GLOBAL RECESSION AT PORTAS
By John Rubino via DollarCollapse.com,
Submitted by Tyler Durden on 01/11/2016. :
The following three charts make last week’s market
turmoil easier to understand. Falling trade means lower corporate
profits, which, if history is still a valid guide, means less valuable
equities. So it could be that the markets are simply figuring this out
and revaluing assets accordingly. The US trade
deficit (exports minus imports) has been getting smaller. Since a trade deficit
subtracts from GDP growth, a shrinking deficit will, other things being equal,
produce a bigger, faster-growing economy (that’s the mainstream take).
ORIGINAL
SOURCE
US trade balance.
by John Rubino on January 10, 2016 · http://dollarcollapse.com/the-economy/the-shrinking-global-economy-in-three-charts/attachment/us-trade-balance/
But other things aren’t equal. It turns out that the components of
that trade balance figure are both shrinking. Exports — the stuff we sell
to foreigners - have been declining since the dollar spiked in 2014. That’s not
a surprise, since a strengthening currency makes exports more expensive and
thus harder to sell. So other countries are buying less of our stuff, which
though not surprising is a bad sign.
Meanwhile, imports — stuff we buy from abroad — have also plunged in
the past year, which is partly due to cheaper oil lowering the dollar value of
energy and other commodity imports. But it also means that even though
French wine and German cars have become less expensive as the dollar has soared
against the euro, we’re not buying more of them. So US consumers, even
with all the money they’re saving at the gas pump, still can’t (or won’t) take
advantage of a sale on imported goods.
If imports and
exports are both falling, that means consumption is weak pretty much
everywhere. And weak consumption means slow or negative growth, which contradicts
the recovery thesis that now dominates policy making and the financial media.
It also makes
last week’s market turmoil easier to understand. Falling trade
means lower corporate profits, which, if history is still a valid guide, means
less valuable equities. So it could be that the markets are simply
figuring this out and revaluing assets accordingly.
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