When the economy collapses, it will collapse down to a lower sustainable level. Much of the world’s infrastructure was built when oil could be extracted for $20 per barrel. That time is long gone. So, it looks like the world will need to collapse back to a level before fossil fuels - perhaps much before fossil fuels.
One glance at The Baltic Dry Index's collapse is all that most need to see the painful state of the global shipping industry. However, as gCaptain reports, reality is even worse as the boom in so-called "zombie ships" suggests there is no recovery in sight for the beleaguered containership charter market, which is facing its biggest crisis since the 2008 financial crash.
After a brief hope-strewn bounce in September and October, world trade volumes have reverted to their recent stagnating growth trend, drooping 0.1% MoM in November as world industrial production swoons 0.4% MoM. On a smoothed year-over-year basis, world trade volume growth is decelerating at the fastest pace since Q4 2012 (right before QE3 was announced to save the world) and world industrial production growth is near its weakest since Q4 2008. It's not just China either as import volumes declined at the same rate in advanced economies and emerging economies.
Decades of accumulated market distortions appear to be on the brink of a great unwind, most of which can be blamed on expansionary monetary policies. If so, the banking crisis of 2008 was a prelude, rather than the crisis itself. The Keynesians will blame the Fed for a complete policy failure. The reality is, that by implementing conventional policies on the recommendation of group-thinking macroeconomists, the central banks have dug a hole too deep to escape. Recognition of the merits of Austrian sound money theory will simply expose this reality sooner than later.
Having told banks and investors "don't panic" in September, amid spiking interbank lending rates and surging default/devaluation risks, it appears the massive shortage of dollars that we warned about in December has washed tsunami-like ashore in oil-producing Nigeria. Following the Central bank's decision this week to halt dollar sales to non-bank FX market operators, black market exchange rates spiked to 282/USD (vs 199 official) and CDS spiked to record highs implying drastic devaluations loom.
"Commerce between Europe and North America has literally come to a halt. For the first time in known history, not one cargo ship is in-transit in the North Atlantic between Europe and North America. All of them (hundreds) are either anchored offshore or in-port. NOTHING is moving. This has never happened before. It is a horrific economic sign; proof that commerce is literally stopped."
The mainspring of Islamic extremism and militancy isn’t the moderate and democratic political Islam, because why would people turn to violence when they can exercise their right to choose their rulers? The mainspring of Islamic militancy is the despotic and militant political Islam of the Gulf variety. The Western powers are fully aware of this fact, then why do they choose to support the same forces that have nurtured jihadism and terroris?
The problem of reaching limits in a finite world manifests itself in an unexpected way: slowing wage growth for non-elite workers. Lower wages mean that these workers become less able to afford the output of the system. These problems first lead to commodity oversupply and very low commodity prices. Eventually these problems lead to falling asset prices and widespread debt defaults. These problems are the opposite of what many expect, namely oil shortages and high prices. This strange situation exists because the economy is a networked system. Feedback loops in a networked system don’t necessarily work in the way people expect.
With a new wave of terrorism, mass shootings and unprecedented social violence around the globe now a part of the daily routine for billions of people across both developed and developing nations, one group wants to be certain there is no chance of "close encounters", violent or otherwise, with the peasantry during its upcoming annual boondoggle at the World Economic Forum in Davos. According to Swissinfo, when the world's billionaires land their private jets in the gorgeous Swiss town (which at 1,560 m is also the highest town in Europe) on January 20, they will have up to 5,000 Swiss army troops protecting them.
With more financing in place, the world’s tallest skyscraper is moving forward. Saud Arabia's Kingdom Tower in Jeddah is only the latest phase in an enormous boom that began setting new records in 2014, raising another 'skyscraper alert' as the completion of record-setting skyscrapers has long seemed to indicate the beginning of economic crises.
The U.S. dollar is currently accepted as the world’s reserve currency, but it hasn't always been this way...
The S&P 500 closed at 2052 on November 18,2014. That was 405 days ago, and despite the rips and dips in the interim the broad market average has gone nowhere.
The first Fed rate hike in seven years was supposed to trigger a powerful equity rally as the bulls expected money to pour out of bonds into stocks; especially into the cyclicals. Unfortunately for the equity bulls,, as Mizuho's Steve Ricchiuto notes, this time things are different and instead of the Fed rate hike triggering the traditional Santa Claus rally; it looks like the FOMC is actually the Grinch. The key message delivered by the Fed though the SEP, the DOTS and the Chair’s post meeting press conference is that this is the best the economy is going to get.
Since our Keynesian central bankers have no clue that their prodigious money printing resulted in the drastic underpricing of credit and capital over the course of the past two decades, they are flying blind. They simply fail to see that the global economy is now swamped in more excess capacity than at any time since the 1930s, and probably even then. So they keep expecting the commodity cycle to momentarily bottom and prices to rebound, thereby reflating CapEx and household spending.
Economic warfare aims to capture or otherwise control the supply of critical economic resources or destroying a country’s currency. The US understands better than anybody else that a country can sometimes be hurt more by doing this than by bombing its infrastructure. The tool of exclusion from the dollar-denominated global financial system is described as a 'neutron bomb' constituting a more potent bomb than any military weapon. But recent developments signal the first stages of the US dollar’s decay.