China Posts Biggest Trade Deficit Since 1989 As Crude Imports Surge: Is China Recycling Export Dollars Solely Into Oil?
In addition to all the US election year propaganda and delayed after effects of central banks injecting nearly $3 trillion in liquidity to juice up the US stock market, something far more notable yet underreported has happened in 2012: the world stopped exporting. Observe the following sequence of very recent headlines: "Japan trade deficit hits record", "Australia Records First Trade Deficit in 11 Months on 8% Plunge in Exports", "Brazil Posts First Monthly Trade Deficit in 12 Months " then of course this: "[US] Trade deficit hits 3-year record imbalance", and finally, as of late last night, we get the following stunning headline: "China Has Biggest Trade Shortfall Since 1989 on Europe Turmoil." Here we must apologize, but blaming the highest trade deficit in 23 years for a country that needs a trade surplus to exist, on the Chinese Lunar new year, which accidentally happens every year, is more than a little naive. Because as the charts below indicate, while exports did in fact tumble in a seasonal pattern as they do every February although more than expected, February imports of $146 billion not only did not drop, but posted a 19% increase compared to January, and soared 40% compared to a year prior. Why? Perhaps the second consecutive record high in monthly crude imports has something to do with it. Which in turn when considering the huge selloff of US Treasury paper by China in the last few months, indicates that the world's fastest growing economy no longer has an interest in taking its export dollars and using them to fund purchases of US paper, but is in fact converting US fiat into real, hard goods. Such as crude (for all those curious where the marginal demand is coming from that is). And most likely gold. But we will only learn about the gold hoarding well after the fact, when China is prepared to see the price of the metal soar as it did in 2009.
In the meantime, what is truly scary is that for the first time ever, virtually every major economic block in the world is importing (how that is possible in a closed loop system is a different question entirely).
There is hope of course that Europe will be a net exporter (courtesy of the drop in the EURUSD which led an export surge in the only economy in Europe that actually makes things, Germany) when Eurostat announces January numbers in a few days, although if past is prologue and the December EU27 trade balance of a whopping €1.7 billion is any indication, we probably should not get our hopes up too high.
While we wait, without further ado, here are some truly stunning charts showing the epic collapse in the Chinese economy, which while still experiencing intermittent flashes of inflation, will have no choice but to resume easing all over again, in the process sending all commodity prices higher yet again.
China total imports and exports - whoosh:
China trade balance by region - whoosh:
China trade with the US - whoosh:
China trade with the EU - whoooooooooooooooooosh:
However, definitely no whoosh here:
Here's a thought why not:
A tale of two civilizations, one in ascent and one in decline, can probably be best summarized by how they ration for the future in that most important of commodities - energy, in this case vis-a-vis the respective treatment of the strategic oil reserves of China and the US. Because while all the rage in D.C. political gab in recent weeks has been whether the US will allow a release of oil from the SPR, just to appease those Obama voters who actually have a job and have to take a car to get to it, things over at America's nemesis in civilizational conflict are diametrically opposite. As Bloomberg reports, China has "started filling its emergency petroleum reserve at Lanzhou in the nation’s northwest, according to an official at the nation’s largest crude producer." Unlike the US, where everything is now a function of market liquidity, evil speculators, and political ambitions (rest in peace supply and demand), China is completely ignoring all the day to day mundane drivel, and is doing what is right - which is to make sure it is prepared for an "eventuality" in the crude supply. Said eventuality is 100% guaranteed to happen if the Panetta-McCain is given a green light to allow the liberation of Iranian crude to finally proceed following years of foreplay.
Oh, and lets not forget this particular whoosh:
...Is it starting to make sense now?