Mish's Global Economic Trend Analysis |
- Australia Manufacturing Collapses as Commodity Supercycle Stalls; Labor and Unions Wrecked Australia
- Global Manufacturing Stagnates; Global Recession Will Follow
- Shock and Awe: ECB Prepared to "Cope With Consequences of Negative Deposit Rates"; Dancing in the Dark Experiment
| Australia Manufacturing Collapses as Commodity Supercycle Stalls; Labor and Unions Wrecked Australia Posted: 02 May 2013 02:26 PM PDT Australia fundamentals deteriorate rapidly as evidenced by a collapse in the PMI Manufacturing Index in April. Key FindingsAustralia PMI at a Glance
Macro Alert From Steen Jakobsen Via email, Steen Jakobsen at Saxo Bank sent these comments ... Macro Alert: Australia is seeing significant slow-down.Massive Imbalances Please note the massive imbalances in the PMI report. Input prices have been expanding for 131 straight months. Wages have been expanding for 48 months. Selling prices have been contracting for 25 months. New orders and exports tell the story. Wages are too high. Margin pressures mount. Employment must drop and it did. The employment index was down a monstrous 9.4 points. Labor and Unions Wrecked Australia The labor party and unions wrecked Australia. This was invisible for years because a housing boom and China-fueled commodity boom masked the untenable nature of wage and property bubble growth. Now, it's payback time. On September 14, prime minister Julia Gillard, leader of the Australian Labor Party will be thrown out of office in a landslide. Unfortunately, it will take years for Australia to recover from the damage caused by Labor. Addendum - Comments from Steve Keen Steve Keen blames both parties. Via email, Keen says "The damage began under Labor with Hawke and Keating, was turbocharged by the Liberals under Howard, and simply maintained by Rudd/Gillard Labor. And unions have lost significant power all the way through--they've been bystanders, not active participants. It's instead been a series of distortions caused by a neoliberal philosophy that is shared by both parties." Hmm. Parties talk differently but act the same. Where have we seen that before? In the US, it's on war, bailouts, and spending that always goes up. Romneycare and Obamacare were the same. For political purposes people pretend differences exist when they don't, except on some social issues. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Global Manufacturing Stagnates; Global Recession Will Follow Posted: 02 May 2013 10:49 AM PDT The JPMorgan Global Manufacturing PMI shows Global manufacturing growth slows to near-stagnation. At 50.5 in April, the JPMorgan Global Manufacturing PMI™ – a composite index* produced by JPMorgan and Markit in association with ISM and IFPSM – signalled expansion for the fourth straight month. The rate of expansion decelerated slightly during April, meaning that growth so far in 2013 has remained, at best, only marginal.Global PMI April vs. March  Every facet of global manufacturing is slowing and global growth will follow. A global recession is certainly baked in the cake, if indeed a recession is not already in progress. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Posted: 02 May 2013 09:09 AM PDT As expected the ECB, cut its lending rate 25 basis points to 0.50%. Yesterday, I suggested the ECB may try a "shock and awe" move. They did, just not the move anyone expected. Instead, Mario Draghi said the ECB was Prepared to "Cope With Consequences of Negative Deposit Rates". Shock and Awe Bloomberg reports The euro fell for the first time in five days against the dollar after European Central Bank President Mario Draghi said policy makers may take the unprecedented step of charging banks to hold excess reserves.For an analysis of what this means, with a tip of the hat to Steen Jakobsen at Saxo Bank for the link, let's flashback to a decision to cut the deposit rate to zero in July of 2012. Dancing in the Dark Experiment The Financial Times says ECB Dances in the Dark It's clear the ECB has gone into experimental mode.Death of Banking FT Alphaville makes the case Negative rates as a precursor to the death of banking. What we believe is that rather than stimulating the lending market — and the economy along with it — such a rate policy could have a disastrous impact on collateral markets and money market funds, not to mention the net interest income of lending institutions. All of which could unleash a protracted deflationary spiral.FT Alphaville cites Morgan Stanley Research as follows: Our rates team expects short end German yields to follow financing rates into negative territory and some investors to extend along duration and credit curves to achieve positive yields to maturity.Deposit Rate of Zero Did Not Work It's clear that cutting the deposit rate to zero did not work. So why will cutting them to less than zero work? A negative deposit rate will not stimulate lending because it does not fix any structural problems, it does not fix any liquidity issues, and it makes solvency problems worse by turning guaranteed arbitrage gains into guaranteed losses on excess reserves. Should this actually succeed in stimulating lending, expect it to also succeed at stimulating losses on that lending. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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