Happy New Year! My Thoughts after Seeing “The Big Short…”

~By InsightAnalytical

Well, of course, the best time to release a movie about the 2007-8 economic crash is to release it during a holiday week at the same time the masses are being dished out “Star Wars”…again…

Being contrarian by nature, I made it over to see “The Big Short” which is based on the fantastic book of the same name by Michael Lewis.

Well, I went to the noon showing, this last day of 2015…the parking lot was full…of Star Wars fans, most likely.
I counted 20 people in for The Big Short. I was surprised there were that many…it’s only showing in one of the 3 movie complexes in town…seems it may be around for another week, but after that I bet it will be gone…

Of the 20, there were about 4 under the age of 60, probably in their 40’s/early 50’s.

Well, it was really gripping! It really was brilliantly done, esp. the asides with the “explanations.” I doubt, however, that many Selena Gomez fans will be in to see it, though.   I have to say the sleaze award goes to the guy based in New Jersey working for Merrill Lynch…figures.

After it ended I chatted with a woman who said they had lost $26 M in ethanol. Wants to get out the country (me, too!),  $300 for a visa to get out to Vietnam…or Cambodia ….or Thailand…Well, I cautioned her about a place like Vietnam being so dependent on China! Also, told her to watch “The Executioner” via MHzChoice (foreign TV series and one shot movies)….a Danish “movie” based on a true story…you will not want to go to Cambodia maybe after seeing the crap that goes on there. I also told her to read WallStreetWindow.com as well as Zero Hedge (but ignore most of the drek in the comments section…truly awful. I mean it…)
The truth is…with the global connectivity at this point, where is there anyplace “safe”??

She revealed that she had “insurance” in a safety deposit box…and I told her to get it out of that box in a bank!!!

When I got home I spotted the young man who works for Apple from home…he and his wife have just bought a house. I pulled over to say a final goodbye as he did his final move out of stuff….gave him the same info about a few sites that I gave to the woman at the movie and told him to save his money and learn what’s going on, not to keep all his retirement on one stock like Apple….exchanged phone numbers again and I gave him my email…told him I may not know all the answers, but I can figure out where to look most of the time…I’m sure I won’t hear from him again.

And then I came home. Hugged my dogs…and am checking my storage food for freshness…

***
Before going I was watching Bloomberg and the word SCARY came up twice from the anchors…the discussion has been about the 600,000 jobs gone from banking….. The site says 500,000 but they said 600,000 on air.
http://www.bloomberg.com/ne’sws/articles/2015-12-31/half-a-million-bank-jo…

They had a guy on talking about going into recession (for some reason I can’t find THAT video up on the site); the anchor brought up Marc Faber also forecasting that a day or so ago. Yesterday, I saw the mayor of Wilmington, DE talking about the loss of 1700 jobs from the DuPont-Dow deal…he was pretty grim….

Anyway, a couple of the people on air today looked pretty pale…and to hear the word ‘scary’ TWICE, no matter in what context…well, THAT was scary!!!

CNBC’s Fast Money is having a party at the moment…party hats, champagne, are they kidding me?? ….can’t even stand watching CNBC much anymore…Bloomberg seems a bit more “sober” but …where IS that video from the recession talker today??

Stay safe out there in the New Year….

China is Iraq’s New Buddy–Writing off Iraq’s Debt and Getting Invited to Help Rebuild (And Don’t Forget–Their Oil Companies Are There, Not Ours)

~~By InsightAnalytical-GRL

As the U.S. tries  to pull out the last of our troops in Iraq, here’s the irony of all ironies.  From Gulf News:

China could scrap Iraq’s $8.5b debt

Baghdad seeks investments from Beijing

Baghdad : China may write off all of Iraq’s $8.5 billion (Dh31.2 billion) of debt accrued under the rule of Saddam Hussain, Iraqi finance minister Baqer Al Zubaidi said yesterday.

“The Chinese government expressed readiness to write off $8.5 billion of debts owed by Iraq,” Al Zubaidi said in a statement posted on the ministry’s website yesterday.

Iraq is keen to see China play even a bigger role in the reconstruction of the war-torn country, the country’s top envoy to Beijing told the China Daily in an interview last week.

“After 2003, China has supported us very much and reduced Iraqi debts by 80 per cent, which is greatly appreciated,” Iraqi Ambassador to China, Mohammad Sabir Esmail, told the paper, referring to a $6.8-billion debt cut announced by China last month.

Esmail also invited Chinese companies to invest and operate in the country.

“I call on all Chinese companies to come and take up projects in rebuilding Iraq,” he told China Daily.

“China has many giant companies qualified to participate in rebuilding Iraq and… our country will remain a big workshop in the next 20 years,” he said.

Some Chinese firms, mainly in the energy and retail sectors, are already operating in Iraq.

These companies include oil giants such as PetroChina, Sinochem, CNOOC and Sinopec subsidiary Addax Petroleum.

MORE

Well, how about them apples?  All that killing of civilians, torture, multiple tours of duty, brain-traumatized U.S. soldiers returning home…and the Chinese are strolling into Iraq?

This comes on the heels of U.S. companies being shut out of oil contracts in December 2009:

U.S. Companies Shut Out as Iraq Auctions Its Oil Fields

By Vivienne Walt Saturday, Dec. 19, 2009

Those who claim that the U.S. invaded Iraq in 2003 to get control of the country’s giant oil reserves will be left scratching their heads by the results of last weekend’s auction of Iraqi oil contracts: Not a single U.S. company secured a deal in the auction of contracts that will shape the Iraqi oil industry for the next couple of decades. Two of the most lucrative of the multi-billion-dollar oil contracts went to two countries which bitterly opposed the U.S. invasion — Russia and China — while even Total Oil of France, which led the charge to deny international approval for the war at the U.N. Security Council in 2003, won a bigger stake than the Americans in the most recent auction

MORE

So, it looks like Iraq has a budding friendship with China which continues to grab commodities with its masterful use of “soft diplomacy” (already doing the same thing in Africa) and now has a nice firm foothold right in the center of the action in the Middle East.

So, after seven years of mayhem and the draining of our national treasury, that’s the result.

Good work, Bush, Cheney, Rummy and Condi.

Condi is now regretting that the U.S. didn’t work more closely to rebuild Iraq after the overthrow of Saddam, but states that she’d still “liberate” the Iraqis and that George W. will be vindicated for his actions in the future.

More irony: she made her comments during a talk on “The Future of Asia” at the Chinese University of Hong Kong…

Sublime…

Dollar Watch: Middle East Gulf Exporters Create Their Own “Petro-Currency”

~~By InsightAnalytical-GRL

Oops.  Looks like some more movement in the “let’s-dump-the-dollar” game.

Seems like the oil-producing states of the Middle East have made some moves. According to the Telegraph (U.K.):

Gulf petro-powers to launch currency in latest threat to dollar hegemony

“The Gulf monetary union pact has come into effect,” said Kuwait’s finance minister, Mustafa al-Shamali, speaking at a Gulf Co-operation Council (GCC) summit in Kuwait.

The move will give the hyper-rich club of oil exporters a petro-currency of their own, greatly increasing their influence in the global exchange and capital markets and potentially displacing the US dollar as the pricing currency for oil contracts. Between them they amount to regional superpower with a GDP of $1.2 trillion (£739bn), some 40pc of the world’s proven oil reserves, and financial clout equal to that of China.

Saudi Arabia, Kuwait, Bahrain, and Qatar are to launch the first phase next year, creating a Gulf Monetary Council that will evolve quickly into a full-fledged central bank.

The Emirates are staying out for now – irked that the bank will be located in Riyadh at the insistence of Saudi King Abdullah rather than in Abu Dhabi. They are expected join later, along with Oman.

MORE

Earlier in the year, we posted about other moves to dump the dollar.  See below for some relevant posts.

The Gulf pact faces hurdles internally (Saudia Arabia will dominate and Saudi needs will come first and may leave the other states on the short end) as well as from the outside:

Ben Simpfendorfer, Asia economist for RBS and an expert on the Middle East, told the FIKR conference that the rise of China had paradoxically disrupted the case for pan-Arab economic integration.

There was a natural fit ten years ago between rich oil state and low-wage manufacturers in Egypt and Syria, but cheap exports from China have forced poorer Arab states to retreat behind barriers to shelter their industries. “The rationale for a single currency has become weaker,” he said.

We’ll have to see what transpires.  Just wanted to bring you up to date on the latest rumblings.

Related Posts

The Scanner–International Edition, March 24, 2009: Say Goodbye to the Dollar? China, Russia Proposing a New World Currency for “Non-Credit” Based Economies, Echo G-20 Agenda of Expanding IMF; China Will “Consider” Buying IMF Bonds; 10th China Develpment Forum Underway (UPDATE 1X–Geithner Supports China Proposal??)

Russia-China Proposals; “Rebalancing” Global Currency Reserves: Why the U.S. Can’t Take Anything for Granted Re: the Dollar (March 27, 2009)

HEADS UP! It’s HERE! The New World Currency Design, Presented to the G-8 Delegations (With Pics) (July 13, 2009)

As China (And Other Countries, Too) Makes Non-dollar Trade Deals Around the World, Maybe Americans Should Seek Safety in the Reincarnation Bank (July 31, 2009)

Yuan on the Way to Becoming an Alternative Reserve Currency & Obama’s Off to China to INSIST That the Chinese Play Nice (November 12, 2009)

China Solar Panel Maker (Who Already Has Installed a Solar Farm On a U.S. Military Base), Now Sets Up 1st U.S. Plant

~~By InsightAnalytical-GRL

I just watched a BBC America show about the reticent Neil Armstrong, the first man to walk on the moon, and over the last couple of days on NPR radio, the Stardate segments have been devoted to the anniversary of  the Apollo 12 mission when Pete Conrad (the third man to make that walk) and Alan Bean made a pinpoint landing of the lunar module to test  “precise landing techniques” that would be used in future missions.

"The Surveyor 3 spacecraft sits silently in a small lunar crater, with the Apollo 12 lunar module on the crater's rim in the background. Astronauts Pete Conrad and Alan Bean landed just a few hundred feet from Surveyor 3 in November 1969 to test the precise landing techniques that would be needed for future missions."--Stardate.org

We can’t do solar panels here?

***

Early last week I posted this comment by Zachary Karabell, who appeared on CNBC (See: Larry Kudlow Has a Fit as Obama the “Declinist” Opens His Mouth in Japan; Says Obama is “Not His President”):

And he said that if we want China to continue to “hitch” themselves to us more, we’re not supposed to freak out if China wants to buy businesses HERE and not have a “knee-jerk xenophobic response.”

Well, here’s a story that will not make people happy, even though it may help us ultimately less dependent on foreign oil. Of course, we may become dependent on NEW environmental technology from foreign sources, but…

From Business Week (my bolding):

China Solar Panel Maker Sets First U.S. Plant

Suntech Power aims to boost its share of the U.S. market with a solar-panel manufacturing plant to be built in Arizona

China’s Suntech Power Holdings (STP) is no newcomer to the U.S. Last May, President Barack Obama toured the U.S.’s largest solar panel installation at Nellis Air Force Base in Nevada. There, row upon row of shiny black Suntech panels account for about a third of the 14-megawatt solar farm.

Suntech landed that project the same way it has raced to the top of the fast-growing global solar market: by focusing on price and scale. Now the world’s largest supplier of solar panels is boosting its stake in the U.S. market.

On Nov. 16 in Beijing, the company announced its first American manufacturing plant. The facility, to be located in the Phoenix area, will begin production by next October. “The U.S. market is on the cusp of greatness,” says Steven Chan, Americas president and chief strategy officer for Suntech. With the announcement, Suntech becomes the first major Chinese cleantech player to bring factory j obs to the U.S.

MMMM...wonder how many MORE major Chinese players will be arriving? And on U.S. military bases? (Of course, wasn’t there a flap over Bill Clinton selling military technology to China way back when?)

Now, there are some in Congress that are afraid our home-grown “green manufacturing jobs” won’t get a chance to get off the ground if this sort of thing happens on a regular basis. Sure, the Chinese are manufacturing here, but the factory jobs are THEIR creation, not jobs created by  a  home-grown company.

Obama’s visit to China focusing on collaboration in green technologies. Suntech’s move may soften criticism from U.S. lawmakers worried that low-cost factories in China will snare new green manufacturing jobs before they even have a chance to take root in the U.S. “[Suntech’s] decision to bring manufacturing here to the U.S. is a great sign of the increasingly important collaboration between Chinese and American leaders in the renewable-energy industry,” said Dan Kammen, a professor in the energy and resources group at the University of California at Berkeley, in a statement provided by Suntech.

Gee…that Berkley prof can’t write his own statement??

According to the article, most of the grants the U.S. issues for “cleantech” is winding up overseas:

Suntech’s investment comes as anxieties are rising in Washington over foreign domination of the U.S. cleantech space. In late October the announcement of a Chinese-U.S. consortium planning to build a wind park in Texas using imported Chinese turbines led to calls that federal subsidies should be pulled from the project.The same month, a report from the Investigative Reporting Workshop found that in the wind sector, where foreign manufacturers dominate the market, overseas companies have received 84% of more than $1 billion in federal clean-energy grants released since Sept. 1. The study did not focus on solar energy, but the majority of solar panels are also produced by European and Asian companies.

Texas?  Well, naturally…I’d bet that the George Bushes I & II are involved somehow, what with their long-time ties to China…Between them and their heir Barack Obama, things are proceeding very nicely…

In light of my previous post about growing U.S. unemployment, pardon me if I query: WHAT THE HELL IS GOING ON??

(Well, we’re going to build electric cars with the Chinese, for one thing…)

***

Editor’s Note: I loved the space program and now live where Pete Conrad lived…and remember when this irrepressible spirit, who shouted “Whoopee” as he hopped around the moon’s surface, died in a motorcycle crash in California 10 years ago this past July (pictures on this memoria page). (He also rode 2 Gemini missions and Skylab I.)

China Called “The Biggest Risk to the World Economy” But History Shows that War Can Always Straighten This Sort of Situation Out (Update 1X: China Missile = “No-Go Zone” for U.S.?)

~~By InsightAnalytical-GRL

We’ve be writing later about the strength of China, but lately there has been some talk rising about a possible bubble being created in China.  In the Telegraph (U.K.),  Ambrose Evans-Pritchard has written a piece which looks at what’s going on titled China has now become the biggest risk to the world economy.

This article shed a totally different light on the views of Larry Kudlow that I wrote about in my previous post, Larry Kudlow Has a Fit as Obama the “Declinist” Opens His Mouth in Japan; Says Obama is “Not His President”.

Evans-Pritchard argues that China is not going to take over as the growth engine of the world economy.  I’ve heard quite often that China cannot pull the world out of its economic troubles.  The stats that I’ve seen indicate that China, no matter how robust, simply is still too small an economy to accomplish this.

Evans-Pritchard has concluded that China’s policies” continue to play havoc with global trade and risk tipping the world into a second leg of the Great Recession.”

Why?  According to the piece, there’s plenty of overcapacity in China.  I saw a report the other day showing empty structures, built for basically no use.  The article explains:

“The inherent problems of the international economic system have not been fully addressed,” said China’s president Hu Jintao. Indeed not. China is still exporting overcapacity to the rest of us on a grand scale, with deflationary consequences.

While some fret about liquidity-driven inflation, Justin Lin, World Bank chief economist, said the greater danger is that record levels of idle plant almost everywhere will feed a downward spiral of job cuts and corporate busts. “I’m more worried about deflation,” he said.

Paul Krugman is quoted in this piece and he explains that China’s policy to hold the value of the yuan down versus the dollar is basically “stealing American jobs” as it relies on cheap exports to stave off massive unemployment. And other Asian countries must do it, too.

Of course, our capitalists use the cheap labor in China and, as the author says, “then lobby Capitol Hill to prevent Congress doing anything about it. This is labour arbitrage.”

But, China doesn’t hold all the cards, although it seems that way.  Evans-Pritchard writes:

Washington can bring China to its knees at any time by shutting markets. There is no symmetry here. Any move by Beijing to liquidate its holdings of US Treasuries could be neutralized – in extremis – by capital controls. Well-armed sovereign states can do whatever they want.

So, what’s the situation in China?  Their much-heralded stimulus has been spent building up more capacity to ship more goods and they’ve been investing in property and stocks. There is a huge credit explosion and production is booming.  BUT, Evans-Pritchard reveals:

Once you know that Hunan authorities have torn down two miles of modern flyway so that they can soak up stimulus by building it again, or that the newly-built city of Ordos is sitting empty in Inner Mongolia, you know what must come next.

A crash, right??

The Chinese consumer is supposed to be the solution to all this overcapacity and oversupply, but it won’t happen overnight.  Meanwhile, China’s central bank is tightening and fewer loans are being issued.

Evans-Pritchard concludes:

The world economy is still skating on thin ice. The West is sated with debt, the East with plant. The crisis has been contained (or masked) by zero rates and a fiscal blast, trashing sovereign balance sheets. But the core problem remains. The Anglo-sphere and Club Med are tightening belts, yet Asia is not adding enough demand to compensate. It is adding supply.

My view is that markets are still in denial about the structural wreckage of the credit bubble. There are two more boils to lance: China’s investment bubble; and Europe’s banking cover-up. I fear that only then can we clear the rubble and, very slowly, start a fresh cycle.

In my earlier post, I included the quote by Obama that Kudlow ridiculed:

While he also talked of multilateral cooperation and human rights, he came to Asia to deliver the message that the rapidly growing export-driven economies can no longer count on the U.S. consumer to keep them afloat.

It seemed a bit arrogant, particularly because Obama hasn’t really been pushing China much:

As for Obama, during the presidential campaign Obama promised to “crack down on China” but during the primaries there was chatter: “But his commitment to that point of view was thrown into doubt during the primaries when a Canadian official said an Obama adviser had privately characterized his tough stance on the North American Free Trade Agreement as political posturing.” (As an example, see: U.S. to Impose Tariff on Tires From China, Wall Street Journal, September 12, 2009.  Detractors figure that “the tariff won’t result in more jobs. Tires will simply come in from other low-cost countries, they say, and U.S. manufacturers, keep making their cheaper tires in China.”) Of course, this is classic Obama…all that “get-tough” talk and “insisting” while we have to go “hat in hand” to China…more blowing smoke.

But Evans-Pritchard comments (above) about Washington’s ability to really shove are food for thought. To repeat, “Well-armed sovereign states can do whatever they want.”

Now, I’m not suggesting Barack Obama is going to start a “real” war with China.  I don’t even think a sane Repbulican would.  (Then again, the Chosen One may just be arrogant enough????)

But, what about an INSANE Republican or Democrat, for that matter, since the elite in Washington are all about the same?  George W. Bush and his oil buddies decided to mess around in Iraq and look what we’re stuck with.  (George and his father were too busy with their long-time ties to China, so Iraq filled the bill for George II.) Barack Obama is worrying about that pipeline in Afghanistan that’s attacked so often by the Taliban that it hasn’t even been able deliver any oil yet.

But, there are lots of INSANE Republicans and Democrats around and who can trust ANY of them?

And, there’s history which shows a link between trade and wars.

Over at the RGE Monitor, Kevin O’Rourke wrote in a 2008 piece  titled “Lessons of 1000 Years of Trade History“: (my bolding)

Even more fundamentally, the continuation of a broadly liberal international trading environment will require that the geopolitical system adapt to the rise of China, India and other ‘Third World’ giants.  In a historical context, this represents of course the restoration of the status quo ante, the end of a “Great Asymmetry” in international economic and political affairs caused by the Industrial Revolution, which was itself in large part a product of the interactions between early modern Europe and the rest of the world.  But that is not to say that such an adjustment will be easy.  The international system has historically done a pretty poor job of accommodating newcomers to the Great Power club. German unification and industrialisation during the late 19^th century led to tensions with Britain and France over colonial and armament policy, while Japan’s rise to regional prominence during the interwar period, and its search for secure sources of raw materials, ended in war against United States and its allies.  Both precedents are worrying, in that similar questions are posed today, both in terms of the rights of emerging nations to rival the established powers’ military capabilities (notably with regard to nuclear weapons), and in terms of the strategic importance to countries like China of ready access to oil supplies and other natural resources.

The last point should cause us to reflect that, Cobden and Montesquieu notwithstanding, interdependence and trade do not necessarily guarantee peace.  The world economy of the late 19^th century was extremely interdependent, to the point where Norman Angell famously felt able to pronounce, on the eve of World War I, that major conflict was now unthinkable.  Interdependence implies vulnerability, and vulnerability can lead to fear, with unpredictable consequences, as Anglo-German rivalry in the run-up to the Great War, and Japanese reactions to the Great Depression and Smoot-Hawley, both indicate.

Impermanence appears to be the most enduring feature of the human condition, and if there is one lesson which we can safely learn from history, it is that history has not ended.  Hopefully it will not repeat itself.

We know that Barack Obama knows nothing about history (in fact, dismissing the entire Viet Nam experience), and I’d bet that none of our future leaders will know it either. And, even if they DO, I doubt they’d actually pay any attention to any lessons to be learned.

***

UPDATE 1

Looks like China isn’t missing this military angle:

Related Story from Bloomberg News, November 17, 2009 (excerpt):

China’s New Missile May Create a ‘No-Go Zone’ for U.S. Fleet

China’s military is close to fielding the world’s first anti-ship ballistic missile, according to U.S. Navy intelligence.The missile, with a range of almost 900 miles (1,500 kilometers), would be fired from mobile, land-based launchers and is “specifically designed to defeat U.S. carrier strike groups,” the Office of Naval Intelligence reported.

Five of the U.S. Navy’s 11 carriers are based in the Pacific and operate freely in international waters near China. Their mission includes defending Taiwan should China seek to exercise by force its claim to the island democracy, which it considers a breakaway province.

The missile could turn this region into a “no-go zone” for U.S. carriers, said Andrew Krepinevich, president of the Center for Strategic and Budget Assessments in Washington. (MORE)