deconsumption

China to Impose New Tariffs on Nylon

In the latest in what appears to be an emerging trade war with China, tariffs of up to 36% will be imposed on US production of Nylon 6, with lower rates for that produced in the EU, Russia and Taiwan.  The primary companies affected will be BASF and Honeywell.

According to Wiki, the nylon in question is used in the following applications, most of which are items you'd expect to be Made in China:

1. Bristles for toothbrushes, sutures for surgery, etc.
2. Manufacture of hosiery, knitted garments, etc.
3. Manufacture of a large variety of threads, ropes, filaments, nets, tire cords, etc.
4. Strings for acoustic and classical musical instruments, including guitar, violin, viola, and cello
5. Gun frames, such as those used by Glock, are made with a composite of Nylon 6 and other polymers.

Link to Original newspiece

China Strikes Back on Trade...

...restricting imports of chicken and auto product.  Not considered a big deal...could be a face-saving measure, meaning Washington has persuaded them to let the tire thing slide and just put on a show.  Time will tell.

Short-form Wall Street Journal piece.

Dear Youth: "For most of you, college is an expensive waste of time."

I wish this piece had been worded more skillfully, but I completely agree with the sentiment:

What Obama Should Have Told the Kids Today

"...the market will eventually figure out that the degree doesn’t mean what it used to. It will become less useful as a heuristic for intelligence and achievement. And college graduates will find themselves with an asset—a degree—whose value is dropping while their debt remains high.

It’s all a little reminiscent of the housing bubble."

In our present time, knowing a trade or honing a specific talent is going to be a great deal more important and lucrative than getting a specialized -- or god forbid, a generalized -- degree.

What opened my eyes up to this was that many years ago I looked into moving to Australia.  Long story short, they only wanted people with real skills: builders, carpenters, plumbers, auto-repair, etc. etc.  People who could fix and build things.

Other than doctors and maybe engineers, there was very little interest in the "higher-educated".  In fact, those are also professions that fix and build things.

Law, Finance, Political Science, Computer Programming, Graphic Design and such....those were all "skills" born of our particular Western-American cultural needs.  Apparently they don't export well.  And in a system that's in decline, they're not going to hold up very well either.

US takes another step toward trade-conflict with China

US penalizes Chinese tires, infuriating Beijing

"For the Chinese government, the tire dispute threatens an economic relationship crucial to China's economic growth. There was speculation before the decision that new tariffs could produce public pressure on Beijing to retaliate, potentially leading to a trade war."

Domestic pressures quite reasonably force economic actors to reign-in foreign outflows and invest internally, which by definition only increases the domestic pressures on those foreign economies that are being shunned, so they retaliate in kind, and things can often spiral out of control.  That's the basic idea behind a 'trade war'.

At least, that's how it's tended to happen in the past.  But after decades of globalism, in which countless so-called "American" corporations are now de facto Chinese (or other) manufactures -- and thus may find themselves on the receiving end of possible trade-tariffs & sanctions -- the potential for a looming trade war becomes a lot more, shall we say, 'multi-faceted'. 

All this has corporate-globalist economic pundits pushing the message that this time it can be different, that this time the US administration can dig us all out of a financial hole without reigning-in foreign spending and increasing domestic investments in jobs, manufacturing and the like.  And it's easy to imagine that the keystone to any "growth-without-reducing-foreign-spending" strategy almost certainly relies on printing more money out of thin air instead.

The argument on the free-trade side also evidently goes like this:

"The biggest hit would be felt by American consumers who now buy 50-dollar Chinese-made tires and can't afford U.S. brands that cost as much as 150 dollars, many distributors warned."

Which really just opens up the old "No, I can't afford $150-dollar tires because my job was shipped to China" argument, and the circular reasoning continues....

At any rate, China is certainly "protecting" it's own resources, stockpiling oil and other basic commodities, and most recently hoarding their rare-earth resource metals. 

And it's going to be a real test of this Democratic administration's true mettle, because a Democratic President has to be 'pro-worker' and 'anti-foreign-corporations', doesn't he?  Isn't that, like, in the Democrat Party Oath of Allegiance or something?

And this certainly seems to be one of the more distinctly Democrat-ic actions this administration has embraced. It should be interesting to keep an eye on any future news of trade issues.

World's largest gold producer eliminates entire hedging portfolio

Barrick Gold either decisively believes the price of gold will be going up...or perhaps is simply admitting that it can no longer collude with the Fed to manipulate the price downward.  Most likely it's both.

Regardless, though, this is a major indicator that gold will likely be trending-up for a long time. Which by contrast means the value of currencies in general should be trending down.

Barrick Gold will issue $3 billion in stock to eliminate all of its fixed-price gold hedges and a portion of its floating hedges, taking a $5.6 billion hit to third-quarter earnings, the world's top gold miner said on Tuesday.

For Barrick, which expects gold prices to keep rising, the deal should remove what has been a big drag on its shares, the legacy of the company's past reliance on hedging, a practice it abandoned in 2003.

During times of weak prices, gold miners often sell a portion of their future production to protect, or hedge, against the possibility that prices will fall.

When prices rise, as they have done since 2001, the company suffers because value of the future production they've sold does not increase with the gold price.

"It's long overdue," John Ing, president of Toronto investment dealer Maison Placements, said of the move.

"In the bear market, (hedging) saved a lot of people, but in the bull market it just added supply to the market ... it was the original derivative."

Found via Mike Runge

The Atlantic: The Quiet Coup

I'm in the process of reading this, but it already seems quite good. I may comment on it tomorrow, or just list exemplary quotes.

The Atlantic Magazine: "The Quite Coup" by Simon Johnson

Simon Johnson, a professor at MIT’s Sloan School of Management, was the chief economist at the International Monetary Fund during 2007 and 2008

"It's part of a larger trend which is that a lot of good managers, and bad, are closing their doors because they're realizing, I can't make good money in this market"

Major Hedge Fund Closes: Even the "World's Best Business" Is Getting Tougher

One of the brightest stars in the hedge fund universe has burnt out. Tim Barakett founder of Atticus Capital says he's packing it in – telling investors he will return $3 billion of invested capital and will close two of the firm's biggest funds. Barakett, told the Wall Street Journal, after losing money last year he started to reflect, "I've wondered, 'Do I really want to be on this treadmill forever?'"

Not mentioned:

--The SEC has cracked-down on short-selling.

--The IRS is cracking-down on tax-evasion through off-shore money management firms, most recently winning an precedent-setting settlement against the Swiss/UBS.

--Public resentment of the entire financial industry is putting pressure on lawmakers to tighten regulations over firms like Atticus Capital.

--Individual investors have largely withdrawn from the markets, leaving the vast majority of trading to the 'house' firms with the insider connections.

And ultimately, most of these hedge-fund managers were opportunists in the first place. Now that the game is neither easy nor profitable, what else would they do but take their chips off the table and look forward to whatever new venture they can find.

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When the Tide Goes Out, No Boats Rise

I want to add a quick post here, albeit only for my own personal sense of completeness. Contrary to virtually every analyst everywhere, I've long stated that I did not feel China was an unquestioned shoe-in to emerge as the next great world power. As early as 2004 ("All Dressed-Up, But Nowhere to Go...") I argued:

"China is an old country, certainly, and is already filled to the brim with people. Their modern economic growth has been the result of nothing other than their success at leveraging the last few bucks out of the Industrial revolution. What China has to its credit is cheap labor. That's the "resource" they've efficiently exploited during this last gasp of Industrialism. But they won't have the fossil-fuels needed to support the future they seem to be building toward. In fact they won't even have the "resource of money" they'd need, since the Dollar explosion is already fizzling and it's not going to be replaced by the Euro or Yuan (and there is certainly not enough gold in the world to fund their future). The Chinese are undoubtedly having fun getting all dressed up, but they've really got nowhere to go...."

So I've been curiously following lately how well the Chinese economy is weathering the current financial crisis. Sure, the Hang Seng has been cut in half, but what's transpiring in the real nuts 'n' bolts economy? I've just come across the first well-stated report on the subject, and it only confirms my feelings so far. From The Guardian 10/31/08: Chill winds blow through China's manufacturing heartland

"Now the global financial and economic crisis is proving the final straw for exporters already punished by rising costs and a stronger currency. In the last year, chill winds have blown through the baking Pearl River Delta. Sixty-seven thousand small and medium-sized businesses in China collapsed in the first half of 2008, many in these manufacturing heartlands, says the national economic planning body. Toy firms have been particularly badly hit, thanks to safety scares and product recalls. Textile firms, with wafer-thin margins, are also reeling. Next came tighter credit for many foreign-owned firms, such as Hong Kong's Smart Union. And then, in the last two months, a sharp drop in US and European demand as consumers reined in spending. A local trade association predicts that by the end of January, Dongguan and its neighbours Shenzhen and Guangzhou will lose 9,000 of their 45,000 factories. "Many factories are looking at completely empty order books," warned Stephen Green, head of China research at Standard Chartered, who believes the export sector will be stagnant and could even shrink next year. Green predicts that China will grow 7.9% next year — well below the double-digit figures enjoyed over the last half decade — while others suggest it could fall closer to 7%. That sounds enviable to western countries facing recession. But with the working age population still growing, China needs at least 8% growth to maintain the current employment rate. And the fall-out will be highly concentrated in provinces such as Guangdong."

Historically, economic collapses have seen shifts of power and influence toward more advantaged countries. But then, historically, economic collapses have always been relatively isolated events. "Globalization" isn't just a buzz-word large corporations use to justify throwing-off their nation-state shackles. It also means there are no buffer-zones anymore when things go fundamentally wrong.

Which is also not to say no phoenixes will arise from the coming ashes...obviously some, perhaps many, will. My personal hope, however, is that they'll be birds of a feather we haven't already seen so many times before.

[UPDATE 11/14/08: a new piece in the NY Times now quoting:

“There’s very serious damage being done down there, I don’t deny it, and I think it’ll get worse because we haven’t seen the full impact of the economic downturn in Europe,” said Arthur Kroeber, managing director of Dragonomics, an economic research and advisory firm based in Beijing. “I think next year we might see export growth in the country as a whole go down to 0 percent.”

Searching for A Way Out

I've been looking at the stats for Deconsumption over the past few days, and I've noticed a couple things worth mentioning.

One is that I've been getting a rather large number of search engine referrals from people looking for something along the lines of a "crisis timeline". That's not all that surprising, since our world is in crisis and I did indeed write a crisis timeline. But I mention it in passing because...hell, I don't know, because evidently a lot of people are looking for someone who has a top-down view of what's going on. And of course it also tells us that a lot more people are waking-up to our cultural predicament than were, say, a few years ago.

But more interesting is that I'm also getting a respectable and regular number of hits from search engines given the precise term "New American Revolution".

I'd written a piece a back in 2005 entitled "Join the New American Revolution! (...and Get Out of Debt)", and evidently it comes up high on those search returns -- and I'm delighted it does, since any discussion of revolution in this country must only begin by seeing how stupidly enslaved we've allowed ourselves to be by our implicit acceptance and support of large corporations.

Early American history is a virtual tapestry of independence-minded people fighting tooth-and-nail against the imposing dominance that corporations were assuming over all our lives....but of course, most of those examples were quickly subsumed in a history written by the winners.

Still, it's fun to note the increasing number of people out there who are evidently rubbing the Google magic 8-ball, hoping it might actually tell them who might lead them out of this mess....

Oh, and while I'm on the subject.... It would literally boggle your mind to know just how many people actually google: "sometimes + you + eat + the + bear + and + sometimes + the + bear + eats + you"

ACRES Interview with Michael Hudson

Deconsumption has rather unofficially closed its doors, and its readers scattered to the wind.

But as I'm still paying to host the past several years of material here, and with various sources still directing some 400 hits here each day, I figured I might as well take a couple moments to link-promote this fantastic interview with investment advisor Michael Hudson which appeared in this month's (March '08) Acres magazine.

Debtor Nation: The Highjacking of America's Economy (.pdf file)

We're long-time subscribers to Acres (the "voice for eco-agriculture"), but I can't help being floored that they're so thematically open-minded as to scoop such a high-quality (and extensive) interview. I literally read it twice. A former investment analyst myself, I've long accepted that the American political and economic systems have become almost entirely closed-doors processes, and as such that there are a myriad details and answers which we might vaguely discern from without, but which can only clearly be grasped by those within. This interview provides a refreshing view from someone who has spent time acting behind that proscenium. So while it generally only reinforces much of what I've been exploring on this weblog the past few years, at the same time it proves stimulating and refreshing enough to warrant promoting here.

Now I know most readers won't be all that interested at delving into an interview with an investment/economic advisor, so I should state that I myself have generally detested the willful ignorance and denial so prevalent throughout our dysfunctional financial industry this past decade. In fact I've long stated here at Deconsumption that the reason I left the investment industry was because I couldn't see anymore how the benefits of publically-traded vehicles (with the cautious exception of short-term treasuries and select CDs, money markets, and foreign currencies) could overcome the frightening risks inherent within the system itself. For me it was no longer a question of simply how to allocate funds based around a pessimistic world-outlook. Rather I became convinced that there could be no safe haven whatsoever when it's the system itself that is losing its structural integrity.

I mean, the real betrayal that should be acknowledged publically is that there is nothing happening now that wasn't entirely forseeable several years ago. And yet, where were the economists and money managers then? Forget clowns like that Cramer guy saying you should hold onto your Bear Stearns, nobody with history in this business has payed any real attention to CNBC since the late '90's. And clearly the majority of professionals, no matter what the industry, are little better than 'intitutionalized' thinkers. But what about a street smart guy like, say, uber-bond-guru Bill Gross? Head-and-tails smarter by far than myself, far more experienced, infinitely better connected.... He was probably the earliest of the large asset managers to start grumbling about economic "mismanagement" in America, and that was little better than a year ago. Of course he never went so far as to say "get your money out of higher-yield bonds while you can". He yet he clearly must have known what was in the cards even 5 years ago. It wasn't like there was any baseless speculation involved -- the writing was on the wall as clear as day. I even sat down and outlined what turned out to be a remarkably cogent attempt at defining coming events for myself (Timeline for Unfolding Crisis), which has been one of the more enduringly popular posts from here. In fact, Deconsumption itself was really only an ongoing attempt at grappling with how to prepare for the various themes I'd presaged then.

And the fact is, I ain't smarter than the best and brightest at our nation's investment houses. The only difference is that I left the industry. As such I didn't have to lie to people any longer, to pretend that what was already beginning to happen wasn't going to happen.

Anyway, to wind my way back around to the subject of this post, I suspect Hudson may be cut from a similarly jaded cloth, and I was certainly encouraged to hear he has an affiliation with the American Monetary Institute -- which I believe is easily the most well-credentialled and determined monetary reform organization in America (I've long linked to the AMI website over on the right).

In one fell swoop Hudson explains....

...the failure of the modern US agricultural system (the wealth created by increased productivity went entirely to the bankers who convinced hapless farmers they had to "get big or get out")

...how the runaway Caribbean off-shore industry was originally established to launder drug-money

...why countries like Panama and Liberia are really "anti-countries", established by American oil interests to avoid paying taxes

...how the University of Chicago economists espoused the torture and murder of everyone who didn't support free market thinking in Latin America

...how to steal your nation's resources using taxpayer money

....and in one of my personal favorite sections, Hudson speculates on the most bewildering aspect of contemporary economics -- why is it that so many foreign economies continue to embrace and support a patently homicidal/suicidal US Dollar-economy:

"HUDSON. ...Because [countries like China and Germany] don’t seem to care about their internal economies, except to go on waging the old class war. That is how mainstream economics is taught these days — and why I stopped teaching academic economics for many years. Many people have tried to explain why European central bankers are so idiotic when it comes to this system. One suggestion is the “Stockholm Syndrome”: When somebody is kidnapped, the victim tends to identify with the kidnapper, the victimizer — and there is an idea in Germany, in England, and other countries that no matter what, they have to do whatever the U.S. government recommends. It’s a passive mentality.

But for Europe and Asia to behave in this way violates every theory of how international relations are supposed to work. In theory, every nation is supposed to act in its own self-interest. But in today’s world
it seems that only the U.S. government is acting in this way. It is understandable why the United States would love to pay paper dollars and get foreign resources for nothing. It’s not understandable why foreign
countries go along....Europe is senile from the vantage point of how to conduct international diplomacy and domestic economic growth. It imagines that it is getting a benefit by exporting goods to American buyers rather than providing for its own population.

ACRES U.S.A. Why this disregard for their own internal economies?

HUDSON. The only reason I can think of is that the one thing central bankers feel passionate about is class warfare. They are trained as financial planners to hate labor so much that they will give everything to America for free if it will hurt their own labor force. That anti-labor ideology is a precondition for getting a job at the central bank in today’s world."

A Post from the Past

At this, the top of yet another inning in the Dollar collapse....

...and in the wake of what appears to be an impending run on the Bank of England...

...and in the dismal shadow of the release of Alan Greenspan's pre-humous attempt at pre-historical autobiographic revisionism...

I felt compelled to dredge up from the Deconsumption dustbin my own little ode to the even little-er (not-actually)Federal Reserve Chairman:

"Alan Greenspan Is Such a Huge Pathetic Loser (an objective perspective on the man and his work)"

Calls for peace after caste riots

3 news reports, only 1 title:

Calls for peace after caste riots

"On Friday, eight people were killed and up to 20 injured in clashes between the Gujjars and rival Meena community. Earlier in the week, 20 people died in clashes between the Gujjars and the police.

The powerful Meenas, who make up about 15 per cent of the population and already enjoy the privileges, oppose the Gujjars' demand as it would mean more competition for them."

Calls for peace after caste riots

"MORE than 150 police have been injured in violent clashes with protesters at a demonstration in northern Germany against next week's G8 summit, a police spokesman says.

Masked demonstrators hurled Molotov cocktails, stones and bottles at police as tens of thousands of people marched through the streets of Rostock.

...The Rostock demonstration kicks off a week of protests against the summit of the leaders of Britain, Canada, France, Germany, Italy, Japan, Russia and the US."

Calls for peace after caste riots

"A crackdown on violators of the one-child policy triggered massive unrest and the outbreak of violence in the southwest region of the country, as villagers fought back against government officials and the one-child policy enforcers.

Thousands of Chinese peasants rioted over exorbitant fines, forced abortions and sterilizations, and the destruction and confiscation of property inflicted on the communities by family planning officers. "

UN report calls for US dollar support to avoid global recession

Surprisingly tough to find links to this story. Here's one. Here's another. And here's the Report.

"In order for current world economic growth rates to continue, it is crucial to keep the United States dollar from falling rapidly while also avoiding a recession, says a United Nations report released Wednesday.

We call for a coordinated strategy that would think about how to adjust these global imbalances while avoiding recessionary tendencies in the global economy”

In other words: everyone wants out of the US Dollar, the Central Banks of the world aren't confident they can "coordinate" it amongst themselves, so now the UN is stepping into the fray.

Oh, and that last line there...you could substitute the words "Don't panic everybody, we can still all get out of this with our shirts intact". Well, all but the "non-privileged" Americans anyway....

"A Deeper Shade of Green"

Hey, I'm published!

If you're interested, a couple months ago I penned a piece for an excellent new magazine here in the Upper Mississippi Valley region called Natural Communities, which is devoted to chronicling what I've taken to refering to as the emerging "culture of responsibility". The article is entitled "A Deeper Shade of Green", and it argues that just as the term "Organic" was co-opted by big-business, so "Green" is going to be as well. But that's alright, because just as true organic food buyers have deepened their understanding and become more informed and discerning about what makes food healthy, so too will those who wish to create healthy, responsible homes.

Or to put it another way, nobody really goes to Wal-Mart to buy healthy food, and nobody goes to Home Depot to buy truly "green" building materials either. They go there for "cheap". And this newly emerging culture of responsibility is by it's nature inherently incompatible with our dying culture of "quantity and consumption". Yes, I'll grant you it doesn't always seem that way, but it is.

"The green building revolution will pursue a practical course, which starts by re-examining the existing materials in our homes and workplaces and asking ourselves whether they might actually be harming us. Then, over time, we should replace these things when feasible, and explore ways to seal their toxins in when it’s not.

As a good rule of thumb though, just as with the organic foods movement, we should probably maintain a healthy distrust for any solutions we’ll be offered by the very corporations and industries that put us into this mess in the first place."

Of course don't get me wrong--the Big Box stores will still do huge business catering to the majority of people, since the majority of people--by their very nature--don't really give a shit. I mean why do you think Wal-Mart even bothered to go "Organic®" in the first place? Because they know that when push comes to shove, most people prefer a comforting lie to actually making any real effort to do the right thing.