[Sixstrings]

Those of us who still question whether the world has purged its toxins are reduced to the same tiny band of moaning Druids from early 2007, when we shook our heads in disbelief as the carry trade swept Iceland to fresh madness and bankers laughed off sub-prime rot at Bear Stearns.

We learned then to thicken our skins with walnut juice, lie down in dark rooms, and dissent from Goldman Sachs. Such seclusion is called for once again as Goldman replays its BRIC anthem and raises its oil forecast to $85 a barrel this year, betting that the world will roar back on a tidal wave of liquidity.

It is perhaps unkind to mention that Goldman issued a $200 call at the top of the speculative frenzy last year, just before oil crashed, but they have broad shoulders.

Note that Total's Jean-Jacques Mosconi said markets are awash with so much crude that almost 100m barrels (a near record) are stored on tankers at sea. Note too that May electricity use fell 10pc in China's industrial hub of Guangdong from a year earlier.

This is revealing, given that China's fiscal boost has reached peak and will fade later this year. For guidance on where we are in this long-drawn saga, I look to Berkeley's Barry Eichengreen, author of the Great Depression classic Golden Fetters – which avoids the error of viewing the 1930s through a US prism.

He has crunched the latest data with Trinity College Dublin's Kevin O'Rourke for VoxEU, concluding that the global rupture over the last nine months has been more violent than in the early slump. This is logical. Global debt leverage is much greater this time.

The fall in industrial output has been roughly equal to the 1929-1930 stage for Germany and the Anglo-Saxons, but worse for Japan, France, Italy, and Eastern Europe. The collapse in world trade has been swifter: the global equity crash has been twice as bad. "It's a depression alright. The good news is that the policy response is very different. The question now is whether that response will work," they said.

The elastic was bound to snap back, just as it did in the bear rally of early 1931. Whether the underlying economy has begun to heal is another matter. World Bank chief economist Justin Yifu Lin said capacity utilization is running at an historic low of 50pc-60pc. Companies will have to fire a lot of workers. This is where the danger lies, and why he fears that deflation is creeping up on us.

Trade data from Asia are flashing warning signals again. Korea's exports were down 28.3pc in May, reversing the April rebound. Malaysia has slipped to -26pc, and India has touched a new low of -33pc.
US freight data is getting worse, not better. The Association of American Railroads said traffic was down 22pc in the third week of May from a year earlier. Canadian freight was down 34pc.

The American Trucking Association (ATA) said it saw fresh drops of 4.5pc in March and a further 2.2pc in April. Tonnage is down 13pc over 12 months. Bob Costello, the ATA's chief economist, said companies have not cut inventories fast enough to keep pace with declining sales. The contraction in truck volume has "accelerated".

Yes, the Baltic Dry Index for bulk shipping of resources has quadrupled since January, but this reflects China's bid to stockpile metals while prices are low.

Stephen Roach, Morgan Stanley's Far East chief, fears an "Asian Relapse", saying the region is prisoner to its fatal dependency on exports to the West. The export share of GDP has risen from 36pc to 47pc across developing Asia over the last decade.

"China's incipient rebound relies on a time-worn stimulus formula: upping the ante on infrastructure spending in anticipation of an eventual rebound of global demand," he said. The strategy cannot work this time because Americans have exhausted their credit, and their desire to borrow. Consumption will fall from its peak of 72pc of GDP to the "pre-bubble norm" of 67pc, if not more.

David Rosenberg from Gluskins Sheff expects Americans to retrench ferociously as 78m baby boomers face the looming threat of penury in old age. "The big story is that the personal savings rate hit a 15-year high of 5.7pc in April. I believe it could test the post-War peak of 15pc. Too many pundits are still living in the old paradigm of Americans shopping till they drop," he said.

If he is right, this will shatter the surplus economies of China, Japan, and Germany, unless they adjust fast to the new world order. Germany does not even seem to understand the problem it faces. Chancellor Angela Merkel lashed out last week at quantitative easing by the Fed, the Bank of England, and the European Central Bank, repeating the silly mantra that this will set off an inflationary storm.

How can it do so when the velocity of circulation has collapsed, and unemployment is rising everywhere? The Fed's "monetary multiplier" ended last week at 0.867, half its average of 1.7 over the last decade. The credit mechanism is still broken. This is what happened in Japan in its Lost Decade.

The ECB says the eurozone economy will contract until mid-2010, at best. Germany's trade association (Wirtschaftsverbände) warned Mrs Merkel last week that the credit drought threatens to become "life-threatening by the summer at the latest".

The list of countries in deflation is growing every month: Ireland (-3.5), Thailand (-3.3), China (-1.5), Switzerland (-1), Spain -0.8 ), the US (-0.7), Singapore (-0.7), Taiwan (-0.5), Belgium (-0.4), Japan (-0.1), Sweden (-0.1), Germany (0).

Yet markets seem to think otherwise, and this has its own awful consequences. Inflation fears have driven 10-year US Treasury yields to 3.86pc, a full point above levels in March when the Fed intervened to force rates down. US mortgage rates have jumped to 5.29pc. Gilts have reached 3.92pc, and French 10-year bonds are at 4.05pc.

This bond revolt is enough to bring any global recovery to a shuddering halt. The irony is that those fretting loudest about inflation may themselves tip us into outright deflation, with all the perils of a debt compound trap. It is Angela Merkel who plays with fire.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5461562/Merkels-inflationary-fretting-may-wake-the-bears-from-hibernation.html

+1 to the UK Telegraph for such excellent journalism. It's amazing to me how different the coverage is.. here in America, it's all Green Shoots, while in the UK they're telling it like it is.

[ColossalContrarian]

+1 to the UK Telegraph for such excellent journalism. It's amazing to me how different the coverage is.. here in America, it's all Green Shoots, while in the UK they're telling it like it is.

It’s said to be all about “confidence” with differing views everywhere and outright lies of the past “it’s contained”, “mild recession”, “recovery later this summer”. I can’t see how anyone can have confidence in this system. It’s broken.
Here’s my favorite quote:

How can it do so when the velocity of circulation has collapsed, and unemployment is rising everywhere? The Fed's "monetary multiplier" ended last week at 0.867, half its average of 1.7 over the last decade. The credit mechanism is still broken. This is what happened in Japan in its Lost Decade.

I think Japan’s Lost Decade is about the closest precedent there is for the future of the financial system but we’re still in uncharted waters…

[shortonoil]

Sixstrings quoted:

The Fed's "monetary multiplier" ended last week at 0.867, half its average of 1.7 over the last decade.

Thanks Six, I’ve been looking everywhere for that number (0.867)!

Good article, and it just goes to show, we can’t all be wrong!

+1 to the UK Telegraph for such excellent journalism. It's amazing to me how different the coverage is.. here in America, it's all Green Shoots, while in the UK they're telling it like it is.

A lot of what was said in that article I have mentioned before in my posts (except of course the 0.867 number, lol). The nation’s problems can not be solved because we are now embedded in crony capitalism. When the likes of CNBC (which is owned by GE , which is a bank that owns a light bulb company) are spouting absurdities why would you expect to get honest news from them? They are talking their book (GE’s) everyday. Three people now control 95% of the media, and not one of them is going to say a word that might upset a sponsor (not in this advertising starved environment).

Outside of a few sites like this one, the American people are told nothing. You can bet that the media is going to make sure that it stays that way! This is not going to get fixed until the wheels fall off. Let’s hope they do while we still have the use of a few pieces to put them back on with.





AvailableEnergy

[Sixstrings]

Sixstrings quoted:

The Fed's "monetary multiplier" ended last week at 0.867, half its average of 1.7 over the last decade.

Thanks Six, I’ve been looking everywhere for that number (0.867)!

Good article, and it just goes to show, we can’t all be wrong!

+1 to the UK Telegraph for such excellent journalism. It's amazing to me how different the coverage is.. here in America, it's all Green Shoots, while in the UK they're telling it like it is.

A lot of what was said in that article I have mentioned before in my posts (except of course the 0.867 number, lol). The nation’s problems can not be solved because we are now embedded in crony capitalism. When the likes of CNBC (which is owned by GE , which is a bank that owns a light bulb company) are spouting absurdities why would you expect to get honest news from them? They are talking their book (GE’s) everyday. Three people now control 95% of the media, and not one of them is going to say a word that might upset a sponsor (not in this advertising starved environment).

Outside of a few sites like this one, the American people are told nothing. You can bet that the media is going to make sure that it stays that way! This is not going to get fixed until the wheels fall off. Let’s hope they do while we still have the use of a few pieces to put them back on with.

Can you expound on the significance of the .867 number? Is that the the current multiplier of new money being created through debt?

If it is, then I guess that means we're awfully close to negative territory?

EDIT: re-read that section of the article and answered my own question, lol. So.. are the doomsday scenarios of that number going negative something to be concerned about?

[deMolay]

Good one 6 strings, I think anyone with a brain cell left has tuned out the hawkers and hucksters on the MSM Financial networks. They could sniff a fart as they walked down the street, and by the time they get to the office, the fart has a full suit of clothes and a full time high paying job and is making a fortune on the markets.

[patience]

Sixstrings,

I think that multiplier is the Federal debt $ / increase in GDP, or maybe Federal Reserve infusion $/ GDP? Probably what Denninger went nuts about a while back, saying that when it got to below 1:1, we are screwed--it taking more than $1 of input to get $1 of GDP. That is a REALLY bad number, signifying to my ignorant interpretation that the Fed has lost it. No control over what's next, per TF. Egad!

edit: Hope short chimes in here--I know when I am half full of it. Need a more informed response than mine.

[shortonoil]

patience said:

I think that multiplier is the Federal debt $ / increase in GDP, or maybe Federal Reserve infusion $/ DP? Probably what Denninger went nuts about a while back, saying that when it got to below 1:1, we are screwed--it taking more than $1 of input to get $1 of GDP. That is a REALLY bad number, signifying to my ignorant interpretation that the Fed has lost it. No control over what's next, per TF. Egad!

edit: Hope short chimes in here--I know when I am half full of it. Need a more informed response than mine.

Boy, those MEs are a smart bunch of dudes! (If we don’t pat ourselves on the back patience no one else will).

patience is right, it is expressed as a dollar injected into the economy to the growth of GDP. In 1960 one dollar injected into the economy increased GDP (GNP at that time) by $6. Now every dollar created by the FED is shrinking GDP. Put in 1 buck, get 87 cents back.

I’ve been saying for a while that monetization has its limits. Guess what - we hit it!

Ben might be a genius when it comes to the Great Depression, but he obviously flunked Monetary Theory 101!


Ben to the President, “Mr. President, you know that zillion dollars in debt that you wanted to float. Well, there's a problem ----- it ain’t floating”.

We are so screwed!!!!!!!

[americandream]

The Telegraph is a tory free marketeering/corporate socialist (when it suits therm) rag. Their dire warnings are the equivalent of a drug pusher warning his regulars against the harmful effects of using his drugs.

Basic Marxism...as the problems of global overcapacity overwhelm maximised global demand (and we aren't there yet), the mother of all deflations will be born. For the moment this is just another regional crisis poised for the next bubble which will be third world starting in China. For the time being however, its effect will be deflationary as it mimicks the big one.

[shortonoil]

americandream said:

For the time being however, its effect will be deflationary as it mimicks the big one.

Sorry to pop your bubble, but this is the Big One. The FED no longer has Card Blanck to print money. Our Bretton Woods credit card just expired. We made it all the way up Shit Creek ---- but lost the paddle!

That multiplier has been getting closer and closer to 1 for the last couple of years. If you want to scare the sheep you tell them American Idol was canceled. Multiplier means nothing to them, and it won’t until their unemployment insurance craps out.

Uncle Willy is now $3 trillion short for the year. If they try to print they’ll be $3.45 trillion short. Ever wondered how high a federal draft can bounce. We are about to find out!

[americandream]

americandream said:

For the time being however, its effect will be deflationary as it mimicks the big one.

Sorry to pop your bubble, but this is the Big One. The FED no longer has Card Blanck to print money. Our Bretton Woods credit card just expired. We made it all the way up Shit Creek ---- but lost the paddle!

That multiplier has been getting closer and closer to 1 for the last couple of years. If you want to scare the sheep you tell them American Idol was canceled. Multiplier means nothing to them, and it won’t until their unemployment insurance craps out.

Uncle Willy is now $3 trillion short for the year. If they try to print they’ll be $3.45 trillion short. Ever wondered how high a federal draft can bounce. We are about to find out!

America is but one oversupplied region in a market of 6 billion. OK...lets be generous and throw in the entire West. Lets see...thats one billion out of 6 and the jurys still out on AGW and commodity exhaustion.

How long do you think it will take to get to the point of no return for this planet? I most certainly don't know nor do most of us.

What we do know is that all the wherewithal for extracting labour surplus is now well ensconced in the third world (5 billion strong at that) and that the process of consumerism is well apace over there.

The West is now irrelevant in the global paradigm of capital and only a complete exhaustion of global demand will bring about the catalyst we need for true systemic change.

That may or may not coincide with the onset of AGW (though it will most likely precipitate the complete exhaustion of core resourcing such as oil) but it will come hard on the heels of global overcapacity in the face of maximised global demand.

[dunewalker]

moved comment to different thread...

[americandream]

I know many on here and in the West generally are tired of this merry go round our lives have become. However, the elite have only just started. We have much to endure yet as the bland global culture necessary to foster mindless consumerism takes hold everywhere. Only then will we all be on the same page for change. In the meantime, the hope of 5 billion on the outside looking in is what keeps this tub afloat.

[shortonoil]

M1 Multiplier Indicates The Fed’s Gas Pedal Is Broken
By: Brian Kelly Wednesday, March 11, 2009 2:11 PM

The following charts depict the monetary base vs the M1 multiplier (M1/monetary base) and M2 multiplier (M2/monetary base).

What’s striking about these relationships is that the correlation is negative. The the larger the monetary base, the smaller the impact on money supply. The inverse relationship is most pronounced in the M1 multiplier which has a near perfect negative correlation at both the 6 and 12 month time lag. If the transfer mechanism (i.e. the Fed’s gas pedal) was working properly one would expect that the multiplier would either increase or remain stable, but it would not decline.

istockanalyst

The definition of the money multiplier is M2 or M1 divided by the monetary base. Both of these indicators now display a ratio of less than one.

This indicates that the FED and federal government have now lost their printing press. With a deficit coming down the road of better than 2 $trillion this year, and no one left to loan the government the money, their only recourse was to print. Printing (monetization) will now suppress the economy by contracting the GDP, and further reduce tax revenues.

Monetization affects the GDP by increasing the price of debt, and lowering its return. This suppresses the credit markets which in turn lowers GDP. The credit markets are what the FED has been trying so desperately to unfreeze.

To save the bloated federal bureaucracy, that now has a 50% tax revenue deficit, massive new tariffs will have to be levied. Expect a robust push, with all the hullabaloo that the MSM can muster, to back a federal sales tax. VAT will be the new call for a better, safer, prosperous American. If you buy that, contact me. I have an unusual selection of brand new, freshly painted bridges, which I’m dying to unload.

The only hope to save the present overloaded, rotten structure would be for the US economy to take off into a blaze of re-inflated growth. That is not going to happen. We are reaching the end of the fossil fuel age, and one of the most basic elements to fuel industrial expansion is now missing; excess energy.

money multiplier - M1 or M2 divided by the monetary base monetary base - total bank reserves plus money in circulation
money velocity - ratio of nominal GDP to M2 money

M1 - currency in circulation + checkable deposits + travelers checks
M2 - M1 + savings deposits, time deposits great less than $100,000, and money market accounts for individuals







AvailableEnergy

[patience]

10 year bond auction today--hit 4% yield. Houston, we have a problem developing.

[threadbear]

10 year bond auction today--hit 4% yield. Houston, we have a problem developing.

What happens next, Patience? My intuition fails me. I have a tough time thinking we're going into deflation -- don't buy it. All the funny money is ending up in commodities. The TSX not doing too badly as a result. I still think, and it's echoed throughout the threads on this forum, that supply is dropping even faster than demand. That's stagflation. Higher prices, higher interest rates. All credit sensitive items, spiral down....I think.

[Tyler_JC]

The higher interest rates on the 10-year are wrecking havoc on the mortgage refinancing market.

A central component of the Fed's plan to revive the economy is to force long term interest rates down, allowing consumers to refinance their debt into something a bit more manageable.

The Market isn't letting the Fed get away with it. They are pushing interest rates up and destroying the mini-refinancing boom that we were experiencing over the past few months.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aZb6bu33Whng

June 10 (Bloomberg) -- U.S. mortgage applications fell last week to the lowest level since February as a jump in borrowing costs discouraged refinancing and signaled that Federal Reserve Chairman Ben S. Bernanke’s efforts to cap rates is stalling.

The Mortgage Bankers Association’s index of applications to purchase a home or refinance dropped 7.2 percent to 611 in the week ended June 5, from 658.7 the prior week. The refinancing gauge fell 12 percent. The purchase index gained 1.1 percent.

Fixed U.S. mortgage rates jumped to the highest level this year last week, threatening to deepen the housing slump and sideline prospective home buyers. An improving economic outlook spurred an increase in rates even as a rising jobless rate is contributing to record home foreclosures. Still, lower property values are helping the housing market stabilize.

“We still have a long way to go before conditions are good,” said Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania. “We need to get this market back up and running more normally.”

Government bond yields, consumer rates and price swings are increasing as the Fed fails to say if it will extend the $1.75 trillion policy of buying Treasuries and mortgage bonds through so-called quantitative easing, traders say.

Rising Yields

The yield on the benchmark 10-year Treasury note rose to 3.90 percent last week as volatility in government bonds hit a six-month high, according to Merrill Lynch & Co.’s MOVE Index of options prices. Thirty-year fixed-rate mortgages jumped to 5.45 percent from as low as 4.85 percent in April, according to Bankrate.com in North Palm Beach, Florida. Costs for homebuyers are now higher than in December.

A jump from 4.85% to 5.45% might not sound like much but it increases the monthly payment on a $200,000 mortgage from $1055.38 to $1129.31. Over the course of an entire year that amounts to an additional $887.16 in yearly mortgage payments. That's not an insignificant chunk of change and the increase in mortgage interest rates has barely begun.

[patience]

Threadbear,

I don't even understand all the terminology of the markets, let alone be able to out predict them! No fear, however, I'll guess anyway. (Where's my crystal ball? It's around here SOMEWHERE!)

Stagflation, yes, or something like that. Yeah, credit sensitive items won't sell very well with little credit available and J6P tapped out, and maybe laid off. Housing comes down, appliances, cars, the lot of it. However, the production costs of most things is pretty inflexible, and can go up with energy and other inputs rising. Big money could flee from US T's, and go into stocks, or commodities. I dunno. If the bond market dislocates (bond prices go down and down for months = yields go up), then the money goes somewhere. My bet is commodities make another run.

But that can't be the whole story. If the US govt can't borrow to fund itself, the choices are limited: they either cut spending, or print. Either way we get a de facto default, right? If yields are high enough, they can't keep the debt afloat. I'm betting that the do some version of printing, and I think it is close to that now. Jim Grant thinks so too: http://market-ticker.org/archives/1106- ... krupt.html
Grant says the Fed is dead meat, in his calm, analytical way. And he's a heavyweight in bonds.

Here's a link (I know, I'm computer illiterate = long link) to Denninger's Ticker essay and discussion of it about what to DO now. http://tickerforum.org/cgi-ticker/akcs-www?post=98035

The Fed is effectively bankrupt, according to the above people, like Citigroup, dead and still walking around. China and Russia are making noises about dumping the US dollar. It's only a matter of time until that idea takes off, IMHO. That + printing = devaluation, and maybe a quick collapse, like happened to Iceland on the Forex. The prices of imported goods to the US could make a rocket shot. Or, some other country could go first, like Ireland who is in worse shape. Like popping popcorn, which grain goes blooey first? Who knows?

I cannot guess what is NEXT, but only take a stab at the big picture. So, deflation (money supply) now, stagflation coming right up during a transition phase, until the US dollar goes poof, then high inflation on all imported goods, including oil, which kills the US economy--dead. "And Hell followed after..." I'm starting to sound like RE here! I see that as worst case. Hope and pray I'm wrong, but if you read Gerald Celente, he agrees MOL.

I have put all my efforts into trying to hedge what very d----- ed little we have. For that, the best advice I have heard is to put it into something productive for YOU. In our case, with very little, we have stocked up on the basics of life, particularly imported items, and are running headlong to get self reliance things in operation. Since I was born in 1946, the only thing I have seen to compare with where we are now, was the local 24.6% unemployment in Kokomo, IN, in 1974. I have never seen anything to compare with where I think we are going in the next year or two. Full Depression Mode at our house.

[fletch_961]

patience is right, it {the monetary multiplier} is expressed as a dollar injected into the economy to the growth of GDP. In 1960 one dollar injected into the economy increased GDP (GNP at that time) by $6. Now every dollar created by the FED is shrinking GDP. Put in 1 buck, get 87 cents back.

No.

For the purposes of this course, we can define the money multiplier as equal to

= 1/r.r.

which equals to one divided by the reserve requirement. While we will work with the simple multiplier, in reality there are a number of leakages from the above scenario that will reduce the value of the multiplier:

1. People may not deposit all of their cash into the banking system. Besides the money we keep in our wallets, we may save some of our money outside the depository banking system.
2. Banks may not loan out all potential reserves, choosing to keep excess reserves.

On October 3, 2008, Section 128 of the Economic Stabilization Act of 2008 allowed the Fed to begin paying interest on excess reserve balances as well as required reserves. They began doing so three days later.[2] Banks had already begun increasing the amount of their money on deposit with the Fed at the beginning of September, up from about $10 billion total at the end of August, 2008, to $880 billion by the end of the second week of January, 2009.[3][4] In comparison, the increase in reserve balances reached only $65 billion after September 11, 2001 before falling back to normal levels within a month.

The only thing that number says is that banks are not lending the money out. For every dollar the fed puts into the system more than 1 dollar is being put into the banks' reserve (or is going under your mattress).

[shortonoil]

fletch_961 said:

No.

The only thing that number says is that banks are not lending the money out. For every dollar the fed puts into the system more than 1 dollar is being put into the banks' reserve (or is going under your mattress)

That is exactly what was said. For every $1 injected by the FED, 13 cents is now leaving the economy! Or, 87 cents is left remaining.

Banks would now rather sit on reserves and let the FED pay them interest on them than loan the money. This will continue as long as asset values decline and risk continues to grow from depreciating collateral values. Asset values will decline as long as the economy declines. There is no indication, either in the US or the world, that is going to change in the future.

1. People may not deposit all of their cash into the banking system. Besides the money we keep in our wallets, we may save some of our money outside the depository banking system.

A 10% saving rate of all FRN’s would only change the monetary base by $80 billion a year. A negligible amount. M2 is now about $8.7 TRILLION.

2. Banks may not loan out all potential reserves, choosing to keep excess reserves.

That is one of the problems that the FED can’t solve because of asset depreciation. As M0 goes up MM goes down.

Money multiplier = M1 or M2 / monetary base.
Monetary base (M0) = currency in circulation and in bank vaults, plus reserves which commercial banks hold in their accounts.

[shortonoil]

threadbear said:

What happens next, Patience? My intuition fails me. I have a tough time thinking we're going into deflation -- don't buy it. All the funny money is ending up in commodities. The TSX not doing too badly as a result. I still think, and it's echoed throughout the threads on this forum, that supply is dropping even faster than demand. That's stagflation. Higher prices, higher interest rates. All credit sensitive items, spiral down....I think.

Thread I see no reason to suspect that we are looking at inflation, either in the short term or long. That “funny money” doesn’t seem to be going anywhere but into bank reserves.

Except for a brief upswing, that I contribute to a Stimulus Package effect, the Velocity of Money has been heading down for some time. The M1 Multiplier has dropped to a record 0.86 and banks are still hoarding money.

As long as asset values are declining (there is no indication that will change) banks are not going to rush into lending; not with their collateral evaporating in front of their eyes. This will continue as long as the GDP keeps contracting, which I predict will be occurring for the next 16 years.

US Economy: Velocity Of Money And M1 Multiplier Paint A Mixed Picture

The reserve multiplier dropped to a historic low of 1.91, as banks continued to stockpile money. As well the M1 multiplier dropped to a stunning 0.86.

Another record low that indicates the money the Fed is printing is not making it into the economy. As well, M2 continues to fall below its 4 week moving average.

Dailymarkets

China’s Commodity Buying Spree
Strong buying by China has helped lift commodity prices around the world this spring, but growing evidence suggests that a sizable portion of this buying has been to build stockpiles in China, and may not be sustainable. At least 90 large freighters full of iron ore are idling off Chinese ports, where they face waits of up to two weeks to unload because port storage operations are overflowing, chief executives of shipping companies said in interviews this week. Yet actual steel production from that iron ore is recovering much more slowly in China, and Chinese steel exports remain weak.

NYTIMES

China’s buying is pushing up commodity prices. They are buying as a hedge against a collapsing $, not because their economy needs them. Although exports are down 26% this year, copper, iron, oil, and wheat appear to them a better buy than US debt which is backed by an obviously collapsing currency and probably insolvent FED.

Imports were down 25.2 percent from a fairly weak level a year ago, as China’s overall trade surplus continued to narrow, to $13.39 billion.

Even with a huge effort to stockpile commodities, imports for China have dropped significantly. Once China can no longer absorb the world’s excess commodities expect prices to crash. Once they have fallen below their cost of production, shortages will become widespread. Every major economy in the world is now contracting rapidly.



I doubt that the emerging market nations’ appetite for commodities will continue to grow with their exports falling precariously, and developed nations showing no significant signs of recovering.





AvailableEnergy