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Chart Of The Day: US-China Trade Deficit Hits Record

Tyler Durden's picture





 

The US Census Bureau reported that in October, the total deficit with China hit a record $29.5 billion. What did America need to export so much that it is willing to impair its GDP (net imports are a GDP drain) and boost the GDP of China? "Primarily computers and toys, games, and sporting goods." In other words, gizmos and iPhones. And no, China did not buy US bonds - recall that China has boycotted US Treasurys for precisely one year - so the age old equality that we export China worthless paper in exchange for just as worthless gizmos, yet somehow everyone benefits, is no longer valid. What the US does, however, export to China, is inflation, courtesy of the USDCNY peg, and is the reason why the PBOC is still terrified, and certainly will be after Bernanke announces QE4EVA (RIP QEternity) tomorrow, to ease more as the last thing it can afford is to create its own inflation in addition to importing America's.

 


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Tue, 12/11/2012 - 10:22 | Link to Comment zanza
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iPhones bitches!

Tue, 12/11/2012 - 14:46 | Link to Comment oak
Tue, 12/11/2012 - 10:22 | Link to Comment EscapeKey
EscapeKey's picture

I like how Ireland allegedly grew their treasury holdings by 50% in a year despite having their own financial calamities to deal with:

http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/...

Tue, 12/11/2012 - 15:59 | Link to Comment Bwahaha WAGFDSMB
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That table lists holdings of Irish citizens, not the Irish government.

Tue, 12/11/2012 - 10:23 | Link to Comment SheepDog-One
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'Toys, games, and sporting goods'...YAY!!

Tue, 12/11/2012 - 10:29 | Link to Comment Dr. Richard Head
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China is needed by the US for its circuses, EBT needed for bread.  Any questions?

Tue, 12/11/2012 - 10:24 | Link to Comment buzzsaw99
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as long as the walton clan is happy that's all that matters

Tue, 12/11/2012 - 10:25 | Link to Comment Kristian
Kristian's picture

I really love ZH's cynisicm, that is a reason alone to be a frequent reader of these articles, however, don't trade of it.

Tue, 12/11/2012 - 10:39 | Link to Comment EscapeKey
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"A cynic is what an idealist calls a realist."

Tue, 12/11/2012 - 10:28 | Link to Comment gmak
gmak's picture

This is good for those bullish on USD_denominated assets.  A bigger deficit means that China has more 'money' to lend back to the USA or to buy USD assets. IF the trade deficit is gorwing, then 'money supply' is growing - and asset prices get pushed up. If they're not buying T-notes, China is buying other USD_denom assets.

Tue, 12/11/2012 - 10:26 | Link to Comment Mike in GA
Mike in GA's picture

Man, the collapse when it comes is gonna be one for the history books.  I thought I knew how to prepare, sorta, but the deeper this gets the less I think I know. 

Tue, 12/11/2012 - 10:39 | Link to Comment SheepDog-One
SheepDog-One's picture

Yep, when this finally topples over its going to be a complete collapse. 'Prepare' best as possible for living in around 1850 conditions.

Tue, 12/11/2012 - 11:42 | Link to Comment Seer
Seer's picture

Wasn't it Glen Frey (Eagles fame) who sang a song with the lyric "The more I know, the less I understand"?

It's one of the reasons why I've grown to appreciate wisdom.

Life would be pretty boring if there weren't challenges...

Tue, 12/11/2012 - 10:29 | Link to Comment Azannoth
Azannoth's picture

China has the Antidote to the $USD hegemony, they simply confiscate all $$ at the border and exchange them for own currency to domestic exporters, than take those dollars and 're-issue' them abroad, genius!

Instead of letting the USA have the upside of the world reserve currency they are turning the game around the profiting from it them selves! And the USA gets stuck with the bill, genius again!

Nature abhores an imbalance, it will always find an 'opportunist' to take advantage of it.

Tue, 12/11/2012 - 10:32 | Link to Comment youngman
youngman's picture

Don´t forget they are now a Primary Dealer too.......wonder why???

Tue, 12/11/2012 - 10:56 | Link to Comment Mike in GA
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Yeah.  Didn't they stop buying about the same time primary dealer status was granted? 

You reckon they got one good look at the books and how they're cooked backstage and hightailed it straight over to the gold window?

Tue, 12/11/2012 - 18:14 | Link to Comment laomei
laomei's picture

Well, not entirely true.  There are USD accounts here, ditto with Euro, HKD, Aussie, etc.  But buying up the USD when it's converted means more RMB in the system and that means inflation.  The only real way to prevent it is to encourage overseas spending of funds which are not converted, and making outward conversion easier.  While at the same time, discouraging consumer spending on USD junk, while instead focusing on real assets.

Real assets being:

Companies/IP

Real estate

Resources

This is already going on, and it's by far the best card to be played.  Sending off rich Chinese to snap up properties and land abroad doesn't hurt China in the least bit.  It sucks RMB out of the system, while at the same time sends the rent-seekers elsewhere.  China doesn't get much revenue from income tax anyways.  If businesses are going to be opened, they will typically be opened in China, and there are even incentives for overseas Chinese to do just that, especially if they bring foreign IP into the deal.

 

This is where fed policy is retarded and they will not figure it out till it's a run-away chain reaction.  A "weak dollar" policy won't boost domestic jobs or manufacturing.  It's still cheaper overseas.  China's more or less ensuring that.  African development, development in SEA, is multi-purpose.  Firstly, it boosts relations to China in a big way.  Second, it opens up new markets to China.  Third, it increases local wages to detract them them being viable options to China while at the same time giving an increased ability to buy Chinese goods.  Fourth, the improved infrastructure puts into a place the capability for eventual shifting of manufacturing to those countries, however when it does happen, China still dominates the logistics chain.  The main problem with the "weak dollar" policy, is that the real impact will be a deep dive in living standards.  Weakening and inflation outpaces salary growth, but to fall to a point where it makes no sense to outsource anymore, it's a complete collapse.  By sending those dollars back home, this weakens the dollar at the same time as it boosts US inflation to a degree that demands increased wages.  Thus staving off the idea of onshoring further.  The only counter to that move is to ensure that the dollars never hit the real economy and remain locked up tight

The strong manufacturing and high pay of the 40s, 50s and 60s were the imbalance that is being corrected.  You can't have both at the same time in a global economy without slavery.  Pushing for infrastructure during the depression as a make-work program and failing to be smashed to pieces during WW2 is what allowed for it to happen.  The increase in wages hit a wall in the 70s and has been diving ever-since as the rest of the world recovered.  And the greatest punchline to the joke is that everyone has brand new infrastructure while the stuff in the US is falling apart to a point of requiring massive investment to even make manufacturing feasible again.   The regulations and red tape pretty much prevent it as well.  The costs are damning to a point where it's just not gonna happen.

 

The fed is playing it all backwards, but it won't figure it out till it's too late.  

 

Tue, 12/11/2012 - 10:27 | Link to Comment zorba THE GREEK
zorba THE GREEK's picture

In my observations, it seems we are also importing large

quantities of Chinese people.

 

Tue, 12/11/2012 - 12:19 | Link to Comment Azannoth
Azannoth's picture

I personally prefer hard-working Asians to pretty much any other immigrants.

Tue, 12/11/2012 - 10:29 | Link to Comment Dr. Richard Head
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Those damned communist currency manipulators!  The question is, which country am I referring to?

Tue, 12/11/2012 - 10:30 | Link to Comment francis_sawyer
francis_sawyer's picture

light the match...

Tue, 12/11/2012 - 10:30 | Link to Comment BrigstockBoy
BrigstockBoy's picture

QE4EVA, sounds like hospice for a dying economy...

Tue, 12/11/2012 - 10:31 | Link to Comment youngman
youngman's picture

You know those funny little cocktail umbrrellas are made in China.....I have always wondered what goes thru the ladies minds when they are painting them by hand.....they must think what a country the USA is to buy these stupid little cocktail umbrellas...

Tue, 12/11/2012 - 10:34 | Link to Comment Dr. Richard Head
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Those, as well as those damned trade show trinkets. 

Tue, 12/11/2012 - 10:36 | Link to Comment Clint Liquor
Clint Liquor's picture

Read this from the Asia Times for perspective:

http://www.atimes.com/atimes/Global_Economy/NK27Dj02.html

 

 

Tue, 12/11/2012 - 10:41 | Link to Comment BurningFuld
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Excellent read.  What cha gonna do when the world turns it's back on you.

Tue, 12/11/2012 - 11:03 | Link to Comment HoaX
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Loved the authors creds:

A volume of his essays on culture, religion and economics, It's Not the End of the World - It's Just the End of You, also appeared last fall.

 

Tue, 12/11/2012 - 12:03 | Link to Comment Seer
Seer's picture

Spengler has always kind of annoyed me.  I think that this article finally told me why...

I won't dispute the decline of the US, but those who think that Asia is anything but paper just doesn't understand the PHYSICAL realities.  Asia doesn't have the physical resources that TODAY'S economic world relies on.  Only through massive trade do they manage to be able to scrape together the flows to purchase raw materials.  Up until now this has been working.  BUT... it is MY contention that it's been working because of US policies that have promoted it this way.

I stressed "TODAY" because tomorrow WON'T be what today is...  Tomorrow will be about physical resources, less emphasis on techno stuff (iCrap).

The market for continued growth for Asia is where?  Asia built-up based on the loose credit policies of the US and Europe.  With these markets in decline I see no gap-fillers, let alone growth markets.

The US has managed to somewhat endure the massive job losses from industries that are less fundamental to the future.  What happens with Asia when they start facing massive job losses due to their markets bases continued credit contraction?

None of what I say here should be interpreted as a slam against the people of Asia.  It has to do with the Grand Chessboard, geostrategic resources.  Because I believe that contraction is the continuing trend I see a ramping up of protectionist policies.  IF this path becomes increasingly trodden what countries are the "best looking horses in the glue factory?"  Those countries that have a decent mix of physical resources will always be in the better position: Russia, Canada and the US are tops here; China is marginal, the problem is that I suspect that they have way over-shot their carrying capacity.

Tue, 12/11/2012 - 14:51 | Link to Comment MagicMoney
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Chinese economy will grow because of increased purchasing power. In my view, this is where "real" growth comes from. Savings, and increased purchasing power. When purchasing power increases, so does value of savings, thus enhancement of investments. China is a centrally planned economy, but they seem to understand how the basics of capitalism works. Well at least some parts of it. You increase supply by production, means more stuff to buy with money, means better purchasing power parity at home, but let's look internationally.. Chinese are now marketing their currency for internetional use. This why Japan grew so fast similarly. Japan boomed on savings, and production, and their purchasing power increased. China, or Asia I don't believe need the US as much as you think. US was just a useful idiot to work their way up on the ladder. Haha, no pun intended. Of course you can blame the Federal Reserve. As a Austrian subscriber you know I had to throw that in there. You can blame the politicians too don't forget. China should know how capitalism works, or know the fundamentals of it, because they have the freest economy in the world  setting in Hong Kong which has it's own currency traded internationally as well.

Tue, 12/11/2012 - 10:39 | Link to Comment swissaustrian
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Let's dump gold and silver on the news.

Tue, 12/11/2012 - 10:42 | Link to Comment SheepDog-One
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Exactly, thats why I have little belief these days that gold and silver will be much of any real benefit, although I do own some.

Tue, 12/11/2012 - 10:49 | Link to Comment swissaustrian
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Today's COMEX pm trading session is all about perception management for tomorrow (FOMC).

I wouldn't give too much thought on pm pricing today. Tomorrow is the big day.

Tue, 12/11/2012 - 10:37 | Link to Comment BurningFuld
BurningFuld's picture

AND>>>>  Gold smack down right on cue.

Tue, 12/11/2012 - 10:42 | Link to Comment holdbuysell
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That looks like a NANEX chart of the SPY on a milliseconds timescale.

Tue, 12/11/2012 - 10:48 | Link to Comment yogibear
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Our jobs czar, Jeff Imelt, says communism better. Another feather in Obama's hat on his move to socialism/communism

http://lonelyconservative.com/2012/12/jeffrey-immelt-thinks-chinas-state...

"General Electric CEO and chairman of President Obama’s jobs council Jeffrey Immelt told Charlie Rose that China’s state run communism works pretty well. I guess he would think so, seeing that GE has been expanding in China."

Nothing but praise after shifting US jobs to China.


 

Tue, 12/11/2012 - 10:51 | Link to Comment swissaustrian
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Who would have thought that slavery/forced labor (China) is good for capital and bad for labor.

Tue, 12/11/2012 - 11:08 | Link to Comment Mike in GA
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Comments like Immelt's are why corporations like GE are too big to exist. 

The Chinese gov't "works" because, after all, who can say no to the big, bad central gov't. 

It "works" because bribes (OK, quid pro quo) is how things get done there, too, not just in our CONgress.

America worked well too, before our gov't was repopulated by the best minds money can buy.

Tue, 12/11/2012 - 10:52 | Link to Comment johnnymustardseed
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Yes, but they are getting worthless dollars and we are getting cheap shit.

Tue, 12/11/2012 - 11:08 | Link to Comment Weyland_Yutani
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But Obama said the US of A is in good shape. Was he wrong?

Tue, 12/11/2012 - 12:44 | Link to Comment Seer
Seer's picture

Like he's going to say anything else (other than what his handlers want him to say)?

Wasn't it Bush who said that the economy was fine, just before the threat of economic meltdown was held as ransom for the start of the Great Bank Bailout?

Anyone thinking that the POTUS (or anyone else for that matter) has ANY real ability to perform magic (whether it's to fuck things up or to un-fuck things) just doesn't understand the Big Picture.

If their lips are moving they are lying.

Tue, 12/11/2012 - 11:09 | Link to Comment yogibear
yogibear's picture

The Chinese will soon be able to make harse demands from Obama and the rest of Washington, if they haven't already.

Like they would crater the US economy if their demands are not met. China will soon surpass the US. Taking the technologies and industries they can create a lot of pain for the US when it refuses to abide to their demands.

China knows the way to defeat the US is economically, not militarily. 

Just a bit more time. Many of the Chinese economist attended the top US universities and know the way the Federal Reserve operates (through joint discussions when China was evolving). It also has hacked into systems and knows the conversations between economist within the treasury and Federal Reserve.

 

 

 

 

Tue, 12/11/2012 - 12:14 | Link to Comment moonstears
moonstears's picture

Well Yogi, I read on the intewebs that that "pipeline" from Canada, that Mittens was gonna "push through" has alot of China interest, and MAYBE, since they have financial interests in the wells that feed it, they called PrezO, and that fell through. Could this be an example? Can't always believe what you read on the net, but "meh".

Tue, 12/11/2012 - 12:53 | Link to Comment Seer
Seer's picture

"China knows the way to defeat the US is economically, not militarily. "

Um, duh!  The Art of War: not like folks in the US don't know about this.

While China is pretty savvy, NEVER underestimate the US (The Art of War cautions about under-estimating the enemy).

The global economy is going to collapse.  Whether this occurs as the result of the US's economy crashing, or whether the US economy crashes as a result of the global collapse...

You cannot squeeze blood out of a turnip.  Paper will be burned.  Have physical?  China is a bit short here.

Tue, 12/11/2012 - 14:11 | Link to Comment MagicMoney
MagicMoney's picture

This is great news. Consumer spending is economics growth.

Tue, 12/11/2012 - 15:53 | Link to Comment Kiwi Pete
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So what's China doing with all it's dollars if it's not buying Treasuries any more?

Tue, 12/11/2012 - 18:33 | Link to Comment laomei
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Buying up companies, real estate, resources, developing Africa and other countries, being a good-faith trading partner to countries where they never had that experience prior, etc.  As the economy in China rises, certain sectors no longer make sense to have.  The key is to be able to hand them off to trading partners and grab the credit for it rather than allowing the west to do it first.

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