THE WORLD IS ON BRINK: An Outright TRADE WAR Imminent, Export Orders Collapsing Around The World, China Is On The Cusp of A Deflationary Vortex, And ESM Didn’t Have Enough To Rescue Spain

US to implement tariffs on imports from China

Rumors that the United States would slap tariffs on China goods are now reality. The US Commerce Department set duties on billions of dollars of solar energy products from China

Export Orders Appear To Be Collapsing Around The World

The chart below was presented recently by the Frederick Smith, the President and CEO of FedEx Corp., which shows the clearly negative trends in the year-over-year exports including the U.S.


These very negative trends are important to understand because it is the source of revenue for businesses worldwide. As consumer demand slows it reduces the need for production ultimately reducing profitability. Furthermore, this decline in production and consumption leads to higher unemployment, lower incomes and ultimately an economic recession. Domestically, exports are more crucially important than ever as they now comprise more than 13% of GDP and 40% of corporate profits.

** DAVID ROSENBERG: The Last Two Times Export Orders Collapsed Like This, We Were In A Recession

Ambrose Evans-Pritchard: The last thing the world needs now is a deflationary shock from China

July 9th, 2012

China is on the cusp of a deflationary vortex.

China is on the cusp of a deflationary vortex.

This was signalled late last year by the sharpest contraction in the (real) M1 money supply since modern records began. The hard data is now confirming the warnings.

Consumer prices have been falling for the last three months, producer prices have been falling for four months. This is not a food cost story. It is systemic.

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“While an economy-wide generalized deflation is yet to be seen, the deflationary spiral looks to have started in some industrial sectors, attesting to considerable stress with the economy. Persistent deflation can be poisonous,” said Xianfang Ren from IHS Global Insight in Beijing.

Indeed it can be poisonous, and China already has the twin-afflictions of the deflation malaise: a fast aging nation, and a surfeit of factories and industrial plant.

China Will Grow Old Before Growing Rich, And It Will Bring Down The Rest Of Asia

Banking crises historically follow demographics-induced credit booms.

The Ponzi schemes and off-balance sheet loans in China’s banking system are in the forefront of today’s news. Reuters reports Bank of China executive warns of shadow banking risks

A senior Chinese banking executive has warned against the proliferation of off-book wealth management products, comparing some to a Ponzi scheme in a rare official acknowledgment of the risks they pose to the Chinese banking system.

China must “tackle” shadow banking, particularly the short term investment vehicles known as wealth management products, Xiao Gang, the chairman of the board of Bank of China, one of the top four state-owned banks, wrote in an op-ed in the English-language China Daily on Friday.



REPORT: ESM Didn’t Have Enough To Rescue Spain

“The euro EURUSD trimmed its rise against other currencies, including the U.S. dollar, after a report by the International Financing Review that the European Stability Mechanism did not have enough cash to rescue Spain if the nation asked for a bailout before the end of the year. But officials stressed in interviews with other media outlets that the fund has the means to raise capital by selling fixed-income securities.”




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