Young girl gets hit by truck in China; nobody cares …

October 21, 2011 · Posted in Global Economics · Comment

Chinese Economy “Teetering On the Edge”

September 27, 2011 · Posted in Global Economics · 2 Comments

Some posts I wrote before on China:

Rally in Chinese Stocks – Time to Kiss it Goodbye and Cash Out:

The truth is: There is no decoupling. The Chinese economic miracle is a mirage, a very popular one to be sure. If it is China the world is banking on to lead a recovery, then the world is royally screwed.

By the way, the Shanghai Composite index has fallen from around 3000 when I wrote that post to around 2390 now, a 20+% drop.

China’s Bubble Produces Empty (!!!) City:

China’s growth is a mirage, its bubble a monstrous one, its impending crash completely inevitable.

China will not be immune to this global slowdown, in fact it may be leading it.

Update: Another important post I wrote about the macro environment in China, in particular money supply:

The Chinese money supply figure that is closest to my True Money Supply in the US is M1 as reported by the People’s Bank of China:

The money supply in China has easily tripled over the past 6 years.

And here is a comparison between the money supply growth rates in the US and China:

Money supply and credit supply have both been exploding in China, while money supply in the US has rather stagnated or at least grown a lot slower alongside contracting credit.

This is the main reason why I don’t think that the Yuan will remain strong against the US dollar for very long, and it is also why I don’t think the Chinese bubble can continue for much longer, but then … bubble often times last a lot longer than you’d expect.

The only way how the Yuan can maybe remain strong against the US$ for a sustained period of time, in my view, is if the PBC tries to cheapen the Dollar by selling reserves against Yuan, which in turn would exert an upward pressure toward exports from the US into China while having the adverse effect on Chinese exports, and thus hurt China’s politically powerful export lobby.

However, such a policy, too, would find its natural boundaries in the amount of Dollar reserves accumulated by the PBC.

Tags: china, chinese economy

The Euro Has Failed

September 6, 2011 · Posted in Global Economics · Comment

About 2.5 years ago I wrote:

The 3% ceiling won’t matter anymore from hereon. Consider the European stability treaty dead. One member state after another will violate the requirements. The fact that a bailout of some Euro states by others is discussed, just shows how torn this European Union really is, how severe its imbalances are. With discrepancies like these, it is completely unfeasible to maintain a currency union. The Euro will keep taking its beating for it.

The breakup of that currency union is now approaching at an ever accelerating pace.

Yesterday Mish issued a nice little note to Trichet:

Hello Mr. Trichet.

The odds 17 sovereign states “get their act together” quickly regarding a fiscal union is zero.

There is no agreement on Eurobonds even from Germany and France, so how are 17 countries supposed to quickly agree on that?

Finland and Austria want collateral, and pray tell why shouldn’t they? Is every country supposed to do exactly what you want?

Greece is going to default and you and your big ego made matters worse by refusing to accept that fact, so much so that you and the ECB failed to plan for it.

You want 17 countries to get their act together. How about one central bank, the ECB, led by you, get its act together and admit your policies have failed? How about the ECB coming up with a legitimate plan for dealing with it this crisis instead of illegally making demands on sovereign nations?

The market gave you fair warning on Greece and you refused to see it. Now the market has said “time’s up”.

Face the facts Mr. Trichet “The Euro has failed.”

Mr. Trichet, you better come up with a plan to deal with the aftermath, because odds of a Eurozone breakup are large and growing.

… actually, in my opinion the best thing that could happen to the Eurozone would be to for it to break up, and take those bureaucratic, corrupt, and destructive leviathans of the European Parliament, the Commission, the Council, and the ECB right with it and thus off the backs of Europe’s sovereign nations once and for all.

Tags: euro, euro breakup, eurozone

Riots in Greece

June 15, 2011 · Posted in Global Economics · Comment

With a formidable yield of over 16 percent on their government bonds, way ahead of such shining beacons of economic stability as Pakistan and Colombia, Greece sure is a good example for how you can act like a third world country and get paid like an industrialized nation for a while if only you are lucky enough to find a pool of greater fools who would conceive of a deranged and imperialistic project such as the European Union.

Tags: european union, greece

China Manufacturing Slows Further; Australia GDP Drops by Most in 20 Years; US Manufacturing Slows

June 1, 2011 · Posted in Global Economics · Comment

To follow up on what I wrote in March China’s slowdown continues:

HONG KONG (MarketWatch) — China’s manufacturing activity expanded in May at its weakest pace in three quarters, as the economy faced headwinds of high inflation and government efforts to rein in prices, according to rival surveys of companies released Wednesday.

One line caught my eye immediately:

However, analysts said Wednesday that the weaker growth implied in the PMIs isn’t likely to sway the government from its current policy direction, with Credit Suisse analysts saying that “Beijing is fine to see a softening in growth.”

… and a softening in growth is what Beijing is gonna get.

On an obviously related note Australian economy sees sharpest contraction since 1991:

Australia has reported its biggest quarterly fall in gross domestic product (GDP) in 20 years.

Its economy contracted by 1.2% in the first three months of the year compared with the previous quarter, the latest government figures showed.

The government said flooding and cyclones in the resource rich states of Queensland and Western Australia had a significant impact on growth.

Australia’s economy is heavily reliant on exporting its natural resources.

“The economy has hit a temporary pothole courtesy of the natural disasters this year,” said Besa Deda of St George Bank.

Ah yes, the weather. I’m sure the global and in particular the Asian slowdown has NOTHING to do with it ;)

Growth figures are being revised down in the US:

… and Chicago manufacturing gauge nosedives:

A Chicago-area manufacturing gauge dropped by the largest amount in nearly two-and-half years in May, in a further sign that the rise in oil prices and the Japanese earthquake have affected activity.

The Chicago PMI fell to a reading of 56.6% in May, the lowest reading since Nov. 2009, from 67.6% in April.

While that reading is still significantly above the 50-line indicating growth, the eleven-point drop is the biggest one-month deceleration since Oct. 2008 and was worst than the 60% reading that economists polled by MarketWatch anticipated.

Indexes for production, new orders and order backlogs each dropped by double digits. Inventories jumped, which in this case is more likely an indication of unplanned gains due to a lack of sales than stocking up in anticipation of better times ahead.

Say Hi to the global slowdown and a double dip recession in the making …

Tags: australia, china, global slowdown, us manufacturing

Al Quaeda Seizes Yemenese Coastal Town; Protests and Police Brutality in Morocco; 2,000 Protest in Kuwait

June 1, 2011 · Posted in Global Economics · Comment

Lots of news from the Middle East these days …

The New York Times writes Islamists Seize a Yemeni City, Stoking Fears:

SANA, Yemen — Islamist militants consolidated control over a second city in southern Yemen on Sunday, seizing banks, government offices and the security headquarters as government forces responded with mortar fire.

The fall of the coastal city of Zinjibar to self-styled holy warriors who claimed to have “liberated” it from “the agents of the Americans” fed into Western fears that militants sympathetic to Al Qaeda could exploit the breakdown of authority to take control of territory.

This is the blowback from decades of the US government’s support for authoritarian regimes in the Middle East, such as this one.

Furthermore there are more anti-government protests in Casablanca and its twin city Sala:

Thousands of demonstrators Sunday took to the streets of Casablanca, the country’s largest city, in an antigovernment protest police struggled to disperse, driving into the crowd on motorcycles, armed with clubs.

A similar protest in the capital’s twin city of Sale on Sunday also was violently disrupted, as was a demonstration in front of the Moroccan parliament Saturday.

Clips and a Picture from Morocco:

Protester beaten by police

And last but not least, in Kuwait 2,000 people took to the streets:

Pressure is building on Kuwait’s embattled Prime Minister Sheikh Nasser Mohammad Ahmad Sabah, who has come under fire for refusing to be questioned in parliament for allegedly misusing public funds, among other accusations.

Around 2,000 people took to the streets of the oil-rich gulf country’s capital amid tight security, chanting, “The people want to topple the head [of government],” in reference to Sheikh Nasser, according to Agence-France Presse.

Local Kuwaiti media reports said activists had dubbed the protest “Day of Rage” and that demonstrators, flanked by hundreds of police in riot gear, marched on the National Assembly on Friday night holding banners reading, “The youth want reform of the regime” and “Youths want the closure of corrupt channels,” while chanting against the prime minister.

Tags: arab spring, kuwait, middle east, morocco, yemen

Barcelona – Riot Police Cracks Down

May 28, 2011 · Posted in Global Economics · Comment

Police in Spain is proceeding to beat up and shoot at peaceful protesters in Barcelona:

Spanish police fired rubber bullets and swung truncheons to disperse anti-crisis protesters in a Barcelona square Friday as cleaning crews cleared their tent camp.

Catalan police in anti-riot gear moved in after about 50 protesters sat down on the street to block a convoy of cleaning trucks leaving the Plaza de Cataluna square with remnants of the encampment.

Police, some with plastic shields, were shown on television dragging protesters along the street and swiping with truncheons at activists, who had been chanting: “They shall not pass.”

An AFP reporter at the scene saw rubber bullets fired.

The protest blockade was broken up within minutes but about 100 protesters regrouped in the square. They were surrounded by two police cordons blocking hundreds more people from entering from nearby roads.

Here is a clip:

Upgrade Democracy??

According to Wikipedia the main goals of the Spanish protests are to “Upgrade democracy, reduce influence of economic powers in politics”.

Since I’m not exactly sure what that means and since the exact goal of these protests doesn’t seem very clear or obvious it is hard for me to sympathize with these people.

If they are protesting the recent liberalization of the labor market and the recognition of an employer’s right to hire and fire employees as he deems necessary, and if all they are asking for is cosmetic changes in their current flavor of the taxation extortion racket (=democracy), if in fact they are maybe even asking for the government to fund health care and education even more extensively than it has already been doing with such blood money, then I have little to so sympathy for these protesters.

After all, abolitionists didn’t take to the streets to demand that “slavery be upgraded” either!

The goal to “reduce influence of economic powers in politics” means nothing so long as you allow for the existence of a state. A state by necessity always and everywhere lends itself to special interest meddling on the part of the rich and powerful a.k.a politics, it is a completely boring and predictable side effect of statism.

Nor do I have any sympathy with the police, however I would at least submit that those people have little to no choice than to obey their masters and to go where they are ordered to go and beat up whom they are ordered to beat up.

The protesters meanwhile could have made the demonstrations about spreading truth and knowledge about voluntaryism and against the concept of the state in general.

I may be missing something, but I see no such indications anywhere.

In which case … I don’t mind if they all together smash and kick each others’ heads in, at least it’ll turn off all those who really care to make true and meaningful change happen at some point from joining such movements.

(To be clear: I may very well be missing the true objectives of these protests, the above is only based upon the few pieces of information I was able to gather)

Civil Disobedience

On a related note, some thoughts on civil disobedience …

Tags: protests, spain, spanish protests 2011

Belarus Currency Devaluation & Inflation Spreads Panic

May 27, 2011 · Posted in Global Economics, Monetary Economics · Comment

Business week writes Belarus devaluation spreads panic:

A sharp devaluation of the Belarusian ruble has spread panic throughout the country, with people sweeping store shelves and queuing up at currency exchange offices on Wednesday in a desperate attempt to protect their savings.

President Alexander Lukashenko promised that the national currency will remain stable following the devaluation enacted a day earlier, but experts warned the Belarusian ruble will continue its nosedive if Russia doesn’t provide a quick bailout.

The ruble lost nearly half of its official value against the dollar Tuesday, when the National Bank ordered a devaluation. The new official rate is 4,930 rubles per dollar, up from the previous 3,155 but the perceived value of the local currency is much lower — on the black market it takes 6,000 rubles to buy a dollar.

To make matters worse, there is a physical shortage in the country of dollars and euros, which companies and households desperately want to own to protect themselves from a worse devaluation in the future.

The government has tightly regulated sales of hard foreign currency and its own reserves are badly depleted. Exchange offices have run out of foreign currency because they are allowed only to sell what they buy from clients.

Andrei Krylevich, 42, has spent a week in lines outside an exchange booth in downtown Minsk without a chance to buy a single dollar. The computer company he works at has sent its employees on an unpaid leave, and he urgently needs to pay back a $9,000 loan to a bank.

“In just one month, I have virtually turned bankrupt, the entire country has gone bankrupt,” Krylevich said.

Most Belarusian industries are state-owned, and the government has tried to keep its scarce currency reserves for vital imports. On Tuesday, it set tight limits on interbank currency trading, effectively stifling the market.

The flamboyant Lukashenko, in power for nearly 17 years, has kept an unusually low profile in recent weeks as his government has been pleading Moscow for a vital loan. Russia has been reluctant to provide it, pushing Belarus to sell its industrial assets.

Russia’s Finance Minister Alexei Kudrin said Tuesday that Belarus can get the total of $3 billion in loans from an economic alliance of several ex-Soviet nations over the next three years, including the first $800 million disbursement that could be delivered next month. Kudrin added that Belarus could earn another $7.5 billion by privatizing its industries, most of which remain in state hands.

Events like these are likely to occur more and more in Europe, in particular Eastern Europe, but also in many other emerging markets.

Note how the dollar is still well accepted as a stable flight to safety when other currencies fail. That’s why I marked that one part in bold: This is a perfect example for what happens when credit crunches hit emerging market economies.

Global deleveraging is always rather likely to exert an upward pressure on the Dollar and on gold as well as the chickens of cheap global credit come home to roost.

By the way: It’s comical, but absolutely typical, for any actions taken by government officials, that “Lukashenko promised that the national currency will remain stable”! As if the affected people had any choice in the matter to begin with!! =)

Tags: belarus, devaluation, inflation, ruble, russia

Durable Goods Orders Down by Most in 6 Months

May 25, 2011 · Posted in Global Economics · 1 Comment

Bloomberg writes Durable-Goods Orders in U.S. Dropped 3.6% in April, the Most in Six Months:

Orders for U.S. durable goods dropped more than forecast in April, reflecting a slump in aircraft demand and disruptions in supplies of auto parts stemming from the earthquake in Japan.

The 3.6 percent decrease in bookings for goods meant to last at least three years was the biggest since October and followed a 4.4 percent surge in March that was larger than previously estimated, a Commerce Department report showed today in Washington. Economists projected a 2.5 percent April decline, according to the median forecast in a Bloomberg News survey.

We shall see if it was really just Japan’s quake that dragged this number down so severely.

European economies are slipping into recession or about to default, the Chinese Production Engine Begins to Stutter, Japan’s debt and pension crisis has entered its final stage, the US is in fiscal gridlock with no end in sight for the housing slump … excuse me but could it be that there is a global slowdown underway, setting the stage for a double dip?

Tags: double dip recession, durable goods, global slowdown

Greek Default Now Seems Inevitable; Watch the Euro

May 24, 2011 · Posted in Global Economics · Comment

The WSJ writes in Waking Up to Greece’s Default Position :

Last week saw real progress in reaching a solution to the Greek, Portuguese and Irish debt crises. It is now recognized that these countries can never, ever, repay their debts, certainly not on time, and more than likely not in full. A default by any other name is a default.

Mish writes in his blog:

Untenable Timeline

Note that Roubini’s timeline is 5-10 years. The ECB an EU expect Greece to return to the dent markets by 2013.

Structural reforms or not, Greece will not pay back its debt in two years, nor will Greece return to a healthy bond market in two years.

Greece will default.

A few days ago I revisited the EUR/USD chart among other things:

… and the seemingly most hated currency in the world has also remained within it’s long term trading range, and it may be possible that once again it will show some significant strength for the months to come: