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Whiskey Tango Foxtrot

March 19, 2018

Whiskey Tango Foxtrot


Gordon Parks Daytona Beach, Florida. Bethune-Cookman College. Football practice 1943
Here’s a delicious little rant from Dr. D., by now a regular contributor at the Automatic Earth.

Dr. D: The schizophrenia surrounding the tariff plan is really startling. But then I could just say, “the level of insanity everywhere is startling.”

Self-avowed schmartz-guys are all “doesn’t the U.S. know their empire is failing and everybody is cutting them off? What are they thinking starting trade wars with allies and raising prices???” Stop. So your argument is the U.S. is losing its influence, other nations are about to cut it off and end the trade deficit, and thereby basically halt imports? While the U.S. has no internal manufacturing? And your argument here is that, not if but when the world cuts us off we a) would like to have some steel and aluminum to build factories, washing machines and tanks or b) do NOT want to have access to the basic raw materials of society? Whiskey Tango Foxtrot.

I’m sorry that this generation burned down the factory, then retreated to the mansion, sold off and burned all the furniture there too, then ran up the credit card with cocaine and heroin parties while yelling “I’m a rock star! I’m a Contender!”, but they did. Now there are only bad decisions, like the ones real adults have.

And there’s nothing but work to put that factory back up, and that’s going to cost something, in this case, money and higher prices, using the thousand-year method of protective tariffs. Why not? Europe has 25% tariffs. China has a virtual lockout. If the U.S. machine then also has higher real wages for U.S. workers they can afford the tariffs. I mean, what’s their counterargument? If it’s better to not have steel and aluminum, perhaps we should shut down the few remaining foundries and have NO materials? I mean, if a little is bad, surely none is way better.

Mish for example thinks this way: if China is willing to give us cheap, under-market steel we should take it. No, not if you want to have a country, you don’t. Isn’t it a matter of national security to be able to make tanks, ships, railroads, and artillery? There’s more to the world than money.

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

 

Let The Trade Wars Begin: Trump Says He Will Impose Steel, Aluminum Tariffs Next Week

March 1, 2018

Let The Trade Wars Begin: Trump Says He Will Impose Steel, Aluminum Tariffs Next Week

Update III: After the White House said earlier that today’s meeting would be a “listening” meeting, President Trump has taken investors by surprise by announcing that he will impose the long-rumored aluminum and steel sanctions next week.

As expected, Trump said he would impose a 25% tariff on steel imports, and a 10% tariff for aluminum. Meanwhile, here are the initial details as they trickle in:

  • TRUMP: STEEL, ALUMINUM WORKERS HAVEN’T BEEN REPRESENTED
  • U.S. STEEL’S BURRITT TELLS TRUMP COS. NEED LEVEL PLAYING FIELD
  • TRUMP SAYS WILL REBUILD U.S. STEEL AND ALUMINUM INDUSTRIES: RTRS
  • TRUMP, IN MEETING W/ STEEL COS., PRAISES SOLAR TARIFFS HE DID
  • TRUMP SAYS U.S. WILL INSTITUTE TARIFFS NEXT WEEK
  • TRUMP AT STEEL MEETING SAYS NEXT WEEK WILL SIGN SOMETHING
  • TRUMP SAYS 25% TARIFFS FOR STEEL
  • TRUMP SAYS 10% TARIFF FOR ALUMINUM

“Some time next week we’ll be signing it,” Trump said during meeting with steel and aluminum executives at White House. “And you’re going to have protection for the first time in a long time”

Before making the announcement, Trump praised his recent tariffs on solar cells and washing machines, and said they were an example of how tariffs can lead to additional U.S. investment in sectors

Metals stocks such as AK Steel, U.S. Steel, Commercial Metals and Century Aluminum rose to new session highs after Trump’s midday comments. At the same time, the Canadian dollar fell to a fresh 2018 low at 1.2879 before paring its decline slightly; steel and aluminum tariffs remind of the trade tensions between the two countries amid Nafta negotiations.

And the market is not happy…

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

The Great Fall Of China Started At Least 4 Years Ago

November 19, 2015

The Great Fall Of China Started At Least 4 Years Ago

Looking through a bunch of numbers and graphs dealing with China recently, it occurred to us that perhaps we, and most others with us, may need to recalibrate our focus on what to emphasize amongst everything we read and hear, if we’re looking to interpret what’s happening in and with the country’s economy.

It was only fair -perhaps even inevitable- that oil would be the first major commodity to dive off a cliff, because oil drives the entire global economy, both as a source of fuel -energy- and as raw material. Oil makes the world go round.

But still, the price of oil was merely a lagging indicator of underlying trends and events. Oil prices didn‘t start their plunge until sometime in 2014. On June 19, 2014, Brent was $115. Less than seven months later, on January 9, it was $50.

Severe as that was, China’s troubles started much earlier. Which lends credence to the idea that it was those troubles that brought down the price of oil in the first place, and people were slow to catch up. And it’s only now other commodities are plummeting that they, albeit very reluctantly, start to see a shimmer of ‘the light’.

Here are Brent oil prices (WTI follows the trend closely):

They happen to coincide quite strongly with the fall in Chinese imports, which perhaps makes it tempting to correlate the two one-on-one:

But this correlation doesn’t hold up. And that we can see when we look at a number everyone seems to largely overlook, at their own peril, producer prices:

About which Bloomberg had this to say:

China Deflation Pressures Persist As Producer Prices Fall 44th Month

China’s consumer inflation waned in October while factory-gate deflation extended a record streak of negative readings [..] The producer-price index fell 5.9%, its 44th straight monthly decline. [..] Overseas shipments dropped 6.9% in October in dollar terms while weaker demand for coal, iron and other commodities from declining heavy industries helped push imports down 18.8%, leaving a record trade surplus of $61.6 billion.

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

Everything’s Deflating And Nobody Seems To Notice

October 22, 2015

Everything’s Deflating And Nobody Seems To Notice

Whenever we at the Automatic Earth explain, as we must have done at least a hundred times in our existence, that, and why, we refuse to define inflation and deflation as rising or falling prices (only), we always get a lot of comments and reactions implying that people either don’t understand why, or they think it’s silly to use a definition that nobody else seems to use.

-More or less- recent events, though, show us once more why we’re right to insist on inflation being defined in terms of the interaction of money-plus-credit supply with money velocity (aka spending). We’re right because the price rises/falls we see today are but a delayed, lagging, consequence of what deflation truly is, they are not deflation itself. Deflation itself has long begun, but because of confusing -if not conflicting- definitions, hardly a soul recognizes it for what it is.

Moreover, the role the money supply plays in that interaction gets smaller, fast, as debt, in the guise of overindebtedness, forces various players in the global economy, from consumers to companies to governments, to cut down on spending, and heavily. We are as we speak witnessing a momentous debt deleveraging, or debt deflation, in real time, even if prices don’t yet reflect that. Consumer prices truly are but lagging indicators.

The overarching problem with all this is that if you look just at -consumer- price movements to define inflation or deflation, you will find it impossible to understand what goes on. First, if you wait until prices fall to recognize deflation, you will tend to ignore the deflationary moves that are already underway but have not yet caused prices to drop. Second, when prices finally start falling, you will have missed out on the reason why they do, because that reason has started to build way before a price fall.

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

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