Global Drag Threatens Worst U.S. Export Performance In Over 60 Years

Tyler Durden's picture

Submitted by F.F.Wiley of Cyniconomics blog,

Ever since an über-strong U.S. dollar crushed the export sector in the mid-1980s, the U.S. economy hasn’t looked quite the same.

Exports picked up towards the end of the decade, helped along by the G-7’s historic 1985 powwow at New York’s Plaza Hotel, which led to a coordinated effort to slam back the dollar. Nonetheless, some export industries never fully recovered.

Fast forward to the present, and export performance may soon be as noteworthy as it was 30 years ago. Risks to the global economy (and exports) include turmoil in oil-producing nations, credit markets that are teetering in China and comatose in Europe, and the backside of Japan’s April sales tax hike.

Worse still, export growth already lags behind every one of the past ten expansions, even the 1980s, thanks to a drop in the first quarter:


The chart shows that exports are no longer distinct from other parts of the economy (nearly all of them) that haven’t measured up to a “normal,” credit-infused, post-World War 2 business cycle.

Together with emerging global risks, it begs the question of whether sagging exports can drag the U.S. into recession.

We think it’s too early to make that call, especially while domestic lending continues to grow, credit standards remain relaxed, and most delinquency rates are falling. (For our research on links between lending and the business cycle, see “3 Underappreciated Indicators to Guide You through a Debt-Saturated Economy.”)

Nonetheless, export performance bears watching, and especially as the first quarter’s result mirrored a big drop in corporate profits. Falling export volumes surely contributed to the weak profits result.

Moreover, profits are an excellent leading indicator, as shown below:


Should exports and profits weaken further, that would cause us to reevaluate risks in both financial markets and the economy.

Extra chart (free)

Some readers may prefer this version of the export chart, with each cycle labeled:


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kowalli's picture

fuck fed. reserv

Freddie's picture

Who would buy anything from Obam-Amerika?   All the technology and software is infested with spyware shit.

I talked to some European people in IT and they said they are all trying to get away from anything American.  European companies are concerned that everything they do will get resold to USA competitors via the NSA.

ArkansasAngie's picture

China ... Japan ... The euro. All are being actively devalued. Tag team -- USA has to take a hit. In this financial war ... Who is the winner?
Personally IMO we all lose.

Chief Wonder Bread's picture

European companies are concerned that everything they do will get resold to USA competitors via the NSA.


Or repackaged and exported ftw.


Stuck on Zero's picture

Who would buy anything from Obam-Amerika?  

Don't be silly.  We don't export technology.  We export scrap metal, coal, distillates, food staples, metal ores, recycled cardboard, and all manner of raw materials.  In other words, we're a third world country.


maskone909's picture

fuck paul krugman and the ink cartridge he rode in on

percyklein's picture

Exports: Does this mean more than that we won't be hit so hard as in the past when those f#%^ers stop buying our stuff?

JustObserving's picture

Who needs exports when the Fed can print all the money it wants?

kowalli's picture

They can't print real things...

gdogus erectus's picture

Who needs TAXES when the Fed can print all the money it wants?

PenguinMan's picture

I would like to point out, that essentially that is what it does.

The only real reason for the trifle 2 Trillion in taxes that are collected is for show and tell.

The actual budget per year far exceeds that figure and there is no way the Government could possibly pay for everything from a measily 2 trillion in tax collections.

That won't even cover, a fully deployed F35 air force in war time. (Which is what we are in now.)

Assuming they can get the plane to work that is.

Vendetta's picture

is this a surprise to someone?

Flagit's picture

Only to me.

I thought the Global Drag refrence had something to do with Sir Richard Branson.

Zeta Reticuli's picture

I pictured Ru Paul and Ann Coulter. I had to cauterize my visual cortex with a soldering iron.

hardcleareye's picture

Here is a link of Branson kitesurfing with nude model hanging on to his back....

Make_Mine_A_Double's picture

What stuff? Other than a few finished goods like autoclaves and medical the only things we export are commodities (hay, wood/paper products/resin/cotton, lumber, etc) which is basically colonial era set up.

I've been in the business long enough to go back to the 80's and I can feel it when the collective oxygen is out of the room and that is now. Granted this is typically a lull time between seasonal AG stuff, but it is very quiet with PRC and the Nips lately. SE Asia has been taking up the slack, but even that is dormant now.

IMO we hit peak global consumption a few years back. Just too many things going sideways these days for animal spirits in global trade other than oil.


Falconsixone's picture

Does this include bombs, rockets and du?

XRAYD's picture

Double export in ten years ... Obama said!  He meant digital dollars!

MeBizarro's picture

Need to know more about what is being exported though to really have any takeaway conclusions.

AdvancingTime's picture

I tend to think our exports are not the problem but a larger issue is that we continue to run a massive trade deficit. It is not rational to think that increased trade olone creates a lot more jobs. While it expands ones market allowing a company to grow, the area where the goods are shipped does not enjoy the creation of jobs for making that product.

Granted expanding trade can encourage and enable faster growth but the glory of trade is its ability to maximize production, while expanding  choice, and lower cost, but we must recognize the limits of this benefit. A delicate balance exist, the goal should be to optimize these benefits. A more modern or up to date way to better describe the effects of trade on jobs is to say it "shifts" jobs from one area to another. More on this subject in the article below.

Jack Burton's picture

I remember that uber strong dollar back in the Mid 80's. I was taking good advantage of it to travel to Europe, Australia and New Zealand. Just what a young guy looking for tarvel wanted. I still remember my girlfriend and I landing at Aukland Air Port in New Zealand. I changed $500 US for $1,000 New Zealand Dollars. And as for value, 1 US dollar spent in America had the same buying power as 1 New Zealand dollar did in NZ. So to all intents, I doubled my money upon doing the currency exchange. I planned a nice trip for us, but when the full value of the dollar became apparent, I upgraded everything and we had a luxury trip. Same in Australia, it was changing at nearly 1.8 Aus Dollars to 1 US Dollar with spending power about the same in each nation. In Sweden I got 10 SKR for a dollar, this was a value I never was able to repeat again in Scandinavia.

junction's picture

The reverse angle to your story is what was going on at a factory I visited on Cook Street in Greenpoint, Brooklyn in 1983.  The factory made stuffed toy animals and had a big export business.  The owner pointed to a telegram he had just received and posted.  The telegram, from a French buyer, canceled immediately all pending orders.  Thanks to the fast and sharp increase in the value of the U.S. dollar vs. other currencies, due to the Reagan administration monetary policies, what the French toy buyer had to pay in dollars for the Cook Street factory toys meant the French distributor had a wholesale cost that was greater than the toy's selling price in francs.  Back in the early 1980s, factories in Brooklyn sold stuff all over the world.  Now, you just have hipsters living in those factories.  Those factories that were not leveled.

goldhedge's picture

The US will increase exports of "FREEDOM/DEMOCRACY" to counter this.


world_debt_slave's picture

come on daddy-o, don't be a drag

Caviar Emptor's picture

Don't fret! We don't have to export anything. Nor so we have to really make anything anymore. Even jobs themselves are passé. Entrepreneurship? Maybe for those who cling to the past. All we really need now is the Fed money tree from which goodness is ever forthcoming. The more we print, the happier we get!

klynnn's picture

There is a cold wind a blowin in the USA. Shame it's June. When the products you do make are not worth the powfer to blow them away. At one time our products were the envy of the world. I really don't believe this can be turned around and I doubt most people have a clue.

PenguinMan's picture

I know about that cold wind.

Tomorrow is the longest day of the year and it is 58 degrees right now in Green Bay, WI.

I have never seen weather like this before, and I am not a spring chix'in by any means.

Thank God we have this to protect us:

Can't you just see the carbon exchanges in one of the heads mouth?

Along with industrialization in the other, and the destruction of western civilization in the other.

Is that Al Gore I see holding the reigns?