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We are yet to see whether it will be a hard landing or a soft landing by the end of 2023.

Biden’s administration has shamelessly pumped thousands of billions of dollars into the state financial system for less than two years announcing even a brand new ‘New Deal’ and new financial incentives. One wonders if these measures make any sense and if they get any support from ordinary Americans? How do the money printing and continual and excessive borrowing reflect onto the U.S. economy, and does it have any effect on global inflation the way it is forecasted by Nouriel Roubini, an economics professor at NYU Stern, nicknamed “Dr. Doom” who is warning us that the mother of all crises is looming?

Time will tell whether these measures make any sense or not. They seem not to for the time being. Biden’s administration spent about 1,900 billion dollars to offset the effects of COVID pandemic and then 400 billion dollars for the unpayable student loans, them being a major financial issue in the U.S. economy. Student loans total at about 600 billion dollars and the growing trend is that there is an ever-increasing number of unpayable student loans. Meanwhile, 400 billion dollars have been invested to stimulate the climate change-related Green Agenda. Furthermore, the Biden administration has been announcing a brand-new New Deal, which would cost 4700 billion dollars but there does not seem to be any effect afterwards. Each plan is followed by a new one, which tends to be more prohibitively expensive, which in fact boils down to merely fulfilling the vacuous pre-election pledges for Biden’s voters rather than actual genuinely effective plans.

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Are You Prepared for a Hard Landing?

January 6, 2023

Are You Prepared for a Hard Landing?

The New Year brings both optimism and hope. A chance to start fresh. To turn over a new leaf.

The sentiment is welcome. The outcome, however, can be a grave disappointment.

If you recall, 2022 was supposed to be a year of redemption and prosperity. After the ugly coronavirus fiasco, the economy was finally reopening. The general belief was that the resurgence of economic activity was going to bring a new boom and a new cycle of prosperity.

But then something unexpected happened. On the first day of market trading, January 3, 2022, the S&P 500 hit a closing peak of 4,796. Yesterday, just over a year later, the S&P 500 closed at 3,808. Down over 20 percent.

Over this duration, the yield on the 10-Year Treasury note spiked from 1.66 percent to 3.70 percent. In other words, Uncle Sam’s borrowing costs have more than doubled.

At the same time, transitory inflation proved to be enduring. And gross domestic product (GDP) went negative for the first two quarters of 2022.

What happened?

The calendar year may have started anew. But past actions remained. And there was plenty of wreckage from the past to be reconciled.

Much of this wreckage was created by the central planners at the U.S. Treasury Department and the Federal Reserve. Decades of money printing are not without consequences. And, unfortunately, the consequences dramatically impact your life and your livelihood.

The wreckage doesn’t magically disappear when the calendar hits January 1. Rather, it piles up from one year to the next like rotting refuse at a municipal landfill.

How will the central planners manipulate your livelihood in 2023? How will Federal Reserve monetary policy influence your job, investments, and discretionary income?

Here we scratch for answers…

Foolish Ideas

…click on the above link to read the rest…

China Hard Landing Hits Electricity Consumption

March 21, 2016

China Hard Landing Hits Electricity Consumption

Chairman of large power company slips, apparently.

OK, we’ve heard the official story. China is transitioning from a manufacturing economy to a consumption-based economy. Consumers are king. They’re going to buy stuff. And that’s going to heat up the economy.

Imports and exports have been plunging for months, but no big deal, Chinese consumers – and there are a lot of them – are going to pull the economy forward. That’s the official story.

So now we stumble on a report on the Facebook page of the People’s Daily, the official newspaper of the Chinese Communist Party. The report was helpfully in English. And it was a peculiar venue for a report on China: Facebook is still blocked in China.

So the fact the Communist Party rag published it in English and on a venue that is blocked in China makes it seem like this piece of information is not for the Chinese. Maybe it was slipped in by some underling over the weekend while supervisors weren’t paying attention.

That blurb reported that Qiao Baoping, chairman of state-controlled China Guodian Corp, one of the five largest power producers in China, spoke on Saturday at the China Development Forum about the overcapacity of electricity generation in China.

The China Development Forum is a huge deal. It’s organized by the State Council. Dozens of corporate chieftains from around the globe are there, as is IMF’s Christine Lagarde, and other power brokers. Among them is Facebook’s Mark Zuckerberg and Alibaba’s Jack Ma. They shared the stage on Saturday, as Digital Trends put it, “to lavish praise upon the business cultures of America and China.” It was that sort of event.

And then Qiao Baoping gave his speech on overcapacity of electricity generation in China. Among the things he said were these nuggets, according to the People’s Daily:

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

China’s Hard Landing To Trigger Meltdown In India: “We Will See Another Crisis”

January 11, 2016

China’s Hard Landing To Trigger Meltdown In India: “We Will See Another Crisis”

In late September, India “surprised” 51 out of 52 economists by cutting rates a larger than expected 50 bps.

Despite RBI Governor Raghuram Rajan’s penchant for catching markets off guard and despite the fact that exports had fallen for eight consecutive months, economists still failed to predict that anything more than 25 bps was in the cards.

“The weakness in India’s exports is striking, not only in terms of past trend, but also from a cross country perspective,” Deutsche Bank wrote at the time. “Indeed, India’s exports performance has been the weakest in the region in 2015.”

In short: in a world gone Keynesian crazy, you live and die by your willingness to engage in competitive easing and with China having just a month earlier moved to devalue the yuan, India had little choice but to cut lest the export picture should darken further.

Since then the malaise has deepened.

Exports have now fallen for 12 straight months and although some of the decline is probably attributable to slumping prices (as opposed to lower volumes), it’s worrisome nevertheless.

“India’s external trade likely fell for second consecutive year in FY16E, with both exports and imports contracting by 18.5%YoY and 17.2%YoY in the period Apr-Nov’15,” Citi notes, adding that “the meltdown in India’s exports and imports was even sharper than the global tradewhich contracted by 12- 13%YoY.”

On Friday, in the wake of China’s continued devaluation of the yuan, Indian Trade Minister Nirmala Sitharaman expressed concern about the effect a sharply weaker RMB will have on her country’s trade deficit with Beijing. “It’s worrying,” she said. “My deficit with China will widen.”

India is now looking at ways to prevent a flood of cheap imports from hitting domestic producers. “India steel companies such as JSW Ltd have asked the government to set a minimum import price to stop cheap imports undercutting them,” Reuters writes. “A similar measure was adopted in 1999.”

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

China’s Hard-Landing Has Arrived: Chinese Coal Company Fires 100,000

September 27, 2015

China’s Hard-Landing Has Arrived: Chinese Coal Company Fires 100,000

The global commodity collapse is finally starting to take its toll on what China truly cares about: the employment of the tens of millions of currently employed and soon to be unemployed workers.

On Friday, in a move that would make even Hewlett-Packard’s Meg Whitman blush, Harbin-based Heilongjiang Longmay Mining Holding Group, or Longmay Group, the biggest met coal miner in northeast China which has been struggling to reduce massive losses in recent months as a result of the commodity collapse, just confirmed China’s “hard-landing” has arrived when itannounced on its website it would cut 100,000 jobs or 40% of its entire 240,000-strong labor force.

Impacted by the slump in coal prices, the group saw its loss over January-August surged more than 1.1 billion yuan ($17.2 million) from the year before. In the first half of 2015, the group closed eight coking coal mines most of which had approached the end of their mining lives, due to poor production margins amid bleak sales.

Chaiman of the group Wang Zhikui said the job losses were a way of helping the company “stop bleeding.” The heavily-indebted company also plans to sell its non-coal related businesses to help pay off its debts, said Wang. The State-owned mining group has subsidiaries in Jixi, Hegang, Shuangyashan and Qitaihe in Heilongjiang province, which account for about half the region’s coal production.

According to China Daily, last year, Longmay launched a management restructuring and cut thousands of jobs to stay profitable, amid the overall industry decline. However, the company still reported around 5 billion yuan ($815 million) in losses.

It has been a dramatic fall from grace for the company, which in 2011 reported 800 million yuan in profit with annual production exceeding 50 million metric tons.

Experts said staff costs remain a major reason for the company’s continued heavy losses. That, and the ongoing collapse in met coal prices of course.

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

China Entering Ugly Recession, Not Just a “Hard Landing?”

August 29, 2015

China Entering Ugly Recession, Not Just a “Hard Landing?”

A “hard landing” would be tough for China. But it would still mean economic growth, if very slow growth by Chinese standards. At worst, it would mean stagnation. But now, evidence is piling up that the economy is actually shrinking.

There is practically universal agreement outside official Chinese reporting that the economy hasn’t been growing at anything near the official and for most countries awesome rate of 7% in the last two quarters.

In the US, we don’t know what our quarterly GDP growth is either. We get the first estimate, which may be negative, and then the second estimate, which may be worse. Then the third estimate may suddenly be positive, by which time people stopped paying attention. GDP continues to be revised years later. It’s tough to measure a big economy.

But China doesn’t even revise its GDP growth number. It comes out shortly after the quarter ends and stands as rock-solid as the Communist Party itself. And it always matches or exceeds the decreed target.

Hence no one believes it.

Yang Jian, managing editor of Automotive News China, who has been fretting about plunging auto sales, put it this way:

[E]ven some Chinese government officials remain wary of the reliability of economic data released by the National Bureau of Statistics.

Li Keqiang, now Chinese premier, was one of them. When he was head of the local communist party in northeast China’s Liaoning province ten years ago, he invented his own method of gauging the national economy’s performance by relying on three variables government statisticians cannot easily inflate – electricity consumption, rail cargo volume, and bank lending.

Li’s economic model has been widely adopted by researchers these days. In the first half of the year, except for bank lending, electricity consumption and rail car volumes across China both declined….

So how bad is the economy?

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

China’s Hard Landing Suddenly Gets a Lot Rougher

August 9, 2015

China’s Hard Landing Suddenly Gets a Lot Rougher

This has become a sign of the times: Foxconn, with 1.3 million employees the world’s largest contract electronics manufacturer, making gadgets for Apple and many others, and with mega-production facilities in China, inked a memorandum of understanding on Saturday under which it would invest $5 billion over the next five years in India!

In part to alleviate the impact of soaring wages in China.

Meanwhile in the city of Dongguan in China, workers at toy manufacturer Ever Force Toys & Electronics were protesting angrily, demanding three months of unpaid wages. The company, which supplied Mattel, had shut down and told workers on August 3 that it was insolvent. The protests ended on Thursday; local officials offered to come up with some of the money owed these 700 folks, and police put down the labor unrest by force.

These manufacturing plant shutdowns and claims of unpaid wages are percolating through the Chinese economy. The Wall Street Journal:

The number of labor protests and strikes tracked on the mainland by China Labour Bulletin, a Hong Kong-based watchdog, more than doubled in the April-June quarter from a year earlier, partly fueled by factory closures and wage arrears in the manufacturing sector. The group logged 568 strikes and worker protests in the second quarter, raising this year’s tally to 1,218 incidents as of June, compared with 1,379 incidents recorded for all of last year.

The manufacturing sector is responsible for much of China’s economic growth. It accounted for 31% of GDP, according to the World Bank. And a good part of this production is exported. But that plan has now been obviated by events.

Exports plunged 8.3% in July from a year ago, disappointing once again the soothsayers surveyed by Reuters that had predicted a 1% drop. Exports to Japan plunged 13%, to Europe 12.3%. And exports to the US, which is supposed to pull the world economy out of its mire, fell 1.3%. So far this year, in yuan terms, exports are down 0.9% from the same period last year. As important as manufacturing is to China, this debacle is not exactly conducive to economic growth.

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

The Unnerving Thing Global Automakers Just Said About China’s Economy

August 5, 2015

The Unnerving Thing Global Automakers Just Said About China’s Economy

Global automakers, still intoxicated with their own optimism after years of white-hot growth that transformed China’s auto market from a backwater to the largest market in the world, have an increasingly chilling message.

The auto industry is a huge force in driving economic growth in China. Most vehicles sold in China are manufactured in China. The component industry has been booming. The distribution and dealer network has been growing in leaps and bounds. Every new plant and dealership means more construction, more equipment, more jobs. Then there’s finance and insurance and all the other elements that make up the car business. But now there’s a slowdown.

Today it was BMW. China has been BMW’s largest, most promising, nirvana-like market. Not that BMW’s results for Q2 were that bad. The euro’s swoon produced a year-over-year sales gain of 20%. Yet, due to soaring costs, despite the weak euro, net profit fell 1.1%.

The problem: China’s market is “normalizing” and “becoming increasingly competitive,” BMW said in a statement. “In the medium and long term, we remain utterly convinced of China’s potential for growth,” it said. But it warned, “If conditions on the Chinese market become more challenging, we cannot rule out a possible effect on the BMW group’s outlook.”

China’s contribution to BMWs operating profit dropped 23% in Q2, echoing Volkswagen’s report last week. BMW has cut production in China by 16,000 vehicles this year, CFO Friedrich Eichiner explained. He blamed the stock market. As it crashed, it kept customers from making large purchases; others demanded hefty discounts.

“Normalization” means the Chinese market is in the transition from Nirvana to a rough-and-tumble saturated market where brands have to fight each other for market share to get any sales increases. But no problem: “In the medium and long term, however, we remain utterly convinced of its potential for growth…” he said.

…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…

Chinese Economic Outlook “Skewed Heavily To The Downside,” BNP Says

April 21, 2015

Chinese Economic Outlook “Skewed Heavily To The Downside,” BNP Says

Over the past several months we’ve built on several narratives out of China certainly not the least of which is the idea that economic growth in the country is decelerating quickly at a time when accelerating capital outflows make devaluation an unpalatable (if inevitable) proposition. Signs of a dramatic slowdown were on full display earlier this month when GDP growth slipped to 7%, the slowest pace in six years, while key indicators such as rail freight volume have fallen completely off a cliff:

With the country’s tough transition to a service-based economy being made all the more difficult by the hit industrial production will likely take as Beijing ramps up efforts to fight a pollution problem that was thrust back into the spotlight early last month thanks to a viral documentary, it’s reasonable to suspect we’ll be seeing a lot more of the idle cranes, empty construction sites, and half-finished abandoned buildings that greeted Bloomberg metals analyst Kenneth Hoffman who returned from a tour of the country earlier this month. Ultimately, Hoffman’s assessment was that metals demand in China is collapsing and isn’t likely to pick back up for the foreseeable future.

This is bad news for the Chinese economic machine and it’s also bad news for any iron ore miner out there whose marginal costs aren’t low enough to stay profitable in the face of a protracted downturn in prices because if you can’t convince the big guys that your price collusion idea will pass regulatory muster, well, they’ll likely take the opportunity to keep right on producing despite the slump and run you out of business.

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

Why The Record Drop In Chinese House Prices Suggests Beijing Is Already In A Recession

April 19, 2015

Why The Record Drop In Chinese House Prices Suggests Beijing Is Already In A Recession

Another month, and another confirmation that China’s hard landing is if not here, then likely mere months away.

Overnight, the NBS reported that in March, Chinese house prices dropped in 69 of 70 cities compared to a year ago. According to Goldman’s seasonal adjustments, in March home prices dropped another 0.5% from February, the same as the prior month’s decline, suggesting that theFebruary 28 rate cut hasn’t done much to boost housing spirits.

However, it is the annual data that truly stands out, because with a drop of 6.1% this was the biggest drop in Chinese house prices in history.

To be sure, the PBOC is now scrambling to halt what, unless it is stopped, will become a full-blown hard landing in months, if it isn’t already. As a result, as shown in the chart below it has recently engaged in several easing steps, with many more to come according to the sell-side consensus. So far these have failed to stimulate the overall economy, which continues to be pressured by a deflation-importing world, but have certainly lead to a massive surge in the Chinese stock market.

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

China’s “Illusion Of Prosperity” Exposed: Forget Ghost Cities, Meet Ghost Factories | Zero Hedge

January 2, 2015

China’s “Illusion Of Prosperity” Exposed: Forget Ghost Cities, Meet Ghost Factories | Zero Hedge.

Having exposed the 20+1 charts of China’s demise previously, we move to Exhibit (a) in the “illusion of prosperity” that keeps the dream (looking) alive to the outside (mostly Western get-rich-quick fast-money) world – China’s Zombie Factories…

“There are large numbers of companies across China that should go bankrupt but haven’t done so,” says Han Chuanhua, a bankruptcy lawyer at Zhongzi Law Office, a Beijing legal practice.

“The government doesn’t want to see bankruptcy because as soon as companies go bust, unemployment spikes and tax revenues disappear. By stopping companies from going bankrupt, officials are able to maintain the illusion of local prosperity, economic growth and stable taxes.”

Here’s Reuters from earlier last year…

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

The Elephant Dragon In The Room: China’s Hard Landing, In 21 Charts | Zero Hedge

January 2, 2015

The Elephant Dragon In The Room: China’s Hard Landing, In 21 Charts | Zero Hedge.

Back in September, before the crude crash started in earnest driven far more by the relentless Chinese – and global – economic slowdown than anything OPEC may or may not have done (and whose output, as a reminder, hasn’t changed in years and actually declined, indicating the plunge is demand not supply driven) we showed, with the help of a few clear charts, that China is gripped by the worst commodity, and economic, crash in ages.

Today we update where China stands on its path to a very hard landing. As the charts below show, what has been so far a controlled descent is rapidly sliding out of control.

China’s NBS manufacturing PMI at 50.1 in December, down from 50.3 in November, the lowest in one and a half years.

Industrial production (IP) growth declined to 7.2% yoy in November from 7.7% yoy in October. Growth in power production decelerated to 0.6% yoy in November from 1.9% in October.

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

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