The Phaserl


Economic Disaster

from The Daily Coin:

If we look at some of the dots that are beginning to line up, 2016 may not be a very good year for manufacturing, retail or the economy as a whole. The U.S. economy is 70% retail, which is an unsustainable economic base anyway you look at it. If the people that flip burgers next door to the big box store are one-anothers-customers and this is the majority of your economic base, how is that sustainable?

Caterpillar, which has been one of the “measuring sticks” for China’s growth, the mining industry and construction around the world, is in trouble. As the world’s largest manufacturer of heavy construction equipment one can get a sense of what will be happening in the coming months based on the sales of Caterpillar equipment.

No sales, no construction and from there you have a massive whole in the economy. The number of other industries that are tied to construction and mining are immense. The situation is so bad Caterpillar announced they were cutting 10,000 jobs through 2018 and 5,000 of those would be in 2016. This does not bode well for global economic growth.

As we have reported for most of 2015 the Baltic Dry Index (BDI) has been bleeding-out all year. In the Spring the BDI was already falling off a cliff and people were crying that it was due to the Longshoreman’s strike in California that began in February 2015. This was simply not the case as the BDI has continued to slide and on two different occasions hit new record lows. The BDI represents the contact price for container ships that haul raw materials to China, India and the other manufacturing centers around the world, including the U.S. As these numbers tumble, this means no one needs this service. From my perspective, if manufacturing centers are not receiving raw materials there must be a slow down in manufacturing. This is one of the first steps in creating an economy. There must be products made in order for stores to have products on the shelves. No products, no business, no economy. You can see a plethora of articles, from a variety of sources, on this topic HERE. It is stunning how this index has tanked and doesn’t appear there will be a recovery anytime soon.

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