Mish's Global Economic Trend Analysis

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• China's PPI Drops 44th Month, Chinese Trade Slumps on Waning Demand, Deflationary Pressures
• Merkel's Cream Puff "Tougher" Stance
• Reader Asks "Without a Job, Who Can Afford to Buy What Robots Make?"

China's PPI Drops 44th Month, Chinese Trade Slumps on Waning Demand, Deflationary Pressures Posted: 09 Nov 2015 08:37 PM PST China's PPI Drops 44th Month China's CPI is up a modest 1.3 percent year over year but Producer Prices Fall for 44th Month. China's consumer inflation moderated again in October, while producer prices declined for the 44th straight month, as falling commodity prices and weak demand add to deflationary pressure. The producer price index (PPI) fell 5.9 percent in October from a year earlier, identical with the decline in September, and slightly more than economists' forecasts of a 5.8 percent drop. China's CPI Slows Amid Deflationary Pressures The Wall Street Journal reports China's Inflation Slows in October. China's consumer inflation dipped further last month due to lower food prices, adding to what economists say are signs of slack demand and slowing in the world's second-largest economy. China's consumer-price index rose 1.3% in October last month from a year earlier, according to the government's statistics bureau. The pace was slower than the 1.6% year-over-year rise in September and a tick down from the median 1.4% gain forecast by 11 economists in a survey by The Wall Street Journal. Prices of goods at the factory gate fell 5.9% in October from a year earlier, matching September's decline. "It's quite clear, China is facing deflationary pressure," said Mizuho Securities Asia Ltd. economist Shen Jianguang. "The issue is how to revive growth that's been below target, while restructuring the economy to reduce overcapacity." Trade Slumps on Waning Demand Chinese imports and exports hit the skids as Trade Slumps on Waning Demand China's trade with the rest of the world fell sharply in October from a year earlier, with imports of raw materials particularly hard hit as slowing Chinese investment feeds through into weaker demand in the world's biggest trader of goods. Chinese imports fell 18.8 per cent in October from the same month a year earlier, a slight improvement from the 20.4 per cent year-on-year fall in September. Sharply lower prices of oil and other commodities also helped scythe the bill. Exports declined 6.9 per cent in October from a year earlier, deteriorating from the 3.7 per cent fall the previous month as weak global demand and higher Chinese costs led to slumping shipments of the cheap Chinese goods that have flowed to the world in the last decade. At the start of the year, the ruling Communist party set a target of 6 per cent growth in trade for this year but total trade has now fallen by just over 8 per cent in the first ten months of 2015 compared with the same period a year earlier. In the first 10 months of the year, Chinese exports to the US were up 5.2 per cent from the same period in 2014, while exports to countries in Asean were up 3.7 per cent, according to Chinese customs figures. Exports to the EU, Japan and Hong Kong — which serves as a transit point for exports to many other parts of the world — fell by 4.1 per cent, 9.5 per cent and 12.2 per cent respectively. No Decoupling I have stated this several times before but it's worth noting again: The widely believed notion that China would decouple from the global markets in 2007 and 2008 was as silly then as the notion the US can do the same today. Mike "Mish" Shedlock Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Merkel's Cream Puff "Tougher" Stance Posted: 09 Nov 2015 02:40 PM PST The Financial Times reports Merkel Takes Less 'Welcome' Tone on Refugees as Pressure Builds. Refugees securing asylum in Germany should expect long delays before they can bring over their families, Chancellor Angela Merkel warned on Monday in a departure from the "welcome" policy critics have blamed for triggering a huge influx of migrants. The announcement came amid signs of demands in the ruling CDU/CSU bloc for a tougher response to the crisis, with Wolfgang Schäuble, finance minister, adding his voice to those advocating immigration restrictions. Steffen Seibert, Ms Merkel's spokesman, said on Monday there had been no legal change in the government's policy. Still, in a clarification that may be welcomed by some hardliners, he explained that even refugees entitled to bring in their families could not now expect to do so because immigration officials were busy dealing with the wave of arrivals. "When you see this reality from one end of the country to the other, then it is clear to everyone: family reunion as it has been understood until now cannot currently take place," he said. His words appeared to be aimed at countering the positive image of Germany among refugees that was created in the summer by Ms Merkel's open doors policy for Syrians. Bring the Wife and Kids Somehow, "no change" is a tougher stance. But let's work this symbolic change to the end meaning: If you are going to come, bring the wife and kids in the first place. Mike "Mish" Shedlock Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Reader Asks "Without a Job, Who Can Afford to Buy What Robots Make?" Posted: 09 Nov 2015 04:43 AM PST In response to Robots Will Change World Beyond Recognition reader "DB" has a couple of questions: Who can afford to buy what the robots produce? Does this lead to a world war between the have and have-nots? Those are key questions that should be on everyone's mind. But recall there were two viewpoints written in my post. Bank of America paints one picture and McKinsey another. McKinsey: Automation Will Change Jobs More Than Kill Them Bank of America: Robots and other forms of artificial intelligence will transform the world beyond recognition as soon as 2025 Pater Tenebrarum at the Acting Man blog pinged me with his thoughts (similar to ideas I have expressed before). I'm convinced McKinsey is right, for the simple reason that this is precisely the history of economic progress: the more productive production processes have become due to automation, the more the division of labor has increased, and the more new jobs and industries have come into being, and the more incomes, leisure time and life expectancy have increased as well. Just watch this fascinating video and think about it for a moment: Would we be better off or worse off if this machine didn't exist? Emphasis his, video follows. Link if video does not play: WFL M60 MillTurn Complete Crankshaft Machining - MARTECH Machinery, NJ - USA One could have presented a thousand videos if not ten thousand videos asking the same question Pater posed: "Would we be better off or worse off if this machine didn't exist?" The problem is not technology. Rather, the problem is the Fed's response to technology. Reader Brad agrees. Brad writes ... Your conclusion was perfect: "Regardless of which viewpoint you think more likely, it should be perfectly clear that robots are a huge deflationary force." The elites don't comprehend it. Brad Central Bank Insistence on Inflation in a Deflationary World Central bank insistence, especially the Fed's insistence, on 2% inflation in a technologically deflationary world is precisely the driver of income inequality that the Fed and others complain about. The solution is not higher minimum wages, but rather deflation that let's people buy more with their money. It's not about how much one makes but how far it goes that matters. And the Fed is hell-bent on making sure the money you make goes less far each year. Fed policy benefits the banks, the government taxing bodies, and the already wealthy with first access to money. Will this eventually lead to a war between the have and have-nots? Actually, an economic war is already underway. How violent the war gets remains to be seen. Mike "Mish" Shedlock Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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