by Jim Willie, Gold Seek:
World trade has fallen for the second quarter in a row. The decade of stagnation of industrial production in the United States, Japan, and European Union can be blamed on financial engineering, housing bubbles, war, and recently on destructive monetary policy in QE bond purchase program. It is not stimulus, but rather a destroyer of capital. The West contains several nations with heavy industrial emphasis, hardly advanced economies anymore. They risk a fall into the Third World from a generation of outsourcing, asset bubbles, and financial fraud, as soon as the new currency regime is installed as part of the financial RESET.
The CPB Netherlands Bureau for Economic Policy Analysis, a division of the Ministry of Economic Affairs, just released its preliminary data of its Merchandise World Trade Monitor. Trade volumes rose 0.7% in June sequentially, after falling 0.5% in May. Trade was flat year-over-year, but below the volumes of December 2014. On a quarterly basis, world trade fell 0.8%, contracting for the second quarter in a row. Without a doubt the global economy is stuck in a powerful recession. No positive constructive remedies or proper reform policy have been put in place since the Lehman failure. Exactly none. To be sure, none have even been attempted.
Worse, the CPB recently adjusted its world trade data downward, going back several years. The newly updated data depicts a post-Financial Crisis recovery of global trade which is considerably weaker than their original data had indicated. These downward adjustments of 2% to 3% came in a climate of stalled economic growth, according to the IMF. Much of the Western national data is rubbish, forced positive by the common NeoCon fascist dictum. The chart of the CPB’s World Trade Monitor index shows the old data released as of July 2015 (blue line) and the newly adjusted data released (red line). Observe the horrendous 4.4% downard adjustment from the peak in global trade volumes in the original data for December 2014 and in the current data for June 2016. They confirm a broadbased global recession of about 1.0%, in full contradiction of the nonsensical constant Orwellian propaganda of sluggish recovery, spouted routinely in the drumbeat of mainstream news.
World trade is a direct reflection of only the goods producing economy. Services are not shipped around the world. An airline flight of a group of consultants is not considered world trade, any more than tourism. Finished products, raw materials, and intermediate goods (like car parts for assembly) are shipped regularly. So industrial production, excluding construction, is key. The trend is terrible for advanced economies. Global industrial production, excluding construction, rose 0.6% in June, after a 0.3% decline in May. The index for industrial production in advanced economies rose to 102.5, below where it had been in January at 103.4, a level reached after the Financial Crisis in December 2012. The industrial output remains below from the glory days before the Financial Crisis when the index peaked at 107.8 in February 2008. The global economic recession is as painfully evident as it is denied.
The current level for the index has returned almost exactly to where it was in April 2006, right before the Lehman failure and ensuing crisis. The world has endured a full decade of stagnation, without any remote attempt at remedy or reform, while the bank syndicate remains in power. Remove rose colored glasses. Combine the abandoned austerity budget initiative for the USGovt with the ongoing big bank welfare (known as QE), the preserved insolvent big banks (in dire need of liquidation), the expanding welfare state, then sprinkle on Arab human garbage, and stir with the maintained constant war. Thus no economic recovery, just talk of such.
To varying degrees, the gripping recession has occurred in the United States, Japan, and the EuroZone. A few other so-called industrialized (advanced) economies have exceeded their pre-Financial Crisis levels. Industrial production has shifted to emerging economies, capitalizing on their cheap labor for many years, such as China. Decades ago the vast array of companies in the US, and eventually in Europe and Japan, began outsourcing production to emerging economies in foreign lands. Hence, industrial production in emerging economies has surged over this period. This was particularly the case after the Financial Crisis when companies in the US, Europe, and Japan redoubled their efforts to get production relocated offshore, using easy money from the USFed which moved the cost of money to near 0%, where it has remained for seven years. However, an extreme point of caution. The Emerging Market USD-based debt stands at over $5 to $9 trillion, depending on the definition of such nations. Some estimates are higher. The debt is on the verge of default, due to their currency declines and reduced commodity income, including from crude oil. Thanks to Wolf Street for the contribution.
HANJIN SHIPPING CRISIS
The Hanjin crisis brings new headache to US-based importers. Trailers stack up, adding to client costs while trailer shortage looms. The idle containers are clogging the entire system. Confusion abounds, as emergency measures are being sought. A drop-off point system for the empties is being considered. Soon the used containers will become a newly created market for cargo owners. The bankruptcy of South Korea’s Hanjin Shipping Co Ltd is causing ripple effects for importers bringing goods from Asian factories to the US marketplace. Port facilities are being jammed, while a shortage of trailers is created to move ocean shipping containers on US roads and railways. The world’s seventh largest container carrier owns and transports more than half a million containers. They are in many cases clogging up ports and truck yards, tying up trailers that cannot be used to handle other cargo. The growing chaos is beginning to worry freight handlers at US ports on the West Coast. Witness the first sign of follow-on effects from the failure of Hanjin. The problem stems from Hanjin’s shortage of cash, which has stranded $14 billion of cargo owned by companies such as HP Inc, Home Shopping Network, and Samsung Electronics. Much of the cargo have been stuck on over 100 ships at sea because cargo handlers, tug operators, and ports are refusing to work with Hanjin unless they are paid upfront. They all are aware of the risk of not receiving payment.
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