Post by jeffolie on Oct 1, 2007 12:39:36 GMT -6
Calling a Spade a Spade: It’s Crack Up Boom
Monday, October 1st, 2007 at 12:17 AM
Further demonstrating the absurdity of Ministry of Truth claims that inflation is contained around 2-3%, comes this look at the extreme blowback in commodity prices in the month of September. I am almost alone in using the term crack up boom (* see footnote for the Von Mises description) , and I suppose it’s all semantics, but I truly now believe the burden is on the Orwellians to prove otherwise. Is a 8% one month increase in the CRB index a crack up boom? I’d say so.
Sept. 28 (Bloomberg) – Commodities had the biggest monthly gain in 32 years, led by wheat, crude oil and gold, as the dollar’s slump enhanced the appeal of energy, grains and precious metals as a hedge against inflation. The 19-commodity Reuters/Jefferies CRB Index was up 8.1 percent this month, the most since July 1975.
China is just a crack up boom mess. This Financial Times article is a must read that describes it. In fact it’s fast approaching the time to call a spade a spade, China is an inferno. The crack boom dynamics couldn’t be much clearer:
Inflation has lowered the attractiveness of bank savings, which pay only 3.87 per cent interest on a one-year deposit account. If negative real interest rates persist, policymakers fear depositors could flee the banks and pour more of their money into the already frothy stock and property markets. “Inflation and the asset bubbles are now supporting each other. This is very dangerous,” says the economist.
To date, China has elected to deal with this crack up boom with price controls and Orwellian dictates such as this:
Beijing has instructed local statistical bureaus not to use the word “inflation” to describe the recent high price rises. Officials at the state statistics bureau say they have received no “formal instructions” along these lines but add that it is understood they should talk about prices rising “too fast”, or being “too hot”, rather than use the I-word.
This is what “too hot” looks like for the people forced to live with disingenuous negative selection leadership. Again is a 50% increase in the primary food consumed by a nation not a crack up boom?
Of course other economic players who supply input goods to China don’t have to play by the same Orwellian rules. One natural consequence of a crack up boom are projects that make no economic sense. Putting up big steel frame buildings or port facilities that stand empty is driven by distorted front loaded incentives such as the desire to get out (and borrow) of Yuan, and it’s weak stepsister the US Dollar. The causa proxima of this activity is crack up boom behavior and NOT Panglossian notions of global “growth”. Therefore products like iron ore start seeing price increases that hardly look contained, but down right hyper-inflationary instead.
Prices may rise more than 50 percent next year because of low inventories at Chinese ports and lack of supply, Merrill Lynch analysts said in a report Wednesday.
Port facility construction: as I pointed out last week inbound containers into LA-Long Beach were down 7% in August. Are the Playas even paying attention? Remember negative selection rules in these countries, and this is part of the “prestige” of being a big Mucky Muck.
Major projects alone will add about 60 million 20-foot equivalent units (TEUs) of capacity from now to the end of 2009, equivalent to about 73 percent of the country’s capacity last year, Drewry Shipping Consultants estimates. About half a dozen major ports such as Shanghai, Shenzhen and Qingdao are building capacity just ahead of demand, argues Richard Nicholson, vice president of AP Moeller’s APM Terminals. “The other half are building capacity far ahead of demand - whether to attract cargo, to attract business partners, or because they have the construction teams already in place,” he said. “Of course, that has an impact on their economics.” “Going down the coast from Dalian to Tianjin, Ningbo and Xiamen, those mid-sized ones might see a glut,” he added.
Ludwig Von Mises on Crack Up Boom:
“‘This first stage of the inflationary process may last for many years. While it lasts, the prices of many goods and services are not yet adjusted to the altered money relation. There are still people in the country who have not yet become aware of the fact that they are confronted with a price revolution which will finally result in a considerable rise of all prices, although the extent of this rise will not be the same in the various commodities and services. These people still believe that prices one day will drop. Waiting for this day, they restrict their purchases and concomitantly increase their cash holdings. As long as such ideas are still held by public opinion, it is not yet too late for the government to abandon its inflationary policy.’
“But then, finally, the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against ‘real’ goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them.
“It was this that happened with the Continental currency in America in 1781, with the French mandats territoriaux in 1796, and with the German mark in 1923. It will happen again whenever the same conditions appear. If a thing has to be used as a medium of exchange, public opinion must not believe that the quantity of this thing will increase beyond all bounds. Inflation is a policy that cannot last.
wallstreetexaminer.com/blogs/winter/?p=1107#more-1107
Monday, October 1st, 2007 at 12:17 AM
Further demonstrating the absurdity of Ministry of Truth claims that inflation is contained around 2-3%, comes this look at the extreme blowback in commodity prices in the month of September. I am almost alone in using the term crack up boom (* see footnote for the Von Mises description) , and I suppose it’s all semantics, but I truly now believe the burden is on the Orwellians to prove otherwise. Is a 8% one month increase in the CRB index a crack up boom? I’d say so.
Sept. 28 (Bloomberg) – Commodities had the biggest monthly gain in 32 years, led by wheat, crude oil and gold, as the dollar’s slump enhanced the appeal of energy, grains and precious metals as a hedge against inflation. The 19-commodity Reuters/Jefferies CRB Index was up 8.1 percent this month, the most since July 1975.
China is just a crack up boom mess. This Financial Times article is a must read that describes it. In fact it’s fast approaching the time to call a spade a spade, China is an inferno. The crack boom dynamics couldn’t be much clearer:
Inflation has lowered the attractiveness of bank savings, which pay only 3.87 per cent interest on a one-year deposit account. If negative real interest rates persist, policymakers fear depositors could flee the banks and pour more of their money into the already frothy stock and property markets. “Inflation and the asset bubbles are now supporting each other. This is very dangerous,” says the economist.
To date, China has elected to deal with this crack up boom with price controls and Orwellian dictates such as this:
Beijing has instructed local statistical bureaus not to use the word “inflation” to describe the recent high price rises. Officials at the state statistics bureau say they have received no “formal instructions” along these lines but add that it is understood they should talk about prices rising “too fast”, or being “too hot”, rather than use the I-word.
This is what “too hot” looks like for the people forced to live with disingenuous negative selection leadership. Again is a 50% increase in the primary food consumed by a nation not a crack up boom?
Of course other economic players who supply input goods to China don’t have to play by the same Orwellian rules. One natural consequence of a crack up boom are projects that make no economic sense. Putting up big steel frame buildings or port facilities that stand empty is driven by distorted front loaded incentives such as the desire to get out (and borrow) of Yuan, and it’s weak stepsister the US Dollar. The causa proxima of this activity is crack up boom behavior and NOT Panglossian notions of global “growth”. Therefore products like iron ore start seeing price increases that hardly look contained, but down right hyper-inflationary instead.
Prices may rise more than 50 percent next year because of low inventories at Chinese ports and lack of supply, Merrill Lynch analysts said in a report Wednesday.
Port facility construction: as I pointed out last week inbound containers into LA-Long Beach were down 7% in August. Are the Playas even paying attention? Remember negative selection rules in these countries, and this is part of the “prestige” of being a big Mucky Muck.
Major projects alone will add about 60 million 20-foot equivalent units (TEUs) of capacity from now to the end of 2009, equivalent to about 73 percent of the country’s capacity last year, Drewry Shipping Consultants estimates. About half a dozen major ports such as Shanghai, Shenzhen and Qingdao are building capacity just ahead of demand, argues Richard Nicholson, vice president of AP Moeller’s APM Terminals. “The other half are building capacity far ahead of demand - whether to attract cargo, to attract business partners, or because they have the construction teams already in place,” he said. “Of course, that has an impact on their economics.” “Going down the coast from Dalian to Tianjin, Ningbo and Xiamen, those mid-sized ones might see a glut,” he added.
Ludwig Von Mises on Crack Up Boom:
“‘This first stage of the inflationary process may last for many years. While it lasts, the prices of many goods and services are not yet adjusted to the altered money relation. There are still people in the country who have not yet become aware of the fact that they are confronted with a price revolution which will finally result in a considerable rise of all prices, although the extent of this rise will not be the same in the various commodities and services. These people still believe that prices one day will drop. Waiting for this day, they restrict their purchases and concomitantly increase their cash holdings. As long as such ideas are still held by public opinion, it is not yet too late for the government to abandon its inflationary policy.’
“But then, finally, the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against ‘real’ goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them.
“It was this that happened with the Continental currency in America in 1781, with the French mandats territoriaux in 1796, and with the German mark in 1923. It will happen again whenever the same conditions appear. If a thing has to be used as a medium of exchange, public opinion must not believe that the quantity of this thing will increase beyond all bounds. Inflation is a policy that cannot last.
wallstreetexaminer.com/blogs/winter/?p=1107#more-1107