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The chart above shows a complete and utter exponential trend failure. If the red trend line represents normal, then there is absolutely no chance of returning to normal. This has huge implications for US retailers, Chinese manufacturers, and global long-term investment return assumptions.
In my opinion, exports rose due to dollar debasement. The rest of the world seems to be catching on. If it works for us, then it must work for them too! There's just one problem of course. It can't work for everyone simultaneously.
To put it bluntly, global trade is leaning on the ropes, gasping for breath, and is having its head pummeled by the fists of stagnation.
If it was our goal to close the trade deficit and once again become a fully sustainable economy, then we've clearly got a LOT of work left to do.
I'm bracing for more deflation in the short-term, but I think stagnation will eventually turn into stagflation. In any event, what we are seeing in these charts is certainly not prosperity being formed. Of that I am quite certain.
See Also:
LA Area Port Traffic Is Stagnating Again
Source Data:
Port of Long Beach: Statistics
Port of Los Angeles: Statistics
The X-12-ARIMA Seasonal Adjustment Program
23 comments:
Wow. The total graph looks almost identical to the import graph and nothing at all like the export graph. Hence the trade imbalance.
I don't think you need a positive balance to be fully functioning economy - else half the collective global economy must be dysfunctional at any given time.
But to impose fiscal austerity while the private sector is perforce deleveraging and the trade balance in strongly negative means deep, deep contraction.
WASF!
JzB
Jazzbumpa,
I personally root for fully balanced trade (neither a positive surplus nor a negative trade deficit, as priced in dollars).
More pain is coming in one form or another.
Fiscal austerity would create massive pain at this time.
Kicking the can down the road and allowing it to grow in size risks creating even more pain at some point in the future.
In my opinion, pick your poison. Choose wisely. Hindsight can be very cruel.
Mark,
I think stagflation is here. While output is down, producer prices are up over 7% YoY (from the PPI report today). CPI is running over 3% YoY. Combined with slowing GDP, that spells Stagflation!
Winning the Future (after golf and some more vacation of course).
Mr Slippery,
Stagnation is here. The definition of stagflation requires a high inflation rate though, and I'm not sure 3% would meet the criteria. It is certainly debatable though.
The biggest holdout would be the long-term nominal treasuries. They do not exactly scream stagflation. There's a chance that they are right yet again (as they were in late 2008).
My short-term inflation mood is mixed. I think we may be nearing a tipping point, but I'm not sure which way we'll tip.
My long-term inflation mood remains firmly planted. If one combines that with zero real growth then things could get very ugly.
The one thing we could do to reduce our trade deficit is: Drill for and produce our oil.
ANWR and Santa Barbara Channel oil could be in the pipelines in 2-3 years if the green flag was given in Obama's jobs plan in Sept. Not holding my breath on that one.
Are you using data on containers in and out like Calculated Risk; or some other data set?
The definition of stagflation requires a high inflation rate though, and I'm not sure 3% would meet the criteria. It is certainly debatable though.
Ok, technically, stagflation requires high inflation, but wouldn't a better definition be negative real interest rates with low growth?
If inflation is running higher than interest rates, does it make a difference if the interest rate is 7% and inflation 10% vs. interest rate of 0% and inflation at 3%?
And look at PPI at 7.2% YoY. Companies either take that out of profits or pass it along in higher prices. We certainly have the low growth part.
Just something to ponder.
Jimmy J.,
Perhaps we'll wait to drill until the rest of the world runs out. Mwuhahaha! *cough* *sputter*
Scott,
Same data. I just run it through a seasonal adustment program (see links within post).
Mr Slippery,
It makes a difference in one way. As a saver, true stagflation would push me into a higher tax bracket due to the massive inflationary gains.
No Recession = More Stagflation?
Recession = More Deflation?
So are slipping into recession again or not?
For what it's worth, I lean towards recession/depression. Sigh.
CPI came in hot today at 3.6% and up 0.5% for the month of July.
Whatever we decide to call it, it is a big bag of economic suck. :(
Mr Slippery,
Looks like my stagflationary name gets 15+ minutes of fame again!
It feels like 2007 all over again. If we drop back into recession with 9%+ unemployment then the big bag of economic suck will turn into a candy mountain pinata!
it is a big bag of economic suck
Indeed it is!
If there's one thing this eCONomy needs, it's more descriptive, highly technical terms. How about:
Whoop @ss eCONomy!
Charlie...Charlie...wake up sleepy head, it might be time to go to RubiCON mountain again Charlie!
Mark - the other side of this is no surcharges like normal for holiday traffic from Asia, as ships aren't filled but yet costs of running them rise.
The Chinese already backed off their higher yuan peg a bit. This is major pain for Chinese exporters.
My wv is "pliqua", which I take to be a new noun meaning the liquor designed to be sipped while watching the economic news and experiencing the piquant sorrow of watching multiple economies break down at once.
Great post, stagflation it is!
mab,
Advertising Slogan Generator: Economy
Break Me Off a Piece of That Economy.
Watchtower,
Advertising Slogan Generator: Candy Mountain
With A Name Like Candy Mountain, It Has To Be Good.
MaxedOutMama,
Advertising Slogan Generator: Pliqua
Once You Pop, You Can't Stop Pliqua.
GYSC,
Advertising Slogan Generator: Stagflation
I Can't Believe It's Not Stagflation.
Oil dropped considerably today.
Stagflation is wage-price spiral.
Not gonna happen.
In the 1970s the economies of China, India etc might as well have been on the moon.
Troy,
My 15 minutes of stagflationary fame is just about over again it seems. I continue to lean deflationary in the short-term. Oil's falling yet again, as are inflation expectations.
My investment in TIPS was two-fold. I did want some inflation protection but I also wanted real yield protection in a world of falling real growth. Hindsight shows the latter to be most important so far. Inflation/deflation has been a side show by comparison.
I think I'll experience some TIPS pain but I intend to just ride it out again (like I did when deflation last appeared).
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