Seven Reasons Why We Should Not Depend on Imported Goods from China

It seems to me that the situation in China is far different from what most people think it is. Even if we would like to depend on China, we really cannot.

Reason 1. When we depend on goods from China, an amazingly large share of the world’s industrial activity gets concentrated in China.

The five largest users of energy in the world are China, the United States, India, Russia, and Japan. The International Energy Agency shows total energy consumption as follows for the year 2016:

Figure 1. IEA’s estimate of energy consumption (total fuel consumed, or TFC) by sector in 2016 for the top five energy consuming nations. Mtoe is million tons oil equivalent. Source: IEA. Non-energy use is the use of fossil fuels as a material to create end products that are not burned. Examples include medicines, plastics, fertilizers, asphalt, and fabrics.

When these countries are compared, restricting our analysis to the portion of energy used by industry, we find the rather disconcerting result shown in Figure 2:

Figure 2. Chart by the International Energy Agency showing total fuel consumed (TFC) by industry, for the top five fuel consuming nations of the world.

China consumes more fuel for industrial production than the next four countries listed (United States, India, Russia, and Japan) combined. Of course, we don’t know exactly the corresponding amounts for other countries of the world, but we can observe that if a country is concerned about its CO2 emissions, the easiest way to reduce these emissions is to send heavy industry elsewhere, such as to China or India. There are likely many countries that are primarily service economies, thanks to the option of outsourcing most industry to other countries.

Much of the discussion I have read regarding sending industry elsewhere has been in the direction of, “As advanced as our economy is, we don’t need heavy industry; service jobs will substitute. Industry can be developed at lower cost elsewhere. Everyone will be better off with this arrangement. The invisible hand will provide jobs and goods and services for everyone.” In addition, corporations saw the possibility of adding customers from around the world. Not too many thought about the real-world problems that might result.

Clearly there is a problem with the jobs being lost to China and other Emerging Markets. When new service jobs are added, they often do not pay as well the industrial jobs they replaced. In fact, there might not be enough jobs in total, if automation plays an important role as well.

Another issue is that the level of industrial concentration can be a problem. We are now depending on China and perhaps a few other countries to provide for a large share of the “stuff” we use. Even if China is not the only provider, it is often an important part of the supply chain. If something should go wrong (for example, widespread riots in China), we don’t have a Plan B.

Reason 2. China needs energy products to make the goods it uses for itself and for the goods it exports. China’s own energy supply is faltering. Because of China’s huge size, it is becoming increasingly difficult to keep China’s energy consumption rising sufficiently rapidly using imported energy.

China’s own energy production is shown in Figure 3. (Note: Hot off the press! New BP report released this week.)

Figure 3. China energy production by fuel, based on 2019 BP Statistical Review of World Energy data. “Other Ren” stands for “Renewables other than hydroelectric.” This category includes wind, solar, and other miscellaneous types, such as sawdust burned for electricity.

It is easy to see that China’s coal production hit its highest point in 2013 and has stayed at a lower level since that date. Also, China’s highest oil production occurred in 2015, with lower production since that date. China’s total energy production has been rising recently, but only with great effort. Total energy production is only 8.9% higher in 2018 than it was in 2012, implying an increase of less than 1.5% per year, relative to 2012 amounts.

A standard workaround for inadequate energy production growth is imported energy products. Even with these imports, it has been impossible to keep total energy consumption rising as rapidly as it rose in the 2002 to 2007 period. The cost with imports is greater, also.

Figure 4. China energy production by fuel, plus line showing its total energy consumption (including imports), based on BP 2019 Statistical Review of World Energy data.

In 2018, China imported 71% of its petroleum (either as crude or as products), and 43% of its natural gas. It was the largest importer in the world with respect to both of these fuels.

In 2018, China’s coal imports shrank as its own coal production surged. This was almost certainly a change planned by China. China would much prefer producing its own coal (and keeping the jobs within the country) to importing coal from elsewhere. China imported 4% of its coal from elsewhere in 2018.

Reason 3. The commodity demand from China is so huge that, to a significant extent, it determines world commodity price levels. Where regional energy prices exist, China’s choice regarding whether or not to import from a country can influence local price levels.

Chile is the largest copper producer in the world. A recent article regarding problems associated with lower copper prices notes that the demand for Chilean copper has been driven “almost entirely by the expanding Chinese economy over the last three decades.” For many commodities, China consumes over half of the world’s commodity supply. If China’s industrial demand is growing, prices will tend to rise, allowing more of the mineral to be extracted. Higher commodity prices tend to be needed over time because the ores of highest concentration (and otherwise easiest to extract ores) tend to be extracted first. Ores extracted later tend to be more expensive to extract, so higher prices are required for extraction to be profitable.

This situation of China playing an extremely large role in commodity prices holds for a very large number of commodities. If China is building widgets or any other product, using a particular commodity, China’s need to buy this commodity in the world market will tend to hold up world prices for the commodity. This situation holds even for fossil fuel prices.

Reason 4. Over the next few years, China’s coal supply is likely fall significantly because of depletion. This lower fuel supply is likely to lead to a shrinkage of China’s industrial capability, and, indirectly, falling world commodity prices of all kinds.

The problem that China is encountering in Figure 3 is “peak coal.” This is a similar problem to that encountered by the United Kingdom immediately before World War I, and to that Germany encountered just before World War II.

Figure 5. The timing of the peaks is peculiar, relative to wars.

Coal tends to be the industrial fuel of choice because it is cheap. Goods made with coal tend to be inexpensive, especially if wages paid to workers are low and if the company making the goods does not spend much money on pollution prevention. Hydroelectric can be an adequate substitute for coal, if the water flow can be depended upon. Wind and solar are too intermittent and not sufficiently inexpensive to be adequate substitutes for coal. Wind and solar (included in “Other Ren” on Figure 3) are also far smaller in quantity than coal.

Outsourcing a large share of the world’s manufacturing to China seemed like a great idea back when it was started, often in the early 2000s. If, at some point, China cannot really handle the responsibility it has taken on, outsourcing gets to be a huge problem.

The reason why coal prices cannot rise very high is because if they do, the prices of finished goods will need to rise as well. Wages of workers around the world will not rise at the same time because the higher cost of production takes place due to something that is equivalent to “growing inefficiency.” The coal mined is of lower quality, or in thinner seams, or needs to be transported further. This means that more workers and more fuel is needed for each ton of coal extracted. This leaves fewer workers and less fuel for other industrial tasks, so that, in total, the economy can manufacture fewer goods and services. Because of these issues, countries experiencing peak coal are pushed toward economic contraction.

Unfortunately, rather than leading to high prices (to compensate for the higher extraction costs), running short of inexpensive-to-extract fuel tends to lead to war, or to tariff fights. Countries whose coal is depleting will try to maintain their own supply as long as possible. They will invent excuses to stop importing coal. Back in September 2018, the Financial Review reported, “China has introduced unofficial restrictions on coal imports in a bid to prop up domestic prices by slowing down customs approvals at key ports.” China needed higher internal prices to make it profitable to extract coal from its depleting coal mines.

Figure 6. Chart showing prices of Brent Oil, China Qinhuangdao Spot Coal price, and Asian Marker Coal, all in US$ of the day. Amounts from BP 2019 Statistical Review of World Energy. Note also that the units of coal (ton) are much larger than the units of oil (barrel) used on this chart. Thus, the same number of dollars of buys a much larger quantity of coal than of oil; coal is cheaper.

If higher coal prices really were possible over the long term, it would make it possible to open new mines in more distant locations. The location of coal mines is important because transport costs by rail or truck tend to be high. China built the large ghost city of Ordos, Inner Mongolia, on the expectation that coal prices would rise, making development of coal in the area profitable. Unfortunately, coal prices fell, making the project not economic. I visited the area in 2015, after teaching a short course on Energy Economics in Beijing. There was a large almost empty airport, and few vehicles were using nearby multi-lane roads.

Reason 5. All of the concern about future tariffs artificially raised China’s 2018 industrial production and commodity prices. Because production was brought forward into 2018, China’s production and world commodity prices can be expected to be lower in 2019 and in future years.

Manufacturers wanted to front-run tariffs, so they tended to ramp up production in advance of the tariff implementation date. This higher production in turn tended to raise commodity production and prices around the world. Note on Figure 6, above, that coal and oil prices are both higher in 2018 than in 2017. Prices in 2019, not shown, are tending to trend downward again.

China badly needed higher coal prices in order to help its coal extraction. Thus, part of the reason that China was able to continue to function as well as it did in 2018 was because of all of the discussion about future tariffs. If this discussion had not taken place, employment in China would likely have been lower. With this lower employment, sales of automobiles and smartphones would have been lower as well.

Note, too, that even with the demand brought forward into 2018, China’s economy was not functioning very well in 2018. Private passenger automobile sales for the year fell by 4%. Smartphone sales fell by a worrisome 15.5%. Clearly, workers were having difficulty buying the kinds of goods a person would expect a growing economy to be selling. I would attribute these problems to the peak coal problem mentioned earlier, making it increasingly difficult to increase the amount of industrial operations provided by China’s economy.

Reason 6. The Chinese economy has been gradually changing and adapting to hide its energy problems. Even more changes will be needed in the future, potentially affecting the world economy, with or without tariffs.

The Chinese economy reports carefully massaged GDP numbers, which many analysts consider to be inflated in recent years. Its debt level keeps rising to try to keep all of its operations going.

We know that China discontinued one major industry at the beginning of 2018: recycling plastic and other types of low-valued recycling. With low oil and natural gas prices, this type of recycling cannot be profitable. Of course, discontinuing a major industry can be expected to lead to a loss of jobs within China. But, on the positive side, it frees up coal and other energy resources in China for other industries that can (perhaps) make more profitable use of them.

On a world basis, the loss of the plastic recycling industry becomes a problem. If rich countries are willing to subsidize the cost of sending plastic recycling to China, this subsidy allows containers that bring goods to rich countries to be sent back to China with a paid load inside. Thus, operating the plastic recycling industry helps keep the cost of shipment of goods from China to the US or Europe down because the shipping costs only need to cover the one-way cost of transit, rather than also covering the cost of shipping the empty container back. Without the subsidy to pay the freight of the plastic recycling, costs for the shipping industry rise, making international trade more expensive. Eliminating the subsidy that rich countries are paying to ship otherwise-empty containers back full of mixed trash is part of what pushes the world economy to contraction.

Other countries are not taking over very much of China’s role in recycling plastic, either. The net effect is that the loss of recycling is one of the things pushing the world toward contraction.

China has no doubt been cutting back in other ways as well. It is likely that it is not building as many uninhabited cities and roads that are really not needed. Ugo Bardi recently posted this chart showing global cement production.

Figure 7. World Cement Production by Ugo Bardi from a blog post on January 19, 2019.

China produces over half of the world’s cement; part of the reduction we are seeing relates to China’s falling use of concrete in new buildings and roads.

In some cases, China is moving in the direction of being a service economy. A recent video states that of the $237.45 cost of producing an iPhone in China, Chinese workers only provide assembly services, worth $8.46. The US contributes $68.69 of the cost, mostly in the design and distribution phases. The parts are generally outsourced from other parts of the world.

One way of looking at what is happening in China’s economy is to analyze the country’s oil consumption in terms of the relative amounts of diesel (used primarily by industry) and gasoline (often used by private passenger vehicles).

Figure 8. Gasoline and diesel consumption for China, based on data from 2019 BP Statistical Review of World Energy.

Based on Figure 8, it appears that China’s industrial growth suddenly leveled off about 2012. This, not by coincidence, is about the time that China’s coal problems were becoming apparent in China. China’s gasoline consumption has continued to rise, however. It appears that once it became apparent that its coal supplies were starting to seriously deplete, China began to “grow” China’s economy more as a service economy. After 2012, most growth seems to have come in the non-industrial sectors of China.

Reason 7. A major concern should be a financial collapse, far worse than 2008, both in China and for the world as a whole.

The world needs growing energy supply to support the world economy. China is increasingly having difficulty with its energy supply. When China has trouble with its energy supplies, the world as a whole has a problem with its growth in energy supplies.

A few months ago, I showed the role China has played in the world economy is this chart:

Figure 9. Ten year growth in world energy consumption, divided between the blue portion associated with rising population, and the red portion associated with higher energy consumption per capita, which I have called “Living Std.”, meaning “Higher Living Standards.”

China added a little bump in GDP growth at the end of the nearly 200-year time period shown, after it joined the World Trade Association in December 2001. The energy added by China (mostly in the form of coal) allowed the world economy to continue to grow, when it otherwise would have been up against limits.

Now we are reaching a situation where China’s energy production is likely to flatten or fall because of the depleted state of its coal mines, and the fact that coal prices can’t rise high enough, for long enough, to open new mines. The world economy, over the period shown, has always had rising energy consumption. In most cases, energy consumption rose faster than population growth, allowing some growth in the standard of living over time.

Changing to a situation of shrinking energy consumption per capita would likely be extraordinarily traumatic. Population would likely fall. Commodity prices would drop to low levels. Debt would tend to default; prices of shares of stock would fall. Many governments would fail. If shrinking energy consumption per capita starts in one country (whether China or elsewhere), it could easily spread to other countries around the world.

We don’t know what is ahead, but we know that the low points on Figure 9 were very bad times, even though energy consumption in total was not contracting. The decade of 1860 to 1870 was the decade of the US Civil War. The decade of the 1930s was the decade of the Great Depression. The decade of the 1990s was the decade of the collapse of the central government of the Soviet Union.

We also know that world energy consumption and GDP growth tend to be highly correlated.

Figure 10. World GDP Growth versus Energy Consumption Growth, based on data of 2018 BP Statistical Review of World Energy and GDP data in 2010$ amounts, from the World Bank.

This is as we would expect, because energy consumption is required for the many aspects of GDP growth. Transportation, heating and/or cooling, and electricity all require energy consumption, for example.

The recent divergence between GDP and energy consumption on Figure 10 may be the result of overstated GDP amounts by China, India, and other countries. If a country wants to appear inviting for new investment, there is a temptation to overstate GDP since other countries seem to be doing so, without penalty.

Back during the Great Recession of 2008-2009, our problem was with homeowners who took out loans that were far higher than they could really afford. Today, we have whole economies taking on more debt than properly stated GDP reports would suggest they are able to handle. We go from one version of optimism regarding debt levels to another.

Conclusion. If a person doesn’t understand how badly the energy situation is working out for China, or how important energy consumption is, it is easy to think that the problems China is facing are primarily tariff-related. In fact, China’s situation is a very worrisome one, with or without tariffs being added.

To fix the situation, China would need a very cheap, non-intermittent, locally produced, non-polluting additional energy source. This energy source would also need to be rapidly scalable. Such an energy resource doesn’t appear to be available.

 

 

 

 

 

 

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
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890 Responses to Seven Reasons Why We Should Not Depend on Imported Goods from China

  1. Rodster says:

    “Demographic Doom? Germany, Italy, Korea, & Japan Face Workforce Collapse By 2050“

    https://www.zerohedge.com/news/2019-06-26/demographic-doom-korea-germany-italy-and-japan-set-see-workforce-collapse-2050

    • I’d offer few factoids to ponder – muse about..

      – Unemployment of youngsters in Italy is currently at shocking %40+
      – Germany started their Turkish import workers program in late ~1960-70, many of them were directly employable in industries, services, true some contributed to parallel economy etc. While today’s wave of Afghani and subsaharan migrants are in majority NONE employable at all..

      • The immigrants to the US from Mexico have generally been very employable. The people seem to be conscientious and hard working. The culture is not too different. For the most part, they have been easy to absorb into the economy.

    • We will have enough other problems by 2050 that this won’t matter much, however.

  2. SuperTramp says:

    Oh, well 50% decline in bat deaths…what about the other 50% that die?
    Now Duke Energy Corp. is deploying technology to dissuade the creatures from flying headlong into their deaths. It uses ultrasound to block sonar bats use to navigate at night, prompting them to avoid areas around turbines.
    The Charlotte, North Carolina-based utility owner is using the “Bat Deterrent System” at installations in the Rio Grande Valley. It’s first time a company has commercially deployed the system, developed by ESCO Technologies Inc.’s NRG Systems, according to a statement Wednesday. A two-year study found it can reduce bat fatalities by 50%, Duke said
    https://finance.yahoo.com/news/bat-killing-wind-turbines-outfitted-191851343.html

    A two year study it CAN!? Sure it can…makes the green brigade feel good and put a WWF approved seal on it, after Duke donates $$$ to them? Mission Accomplished, next!

  3. SuperTramp says:

    Just keeps getting deeper and deeper…
    While the FAA and Boeing didn’t disclose the exact nature of the flaw, CNN reports government pilots found an issue with the microprocessor that may lead to the plane pointing downwards if the chip fails. According to one of the outlet’s sources, during the simulator tests, “it was difficult for the test pilots to recover in a matter of seconds. And if you can’t recover in a matter of seconds, that’s an unreasonable risk.” It’s not clear if the microprocessor played a role in the crashes.
    The 737 Max has been out of service since earlier this year after two crashes killed 346 people. Last month, Boeing said it completed an update to resolve software flaws that contributed to the incidents
    https://www.engadget.com/2019/06/26/737-max-faa-boeing/?yptr=yahoo
    A new report from the New York Times details a bureaucratic mess, caused by the overhauling of an A.I. system, that it says is responsible for the two fatal Boeing 737 Max 8 crashes in Oct. 2018 and March 2019.
    Boeing allegedly introduced “aggressive and riskier” changes to an A.I. system built for safety. Those changes, plus siloed departments and a lack of pilot training and regulatory oversight, reportedly led to the deadly Boeing 737 Max crashes.
    P.S. Boeing CEO Personnel changes have occurred due to the MAX 8…..give the man his Bonus…
    He earned it!

  4. Harry McGibbs says:

    “US President Donald Trump has called new Indian tariffs on US products “unacceptable” and demanded that they be withdrawn.

    “India imposed retaliatory tariffs on 28 US products earlier in June, after the US announced it was withdrawing India’s preferential trade treatment.

    “Mr Trump’s criticism came a day after the two sides had downplayed tensions. He is due to meet Mr Modi on the sidelines of the G20 summit, which begins on 28 June in Osaka, Japan.”

    https://www.bbc.co.uk/news/world-asia-india-48782197

  5. Harry McGibbs says:

    “The global economic mood is souring. At their meeting in Fukuoka, Japan, earlier this month, G20 finance ministers and central bank governors warned that economic growth remains weak, with risks still tilted to the downside.

    “Just a few days before that gathering, the World Bank had lowered its 2019 global growth forecast to 2.6 per cent – the lowest in three years – and predicted that growth would remain tepid in 2020-2021.

    “These headlines conceal an even gloomier story: the worsening plight of the world’s poorest people.”

    https://www.scmp.com/comment/opinion/article/3016140/global-economy-slows-spare-thought-worlds-poorest

    • It really takes more very cheap energy to help these countries. No matter how much we would like to help them, it is doubtful that we really can help them.

    • Chrome Mags says:

      “These headlines conceal an even gloomier story: the worsening plight of the world’s poorest people.”

      As available surplus energy declines, that scenario will continue to get worse, much worse. Then what had been the middle class will be a worsening plight in the next recession. Think of the super wealthy as the epicenter, with the perimeter getting the shaft first, then working its way in. Its gonna be rough.

      • Xabier says:

        People will wake up to the fact, after a big crisis, that they didn’t actually belong to a class, it was merely an economic accident: goodbye ‘middle-class’ status forever…..

      • your ”class” is defined by the surplus energy available to support you

        thus, a king/president has available the energy of the nation to sustain his ”class status”–whether in modern times (presidential jet) or previous times, coach and horses with outriders and so on.

        there are numerous ”class stages” until you get down to the lowest peasant, who does not have enough surplus energy available to feed clothe and house himself in any sustainable way.

        There has always been a tendency to look down on ”classes” lower down the scale.

        As surplus energy depletes, the wealthy elite will lose their class status. Then there will be a reversion to holding on to status by physical force, for as long as possible,

        that part is going to be very unpleasant

  6. SUPERTRAMP says:

    The retail brick and mortar meltdown continues…
    Pier 1 Imports plans to close 57 stores, and more closures could be coming, interim CEO says

    Based on figures from global marketing research firm Coresight Research, bankruptcy filings and company earnings reports, more than 7,000 stores are already slated to be shuttered in 2019. Coresight tracked 5,864 closings in 2018.
    The trade war with China could force “widespread store closures” and put $40 billion in sales at risk, according to a May report by UBS investment bank.

    Days after Pier 1 reported financial results in April, S&P Global Ratings, a major credit rating agency, said the retailer was careening toward a potential bankruptcy restructuring.
    According to company documents, there are more than 965 stores in the U.S. and Canada. The chain sells home décor, furniture and other accessories
    The Texas-based home goods retailer said Wednesday it was looking to close 57 stores in the fiscal year, up a dozen from the April estimate of 45 stores.
    https://amp.usatoday.com/amp/1580216001

    Looks like we are headed for hard times…remember when retail jobs were survival work you could get it you needed a employment. Now with self check-out .

    • The stores that seem to sell the “nicer” things tend to do worse. There were no doubt cheaper substitutes available at Walmart for Pier 1 goods.

  7. Yoshua says:

    The WTI 50 DMA & 100 DMA are just about to form a death cross as the global trade is contracting.

    https://pbs.twimg.com/media/D-DclpjW4AEHup2?format=jpg&name=900×900

    • So this means the path of the 50 day moving average is likely to change dramatically?

    • I see that Wolf Richter has an article up, talking about the stimulative impact of today’s very low long term interest rates. Ten year US treasuries are a little over 2%, stimulating refinancing of homes and new investment of all kinds. I suppose this is part of what is bidding oil prices up.

      How long all this can last is not clear. At some point, high energy prices get in the way of profitable investment. The time may be close at hand.

  8. Dennis L. says:

    Again, we need food on a somewhat regular basis and with corn as Gail has noted, we have tied corn to fueling of automobiles and associated ethanol.
    Spoke with tenant, he is optimistic as always, I don’t know what beans should look like at this time of year and I didn’t see much corn, but the link paints a stark picture. Caution: excess sells news and gets notice, it never is as bad as presented nor as good as it seems.
    It is raining here today, sprayer parked, half a day’s work done; it will take a few days to dry out.
    https://www.zerohedge.com/news/2019-06-25/its-scary-picture-midwest-farming-turmoil-being-compared-2008-housing-crisis
    We are running everything on the edge, it is thrilling until one falls.

    Dennis L.

    • Harry McGibbs says:

      “Corn futures headed for the biggest quarterly gain since the end of 2010 after the spring deluge in the U.S. Midwest left planting at the slowest since records dating back to 1980, eroding prospects for production.”

      https://www.bloomberg.com/news/articles/2019-06-27/midwest-deluge-drives-corn-to-biggest-quarterly-gain-since-10

      • Grant says:

        To plagiarise a well know phrase from History related to matter in France (allegedly) some years ago, perhaps the attitude is “let them drink gasoline”?

        At least – metaphorically speaking that might be the message.

        I suppose the results would, in the minds of some, still be beneficial in terms of the “War against Climate Change”.

      • Let’s see how long the high prices really last. They might be possible for a little while, for a small share of their normal uses. But people will not pay a whole lot more for food for animals or for ethanol, for very long, I expect.

  9. Grant says:

    CNN Reports that Ford are cutting 12,000 jobs in Europe in the next few months and closing several plants, some of which are in areas with lower costs such as Slovakia.

    If they can’t make things work in lower cost locations one has to wonder what is going on.

    • Ford brand (and its models) simply lost appeal on over supplied market. While other brands keep their own niche or even expanded by offering more ‘desirable models’ ..
      In particular the French brands have risen from the grave, and South Koreans finally make more than price competitive offering..

      Obviously apart from biz decisions, if you dig deeper, it’s also question about access to cheap(er) labor and various gov-cb support etc..

    • Dan says:

      I’ve said it before and I’ll say it again – people (working consumers / the people who keep the wheels turning) are maxed. The economy never improved for the working class and there is only so much cheap debt a household can sustain on stagnant wages.

      As we all know without cheap energy there can be no real wage growth so we can expect things to worsen. In past recessions car sales have been the Canary in the coal mine.
      There is no escaping EROEI

      • Dennis L. says:

        Point estimate: I feels like it, things a retired person purchases are increasing in price, I use Quicken and nothing has gone down in price. Looking at the market, actual cash returned in the form of dividends/capital is down, it is buying the dips and selling the highs, all paper wealth. In the real world, hard to escape. Millennials feel it in rent and useless college credits at exhaubrant cost. Periodically I peruse college bookshelves in mathematics, Calc I thru Calc III has been dumbed down compared to the 60’s, the good books are in the honor sections and these would have been standard sections in the day.

        This site looks for macro solutions, I live on a daily basis and look more at the micro and how to navigate and storms. It is not easy. Subscribed lately to a periodical on grass fed cattle, crp land is now on a yearly sign up, looking ahead, picked out a cowboy hat, growing my hair long over my neck is no longer a viable option to say nothing of the top.

        Dennis L.

        • Xabier says:

          Diluting standards at universities has been the means to increase the flow of debt-sucker students: just another an industry now -sometimes even the only major one supporting a town – not an educational endeavour Property speculation is the main university preoccupation here as far as I can see and hear (all the building!)

          • Diluting standards for entrance and the need for retraining to focus on increasingly specialized areas have also added to the pool of potential students. Students find that they need to come back, for more study, to keep up with new requirements.

    • adonis says:

      apparently Ford made a loss in its Europe operations in 2018 after taxes and interest of 398 million dollars they will cut 12000 jobs from 51000 in Europe or just over 25% of the workforce from 2018 levels

      • If the sale of automobiles is shrinking, it is very difficult to make a profit. Companies try to make the best of a bad situation by laying off workers and closing plants. It becomes more and more difficult to maintain earnings per share and to repay debt with interest.

        • Artleads says:

          People buy products for irrational reasons. And it’s never clearer than why they buy art. While my art is essentially non commercial, I’m starting to appreciate the “business” side of it. As far as I can tell, a niche market, at least, could be had for battered old vehicles from a simpler era and easier to repair. There’s a lot of art around battered old pieces of metal, and battered old vehicle often function (without maximizing its advantages) as mobile art. A less rigid market more on the art side is likely to interest more people over time.

        • adonis says:

          my son who works in a major supermarket here in Australia also told me that the profits are very low under 5% about two years ago about a few weeks ago he was told he would be made redundant along with a bunch of other managers . my feeling is that they are laying off workers due to profits disappearing similar to what’s happening in the car industry

          • Grant says:

            That seems to be true everywhere so far as I can tell.

            Also the usual round of business feeling a need to increase prices at a rate above that of inflation (probably entirely false numbers) and any assessment of typical ‘average wage increases’. Wages increases in the general market are rather meaningless for retailers when large numbers of workers are being released across all industries.

            Worst of all, of course, are the organisation that are not in a truly competitive situation and have some form of legalised enforcement behind them.

            Local authorities, for example, who see an ever extending need to pay their executives more and more for less and less – especially in terms of generous pension scheme contributions. When the largesse from Central Government dries up they simply apply their own increases well above the rates that the population can support and carry on reducing services.

            In the commercial sphere the Insurance companies are past masters at the art of gouging and have a significant client base that is legally obliged to employ their alleged services – in this case any insurance that is mandated by some level of ‘government’ gives the insurance companies specific opportunities to cash in .

            Since everyone is looking for 10% take from the consumer’s phantom 1% rise in disposable credit the time seems ripe, once more, for some major shake outs and perhaps significant social upheaval.

  10. Harry McGibbs says:

    “Worrying excesses are building up in the world’s $52 trillion nexus of shadow banking and investors risk serious losses when the financial cycle turns, the ratings agency DBRS has warned.

    “The hunt for higher yield has led to a surge in leveraged loans, collateralised loan obligations (CLOs), and other arcane high-risk instruments with echoes of the Lehman crisis.

    “While banks have been forced to raise their capital buffers and are deemed much safer than in 2008, the hazards have migrated to dark pockets of the vast non-bank sector. This now makes up 62pc of the $97 trillion assets of the financial industry…”

    https://www.telegraph.co.uk/business/2019/06/27/concerns-mount-reckless2008-style-lending-52-trillion-shadow/

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