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Follow the money No. 99 | In pursuit of the elusive soft-landing
Latest from Uncle Sol. A version of this column is scheduled to be published Monday, Jan. 2, 2012, in The Washington Times -- Chris
By Sol Sanders <solsanders@cox.net>
Follow the money No. 99 | In pursuit of the elusive soft-landing
The new year’s worldwide economic downturn has an interlocking effect: every national economy is searching to accommodate itself politically as well as economically to what looks to be an extended period of low growth. After longer or shorter periods of historically unrivaled prosperity, they are feeling for a “bottom” – a level to wait out new growth. That is the proverbial “soft landing”.
Last to go through the motions are the BRIC -- Brazil, Russia, India and China. Some had hoped they would be immune to the U.S. and Europe blight because of their developing domestic markets. That’s turning out to be a foolish miscalculation. All, to a greater or lesser extent, were dependent on exports. With Western consumers’ incomes dropping [including a plateau in Japan], markets are drying up with the added irritant of new low-cost competitors.
China is, of course, the most critical since “the factory of the world” has accounted for recent commodities growth. Brazil, luxuriating with a new middle class and developing internal market, nevertheless will feel China’s downturn coupled with its own bubble, an inflated currency discouraging exports and encouraging capital flight. [Ask the Miami real estate agents about their best customers.] Australia, which offshored manufacturing decades ago, first to Japan, and then China, sees ore prices dropping with oil and gas exports soon to suffer. Russia’s high-cost oil and gas sales are Moscow’s only crutch, now threatened when worldwide consumption falls dramatically. [Ironically, Tehran’s threatened Hormuz Strait closing – the mullahs’ way of boosting oil prices – is a boon.]
Chinese official figures, always dubious, indicate growth moving down toward 8% annually – a rate convention says is minimal to absorb population growth and sustain a politically potent urban elite. The question, of course, is whether that is the end of the slide. Unanticipated events surely await a jerrybuilt economic structure, already signaled by growing unemployment and strikes – often against foreign multinational assemblers under pressure to trim China costs even more.
Communist leaders promise a turn from unrestricted government-backed infrastructure expansion and subsidized exports to domestic consumption. So far it has been just talk. Having starved the rural sector for more than two decades – after an initial agricultural liberalization spurt – Beijing has little leeway. The $4 trillion “stimulus” to meet the 2008-09 worldwide financial crisis went disproportionately to goliath inefficient government corporations, and bank credit is now stretched particularly at local levels.
India, long seen as Beijing’s limping development rival with its 1.3 billion soon to pass China as the world’s largest and younger population, has also snagged. Monumental corruption scandals involving New Delhi’s morass of British colonial and Nehru era Soviet-style bureaucracy has halted economic liberalization. Indian family capitalists are turning to overseas investment and new government programs to remedy horrendous inequalities will only add to inflation Prime Minister Manmohan Singh’s exhausted government has failed to contain. India’s soaring trade with China – raw materials exchanged for cheap imports – will feel Chinese cutbacks and Indian manufacturers already call for protection. All of this, of course, backgrounded by continuing tension along the 2,000-mile Tibetan border and Chinese expansion of commercial and possible military footholds around the Indian Ocean which New Delhi would like to call its own.
All this plays out against the chaotic Eurozone with its 17 members unable to find a quick solution to the dilemma posed by Germany’s relatively still relatively robust -- if export-led -- economy and its defaulting southern members. They are increasingly overwhelmed by debt and unemployment as the proposed remedy, austerity, kicks in. Reduced consumption in the world’s largest market will increasingly ripple through export income for the rest of the world. And if European banks, overleveraged with public as well as private debt, cannot be quickly recapitalized, there is danger of another financial crisis to which the U.S. would not be immune.
An anti-business administration in Washington still refuses to end its environmental war crippling American energy and gorging already bloated Persian Gulf tribal hoards. U.S growth, produced through continuing growing public debt, is feeble with vast structural changes as well as lack of business confidence feeding unemployment, sapping consumer confidence, the wellspring of world growth. So far the U.S.’ economy’s vast dimensions – including unbelievable fat and waste – have braked the downturn. But rising U.S. exports, based on a devaluing dollar, will feel the EU and BRIC fallback, pointing toward a Washington search, too, for a “soft landing”.
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bland, blander, blandest.....
The Washington Times? I guess both Whalebone and old Sol have only old Korean evangelicals that will pay for their fluff. Going for that really big audience demographic now? The "anti-business administration in washington" should have had a Banzai coffee warning on it.
Did one of these sphincters marry a Korean import to impress and extract funds from god reverend Moon? Are they married to a Hyundai and trying to get his okay for an anullment? Did they have to get down on kneepads to blow the old feller? Maybe they cranked up his hospital bed?
really should label some of these comments just to warn us so we can be polite and leave it alone.
"...Washington refuses to end its environmental war crippling U.S. energy production..."
Yeah, right. Note the rise in U.S. production that began in 2009 (the election of your "anti-business Washington")and is soon set to pass 40 year highs:
http://www.chron.com/business/energy/article/N-American-oil-output-could...
Since production takes several years to increase, these increases are a result of higher oil prices and Bush administration policies encouraging more oil production. But there is no evidence at all that the current administration is "crippling" U.S. energy production.
Makes me wonder what other facts So dreams up.
unlimited freedom of enterprize is the only solution.
http://covert.mypressonline.com
Golly gee - a whole string of intelligent comments with not a single "(xxxx) Bitchez" comment - everybody make a News Years Resolution to up the zh quality quotient?
"But rising U.S. exports, based on a devaluing dollar, will feel the EU and BRIC fallback, ..."
Sol obviously meant 'fuel', but somehow 'feel' reads a LOT better. "Feeling BRIC fallbacks" has the potential for becoming one of ZH's memes of the year.
I'm with GNWT on Uncle Sol losing any credibility with this piece, which feels very unfinished to me - he must of been hungover and in a hurry - when Sol claims the current administration is 'anti-business' - this feels like a MSM attempt to make the current POTUS a populist. Note the current vigorous SEC actions against Corozine and other top MS Global pirates - oh, wait...
nfp
You almost had me there with "vigorous SEC actions". I think my blood pressure spiked 10 pts. +1 for the "oh, wait".
Oh yeah, Silver BitcheZ, and a BTFD for good measure.
We are all scrabbling for more, more, more in the face of less, less, less.
In the big picture, this leads inevitably to a "population event".
How does one quantify "business confidence"? An essence to be restored which would lead us on a path of growth and cure our current economic blight? Pro-business tax and regulation reducing administrations, loved by the business community, have contributed mightily to the explosion in public debt. Cutting taxes to "starve the beast" has just stimulated the beast's appetite, now sated with large bales of borrowed hay. And does anti-business regulation extend to finance, where wildly over-leveraged greed and a transfer of moral hazard to public sector threatens to destroyed capitalism? Our financial brothers-in-arms who are so lavishly rewarded for creating products that do nothing but produce these lavish rewards for the few while threatening the many?
So much I agree with but who is Sol's paymaster? What's he selling? We're all selling something...
Until we get our arms around a sense of shared sacrafice; a distributed deleveraging that allows for civil society to survive, we will continue tottering angrily toward the economic apocalypse, pointing fingers at one another as we descend into the flames.
But I would make little distinction between either the Republicans or Democrats: on one side a desire to slash regulation, lower taxes and impose austerity (preferably on the bottom-dwellers in the pond) and restore growth, vs. grow public debt to stimulate the economy and return sunshine to America. Both are doomed to catastrophic failure. Unfortunately any recognition of this approaching desperate reality is not allowed to contaminate the public debate lest it threaten confidence in both our glorious economic future and our exhalted American pedastal in the Pantheon of Greatest Civilizations.
We have been reporting on this financial terrorism on Iran by the US Government now for some time:
Unlce Sol? still lost in a belief that this is not all scripted by the same folks who brought you Hank Paulson's Cleavon Little imitation when he put a gun to his head and said,
"Gonna kill this banking system if you don't give me 800 million."
Sol, I am probably as old as you, and it did take many years for me
to listen to the conspiracy theorists, etc. You really have to go deeper.
But, really, two wars that cost trillions?
Supported by both parties.
An anti-business administration in Washington -
dude, you are pretty much embarassing here at ZH in my humble opinion.
When an administration has JP Morgan as the chief of staff, Goldman all over the place, etc. is called "anti-business", you really have to go deeper "Uncle Sol".
G
JP Morgan Chase is not a business in any meaningful sense, nor is it remotely capitalist. Like GS, it is a legalized RICO mob with institutionalized control over the means of governance. Real businesses must compete with other businesses. JPM does not compete; it gets its revenue flow from a captive "government" on a no-bid basis (EBT cards, etc.), and its tier capital is a gift from its Fed subsidiary, at the expense of anyone who works, saves or transacts in its FRN scrip.
Sol meant "real" businesses, meaning anyone who isn't TBTF, vampire squid, or has access to Fed facilities such as CPFF and anonymous discount windows.
BTW, you meant "billion", not "million". You should cut Sol a little slack.
The point being, Solly?
Long or short Netflix?
Not sure this piece actually contributes anything new? Incidentally, in case you hadn't noticed, the DXY has been strengthening, not weakening over the past months. China's growth will probably decline to ONLY 8% in 2012 and the US is fucked like Europe. Ultimately fundamentals do count even if Wall Street driven risk valuation models are totally wrong, with high beta being placed on true long-term growth and the PD's (HSBC and JPM) depressing PM's at the behest of the CB's. And Gubmin trying to have it both ways with Iran. Too much war-readying agitprop and the price of oil goes up. High prices not good for re-election chances and pisses off the sheeple. Thank goodness that, miraculously, oil inventories zoomed higher and oil prices fell. What a relief.
As above, this piece contributes very little to the debate. No substance, no conclusions, no recommendations. Yawn...........
So far we've seen the struggle of goverments to retain fiat currencies while individuals and some private/ngo organizations struggle to acquire a non-fiat currency for survival in case of hard times. A few countries look like they are quietly preparing for a PM backed currency. It could be the first country to go back to PM backed money will not so much be the winner of the currency wars but the survivor. The thing that might happen, but I don't bet on it, is that when the Idea of a PM backed currency starts to look like a legitimate suvival mechanism there might be a reverse domino effect and there will be a cascade of returnees to PM currencies.
A PM-backed currency is meaningless. The issuing central bank can easily lie about how much PM backing said currency has, and it doesn't prevent ongoing printing and debasing said currency.
But rising U.S. exports, based on a devaluing dollar, will feel the EU and BRIC fallback, pointing toward a Washington search, too, for a “soft landing”.
IS THIS PART OF A COMEDY ACT?
I think Sol fell victim to poor sentence structure. I believe what he was trying to say was something like this:
"The Soft-Landing crowd will be looking for U.S. exports to rise on the back of a weaker dollar, but will find their hopes dashed by a lack of demand due to Depr--I mean, recession in the EU and BRIC nations."
But I'm only guessing.
I don't know if I'd state it is as "rising exports" because imports will also be shrinking along with a devalued dollar. A better way to put it would be "A poorer US won't be able to consume the world's goods, causing the trade deficit to shrink."
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