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The tremors rattling markets are not exactly what they seem to be. A meme prevails that these movements represent a kind of financial peristalsis — regular wavelike workings of eternal progress toward an epic more of everything, especially profits! You can forget the supposedly “normal” cycles of the techno-industrial arrangement, which means, in particular, the business cycle of the standard economics textbooks. Those cycle are dying.

They’re dying because there really are Limits to Growth and we are now solidly in grips of those limits. Only we can’t recognize the way it is expressing itself, especially in political terms. What’s afoot is a not “recession” but a permanent contraction of what has been normal for a little over two hundred years. There is not going to be more of everything, especially profits, and the stock buyback orgy that has animated the corporate executive suites will be recognized shortly for what it is: an assest-stripping operation.

What’s happening now is a permanent contraction. Well, of course, nothing lasts forever, and the contraction is one phase of a greater transition. The cornucopians and techno-narcissists would like to think that we are transitioning into an even more lavish era of techno-wonderama — life in a padded recliner tapping on a tablet for everything! I don’t think so. Rather, we’re going medieval, and we’re doing it the hard way because there’s just not enough to go around and the swollen populations of the world are going to be fighting over what’s left.

Actually, we’ll be lucky if we can go medieval, because there’s no guarantee that the contraction has to stop there, especially if we behave really badly about it — and based on the way we’re acting now, it’s hard to be optimistic about our behavior improving.

…click on the above link to read the rest of the article…

Is The Oil Crash A Result Of Excess Supply Or Plunging Demand: The Unpleasant Answer In One Chart

August 21, 2015

Is The Oil Crash A Result Of Excess Supply Or Plunging Demand: The Unpleasant Answer In One Chart

One of the most vocal discussions in the past year has been whether the collapse, subsequent rebound, and recent relapse in the price of oil is due to surging supply as Saudi Arabia pumps out month after month of record production to bankrupt as many shale companies before its reserves are depleted, or tumbling demand as a result of a global economic slowdown. Naturally, the bulls have been pounding the table on the former, because if it is the later it suggests the global economy is in far worse shape than anyone but those long the 10Year have imagined.

Courtesy of the following chart by BofA, we have the answer: while for the most part of 2015, the move in the price of oil was a combination of both supply and demand, the most recent plunge has been entirely a function of what now appears to be a global economic recession, one which will get far worse if the Fed indeed hikes rates as it has repeatedly threatened as it begins to undo 7 years of ultra easy monetary policy.

Here is BofA:

Retreating global equities, bond yields and DM breakevens confirm that EM has company. Much as in late 2014, global markets are going through a significant global growth scare. To illustrate this, we update our oil price decomposition exercise, breaking down changes in crude prices into supply and demand drivers (The disinflation red-herring).

Chart 6 shows that, in early July, the drop in oil prices seems to have reflected primarily abundant supply (related, for example, to the Iran deal). Over the past month, however, falling oil prices have all but reflected weak demand.

…click on the above link to read the rest of the article…

Recession, Not Fracking, Behind Drop in U.S. Carbon Dioxide Emissions, Scientists Conclude

July 22, 2015

Recession, Not Fracking, Behind Drop in U.S. Carbon Dioxide Emissions, Scientists Conclude

It’s been a talking point for boosters of the shale gas rush for years: as fracking spread across the country and the supply glut drove prices down, utilities have been shuttering dirty coal plants and burning natural gas instead – meaning that America’s carbon dioxide (CO2) emissions dropped sharply. Fracking, the argument went, is actually good for the environment because it’s good for the climate.

“The boom in American natural-gas production is doing what international negotiations and legislation couldn’t: reducing U.S. carbon-dioxide pollution,” Bloomberg reported in 2012.

“While other factors, including a sluggish U.S. economy and increasing energy efficiency, have contributed to the decline in carbon emissions from factories, automobiles and power plants, many experts believe the switch from coal to natural gas for electricity generation has been the biggest factor,” said the Wall Street Journal in April 2013.

“In these last years, the natural gas revolution, shall we say, has been a major contributor to reducing carbon emissions,” the Obama administration’s Department of Energy Secretary Ernest Moniz said at Columbia University on Aug. 26, 2013, as he described the President’s goals for reducing carbon emissions. “We are about halfway there, and about half of that is because of the substitution of natural gas for coal in the power sector, essentially driven by market forces.”

But, it turns out, correlation is not the same thing as causation. And while the drop in emissions happened at roughly the same time as the fracking rush spread, shale gas had relatively little to do with the drop in carbon emissions, according to a scientific paper published today in the journal Nature Communications.

“Before 2007, rising emissions were primarily driven by economic growth,” ecological economist Dr. Klaus Hubacek and his fellow researchers wrote. “After 2007, decreasing emissions were largely a result of economic recession with changes in fuel mix (for example, substitution of natural gas for coal) playing a comparatively minor role.”

…click on the above link to read the rest of the article…

Major Chain Stores Shutting Down as America Faces “Birth Pangs of Retail Apocalypse”

July 15, 2015

Major Chain Stores Shutting Down as America Faces “Birth Pangs of Retail Apocalypse”

Reduced consumer spending is heralding a looming economic downturn, if not collapse, with an unprecedented shutdown of major box stores, restaurants and grocers underway.

It doesn’t bode well for the millions of Americans who are already seriously struggling, and will only accelerate the death of the middle class.

Along with this massive shrinkage of the retail sectors will go thousands of jobs.Natural News reports:

There is chatter across the web about dozens of major retail chains that are expected to permanently shutter a large number of their store locations this year. Popular names like Abercrombie & Fitch, Barnes & Noble, Chico’s, Children’s Place, Coach, Fresh & Easy, Gymboree, JCPenney, Macy’s, Office Depot, Pier One, Pep Boys, and many others are named as soon-to-be casualties in what some news sources are now referring to as the coming “retail apocalypse.”

The Economic Collapse Blog pins 2015 as a significant “turning point” for the U.S. economy, ominously warning that at least 6,000 retail store locations are expected to close this year based on company announcements. Many American consumers are already witnessing the birth pangs of this retail apocalypse as brick-and-mortar department, specialty, and even food shops close their doors for good.

The list of store closures (see here) is truly massive, and in no way accounts for everything that’s coming.

But Americans are still buying one major retail category — technological gadgets like iPhones, wearables, smart devices and computers. As technology purchases soar, shopping malls that have long specialized in clothing and fashion retail are falling in on themselves.

Business Insider calls it a slow and painful death, noting the collapse not only of thousands of stores from dozens of chains, but even the fall of giants like Gap:

Gap once ruled the retail world. But today America’s largest apparel retailer is closing a quarter of its stores and laying off hundreds of workers after disappointing sales.

Gap’s closures are indicative of a larger trend in American retail.

…click on the above link to read the rest of the article…

Canada’s economy isn’t in recession, despite report, Joe Oliver says

July 10, 2015

Canada’s economy isn’t in recession, despite report, Joe Oliver says

Private sector economists warn of possibility of recession this year

Despite an economy that’s shrunk every month for which we have data this year, the federal finance minister says Canada is not in a recession and is poised for growth later in 2015.

At an event in Toronto on Friday, Finance Minister Joe Oliver told reporters that the economy will avoid recession this year, despite newdata from Statistics Canada earlier this week that shows GDP has contracted in each of the first four months of the year — two-thirds of the way toward the technical definition of a recession.

“First off, we’re not in a recession,” Oliver was quoted by Bloomberg as saying. “We don’t believe we will be in a recession.”

Technically, economists define a recession as two consecutive quarters with negative GDP growth. Oliver said it’s too early to say the country is in a recession because we don’t have economic data for the entire January to June period.

“We expect solid growth for the year, following a weak first quarter.”

Economic slowdown

Finance Minister Joe Oliver’s April budget projected an economy that would grow by about two per cent this year. (Darren Calabrese/Canadian Press)

April’s federal budget assumed an economy that would grow by about two per cent this year. So far, the numbers show the economy shrank by 0.6 per cent in the first three months of the year, and another 0.1 per cent in April.

The Finance Department’s optimism is far from a universal view. Bank of America economist Emanuella Enenajor raised eyebrows with a report on Thursday, in which she said the GDP report for April, which showed the economy shrank by 0.1 per cent, caused her to revise her expectations downward for the entire April to June quarter.

That would be enough to bring a dirty economic word into the discussion: recession.

…click on the above link to read the rest of the article…

Greece: the bad apple of the bunch?

July 3, 2015

Greece: the bad apple of the bunch?

Posted by Ugo Bardi

Image by Vicky Brock

The present debate about the Greek financial situation tends often to pit Greece against the rest of the Eurozone. As an example, Joergen Oerstrom Moeller writes that:

Since 2010 the Eurozone economy has turned around from contraction to growth – the growth forecast for 2015 is 1.5 percent, work to set up a banking union is well under way, and measures constituting bulwarks have been put in place. The little stroke can fell great oakeswas a proverb that ominously sounded in the corridors 4-5 year ago; not any longer.

and

Unless Greece is willing to restructure its economy implementing policy objectives and instruments used by the majority of the EU member countries why should the Eurozone bail it out? What is the virtue of having a member that consistently and continually refuse to bring its economy into a shape similar to the one that the rest of the club is running. Ireland, Portugal, Spain, and Italy have all gone through painful reforms and been rewarded with a much improved economic situation and a promising outlook for the future. What are the arguments for not asking Greece to do the same?

Unfortunately, the data tell a different story. Greece is not alone in having economic problems and all the Southern European countries tend to show similar trends. For instance in terms of GdP per capita, the Greek decline is sharper than that of the others, but not qualitatively different. (image from Google public data)

If this were not enough, take a look at the industrial production data (from Bilbo Economic Outlook). Greece is sinking, yes, but so are Italy and Spain, and France is hardly doing better.

…click on the above link to read the rest of the article…

A Recession Within A Recession

May 30, 2015

A Recession Within A Recession

On Friday, the federal government announced that the U.S. economy contracted at a 0.7 percent annual rate during the first quarter of 2015. This unexpected shrinking of the economy is being primarily blamed on “harsh” weather during the first three months of this year and on the strengthening of the U.S. dollar. Most economists are confident that U.S. GDP will rebound back into positive territory when the numbers for the second quarter come out, but if that does not happen we will officially meet the government’s criteria for being in another “recession”. To make sure that the numbers for Q2 will look “acceptable”, the Bureau of Economic Analysis is about to change the way that it calculates GDP again. They are just going to keep “seasonally adjusting” the numbers until they get what they want. At this point, the government numbers are so full of “assumptions” and “estimates” that they don’t really bear much resemblance to reality anyway. In fact, John Williams of shadowstats.com has calculated that if the government was actually using honest numbers that they would show that we have continually been in a recession since 2005. That is why I am referring to this as a “recession within a recession”. Most people can look around and see that economic conditions for most Americans are not good, and now they are about to get even worse.

For quite a while I have been warning that another economic downturn was coming. Well, now we have official confirmation from the Obama administration that it is happening. The following is an excerpt from the statement that the Bureau of Economic Analysis released on Friday…

…click on the above link to read the rest of the article…

China Momentum Indicator Plunges to “Hard Landing” Level

May 16, 2015

China Momentum Indicator Plunges to “Hard Landing” Level

“But nothing is normal in China anymore.”

Hard-landing gurus have been predicting an imminent end of the China bubble for years. A “hard landing” would be the optimistic scenario. The other scenario would be a crash-and-burn. But to their greatest frustration, there was no hard landing, or a soft landing, or any landing for that matter. China just kept on flying.

Fueled by an enormous credit bubble and monetary propellants, it kept adding to entire ghost cities, industrial overcapacity, and the most breath-taking infrastructure build-out the world has ever seen. Global demand for its products faded as labor got more expensive, but the 1.35 billion increasingly moneyed Chinese consumers discovered splurging on smartphones, cars, luxury goods, and a million other things. The China bubble stayed aloft, despite all the cracks appearing here and there.

But now it’s running out of air.

The car business in China has been the most phenomenal growth party in the world: in two decades, it went from nearly nothing to 20 million passenger vehicle sales per year. Every global manufacturer elbowed into it with multi-billion dollar investments. It’s a big part of the Chinese economy, impacting retail sales, manufacturing, and investment in fixed assets as plants, distribution centers, and dealerships are built. It adds to transportation as these cars are shipped from the plant to dealers across the country. It adds to services such as finance and insurance.

But the party has been running out of booze. In April it just about stalled at a dreadfully tiny year-over-year growth rate of 3.7% when the industry is counting on a 9% increase for the year and is building out capacity to accommodate much more. Hence what automakers dread: price cuts.

…click on the above link to read the rest of the article…

US Economy Collapses Again

May 14, 2015

US Economy Collapses Again

4th Time in 4 years

Data released last week by the U.S. government showed the U.S. economy came to a near halt in the first three months of 2015, falling to nearly zero – i.e. a mere 0.2 percent annual growth rate for the January-March quarter. The collapse was the fourth time that the U.S. economy in the past four years either came to a virtual halt or actually declined. Four times in four years it has stalled out. So what’s going on?

In 2011, the U.S. economy collapsed to 0.1 percent in terms of annual growth rate. At the end of 2012, to a mere 0.2 percent initial decline. In early 2014, it actually declined by -2.2 percent.

And now in 2015, it is essentially flat once again at 0.2 percent. The numbers are actually even worse, if one discounts the redefinitions of GDP that were made by the US in 2013, counting new categories as contributing to growth, like R&D spending, that for decades were not considered contributors to growth – in effect creating economic growth by statistical manipulation. Those highly questionable 2013 definitional additions to growth added around US$500 billion a year to U.S. growth estimates, or about 0.3 percent of U.S. GDP. Back those redefinitions out, and the U.S. experienced negative GDP four times in the last four years. We get -0.2 percent in 2011, 0 percent in 2012, -2.5 percent in 2014 and -0.1 percent earlier this year.

It is therefore arguable that the U.S. has also experienced at least one mild ‘double dip’ recession, and perhaps two, since 2010.

…click on the above link to read the rest of the article…

China Containerized Freight Index Plunges to Multi-Year Low, Shanghai-EU Rates Totally Collapse, US Rates Morose

May 5, 2015

China Containerized Freight Index Plunges to Multi-Year Low, Shanghai-EU Rates Totally Collapse, US Rates Morose

If trade is a reflection of global demand, and if shipping rates are a reflection of the supply of ships by carriers and the demand for those ships by exporters to meet that global demand for goods – well then, we’ve got a situation on our hands.

Two weeks ago, when I wrote about the Shanghai Containerized Freight Index (SCFI), the index had fallen so far so fast that it seemed to be a statistical fluke, something that would instantly bounce back. The SCFI tracks the spot rates from Shanghai to various destinations around the world. At the time, the SCFI component for Northern Europe had plunged 14% from the prior week to $399 per twenty-foot container equivalent unit (TEU), down 67% from a year ago. An all-time low.

There was a lot of handwringing because, even with the lower bunker fuel costs, the break-even rates for these routes were $800 per TEU, according to a report by Drewry Maritime Research. Over twice the spot shipping rates!

The question was how much lower could rates drop?

A lot lower. Over the two weeks since, the SCFI for Northern Europe plunged another 14% to $343, setting a new all-time low. A terrific 68% collapse from the same week a year ago. Something big is going on in the China-Europe trade.

Carriers have tried to impose big rate increases, with UASC pushing for an increase of $1,300 per TEU, and a gaggle of others going for an increase of $1,000 per TEU, according to the Journal of Commerce. None of them were able to make them stick.

…click on the above link to read the rest of the article…

Sucking Spoilt Milk From A Bloated Dead Sow

May 4, 2015

Sucking Spoilt Milk From A Bloated Dead Sow

With US GDP growth ‘officially’ back where it belongs, in the Arctic zone close to freezing on the surface but much worse in real life, for reasons both Albert Edwards and Ambrose Evans-Pritchard (not exactly a pair of Siamese twins) remarked this week; that is, excluding the “biggest inventory build in history, the economy contracted sharply”, it’s time for everyone to at long last change the angle from which they view the world, if not the color of their glasses.

But ‘everyone’ will resist, refuse and refute that change, leaving precious few people with an accurate picture of the – economic – world. Still, for you it’s beneficial to acknowledge that very little of what you read holds much, if any, truth or value. This is true when it comes to politics, geopolitics and economics. That is, the US is not a democracy, it is not the supreme leader of the world, and the American economy is not in recovery.

Declining business investment, a record inventory build and extreme borrowing to hold share prices above water through buybacks, it all together paints a picture of a very unhealthy if not outright dying economy, and certainly not one in which anything at all is recovering. But how are you supposed to know?

The entire financial media should change its angle of view, away from the recovery meme (or myth), but the media won’t because the absurd one-dimensional focus on that perpetuated myth is the only thing that makes the present mess somewhat bearable, palatable and, more importantly, marketable, to the general public.

…click on the above link to read the rest of the article…

Major U.S. Retailers Are Closing More Than 6,000 Stores

May 2, 2015

Major U.S. Retailers Are Closing More Than 6,000 Stores

If the U.S. economy really is improving, then why are big U.S. retailers permanently shutting down thousands of stores? The “retail apocalypse” that I have written about so frequently appears to be accelerating. As you will see below, major U.S. retailers have announced that they are closing more than 6,000 locations, but economic conditions in this country are still fairly stable. So if this is happening already, what are things going to look like once the next recession strikes? For a long time, I have been pointing to 2015 as a major “turning point” for the U.S. economy, and I still feel that way. And since I started The Economic Collapse Blog at the end of 2009, I have never seen as many indications that we are headed into another major economic downturn as I do right now. If retailers are closing this many stores already, what are our malls and shopping centers going to look like a few years from now?

The list below comes from information compiled by About.com, but I have only included major retailers that have announced plans to close at least 10 stores. Most of these closures will take place this year, but in some instances the closures are scheduled to be phased in over a number of years. As you can see, the number of stores that are being permanently shut down is absolutely staggering…

180 Abercrombie & Fitch (by 2015)

75 Aeropostale (through January 2015)

150 American Eagle Outfitters (through 2017)

223 Barnes & Noble (through 2023)

265 Body Central / Body Shop

66 Bottom Dollar Food

25 Build-A-Bear (through 2015)

…click on the above link to read the rest of the article…

The Dwindling US Economy

May 1, 2015

The Dwindling US Economy

The announcement today (April 29) of a barely positive GDP first quarter 2015 growth rate of 0.2 percent (two-tenths of one percent) is an intentional exaggeration.

Today’s GDP report is the “advance estimate.” There will be two revisions, with the first occurring in one month on May 29.

Although the “consensus estimate,” which is Wall Street’s estimate, declined dramatically over the past month, the consensus estimate was for 1.0 percent.

The BEA’s advance estimate bears the burden of impact on financial markets even though it is the least reliable estimate. Subsequent revisions receive much less attention. Because of its market impact, the advance estimate is fudged by the Bureau of Economic Affairs (BEA) in order not to upset financial markets keyed to the consensus forecast.

All indications are that the first quarter experienced negative GDP growth, that is, a decline from the previous quarter. However, if BEA reported a negative GDP when the financial markets were relying on positive real growth, the government’s Plunge Protection Team might be unable to prevent a substantial market decline.

Therefore, the BEA in its advance estimate reported a barely positive result that kept GDP out of negative territory. This gives financial markets a month to undergo an orderly reduction prior to the first and then second revisions of the advance estimate, or simply to forget the poor performance altogether until the second quarter advance estimate.

…click on the above link to read the rest of the article…

Hopium: How Far Can Irrational Optimism Take The U.S. Economy?

April 23, 2015

Hopium: How Far Can Irrational Optimism Take The U.S. Economy?

If enough people truly believe that things will get better, will that actually cause them to get better? There is certainly something to be said for being positive and thinking that anything is possible. And as Americans, optimism seems to come naturally for us. However, no amount of positive thinking is ever going to turn the sun into a block of wood or turn the moon into a block of cheese. Any good counselor will tell you that one of the first steps toward recovery is to stop being delusional and to come to grips with how bad things really are. When we deny reality and engage in irrational wishful thinking, we are engaging in something called “hopium”. This is a difficult term to define, but the favorite definition of hopium that I have come across so far goes like this: “The irrational belief that, despite all evidence to the contrary, things will turn out for the best.” In hundreds of articles, I have documented how the U.S. economy is mired in a long-term decline which is about to get a lot worse. But most Americans see things very differently. In fact, according to a brand new CNN/ORC poll, 52 percent of Americans describe the U.S. economy as “very” or “somewhat good”, and more than two-thirds of all Americans believe that the U.S. economy will be in “good shape” a year from right now. But if you asked most of those people why they are so optimistic, they would probably mumble something about “Obama” or about how “we’re Americans and we always bounce back” or some other such gibberish. Well, it’s wonderful that so many people are feeling good and looking forward to the future, but are those beliefs rational?

…click on the above link to read the rest of the article…

A Field Guide to Negative Progress

April 23, 2015

A Field Guide to Negative Progress

I’ve commented before in these posts that writing is always partly a social activity. What Mortimer Adler used to call the Great Conversation, the dance of ideas down the corridors of the centuries, shapes every word in a writer’s toolkit; you can hardly write a page in English without drawing on a shade of meaning that Geoffrey Chaucer, say, or William Shakespeare, or Jane Austen first put into the language. That said, there’s also a more immediate sense in which any writer who interacts with his or her readers is part of a social activity, and one of the benefits came my way just after last week’s post.

That post began with a discussion of the increasingly surreal quality of America’s collective life these days, and one of my readers—tip of the archdruidical hat to Anton Mett—had a fine example to offer. He’d listened to an economic report on the media, and the talking heads were going on and on about the US economy’s current condition of, ahem, “negative growth.” Negative growth? Why yes, that’s the opposite of growth, and it’s apparently quite a common bit of jargon in economics just now.

Of course the English language, as used by the authors named earlier among many others, has no shortage of perfectly clear words for the opposite of growth. “Decline” comes to mind; so does “decrease,” and so does “contraction.” Would it have been so very hard for the talking heads in that program, or their many equivalents in our economic life generally, to draw in a deep breath and actually come right out and say “The US economy has contracted,” or “GDP has decreased,” or even “we’re currently in a state of economic decline”? Come on, economists, you can do it!

…click on the above link to read the rest of the article…

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