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! We are happy to report that we have reached our turn-of-the-year funding goal and want to extend a special thank you to all of you who have chipped in. We are very grateful for your support! As a general remark, according to usually well informed circles, exercising the donation button in between funding drives is definitely legal and highly appreciated as well.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • French labour union workers and students attend a demonstration against the French labour law proposal in Marseille, France, as part of a nationwide labor reform protests and strikes, March 31, 2016. REUTERS/Jean-Paul Pelissier/File PhotoHow the Welfare State Dies
      Hollande Threatens to Ban Protests Brexit has diverted attention from another little drama playing out in Europe. As of the time of writing, if you Google “Hollande threatens to ban protests” or variations thereof, you will find Russian, South African and even Iranian press reports on the topic. Otherwise, it's basically crickets (sole exception: Politico).  Gee, we wonder why?   They don't like him anymore: 120.000 protesters recently turned Paris into a war zone. All...
  • The-answer-is-yesToward Freedom: Will The UK Write History?
      Mutating Promises We are less than one week away from the EU referendum, the moment when the British people will be called upon to make a historic decision – will they vote to “Brexit” or to “Bremain”? Both camps have been going at each other with fierce campaigns to tilt the vote in their direction, but according to the latest polls, with the “Leave” camp’s latest surge still within the margin of error, the outcome is too close to call.   The battle lines are...
  • water houseA Market Ready to Blow and the Flag of the Conquerors
      Bold Prediction MICHAELS, Maryland – The flag in front of our hotel flies at half-mast. The little town of St. Michaels is a tourist and conference destination on the Chesapeake Bay. It is far from Orlando, and even farther from Daesh (a.k.a. ISIL) and the Mideast.   St. Michaels, Maryland – the town that fooled the British (they say, today). Photo credit: Fletcher6   Out on the river, a sleek sailboat, with lacquered wood trim, glides by, making hardly a...
  • nails-in-a-bed-of-nails-new-yorker-cartoonGoing... Going... Gone! The EU Begins to Splinter
      Dark Social Mood Tsunami Washes Ashore Early this morning one might have been forgiven for thinking that Japan had probably just been hit by another tsunami. The Nikkei was down 1,300 points, the yen briefly soared above par. Gold had intermittently gained 100 smackers – if memory serves, the biggest nominal intra-day gain ever recorded (with the possible exception of one or two days in early 1980). Here is a picture of Haruhiko Kuroda in front of his Bloomberg monitor this...
  • queen_gold-840x501Rule Britannia
      A Glorious Day What a glorious day for Britain and anyone among you who continues to believe in the ideas of liberty, freedom, and sovereign democratic rule. The British people have cast their vote and I have never ever felt so relieved about having been wrong. Against all expectations, the leave camp somehow managed to push the referendum across the center line, with 51.9% of voters counted electing to leave the European Union.   Waving good-bye to...
  • junkThe Problem with Corporate Debt
      Taking Off Like a Rocket There are actually two problems with corporate debt. One is that there is too much of it... the other is that a lot of it appears to be going sour.   Harvey had a good time in recent years...well, not so much between mid 2014 and early 2016, but happy days are here again! Cartoon by Frank Modell   As a brief report at Marketwatch last week (widely ignored as far as we are aware) informs us:   “Businesses racked up debt in the...
  • MACAU, CHINA - JANUARY 28: Buildings of Macau Casino on January 28, 2013, Gambling tourism is Macau's biggest source of revenue, making up about fifty percent of the economy.What Could Possibly Go Wrong?
      A Convocation Of Gamblers The Wall Street Journal and BloombergView have just run articles on the shadow banking system in China.  This has put me in a nostalgic mood. About 35 years ago when I was living in Japan, I made a side trip to Hong Kong.   Asia's Sin City, Macau Photo credit: Nattee Chalermtiragool   I took the hydrofoil to Macau one afternoon and the same service back early the next morning.  On the morning trip, I am sure that I saw many of the...
  • saupload_loves-me-loves-me-notA Darwin Award for Capital Allocation
      Beyond Human Capacity Distilling down and projecting out the economy’s limitless spectrum of interrelationships is near impossible to do with any regular accuracy.  The inputs are too vast.  The relationships are too erratic.   The economy - complex and ever-changing interrelations. Image credit: Andrea Dionne   Quite frankly, keeping tabs on it all is beyond human capacity.  This also goes for the federal government.  Even with all their data gatherers and...
  • deflated-souffleThe Fed’s  Doomsday Device
      Bezzle BALTIMORE –  Barron’s, in a lather, says the market is facing the “Two Horsemen of the Apocalypse.” Huh?   Only two? There were four last time!   Supposedly, the so-called Brexit – the vote in Britain this Thursday on whether to leave or remain in the European Union (EU) – and uncertainty over where the Fed will take U.S. interest rates are cutting down stocks faster than a Z-turn mower. But Brexit is a side show. As our contacts in London...
  • rate_hike_cartoon_10.15.2015_largeJanet Yellen’s $200-Trillion Debt Problem
      Blame “Brexit” BALTIMORE – The U.S. stock market broke its losing streak on Thursday [and even more so on Monday, ed.]. After five straight losing sessions, the Dow eked out a 92-point gain. The financial media didn’t know what to say about it. So, we ended up with the typical inanities, myths, and claptrap.   “Investors” are pushing the DJIA back up again..apparently any excuse will do at the moment. The idea may backfire though, as exactly the same thing happened...
  • Brexit supporterGold and Brexit
      Going Up for the Wrong Reason Gold is soaring. It should—and a lot—but in my view not for the reason it is. Indeed gold is insurance for uncertain times, a time that Brexit seems to represent. But insurance is an administrative cost — one must minimize its use.   August gold contract, daily – gold has been strong of late, but this seems to be driven by “Brexit” fears - click to enlarge.   Moreover, insuring against Brexit might ironically be equivalent...
  • cameron at the EUBrexit Paranoia Creeps Into the Markets
      European Stocks Look Really Bad... Late last week stock markets around the world weakened and it seemed as though recent “Brexit” polls showing that the “leave” campaign has obtained a slight lead provided the trigger. The idea was supported by a notable surge in the British pound's volatility.   Battening down the hatches...   On the other hand, if one looks at European stocks, one could just as well argue that their bearish trend is simply continuing – and...

Austrian Theory and Investment

Support Acting Man

Own physical gold and silver outside a bank

Archive

j9TJzzN

350x200

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]

 

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

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com