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Greece, China and the USA
On Greece
I spoke with someone from Athens today. It's not a pretty picture.
Issues related to subsistence have replaced the fervor for demonstrations. This may not last according to this resident.
The closing of stores and shops is escalating. Apparently, 20% of all retail establishments are shuttered. Nearly every block has one reminder of the ongoing depression in the economy.
The Greek Diaspora is in full swing. People are leaving the country, old and young alike. They are going to Europe, where the prospects of jobs stink, but not as badly as in Greece. They are also fleeing to America (family members in the US have been helping out), Australia (where some are welcome) and South America.
The talk is that the Greeks are becoming the new Palestinians. They leave their homes, as there is no future there, but all the time they wish they never left.
As the shops close and the people leave, the economy shrinks. My Greek friend is convinced that government revenues are collapsing as a result. Whatever estimates the Troika were looking at six-months ago are pure fantasy today. The country is imploding.
People are feeling hopeless, and the situation is getting worse. In this fellow’s opinion, there is not a chance in hell that Greece will avoid a default. Two years ago there was a general belief that Greece could manage through a crisis, and avoid defaulting and sustain the link to the Euro. That is no longer the case.
This friend understands that a transition from the Euro to the Drachma would cause huge additional pain. It would devalue the pensions of every citizen by at least 50%. He understands that a default would mean that Greece would be a debt pariah. In spite of this, he prefers that it would come sooner rather than later. He thinks this is the prevailing sentiment in the country. There is nothing desirable about this choice. It’s now just inevitable.
On Cement
The big Swiss cement company Holcim announced a charge to assets as a result of a write down of fixed assets. Here's the headline and a look at Holcim’s stock performance. Note that the stock got clipped for a 1/3 of it value about 8 months ago.
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The large cement producers from France and Germany also had their stocks whacked at about the same time.
Actually there is not much good news for the cement boys anywhere:
A question for readers: How big is China when it comes to cement? Keep in mind that the EU and the USA have GDPs of about $15T apiece. China is much smaller and has a GDP closer to $6T. Knowing that, what’s your guess on how China stacks up in the world of cement? I would have thought that China was as big as the US or EU. The economy is smaller, but they are building so much, my guess was about equal.
Wrong. wrong. wrong. I must admit, I was blown away by this:
China is 25 Xs larger than either the US or EU! When it comes to cement, forget the rest of the world and focus on what is happening in the country with a 54% market share.
China’s cement production has been on a tear for years. But it's slowing down. The production for 2011 will come in at 1.88mm metric tones, an increase of only 6% over 2010 (the slowest in 15 years). The Cement Association of China is forecasting that 2012 total production will be “about the same as 2011”. We shall see. I saw this article on cement pricing in Sichuan province.
Since 2004 China' GDP has doubled. So has its cement production. That's not a coincidence. The forecast for unchanged production in 2012 is inconsistent with high growth in GDP. What does zero growth in cement production translate into Chinese economic growth? My guess is that 4% GDP would be a good result. That would be well below stall speed for China.
On Continuing Resolutions
The CBO sent a memo to the House and the Senate. It was reminder of all of the stopgap measures that are in place. The government is running on a series of continuing resolutions. How big a deal is this? Potentially, it’s a very big deal. The amount involved is $969B!
There are two lists. This first one looks at the spending for which the necessary enabling legislation has already expired:
This one is for those expenditures whose authorizations expire on or before September 30 of this year:
You might rightly ask, “What’s that big chunk of money being spent on?” The biggest chunk is the military (68%). Even with partisan politics and an election year, the military will likely get its money without much of a fight. The CBO report spells out what the rest of the dough is being spent on. (It runs 100 pages.) Some snippets:
General Administration
Unauthorized FY 2012 Appropriations: 11,519,966,000
United States Marshals service
Unauthorized FY 2012 Appropriations: 11,806,793,000
National Institutes of Health
Unauthorized FY 2012 Appropriations: 30,689,990,000
Western Hemisphere Drug Elimination
Unauthorized FY 2012 Appropriations: 1,061,000,000
Operations of the Peace Corps
Unauthorized FY 2012 Appropriations: 375,000,000
Migration and refugee assistance
Unauthorized FY 2012 Appropriations: 1,639,000,000
Department of State diplomatic and consular programs
Unauthorized FY 2012 Appropriations: 8,275,386,000
Section 8 tenant-based housing assistance
Unauthorized FY 2012 Appropriations: 18,914,369,000
Low-income home energy assistance
Unauthorized FY 2012 Appropriations: 3,478,246,000
Noxious Weed Control and Eradication
Unauthorized FY 2012 Appropriations: Not Available
Brown Tree Snake Control and Eradication
Unauthorized FY 2012 Appropriations: Not Available
Assistance to trafficking victims in the United States
Unauthorized FY 2012 Appropriations: 9,794,000
Administration on Aging programs
Unauthorized FY 2012 Appropriations: 1,473,703,000
Bureau of Labor Statistics
Unauthorized FY 2012 Appropriations: 610,224,000
National Endowment for the Arts
Unauthorized FY 2012 Appropriations: 292,510,000
Pandemic and All-Hazards Preparedness Act
Unauthorized FY 2012 Appropriations: 62,700,000
Project Bioshield
FY 2012 Appropriations: Not Available
Strategic Petroleum Reserve
FY 2012 Appropriations: 192,704,000
National Highway Traffic Safety Administration
FY 2012 Appropriations Authorized 24,693,000,000
Federal Trade Commission operations:
Unauthorized FY 2012 Appropriations: 311,563,000
Centers for Disease Control programs regarding infertility and sexually transmitted diseases
Unauthorized FY 2012 Appropriations: 964,855,000
Corporation for Public Broadcasting
Unauthorized FY 2012 Appropriations: 445,000,000
Administrative expenses for Government National Mortgage Association guarantees of mortgage-backed securities
Unauthorized FY 2012 Appropriations: 19,500,000
Funds appropriated to the President for international assistance.
Unauthorized FY 2012 Appropriations: 16,462,253,000
Secretary of Health and Human Services refugee and entrant assistance programs
Unauthorized FY 2012 Appropriations: 769,789,000
Pacific Salmon Treaty
Unauthorized FY 2012 Appropriations: 123,566,000
Nutria Eradication and Control Act
Unauthorized FY 2012 Appropriations: Not Available
Bureau of Land Management
Unauthorized FY 2012 Appropriations: 973,552,000
Paperwork Reduction Act of 1995
Unauthorized FY 2012 Appropriations: Not Available
Renewable energy research and development
Unauthorized FY 2012 Appropriations: 963,000,000
Appropriations for the Coast Guard
(1) Operation and maintenance
Unauthorized FY 2012 Appropriations: 7,051,054,000
(2) Acquisition, construction, rebuilding, and improvement
Unauthorized FY 2012 Appropriations: 1,403,924,000
(3) Retired Pay
Unauthorized FY 2012 Appropriations: 1,400,700,000
Specialty crop research initiative
FY 2012 Appropriations Authorized 100,000,000
Food animal residue avoidance database program
FY 2012 Appropriations Authorized 2,500,000
National Sheep Industry Improvement Center
FY 2012 Appropriations Authorized 10,000,000
Block grants for energy efficiency
FY 2012 Appropriations Authorized 2,000,000,000
Central Intelligence Agency Retirement and Disability Fund
FY 2012 Appropriations Authorized 514,000,000
Have a look at the report. There are hundreds of line items for expenses. Something for everyone to hate.
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Hey Bruce - nice article dude. Always looking in between the wall and the wall paper for soem socio -econmic clues as to wither the markets.
The Chinese cement thing however....chinese produce a very low grade cement with little or no (or faked) QA testing / standards.
Most of their building s will be falling down in 10 years, perhaps sooner if they are ever populated. Cheers.
Agreed on:
Western Hemisphere Drug Elimination
Section 8 tenant-based housing assistance
Administration on Aging programs
Strategic Petroleum Reserve
National Highway Traffic Safety Administration
Federal Trade Commission operations:
Administrative expenses for Government National Mortgage Association guarantees of mortgage-backed securities
Funds appropriated to the President for international assistance.
Bureau of Land Management
Specialty crop research initiative
Food animal residue avoidance database program
National Sheep Industry Improvement Center
Central Intelligence Agency Retirement and Disability Fund (do they mean "retire" or "retire" <gun to head>?)
Cemex, based in Mexico, also a huge cement producer in deep trouble with debt load and deterriorating world market. At least Mexico is diversified with drug trade. Closer to home , how much does Homeland Security get and what do they do? Originally objective was to stop terrorism, then became a jobs retaining program(police & fiemen), then a post Katerina development mechanism, and now anti civil unrest agency. They along with other government agencies cannot even stop drug trafficking at the border.
Concrete Cutback Concern for Cold Corpses!
What's the mafia (re: TPTB) to do with all those dead and dying enemies??
Got it... paper mache shoes baby! ... unlimited supply!
My "cousin" has an incinerator...and a "chop shop" for "spare parts"...it's a growth industry with customers on a "waiting list".
$24 billion for the National Highway Traffic Safety Administration?? WTF. What do those guys do?
Its been shown that everytime a country defaults they only need to wait 3-5 years and the world is more that willing to start lending them money again. So do it Greece, rip the fucking band-aid off and get it over with. The sooner they do that the sooner they can get back to normal
Every other time they did, the rest of the world wasn't broke too.
And it sometimes takes much longer to get access to bond markets...it depends quite a bit on the nature of the default.
Check out "This Time is Different", it has a great perspective on defaults and crises...amazing that capitalists claim this system works so well with such a preponderance of evidence to the contrary littered throughout history.
When was this magical time, when everyone used gold and silver and markets never bubbled, teetered, and collapsed causing bank runs and deep recessions?
Krasting: Ok, good article.
Another metric that is very revealing about economics - apart from cement production - is steel production.
I would throw out all of the appropriations, EXCEPT the Brown Tree Snake Control thing. Brown Tree Snake Control is the only thing *I* care about, so we're keeping it!! ... but if you really insist, you can keep yours if I can keep mine ...
At a certain point, it will be time for the peeps to get the lead out.
If we stand in place, it's all going to close in.
Choosing between Romney and Obama is like choosing between SOPA or PIPA.
Corporations are adapting through the power structure to match and counter third world Oligarchies, and are becoming the same. They are learning to be better corrupt.
US Corporations were third world Oligarchies a hundred years ago, so the change should not be surprising.
Carlyle wants to take shareholders rights and lock them into arbitration, into the shadows of confidentiality and manipulation.
Oh wait, but that is their specialty, confidentiality and manipulation. We will have listed private companies. Like GS ?
Pedaling your bicycle to the local factory, you we will be forced to sing patriotic songs before work, and your tax rate will still be higher than your ( King's) President.
You forgot to add "Captain Stuebing has an announcement to make." Other than that spot on.
Corporations are adapting through the power structure to match and counter third world Oligarchies, and are becoming the same. They are learning to be better corrupt.
//////////////////////////////////////////////////////
Made me laugh.
Sure, sure. The mighty US citizens corporations are forced to adapt by some third world weaklings. Wonderful.
Everything to avoid self indiction.
Reality: US citizens are not corrupted. They have behaved the same from day one (they have propagated they have changed or never were as such. Propaganda remains propaganda)
As a result, there is no corruption among US citizens as they have not changed.
If there is adaptation and learning, it is much more by third worlders who are learning what it means to become a US citizen.
Yep, on the world stage, US citizens lead the dance.
But hey, classical by now.
The helpless forces the powerful to adapt. The weak coerces the strong. Right from US citizenism benchmark.
US citizenish critical thinking at its best.
Not allowed an Avatar where you come from ?
Great post. But I've got a feeling your Greek friend won't quite get his wish, yet. I think Greek bailout II will get pushed through one way or another, with a probably involuntary PSI. As fed up as the Germans are with Greece, I don't think they want to leave the Greek banks to freeze or devalue deposits, lest that kick off bank runs in the rest of the PIIGS. If I'm right, we'll get a Greece as indebted as ever, now mostly owed to public creditors who are still very reluctant to accept write-offs. The privately owned bonds, after being converted from ~200b of principal down to ~100b (give or take, depending on the coupon), will trade at ~50% of the new par, or a quarter of old par. There will still be no hope for recovery before the debt burden is cleared. Everyone will still be waiting for the big default.
FYI China GDP was about $7t in 2011, EU about $17.5t, Eurozone about $13t. China will hit 7.5-8 this year, EU/EZ fall below 16/12.
Economic depression and overcapacity world wide...1929 territory coming up very fast!
For first world economies. If the BRICS can decouple they will benefit from this "rich man's recession".
Reaganomics and international labour arbitrage, over thirty years of bubblenomics... Lets face it, the whole economy just works on cheap energy, aka ME OIL, and cheap labour, aka Chindia manpower...The rest is toast, in this economic paradigm run by the 1%. ANd the MIC is there to keep the plebes in line until the swine who run the combine turn their own folks into abandoned flock of scared shitless goats and sheep; like in Greece, where having been fleeced, they run naked and ragged to the urban ghettos of the world as the new Gypsies of global mayhem.
Yes, Brave New World. Thank you Mustapha Mond for being such a torch bearer in NEw Hatchery.
My,my,my, is this US citizen start to approach the incoming new wave of colonization that US citizens are triggering?
Greece is the forefront. But what?They go to the rest of Europe. Where are those Europeans going to go when they are in the same situation? To Greece?
Funny, funny.
Western Hemisphere Drug Elimination
Unauthorized FY 2012 Appropriations: 1,061,000,000
----------------
How's that one working out for ya, guys?
*cough*
Quite well actualy. They've discovered 12 pot plants outside of San Francisco. After that it's darts and pool at Schmegegi's boyz!
Thanks Bruce. I find this 'ancedotal' reporting (Greece) a lot more useful than the so-called msm news quoting vapid politicians, appointed bureacrats, and self-serving bankers and troika members, none of whom seem to ever get out and walk down main street.
I also really liked the escaped cat...
Very interesting that little-ole VietNam is in the 2% group - don't hear much about them any more, but they are obviously still re-building hard. Spent some time there once...
Finally, this business of temporary authorizations to run our government programs...
Basically, our fiscal policy (ha) as determined by Congress (ha ha) is so totally FUBAR as to exemplify bad management to the max. Disguise the players, and it would be a classic business text case-study of 'what is wrong with this outfit'?
The FAA (for example, because I'm a pilot) has not had a REAL budget for something like 4+ years now. Just temporary 'Authorizations' for another year. This makes long-term, real capital equipment planning impossible - significantly impacting the NextGen program of better GPS controls and collsion avoidance stuff for our busiest airspaces; real progress on research so we can move ahead with bio-fuels, and much, much more. FAA senior and mid-level managers just can't MOVE with the continued uncertainy of not having a real budget to work with, and sometimes running out of funds temporarily because of Congress posturing.
Multiply this by about a hundred agencies, also unable to do significant long-term planning, or more usually putting long-term plans on hold, and we, the people, are just getting screwed by bad hideous mis-management of the biggest budget in town.
Sigh...
nfp
The railroad cut off service over a year ago. This is a planned execution. They're gonna "blame Greece" for the collapse of the EU. And to prove just how at fault they...and Hungary...are EU people will "wipe them off the map." until France pulls a Rahm Emmanuel of course.
Bruce,
What is the estimate of FDI as a percent of 2011 China GDP? If I recall FDI has run >50% of China GDP for the last several years. A full 10 points higher than the peak rate of FDI in any developing country since WWII.
This is the problem with a cap ex boom masquerading as real cyclical growth. Maintaining 10% growth in this "cement" portion of the economy is equivalent to building as many buildings as were built the year previous, plus 10% more! When this growth comes to end, it doesn't slow, it goes into reverse!
Yes, China when it lands will land hard.
Bruce forgot to add Mexico to his cement list...that was wiped out over a year ago. This is a global real estate collapse. Cement is just the"tip of the cruise line industry" on this exceedingly dangerous time we have been in for some time now.
The budget process and the underlying government is so dysfunctional that I think it might only be a matter of another decade or so before an American president declares his own budget and taxes/borrowing and bypasses Congress altogether.
For many coutries, the best answer appears to be strategic default. Repudiate. Walk away and borrow no more. Restructure internal finances to fit the needs of the populace, drastically reduce the size of .gov, encourage innovation and development, aggressively focus on key, strategic industries.
Example: Qatar has one of the largest and finest airlines in the world yet no one in their right mind would want to go to Doha. The emir's visionary leadership has built Qatar Airways to become one of the world's preeminent airlines, carrying millions of passangers from Asia to Europe and vice versa -- through Doha. When most airlines are losing money and rely on .gov subsidies, Qatar Airways is making money hand over fist.
If Qatar can do this, why can't Greece or Hungary or Portugal? Not in the airline industry but some other where they have some strategic advantage...
"why can't Greece or Hungary or Portugal?.." -- that --> "The emir's visionary leadership" they don't have any leadership that gives a shit
Bruce, man I love that cat coming out of the bar code cage. The rest was also great and must read , but that cat is your bestest.
I wish this was mine. It's a Banksy. I'm not sure where the original was.
If it was intact, it would be worth a bundle. Banksy has stuff for sale at galleries. He drew a rat on a safe. It sold for $100k.
http://www.bbc.co.uk/news/uk-england-oxfordshire-13142066
Look at the financial commitment to the military. Still don't know why folks ignore the possibility of a military take over in the U.S. Still have many friends in the service, all support Paul and see the laughable connection between the banks and the political puppets.
I'd be much more concerned about a junta if they stopped paying them.
On Cement
About 6 months ago I tried to buy some concrete for a couple of pads at my ranch. US$8000 was the quote! I was expecting $2000. I was told the chinese were buying all the cement (an ingredient in concrete).
On the bright side maybe now I can afford to get the pads poured.
Nicely worded and summarized, Bruce. Thank you.
On Spain
A friend of mine is an American ex-pat who has lived in Spain the past 30 years along with his Spanish wife and children.
He has supplied me with weekly man-on-the-ground (he lives in Madrid) info on what is going on.
Last week he told me he plans to move back to the US in the next 24 months.
He is trying to hang on until his last child reaches the age of majority, but said I should be ready for him to possibly show up earlier.
Probably a wrong decision. Europe will be clawing its way out of the abyss just as the US will be descending into it.
The US faces severe challanges not unlike Europe is struggling with: too much debt, the unwillingness to cut down the size of .gov, increasing taxes. Inflation will rear its ugly head at the first sign of economic recovery, making a lot of the public as well as private debt unsustainable.
The US is worried about (illegal) immigration. It should be more concerned with emigration as many productive and highly educated people (like me) have expatriated or are in the process. I live in SE Asia now but I am seriously considering moving to Europe in the next 12 - 18 months. The food is much better and property values are collapsing.
mmm, no thanks. When the whole world is rioting and lawless I at least want to be in the country where I can have guns. Reading about the London riots and bat sales going up 4000% in a week was enough to press that point home.
Mossberg > Louisville Slugger
"When the whole world is rioting and lawless"
"where I can have guns"
Mindslavery is a bitch.
Off topic, I believe you have an interest in MS.
http://wimp.com/mindingmitochondria/
The talk is that the Greeks are becoming the new Palestinians. They leave their homes, as there is no future there, but all the time they wish they never left.
If they had any balls they would string up the politicians. 50+% of all Greeks are union members and mostly unionized govt workers. The Eu Euro was welfare for a nation. The Greeks thought they could have the Germans standard of living when Greece has no industrial economy. The only thing they have that they want to export is their debts. Sad but the credit cards for the EU nations, Japan and ObamaLand USA are all maxed out.
(post flagged and under review - Dept. of Homeland Security)
I was with you until you described the USA as "Obamaland", as if our debts were incurred as a result of his administration's policies. Our national debt has bipartisan parentage, my friend, as do the Bush tax cuts and the Great Recession, both of which are the primary cause of lost tax revenue.
Well that's only partially true. The debt has increased $4T+ since he took office. Even Bush II wasn't that lavish.
Bruce, what's your take on FOFOA's (http://fofoa.blogspot.com) belief that the Euro as a currency is safe from the debt turmoil of the member countries, and that no country will leave the EMU? It hinges on gold being the counterbalance, and I understand the argument I think, but I'm just not sure I can fully buy in. Any thoughts? I consider you the resident Euroexpert...
What? They all have gold so they leverage up their balance sheets?
Europe is as much a political crisis as it is an economic crisis. This is about unemployment, lost opportunity, lost savings, wealth gaps, etc, as much as it is about the banking houses having their margins blown out.
Sure, pump the assets to tens of trillions of euros and then the debt is balanced, but that does nothing for real growth, it only maintains the status quo of the Fiat Ponzi.
And the Fiat Ponzi is an illusion.
Yes, but the argument is gold will rise in value and the large reserves the ECB has (relative to outstanding currency) will appreciate in value, balancing out the newly minted Euros. The argument assumes freegold is implemented, either officially or de facto, so, yes, the ponzi fiat game is over, and currencies will be forced to float against hard assets, most likely and preferably gold.
Damn brown tree snakes ate my cats. We need to fund that one!
National Sheep Industry Improvement Center
FY 2012 Appropriations Authorized 10,000,000
They are showing signs of looking around and getting restless...
Time to adjust the tranq levels.
Budget debates are becoming meaningless. All the back and forth about what the numbers mean is just a distraction. Since the house of cards depends on everyone participating in the same crime. debt reduction is a symptom in itself, not a cure. This is the parallel with the end stages of drug addiction. Any mention of reducing the dole creates panic attacks, withdrawal symptoms and hallucination. Greece is in the shakes and chills, now.; China may resort to that special form of global burglary, the trade war that everyone fears. The U. S. is the longest running Ponzi scheme, in the world. All of the foreign investors are discovering that they were cheated. The mess that Nixon tried to wriggle out of in 1972, is coming back to haunt us. The Federal Reserve didn't promise to make good on it. U. S. taxpayers did.
http://georgesblogforum.wordpress.com/2011/11/02/the-daily-climb-2/
National Sheep Industry Improvement Center
FY 2012 Appropriations Authorized 10,000,000
in New Zealand that would only be 30 cents a head
I have a number of former colleagues on the bench now in cement and take umbrage at the decline of this industry - some people need killing and cement is the best way to keep them killed. Greece has gone into default 5 times and now makes 6 - at what point does a black hole get to be more of a hole? Is there such a thing as more "holeness?" Well, Mr BK has an answer for that too - the US budget. Guilty! Hang the bastards and drinks all around. First, get the cement.