by Patrick Wood
In Q4 2011 core economic growth, adjusted for inventories, grew at a mere 0.8 percent, compared to 3.2 percent in Q3. While still positive, this is a dramatic slowing of economic growth, and far from the optimistic spin produced by Obama’s economists.
The housing market generally reflects overall economic activity: The Case-Shiller 20-city composite home price index slipped 0.7 percent in November (month-over-month) and 3.67 percent year-over-year. There have been no revelations since November that housing has picked up.
The Baltic Dry Index continues to collapse at an alarming rate. In the month of January alone it has given up almost 63 percent of its value. Today’s reading was 680, just 17 points above the 12/05/08 low of 663. After that, the BDI levitated back to 4661 by 11/19/09 and has meandered lower until December when it really collapsed. From the 11/19/09 peak, it has given up over 85 percent.
Another index, HARPEX, tracks shipping rate charges for inter-modal container ships. Container shipping traffics mostly finished goods of one kind or another. During an economic slowdown, one would expect a drop in raw and finished goods, which is exactly what we see here.
This chart shows corporate profits as a percentage of GDP (Gross Domestic Product)
This chart shows wages as a percentage of GDP.
Do you see a problem? While corporate profits have risen steadily since the mid-1980’s, personal wages have been tanking; in other words, America’s workforce has been screwed to the wall while corporations are still making billions.
This is the direct result of corporations using dirt-cheap labor in countries like China, India and Mexico. This is the inevitable result of globalization. If I could see this 30 years ago, why couldn’t anyone else see it?
Answer: Greed. The corporations, of course. But consumers are just as guilty because they want everything cheaper, on sale, discounted, marked down, etc. They trample each other in Walmart at Christmas to get the cheapest toys made in China with near-slave labor. They wait days in line to get the latest iPhone or iPad from Apple, all of which are made in China. Buy American? Heck no… too expensive.
This short-sighted lunacy is destroying our country. It’s the epitome of cutting off your nose to spite your face.
The latest trade deficit numbers are in for November 2011 — rising back to $43.3 billion. Exports decreased and imports increased. To clarify, the U.S. bought $43.3 billion more goods from foreigners than they bought from us. On an annualized basis, this amounts to over a half-trillion dollars.
No politician talks about the trade deficit because they are all Free Traders, including Ron Paul. If we could just “level the playing field”, they say, then we can compete successfully, exports will rise and the deficit will disappear. This is a pipe-dream. And the reason is in plain sight: How can American workers ($23.24/hour) compete with Chinese workers ($2.00/hour)? Answer: They can’t! Duh. [Note: $2.00/hour is the highest hourly rate paid in China; most are paid much less.]
There is only one GOP presidential candidate who favors the immediate installation of import tariffs — Gov. Buddy Roemer. But, if you think Ron Paul is frozen out of the mainstream press, then Roemer is in an Alaskan deep-freeze. The GOP wants nothing to do with him.
But, think what would happen if a 30 percent tariff was imposed. Imports would plummet in the first month. People would scramble to find local sources for all kinds of goods. Factories would have to be quickly built and put into production. People would go back to work. Our own (massive) oil and gas deposits would have to be drilled and put into production. Profit margins of corporations who prey on America would tank overnight.
On the other hand, foreign nations and global corporations would quickly want to go to war with us (e.g., China’s economy would crash overnight). Walmart shoppers would rise up in mass protest even as Walmart itself would be threatened with bankruptcy.
Historically, the presence of tariffs is what forced America to create industry. Article I, Section 8 of The U.S. Constitution states that Congress shall have the power ‘To regulate Commerce with foreign Nations.” When tariffs were stiff, America prospered. A gradual change in political philosophy was seen between about 1880 and World War II, but a radical change came in 1947 when the globalist crowd established the General Agreement on Tariffs and Trade (GATT). GATT later became the World Trade Organization (WTO) in 1995. As Congress abdicated its role to protect America, the global elite seized control of trade policy… and the rest is history.
“Men are qualified for civil liberty in exact proportion to their disposition to put moral chains upon their own appetites.” — Edmund Burke
The choice is now between Romney and Gingrich, both life-long globalists. Either would continue the work of globalist presidents before them: Carter, Bush, Clinton, Bush and Obama. I’ll leave Reagan out of it, but only because it was his vice-president George W. Bush who mostly drove the New World Order agenda during the Reagan years.
From the current view, I can see no reason that Obama will not walk into a second term. Should any serious third-party candidate emerge, he/she will will only leave more votes for Obama.
Today’s strong rally in stocks sets up some interesting options. Overall, the weight of market internals and wave structure indicate that a topping process is in progress; just how it ends is still up for grabs.
The most recent decline in stocks looks more like a 3 wave correction than an 5 wave impulsive decline. This could change with an immediate reversal to the downside, but if true, the implication is for a modest new high as wave 5 is completed. The next few trading hours will tell the story.
Gold is in the same pattern as well. The recent decline looks like a 3 wave move more than the start of a 5 wave decline. If higher prices are in store, we could see $1,800 or slightly higher.
The inverse of stocks and gold is the dollar, which does not appear to have found a bottom in its current correction. The trend is still clearly up on a longer term basis.
When these asset classes reach their respective limits, significant directional turns should be seen.