — Muslim 86.1%
    Iran — Muslim 98%
    Iraq — Muslim 97%
    Jordan — Muslim 92%
    Morocco — Muslim 98.7%
    Pakistan — Muslim 97%
    Palestine — Muslim 99%
    Syria — Muslim 90%
    Tajikistan — Muslim 90%
    Turkey — Muslim 99.8%
    United Arab Emirates — Muslim 96%

    100% will usher in the peace of ‘Dar-es-Salaam’ — the Islamic House of Peace. Here there’s supposed to be peace, because everybody is a Muslim, the Madrases are the only schools, and the Koran is the only word, such as in:
    Afghanistan — Muslim 100%
    Saudi Arabia — Muslim 100%
    Somalia — Muslim 100%
    Yemen — Muslim 100%

    Unfortunately, peace is never achieved, as in these 100% states the most radical Muslims intimidate and spew hatred, and satisfy their blood lust by killing less radical Muslims, for a variety of reasons.

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  7. @kfc
    Shocking statistics, but no surprises. The elites have accelerated this for christians in europe. There will be consequences.

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  8. JCB market share in the first six months are down Russia 70% Brazil 36% China 47% France 26% etc, Redundancies at Rolls Royce marine, steel plants closed for ever in the NE and Brum.Etc. BDI down Raw materials down.
    Let’s face it ,you do have do be some sort of optimist or a complete twat to put a bright spin on the indicators.
    I fear the latter.

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  9. It seems that everyone globally is chasing yield/profit.
    The end game is surely very close – the collapse of currencies leading to a violent deflation.
    Physical cash and a stop to ALL spending other than on absolute essentials might be good preparation for what’s coming.

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  10. Your analysis is quite correct and as mentioned earlier the shipping slowdown continues. Maersk has thrown in the towel according to Shippingwatch and cut back service in an effort to stem the losses that have occurred this year. These losses show no sign of abating.
    http://shippingwatch.com/carriers/Container/article7707155.ece

    The cost of prescription drugs FOR SENIORS in the US is not a problem. Most of those on Medicare have opted for subpart D coverage. Those with healthcare coverage of some kind also get a deep discount from the figures that I am assuming you are using. Very few people pay list price for drugs. I know a man who purchased a pacemaker for his homeless brother. He asked the hospital how much they were charging for the pacemaker and due to the fact he was not buying through a insurance plan the unit was quite expensive. He asked the hospital the name and model of this piece of equipment and the billing office did not have a clue. Pacemaker was just a code on a spreadsheet and a price with no reference to reality.

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  11. I have the notion now that sovereign states have begun to trade paper weapons contracts between each other so that the cash figures can be misreported on and off their respective GDP books.
    The US drops a few tonnes of armaments into the Syrian abyss and the figure gets written off.
    Convenient.
    But that’s not enough.
    Osborne helps out by doubling the order for F-35 aircraft, which, by themselves would be better fashioned from folded paper. So useful, those defence contacts with open ended final figures, that conveniently are never final.
    Trading the future. Where could this be leading to?

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  12. F35 is a mistake IMHO. Not nimble enough to be a fighter , not enough range with a full bomb load so no good as a bomber won’t stay in the air long enough to be a support attack plane and humongousley expensive and possibly too late.

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  13. Ambrose is just the new talk representative 1984 warned us about. As for the price of copper QE can raise the price call it hyperinflation.

    A trick to stabilise all this and prevent WW3 got to increase consumption.

    Me I reckon on WW3 but not my problem.

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  14. For those that haven’t already seen it…

    Pierre Sprey – co-designer of F16 and A10 says the F35 is a lemon and is simply an excuse to funnel money to the MIC.

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  15. Canexpat A friend of mine had his first flight in the F35 a couple of weeks ago. He send a picture of him wearing his $400.000 flight helmet sitting in the cockpit preflighting the bird. I am anxious to hear what he thinks over some beers.

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  16. @BC

    I sincerely hope you will be able to post his views on whether the UK taxpayer is getting value for money. $400,000 for a flight helmet?? Is it gold-plated?

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  17. Central bank mistake… When your real economy is tiny relative to the debt as been happening the last 40 years any attempt on rate rises / taxation has a reduced effect.

    In addition only a credit expansion has any effect on the credit model. That would be QE forever, hidden or concealed.

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  18. Canexpat F35 A guy I was chatting to a while ago went so far as to say that because of some of its inherent faults ,yet to be fixed, if it was a civil airliner it would be grounded.

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