Situation getting worse, faster
OUTSIDE THE BOX
The data and news of the past week clearly show that the global financial and economic condition continues to deteriorate. There are no bright spots for those areas and nations that dominate the world economy.
While all eyes seem to be on Greece, in truth, the Greek debt situation is but a small pothole on the European economic road off the euro currency cliff in comparison to Italy and Spain.
Instead of the silly “bailouts,” already having reached $150 billion, the entire Greek debt could have been bought out for $240 billion a year ago. Talk about throwing good money after bad. The real problem looming for Europe is Italy holding around $1.5 trillion in debt that could go down the hill at any time. Greece is the smoke and mirrors that takes attention away from the more serious issues of Spain and Italy. The only reason we are not focusing on these two countries is to see if and how the European Central Bank handles Greece and Portugal.
While the Philippines has been upgraded by the debt-rating agencies, Portugal now joins the Third World with its government debt being downgraded to junk-bond status. I admit that I take great satisfaction in seeing the West, that for 20 years scolded, harassed and insulted countries like the Philippines for their economic policies, get what they deserve for following the debt-based wealth creation model.
The economic numbers out of the US are a complete disaster. There is absolutely nothing positive that can be lied about to make the situation be any better.
The June employment numbers have never been any worse when you examine the situation behind the data. The US needs to create 150,000 per month just to break even against population growth. The May 2011 figures were revised down to show only 25,000 new jobs. The June jobs numbers show only 18,000 were newly employed and this number is subject to downward revision in 30 days. While the actual nominal employment numbers are not as bad as a year ago, this is after $1.4 trillion was spent to simulate new jobs. Further, long-term unemployment, those without jobs for six months or longer have never been higher at 46 percent. Only about 60 percent of men over 20 are able to find jobs and working.
To return to employment levels in 2006, the US would need to create 11 million jobs. At a creation rate of 150,000 per month, that would take seven years.
When you look deeply into other data, the situation is even poorer. When people are fearful of the future, those that can, tend to save money. Those that cannot, borrow more. For May, spending at grocery stores actually dropped and spending at pharmacies was almost flat. Consumer credit increased after trending down for one year. And note this: consumer bank deposits increased in June, indicating that those with any excess cash are saving for future basic expenses.
While the US is the leader in the destruction of the global economic system as we know it, China is not helping things either and is suffering greatly.
In June the Chinese trade balance soared to $22.3 billion. The surplus was $13.1 billion the previous month and $20 billion a year earlier, an all-time record in gross exports that hit $162 billion in June, driven by all-time high exports to both the US and the European Union. This kills the idea that China will soon be a domestic-oriented economy. Further, the increasing trade deficit with China will take a chunk out of the forecast US gross domestic product. Buying things from abroad does not increase a nation’s economic activity.
An increasing trade surplus, with billions of dollars flowing in, is also the last thing China needs to control its inflation. The official numbers say Chinese inflation rose 6.4 percent in June from May’s 5.5 percent. The 6.4 percent is bad enough but as with most broad government numbers, it is probably half true. How bad is Chinese inflation for the average citizen? The price of pork, the country’s meat source, jumped 57 percent in June.
You better get used to this kind of gloom-and-doom situation because it is going to get worse. And while the Philippine government publicly does not seem to have a clue about global macroeconomics, you need to. Buy the peso. Buy the PSE. Buy the Philippines.
Foreign-money managers are quietly realizing there is much more money to be made in countries like the Philippines. Over the next six to 12 months, money will begin to flood into the Philippines. You should be there before the foreigners start to move in.
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Tuesday, 12 July 2011
Situation getting worse, faster