Guest Post: Global Economic Slowdown Signals Sad New Year

Tyler Durden's picture

Submitted by Brandon Smith of Alt-Market blog,

The markets, as most people reading this should now well know, no longer reflect in any way the true economic health of our country.  If one was to measure the financial “recovery” of this nation by the strength of global stocks alone, he would probably come to the conclusion that the collapse of 2008 was a mere hiccup in the overall success of the worldwide economic system.  However, electronically traded equities with little more to back their value than scraps of receipt paper and numbers on a screen have no bearing on what is going to happen to you, and to me, over the course of the coming year.  The stock market is a sideshow, a popcorn movie, a façade.  The real drama is going on behind the scenes and revealed in fundamentals that mainstream analysts no longer discuss...

The only advantage of a long drawn disintegration of the overall system is that as the years past, it becomes possible to discover a pattern through which we can gauge where we really stand today and will stand tomorrow, giving us a chance (a narrow chance) to limit the eventual damage.  Unfortunately, the pattern now in motion suggests that the next year will be exactly what we have been predicting over the past several months:  Dismal.

The MSM refuses to discuss it at great length, but all signs show an epic global slowdown in demand and production, especially in the final quarter of 2012.  This slowdown cannot be denied, nor can it be shrugged off as inconsequential.  This development is exactly as I predicted in January of this year using the Baltic Dry Index as a guide.  During that first quarter, the BDI fell to record lows, indicating an extreme decline in shipping demand around the world, which, in turn, indicated a fall in demand for raw goods, which, in turn, indicated a fall in demand for consumer goods.  Mainstream pundits sought to distract the public from this fact by claiming that the BDI was collapsing due to an “oversupply of ships”, not rescinding demand.  This disinformation was proven incorrect in the beginning of the third quarter of this year, when export nations from China, to Japan, to Germany all began reporting abysmal manufacturing numbers and steep faltering in overseas purchases. 

Of course, we all know what happened next:  The markets began to tank when they caught the scent of a slowdown, losing a thousand points within the span of a week.  Not so unpredictably (since I also predicted it at the beginning of the year) the Federal Reserve leapt into action with its announcement of QE3 (QE Infinity).

QE3 has done little to change the problem of falling global demand, but it has certainly defibrillated stocks.  In fact, I think it is safe to say that a majority of QE fiat funds are flowing (directly or indirectly) into the DOW, and not much else.  International trade and consumption is starting to feel the pain, and respective countries are no longer able to hide it.  Keep in mind that this slowdown is occurring right at the height of the Christmas season, when consumption is usually supposed to reignite.

Despite the sugar coated claims of insane Keynesians who only a few years ago were predicting a “resurgence” of American industry and exports due to the Federal Reserve’s ongoing devaluation of the dollar, production in the U.S. has remained pathetically weak, and continues to decline:

http://www.nytimes.com/2012/12/12/business/economy/decline-in-exports-hurts-us-trade-deficit.html

This is of course a direct result of slowing global demand, reducing potential markets all over the world, which is something deflation fear mongers apparently didn’t see coming.  The reality is that demand is faltering EVERYWHERE, not just in the U.S., and this begs a particular question:  In an interdependent economic system driven primarily by consumption, who is going to fill the void when all nations are dry of spending cash?  That is to say, who is going to take up the slack, when obviously no one has the wealth to do so?  Without a cultural cash engine, the globalized framework is destined to fail.   

China’s export growth fell far more than expected in November, something which many Chinese economists are attributing to a complete lack of revival in American markets:

http://www.reuters.com/article/2012/12/10/us-china-economy-idUSBRE8B80FL20121210

Manufacturing in the UK went into steep decline almost simultaneously, showing that sinking demand is striking both the Pacific and the Atlantic:

http://www.bloomberg.com/news/2012-12-07/u-k-manufacturing-drops-more-than-forecast-on-food-alcohol-1-.html

Germany, the largest economy in the EU and the only country still holding the absurd political entity together, has been shocked to discover that its own Bundesbank is forecasting a contraction in growth to near zero in 2013:

http://www.actionforex.com/analysis/daily-forex-fundamentals/germany%27s-bundesbank-revise-lower-2013-outlook-20121207180090/

Japan’s economy suffered an annualized decline in GDP in November greater than that which occurred during the Fukushima disaster:

http://www.bloomberg.com/news/2012-11-11/japan-s-economy-shrinks-at-fastest-pace-since-earthquake.html

This contraction has recently caused Japan to install a new revamped government during elections this month, which unfortunately will be instituting almost identical policies to the last regime.

Finally, Brazil, a developing export nation with very important significance as a litmus test for world consumption, posted near zero growth in the third quarter of 2012, far below expectations but in line with the bigger picture.  The global financial machine is grinding to a halt right under our very noses…

http://www.reuters.com/article/2012/11/30/us-brazil-economy-gdp-idUSBRE8AT0KM20121130

At the end of 2012, it is undeniable; the system is running out of steam, and not even constant fiat injections by central banks are reversing our current course. 

In order to understand what is happening, I want you to imagine a quickly diminishing cycle.  Imagine that in 2008, America was on the edge of a whirlpool, or a spinning vortex, and was suddenly caught in the outermost current.  Today, we have circled the epicenter several times, each rotation becoming smaller and more volatile than the last.  Eventually, the whirlpool will reach an end, and our economy will be sucked into the destructive funnel.  One can see clear evidence of this decline in the Baltic Dry Index:

Notice how each year since 2008 there is a spike in shipping rates indicating a rise in demand for materials at the onset of the Christmas season, which is the natural progression of things.  Yet, also notice that this spike in demand grows smaller with each passing year.  In 2012, the increase has been almost nonexistent, meaning that we are likely very close to going down the drain.

Some pundits may argue that November’s Black Friday sales were tremendous, and this signals a recovery in spending and consumption.  I would point out that such numbers are deceiving.  High sales during the most discounted day of the Christmas buying season is not necessarily a good thing.  What it really reveals is that a majority of shoppers were looking for the lowest prices possible because of a lack of personal savings.  It is a sign of desperation, not revitalization.  Full season numbers have not yet been released, but when they are, I believe we will see a fantastic spike in sales on Black Friday followed by a complete flatline for the rest of the year.  Obviously high consumption has not been sustained, otherwise, worldwide manufacturing and shipping would be in much better shape. 

The issue here is one of priorities.  With multiplying distractions going on around the globe, including the fear of recent mass murders at home, will the public be able to keep track of the deadly financial tidal waves just off the coast, or will they even care when distracted by so many sharks in the water?  The next two months will be very revealing.  The so-called “fiscal cliff” is on the way, and the question of whether or not the U.S. government should kick the can down the road or take the sour medicine it needs and move on has arisen once again.  This debate is and always has been an illusion.  Whether we continue to increase government spending, taxation, and inflation, or we cut all spending and shut down the fiat presses, there is still going to be a collapse.

However, the “fiscal cliff” could be very dangerous in an entirely different respect...

The coming collapse will not be due to the indecision or partisan bickering of our politicians.  They are in much closer agreement than the MSM would like to admit.  Instead, the monolithic Catch-22 of our age will be the direct result of the actions of the private Federal Reserve and the peripheral international banking cartel; the engineers who gave birth to the toxic derivatives implosion in the first place.  What I fear most is that the results of the fiscal cliff negotiation along with other triggers around the planet (Syria, Iran, the EU breakdown, etc.) will be used to veil the true weaknesses of our already imploding system, and eventually be exploited as scapegoat events for a disaster that has been in the making for decades, not just a few years.  The omens are not good for 2013, and we can only circle the drain for so long...

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mrktwtch2's picture

911..hello this is patel in india how may i be of service..lol

Silver Bug's picture

The paper markets are so manipulated it is sad. The only true thing left is the tangible physical markets, ie gold and silver. Keep stacking.

 

http://schiffblog.blogspot.ca/

overbet's picture

Is there anyway to buy physical without paying those ridiculas dealer spreads like at Kitco? Even on craigslist in my area people are only selling with the same dealer spreads. 

CPL's picture

Yeah, you cost average down by buying by the pound.  

overbet's picture

sheesh looking for more of an answer like this:

 

http://www.youtube.com/watch?v=g7Fe9RsP7t8

OutLookingIn's picture

Going...

Going...

Going...

GONE!

TwoShortPlanks's picture

"Some pundits may argue that November’s Black Friday sales were tremendous, and this signals a recovery in spending and consumption"

I have a theory (Hypothesis actually) on this. What I believe is happening is that people are putting off buying things (Cookware, clothes, bicycles etc) until the Pre & Post Xmas Sales come into effect. All year it's been really bad for retail, even though there have been and endless stream of sales on throughout the year, and now, in the Pre Xmas Sale period, Boom!

People are waiting for periods of maximum sales discount periods.

I went into a store yesterday. A 50% off sale. It was orderly mayhem. I was the only person who paid cash in the entire line-up (not used my CC for over 3 years now).

I think we are seeing volatility in buying habits; buy when you need is being replaced with hold off till sales....on even the basics.

Boris Alatovkrap's picture

"the collapse of 2008 was a mere hiccup in the overall success of the worldwide economic system."

Boris is also have theory on this. In 2009, Boris is so drinking, cannot taste difference of Vodka or Ethylene Glycol (* but when is give to urine, can see difference). After 13 year is sober, is but mere hiccup in overall success of two step program.

Of course, Boris is now give way to frequent inebriation since 2009, but is still more sober than Boss Bernanke.


Boris Alatovkrap's picture

* Many is familiar with 13 Step program, but Boris is find Two-Step program instead for much quicker. One day, on way to church for meeting, Boris is see sign for Two-Step, so sign up for new program. Much less talk about guilt, much more action.

Maybe is not cure for alcoholics, but is new skill in Polka and Swing!

BKbroiler's picture

Miles Franklin is good, when you consider shipping and everything together, it's the best of the official mint dealers I've worked with.  No, I don't work there or care if you buy from them.

overbet's picture

Thanks I will look. Drives me nuts to buy something I need to increase 5% to be even. 

dmger14's picture

I can vouch for MeritFinancial and Bulliondirect.  MF has the lowest prices I've seen but you have to overnight a check.

CPL's picture

Shit sorry Patel...

<dial back>

Option 2 for French.

<three seconds later>

Salut, M'appelle George Martin...

Salut...sorry bud I need a ticket started on a ProdID X.

Bien oui...yuppers...done.  This line is only for French btw.

Yeah, but you are in Toronto.

LOL

LOL

 

true story...skip the bullshit and press 2 for French and talk to Toronto.  Metrics on solutions are better as well if counting from a client end btw.

ball-and-chain's picture

Last night, I asked my poor old Scottish mother if there's any hope.

She said no.

Sadly, I believe her.

All the best.

Merry Christmas.

http://www.angrysinner.blogspot.kr/2012/12/yesterday-dragon-lady-served-beef-and.html

nope-1004's picture

The stockmarket is a sideshow.  But, if everyone leaves and all that remain are government run HFT's, then they rule all price discovery mechanisms, which is the objective IMO to keep an accurate assessment of the true value of fiat under the rug.

COMEX is a great example of this.... with no one wanting to get into the futures game, they control price.  By comparison, fiat doesn't look too bad (if you only look back to 2006 or so).  Now JPM is getting a copper ETF too.... gee, wonder why? 

Boris Alatovkrap's picture

But Boris is love sideshow, specially clown and bear. In Russian Circus, bear is not only can dance and answer simplified mathematical question, but is can fill out entire tax form without software. Boris is learn Clown is just distraction while gypsy vendor is pick pockets, but is still make laugh by clown tricks!

When Circus is leave town, only peanut shells and animal dung.

Michaelwiseguy's picture

You can't have job growth in America because of all the globalist new world order trade treaties, NAFTA, CAFTA, GATT/WTO, etc. Wage arbitrage using slave wage countries against American workers prevents job creation in the USA. The Federal Reserve Corporation knows its sick twisted game is just about over.

marathonman's picture

I thought it was just a feature of the over-valued dollar because of its world reserve status.  Just think of the job creation when the dollar is no longer world reserve currency.  Our labor rates are going to get a lot more competitive.

HappyCamper's picture

@Michael

It's a global economy now. Do we just build a wall and say to the world to "keep your crap out of here" so that demanding union workers get paid top dollar?

The first car I owned in the 70s was a Ford Mustang, union built, and it cost me a fortune, then it literally fell apart.  But the people who built that clunker got paid very well.  Thank god the Orientals came into the market and forced the unions to start taking quality and affordability seriousy!

My career is in tech, so I have to directly compete with people from China, India, Russia, and the entire world. So does my wife.   Why can’t you?  Why should we be forced to pay $50,000 for a crappy American car that just falls apart after 2 or 3 years?  Thank god we don't.  Why should Americans pay 2 or 3 times as much for consumer items just to keep union wages and benefits ridiculously high?  If you union guys had your way, that's exactly the way it would be.

We need to stand on our own two feet and compete in the free market like men (or women) and quit crying about how unfair it is that we live in a worldwide economy. It's not the 19th century anymore and most of us are very glad we don't have to pay extremely high amounts for poor quality crap.

blunderdog's picture

Why should 'Merkin executives be paid better than Bangladeshi ones?

in4mayshun's picture

1st of all Happy, Honda's, Nissan's, and Toyota's were made in Japan in the 70's and 80's and were built by workers making a fair wage- not by 12 year olds making slave wages. Secondly, no one is saying that we shouldn't conduct trade with other countries, just that it is nearly impossible to compete with slave labor and virtually zero environmental laws.

Michaelwiseguy's picture

Computer aided design and manufacturing fixed the quality issue in America.

The wage arbitrage problem will be fixed when the US defaults on the national debt and the rest of the planet cuts us deadbeats off from trade with them. I welcome that day.

algol_dog's picture

A house of cards ...

http://finance.yahoo.com/news/slight-uptick-mortgage-rates-spooks-165206512.html

 

 

This is how robust the housing come back is ....?

Jason T's picture

Dont forget Singapore, GDP declined 5.6% in Q3 

tenpanhandle's picture

me thinks the guy needs to fix his toilet.

Vashta Nerada's picture

I'm waiting for lead to show up on the PM short list

tuttisaluti's picture

Not good for the PM's either

tuttisaluti's picture

Not good for the PM's either

Frank N. Beans's picture

good general discussion, but the economic slowdown does not mean that the US stock market will tumble any time soon what with all the QE refilling the toilet bowl after each flush.

new game's picture

Captin!, SIR, our radar indicates a huge object underwater and WE ARE HEADED STRAIGHT toward it.

mate, don't you worry this ship was designed to go through anything- worry not mate...

ha fucking ha.

fonzannoon's picture

the market is coming back while this dumb bitch pelosi speaks. amazing.

new game's picture

pelosi; wow, when i read that name i got a sick feeling...

excuse me but that is as vial as it gets; well maybe second to the f-steiner of ca too...

ShrNfr's picture

Pelosi in a vial, now that is vile.

new game's picture

tanks for the correction.

insanelysane's picture

Retail is booming so much they are trying to figure out how to open on Christmas Day to unload all of the crap they haven't sold.  The new Black Friday will be Christmas night.

new game's picture

trust my judgement, they are all donkey dick fuck sticks,...

fonzannoon's picture

i'm home sick watching cnbs. they are so pissed the market is not tanking. they just keep telling each other how bad the market is as it sits there, barely selling off. after 3 mins i put on espn, their ratings must suck so bad.

kito's picture

Fons go buy quantum cold and flu. It's a liquid herbal extract that will knock your illness away in 24 hours. Take 90 drops a day.......and stop watching that crap on tv......bad for your health.....

SmoothCoolSmoke's picture

I've never known CNBC to root for stocks to go down.  Bob Psi-on-mee....Cramer.....stocks down?   Never.

new game's picture

alrighty now, i've made enuf stupid comments for one day.

my real thoughts are;

most indicators indicate more printing ahead.

pm's on discount and/or crossing over to severly oversold(manipulated).

supported by simple metric of 85b/month unsterilized money creation.

think clearly and pm cost average monthly (too)...

youngman's picture

Look at Japan today...going to print trillions..and they are up over 2%....flooding the market works...at least for today

cardis's picture

N bomb. thousand years sterilization. ameba, paramecium.

kevinearick's picture

the empire bet is that the status quo will crash out, but the new must be distributed through the old control structure. bad bet, but what else can the pensioners do?

rosethorn's picture

If housing starts are trending up, then a FRB tightening cycle is on the horizon; since housing starts are a leading indicator.  When will the Fed tighten?

Perversely, house prices would have to drop to keep the monthly payment for purchasers the same in a tightening cycle.

centerline's picture

But would kill the refi's at the same time.  Catch-22 - at least until administration finally launches some sort of no questions asked, refi for some crazy low percentage regardless of equity.

JosephConrad's picture

The FED is a sham and a scam. It and foreign investors have been holding the stock market up to prevent the world from seeing the US emperor has NO CLOTHS! Th Banks are holding millions in illegal foeclosures off the market to keep prices from tanking and from having to explain - in myriad cases - where all the @#$% paperwork for the homes they're keping in hiding!

Hey, none of the big bank CEO thugs wants to see rates rise, be found out as a thief & a liar ready to go to San Quentin for Tax Evasion - at the very least. The housing market in the nation should be in the toilet but like Liars' poker, no one is willing to tell the truth and do BIG TIME!