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In short, the neoliberal consumption model is going to have its crack withdrawn rather suddenly.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.