Saxobank Warns China Is Exporting Deflation (And It's Not Going To Stop Anytime Soon)

Tyler Durden's picture

With global growth expectations for 2014 having just collapsed to new lows...



...and on the heels of mixed inflation data last night in China (and stubbornly low-flation in Europe), Saxobank's Steen Jakobsen explains in this brief clip how, thanks to massive over-building and now over-capacity, China is in fact exporting its deflation to the rest of the world - most problematically Europe.


What is more worrying for all the optimists, Jakobsen argues that both the Eurozone and China are at the centre of a slowing world economy which will see stagnation for the immediate future and ECB action, or lack of it, can't do a thing to change the status quo.

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tmosley's picture

Why doesn't he just say that they are importing inflation?

Oh, because he's an idiot. Carry on.

SAT 800's picture

Probably because importing inflation, which they've been doing for twenty years has no relation to exporting deflationary pressure on foreign trading partners; which is a new thing; and hence newsworthy. Why did you type this note/ just to prove that you're clueless?

CrashisOptimistic's picture

And that is that.

Exported deflation restricts growth.  Low growth puts downward pressure on US T yields.

Manthong's picture

Pretty soon I expect Harbor Freight will be paying people to take their stuff away.

LawsofPhysics's picture

Growth in what?  Plastic shit from China that we don't need?  Financial "products" of mass destruction?  Fuck em both.

There is no such thing as "deflation" for most people.  Don't believe me?  Name one society/currency that collapsed/died because their purchasing power was too strong.

blunderdog's picture

Monetary deflation's rough on the banking system, and as you should well-know, that's the only thing that matters today.

Maybe if we just synchronize the USA's inflation exports with China's deflation exports, everything should be just fine.

SafelyGraze's picture

it is all about the nouveau de-quantity theory of money:

the more of it you print, the more you deflate prices

because the increased supply of currency makes it more valuable relative to goods and services that are decreasing in quantity

which happens to be part of the nouveau de-supply and de-demand theory of de-pricing


knukles's picture

Just what I needed, a KrugHug
I was just reading a great escapist novel (just wanted a good story) at around 0200 dark windy hours about alien abductions and turned a page and in the book and there, someone had left an old, and I mean old, black and white print, all washed out, dog eared, etc, of a little girl in a high chair with a very disturbing look on her face.
I'm not sure what is creepier.... that photo or an imaginary KrugHug

Yen Cross's picture

 "Krug Hug". You should patent that knuks.

SafelyGraze's picture

that disturbed little girl in the photo ..

you know who she is


Yen Cross's picture

 OHH GawDD. Barf. You tricked me!

willwork4food's picture

Quick, go outside and thow up everything in your stomach..purge yourself. Everything will be OK.

knukles's picture

Safely, that is just plain fucking wrong.  I mean it ranks right up there with shit like waterboarding.
Next Muzzie terr they wanna make talk, should rub her minge with bacon and make him....

The Lord is gonna strike you down, bro.

shovelhead's picture

I'd hide, knuks.

That shit is right out of Steven King. You're gonna start seeing that little kid every where you go.

You're gonna start wishing for an alien anal probe instead of creepy kid.

Wahooo's picture

That girl is going to walk right out of that picture and be standing at the foot of your bed when you wake up. You'd better have some chocolate chip cookies and milk handy.

tmosley's picture

Wow, you sure do know a lot.  I bet you have a PhD in Economics from Harvard AND Princeton.  Probably a Nobel prize, too.

China has been selling cheap goods for paper of dubious value forever.  This is absolutely no different than the situation a year ago.  The collapsing competitiveness of the West has nothing to do with China.  It is caused by their own policy.  China just does what it has always done, provide cheap goods in return for debt (ie power over debtor nations).  

malek's picture

Do you really believe that bullshit distinction?

And then as the cherry on top suggesting that the others are clueless.

lordbyroniv's picture

6 years later...and STILL the same fucking inflation / deflation debate.


Kill self.



SAT 800's picture

As I've said before; Saxobank has good credibility. It has a world class on-line trading platform where you can do currency crosses or silver or gold, paper only, for trading; but it 's also an old successful Bank headquartered in Denmark that's extremely unlikely to make any silly moves. Sometimes their analysis is even right; a lot compared to UBS, for instance.

navy62802's picture

Oh you mean like the US has been doing for the past 5 or 6 years?

Make_Mine_A_Double's picture

If the Chicoms are exporting deflation and we're exporting inflation they should meet somewhere around Hawaii and cancel each other out.

Deflation? Really? Anywhere? Been to Euroland lately. It is fuck all expensive - worse than here. Asia? I just got back a few weeks ago - ain't no deflation there.

USSA? Shit, I'd say real annual inflation on a real basket of goods (not the 'typical' CPI basket of hammers, dildos and sofas) is somewhere in the ball park of 7-10% annually.

We will have a 'come to Jesus' moment this year. There is no way the middle class can hold the line against these increases.


Milton Waddams's picture

I use the vending machine in our little watercooler room as a measure of inflation - across the board $0.10 to $0.25 increases in garbage, gut-wrenching "snacks." That's a 10% to 25% increase. The average COLA adjustment, er "bonus," was just shy of 2%.

RaceToTheBottom's picture

I bet you size of the "snacks" are getting smaller, too.

knukles's picture

Try groceries in CA.  We have been hit hard within the last 2 or so months.... All of a sudden prices skyrocketed...
You all had been talking about this for a long time, but for some reason, the Big Increases had not yet shown up here.
I know.
I do the grocery shopping in my family.
Otherwise there's no stuff like HagenDas, potato chips or beef... just all sorts of green shit that's no more useful to mankind than garnish.

FredFlintstone's picture

With a name like Knuckles I assume you are a tuff guy, but when I hear grown men use the word groceries it makes me cringe. I take pride in taking 10 minutes to find 1 item at the store. In my world men don't shop for groceries or bitch about the price of food.

Sorry, but otherwise you are a cool guy.


RaceToTheBottom's picture

Grub sounds so much more macho....

shovelhead's picture

Pretty harsh judgement there, boyo...

He pushed a fat kid out of his way last week.

That's gotta count for something.

FredFlintstone's picture

Its all in good fun. I am a caveman. Wilma does all of the shopping. I don't know the price of anything at the grocer.

willwork4food's picture

Lol caveman. You ever been hungry in your life? Ever been wondering if you'll survive without begging for help? Obviously not. I FUCKING LOVE going to the grocery store and shopping goods for my family with real money that I've earned. It's a blessing, not a curse dude.

And my dick is bigger than yours.

FredFlintstone's picture

I do have a small dick and I get hungry every hour or so. I can beg. A real man doesn't have time to waste doing women's work. :)

willwork4food's picture

Thx for that. Guess it's all in life's experiences each one of us is handed.  I remember vivedly, going with my roommate (sharing a working van down at the beach) to the local plasma center in downtown San Diego back in the early 80s donated my plasma and getting a free cup of chicken soup & $8. We got an extra $5 every 3rd time..or was it the 5th?. It took and hour or so. A little time after we had enough money to actually go to the local grocery store and buy real food, a little beer and it was heaven. I have never forget that moment in time and I hope I never will forget the gratitude I gave God for that.

FredFlintstone's picture

Good story. I am too much of a wuss to even donate blood. You are more a man than I.

Miffed Microbiologist's picture

God I know what you mean Fred. When the guys and I ( the lone woman in the group) slaughter chickens, they chop their heads off, rip out the guts and hand them to me to pluck. I'm always eventually alone with a big pile of birds and they're off drinking beer slapping each other on the back. They won't even toss me a cold one. I guess they think that wouldn't be becoming to a lady.


FredFlintstone's picture

Leading the world in Men Pushing Shopping Carts?

MeelionDollerBogus's picture

Ya, well in the real world we can't all have enough land to be farmers & in the real world farmers won't have anything to sell if we were, so this grocery-store setup actually means we can do non-farm work yet still get farm food and farmers can use economies of scale, safely, to produce excess food at a lower cost making better use of their land. Everyone's better off this way or we'd all be farmers.
That means very few people to be doctors because a lot of medicinal advances require labs & labs require a lot of other kinds of workers, and in this day and age that includes robotics, computers, a lot of assistants, a lot of manufacturing.
We are all better off just looking at food cost in real energy+time terms as well as related advances which includes transport, containers, medicine.

By all means I hope you are happy doing it all on your own and by all means I want the skills & the means but I would never suggest the world's a better place, that men should all be "real" men who do not, will not or can not use a grocery store, because the total global implication is actually not a good one.

sessinpo's picture

With all the money that has been massive printed, you should have 1000% increases.

greygoo's picture

"Shrinkflation" is the term I believe.

MeelionDollerBogus's picture

honestly I'll suggest that's a poor measure. The price of the delivery & maintaining the machines is all factored into base cost and then a huge markup is applied, bigger than stores, for the small amounts doled out per coin. It's the laziness factor being priced in. If you buy the same snacks at a bulk-barn store you can get tons more & bring your own.

navy62802's picture

The truth is that the US is exporting deflation. If the Fed had not stepped in with incredibly inflationary measures during the 2007/2008 crisis, the US would have experienced crippling deflation.

On their face, the measures that the Fed took to prop up the economy are blatantly and massively inflationary. The takeaway is that without such massively inflationary measures, we would have surely seen deflation on a magnitude equivalent to the magnitude of the inflationary measures taken by the Fed. It's kind of like 1 + (-1) = 0.

And to be sure, I do not agree with the Fed's actions. However, I'm just pointing out the way that I see it. I personally would rather have seen a crippling correction and then a healthy recovery rather than a false one on the back of Fed policy. I further believe that the Fed's actions are simply a delay and that we will eventually face the brunt of the 07/08 crisis at some point in the future. Only the effect will be magnified with time.

Bazza McKenzie's picture

What is this "crippling" deflation of which you speak?  You have bought the Fed Kool-aid.

Economies don't contract because prices are falling, though sometimes prices fall when economies are contracting.  They also fall when productivity is increasing and the supply of money is stable.

The Fed did not "prop up the economy".  It caused the transfer of wealth from savers to big banks and other borrowers.  That theft is invalidly counted in government GDP calculations as a positive contribution to GDP.

A "correction" would have been crippling only to big borrowers (banksters, government, overleveraged investors) not to the rest of the community.  Instead all of those who should have paid a price for their bad behaviour were bailed out by the Fed and the US government at the expense of everyone else.  Just rampant corruption and theft.

Tom_333's picture´s the increasing taxation that is making everything more expensive. Taxes to garner funds to fight the deflation. So now we have deflation and rising taxes. And so have you. U.S. taxe rates are going to be the new moonshot.

Yen Cross's picture

 China exporting inflation?  That's a laugh!

  Why then is PBoC locking down REPO facilities?

  China plans for North Korean regime collapse leaked - Telegraph

I Write Code's picture

Lower prices for goods does not comprise deflation, especially when they stole the jobs from the US to make the stuff in the first place - there's no money left to buy the goods, so they HAVE to decrease prices.

Somebody wake up Ricardo and have him update that old screed.

Robinhood's picture

I happen to take this as great news! Contrary to public opinion China makes some very fine products, that work and are helping me make a living. If they are deflating? I'm backing up the truck or docking the ship. They work, they work every day and they afford me the opportunity. As a small business I have delt directly with big co's in China and I'm treated with way more respect than by US co's, this is a real problem.

Another problem is that the preception of China and its products is based on the whore importers called Walmart, Homedepot et al who pressure the Chinese manufacturers to produce to their price point. If you want shit they will produce it for you, it's shouldn't be their problem if they deliver what Walmart, HD, et al purchase.

The one thing I can say with repect to the Germans is that they price things so high that only they can afford to buy them. Thank you China!!!!

ParkAveFlasher's picture

I think you just drew a line between deflation and substitution.  Substitution shouldn't be deflationary because you would need to consume more cheap product for the same general effect, thus multiplying the transaction activity which is naturally inflationary.  Even though the price is lower, you require more frequent replacement-type usage to net the same qualitative effect.  There is unit volume offset to the lower price.  A new problem then becomes consumers growing wary of consuming. Once you play price games with goods and services, and I do this for a living, you open a Pandora's box of effects, mostly harmful to a marketplace.

MeelionDollerBogus's picture

I'll choose the high quality, high value product every time. I understand if China will produce them. If low quality products are sold by specification of the big-box stores I will avoid the product & the store each time. I have no use for a shit product that dies on the spot. I got an MP3 player for only $40 from Target. It doesn't work. Problem: audio jack is too small to fit the plug and doesn't fit tightly so it's scratchy. If you jam it in too far you get no sound, otherwise it's hanging half way out and will easily get moved or fall out. Worthless to me.

That was my first purchase at target. If they're lucky I'll get something there that's not electronics but I can already see it's not looking good.

rtalcott's picture

Simple solution is a war to destroy all the excess capacity...yeah...there will be some additional damage/consequences but's for the children.

intric8's picture

Good! We could use some deflation.

RaceToTheBottom's picture

Imagine the deflation if the chinese products didn't break as soon as you opened them.....?