Chinese electricity consumption and imports fell faster in January than in 2008-9
Posted on 20 February 2012 with no comments from readers
Economic statistics coming out of China for January point to a steeper decline in activity than in the Great Recession of 2008-9 after the Lehman crisis. So much for recent bullishness from US commentators on the back of their employment data. The global economy is in deep trouble. Blame the eurozone?
Chinese electricity consumption fell by 7.5 per cent in January compared with the same month last year. Imports dropped by 22.5 per cent, bad news for foreign car companies in the world’s largest car market.
Real estate bust
A property crash in China following a credit bubble is the real culprit, though the recession in China’s largest export market, the European Union is a factor too. The housing bubble is bursting. It was fuelled up by the fastest expansion of credit seen in history to offset the last global financial crisis.
Will China now manage a soft landing? Economists who project straight lines find it difficult to imagine anything else. They seem to have myopic flaw in their analysis. It never is different this time. It is always the same, again and again. Nothing goes up in a straight line forever.
The problem is that economies can go up in a straightline for such a long time that all the critics are gradually dismissed as cranks. One of the signs of a market top is that all these ‘cranks’ fall silent because they have been wrong for so long.
No different this time
Will it be the same for China? It would really be incredibly strange if it was not. And yet very few investors and analysts are reading it this way with the honourable exception of hedge fund manager Jim Chanos who also made a fortune shorting US subprime.
John Paulson was the other epic dealmaker who made billions on subprime. He’s long gold and out of US financials because he sees another global financial crash in which gold is the only currency that will be worth holding.
And yet strangely stock markets are up this week on news that China is easing its reserve ratio for its banks again. The logic is that this means more money will go into equities. How short-sighted are the fools who see the momentary smile on a patient in the terminal ward and conclude that they are getting better.
