One of the primary things that Trump’s presidency will be judged upon is his ability to encourage the creation of good paying jobs for American workers, and so far the results have been quite promising. Since Trump’s surprise election victory in November, a whole bunch of companies have either promised to bring jobs back into the country or have pledged to create new ones. Ultimately time will tell if those jobs actually materialize, but for the moment there is a tremendous amount of optimism in the air. In fact, I don’t know if we have ever seen anything quite like this at the beginning of a new presidency. The following are 10 companies that have promised to add jobs in the United States since the election of Donald Trump…
#6 Sprint has announced that 5,000 jobs will be brought back to the United States instead of going overseas.
#7 After meeting with Trump, the CEO of SoftBank stated his intention to create 50,000 new jobs in the United States.
#8 After a phone call from Trump, industrial manufacturing giant Carrier promised to keep hundreds of jobs in the United States instead of moving them out of the country.
#9 Hyundai has promised to spend 3.1 billion dollars supporting their current factories in Georgia and Alabama, and they have said that they are now considering adding an additional factory in the United States as well.
#10 GM has pledged to invest a billion dollars in U.S. factories and to add or keep 7,000 jobs in the United States.
Unlike most politicians, so far Donald Trump seems determined to actually keep many of the promises that he made during the campaign. And on Monday he kept a very important promise by pulling the U.S. out of the Trans-Pacific Partnership. If you are not familiar with the Trans-Pacific Partnership, the following is a pretty good summary from USA Today…
The TPP is a comprehensive trade agreement among 12 Pacific Rim countries, not including China, that was signed last year by President Obama after seven years of negotiation. But the Senate had not yet ratified it. The 30-chapter pact, which also needed to be ratified by other countries before Trump’s order Monday, primarily aims to boost exports, remove tariffs and non-tariff barriers, open access to more markets and usher in transparency in trade rules.
The 12 nations that were to be included in the Trans-Pacific Partnership collectively account for approximately 40 percent of global GDP. So it was going to be a very big deal, and it is something that Barack Obama had been working on for many years.
But with one stroke of a pen it is over, and as I will explain below that is a very good thing.
On Nafta, Trump said Sunday that he’ll meet with Canadian Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto to begin discussing the deal, which he has routinely blamed for the loss of U.S. jobs although there was little change to employment in the U.S. in several years after it went into effect. Trump signaled that he’s willing to work with the U.S.’s closest neighbors.
“We’re going to start renegotiating on Nafta, on immigration, and on security at the border,” Trump said at the start of a swearing-in ceremony for top White House staff. “I think we’re going to have a very good result for Mexico, for the United States, for everybody involved. It’s really very important.”
Nobody is suggesting that we shouldn’t trade with the rest of the world, but what Donald Trump understands that so many other politicians do not is that many of these “free trade deals” have been extremely destructive to the U.S. economy.
For years, we have been buying far, far more from the rest of the world than they have been buying from us. As a result of our massive trade deficits, there has been a continual flow of cash, jobs and businesses leaving the country.
Over the past several decades, formerly great manufacturing cities such as Detroit have been reduced to urban hellholes. Meanwhile, China has become exceedingly wealthy and gleaming new factories have sprouted like mushrooms in their major cities.
This didn’t happen by accident.
Bad decisions lead to bad results. And if we had kept on doing the same things, we would have continued to systematically impoverish our nation.
For more than seven years, I have been hammering home the message that our trade policies have been absolutely killing us. So I am quite thankful that we finally have a president that understands these things.
Of course there is much more to fixing our economy than just addressing our trade deals. As I discussed yesterday, our rapidly growing debt is becoming a major crisis, and that is going to present quite a challenge for Trump.
But for the moment, we should definitely celebrate the fact that Trump has gotten us out of the TPP and that he plans to renegotiate NAFTA.
Donald Trump understands business, and it is going to be fascinating to watch how a businessman handles the position of the presidency. It has only been a few days, but already some of his former critics seem to be coming around a little bit. For instance, just consider what Mark Cuban is saying…
The Dallas Mavericks owner and entrepreneur is “playing it by ear” when it comes to the effect President Donald Trump’s policies will have on the stock market. But he thinks there’s possible upside.
“I think the discussed economic programs are potentially a big plus for public companies and the overall economy,” Mr. Cuban said in an e-mail Monday morning.
The potential policies Mr. Cuban is optimistic about: corporate tax cuts; getting rid of the “friction” for small businesses; and reducing and simplifying administrative activities.
Considering our current trajectory and the immense amount of long-term damage that was done during the Obama years, it is hard to be optimistic about the future of the U.S. economy.
However, I am certainly willing to give Donald Trump a chance to show what he can do.
At least he is doing things differently than his predecessors did, and that is to be greatly applauded because the road that we were on clearly would have ended in economic oblivion.
We may very well end up there anyway, but there is certainly nothing wrong with being hopeful that Trump can somehow turn things around.
What is going to happen when America finally doesn’t have any manufacturing jobs left at all? On Wednesday, we learned that Ford Motor Company is shifting all small car production to Mexico. Of course the primary goal for this move is to save a little bit of money. This hits me personally, because my grandfather once worked for Ford. He was loyal to Ford all his life, and he always criticized other members of the family when they bought a vehicle that was not American-made. When I was young I didn’t understand why making vehicles in America is so important, but I sure do now. By shipping jobs overseas, we are destroying jobs, we are destroying small businesses and we are destroying our tax base. If we want to be a wealthy nation, we have got to make things here, and hopefully we can get the American people to start to understand this.
In 1914, Henry Ford decided to start paying his workers $5.00 a day, which was more than double the average wage for auto workers at the time.
One of the reasons why he did this was because he felt that his workers should be able to afford to buy the vehicles that they were making. This is what he wrote in 1926…
“The owner, the employees, and the buying public are all one and the same, and unless an industry can so manage itself as to keep wages high and prices low it destroys itself, for otherwise it limits the number of its customers. One’s own employees ought to be one’s own best customers.”
These days Ford is going in the complete opposite direction. Pretty soon, Ford won’t be making any more small vehicles in the United States at all…
Ford is shifting all North American small-car production from the U.S. to Mexico, CEO Mark Fields told investors today in Dearborn, even though its plans to invest in Mexico have become a lightning rod for controversy in this year’s presidential election.
“Over the next two to three years, we will have migrated all of our small-car production to Mexico and out of the United States,” Fields said.
Could Ford keep jobs in America?
Of course they could. During the second quarter of 2016, Ford reported a net income of 2,000,000,000 dollars.
But if they move production to Mexico they can boost that profit just a little bit higher.
Shame on them.
Needless to say, Donald Trump is quite upset about this move by Ford. This was his response…
“We shouldn’t allow it to happen. They’ll make their cars, they’ll employ thousands of people, not from this country and they’ll sell their car across the border,” Trump said. “When we send our jobs out of Michigan, we’re also sending our tax base.”
And he is exactly right about all of this. We can’t afford to lose more good paying jobs, we can’t afford for the middle class to shrink any more than it already has, and we certainly can’t afford our tax base to continue to deteriorate.
We may think that we can live on borrowed money indefinitely, but that is going to catch up with us in a major way at some point.
Sadly, Ford is not the only auto company doing this. Just like Ross Perot once predicted, there is a giant sucking sound as good paying auto jobs leave the United States and head to Mexico…
Ford isn’t alone. Fiat Chrysler Automobiles said earlier this year it will end production of all cars in the U.S. by the end of this year as it discontinues production of the Dodge Dart in Belvidere, Ill. and the Chrysler 200 in Sterling Heights, Michigan.
In recent years, automakers that include General Motors, Honda, Hyundai, Nissan, Mazda, Toyota and Volkswagen have all announced plans to either expand existing plants or build new ones in Mexico.
The bad news for American workers won’t end once all of our manufacturing jobs are gone.
Today there are millions of Americans that make their living by driving, but the revolution in self-driving vehicles threatens to make large numbers of those jobs obsolete.
Ford, General Motors, Tesla, Google, Apple and a whole host of other big corporations have been feverishly working on this technology, and many of the tests have gone very well so far.
Once this technology starts being rolled out on a widespread basis, the job losses could be absolutely staggering. Just consider the following numbers which come from Wolf Richter…
1.8 million heavy-truck and tractor-trailer long-haul drivers in 2014, expected to grow 4% a year (BLS), with a median pay of $40,260 in 2015. At this growth rate, there will be 1.94 million long-haul drivers by the end of this year.
1.33 million delivery truck drivers in 2014, expected to grow 4% a year (BLS), with a median pay of $27,800 in 2015. They’re picking up and/or delivering packages and small shipments within the city or region, driving a vehicle of 26,000 pounds or less, usually between a distribution center and businesses or households. At this growth rate, there will be 1.44 million drivers by the end of this year.
233,700 taxi drivers and chauffeurs in 2014, growing at 13% annually (BLS). They earned a median pay of $23,510 in 2015. One in five worked part time. This doesn’t – or doesn’t fully – reflect the “rideshare” drivers working for Uber, Lyft, and the like.
“Over 500,000” rideshare drivers are estimated to ply the trade in the US. It’s a high-growth sector: the number of Uber drivers in the US doubled in 2015 from the prior year to 327,000. Half of them worked 15 hours or less per week.
In order to have a thriving middle class, we have got to have middle class jobs.
Unfortunately, big corporations have become absolutely obsessed with finding ways to eliminate expensive American workers by sending jobs overseas or by replacing them with technology altogether.
The elite will always need people to cut their hair and wait on them at restaurants, but those aren’t the kinds of jobs that can support middle class families.
As I noted yesterday, for the first time ever the middle class in America has become a minority and poverty is on the rise all over the nation. The long-term trends that are eviscerating the middle class are accelerating, and there doesn’t appear to be any quick fix which will turn things around dramatically any time soon.
So the middle class is going to get smaller and smaller and smaller, and that has dramatic implications for the future of this country.
Why does it seem like almost everything is made in China these days? Yesterday I was looking at some pencils that we had laying around the house and I noticed that they had been manufactured in China. I remarked to my wife that it was such a shame that they don’t make pencils in the United States anymore. At another point during the day, I turned over my television remote and I noticed that it also had “Made In China” engraved on it. It is still Labor Day as I write this article, and so I think that it is quite appropriate to write about our transition from an industrial economy to a paper economy today. Since the year 2000, the United States has lost five million manufacturing jobs even though our population has grown substantially since that time. Manufacturing in America is in a state of stunning decline, our economic infrastructure is being absolutely gutted, and our formerly great manufacturing cities are in an advanced state of decay. We consume far more wealth than we produce, and the only way that we are able to do this is by taking on massive amounts of debt. But is our debt-based paper economy sustainable in the long run?
Back in 1960, 24 percent of all American workers worked in manufacturing. Today, that number has shriveled all the way down to just 8 percent. CNN is calling it “the Great Shift”…
In 1960, about one in four American workers had a job in manufacturing. Today fewer than one in 10 are employed in the sector, according to government data.
Call it the Great Shift. Workers transitioned from the fields to the factories. Now they are moving from factories to service counters and health care centers. The fastest growing jobs in America now are nurses, personal care aides, cooks, waiters, retail salespersons and operations managers.
No wonder the middle class is shrinking so rapidly. There aren’t too many cooks, waiters or retail salespersons that can support a middle class family.
Since the turn of the century, we have lost more than 50,000 manufacturing facilities. Meanwhile, tens of thousands of gleaming new factories have been erected in places like China.
Does anyone else see something wrong with this picture?
At this point, the total number of government employees in the United States exceeds the total number of manufacturing employees by almost 10 million…
Federal, state and local government employed 22,213,000 people in August, while the manufacturing sector employed 12,281,000.
The BLS has published seasonally-adjusted month-by-month employment data for both government and manufacturing going back to 1939. For half a century—from January 1939 through July 1989—manufacturing employment always exceeded government employment in the United States, according to these numbers.
You might be thinking that government jobs are “good jobs”, but the truth is that they don’t produce wealth. Government employees are really good at pushing paper around and telling other people what to do, but in most instances they don’t actually make anything.
In order to have a sustainable economy, you have got to have people creating and producing things of value. A debt-based paper economy may seem to work for a while, but eventually the whole thing inevitably comes crashing down when faith in the paper is lost.
Right now, the rest of the world is willing to send us massive amounts of stuff that they produce for our paper. So we keep producing more and more paper and we keep going into more and more debt, but at some point the gig will be up.
If we want to be a wealthy nation in the long-term, we have got to produce stuff. That is why the latest news from Caterpillar is so depressing. In addition to the thousands of layoffs that had been previously announced by the industrial machinery giant, it appears that a fresh wave of layoffs has arrived…
Hundreds of mostly office employees received layoff notices at one of the largest Caterpillar Inc. facilities in the Peoria area this week, just as the company announced plans to close overseas production plants and eliminate thousands more positions.
A total of 300 support and management employees at Building AC and the Tech Center in Mossville this week received job loss notifications that included severance packages, 60 days notice and mandated Illinois Worker Adjustment and Retraining Notification Act letters.
During this election season, you will hear many of our politicians talk about how good “free trade” is for the global economy. But that is only true if the trade is balanced. Unfortunately, we have been running a yearly trade deficit of between 400 billion dollars and 600 billion dollars for many years…
When you have got about half a trillion dollars more going out than you have coming in year after year that has severe consequences.
Let me try to break it down very simply.
Imagine that I am the United States and you are China. I take one dollar out of my wallet and I give it to you and then you send me some stuff.
After a while, I want more stuff, so I take another dollar out of my wallet and send it to you in exchange for more products.
But that stuff only lasts for so long, and so pretty soon I find myself taking another dollar out of my wallet and giving it to you for even more stuff.
Ultimately, who is going to end up with all the money?
It isn’t a big mystery as to how China ended up with so much money. And when we can’t pay our bills we have to go and beg them to let us borrow some of the money that we sent to them in the first place. Since we pay interest on that borrowed money, that makes China even richer.
This is why I am so obsessed with these trade issues. They truly are at the very heart of our long-term economic problems.
But most Americans don’t understand these things, and they seem to think that our debt-based paper economy can just keep rolling along indefinitely.
In the end, history will be the judge as to who was right and who was wrong.
Exports fell precipitously during the last two recessions, and now it is happening again. So how in the world can anyone make the claim that the U.S. economy is in good shape? On my website I have been repeatedly pointing out the parallels between the last two major economic downturns and the current crisis, and I am going to discuss another one today. Since peaking in late 2014, U.S. exports have been steadily declining, and this is something that we never see outside of a major recession. On the chart that I have shared below, the shaded gray bars represent the last two recessions, and you can see that exports of goods and services plunged dramatically in both instances…
The U.S. trade deficit widened more than expected in January as a strong dollar and weak global demand helped to push exports to a more than 5-1/2-year low, suggesting trade will continue to weigh on economic growth in the first quarter.
The Commerce Department said on Friday the trade gap increased 2.2 percent to $45.7 billion. December’s trade deficit was revised up to $44.7 billion from the previously reported $43.4 billion. Exports have declined for four straight months.
Because our exports are falling faster than our imports, our trade deficit is blowing out once again. Every year we buy hundreds of billions of dollars more from the rest of the world than they buy from us, and this is systematically wrecking our economy. Over the past several decades, we have lost tens of thousands of manufacturing facilities, millions of good paying manufacturing jobs, and major exporting nations such as China have become exceedingly wealthy at our expense.
We are being absolutely killed on trade, and yet very few of our politicians ever want to talk about this.
A brand new study that was recently discussed in the New York Times is bringing some renewed attention to these problems. It turns out that the promised “benefits” of merging the U.S. economy into the global economic system simply have not materialized…
In a recent study, three economists — David Autor at the Massachusetts Institute of Technology, David Dorn at the University of Zurich and Gordon Hanson at the University of California, San Diego — raised a profound challenge to all of us brought up to believe that economies quickly recover from trade shocks. In theory, a developed industrial country like the United States adjusts to import competition by moving workers into more advanced industries that can successfully compete in global markets.
They examined the experience of American workers after China erupted onto world markets some two decades ago. The presumed adjustment, they concluded, never happened. Or at least hasn’t happened yet. Wages remain low and unemployment high in the most affected local job markets. Nationally, there is no sign of offsetting job gains elsewhere in the economy. What’s more, they found that sagging wages in local labor markets exposed to Chinese competition reduced earnings by $213 per adult per year.
Another study conducted by some of the same researchers discovered that 2.4 million American jobs were lost between 1999 and 2011 due to rising Chinese imports.
The China Containerized Freight Index (CCFI), published weekly, tracks contractual and spot-market rates for shipping containers from major ports in China to 14 regions around the world. Unlike most Chinese government data, this index reflects the unvarnished reality of the shipping industry in a languishing global economy. For the latest reporting week, the index dropped 4.1% to 705.6, its lowest level ever.
How many numbers like this do we have to get before we will all finally admit that we are in the midst of a major global economic meltdown?
Here in the United States, the recent rally in the stock market has most people feeling pretty good about things these days. But the truth is that there are ups and downs during any financial crisis, and this recent rally is putting the finishing touches on a very dangerous leaning “W” pattern that could signal a big dive ahead.
The bull market from early 2009 into May 2015 looks just like every bubble in history, and I’m getting one sign after the next that we did indeed peak last May. The dominant pattern in the stock market is the “rounded top” pattern:
After trading in a steep, bubble-like channel from late 2011 into late 2014, with only 10% maximum volatility top to bottom, the market finally lost its momentum… just as the Fed finished tapering its QE. That’s because the Fed was the primary driver in this stock bubble in the first place!
Now is not the time to relax at all.
In fact, now is the time to sound the alarm louder than ever.
That is one reason why my wife and I have started up a new television program. It will be airing on Christian television, but it will also be available on YouTube as well…
As I have said before, 2016 is the year when everything changes.
So don’t be fooled just because the stock market had a couple of good weeks. The truth is that global economic activity is slowing down significantly, geopolitical instability continues to get even worse, and this political season has caused very deep, simmering tensions in the United States to rise to the surface.
Let us hope that we have a few more weeks of relative stability like we are currently experiencing so that we can have more time to get prepared, but I certainly wouldn’t count on it.
We just got more evidence that global trade is absolutely imploding. Chinese exports dropped 25.4 percent during the month of February compared to a year ago, and Chinese imports fell 13.8 percent compared to a year ago. For Chinese exports, that was the worst decline that we have seen since 2009, and Chinese imports have now fallen for 16 months in a row on a year over year basis. The last time we saw numbers like this, we were in the depths of the worst economic downturn since the Great Depression of the 1930s. China accounts for more global trade than any other nation (including the United States), and so this is a major red flag. Anyone that is saying that the global economy is in “good shape” is clearly not paying attention.
If someone would have told me a year ago that Chinese exports would be 25 percent lower next February, I would not have believed it. This is not just a slowdown – this is a historic implosion. The following comes from Zero Hedge…
Things are not getting better in China as Exports crashed 25.4% YoY (the 3rd largest drop in history), almost double the 14.5% expectation and Imports tumbled 13.8%, the 16th month of YoY decline – the longest ever. Altogether this sent the trade surplus down to $32.6bn (missing expectations of $51bn) to 11-month lows.
So much for that whole “devalue yourself to export growth” idea…
I don’t know how anyone can possibly dismiss the importance of these numbers. As you can see, this is not just a one month aberration. Chinese trade numbers have been declining for months, and that decline appears to be accelerating.
Another very interesting piece of news that has come out in recent days regards the massive layoffs that are coming at state industries in China. According to Reuters, five to six million Chinese workers are going to be losing their jobs during this transition…
China aims to lay off 5-6 million state workers over the next two to three years as part of efforts to curb industrial overcapacity and pollution, two reliable sources said, Beijing’s boldest retrenchment program in almost two decades.
China’s leadership, obsessed with maintaining stability and making sure redundancies do not lead to unrest, will spend nearly 150 billion yuan ($23 billion) to cover layoffs in just the coal and steel sectors in the next 2-3 years.
For years, the Chinese economic miracle has been fueling global economic growth, but now things are changing dramatically.
Another factor that we should discuss is the fact that the relationship between the United States and China is going downhill very rapidly. This is something that I wrote about yesterday. China has seized control of several very important islands in the South China Sea, and in response the Obama administration has been sailing military vessels past the islands in a threatening manner. Most recently, Obama decided to have an aircraft carrier task force cruise past the islands, and this provoked a very angry response from the Chinese…
The four-ship U.S. strike group that patrolled the disputed South China Sea was followed by Chinese warships, a show of force that prompted a hard-line response from China doubling down on its claim to nearly all of the resource-rich sea.
China’s foreign minister said his country’s sovereignty claims are supported by history and made a veiled reference to the 5-day patrol by the Stennis Carrier Strike Group, as well as recent passes by China’s man-made islands by destroyers Lassen and Curtis Wilbur in recent months.
“The South China Sea has been subject to colonial invasion and illegal occupation and now some people are trying to stir up waves, while some others are showing off forces,” Wang Yi said, according to an Associated Press report, a day after the Stennis CSG departed the South China Sea. “However, like the tide that comes and goes, none of these attempts will have any impact. History will prove who is merely the guest and who is the real host.”
Most Americans are not even paying attention to this dispute, but in China there is talk of war. The Chinese are absolutely not going to back down, and it does not look like Obama is going to either. Needless to say, a souring of the relationship between the largest economy on the planet and the second largest economy on the planet would not be a good thing for the global economy.
And of course China is far from the only country that is having economic problems. Yesterday, I discussed how Italy’s banking system is on the verge of completely collapse. A few days before that I discussed the economic depression that has gripped much of South America. A new global economic crisis has already begun, and just because the United States is feeling less pain than the rest of the world so far does not mean that everything is going to be okay.
There are huge red flags in Europe, Asia and South America right now. In addition, our neighbor to the north (Canada) is experiencing a very significant slowdown. The irrational optimists can continue to believe that the U.S. economy will somehow escape relatively unscathed if they would like, but that is not going to be what happens.
Just like virtually everyone else on the planet, we are heading into hard times too, and this is going to become a dominant theme in the presidential campaign as we move forward into the months ahead.
The 7th largest economy on the entire planet is completely imploding. I have written previously about the economic depression that is plaguing Brazil, but since my last article it has gotten much, much worse. During 2015, Brazil’s economy shrank by 3.8 percent, but for the most recent quarter the decline was 5.89 percent on a year over year basis. Unemployment is rising rapidly, the inflation rate is up over 10 percent, and Brazilian currency has lost 24 percent of its value compared to the U.S. dollar over the past 12 months.
At this point, Brazil is already experiencing its longest economic downturn since the Great Depression of the 1930s, and things are getting worse for ordinary Brazilians every single day. The following comes from CNN…
But with Brazil plunging into its worst recession in over two decades — hopes for a brighter future are fading. The Brazilian economy shrank 3.8% in 2015, according to government data published Thursday. That’s the biggest annual drop since 1990 and the country is in its longest recession since the 1930s.
“I have never seen anything like this,” said Alves, 24, as he stood on his balcony overlooking Rocinha, a massive lower middle class neighborhood or favela in Rio de Janeiro where he grew up. “My parents would tell me about hard times, but today it is really tough. Prices are going up every day.”
So how did this happen?
Well, there are a couple of factors that are really hurting South American economies.
Number one, during the “boom years” governments and businesses in South America absolutely gorged on debt. Unfortunately, many of those loans were denominated in U.S. dollars, and now that the U.S. dollar has appreciated greatly against local South American currencies it is taking far more of those local currencies to service and pay back those debts.
Number two, collapsing prices for oil and other commodities have been absolutely brutal for South American economies. They rely very heavily on exporting commodities to the rest of the world, and so at the same time their debt problems are exploding they are getting a lot less money for the oil and industrial commodities that they are trying to sell to North America, Asia and Europe.
I want you to pay close attention to the following chart and analysis from Zero Hedge. As you can see, the economic problems in Brazil appear to be greatly accelerating…
“The Brazilian economic downturn took a real turn for the worse in February,” according to Markit’s Composite PMI, which collapsed to record lows at 39.0. Despite a slightly less bad than expected GDP print this morning (still down a record 5.89% YoY), hope was quickly extinguished as PMIs showed economic activity continuing to contract at a record pace, job losses accelerating, and manufacturing’s collapse accelerating. As Market sums up, “With the global economy also showing signs of slowing, which will impact on external demand, it looks as if the downturn is set to continue to run its course in the coming months.”
GDP was a disaster (but better than expected)
And of course Brazil is not the only South American economy that is a basket case right now. In fact, things in Venezuela are far worse. In 2015, the Venezuelan economy shrunk by 10 percent, and the official rate of inflation was a staggering 181 percent.
Could you imagine living in an economy with a 181 percent inflation rate?
As prices have escalated out of control, citizens have attempted to hoard basic supplies in advance, and this has resulted in food shortages that are absolutely frightening…
Cardboard signs on the door warning of “No bread” have become increasingly common at Venezuelan bakeries.
Venezuela gets 96 percent of its foreign currency from oil exports, and as crude prices have plunged, so have the country’s imports — among them wheat.
The leftist government of President Nicolas Maduro has tightly controlled access to hard currency, and this has affected imports ranging from medicine to toilet paper. Now it is seriously affecting imports of wheat, which Venezuela does not grow.
Add to this the soaring inflation rate — 181 percent in 2015, the world’s highest — and you see why customers are mainly interested in buying basic food items such as bread.
Here in the United States, there are still people who doubt that an economic crisis is happening.
But in Venezuela and Brazil there is no debate.
Unfortunately, what is happening in Venezuela and Brazil is also slowly starting to happen to most of the rest of the planet as well. It is just that they are a little farther down the road. Economic and financial bubbles are bursting all over the world, and I like how author Vikram Mansharamani described this phenomenon during a recent interview with CNBC…
Deflationary tides are lapping the shores of countries across the world and financial bubbles are set to burst everywhere, Vikram Mansharamani, a lecturer at Yale University, told CNBC on Thursday.
“I think it all started with the China investment bubble that has burst and that brought with it commodities and that pushed deflation around the world and those ripples are landing on the shore of countries literally everywhere,” the high-profile author and academic said at the Global Financial Markets Forum in Abu Dhabi.
And of course the evidence of what Mansharamani was talking about is all around us.
We haven’t seen numbers like these since the last global recession. I recently wrote about how global trade is imploding all over the planet, and the same thing is true when it comes to manufacturing. We just learned that manufacturing in China has now been contracting for seven months in a row, and as you will see below, U.S. manufacturing is facing “its toughest period since the global financial crisis”. Yes, global stocks have bounced back a bit after experiencing dramatic declines during January and the first part of February, and this is something that investors are very happy about. But that does not mean that the crisis is over. All bear markets have their ups and downs, and this one will not be any different. Meanwhile, the cold, hard economic numbers that keep coming in are absolutely screaming that a new global recession is here.
Just consider what is happening in China. Manufacturing activity continues to implode, and factories are shedding jobs at the fastest pace since the last financial crisis…
Chinese manufacturing suffered a seventh straight month of contraction in February.
China’s official Purchasing Managers’ Index (PMI) stood at 49.0 in February, down from the previous month’s reading of 49.4 and below the 50-point mark that separates growth from contraction on a monthly basis.
A private survey also showed China’s factories shed jobs at the fastest rate in seven years in February, raising doubts about the government’s ability to reduce industry overcapacity this year without triggering a sharp jump in unemployment.
For years, the expansion of the Chinese economy has helped fuel global economic growth. But now things have shifted dramatically.
At this point, things are already so bad that the Chinese government is admitting that millions of workers are going to lose their jobs at state-controlled industries in China…
China’s premier told visiting U.S. Treasury Secretary Jacob Lew on Monday his government is pressing ahead with painful reforms to shrink bloated coal and steel industries that are a drag on its slowing economy and ruled out devaluing its currency as a short-cut to boosting exports.
Premier Li Keqiang’s comments to Lew on Monday were in line with a joint declaration by financial officials from the Group of 20 biggest rich and developing economies who met over the weekend in Shanghai. They pledged to avoid devaluations to boost sagging trade and urged governments to speed up reforms to boost slowing global growth.
Across all state-controlled industries, as many as six million workers could be out of a job, with almost two million in the coal industry alone.
But it isn’t just China. Right now manufacturing activity is slowing down literally all over the planet, and this is exactly what we would expect to see if a new global recession had begun. The following chart and analysis come from Zero Hedge…
As the below table shows, 28 regions have reported so far. Seven saw improvements in their manufacturing sectors in February, twenty recorded a weakening, and India was unchanged. This means that over 70% of the world saw manufacturing sentiment deteriorate in February compared to January.
In terms of actual expansion, there were 21 countries in positive territory and 7 in negative. In particular, Greece moved from neutral to contraction territory, while Taiwan dropped below breakeven from expansion.
Unfortunately, most Americans don’t really pay much attention to what is going on in the rest of the world. For most of us, what really matters is what is happening inside the good ole USA.
And of course the news is not good. There were more signs of trouble for U.S. manufacturing in the February numbers, and this continues a trend that stretches back well into last year. The following is what Chris Williamson, the chief economist at Markit, had to say about these numbers…
“The February data add to signs of distress in the US manufacturing economy. Production and order book growth continues to worsen, led by falling exports. Jobs are being added at a slower pace and output prices are dropping at a rate not seen since mid-2012.
“The deterioration in the manufacturing sector’s performance since mid-2014 has broadly tracked the dollar’s rise, which makes US goods more expensive in overseas markets and leads US consumers to favour cheaper imported goods.
“With other headwinds including the downturn in the oil sector, heightened uncertainty due to financial market volatility, global growth worries and growing concerns about the presidential election, it’s no surprise that the manufacturing sector is facing its toughest period since the global financial crisis.“
Over the past couple of decades, the U.S. economy has lost tens of thousands of manufacturing facilities. We desperately need a manufacturing renaissance – not another manufacturing decline.
As good paying manufacturing jobs have been shipped overseas, they have been replaced by low paying service jobs. As a result, the middle class is shrinking and the ranks of the poor are exploding.
And no matter what Obama may say, unemployment remains a major problem in the United States as well. At this point, unemployment rates in 36 states are higher than they were just before the last recession hit in 2008.
Of course a lot of people are going to look at this article and will point to the stock market gains of the past couple of weeks as evidence that “things are getting better”. It is this kind of clueless approach that is keeping the American people from coming together on solutions to our problems.
The truth is that the United States has been experiencing economic decline for decades. Our economic infrastructure has been gutted, the middle class is steadily deteriorating, and we have amassed the biggest pile of debt in the history of the world.
Anyone that believes that things are “just fine” is in a massive state of denial. Consuming far more wealth than we produce is not a formula for a sustainable economy, and it is just a matter of time before we find this out the hard way.
After a series of stunning declines through the month of January and the first half of February, global financial markets seem to have found a patch of relative stability at least for the moment. But that does not mean that the crisis is over. On the contrary, all of the hard economic numbers that are coming in from around the world tell us that the global economy is coming apart at the seams. This is especially true when you look at global trade numbers. The amount of stuff that is being bought, sold and shipped around the planet is falling precipitously. So don’t be fooled if stocks go up one day or down the next. The truth is that we are in the early chapters of a brand new economic meltdown, and I believe that all of the signs indicate that it will continue to get worse in the months ahead. The following are 21 new numbers that show that the global economy is absolutely imploding…
#1 Chinese exports fell by 11.2 percent year over year in January.
#2 Chinese imports were even worse in January. On a year over year basis, they declined a whopping 18.8 percent.
#3 It may be hard to believe, but Chinese imports have now plunged for 15 months in a row.
#4 In India, exports were down 13.6 percent on a year over year basis in January.
#5 In Japan, exports declined 8 percent in December on a year over year basis, while imports plummeted 18 percent.
-The Gap is in the process of closing 175 stores in North America.
-Aeropostale is in the process of closing 84 stores all across America.
-Finish Line has announced that 150 stores will be shutting down over the next few years.
-Sears has shut down about 600 stores over the past year or so, but sales at the stores that remain open continue to fall precipitously.
#19 The price of gold is enjoying its best quarterly performance in 30 years.
#20 Global stocks have fallen into bear market territory, which means that about one-fifth of all global stock market wealth has already been wiped out.
#21 Unfortunately for global central banks, they have pretty much run out of ammunition. Since March 2008, central banks have cut interest rates 637 times and they have purchased a staggering 12.3 trillion dollars worth of assets. There is not much more that they can do, and now the next great crisis is upon us.
Without any outside influences, the global economy and the global financial system will continue to rapidly fall apart.
But if we do have a major “black swan event” take place, that could cause the bottom to fall out at any moment.
“Some countries like us, Saudi Arabia and some other Western European countries have said that a ground operation is necessary,” Turkish Foreign Minister Mevlut Cavusoglu told Reuters in an interview.
However, this kind of action could not be left to regional powers alone. “To expect this only from Saudi Arabia, Turkey and Qatar is neither right nor realistic. If such an operation is to take place, it has to be carried out jointly, like the (coalition) air strikes,” he said.
The Turks and the Saudis very much want the United States to take a leading role in any ground invasion of Syria, but the Obama administration is not likely to do that.
So we shall see if the Turks and the Saudis are willing to go ahead without us. Let us hope that they do not decide to invade Syria, because that could start the biggest war in the Middle East that any of us have ever seen.
Unfortunately, Turkey is already attacking.
Turkey has been shelling Kurdish and Syrian military positions in northern Syria for four days in a row even though the Obama administration has been urging them to stop.
The first month and a half of 2016 has already been quite chaotic, and the stage is set for global events to greatly accelerate during the months ahead.
Sadly, the mainstream media in the United States is largely ignoring the preparations for a ground invasion of Syria, and they keep telling us that the global economy is going to be just fine, so most ordinary Americans are going to be absolutely blindsided by what is about to happen.
For the first time ever, the Baltic Dry Index has fallen under 400. As I write this article, it is sitting at 394. To be honest, I never even imagined that it could go this low. Back in early August, the Baltic Dry Index was sitting at 1,222, and since then it has been on a steady decline. Of course the Baltic Dry Index crashed hard just before the great stock market crash of 2008 too, but at this point it is already lower than it was during that entire crisis. This is just more evidence that global trade is grinding to a halt and that 2016 is going to be a “cataclysmic year” for the global economy.
If you are not familiar with the Baltic Dry Index, here is a helpful definition from Wikipedia…
The BDI is one of the key indicators that experts look at when they are trying to determine where the global economy is heading. And right now, it is telling us that we are heading into a major worldwide economic downturn.
Some people try to dismiss the recent drop in the Baltic Dry Index by claiming that shipping rates are down because there is simply too much capacity out there these days. And I don’t dispute that. Without a doubt, too many vessels were built during the “boom years”, and now shipbuilders are paying the price. For example, Chinese shipyards reported a 59 percent decline in orders during the first 11 months of 2015…
Total orders at Chinese shipyards tumbled 59 percent in the first 11 months of 2015, according to data released Dec. 15 by the China Association of the National Shipbuilding Industry. Builders have sought government support as excess vessel capacity drives down shipping rates and prompts customers to cancel contracts. Zhoushan Wuzhou Ship Repairing & Building Co. last month became the first state-owned shipbuilder to go bankrupt in a decade.
But that doesn’t explain everything. The truth is that exports are way down all over the world. China, the United States, South Korea and many other major exporting nations have all been reporting extremely dismal export numbers. Global trade is contracting quite rapidly, and I don’t see how anyone could possibly dispute that.
The global economy is a mess, but many people are not paying any attention to the economic fundamentals because they are too busy looking at the stock market.
The stock market does not tell us how the economy is doing. If the stock market is up today that does not mean that the economy is doing well, and if the stock market is down tomorrow that does not mean that it is doing poorly.
Yes, the health of the financial markets can greatly affect the overall economy. We saw this back in 2008. When there is a tremendous amount of panic, that can cause a credit crunch and make it very difficult for money to flow through our system. The end result is a rapid slowdown of economic activity, and it is something that we will be experiencing again very soon.
But don’t let the day to day fluctuations of the stock market fool you. Just because the Dow was up 227 points today does not mean that the crisis is over. It is important to remember that stocks are not going to go down every single day. On Thursday, the Dow didn’t even regain two-thirds of what it lost on Wednesday. Even in bear markets there are up days, and some of the biggest up days in stock market history were right in the middle of the crash of 2008.
It is critical that we take a long-term view of things and not let our vision be clouded by every tick up and down in the financial markets. Initial jobless claims just hit their highest level in about six months, and companies like Macy’s and GoPro are laying off thousands of workers. Things are already bad, and they are rapidly getting worse.
And let us not forget the great amount of financial carnage that has already happened so far this year. According to CNBC, approximately 3.2 trillion dollars of stock market wealth was wiped out globally during the first 13 days of 2016…
Almost $3.2 trillion has been wiped off the value of stocks around the world since the start of 2016, according to calculations by a top market analyst.
It has also been the worst-ever start to a year for U.S. equities, said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, as both the S&P 500 and the blue-chip Dow Jones industrial average have posted their steepest losses for the first eight days trading of a year.
Over the past six months, there have now been two 10 percent “corrections” for U.S. stocks. The only other times we have seen multiple corrections like this were in 1929, 2000 and 2008. If those years seem familiar to you, that is because they should. In all three years, we witnessed historic stock market crashes.
The stunning collapse of the Baltic Dry Index is just more evidence that we have entered a global deflationary crisis. Goods aren’t moving, unemployment is rising all over the planet, and commodity prices have fallen to levels that we have not seen in over a decade.
Around the globe, there have been dramatic stock market crashes to begin the year, and we should expect to see much more market turmoil during the weeks and months to come.
If the markets have calmed down a bit for the moment, we should be very thankful for that, because we could all use some additional time to prepare for what is coming.
The debt-fueled standard of living that so many of us are enjoying today is just an illusion. And many of us won’t even understand what we have been taking for granted until it is taken away from us.
A great shaking is coming to the global economy, and the pain is going to be unimaginable. So let us enjoy every single day of relative “normalcy” while we still can, because there aren’t too many of them left.