Hayseed Cronies and Other Dreamers

BALTIMORE – “Facts are better than dreams,” said Churchill. Maybe. But dreams are much more appealing. And far more dangerous. Dreams were much on display in Iowa last night. The caucuses opened at 7 p.m. Then voters were allowed the fantasy that they were actually making a difference.

Trump supporters dreamed of making America great again… and basking in its reflected glory. Sanders supporters dreamed of making America fair again… and spending other peoples’ money.

 

hayseed moonshineThere, just over the horizon… I see even bigger subsidies… Iowan hayseed crony after ingesting a generous measure of claviceps purpurea by mistake

Illustration by

 

Clinton supporters dreamed of having their woman in the White House…Cruz supporters dreamed of NOT having Trump, Clinton, or Sanders in the White House…and of course, the hayseed cronies of the corn state dreamed of forcing people to buy more of their ethanol.

As of this morning, Cruz has won the contest on the Republican side. Clinton and Sanders are in a “virtual tie” for the Democrats.

 

Wings of Debt

On Monday, the Dow fell early in the session. It spent the rest of the day recovering the losses. Worrying investors is news that the U.S. manufacturing sector is in its fourth month of recession.

If you don’t make ‘em, you don’t need to ship ‘em. So rail freight traffic in the U.S. is also down – about 25% from its peak in 2010. And you don’t need trucks to move them, either. Volvo says its heavy truck orders are running 30% below their 2014 level.

The source of the slowdown is that demand is falling around the world. The orders just aren’t coming in. And nowhere is the pain felt more keenly than in the economy most dependent on satisfying those orders: China.

China makes; the world takes. If the world taketh not, China finds itself with excess capacity. Then the world’s leading exporter gets quiet. The furnaces cool. The factories slow. And creditors’ palms grow moist.

“Big China steel producers suffer $9.8 billion in losses,” says a headline in the Financial Times. Chinese heavy industry produces half the world’s steel. Last year, it went into recession for the first time in 35 years.

Naturally, container freight from Chinese ports is falling, too; the shipping index is now 40% below its 2012 level. Too bad they invested so much money to satisfy the world’s needs. Suddenly, the world doesn’t seem to need so much.

 

containerized freight indexChina’s container freight index (measuring prices for container shipping) looks sick – click to enlarge.

 

Here at the Diary, we are always suspicious of “facts.” The only ones we trust are those we make up ourselves. The rest – especially if they come from economists – turn out to not be facts at all. Instead, they are just guesses, wishes, or lies.

Still, as near as we can tell, the facts support the idea that China is slowing down, along with the rest of the world. And why shouldn’t it? After such a breathtaking sprint of growth, surely, China is tired. Surely, it deserves a breather.

Alas, you can stop and rest when you have your feet on the ground. But when you are flying through the air on wings of debt, you can’t afford even to slow down. Or you will crash.

 

Stagnation or Collapse

This leads former banker and financial author Satyajit Das to anticipate “the mother of all crashes” in China. There are only two likely outcomes in China, he said: stagnation or collapse. And colleague Tom Dyson, in the January 23 issue of the Diary, predicted a massive wave of Chinese bankruptcies.

A nightmare, in other words. But dreamy people can hope. Maybe this time really is different. Maybe the Dow will go back to 18,000… and just keep going.

 

DJIA-dailyDJIA, daily – maybe it will, one day…but not right now – click to enlarge.

 

Maybe the combined assault of Draghi in Europe, Kuroda in Japan, and Yellen in the U.S. will be enough to beat back a correction… and even triumph, finally and conclusively, over the credit cycle. What a dream! Dow 25,000? Sure, why not?

 

The Road to Greatness

And why shouldn’t the American people choose a candidate who will put the U.S. back on the road to greatness? Or, at the very least, the road to somewhere someone might actually want to go.

And why shouldn’t the sober citizens of Iowa get to point the direction? After all, the U.S. government is supposed to be a government of, by, and for the people. And some of its people live in Iowa. But wait. There are facts, and there are dreams.

 

luciusannaeusseneca125252What? The road is rough? We want our greatness and we want it now! For free! Who is this Seneca dude anyway… just some old Roman curmudgeon… what does he know?

 

The voters dream that someone somewhere actually gives a damn what they think. PhD economists imagine that they know better than God or markets. Should we wake them up?

The plain people of Iowa think they can control the Deep State elite. And the Deep State elite think they can control the markets.

Our prediction: Both will be proven wrong.
Oh, cr*p…

 

Charts by: Shanghai Shipping Exchange, StockCharts

 

Chart and 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.

 

 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

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: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Punch-Drunk Investors & Extinct Bears, Part 1
      The Mother of All Blow-Offs We didn't really plan on writing about investor sentiment again so soon, but last week a few articles in the financial press caught our eye and after reviewing the data, we thought it would be a good idea to post a brief update. When positioning and sentiment reach levels that were never seen before after the market has gone through a blow-off move for more than a year, it may well be that it means something for once.   Sloshed as we are...   a...
  • Why You Should Embrace the Twilight of the Debt Bubble Age
      Onward Toward Default People are hard to please these days.  Clients, customers, and cohorts – the whole lot.  They’re quick to point out your faults and flaws, even if they’re guilty of the same derelictions.   The age-old art of assigning blame – in this case complemented by firm knowledge of the proper way to prosperity (see lower right corner). Jack Lew not only sees the future with perfect clarity these days, he also seems to have spent his time as treasury...
  • Quantum Change in Gold Demand Continues - Precious Metals Supply-Demand Report
      Fundamental Developments In this New Year’s holiday shortened week, the price of gold moved up again, another $16 and silver another 29 cents. Or we should rather say the dollar moved down 0.03mg gold and 0.03 grams silver. It will make those who borrow to short the dollar happy...   Let’s take a look at the only true picture of the supply and demand fundamentals for the metals. But first, here are the charts of the prices of gold and silver, and the gold-silver...
  • As the Controlled Inflation Scheme Rolls On
      Controlled Inflation American consumers are not only feeling good.  They are feeling great. They are borrowing money – and spending it – like tomorrow will never come.   After an extended period of indulging in excessive moderation (left), the US consumer makes his innermost wishes known (right). [PT]   On Monday the Federal Reserve released its latest report of consumer credit outstanding.  According to the Fed’s bean counters, U.S. consumers racked...
  • Punch-Drunk Investors & Extinct Bears, Part 2
      Rydex Ratios Go Bonkers, Bears Are Dying Off For many years we have heard that the poor polar bears were in danger of dying out due to global warming. A fake photograph of one of the magnificent creatures drifting aimlessly in the ocean on a break-away ice floe was reproduced thousands of times all over the internet. In the meantime it has turned out that polar bears are doing so well, they are considered a quite dangerous plague in some regions in Alaska. Alas, there is one species of...
  • 2018: The Weakest Year in the Presidential Election Cycle Has Begun
      The Vote Buying Mirror Our readers are probably aware of the influence the US election cycle has on the stock market. After Donald Trump was elected president, a particularly strong rally in stock prices ensued.  Contrary to what many market participants seem to believe, trends in the stock market depend only to a negligible extent on whether a Republican or a Democrat wins the presidency. The market was e.g. just as strong under Democratic president Bill Clinton as it was under...
  • Cryptonite
      The Wingsuit Test of 1912 Late last year press reports informed us that by October, the number of active accounts at US cryptocurrency exchange Coinbase* had exceeded the number of accounts at Charles Schwab, one of the oldest US discount brokers, by 1.1 million. The report was dated November 27, by which time the number of accounts had just soared by another 1.6 million. We felt reminded of the final few weeks of China's stock market bubble, which saw similarly stunning growth in retail...

Support Acting Man

Top10BestPro
j9TJzzN

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com