Trade Slump
BALTIMORE – When we left you yesterday, we were discussing the War on Cash – the push by governments to abolish physical currency. It is a fraud. The idea is not to fight crime or boost the economy, as its proponents claim. It is part of a bigger campaign by the Deep State to take more control over your money… and your life.
We’ll return to our theme in a moment. But first… an update on the markets and the economy. It came out last week that world trade did indeed fall in 2015. It was the first time this had happened since 2009.
The decline in sales of “yellow machines” has turned out to be a meaningful signal… Photo credit: Caterpillar Tractor Company
Starting at the end of last year, we began following the trains, trucks, ships, and sales of “yellow machines” – backhoes, loaders, bulldozers, etc. – and watching them all slow down.
Sure enough, they were telling us something important. Reports the Financial Times:
“The value of goods that crossed international borders last year fell 14% in dollar terms.”
Most notably, a decline in world trade means China is not exporting as much merchandise as before. This, we guessed, would mean a greater outflow of foreign exchange reserves from China’s central bank… and make it more difficult for it to prop up the exchange value of the renminbi.
The dollar value of global trade has slumped to the depths of the 2008/9 crisis low
A country accumulates foreign exchange reserves when it exports more than it imports. In the case of China, dollars, euro, etc… flow into the country in exchange for Chinese-made goods. This foreign currency builds up as reserves at the central bank. It can then dip into this stash to buy its own currency and prop up its value.
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