World Trade

• Obama-Romney: Breaking the Tie (BBG)
• Fiscal cliff looms over campaign climax (FT)
• Tough Calls on Deficit Await the Winner (WSJ)
• Election Likely to Leave Housing Unmoved (WSJ)
• Regulator Investigating Rochdale Trading (WSJ)
• Greeks Plan Strikes On Eve of Votes (WSJ)
• China Communists consider internal democratic reform (Reuters)
• Wen urges Asia-Europe co-op to promote world economy (China Daily)
• Italy Said to Reject Bad Bank That May Boost Ties to Sovereign (BBG)
• IMF warning adds to French economy fears (FT)
• Europe, Central Bank Spar Over Athens Aid (WSJ)
• Unlimited Lending May Help Weaken the Yen, BOJ Official Says (BBG)
• PBOC Official Says U.S. Election Won’t Impact Yuan Level (BBG) - Just the USD level to which it is pegged

Could Cost Billions to Replace

For two decades the rate of growth of world trade volumes considerably outstripped that of industrial production as credit-fueled globalization created huge imbalances in the world. As Diapason Commodities' Sean Corrigan indicates in these three simple charts, all that vendor-financed circular exuberance has come to an end. The bottom-line is that forced deleveraging (not least of which in Europe) is crushing the credit-fueled (and unsustainable) dream of endless growth as debt saturation has been reached (on private and now public balance sheets). To wit: Global Trade Volume growth is deep in the danger zone and about to turn negative; as the hopes of so many Sinomaniacs and Pollyannas is slowly peeled back to a righteous recognition of reality.

Don't Read This ... It's Totally Irrelevant, Old News, Who Cares, Americans Are Above the Law, We're Exceptional (and Anyone Who Criticizes anything our Government Does is a Commie Fascist Turruristicalist Moooooslim)

US reliance on oil imports as a share of consumption is gradually declining; but China's, however, is rising and is now higher than the US. As JPMorgan's Michael Cembalest notes, China now has the world's largest new car market and most extensive network of superhighways - which given the lack of a viable, affordable electric car - means fossil fuel consumption is expected to continue to rise. The trends that lead to this inexorable rise have critically important implications for the West in the ongoing containment of Iran's nuclear ambitions. Unfortunately for the West, the prospects for cooperation on sanctions appear dim as the following nine points (on China's relationship with Iran) should make clear.

The ability of reflationary policy to mute the worst risks of debt deflation has been a source of enormous frustration for stock market bears ever since the 2008 collapse. Yes, the initial moderate rally out of the S&P500’s black hole was perhaps not so surprising in 2009. Bombed-out stock markets can always manage some sort of rally. But the ability of the rally to continue through 2010, and then 2011, and now 2012 has been quite vexing and painful for bearish investors. Indeed, the entire post-2008 market phase has now produced an era of consistently poor performance for hedge funds. Recent data, for example, shows that an incredible 90% of hedge funds are underperforming the S&P500 through mid-September. Will the pain continue? If OECD policy makers do in fact lose stock markets as the main transmission mechanism for reflationary policy, then trouble of a very serious nature will make itself known in the biggest way imaginable since the 2008 crisis began.

• Hillary Clinton Accepts Blame for Benghazi (WSJ)
• In Reversal, Cash Leaks Out of China (WSJ)
• Spain Considers EU Credit Line (WSJ)
• China criticizes new EU sanctions on Iran, calls for talks (Reuters)
• Portugal sees third year of recession in 2013 budget (Reuters)
• Greek PM says confident Athens will secure aid tranche (Reuters)
• Fears over US mortgages dominance (FT)
• Fed officials offer divergent views on inflation risks (Reuters)
• China Credit Card Romney Assails Gives Way to Japan (Bloomberg)
• Fed's Williams: Fed Actions Will Improve Growth (WSJ)
• Rothschild Quits Bumi to Fight Bakries’ $1.2 Billion Offer (Bloomberg)

While earlier we were presented with an extra serving of hypocrisy courtesy of the Fed's James Bullard who lamented the lack of income for America's "savers", next we get a less than random selection of US CEOs, those of UPS Scott "Logistics spending would be great if only world trade hadn't completely collapsed" Davis, Honeywell's David "Look over there, Isn't Iran bombing something" Cote, NASDAQ's Bob "I destroyed IPOs" Greifeld, and, of course, Larry "About to switch jobs with Tim Geithner" Fink, who via Bloomberg TV get to opine on such issues as the fiscal cliff and America's $16.2 trillion, and very rapidly rising debt. Some of their views: "It's Washington's fault we're not hiring and not spending." Honeywell's Cote says, "If we were playing with fire in the debt ceiling, we'll be playing with nitroglycerine now when it comes to the fiscal cliff." Larry Fink says, "We need to speak out as  CEOs…Politicians generally address things when their back's against the wall…We have the threat of going into a recession in the first quarter…This is a very uncertain moment." And thanks to the Fed, which has come at just the wrong moments, and always bailed out Congress every time a difficult decision had to be taken, the likelihood of a benign outcome on the fiscal cliff is far worse, than even Goldman's latest worst case scenario which sees just a 33% probability of resolution before the year end.

The conventional validation for perpetual war in the Middle East does not hold when looked at rationally.  When the ideas of nationalism and statist glory are wiped away, the state appears as it really is: institutionalized exploitation of the masses by the few.  The undertaking of war masks this reality for a short period while accelerating the pace at which liberty is stripped away.  In the end, wars are waged to fulfill the sadistic desires of government leaders and to give them an opening to tighten their grip on society.  The parasitic class which makes up the state doesn’t just war with other states; it conducts war against the citizens it claims to protect.

• Trade Slows Around World (WSJ)
• Debt limit lurks in fiscal cliff talks (FT)
• Welcome back to the eurozone crisis (FT, Wolfgang Munchau)
• Euro Leaders Face October of Unrest After September Rally (Bloomberg)
• Dad, you were right (FT)
• 25% unemployment, 25% bad loans, 5% drop in Industrial Production, and IMF finally lowers its 2013 Greek GDP forecast (WSJ)
• Global IPOs Slump to Second-Lowest Level Since Financial Crisis (Bloomberg)
• France's Hollande faces street protest over EU fiscal pact (Reuters)
• EU Working to Resolve Difference on Bank Plan, Rehn Says (Bloomberg)
• China manufacturing remains sluggish (FT)
• Samaras vows to fight Greek corruption (FT) ... and one of these days he just may do it
• Leap of Faith (Hssman)
• Germany told to 'come clean’ over Greece (AEP)

• China accuses Bo Xilai of multiple crimes, expels him from communist party (Reuters), China seals Bo's fate ahead of November 8 leadership congress (Reuters)
• "Dozens of phone calls on days, nights and weekends" - How Bernanke Pulled the Fed His Way - Hilsenrath (WSJ)
• Fed won't "enable" irresponsible fiscal policy-Bullard (Reuters)
• PBOC Adviser Says Easing Restrained by Concerns on Homes (Bloomberg)
• Data Point to Euro-Zone Recession (WSJ)
• Fiscal cliff dims business mood (FT)
• FSA to Oversee Libor in Streamlining of Tarnished Rates (Bloomberg)
• Monti Says ECB Conditions, IMF Role Hinder Bond Requests (Bloomberg)
• Japan Heads for GDP Contraction as South Korea Weakens (Bloomberg)
• Moody’s downgrades South Africa (FT)
• Madrid Struggles With Homage to Catalonia (WSJ)

Durable Goods orders expectations were pushed down to a dramatically low -5.0% after last month's dismal reading and the PMI data since but the print at -13.2% is mind-blowingly bad. Perhaps this is the sneak peek that Ben had? This drop is the largest since January 2009 when world trade had fallen off a cliff. It appears the seasonal-adjustments are the driver of the plunge as NSA is -7.2% (still very weak for August). We are sure there will be calls for the V-Shaped recovery from this but with a very different stimulus-environment around the world (i.e. jaded and soaked in much more debt), we suspect that will be less than forthcoming. The sub-indices were all weaker than expected but we note that defense -40% and non-defense aircraft orders plunged. On the bright side, all this terrible production data inspired less layoffs as Initial claims beat expectations modestly falling to its lowest (best) in two months - sigh.

Ahmadinejad may well be playing the same long game as Osama bin Laden:

We are continuing this policy in bleeding America to the point of bankruptcy.

Osama bin Laden

And they may succeed (although those who believe that war is a stimulus that can end a depression will surely disagree — as Antal Fekete has noted, Western governments may look to a new hot war in the middle east as an opportunity to exit an economic depression that they cannot control).  But for Ahmadinejad and Iran, it may come at a huge, huge cost — a long painful invasion, ending in death in the street or on the gallows. Neoconservatism — and Obama and Romney are both to lesser and greater degrees neoconservatives — is a violent utopian ideology that seeks to force the entire world — by whatever means and at any cost — to conform to American foreign policy imperatives. As America should have learned a long time ago — and as Ahmadinejad may well soon learn — needlessly pissing off violent utopian ideologues creates blowback.

It should come as no surprise - to anyone but the most whocouldanode crowd - but global trade volumes are slowing notably, and surprise surprise, Europe is leading the lag. Between the total lack of any sustainable trade advantage that the PIIGS suffer from (discussed here) and recent outlook cuts from FedEx and UPS (detailed here), it is not a shock that the following detailed charts of Import and Export volumes for China, US, Japan, and Europe are starting to drop notably. Just as we pointed out here, Europe remains the hub of around half of World Trade and as is clear, the myth of decoupling among the world's largest economies is smoke-and-mirrors as it is a lead-lag relationship that is now proven to be entirely un-decoupled as 'obviously' the import and export sides of the world's imbalanced economies show trade is falling in a hurry.

• Anti-Japan demonstrators protest in New York City (China Daily) ...and the propaganda: Younger generation feels wave of emotions (CD)
• And the retaliation: Obama to launch auto trade case against China (Reuters)
• Spanish Banks Bleeding Cash Cloud Bailout Debate (Bloomberg)
• Chicago teachers extend strike (Reuters); Emanuel Promises He’ll Sue to End Chicago Teacher Strike (Bloomberg)
• China hurts own credibility with Xi's vanishing act (Reuters)
• European Squabbling on Euro Crisis Solution May Test Rally (Bloomberg)
• Two South Africa mines reopen, most don't (Reuters)
• Finance Industry Warns of ‘Cliff Effect’ in ECB’s Bond Plan (Bloomberg)
• China struggles to cure the violent ills of health system (Reuters)
• QE3 is for Main Street, except... it isn't: QE3 hit by mortgage processing delays (FT)
• Probe focuses on JPMorgan's monitoring of suspect transactions (Reuters)
• As explained here before: Spanish Bonds Decline as EU Policy Makers Clash on Bank Plan (Bloomberg)