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Making Unique Observations in a Very Cluttered World

Sunday 10 January 2010

China's 2009 Trade Surplus Falls A Record $100 B - no wonder that the Chinese r buying everything it can stockpile -

Reading - China's 2009 Trade Surplus Falls A Record $100 Billion - no wonder that the Chinese government is buying anything and everything it can stockpile


After posting a record crude-oil import month in December, as well as the second highest iron-ore import month in history, China's program economy is roaring back to life, even if the imports are actually sitting in full warehouses, used to build empty cities that consume negative electricity, make washing machines that never launder anything except the government's flawed economic statistics, and create cars that somehow use up ever-less gasoline. Of course, when the government has trillions in increasingly worthless excess dollar foreign reserves that have to be used up for something, it is no wonder that the Chinese government is buying anything and everything it can stockpile, and that can't be devalued by Tim Geithner, hand over fist. As for exports: courtesy of the dollar peg, which makes China's exports as cheap as the US' (assuming the latter had much of anything to export besides financial innovation), China had no shortage of counterparties to purchase its $1.2 trillion in 2009 exports. Yet despite all this, China's trade surplus plunged a record $100 billion, or 34%, to $196 billion from 2008's $296 billion.

[1]

Notably, in December China's crude-oil imports hit a record 21.26 million metric tons, or 5 million barrels per day. It is good that at least for one country the "great recession" never happened. In 2009, China imported 14% more oil than in 2008, for a total of 204 million tons. But the real kicker was in iron-ore imports which was 62.16 million metric tons in December, 22% more than November, and an unbelievable 80% more than a year earlier, and the second highest ever recorded. For all of 2009 628 million tons of iron were imported, 41.6% higher than in 2008. Those empty cities apparently really need more peers. And one wonders why Australia's (5.4% more imports in 2009) and Brazil's (5.3% less) economy are humming: it takes a lot to provide the raw materials to build the biggest bubble in the world.

The simple observation is that instead of having to finance the US consumer's continued spending binge by buying hundreds of billions in Treasuries in 2009, China was let off the hook by the Federal Reserve, which did all of its mandated purchase instead. So with all the excess money China went and stockpiled, stockpiled, stockpiled. Now the only question of whether the required end-consumer demand will ever materialize will determine who is correct in the China bubble debate: Chanos or Rogers. As the US consumers are tapped out (save for some Spanish tourists who apparently can't wait to purchase g-strings at A&F), China better hope its own middle class will use its savings to buy everything the government has already made and built, and counted (hopefully not double or triple) in its GDP calculation.

On the other hand, despite having a savings rate that Americans could only dream of, China is also gripped by gambling fever: who really knows what the domestic balance sheet looks like. Yes, having cash is great, but if the liability side of the consumer balance sheet has 0 equity (or only equity in a massively inflated stock market) and the rest are cheap loans, which the government handed out freely in 2009 to the tune of 11 trillion renminbi, then all bets really are off when the profit taking inevitably begins (as it always does).

Here are some more charts that demonstrate why the traditional Chinese model of an export-led economy may be in trouble if the US and EU consumers don't come back (as a reference point, exports to the EU dropped 19.4% or $236 billion, while those targeted at the US sank by $221 billion or 12.5%).

The chart below demonstrates the phenomenal rise in China's trade surplus, which was effectuated primarily on the backs of the US and EU consumers, who had found themselves big spenders in the years after 2003 courtesy of the HELOC piggybank, a surging stock market, and low interest rates.

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What is very amusing on the above chart is the massive surge in China's trade balance in the months following the Lehman bankruptcy. Truly with the rest of the world shut down for the subsequent quarter, China was exporting excess billions of "stuff" to somebody. Who that somebody was, would be interesting to find out. Had the export data been normalized for the October-February period, $85 billion in GDP would have been removed from the Chinese economy. Yet what is glaringly obvious is that China will have a very tough time at recreating the same surge in the trade surplus in 2010 and onward, especially if calls for renminbi appreciation continue growing ever louder.

Source URL: http://www.zerohedge.com/article/chinas-2009-trade-surplus-falls-record-100-billion

Ron Paul On Bringing Transparency To The Fed - hammers home point of why the Fed needs to finally be accountable -

Watching - Ron Paul On Bringing Transparency To The Federal Reserve - Ron Paul hammers home the point of why the Federal Reserve needs to finally be accountable


Twitter, the popular but money-losing microblogging service, is hiring engineers and specialists who can help turn it into a money-maker.

Reading - Twitter, the popular but money-losing microblogging service, is hiring engineers and specialists who can help turn it into a money-maker.

SAN FRANCISCO (Reuters) - Twitter, the popular but money-losing microblogging service, is hiring engineers and specialists who can help turn it into a money-maker.

The 2-1/2-year-old Internet start-up, whose short text messages or "tweets" have become a global social phenomenon, is building up a team focused on generating revenue with a new range of yet-to-be launched products, judging by job postings on the company's website.

Among the 26 job openings listed on Twitter's site, four are specifically identified as being devoted to "monetization." Striking licensing deals are key responsibilities for two other jobs.

"Twitter is looking for new members of our technical staff to work on cutting edge monetization projects," several of the postings said.

The move to invest in such projects signals that making money is becoming a bigger priority at Twitter, as it seeks to evolve from being one of the Web's fastest-growing social media firms into a self-sustaining online business.

"The company has crossed into the phase where monetization matters. They're ramping it up," said a source close to Twitter who did not wish to speak on the record about its finances.

A Twitter spokesperson said co-founder Biz Stone was not immediately available for comment. The company has about 120 employees, she said.

Tweets, which are limited to 140 characters, have grown into an established communications medium that has played a key role in world events such as the post-election protests in Iran last summer.

"They know they're here for the long term now, so they need to turn on these monetization engines," said Altimeter Group analyst Jeremiah Owyang.

Twitter, a privately held company, does not report earnings, but its website says: "While our business model is in a research phase, we spend more money than we make."

The company spokesperson did not confirm if that is still accurate.

Twitter struck deals in October -- widely reported to total $25 million -- to license its data feed to Google Inc and Microsoft Corp, allowing tweets to appear within search results on the companies' Internet search engines.

The job postings make it clear that generating revenue beyond the licensing deals is one of the 2010 priorities for Twitter, said Altimeter's Owyang.

Twitter, which recently moved into a larger office space in San Francisco, had 19.4 million unique visitors to its U.S. website in November, according to comScore, up sharply from the 1.5 million visitors a year earlier. Many industry watchers believe the actual number of worldwide Twitter users is much higher, since many people access the service through third-party applications instead of the website.

In September, Twitter raised $100 million in a move that valued the company at $1 billion, according to a person familiar with the matter, from backers including mutual fund giant T. Rowe Price and private equity firm Insight Venture Partners.

Twitter executives have said in the past that the company is interested in offering premium services, such as analytic tools for certain customers, and that it was exploring ways to integrate advertising into the service.

According to the job postings, the company is seeking engineers to build out the infrastructure and front-end features to support monetization systems that include "customer applications and reporting."

A posting for a product marketing manager for monetization said the person would focus on "enhancing business users' understanding of the value of Twitter."

Aspartame: Sweet Misery A Poisoned World - This is the movie that Pepsi and Coca Cola don't want you to see.

Watching - Aspartame: Sweet Misery A Poisoned World - This is the movie that Pepsi and Coca Cola don't want you to see.

There is no Economic Recovery Happening - Economic Stability and Recovery = Credit Expansion - We cannot recover until we purge the excess debt

Reading - There is no Economic Recovery Happening - Economic Stability and Recovery = Credit Expansion - We cannot recover until we purge the excess debt from the system.

Look folks, this is really quite simple.

Economic Stability and Recovery = Credit Expansion.

We cannot recover until we purge the excess debt from the system, and the longer we take to do that, the longer the pain will last and the worse it will be.

President Obama and Tim Geithner know this - that's why they are constantly harping on banks to "lend more."

Well, they may want banks to lend more but the people are fed up with being debt slaves and are borrowing less.

Today, we got the latest from The Fed on this subject:

Consumer credit decreased at an annual rate of 8-1/2 percent in November. Revolving credit decreased at an annual rate of 18-1/2 percent, and nonrevolving credit decreased at an annual rate of 3 percent.

I have updated the charts, and this is where we are as of November:

Non-revolving debt (basically auto loans) has pretty much stabilized since mid-year. But consumer revolving debt - credit cards - continues to accelerate in its rate of decline.

The longer-term view looks like this:

These rates of decline are unprecedented and they are not slowing down.

The drop in credit card debt outstanding is on the largest on record since The Fed started keeping those records in 1943!

Consumer recovery?

There is none!

It is axiomatic that you can pump yourself full of speedballs (e.g. government spending) and stay up for days at a time. It is also true that if you do too many speedballs you will have a heart attack and die, and there is no way to know precisely which is the "one too many" until you shoot it - at which point it's too late to change your mind!

The so-called "recovery" has been driven by pump-priming, which has had at its root one primary intent - to drive citizens into herd behavior and get them to spend more and more (that they don't have!)

But at the same time this has been the message credit card rates have been ramped and lines slashed. So now Joe Six Pack is faced with a 30% interest rate on his credit card - if he has any open line left!

There is no possible way for this program to work, since the entire problem originally - what began this recession - was people that were unable to make their debt payments in the first place!

Small business will not hire until their debt load comes down to a reasonable level. This will take literal years if we don't quit trying to prevent the contraction of both asset prices and credit levels. In the mean time millions of Americans will remain in destitution!

There is no way to avoid the bankruptcy of those firms and individuals who are over-levered. The best solution (take the pain now!) will not prevent the bankruptcies, but it will get them over with and let the nation begin to emerge from the morass within 12-18 months. For every month we keep trying to prevent the liquidation of insoluble debt we add months of additional time to that required to resolve the bust and deepen the amount of pain that must be suffered, since all we are doing is adding more debt upon existing debt.

It is time for Washington DC, including The Fed and Congress along with President Obama to embrace the facts - we must finish the de-leveraging that is necessary to return the citizens and corporations of this nation to fiscal health. At the same time the government must stop spending twice what it takes in in taxes.

We have consumed too many speedballs, our heart rate is now 160, and if we don't cut it out the bond market is telling us that we are about to have a fatal heart attack.

Read more - http://market-ticker.denninger.net/archives/1832-There-Is-NO-Economic-Recovery-Happening.html

Dr. Ron Paul and Steve Forbes discuss what is encompassed by the congressman's bill to audit the Federal Reserve

Watching - Dr. Ron Paul and Steve Forbes discuss what is encompassed by the congressman's bill to audit the Federal Reserve

Dr. Ron Paul and Steve Forbes discuss what is encompassed by the congressman's bill to audit the Federal Reserve.

Steve Forbes: What precisely will your bill on auditing the Fed do and not do? Let's just clear that up.

Paul: As a matter of fact, it's a pretty weak bill when you think about it.

Forbes: It seems pretty mild.

Paul: But from their viewpoint it is horrendous because we know what they've been doing. You know? And they don't want us to know what they've been doing. The big argument has always been they don't want transparency because they'll lose their independence. And independence means secrecy. If they lose their secrecy then the people and the Congress won't know what they've been doing. Who gets bailed out at what price? ... I put an explicit statement in there that we have no intention of monitoring monetary policy even though I have different views. But, you know, when you think of it, Bernie Sanders was a cosponsor in the Senate. He and I don't see eye to eye on the market. But we see eye to eye on transparency. So we wouldn't agree on monetary policy, but we agreed on this bill. But in order to clarify that Bernanke would say, "Well what we don't need is Congress coming in the day after we have a FOMC meeting and finding out who said what and why because everybody would be hesitant." And one of the arguments is, "If Congress had anything to do with this, they'd keep interest rates too low too long."

Read more - http://www.forbes.com/2010/01/08/federal-reserve-value-intelligent-investing-ron-paul.html