Something else is restraining trade well
beyond any Chinese goods heading toward the United States waiting to be further
tariffed. This is widespread, very
close to universal...
Trade
between Asia and Europe has dimmed considerably. We
know that from the fact Germany and China are the two countries out of the
majors struggling the most right now. As a consequence of the slowing, shipping
companies have had to make adjustments to their fleet schedules over and above
normal seasonal variances.
It was reported last week that Maersk and MPC would “temporarily suspend”
their sailings on one of the biggest routes between
Europe and Asia.
This
followed a material downgrade in Mexico, of all places, another economic system
highly dependent at the margins on the whims of global trade.
Everywhere you turn,
there are references to global demand while at the same time, by my own
unscientific count, fewer and less emphatic protests over trade wars.
Something
else has to be restraining trade well beyond any Chinese goods
heading toward the United States waiting to be further tariffed. This is widespread, very
close to universal.
That’s why US
exports, for example, are struggling. By conventional terms, that should be the
case – the dollar began rising in the middle of last year making US goods less attractive meaning relatively more expensive on
world markets. That is a reason why US
Presidents claim a strong dollar policy (as if there could be one) in public and in private (and sometimes public) cheer whenever it falls in exchange value.
But as the struggles
in the rest of the world show, the American loss is no
one’s gain. That’s the part none of them ever get – this isn’t the
losing end of beggar-they-neighbor. The rising dollar
leaves no winners in its wake. None.
Rather than
redistribute stable purchasing power and reflect strong demand toward relative
changes in costs, what’s left is only weakening demand
in all cases. Europe, Asia, Central and South America, even the United
States.
According to
estimates released by the Census Bureau this week, US
exports are now routinely falling. Unadjusted, exports to the rest of
the world have contracted in each of the last five months (through July 2019).
Not by huge amounts, though in June it was just about
-5%, more importantly the 6-month average has reached -1.2%.
See Chart:
US exports
of Goods, NSA
Seasonally-adjusted,
the Census Bureau leaves no doubt as to the cause. The peak in the reflation
export cycle was unsurprisingly May 2018 (29th). The
dollar goes up, and collateral draws tight, global trade suffers not because of
trade wars or the cost of US goods relative to alternatives but because the
lack of sufficient dollar availability slowly squeezes the life out of global
demand.
See Chart:
US Trade
in Goods, SA [ Less exports than imports ]
Trade suffers
first because the global reserve currency is its first requirement, the ability
to fluently, efficiently translate economic factors from one system to another. There’s almost no appreciation for the
functions – and what those actually are – of a
global reserve.
A reserve currency is an intermediator, more
than a buffer between national systems often with very little in common.
Starting with currency denomination and monetary terms. The example I
often use is an export firm in Sweden obtaining goods in that country to be
shipped to Japan for final use. The trade can certainly happen without a global
reserve, but not efficiently…
If, however, both sides can use a currency
that is common in both areas it then obviates the need for either of their
national denominations. Should Japanese as well as Swedish banks both hold balances of this
middle currency as a regular part of their business, no special concessions
required, then trade becomes easy and (very nearly) free.
The downside is that this requires a whole lot
of that middle currency to be made available practically everywhere.
See Graph
ALHAMBRA
Investments
You can
then see why global trade downshifted in and around the Great “Recession” and
never really came back – though it was predicted to, and everyone especially in
the EM’s was counting on it. Before
the Global Financial Crisis in that eurodollar system, the middle currency was
freely available for use anywhere. Nowadays, it’s so much harder to source and
maintain funding.
It doesn’t shut off trade
completely, but it does slowly squeeze the life out of it over time. The global regime is starved of its
monetary oxygen. That’s why there are no winners; the dollar shortage isn’t a redistribution of demand, it is
the slow erosion and even destruction of it (as it infiltrates the supply side,
like in China).
See Chart:
US Imports of Goods from China
We see these same effects on the other side of the US
merchandise ledger, too. While American importers are bringing in fewer Chinese
goods because they are being marked up by levies, they aren’t making up for
them by buying extra anywhere else. Imports into the US are falling as
inventory builds up across the domestic supply chain.
The global
slowdown is a global slowdown. The monetary squeeze is not entirely fixated on
global trade, that’s just where it is most visible and easily discernible. It
therefore proposes a far different set of solutions (from a US perspective)
than kill the dollar.
If only it was that easy.
Macro Voices Podcast
….
----
====
----
No hay comentarios:
Publicar un comentario