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Crumbling BRICs... And Why The Developed World Is Not "Taking Off" Either

Tyler Durden's picture


The problem with self-reported economic data by various countries, especially those which are supposed to be at the forefront of economic growth, now that the "developed" world is groaning under consolidated debt/GDP ratios which will soon be the 4 digits, is just that - that they are self-reported: a main reason for the development of such governmental offshoot programs as the "Ministry of Truth." Which means that when the investing public hears of an updated Chinese GDP, or Brazilian inflation, or Russian industrial production, most roll their eyes but go with it, as this is the data that the greater fool down the street will also be using for investment decisions. Luckily, there are secondary indicators which present a much more realistic picture of what is truly happening in this fringe growth markets. A few days ago, we presented the "stock" view of the world's two biggest housing bubbles: China and Saudi Arabia, when demonstrating the epic outlier nature of these two countries in the context of cement consumption relative to GDP per capita: a snapshot which showed just how unsustainable the regional construction bubble in these two countries is. But since this is a snapshot in time, and hence "stock", how about the "flow", or the perspective of the economy from a continuous basis. For that we once again go to Goldman, which has conveniently compiled two alternative yet very critical data sets which go to the core of the BRIC economies: Chinese electricity consumption, as well as Brazilian toll road traffic. The picture(s) is (are) not pretty.

First, a brief reminder of the perilous state of Chinese over expansion - i.e. "stock"

And here is how Chinese electricity consumption has been faring recently, or economic "flow"

Brazil is not doing that much hotter either...

But don't worry: the developed world isn't taking off anyewhere in a hurry soon - as the following chart showing business jet travel shows (until of course the chart goes parabolic at some point in the near future...)

What does this mean? That the world is slowing down everywhere. And since conventional theory means that much, much, more debt will soon be unleashed to restart growth, and since everyone already is full to the gills with debt, the only realistic buyers remain central banks. And they know it. Which, incidentally, is why the market is tumbling: after all, as we have been claiming all along, there must be some pretext for global coordinated QE. Well, another 10-15% drop in the global capital "markets" will get us there in no time.


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Sat, 05/19/2012 - 18:32 | 2443840 malikai
malikai's picture

And jet travel will indeed go parabolic. Probably over the course of one day.

Sat, 05/19/2012 - 18:42 | 2443847 Ahmeexnal
Ahmeexnal's picture

Chelsea sodomized Bayern Munich in UEFA Champions Final match,

Will Merkel sport a "Chelsea smile" at her next public appereance?

Sat, 05/19/2012 - 20:02 | 2443947 Manthong
Manthong's picture

Damn good news...

If you happen to be a Finnish Malthusian.

Sat, 05/19/2012 - 22:00 | 2444121 DoChenRollingBearing
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To me what is most ominous is the Brazilian heavy truck slowdown.  That means they are making less stuff, likely exporting less as well.

One thing I have seen in Korea on this trip is that lots of trucks going around means lots of production...  Even in just a city (Changwon in my case).  The almost zero percent increase in Brazilian truck trafiic is indeed an indicator that The "B" in BRICs is in for a rocky ride.

Sat, 05/19/2012 - 23:59 | 2444403 Dr Benway
Dr Benway's picture

Cement consumption per capita per year sounds like a flow measure to me, not stock

Sun, 05/20/2012 - 01:51 | 2444521 Oh regional Indian
Oh regional Indian's picture


A goldman construct of an un-likely alliance of a head-fucked group of former colonies or otherwise directly or indirectly ravaged nations.

Sink like a BRIC or FLoat like a FWT (First World Turd).




Sun, 05/20/2012 - 03:03 | 2444631 trebuchet
trebuchet's picture

it is i guess Tyler is trying to use it as change in stock

Sun, 05/20/2012 - 00:41 | 2444455 PersonalRespons...
PersonalResponsibility's picture

Lots of truck traffic in the North East USA.  Don't know how it fits in but it's booming.

Sun, 05/20/2012 - 05:07 | 2444724 _ConanTheLibert...
_ConanTheLibertarian_'s picture


Sat, 05/19/2012 - 21:45 | 2444073 francis_sawyer
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foto caption (Merkel) in other thread...

Sat, 05/19/2012 - 18:40 | 2443846 vast-dom
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10-15% tumble -> QE -> ... -> 40-50% crash, or worse -> ...

Sat, 08/18/2012 - 07:53 | 2716320 GMadScientist
GMadScientist's picture

The Charlie Sheen Economy(tm)

Sat, 05/19/2012 - 18:45 | 2443848 guinea
guinea's picture

China's economy in the past 5 years has been mostly fueled by real estate.  Surviving the 2009 recession relatively intact has also made most managers and officials in China extraordinarily cocky.  State owned enterprises make more money speculating on their real estate holdings than their primary industry.  Kind of like Silicon Valley, why invest in material sciences and the next generation of hardware when you can make billions from a website?  

What contributes more to society?  Nikon or Instagram?

Sat, 05/19/2012 - 19:53 | 2443937 azzhatter
azzhatter's picture

This is true. When I lived in China most companies were making profit off of real estate accounting and not their primary business. I was there from 2004-2010 and reviewed over 25 acquisition and JV partners and everyone only booked profits from real estate investments. They were sketchy and fraudulent accounting profits such as empty buildings booking huge gains.

Sat, 05/19/2012 - 18:42 | 2443850 Mentaliusanything
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When you inhale as much as you can, there comes a time when you must exhale.You must so you can rid the system of  the things that will shut you down. Then and only then can you expand your lungs again and refresh the system free of the things that were starving life.

Deflation is necessary. The financial system needs to be purged and delay will kill the host.

Sun, 05/20/2012 - 00:45 | 2444459 PersonalRespons...
PersonalResponsibility's picture

Your muscles don't have to become weaker for you to become stronger.  Don't write any novels, your analogies won't work.

Sun, 05/20/2012 - 03:01 | 2444630 BorisTheBlade
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Oh yah and muscles don't ever contract and keep growing indefinitely. Bloody genious. Especially on steroids:

Sat, 05/19/2012 - 18:42 | 2443851 cherry picker
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ET go home?

Sat, 05/19/2012 - 18:44 | 2443852 wisefool
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Cushing crude oil inventories at record levels

CAMP DAVID: "Addressing shaky oil markets, the leaders set the stage for a broad release of national oil reserves to address any disruption in the world markets when tough new sanctions kick in on Iran's oil exports."

So we hate them because they gave us too much oil? can't be right. Get kissenger on the phone now. He can figure this out.


Sat, 05/19/2012 - 19:01 | 2443873 malikai
malikai's picture

Cushing is irrelevant. Nevertheless, it doesn't surprise me that they'll go and do another SPR ahead of or just after they decide to "free the shit out of" Iran.

Sat, 05/19/2012 - 19:03 | 2443877 wisefool
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America, Frak Yeah!

Sat, 08/18/2012 - 07:54 | 2716322 GMadScientist
GMadScientist's picture


Sat, 05/19/2012 - 19:02 | 2443875 knukles
knukles's picture

They hate us because we have too much freedom fry oil.

Sun, 05/20/2012 - 13:12 | 2445239 caconhma
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Cushing crude oil inventories at record levels


CAMP DAVID: "Addressing shaky oil markets, the leaders set the stage for a broad release of national oil reserves to address any disruption in the world markets when tough new sanctions kick in on Iran's oil exports."

Just one stupid question:

If crude oil inventories are at record levels and Saudies can increase productionby at least 10-15%, why is it necessary to "the Q8 leaders set the stage for a broad release of national oil reserves"?

I am not a Jewish but it doesn't loot to me kosher!


Just an observation from the chart above: People in Greece and Spain have pretty high standards of living. There is plenty room for them to do down before people will become really angry and violent!

Sat, 05/19/2012 - 18:45 | 2443855 ArkansasAngie
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Supply side ... capacity ... ooops somebody forgot about the effect that the fat lady has on demand.

The rest of the year is going to get interesting.


Sat, 05/19/2012 - 18:46 | 2443857 Peter Pan
Peter Pan's picture

Ah yes, the markets. They are like a yo-yo. Up and down, up and down, up and down and then the string breaks.

Sat, 05/19/2012 - 19:36 | 2443924 Joe The Plumber
Joe The Plumber's picture

Gotta be one more ride on this yo yo

If EWZ ever reaches an 8% yield again I will take all of my chips and shove them to the middle of the table

Sat, 05/19/2012 - 20:57 | 2443993 Harbanger
Harbanger's picture

You think we have an accounting/corruption problem here in the US?  I don't understand why people have this new found hope in Brazil, yet little has changed in its politics/culture.

Brazil’s economic freedom score is 57.9, making its economy the 99th freest in the 2012 Index.

Sat, 05/19/2012 - 23:35 | 2444364 theTribster
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Good analogy Pete!

Sat, 08/18/2012 - 07:56 | 2716323 GMadScientist
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Yes, an analogy for Pete's career as a porno puppeteer.

Sat, 05/19/2012 - 19:15 | 2443890 FinalCollapse
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The Fed will be buying everything: Chevy Volts, ipads, Facebook shares, vibrators... No problemo.

Sat, 05/19/2012 - 19:41 | 2443933 Joe The Plumber
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15 dollar lap dances and u can play w the boobs and the crotch all u want in east oklahoma

That is some serious deflation

Sun, 05/20/2012 - 12:35 | 2445212 shovelhead
shovelhead's picture

But those newly minted MBA's have to work extra hard for those $15 bucks.

Go Thunder!

Sat, 05/19/2012 - 19:38 | 2443926 besnook
besnook's picture

what's the problem? all the fed, ecb,boj,pboc have to do is backstop the world like ms backstopped fb. what could go wrong?


the dumbest people in the room trying to out dumb each other.

Sat, 05/19/2012 - 19:58 | 2443944 Arnold
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Here is a cliche that goes across the spectrum. " ya go with what you know"

Sat, 05/19/2012 - 20:33 | 2443974 q99x2
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'now that the "developed" world is groaning under'

globalist bankster occupation.

Sat, 05/19/2012 - 21:00 | 2443998 Theosebes Goodfellow
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To a certain extent though, this is old news. We knew this was happening when the bottom fell out of the Baltic Dry Index. The BDI is the indicator of how the world gets goods for manufacturing, agriculture and industrial processing, among other things. You will know when the "recovery" is underway when the BDI picks up. That said, it may be quite a while before that bit of sunny news comes along, but it should be right after the Euro dies, the USD tanks and the world returns to a gold standard for currencies. Did I say it might take a while?

Sat, 05/19/2012 - 23:48 | 2444389 andyupnorth
andyupnorth's picture


A slow decline will continue for at least 15 more years until it's time to invest again... (only if the rule of law doesn't get destroyed even more) 

Sat, 05/19/2012 - 21:16 | 2444015 Alexandros
Alexandros's picture

Global Debt Crisis - The greatest private fraud of human history.

Who are the great fraudsters who are becoming the murderers of the human kind?


World War III = The first private war in history

Those who won all battles shall lose the war.

Sat, 05/19/2012 - 23:43 | 2444378 silverdragon
silverdragon's picture

Why all the doom and gloom?

Chinese companies and that is all except SOE's are operating without debt and still grow at impressive rates while Beijing has its foot on the break to soft land the property boom.

China has been cleansing its economy for the last couple of years. It is hard on business but healthy as there is no debt and cash is being used for new investment.

China will take their foot of the break when it is in their best interest. When that happens all the countries that are exporting to China will benefit. As Chinese domestic consumptions continues to grow at crazy rates it will also benefit exporters to China.

As China grows the BRICS/Canada/Australia etc will continue to benefit.

It is and should be all doom and gloom for Europe and the US as they increase money supply and continue to debase their currencies.

Probably a good time to buy sh*tloads of Silver.



Sat, 08/18/2012 - 07:58 | 2716324 GMadScientist
GMadScientist's picture

Cleansing? They've been stimulating it like it was Whitney Houston.

China has been smart about acquiring assets, but the Aussies can't sell coal if the Chinese can't sell crap to a depressed rest of the world, skippy.

Sat, 05/19/2012 - 23:44 | 2444381 andyupnorth
andyupnorth's picture



Uneven demographics + centralized monetary powers + legalized crony capitalism + debt saturation + leveraged financial institutions


pain for most + huge gains for a few

Sun, 05/20/2012 - 00:40 | 2444453 silverdragon
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What is happenning is the BRICS, Australia and Canada and all the smaller economies intertwined into the BRIC economies are all going to continue to tick over and grow.

The US is dead, as taking in two trillion a year and spending four trillion is going to end in a debased valueless currency. Employable Americans will have to travel to other countries to find work. The US will break up. The US may end up being a bit like the Philipines with its people sending currency home to family members. More and more are coming to Asia to find work everyday.

Europe will do fine long term as many of its countries have trade surpluses and it economy is interlinked to a greater extend to its colonies which are most of the countries in the world. The Europeans will continue to not declare income and hide it from their incompetent govts who will waste it. Hope they just tell the bankers to  f*ck off when they come calling for their debt.

The US may attempt to start another war but as Iraq and Afganistan have cost trillions and assisted in bankrupting the US it will not be easy especially as the UK and other allies are probably not going to turn up next time as they are broke or are not seeing any benefit.

And yeah, its probably a good idea to buy Silver as it has 10,000 industrial uses and has been currency longer than Gold.

Sun, 05/20/2012 - 07:35 | 2444797 EFNuttin
EFNuttin's picture

"The US may attempt to start another war but as Iraq and Afganistan have cost trillions and assisted in bankrupting the US

Napoleon declared: "Make war pay for war."  The USA has not always squandered trillions on nation building efforts.  The first Persian Gulf War (1990-91) was financed by the nations that benefitted without major military committments: Saudi Arabia, Japan, Germany, Canada, and so on.  Secretary of State James Baker trotted around the planet collecting billion$.  That's how fiscally prudent G.H.W. Bush could be. 

The two most recent ideologues in the White House have paid about zero attention to fiscal prudence.

We are at the point where if the USA is going to invade another country, the place will need to be looted right well and properly to help retire some debt.  Who is up for Chinese food?

Sat, 08/18/2012 - 08:21 | 2716333 GMadScientist
GMadScientist's picture

Much easier to do with the entire Spanish armada supplying new silver constantly.



Sun, 05/20/2012 - 01:20 | 2444490 silverdragon
silverdragon's picture


Reality is that the US hasn't done that well at "the war thing" Vietnam, Korea, Iraq and Afganistan all were not so successful.  Unless you are in the business of making munitions etc. Even in WWII the heavy lifting was done by the Russians. Once again the military industrialist did well out of that.

Sun, 05/20/2012 - 01:28 | 2444500 q99x2
q99x2's picture

This is not good. And now we know not even Facebook can save us.

Sun, 05/20/2012 - 02:03 | 2444533 silverdragon
silverdragon's picture


Lets not forget they have about three billion people, most of the worlds growth, stuff all debt and all the commodities. Add to that the neighbouring economies that they are economically intertwined with and we are talking the only game in town for the next decade.

The US and Europe will tax the life out of its people to pay for their incompetent govt expenditures.

It's time to move to a BRIC or non US/European country to avoid the debasement of your non PM assets.

Sun, 05/20/2012 - 03:40 | 2444669 Jack Sheet
Jack Sheet's picture

"Luckily, there are secondary indicators which present a much more realistic picture of what is truly happening in this fringe growth markets"

What makes you think that these are any less fudged than the GDP data?

Sun, 05/20/2012 - 03:43 | 2444670 silverdragon
silverdragon's picture


Exactly, all the data is nonsense.

Sun, 05/20/2012 - 07:44 | 2444802 orangegeek
orangegeek's picture

Primary wave 3 is on.


Since most stocks follow their indexes, it does not look good for longs and investing for the long term is a strategy to take the longs down to zero.

Sun, 05/20/2012 - 12:18 | 2445183 Colonial Intent
Colonial Intent's picture

Im not a big fan of gerald celente but.............

Sun, 05/20/2012 - 14:27 | 2445441 onebir
onebir's picture

Anyone seen the Chinese electricity consumption figures on a chart with industrial production (/GDP)?

Mon, 05/21/2012 - 04:21 | 2446633 silverdragon
silverdragon's picture

A recent article by Dr Jeff Lewis:

"an Iranian diplomat recently revealed that new energy trades between Iran and China will be settled in China’s official currency the yuan"

"Although the shift away from using the U.S. Dollar in oil trades is currently being spearheaded by Iran, the change is reportedly being backed by India, China, and Russia. These key BRIC countries are already substantial consumers of Iranian oil, and they do not seem at all inclined to let U.S. sanctions cut off their strategic petroleum supply from Iran."

The whole title of this thread "Crumbling BRICS" etc seems poorly though out. Maybe a better title would be:

"BRICS flip the bird"

Sat, 08/18/2012 - 08:22 | 2716334 GMadScientist
GMadScientist's picture

"West scrambles their birds"

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