The global economy is likely to shrink this year for the first time since World War II, and trade will decline by the most in 80 years, the World Bank said this week. "The global volume of trade has collapsed," said Christopher Low, chief economist at FTN Financial.
Predicting the collapse of the Mexican Nation-State. Mexico is once again in the headlines. Oil production continues to fall, border violence is up, and the government is preparing for a showdown with the drug cartels. The Mexican state will collapse, ushering in the beginning of the end of the Nation-State. The US military’s Joint Forces Command issued their Joint Operating Environment 2008 report recently that listed Mexico and Pakistan as the most likely states to collapse in the immediate future (PDF, see p.35 for analysis of Mexico). Even 60 minutes ran a segment about the rising drug violence. Root causes of the problems in Mexico are the precipitous decline of Mexican oil production, declining remittance incomes being sent home by migrant workers in America, declining tourist revenues, and lower revenue per barrel of oil exported. Clearly the drug cartels smell blood—-and tactics like forcing the resignation of the Juarez police chief by killing one or more police officers every 48 hours demonstrate their desire for a decisive engagement. Additionally, the motivation behind a recent truce among rival drug cartels may be to facilitate a joint offensive against the government.
Overt Ops: : The US military has briefed the president on the US military capability to influence or intervene, presumably on the side of the government, in the growing civil war between the Mexican government and the drug cartels that control large portions of the country.
Downsized: Global financial assets (stocks, bonds, used bikes...) lost at least $50 trillion in 2008, an amount equal to an entire year's global output in goods and services.
Thought Experiment: The current economic crisis seems intractable, with no easy solution in view. Think how much harder solving the economic crisis will be after the global food system collapses; for food is but petroleum converted to carbohydrates, protein and fat through the catalytic application of credit.
Help?: The Treasury Department claims its mortgage relief plan will help 9 million homeowners temporarily avoid foreclosure. What they really mean is that it will serve to trick these people in continuing to make payments while the house keeps losing value.
There’s nearly $5 trillion worth of insured deposits in the American banking system. But the FDIC’s Deposit Insurance Fund (DIF) is less than 1% of that total: $18.9 billion. And it’s falling fast, down from $52.4 billion (-64%) at the end of 2007. [Having trouble seeing the red highlighted area in the first chart? Then you see my point. I use constant dollars so readers can see the inflation-adjusted growth of insured deposits. Click to enlarge]
FDIC doesn’t have the resources to bail out the depositors of even one large failed bank, much less the entire banking system. And let’s not kid ourselves: The entire banking system remains very much at risk. Source
The economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond. Source = Warren Buffett, Republican billionaire investor
The turbulence is actually more severe than during the Great Depression, comparing the current situation to the demise of the Soviet Union. Source = George Soros, Democrat billionaire investor
The global economy may be deteriorating even more precipitously than it did during the Great Depression. Source = Paul Volker, former Federal Reserve Chair under Democrat President Carter and under Republican President Reagan, and current economic advisor to President Obama
The late Rudi Dornbsuch of MIT knew a huge amount about financial crisis, and could distill a lifetime of study and involvement in collapses succinctly: “it always takes longer than you think; but when it happens, it always happens faster than you can imagine.” Source
BREAKING NEWS: Factory output is collapsing at the fastest pace everywhere. The figures for the most recent month available are, year-on-year: Taiwan (-43pc), Ukraine (-34pc), Japan (-30pc), Singapore (-29pc), Hungary (-23pc), Sweden (-20pc), Korea (-19pc), Turkey (-18pc), Russia (-16pc), Spain (-15pc), Poland (-15pc), Brazil (-15pc), Italy (-14pc), Germany (-12pc), France (-11pc), US (-10pc) and Britain (-9pc). Norway sails blissfully on (+4pc). What do they drink up there?
This terrifying fall has been concentrated in the last five months. The job slaughter has barely begun. Social mayhem comes with a 12-month lag. By comparison, industrial output in core-Europe fell 2.8pc in 1930, 5.1pc in 1931 and 3.9pc in 1932, according to RBS.
Stephen Lewis, from Monument Securities, says we have been lulled into a false sense of security by the lack of "soup kitchens". The visual cues from Steinbeck's America are missing. "The temptation for investors is to see this as just another recession, over by the end of the year. But this is not a normal cycle. It is a cataclysmic structural breakdown," he said. Source
Weak growth data from India and Malaysia on Friday provided fresh evidence of the deepening impact of the global recession on developing Asia.
Japan’s manufacturing output suffered a record 10 per cent month-on-month drop in January. New job offers in Japan also plummeted 18 per cent to complete an abysmal set of recent figures from the world’s second-largest economy, including a record 45.7 per cent fall in exports in January.
The collapse in Asian exports over the fourth quarter was “nothing short of breath-taking”, said Frederic Neumann, Asia chief economist at HSBC. “Economic models and experience suggest that financial turmoil tends to transmit far more gradually into the real economy than has occurred this time around. In fact, the severity and rapidity of the fall in output exceeds anything we have ever seen before.”
Here's the Plan: The administration [i.e., Timmy the Tax Cheat and Zimbabwe Ben] intends to give unlimited amounts of taxpayer dollars to the 19 largest banks. Treasury folks will go door to door asking the banks how much stress they feel, the banks will lie, and then the Feds will back up the truck and shovel dollars into the banks until they feel better. Or something like that.
At some point, a boondoggle event horizon is reached, like the light event horizon that exists at the surface of a black hole. Beyond that horizon, the only possible course of action is to create more boondoggles. Source: Orlov
"when you see that money is flowing to those who deal, not in goods, but in favors--when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you--when you see corruption being rewarded and honesty becoming a self-sacrifice--you may know that your society is doomed" - an excerpt from Atlas Shrugged, by Ayn Rand
What is needed, of course, is a concerted effort to build a new, vastly different economy, not squander remaining resources on attempts to resuscitate the current, moribund one. But politicians are never willing to dismantle the system that got them into power, and, like Gorbachev before him, Obama will do all he can to restart the current economy instead of letting it shut down and concentrating on planting the seeds of a new one. Source: Orlov
By Chua Kong Ho and Paul Panckhurst
“Tax data show much sharper deceleration in income and consumption in the past few months than suggested by official retail sales or income growth figures,” Goldman Sachs analysts Joshua Lu, Caroline Li and Fiona Lau wrote in a note today.
Value-added tax has “de-linked sharply” from retail sales figures, the analysts wrote. VAT rose 1 percent in the fourth quarter from a year earlier, while retail sales gained 21 percent, according to the note.
China is trying to boost domestic spending to shore up its economy as recessions in the U.S. and Europe smother demand for its exports. The nation’s growth has slowed for six straight quarters, while outbound shipments slumped 17.5 percent in January, the most in almost 13 years, customs bureau data showed this month.
Growth in China’s individual income-tax receipts “slowed down significantly” in the second half and shrank in December and January, the Goldman Sachs analysts wrote. This compares with nominal wage growth of 21 percent in the third quarter, the report said.
“We think the government’s fiscal stimulus package announced so far may help create jobs, but may not necessarily help boost wages which, in our view, is the key driver of consumption growth,” the note said. “As such we are not hopeful that China’s consumption slowdown will bottom out soon.”
Throngs of unemployed New Yorkers braved sub-freezing temperatures on Tuesday in hopes of finding new work amid rising job cuts.
Wrapping around block of the Sheraton New York Hotel for hours, more than 5,000 people - many in business attire - waited in single-file lines for a chance to submit resumes and chat briefly with recruiters. There were 41 companies hiring, according to Women for Hire, who sponsored the job fair and allowed men to attend for the first time, with a total of 1,000 openings to be filled. At the last such event in November just 1,500 people attended.
Obama, not Bush, now seeking delay of Rove deposition Former Bush Deputy White House Chief of Staff Karl Rove has a new president urging Congress not to force him to testify next week. President Barack Obama.
Crass Warfare: The rich claim that Obama's plan to tax the top 2% of Americans - those making over $250,000 - is the beginning of class warfare. The other 98% of Americans certainly hope so. The GOP claims this will pit the have-nots against the haves, instead of their plans, which have always pitted the haves against the have-nots.
Meanwhile Ukraine's gross domestic product has contracted by 20pc over the last year, apparently worse than early Bolshevism or the Stalin famine . . . if Ukraine defaults on its foreign debt – or lets its private companies default on their dollar and euro loans – it will lead to near instant contagion through much of Eastern Europe.
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