Is The Global Economy Imploding?

21 New Numbers That Show That The Global Economy Is Absolutely Imploding

By Michael Snyder

Earth At Night - Public Domain

After a series of stunning declines through the month of January and the first half of February, global financial markets seem to have found a patch of relative stability at least for the moment.  But that does not mean that the crisis is over.  On the contrary, all of the hard economic numbers that are coming in from around the world tell us that the global economy is coming apart at the seams.  This is especially true when you look at global trade numbers.

The amount of stuff that is being bought, sold and shipped around the planet is falling precipitously. So don’t be fooled if stocks go up one day or down the next.  The truth is that we are in the early chapters of a brand new economic meltdown, and I believe that all of the signs indicate that it will continue to get worse in the months ahead.  The following are 21 new numbers that show that the global economy is absolutely imploding…

#1 Chinese exports fell by 11.2 percent year over year in January.

#2 Chinese imports were even worse in January.  On a year over year basis, they declined a whopping 18.8 percent.

#3 It may be hard to believe, but Chinese imports have now plunged for 15 months in a row.

#4 In India, exports were down 13.6 percent on a year over year basis in January.

#5 In Japan, exports declined 8 percent in December on a year over year basis, while imports plummeted 18 percent.

#6 For the sixth time in six years, Japanese GDP growth has gone negative.

#7 In the United States, exports were down 7 percent on a year over year basis in December.

#8 U.S. factory orders have fallen for 14 months in a row.

#9 The Restaurant Performance Index in the United States has dropped to the lowest level that we have seen since 2008.

#10 This month the Baltic Dry Index fell below 300 for the first time ever.

#11 It is now cheaper to rent a 1,100 foot merchant vessel than it is to rent a Ferrari.

#12 Orders for Class 8 trucks in the United States dropped by 48 percent on a year over year basis in January.

#13 Due to a lack of demand for trucks, Daimler just laid off 1,250 U.S. workers.

#14 Even though Saudi Arabia and Russia have agreed to freeze oil production at current levels, the price of U.S. oil has still fallen below 30 dollars a barrel.

#15 It is being reported that 35 percent of all oil and gas companies around the world are at risk of falling into bankruptcy.

#16 According to CNN, 67 oil and gas companies in the United States filed for bankruptcy during 2015.

#17 The number of job cuts in the United States skyrocketed 218 percent during the month of January according to Challenger, Gray & Christmas.

#18 All over America, retail stores are shutting down at a stunning pace.  The following list of store closures comes from one of my previous articles…

-Wal-Mart is closing 269 stores, including 154 inside the United States.

-K-Mart is closing down more than two dozen stores over the next several months.

-J.C. Penney will be permanently shutting down 47 more stores after closing a total of 40 stores in 2015.

-Macy’s has decided that it needs to shutter 36 stores and lay off approximately 2,500 employees.

-The Gap is in the process of closing 175 stores in North America.

-Aeropostale is in the process of closing 84 stores all across America.

-Finish Line has announced that 150 stores will be shutting down over the next few years.

-Sears has shut down about 600 stores over the past year or so, but sales at the stores that remain open continue to fall precipitously.

#19 The price of gold is enjoying its best quarterly performance in 30 years.

#20 Global stocks have fallen into bear market territory, which means that about one-fifth of all global stock market wealth has already been wiped out.

#21 Unfortunately for global central banks, they have pretty much run out of ammunition.  Since March 2008, central banks have cut interest rates 637 times and they have purchased a staggering 12.3 trillion dollars worth of assets.  There is not much more that they can do, and now the next great crisis is upon us.

Without any outside influences, the global economy and the global financial system will continue to rapidly fall apart.

But if we do have a major “black swan event” take place, that could cause the bottom to fall out at any moment.

In particular, I am deeply concerned about the possibility that World War III could be sparked in the Middle East.  In an article that I published earlier today entitled “Turkey Is Asking The United States To Take Part In A Ground Invasion Of Syria“, I included a quote from Turkish Foreign Minister Mevlut Cavusoglu that reveals just how eager Turkey and Saudi Arabia are for war to begin…

“Some countries like us, Saudi Arabia and some other Western European countries have said that a ground operation is necessary,” Turkish Foreign Minister Mevlut Cavusoglu told Reuters in an interview.

However, this kind of action could not be left to regional powers alone. “To expect this only from Saudi Arabia, Turkey and Qatar is neither right nor realistic. If such an operation is to take place, it has to be carried out jointly, like the (coalition) air strikes,” he said.

The Turks and the Saudis very much want the United States to take a leading role in any ground invasion of Syria, but the Obama administration is not likely to do that.

So we shall see if the Turks and the Saudis are willing to go ahead without us.  Let us hope that they do not decide to invade Syria, because that could start the biggest war in the Middle East that any of us have ever seen.

Unfortunately, Turkey is already attacking.

Turkey has been shelling Kurdish and Syrian military positions in northern Syria for four days in a row even though the Obama administration has been urging them to stop.

The first month and a half of 2016 has already been quite chaotic, and the stage is set for global events to greatly accelerate during the months ahead.

Sadly, the mainstream media in the United States is largely ignoring the preparations for a ground invasion of Syria, and they keep telling us that the global economy is going to be just fine, so most ordinary Americans are going to be absolutely blindsided by what is about to happen.

With the last serious economic crash there were several large economies that were still strong and growing - China, India, Brazil. These countries helped pull the rest of the world out of recession. This year, one is hard-pressed to find any countries with strong, growing economies. There is no-one to throw a life-line. Even the Gulf States are suffering from low oil prices. 

Americans have printed money with shameful abandon and borrowed excessively since 2008 raising their debt to GDP ratio to serious levels. With China working hard to replace the dollar with the yuan as global currency, the American greenback may collapse precipitously. 

2016 should be a very interesting, if not frightening year. There is a lot more going on than just the primaries.

BRICS Bank Start-up to Begin Borrowing in Yuan and Other Non-USD Currencies

BRICS heads of state. Brazil's leader hidden behind Xi Jinping

© Paulo Whitaker / Reuters

The BRICS New Development Bank (NDB) could start operations by borrowing in the Chinese currency, according to the bank’s Vice President Vladimir Kazbekov. He says the bank will focus on loans in the national currencies of the bank’s potential customers.

“Considering the stability of the Chinese currency and the scale of the Chinese debt market, I think that one of the first steps in providing the New Development Bank with funds may be entering the Chinese market to borrow in yuan," Kazbekov said on Tuesday at the opening of a BRICS media summit in Beijing.

NDB was established by the BRICS countries Brazil, Russia, India, China and South Africa in 2014. Its main goal is to promote sustainable development projects within the BRICS complementing the World Bank. In July the bank opened operations in Shanghai with start-up capital of $50 billion.

On Monday, the Chinese yuan was included in the IMF Special Drawing Rights (SDR) joining the US dollar, euro, British pound and the Japanese yen.

See: Big Step for Chinese in Plan to Make Yuan World's Dominant Currency

Kazbekov said the NDB is examining ways of entering the financial markets of other BRICS members, Brazil, Russia, India and South Africa.

"We want to find new flexible instruments of lending, to significantly reduce the time to consider a loan, and try to actively use the model of private-public partnership," he added.

There might be a lack of resources for long-term projects without the active attraction of private capital, according to the NDB Vice President.

Big Step for Chinese in Plan to Make Yuan World's Dominant Currency

Chinese yuan to become a global reserve currency

© Kacper Pempel / Reuters

The International Monetary Fund (IMF) gave the yuan a vote of confidence on Monday by including the Chinese currency in its Special Drawing Rights (SDR) uniting the US dollar, euro, British pound and the Japanese yen.

Adding the yuan as a reserve currency will allow central banks to buy more of the Chinese currency, and boost investment in the Chinese stock market. According to Standard Chartered bank, within five years market players will invest at least $1 trillion in Chinese assets.

America Could Become a Third-World Country Overnight

The historic decision has come after years of negotiations between Beijing and the IMF. The main obstacle was China’s monetary policy, which has kept the yuan artificially low to boost domestic exports.

Beijing had to initiate a whole raft of reforms to secure admission, including easier access to Chinese money markets for foreigners, more frequent bond issues, and longer trading hours for the yuan.

The list of currencies in the basket hasn’t been updated by the IMF since 2000, when the euro superseded the franc and deutschmark.

The main opponents of including the yuan as reserve currency have been Japan and the US. According to Eswar Prasad, a professor at Cornell University and former head of the IMF's China Division, the two countries are unlikely to thwart the deal this time. "I think it will be very difficult for the IMF, especially given all that China has done this year, to deny China the prize it really wants," he told Reuters in October.

Beijing devalued the yuan in August in a shock move to respond to slowing growth. That decision was praised by IMF Chief Christine Lagarde, who said the Chinese currency became more market-oriented. However, the yuan is still tightly controlled by the People’s Bank of China, the country’s central bank.

The yuan will not officially become a reserve currency until September 2016.

China Intends to Oust Dollar from Oil Trade

This is China's latest move in attempting to replace the US Dollar with the Yuan as international currency

China is planning to launch its own oil benchmark in October, similar to Brent and WTI, striving for a more important role in establishing crude prices. Unlike the Western benchmarks, the Chinese contracts will be nominated in the yuan, not the US dollar.

Shanghai International Energy Exchange sent a draft futures contract to market players in August, Reuters reported quoting sources.

Oil futures will be the first Chinese contract to permit direct participation of foreign investors. However, this is not the first step for greater oil market openness in China. In July, Beijing allowed private companies to import crude. Previously importing was only done by state-run majors such as Sinopec, China National Petroleum Corporation and China National Offshore Oil Corporation, the Xinhua news agency reported.

A Shanghai-based contract will compete in the crude futures market, which is worth of trillions of dollars and is dominated by two contracts, London's Brent, seen as the global benchmark, and WTI, the key U.S. price.

North Sea, Brent oil was first developed in the 1970s. The ICE Brent futures contract was developed in 1988. With an approximate output of only 1 million barrels per day, this blend is considered a benchmark and its contracts are now used to set prices for roughly 2/3 of the world's oil.

China is one of the world's largest oil buyers. Nearly 60 percent of its oil consumption comes from imports.

Americans Losing Control of World Monetary System

UK support for China-backed Asia bank prompts US concern

The Asian Infrastructure Investment Bank agreement was signed in October
by 21 countries, including China

The US has expressed concern over the UK's bid to become a founding member of a Chinese-backed development bank.

The UK is the first big Western economy to apply for membership of the Asian Infrastructure Investment Bank (AIIB).

The US has raised questions over the bank's commitment to international standards on governance.
"There will be times when we take a different approach," a spokesperson for Prime Minister David Cameron said about the rare rebuke from the US.

The AIIB, which was created in October by 21 countries, led by China, will fund Asian energy, transport and infrastructure projects.

The UK insisted it would demand the bank adhere to strict banking and oversight procedures.
"We think that it's in the UK's national interest," said Mr Cameron's spokesperson.

'Not normal'
Pippa Malmgren, a former economic advisor to US President George W Bush, told the BBC that the public chastisement from the US indicates the move might have come as a surprise.

"It's not normal for the United States to be publicly scolding the British," she said, adding that the US's focus on domestic affairs at the moment could have led to the oversight.

Chinese construction site

However, Mr Cameron's spokesperson said UK Chancellor George Osborne did discuss the measure with his US counterpart before announcing the move.

In a statement announcing the UK's intention to join the bank, Mr Osborne said that joining the AIIB at the founding stage would create "an unrivaled opportunity for the UK and Asia to invest and grow together".

The hope is that investment in the bank will give British companies an opportunity to invest in the world's fastest growing markets.

But the US sees the Chinese effort as a ploy to dilute US control of the banking system, and has persuaded regional allies such as Australia, South Korea and Japan to stay out of the bank.

This is, indeed, another nail in the coffin of American control of the world monetary system. I fully expect the AIIB to use the Chinese Yuan as its base currency thereby further weakening the American dollar as the base of the world economy. Having a major western economy sign-on to that is of very great concern to Americans, as it should be.

In response to the move, US National Security Council spokesman Patrick Ventrell said: "We believe any new multilateral institution should incorporate the high standards of the World Bank and the regional development banks."

"Based on many discussions, we have concerns about whether the AIIB will meet these high standards, particularly related to governance, and environmental and social safeguards," he added.

Analysis: Linda Yueh, BBC chief business correspondent

It's a tricky task to align oneself with both China and the US. The Americans are apparently unhappy with the UK, while China has welcomed the British application.

It may be a pragmatic move, but it's hard not to offend one side or another.

I suspect this will be the first of many decisions to be taken by countries such as the UK to position themselves between the new economic superpower and the existing one.

The trick will be to come away with economic advantage at minimal political cost. We'll find out if this one will pay off for the UK.

'No consultation'
Some 21 nations came together last year to sign a memorandum for the bank's establishment, including Singapore, India and Thailand.

But in November last year, Australia's Prime Minister Tony Abbott offered lukewarm support to the AIIB and said its actions must be transparent.

US President Barack Obama, who met Mr Abbott on the sidelines of a Beijing summit last year, agreed the bank had to be transparent, accountable and truly multilateral.

"Those are the same rules by which the World Bank or IMF (International Monetary Fund) or Asian Development Bank or any other international institution needs to abide by," Mr Obama said at the time.

The Financial Times (FT) newspaper reported on Thursday that US officials had complained about the British move.

The report cited an unnamed senior US administration official as saying the British decision was taken after "virtually no consultation with the US".

"We are wary about a trend toward constant accommodation of China," the newspaper quoted the US official as saying.

However, in response to the UK announcement, World Bank president Jim Yong Kim told a news conference he supported the goals of the AIIB.

"From the perspective simply of the need for more infrastructure spending, there's no doubt that from our perspective, we welcome the entry of the Asian Infrastructure Investment Bank," he said.

Offence

The founding member countries of the AIIB have agreed the basic parameters that would determine the capital structure of the new bank would be relative gross domestic product.

Banking experts have estimated that, if taken at face value, this would give China a 67% shareholding in the new bank.

That's significantly different than the Asia Development Bank, which has a similar structure to the World Bank and has been in existence 1966. There, the majority stakes are controlled by Japan and the US.

Tony Abbott poses with Chinese President Xi Jinping at the
Apec summit banquet in Beijing - 10 November 2014

Speaking in Beijing last year, Mr Abbott said Australia would only sign up to "a genuinely multilateral body"

When asked if Britain would seek assurances before it signed on as a member that no one country would be able to unilaterally control the AIIB, economist David Kuo told the BBC that the UK "wouldn't have a great deal of say in the matter".

"He who pays the piper calls the tune," he said. "The UK could try and negotiate a power to veto projects but it is unlikely to get it," Mr Kuo, who is from investment advisers The Motley Fool, said.

The UK was caught between the US on the West and China in the East, he added.

"It hopes that it can exert force from within, rather than put pressure from the outside - but [the UK] is only one voice in a crowd of many."

With regard to the competition the AIIB would give the ADB or World Bank, Mr Kuo said there were plenty of infrastructure projects in Asia that needed funding.

"The existing sources of money can't do everything. So every little helps."