Global trade contracts as eurozone leaders hold yet another summit
Posted on 05 December 2011 with 5 comments from readers
Another week, another summit of eurozone leaders supposedly about to save the world. Well they had better get a move on. The news from the shipping lines that run global trade is that the lifeblood of the world economy is already slowing down because of the crisis.
In that sense then the next global financial crisis is already with us. The true picture is more complex. Eurozone credit is harder and harder to come by and business confidence low so trade is seizing up worst in the European Union, particularly in the depressed periphery nations led by Greece.
Slowing trade
The US is flatlining with the odd glimmer of hope. China is slowing down from enormous growth rates. Yet there are still pockets of strength. Sweden in the EU and Norway outside. Vietnam, Cambodia and Indonesia, as well as India.
The problem is when you add up all the countries in the plus column they are still very small in comparison to the bulk of the eurozone, US, Japan and the UK. Most of the business of the world belongs to the old nations, and the new nations also rely on them to buy their exports to some extent.
So even a big Christmas present from the eurozone leaders this week will not prevent the first-half of next year being a bad time for global trade and a recession in many countries.
Indeed this week is more about the next phase of the crisis. We have just had the cavalry come over the hill from the IMF. Will the eurozone follow through with its main ranks or leave the IMF to be cut to ribbons by the markets?
Broken basket
That is a nasty call for traders who have to trade in financial markets. Putting all your eggs into a broken basket is contrary to good sense.
If past precedent is any guide we can expect some PR hocus-pocus from the eurozone but how long will it take for markets to realize again that the substance just is not there? Markets are not known for patience and forbearance.
The cavalry will then be surrounded without a way-out. Just because nobody wants an implosion of the eurozone financial system does not mean that it will not happen.
5 Comments posted by readers:
Peter’s operative sentence:
“Markets are not known for patience and forbearance.” Perhaps the “runner-up” operative sentence is “we can expect some PR hocus-pocus from the eurozone.” And the world would yawn yet again, but will the markets remain patient?
To many, the markets appear to have been very, very patient, while the Euro leaders continue with their lies, chicanery, deception, shell games, etc. Throughout this global charade, the central banks, led by the US FED, have been secretly propping up the markets, lest they tumble down into oblivion.
How long can this double charade continue on either side of the “pond?”
Inter alios, Maersk has reduced S E Asia shippings for 2012
What does that tell you?
Shame on me for thinking that the Stability Treaty for Europe offered hope in the global economics! This article brings me back to my senses from all the razzamatazz of Markozy politics.
I like the picture of the battle between the markets and the advance cavalry of the IMF in danger of being cut to pieces if the main ranks of the Eurozone do not come to the support of the IMF. Because we hear so much about Markozy and the IMF, we can underestimate the enormous power of the markets.
For example, Markozy can talk about a new Stability Treaty in place by March next year. Uncritically, I think that’s a good timetable, forgetting that the massed ranks of the markets can bring that idea to dust and the proposed treaty to ruins well before March.
It’s excellent, because realistic, to be reminded that “just because no one wants an implosion of the eurozone financial system does not mean that it will not happen”.
I keep reminding myself that this global debt problem is beyond human ingenuity to solve.
I may be wrong, but the futility of thinking that both growth in this bankrupt world we live in, and increasing that indebtedness by currency printing to make “life-saving” loans, makes optimism look plain silly.
Depopulation is the only mathematical solution, since it is the reverse of exponential growth in debt, which is only employed to provide a good standard of living.
I’m still sticking to my DOW 13,000 prediction for the end of the year. Expect a huge rally on Friday NO MATTER WHAT Mercozy say.
The first half of next year will see the correction as reality of recession in Europe sets in. I’m just glad I live in the reserve currency country awash in natural gas and with INCREASING oil production ! They are even test drilling a potential big oil find in Northern Louisiana. And they have been drilling here for 90 years. They never went deep enough up there.
@ Bill: “I’m still sticking to my DOW 13,000 prediction for the end of the year. Expect a huge rally on Friday NO MATTER WHAT Mercozy say.”
Nice one Bill. The greedy horde of willing bankers need their end of year bonuses.