Meanwhile The Global Economy...

Tyler Durden's picture

While the biggest winner of the ongoing political melodrama is C-SPAN, whose ratings have likely never been higher, and the broad audience is logically largely distracted by the hourly lack of development out of the White House, what we do know is that QE2 has failed to generate any growth in the economy, with both Q2 and Q1 GDP crashing spectacularly to a point where post another revision Q1 will be the inflection point where America re-entered another recession. Furthermore, we have seen a stark example of the economic snake eating its tail, whereby the more than proportional increase in the price of commodities, courtesy of Bernanke's policies, has offset any potential incipient growth germs that may have been lingering in the economy in Q3 2010 through Q2 2011. Yet all of these are backward looking indicators. The question is what happens to the global economy going forward? For the answer we again turn to Sean Corrigan, who remarks on some very disturbing developments in the global macro arena, which when tied in to core tenets of the Austrian Business Cycle theory, indicate that the global soft landing may be a mirage, and that the downslope we are already in, may convert into a stall from which the global airborne Titanic does not recover.

From Corrigan:

Market participants should not lose sight of the fact that, far beyond the twin, transatlantic farces, a rather darker drama is beginning to play out in terms of world economic activity.


The first warning signs come from the freight industry, where US West Coast container traffic has slowed appreciably. Imports, indeed, have decelerated to an extent only exceeded—and then by the smallest of margins—a handful of times in the past 15 years, sending the growth rate plunging from August 2010’s chart?topping 26.4% to a 17?month low of 2.2%.


More broadly, while US intermodal rail traffic is still setting records, its tally now stands a bare 2.5% above the reading recorded at the same juncture in 2010—a sharp deceleration from that earlier period’s 26% YOY increase.


Matching this, across the Pacific, Shenzhen port numbers are also barely in the plus column, as of May?June, while Shanghai has dropped from 18% yoy in the whole of 2010, to a 16?month low over the quarter, touching 7.4% in June itself.


Then we have the IATA air freight numbers, recording their first global decline since the crisis, paced by a swingeing 9.8% YOY drop in the crucial Asia?Pacific region—a drop only exceeded during the worldwide export slump between Sep?08 & Mar?09.



Adding to series of cautious statements emanating from the shipping industry, several key machinery makers have also struck a less optimistic note, among them Atlas Copco, Caterpillar, Sandvik, Alstom, Terex, and Siemens. For an Austrian, signs of stress among these higher?order goods manufacturers are a clear warning of the chance of stormy weather ahead.


All of these micro?trends have again been borne out with the decline seen in various regional PMIs—notably in China and Germany—in the last month, as well as in the slowing of Taiwanese export orders and industrial production.

We have not yet tipped unequivocally into a renewed slump, but it is undeniable that the stimulus? fuelled rebound from the slump has more or less run its course.


A central tenet of Austrian Business Cycle Theory is that the first users’ advantage, conferred when an inflationary impulse is preferentially delivered within an economy, will eventually dissipate as relative prices adjust across the board. This implies that, to sustain their activity above the levels which would naturally  prevail in the absence of that initial inflation, progressively larger (nominal) injections will be needed in what effectively becomes a Red Queen race to keep the productive structure extended beyond the length which voluntary saving alone would dictate.


In such circumstances, any slowdown—whether caused by an outright withdrawal of stimulus or simply a more rapid adaptation to its ongoing application—tends to a degenerative condition in which margins are first squeezed, before revenues themselves begin to decline in the previously favoured sectors and those of their immediate suppliers.


This sink?or?swim attribute of a modern, vertically?segmented economic system is one of the cardinal reasons why the fabled ’Soft Landing’ has historically proven so very hard to deliver. Given the unusual degree of structural elongation brought about by Asia’s investment?driven boom, it is all the more likely to prove to be beyond the capacity of the central planners this time around, too.

Which brings us to the topic at hand: with the Europe fixing already in the back view mirror, and Spanish and Italian spreads once again approaching all time records, the only remaining risk on rally will likely come in the middle of this week when the government "miraculously" finds a compromise, leading to a surge in the S&P, most likely to 2011 highs, coupled with a huge rout in bonds, particularly in the long-end. At that point the distractions will cease, and the market will finally look forward with a clear head, only to see nothing but stormy sailing. Alas, the resulting rout, which will be the catalyst for QE3 in some form (see Goldman on the topic) will likely lead to collateral call-satisfying liquidations in gold and other best performing asset classes, as managers seek to sell their best performing products first. The end result of all this will likely become apparent in late August as Bernanke either does another Jackson Hole or gradually changes his rhetoric to one contemplating more easing. Recall that Q3 is the make or break quarter for stimulus decisions (and forget fiscal stimulus unless it is a tax repatriation holiday in exchange for a another payroll tax extension, both utterly useless). With July down, there are just two more months in which the economy "can" pick up. So far we have yet to see even the faintest glimmer that in the absence of QEasing, any narrow or broad indicators are doing even remotely as expected.

Bottom line: just like last year, when the August NFP number was the catalyst for QE2, expect everyone to look for this number due in the same week as when the Treasury purportedly runs out of cash, with far more focus than what is happening in the House. A sub-zero print will practically guarantee the announcement of more monetary stimulus within several weeks.

As to what happens after that, well that web-based version of the Dying of Money is still floating around somewhere...

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km4's picture

David Stockman: I think the Fed is injecting high grade monetary heroin into the financial system of the world, and one of these days it is going to kill the patient."

I think the Fed will kill the patient with QE3

Crisismode's picture

The Fed

AKA Bernanke

Doesn't have the cojones to actually do anything positive for the economy.

They only exist to serve their Banking Consortium masters.

The Banking Consortium masters only want to serve up the American populace as fish food for their Wall Street Sharks.

Is there anything about that proposition that confuses you?

duncecap rack's picture

It would be pretty hard to justify QE3 with th Q1 and Q2 numbers being right in the heart of QE2.

narnia's picture

"Full employment" had nothing to do with the QE1 & QE2 programs.  Nonetheless, it was used as a justification.  I agree that the game is up on this excuse at this point.

So...  what the Fed will do is claim no QE3, then expand their balance sheet in stealth.  

StormShadow's picture

Cue Chubby Checker: "Come on, let's Twist again..."

StychoKiller's picture

The Bernank sez:  "I got this really neat, big hammer called a printing press..."

smlbizman's picture

i think this ones easy...the first 2 didn't work 'cause they were not large enough, so this time we will get the super size version..

PaperBugsBurn's picture

Let this man be an inspiration to you all


He's going to jail for standing in the way of big oil


a true American patriot



oldman's picture


Absolutely on target. Mr. DeChristopher's courageous act makes all of us seem like no more than whiners.

I can only imasgine such heroism; I do not have anything inside like this man has. I agree----a true american patriot    om

JW n FL's picture

Climate activist Tim DeChristopher blazing own trail


The In-Justice in this Country is Beyond what should be tolerable.


The Court would NOT! allow the Truth to be Presented to the Jury!

If you don’t watch this because you are a drill baby drill crowd member I understand, you are from the shallow end and all you can comprehend is already floating around in that empty head. If you are not part of that crowd.. whether you believe in global warming or not.. the way that this man was railroaded by the Federal Court? And this was in the Spirit of the Constitution how?


Wake Up America!

Never mind the sheep would rather watch Jerry Springer re-runs.. America is Filled with a stupidity so great that it allows the Greatest Country EVER on Planet Earth to be undermined and sold off a piece at a time for Lobby Dollars.


JW n FL's picture


  • Write him a letter (or lots of letters!)  Packages are not allowed, only letters in regular envelopes addressed to the following: 

                                                    Tim DeChristopher

                                                     #2011 - 06916

                                                     c/o Davis County Correctional Facility

                                                     PO Box 130

                                                     Farmington, UT 84025

  • If you'd like to visit Tim, please contact Dylan Schneider at:  Please, do not show up to the jail or prison without contacting Dylan.  Any demonstrations or protestors will only hurt Tim. 
  • Please consider making a generous donation to Tim DeChristopher's Legal Defense Fund.  With Tim now in prison we must prepare for an all out appeal.  Ron Yengich and Pat Shea have volunteered their time to date and will continue to do so for the appeal.  They estimate Tim will need over $50,000 for a well prepared appeal to the 10th Circuit.  Any help with financial donation will be most helpful and appreciated.


I will understand if the Jews are to tight fisted and busy donating their pennies to the Lobby that Controls our Government.. but the rest of you who would NOT! support this man, whether or NOT! you like the cause.. but over the Fact that the Federal Judicial outright kept the FACTS from the Jury???

All of you cowards that think by going along or keeping a low profile that you may be spared the in-justice of the American Federal or Local Court System may be WRONG! it may be YOU! or YOUR!! Child! one day! You had better be concerned with Truth being allowed in a Courtroom for the benefit of ALL!

You think about the Facts and You think about what $20 bucks means from 1,000 people here.. even small amounts add up when we have numbers on OUR! SIDE!!

Fight! Back!! it is over due!





JW n FL's picture

Tim DeChristopher is facing ten years in prison on two felony charges for derailing what he, and many of us believe to have been, an illegal sale of public land from the outgoing Bush administration to private oil and gas developers.

Check out Tim's website:

The HSN staff talked to Tim DeChristopher at Netroots Nation 2011.

JW n FL's picture


Environmentalist Tim DeChristopher Found Guilty of Sabotaging Oil and Gas Auction; Faces up to 10 Years in Jail


DoChenRollingBearing's picture

Great article showing a plausible ugly future ahead, based not just on US numbers, but from Asia and Europe too.  And neither Europe nor Asia will benefit at all when our "Debt Ceiling Negotiations" bring us the BIGGEST, BADDEST, SLIMIEST, SLEAZIEST DEAL EVER IN THE HISTORY OF THE WORLD!

Give yourself a green one for this Tyler!

DeadFred's picture

If/when the debt deal is done they will still have to sell a whole boatload of bonds at affordable rates to people who have just watched this drama. How fast they need to sell the bonds will likely affect how low the S&P has to go and how fast it has to drop. Will they roll out the Euro drama again? It seems that smarter brains than mine might be able to roughly chart the future flow of events. Any volunteers? My WAG is S&P at 1000 by Thanksgiving and the bonds all sold shortly thereafter but what do I know? Then comes QE3?

hangemhigh's picture

TO: Dead Fred                                           Sun, 7/31/2011

"My WAG is S&P at 1000 by Thanksgiving and the bonds all sold shortly thereafter but what do I know? Then comes QE3?"

DF: i've been wondering about same thing.  my point of departue begins with basic premise that, because entire western banking system is insolvent, they, the g7-g8 CB's, are all in as The One.

the game goes like this:  fed sends $630b to euro pd's via qe2 to maintain $ reserve currency status quo. 

total euro bailout at euro 1.40 = $945B.  total at euro 1.25= $845b ; total @ euro 1.15 = $770b = relative value euro debt falls as currency devalued. 

with euro @ 1.15 us$= 84-87; spy = 1050; gold = 1225; slv= 20.

as equities/commodities loose value, UST's become default safe haven...i.e, the cash flows fleeing carnage in hft/algo driven markets winds up in bond market per ponzinomics game plan............for bernankenstein and the gangsta banksta's this is best possible world of potential outcomes as some form of qe3 gains credibility................

numbers based on reversion to mean 6/2010.......only one of several possible outcomes............

buzzsaw99's picture

I remember the old days, when fundamentals mattered, when weakness in the trannies portended ominous selloffs in the dark days ahead. Alas, it is all computerized now, with little bearing or relevance to anything other than the bulge in the bernanke's pants and his love of all things bankster.

Long-John-Silver's picture

Computers eat electricity that someone else pays for.

Long-John-Silver's picture

Great Economic Depression II Bitchez

Zero Govt's picture

Hold on, hold on ..we OFFICIALLY came out of recession in July 2009... we have to wait for Officialdom to declare we're back in recession before Benny can float QE3

...and of course that's a BIG problem because it paints Benny Bullshit Bernanke into a corner.. QE1, Lite and 2 was supposed to get us out of recession so if Officialdumb declares we're back in recession QE1, Lite and 2 officially did not work what's the point of having a fourth vein voyage with QE3 ?!!

Officialdumb appears to be getting its collective knickers in a twist, its loonatic spending orgy not matching its sugary promises of the promised land but instead run aground and exposed on a reef called 'Reality'

the alternative view of course was QE had nothing whatsoever to do with Benny Bullshitters stated aims of 'stimulating the economy' but just a pack of crony lies to sugar coat the turds of bailing out his stone cold bankrupt bum-chums on Wall Street and Washington

So having launched no less than three QE ships, all having failed and hit the rocks, will Captain Bullshitcrapper launch QE3 on Officialdumbs official reclassification the economy needs it or on the desperately bankrupt cash flow of the US Govt and its un-checked suicide spending? 

..i think we have no illusions as to the answer though Captain BS will try to launch yet another paper supertanker with a 4th fanfare of un-stimulating, un-swallowable offical crapology

Silverhog's picture

Yes, QE2 does have that whiff of Spanish Armada.

1100-TACTICAL-12's picture

Deflation can not and will not be tolerated....

ssp2s's picture

Kondratieff, bitchez

PaperBugsBurn's picture

BASF also warned and HSBC fired 10k overseas...



let the Great Reset begin!

kito's picture

dont forget the winners include the dem and repub leaders, as they will have convinced their bases that they fought valiantly till the bitter end. both sides know that this fight is exactly what they needed to raise ire against the "other" party. great way to galvanize their respective bases going into election year. brilliant politics that the masses are eating up.

other winners include ratings agencies, the pentagon, social security recipients, medicaid/ medicare recipients, bond holders, and just about everyone else--all who do not have to worry about real cuts.

and what did they win? only a little more time.........................

DeadFred's picture

But with so many sheep to shear a little extra time is worth a lot.

Miss Expectations's picture

"....they will have convinced their bases that they fought valiantly till the bitter end."

I think that this photo sums up the battle...I've never been in a budget meeting with so little paper.  John Boehner seems particularly unprepared.

snowball777's picture

Hmmm....Boner's drinking tea, Hairy Reed has a check, and Obama is taking notes. Classic.

lelouch's picture

Bernanke seems to be intent on preventing deflation at all costs, which would send the country into a Japan-like scenario. Since GDP growth doesn't seem to be picking up organically, the only other way to create inflation is through QEx . To the Fed, the impact of QEx on the average Joe is immaterial.

baby_BLYTHE's picture


the FED is scared to death of a Japan-like scenario, that is why like you say they are intent on preventing deflation at all costs.

Just look at Ben's recent press conferance, when asked about the plummeting dollar exchange value he didn't show a lick of concern. Never mind other currencies are making all-time highs against the dollar.

That will not hold them back on QE3. The recent GDP print has got to have gotten Ben an itch on the trigger finger. He can't wait to drop more dollar bills out of his helicopter

Tater Salad's picture

Of course he's not concerned about debasing our fiat, why should he be?  Once you elect to grow your way out of a debt situation such as ours, there's no turning back.  Now it's called debase as fast as possible to export our way out.  Problem is, it's going to take a full turn of GDP to get us out of this problem and that my friends will NEVER happen.  In '66 they doubled GDP but much different time, economy and unemployment was 6 and change heading lower versus our 9.2 and heading to double digits, not to mention U6 numbers.  So make no mistake, QE3 will come...perhaps if the SPX loses 20-30% this fall.

F'd up beyond rapair.  Austerity would hurt now but be well worth it to still have a country/globe when all the dust settles. 

mendigo's picture

while it is doubtful that our government will intentionally do anything constructive at least they have suceeeded in bring attention to the farce that our financial system has become

the rating agencies are so useless - are they not yet convinced that the us' financials are poorly and irresponsibly and reclessly managed what evidence are they waiting for aren't thier assements supposed to be somewhat proactive and insightful

i wish that some provider would stream Inside Job to the public - people are only begining to be aware of what has been done and what is being done and the cucarachas are scrambling to get out of the light

zen0's picture

That should be look out above, map-wise.

Rodent Freikorps's picture

The jobs recovery pretty much ended the day after ObamaCare was passed.


JW n FL's picture

Here is why I LOVE ObamaCare.

1. Poor People dont have ANY coverage and I live very well. God has been truly good to me and I should care about others as I damn sure have the time and money to be able too.

2. The Money wasted on Re-Elections would pay for it.. matching Federal Dollars for campaigns.

3. We can NOT expect the poor to get a good job and pull themselves up by thier boot straps when we have moved 7 million manufacturing jobs to china. "We the People" paid for the Tax Breaks and Subsidies to move those jobs to China.

I could go on and fucking on.. how about the Bonus Monies last year that Bankers got on Wall Street that "We the People" paid for is enough to pay for it going forward for years? TARP? TALF??

I am done.. wake up. There is more than enough stupid being repeated to go around.

JW n FL's picture


July 30, 2011

Saudi Arabia's coming oil and fiscal challenge Editor's Note:

The Riyadh-based Jadwa Investment firm has produced an extremely valuable special report, “Saudi Arabia’s coming oil and fiscal challenge,” that addresses a series of key questions about trends in Saudi Arabia’s energy sector and economy. Jadwa Chief Economist Brad Bourland and Head of Research Paul Gamble, authors of the report, noted that Saudi Arabia’s government spending and domestic consumption of oil are growing while the Kingdom’s overall oil production growth is flat. In examining this worrisome trend they sought to address several key questions:

  • What is the “ breakeven” price for Saudi oil going out 20 years?
  • How long will the current run of budget surpluses last?
  • What kind of cushion in terms of foreign assets and debt capacity does the Kingdom enjoy, and for how long?
  • How much oil will Saudi Arabia be consuming domestically, and what will be left for export by 2030?
  • What are the game changers in the global oil market that could have dramatic impact on Saudi Arabia?

Today we provide the special report for your consideration and thank its authors for sharing their perspectives and insights with you.

[Complete report with charts, graphs and tables at this link.]

SHRAGS's picture

Exactly as predicted by the export land model: Export Land Model - 10-7-2010 Brown J

espirit's picture

Free FED dollahs pumped into the global economy about to end?

This isn't about buckling up for a bumpy ride, this is about digging in because the sh*t is about to get real ugly.

toady's picture

I've been praying for a soft landing since '08.

It doesn't look like its working...

Grand Supercycle's picture

S&P500 long term chart shows a series of broadening patterns - aka megaphone wedges.

The three broadening formations reveal an unstable market where buyers and sellers battle for control...

sasebo's picture

If we think of dollars as tickets to buy stuff produced by the economy, and the fed is printing all those new tickets & giving them to the banks so they can buy more stuff, who is producing all the new stuff? But the GDP data says we're not producing any more stuff. Why all the new tickets?    

caerus's picture

Despots and democratic majorities are drunk with power. They must reluctantly admit that they are subject to the laws of nature. But they reject the very notion of economic law . . . economic history is a long record of government policies that failed because they were designed with a bold disregard for the laws of economics.

- Ludwig von Mises

slewie the pi-rat's picture

freaking corrigan!  he's probably right, again.

and as for tyler:  Which brings us to the topic at hand: with the Europe fixing already in the back view mirror, and Spanish and Italian spreads once again approaching all time records, the only remaining risk on rally will likely come in the middle of this week when the government "miraculously" finds a compromise, leading to a surge in the S&P, most likely to 2011 highs, coupled with a huge rout in bonds, particularly in the long-end. At that point the distractions will cease, and the market will finally look forward with a clear head, only to see nothing but stormy sailing.

is this legal?  or merely wonderfunnyful? 

Mark Noonan's picture

I do wonder if Bernanke will really print up another truckload of money...yes, I now he's probably printed up a few bags of money since QE officially came to an end, but I don't know if he'll really go all out and print like mad, again.

Sure, Bernanke is a tool of the financial part of the Ruling Class and he's deterined to keep them rich (with a secondary - but very important -goal of tyring to ensure that 2012 results in a Ruling Class President, no matter who wins), but anyone with any sense at all has to know that even if he printed double what he did before, the amount of "growth" he'd get out of it would be tiny, and the risk of an inflation-driven financial meltdown is horrendous. 

dontshoot's picture

I doubt it will be called "QE3". It will be called something else, and sold as something else. Of course, it will be fundamentally the same thing. Then everyone will argue about whether or not this new plan will succeed, no consensus will be reached. A majority of people will form their opinion through this method of population control without having any knowledge or understanding of the thing they are forming their opinion about.

"This is nothing like QE1 or QE2. Those were designed to ease us out of a deflationary cycle, and succeeded in doing so. The new policy of the FED is designed to address the issues with growth, and unemployment because it (insert bullshit no one understands here)."

Pretty depressing. This song sums it up, I think.

Recall the deeds as if they're all someone elses atrocious stories.

PulauHantu29's picture

Perhaps watcing re-runs of The balloon Boy for 18 hours is preferable then listening to these Muppets argue. I wonder how much $$$ Lobbyists have been pouring into their pockets during this so-called "stalemate?"

Alex Kintner's picture

Gee borrowing Trillions to give away to the banks/oligarchs (QEx) and lumping the debt burden on the working class just didn't work. Who could have seen that coming. Truly shocking.

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