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:

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:

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

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:

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

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…

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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JosephConrad's picture

This is for several reasons. Not a single lying, thieving and cheating Big Wall Street Bank CEO has gone to jail for ANY OF MYRIAD felonies they've committed.

The 12- PRIVATE BANKS of the COLLUSIONARY FED are holding down interest rates rather than BLOW UP the UNREGULATED Derivatives and Mortgage markets.

Taxpayers are still on the hook for every bit of felonious financial depravity Wall Street bankers have committed. 

Finally, numerous KEY UNINDICTED WAL STREET BANKER FELONS are within the Beltway running this nation into the ground - to their benefit!   

ejmoosa's picture

If we are going to have inflation due to monetary policy, it may as well show up in the rising stock prices before it starts to show elsewhere.


Shouldn't it take more of those worthless dollars to buy stocks as well as everything else?

Joe moneybags's picture

Exactly correct, EJ.  The current stock and PM bull markets are indications of what you speak.  And, housing is rebounding (30% yoy) here in Kalifornia.  Inflation is slowly building.

Never One Roach's picture

Everything is fine says MSM...go back and continue eating your double cheeseburger and super-sized fries while watching Dancing with the Idols.

Floodmaster's picture

Nobody seems to understand the velocity of money

Angus McHugepenis's picture

The McHugpenis Dick-tionary defines the velocity of money thusly:

The rate at which your hard earned money exits your wallet by Vegas casinos, governements at all levels, and the local constabulary.

Christ, it's almost time to start having boating accidents with FRNs and other worthless paper!

notadouche's picture

The only concern economically speaking from the MSM and this administration is a "fair tax structure" as if that is the panacea for the US.  They reference the Clinton era tax structure and economy as if it were indeed the utopia that we should all wish to return to.  Now what bothers me is that not a single pundit brings intellectual honesty to the discussion.  You know the part where the Clinton economy and "budget surplus" was a funciton of the creation of millions of temp jobs filled by fraudulent dot com corporations that didn't have a shelf life past the spring of 2000.  That "surplus" was a fictional paper surplus that was based on projections resulting from fictional stock profits that never materialized for 99.8% of the people due to the pump and dump of Wall Street and Silicone Valley robber barrons.  When reality hit most were left holding worthless statements from companies that no longer existed.  

Funny when asked most didn't sell because they didn't want to pay the tax bill on those massive profits.  Many paper millionaires disappeared overnight as if abducted by aliens.  Mission accomplished though they weren't really all that happy about avoiding that tax bill as you thought they would be.  

Personally I was lucky because my wife forced me to buy our first house in 1999 in which we were in a bidding war seemingly everyday and I thought OMG I'm buying at the absolute top.  Turned out in Fairfield county at the time it was the new bottom.  If not for her constant nagging I'd be one of those that lost everything with nothing to show for it.  

Back to the point.  This notion that if we just return our tax structure to the Clinton years that it will magically be an impetus for a growing economy is totally farcical yet it's what the majority apparently believe.   Well there was one particular group that benefitted immensly from those Clinton dot com Y2K years, the Wall Street litigation group.  For a decade I think I got a letter a week from class action attorney's suing defunct companies for stock/accounting fraud.    

One last thing, anyone know what happened to all that money the Clinton government extracted from all those tobacco firms?  I'm sure it helped the budget on paper but what happened to the real dollars? 

alfbell's picture

Collapse in slow motion. Circling the bowl in slow motion. Will go on for a very long time. Look how Japan has managed to extend. The EU is doing the same thing. China will also. So will the USA.

Foolish to put all or majority of your capital into gold. The government will confiscate it just like in 1933. $10,000 fine and up to 10 years in jail if caught with gold.

Water, food, shelter, farm land, clothes, tools... that is where it is at.

notadouche's picture

I always thought it was foolish to put all or the majority of your capital into any single asset class.  Why point out gold as if it were somehow different or "barbarous".   If the government chooses to confiscate gold (personal property) what makes you think they stop there?  What makes you believe they won't confiscate food, shelter, farmland, tools etc...

Angus McHugepenis's picture

There are many articles online about how local cops in various parts of the USofAID confiscate FRNs from people who are carrying too many of them when they are discovered during a roadside pullover.

Somebody here posted a few days ago an article about a guy who was awarded $50k from a car accident. He got pulled over sometime later and had $17k cash on him. They took it, he fought it in court, and still lost despite being able to prove the money didn't come from drug dealing. Apparently the reason he didn't get it back was because he "could have" used the money for drugs. WTF????

The local cops get a cut from any money or property the "find". It helps them fund their local needs and keep them employed... to continue the pillaging and raping (gotta put gas in the cruiser and pick up a gallon of milk for Jr cop on the way home).

Nothing is safe from being taken from you at the point of a gun. It matters not if they wear a badge or black ski mask.

Fishhawk's picture

Merrit Financial has gold eagles at $70 over spot, silver eagles at $2.53 over spot, and silver rounds at $1.80 over spot.

Meanwhile, Tulving has gold eagles at $66, silver eagles at $2.49, and Amark silver rounds at 59 cents.  Tulving has minimum orders of 20 ounces of gold and 500 ounces of silver.  Shipping is free on all orders.  Wire transfer of funds or overnight preferred.  Tulving is the best supplier in the metals market ($400 mm in sales last year; more this year).  Tell Hans I said hi... 


alfbell's picture

You are a douche.

rsnoble's picture

Side show? More like freak show.

Element's picture



Consumer Metrics - shows similar for US online consumption trends as well:

It's christmas ... and the spend-a-thon ain't happening in these graphs.


Monthly Absolute Demand Index 

Current Weighted Composite & Sector Index Values 

Daily Absolute Demand Index


CoolBeans's picture

Who knew those Mayans were referring to financials.

Damn Mayans.  Wait a sec...maybe its death to banksters and the like.

Radical Marijuana's picture

While most mainstream statistics were distorted bullshit, and most mainstream predictions were therefore bullshit, the overall economic realities were going from bad to worse! Here are some of my reasons for WHY:

The history of the USA has been the history of the best organized gangs of criminals covertly taking control of the government, and then driving the country into the ground. In human ecology terms, the top carnivores that were the triumphant predators gradually decayed into being worse and worse parasites. Thus, the history of America was that of predators taking over more and more, and then, slowly turning into worse and worse parasites. The original greatness of the American predators enabled them to become the dominant global predators. However, as those dominant global predators degenerated into parasites, then their entire global system degenerated into being controlled by parasites. The difference between the predators and the parasites is how their functions become packaged, and how that then effects their prey population. Predators tend to strengthen the overall health of the prey population. Parasites tend to degrade the overall health of their preyed upon host population. The overall history of America has been the development of the best organized gangs of criminals controlling the country. The beginning phases saw the cleanest fights between different predator populations, resulting in benefits for the prey population. That devolved into dirty and dirtier fighting between predators, which thereby devolved into parasites, with resulting bad effects upon the prey population, that went from being productive prey, to being debilitated hosts for parasites.

The global economy is suffering from its debt slavery devolving into debt insanity. That matches the devolution of the predators turning into parasites. The global economy is now so overburdened with debt insanity that it can no longer function. The systems that the predators originally made and maintained have devolved, due to too much of their own "success." At the same time the language used to talk about "economics" became more and more deceitful, so that the activities of the predators were explained as if they were doing the same things as the productions of the prey. Furthermore, that deceitful language was then extrapolated to become that the descriptions of what the financial system parasites were more and more doing were still using the same language that their parasitism was productive.

We have reached the point where that bullshit language has become so inconsistent with reality that the basic ways we talk about these things are as nuts as their numbers. In the old days, the "robber barons" deserved their nick name. However, the financialization of their systems has rendered them into more and more overburdening parasites. A standing system can take up to almost half of the total population being productive prey, while the other half are predator/parasites. Indeed, most systems will eventually arrive at some dynamic equilibria like that. However, we are now witnessing the runaway triumph of the parasites overwhelming the hosts, with potentially catastrophic consequences. Unfortunately, all of the triumphantly deceitful language of "economics," and its corresponding numbers which are nuts, do not allow that system to understand and fix its problems. Financialization of the economy more became the dominance of fundamentally fraudulent financial accounting systems, whereby the predators became more parasitical.

The global systems have evolved under the influence of predators, until they started to devolve under the influences of those predators devolving into parasites. THEORETICALLY, we should go through a radical transformation regarding how the predator functions manifest their murder systems and death controls. Unfortunately, for the foreseeable future, (without a series of political miracles) what is most probably going to actually happen is the runaway trajectory towards tragedy, as the parasitical systems get astronomically amplified to become genocidal global wars, along with democidal martial law.  There are NO good solutions within the established frames of reference. THEORETICALLY, we should have radically different ideas about human ecology and political economy, which are fundamentally consistent with energy laws and general systems theory. HOWEVER, doing that then directly leads to the realizations of those things which I outlined in the previous paragraphs. That is, instead of human society evolving up towards better human ecology, along with better industrial ecology, consistent with natural ecologies, we are most probably going to go on down the path of least resistance towards worse conditions for all of those things. Instead of the predators resolving prey into the quick from the dead, the parasites make their hosts chronically sick.

This article is about how the global economic system, with the US dollar as still the global reserve currency within that system, is becoming chronically sick, as it passes through one acute crisis, into another, without any genuine recovery. The basic mainstream economics has become such triumphant bullshit, that it is a main manifestation of the degree to which the whole system is delusionally distorted, by the ability of the dominant parasites to continue to assert that they are being productive, and therefore, things will get better. The ONLY good solutions would require a series of political miracles sufficient to operate a better murder system, with its radically different systems of death controls, as the keystone of a system of alternatives, or as the lynch pin holding those alternatives together in a system. However, apparently, we are going to have to go through a lot more insane devolution of the established death and debt controls into worse and worse parasitical and host destroying events, before those established systems might finally become a new ground for the emergence of new systems.