Wednesday, June 15, 2005

PRECARIOUS BALANCE ACT

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If we don't have a series of utterly devastating earthquakes on the West Coast, at least not in the next three months, there will be other forces at work, shaking the world's economies.

The G 8 just "forgave" I think, $22 billion in old loans to Africa. Now isn't that kindly of them! Of course, the key nation, the USA, is giving something it doesn't have: credit. When a debtor nation gives another debtor nation money this simply takes more out of the world pool of debt money avilable, no? The nice thing with money is, the value attached is imaginary so one can do whatever one wants until people become suspicious and demand the money be translated into hard, physical objects. This is called a "bank run". One sign of incipient bank runs is the price of hard goods like property and gold and art shoots way up as investors park their denominations in a physical space that retains some value somehow if all fails.

Today's news: oil up.
July-dated crude futures topped $56 a barrel Wednesday on the New York Mercantile Exchange after the Energy Department said U.S. crude supplies fell 1.8 million barrels in the week ended June 10. The Energy Department also said gasoline supplies declined 900,000 barrels, but distillate stocks rose 2.5 million barrels. July crude was last at $56.05, up $1.05.

OPEC keeps telling us they will up the amount of oil being pumped. Saudi Arabia boasts they have endless oil and can pump more but over the last year, it can't budge above 9.5 million barrels per day. So speculators seem to have come to a consensus that this is the Hubbert Oil Peak and are betting accordingly.
Stocks trade lower as oil prices jump
Oil tops $56 a barrel after drop in weekly crude supplies


Investors cheered a consumer price report showing inflationary pressures in the economy remained subdued.
says the CNBC Marketwatch. For years, I said, stocks go up when oil prices go down and all the economic "experts" bent every straw to prove this was false. Yet the headlines this year back me up. All of them see the obvious connection.

The other obvious connection is, inflation is 100% tied to the value of labor only if that labor is outside the currency of the USA dollar which is the world's teetering benchmark currency. Cheap labor at home doesn't help much but overseas it works like a wonder because any money printed up is removed from the benchmark currency's bloodstream and isolated and transformed overseas into loans that return here as debt.

Which ends with our bankruptcy. There is no eternal Moebius strip of currency flow that is open ended. No matter how you twist it, the system, if out of whack, whacks back.

Right now, China is the nation to watch.
China's macroeconomy can no longer be properly described as "overheating," as the country's economic growth peaks and gradually slows, the latest report from the Morgan Chase Company said Tuesday.

"We'd rather use 'moderate' to describe the growing trend of China's macroeconomy," Morgan Chase economist Ben Simpfendorfer was quoted as saying by the Beijing-based First Finance Daily Tuesday.

A decline in the investment of fixed assets has been attributed to the moderate trend, said the newspaper.

The cement industry, for instance, has seen a reduced production capacity. Nearly 2,000 of the country's 5,700 manufacturers have either reduced or halted their production this year amidst a sluggish market demand and rising production costs spurred by increasing raw material prices, said the report.

According to previous figures released by the National Bureau of Statistics, the country's combined investment in fixed assets between January and April decreased 1.9 percentage points to 25.7 percent from the same period last year.

Meanwhile, the growth rate of financial institutes' balance for loans slowed 2 percentage points from the end of last year to 12.5percent in April. The deposit balance of companies grew at 13.2 percent, about 3.6 percentage points less than the end of last year.
My long slog online, explaining how the Chinese economy interacts with our own, tracking the money flow, explaining how China and Japan are using us, is finally bearing some delayed fruit. Of course, understanding the end game still eludes most people but that is understandable. No one likes to think about becoming dead, either.

The Chinese recently had a very bad flood. Many little school children died. Around 100, latest count. Look at American news and see how concerned we are, the loud calls for aid and sympathy and love. Eh? What? If I were Chinese, I would be rather steamed about this. If 100 Israeli school children or British kids were to be swept away, it would be huge news here, no?
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Crushed school children at Aberfan, Wales I still remember the poor children at school in Wales who died suddenly when a mine slurry collapsed on their school, entombing them. This is an identical tragedy in size and pain. They are still tracking the Welsh kids who survived, giving them treatment for this trauma. So why are we so indifferent to the Chinese children? Hmm?

From the always good Calculated Risk:

"And in a related story, the Port of Long Beach hosted the "Peak Season Forecast Conference" on Tuesday.
At the Pulse of the Ports conference, the experts forecast 2005 cargo gains of 10 to 15 percent. In preparation for this year's increase, they said they have added workers and equipment, and cargo has been moving smoothly.

"We may see two-to-three-day delays," during the peak season, said Frank Baragona of CMA CGM.

"We had one-week delays last year and that's not going to happen this year," said Doug Tilden of Marine Terminals.

This shipping data probably indicates near record imports from China. My very preliminary guess is that US imports from China will be over $19 Billion NSA for May compared to $18.12B for April 2005."

Imports from China are still rising. The Chinese are already complaining that high energy/raw materials prices are cutting into their profits but they will slog on through thick and thin simply because they have a vested interest in keeping the vital industrial base firmly planted in their home empire for the obvious reason that this is how you win a struggle for domination vis a vis another empire.

Unlike the USA which pretended to not be an empire even as we relentlessly expanded our borders and our reach, the Chinese have considered themselves to be an empire for nearly as long as Iraq has thought of itself as a civilization, namely, for at least two+ thousand years!

I am predicting this waiting game will continue. America will continue to bleed in Iraq, fatally. And we will continue to suck up all world credit for ourselves even managing to do this as we "forgive" African debts, mostly by asorbing it into our own debt, and the Chinese will continue to expand their industrial base and all this will continue until it crashes as it will crash. This isn't an "if" but "when."

My personal opinion is, the breaking point will be when the Great California/Oregon/Washington Earthquake flattens a major city.
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