Quantitative Easing, Take 3 – The Global Shutdown

QE3 is the ultimate move of desperation. Open ended bond buying and monetization of debt.

So this is it folks: Once people see that this measure, too, will have failed to spur sustainable job and economic growth, there’s most likely going to be no other fantasy left to look forward and cling on to.

Expect gold and other save haven investments to break out, while stocks and junk bonds finally hit their ceiling and economic crises around the world, in particular China, Australia, and Japan, move to the center of attention while the US, too, will enter its next and well deserved recession.

King World News writes:

Today Mish warned King World News that investors should prepare, “… for a big plunge in economic growth worldwide.” Mish also said that despite the plunge in the global economy, “I expect to see gold breakout to the upside and I think we are starting to see that right now. The same thing is true for silver.”

But first, here is what Mish, who runs the Global Economic Analysis site, had to say regarding the plunge in economic activity: “We are seeing a decline in the global economy. China has slowed down dramatically, so any commodity exporters which export to China are slowing down as well. We’re already seeing this happen in countries like Australia. We are also starting to see the Australian housing market begin to crash.”

Government intervention is aggression. Aggression breeds malinvestment. Excessive aggression breeds excessive malinvestment. Excessive malinvestment calls for radical correction. Radical correction is what we’ll get, whether we like it or not.

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

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 …

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Durable Goods Orders Down by Most in 6 Months

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?

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