The Yellow Machines Go Silent
PARIS – What should you do if you are running out of time and money? This is the question we get from readers over 50… over 60… and sometimes over 70.
We baby boomers were famously “na… na… na… live for today.” Now, it’s tomorrow. And many of us – often through no fault of our own – are having trouble making ends meet.
At the Diary, we write about the world of money. About economic policy and how it affects you. But what if, in your world of money, you are running short? What should you do to get more? Check under the seat cushions? Rob a bank?
We’ll come back to this question in a few moments. First, let’s take a look at the big picture.
It appears that the world economy is headed for recession. An economy makes and takes. Whatever you make – whether it is an apartment building or a plastic toy – you have to begin by taking dirt out of the ground.
Caterpillar-made fleet of mining trucks
Photo credit: Caterpillar
You need to dig a hole before you can put up a building… or even make a parking lot. And you need to scrape up raw materials – copper, iron, oil, etc. – before you can make anything at all.
This requires machines. Yellow machines. When economic activity goes down… so do sales of these machines. Yellow machines move dirt. They are used in construction, mining, and every sort of resource industry. We’re talking about backhoes… tractors… forklifts… excavators… bulldozers… and loaders.
Ominously, demand for these machines – along with the stuff they move – is collapsing. Two of the biggest suppliers are Caterpillar in the U.S. and JCB in Britain. Both report catastrophic drops in sales.
Caterpillar says its sales have fallen three years in a row. And it expects a fall of another 5% next year. This marks the first time in its 90-year history that sales have fallen four years straight.
CAT’s worldwide sales have been declining for quite some time (via Zerohedge) – click to enlarge.
The Illinois-based company – which gets 60% of its revenues by selling machines outside the U.S. – says it has had to lay off 31,000 people so far… with more job losses to come.
JCB says that it, too, is suffering a devastating fall in sales. Commenting on falls in demand of 70% in Russia, 47% in China, and 36% in Brazil, JCB’s CEO, Graeme MacDonald, said:
“Market conditions in the construction equipment sector have been difficult for some time, but they have worsened quite rapidly in recent weeks.”
The yellow machines are at the beginning of the process, not the end. You have to move dirt before you put up a factory. Or build a house. So, when the wheels stop turning on the yellow machines, it won’t be long before it shows up in falling GDP figures.
CAT weekly – after the 2009 low, the stock rallied strongly until 2011 – since then it has gone sideways, but it looks now as if it may be about to break down from this extended trading range – click to enlarge.
What Really Matters
Now, back to the question on the table: You are 70. You have no money. What do you do? Sell your body for medical experiments? Invent a new app? As we said last Wednesday, sophisticated trading systems and expensive investment programs are not a good idea if you fall into this category.
They are for people who have money already. If you have money, want more, and enjoy the thrill and challenge of financial adventure, they can be highly lucrative. But what if you don’t have money already?
We don’t know anything more than anyone else on the subject. We don’t have any secrets. But after thinking about it, we have some ideas. This is not advice. This is just what we would do if we were in that situation…
First, we would go back to philosophy – Democritus, Epicurus, Zeno, Seneca, Marcus Aurelius, and Lucretius (not to mention Jesus of Nazareth!). They argued – albeit in different ways – that what matters in life has little to do with wealth or status. What matters (at least according to Plato’s description) are courage, wisdom, justice, and temperance.
We would add beauty and dignity. And a good wine. And a good cook. But nowhere on the list is a Rolex or a house in Malibu. The nice thing about Plato’s list… as well as the whole Epicurean/Stoic/ascetic creed… is that it doesn’t cost much!
As many philosophers and religious teachers have said, wealth may get in the way of the things that matter. It may distract you and reduce your real happiness.
You may be better off without it…
The underpass library in Toronto, for those with no money at all.
Photo credit: Stephane Blais / CBC
A Better Philosophy
We are not ducking the question. We are just putting it in context. If you want more money, you first have to understand what you want it for… and how it might affect your life.
Our goal is not to “come to terms” with financial misery. Nor is it to submit to poverty – even happily. Instead, we want to master poverty… to live better.
As Nietzsche put it, we aim to “set to dancing with arms and legs.” And for that we need context. Tomorrow – a simpler, better philosophy… and how to use it to get more money!
Charts by zerohedge, stockcharts
Image captions by PT
The above article originally appeared at the Diary of a Rogue Economist, written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.
You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.
Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke
Most read in the last 20 days:
- Modi’s Great Leap Forward
India’s Currency Ban – Part VIII India’s Prime Minister, Narendra Modi, announced on 8th November 2016 that Rs 500 (~$7.50) and Rs 1,000 (~$15) banknotes would no longer be legal tender. Linked are Part-I, Part-II, Part-III, Part-IV, Part-V, Part-VI and Part-VII, which provide updates on the demonetization saga and how Modi is acting as a catalyst to hasten the rapid degradation of India and what remains of its institutions. India’s Pride and Joy Indians are...
- Global Recession and Other Visions for 2017
Conjuring Up Visions Today’s a day for considering new hopes, new dreams, and new hallucinations. The New Year is here, after all. Now is the time to turn over a new leaf and start afresh. Naturally, 2017 will be the year you get exactly what’s coming to you. Both good and bad. But what else will happen? Image of a recently discarded vision... Image by Michael Del Mundo Here we begin by closing our eyes and slowing our breath. We let our mind...
- The Great El Monte Public Pension Swindle
Nowhere City California There are places in Southern California where, although the sun always shines, they haven’t seen a ray of light for over 50-years. There’s a no man’s land of urban blight along Interstate 10, from East Los Angeles through the San Gabriel Valley, where cities you’ve never heard of and would never go to, are jumbled together like shipping containers on Terminal Island. El Monte, California, is one of those places. Advice dispensed on Interstate...
- A Trade Deal Trump Cannot Improve
Worst in Class BALTIMORE – People can believe whatever they want. But sooner or later, real life intervenes. We just like to see the looks on their faces when it does. By that measure, 2017 may be our best year ever. Rarely have so many people believed so many impossible things. Alice laughed. "There's no use trying," she said: "one can't believe impossible things." "I daresay you haven't had much practice," said the Queen. "When I was your age, I always did it for...
- Pope Francis Now International Monetary Guru
Neo-Marxist Pope Francis Argues for Global Central Bank As the new year dawns, it seems the current occupant of St. Peter’s Chair will take on a new function which is outside the purview of the office that the Divine Founder of his institution had clearly mandated. Neo-Papist transmogrification. We highly recommend the economic thought of one of Francis' storied predecessors, John Paul II, which we have written about on previous occasions. In “A Tale of Two Popes” and...
- Where’s the Outrage?
Blind to Crony Socialism Whenever a failed CEO is fired with a cushy payoff, the outrage is swift and voluminous. The liberal press usually misrepresents this as a hypocritical “jobs for the boys” program within the capitalist class. In reality, the payoffs are almost always contractual obligations, often for deferred compensation, that the companies vigorously try to avoid. Believe me. I’ve been on both sides of this kind of dispute (except, of course, for the “failed”...
- Trump’s Trade Catastrophe?
“Trade Cheaters” It is worse than “voodoo economics,” says former Treasury Secretary Larry Summers. It is the “economic equivalent of creationism.” Wait a minute - Larry Summers is wrong about almost everything. Could he be right about this? Larry Summers, the man who is usually wrong about almost everything. As we have always argued, the economy is much safer when he sleeps, so his tendency to fall asleep on all sorts of occasions should definitely be welcomed....
- Money Creation and the Boom-Bust Cycle
A Difference of Opinions In his various writings, Murray Rothbard argued that in a free market economy that operates on a gold standard, the creation of credit that is not fully backed up by gold (fractional-reserve banking) sets in motion the menace of the boom-bust cycle. In his The Case for 100 Percent Gold Dollar Rothbard wrote: I therefore advocate as the soundest monetary system and the only one fully compatible with the free market and with the absence of force or fraud...
- Silver’s Got Fundamentals - Precious Metals Supply-Demand Report
Supply-Demand Fundamentals Improve Noticeably Last week was another short week, due to the New Year holiday. We look forward to getting back to our regularly scheduled market action. Photo via thedailycoin.org The prices of both metals moved up again this week. Something very noticeable is occurring in the supply and demand fundamentals. We will give an update on that, but first, here’s the graph of the metals’ prices. Prices of gold and silver...
- Trump’s Plan to Close the Trade Deficit with China
Rags to Riches Jack Ma is an amiable fellow. Back in 1994, while visiting the United States he decided to give that newfangled internet thing a whirl. At a moment of peak inspiration, he executed his first search engine request by typing in the word beer. Jack Ma, founder and CEO of Alibaba, China's largest e-commerce firm. Once he was a school teacher, but it turned out that he had enormous entrepreneurial talent and that the world of wheelers, dealers, movers and...
- Side Notes, January 14 - Red Flags Over Goldman Sachs
Red Flags Over Goldman Sachs Just to prove that I am an even-handed insulter, here is a rant about my former employer, Goldman Sachs. The scandal at 1MDB, the Malaysian sovereign wealth fund from which it appears that billions were stolen by politicians all the way up to the Prime Minister, continues to unfold. The main players in the 1MDB scandal. Irony alert: apparently money siphoned off from 1MDB was used to inter alia finance Martin Scorcese's movie “The Wolf of...
- Regime Change: The Effect of Trump's Victory on Stock Prices
A Soaring Market On January 20 2017 Donald Trump will be sworn in as the new president of the United States. On the stock market his victory has triggered a lot of advance cheer already: the Dow Jones Industrial Average rose by a sizable 7.80 percent between the election and the turn of the year. Two big winners: the DJIA and Donald Trump - click to enlarge. Many investors are now wondering what effect the change in government will have on stock prices in the new...