Page added on May 6, 2013
The media is jumping for joy over last week’s US jobs numbers. But beneath the veneer of headline numbers lies a truly horrible economic reality.
Let’s have a look at the two key economies for the world: China and the US.
For starters, China’s recent economic data, as massaged as it is to the upside, is downright awful. China’s PMI numbers were the worst in two years. Staffing levels in the Chinese service sector decreased for the first time since January 2009 (remember that year).
China’s LEI also shows no sign of recovery. If anything, it indicates China is heading towards an economic slowdown on par with that of 2008. And if you account for the rampant debt fueling China’s economy you could easily argue that China is posting 0% GDP growth today.
In the US, last week’s jobs report didn’t look too bad until you dug deeper into the report and found that the average workweek declined by 0.2 hours from March- April.
So what you may ask… 0.2 hours? Just under a 15 minutes per week?
The issue here is that if you apply this drop to the total number of people employed in the private sector, this is the equivalent of over 21 million work hours being lost in one month.
That is the single biggest drop since April of 2009 when the US economy was absolutely imploding. It’s the numerical equivalent of firing 718,000+ people.
This is how companies deal with economic contractions. They don’t start laying people off en masse… they start cutting work hours bit by bit. The mass layoffs don’t come until the official numbers announce that we’re in a full-blown recession.
The first stage of this is already happening. 99% of investors fail to see it, but the clear signs are there.
Investors take note, the market may be hitting new highs thanks to traders’ games, but the real economy is contracting sharply. This is precisely what happened during the market peaks before the Tech Crash and the 2008 Collapse.
We are getting precisely the same warnings this time around.
If you are not already preparing for a potential market collapse, now is the time to be doing so.
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Best Regards
Graham Summers
7 Comments on "Are We Heading For a 2008-Style Economic Implosion"
Dmyers on Tue, 7th May 2013 12:39 am
If the article’s title is in the form of a question, the answer is yes. That’s for all the reasons mentioned by the author and many more.
China is now a big player. This is a completely new reality. I don’t know how it works. No one does. China’s economic relationship with the rest of the world has not been well tested on the down side.
BillT on Tue, 7th May 2013 3:27 am
“Are We Heading For a 2008-Style Economic Implosion?”
Answer: No.
We are headed for a crash that will make 2008 look like a day at the beach.
The US is bankrupt.
The ‘bread lines’ are already 18,000 miles long and growing.
Real unemployment is in the double digits. (vs 4.6% in 2008)
Interest rates are at 0%.
US real inflation is at least 8%.
Europe is bankrupt.
Japan is beyond bankrupt.
China is sputtering.
A total war is brewing in the Middle East.
Does that sound like it will be like 2008?
GregT on Tue, 7th May 2013 6:52 am
Agreed BillT,
We are headed for a 2014, 2015, or 2020 style economic implosion. An economic implosion that will make 2008 seem like a non-event.
Arthur on Tue, 7th May 2013 9:56 am
“Europe is bankrupt.”
Dream on.
http://deepresource.wordpress.com/2012/12/11/the-real-state-of-western-finances/dwo-eu-27nachhaltigkeitsran/
This picture says it all, the sustainabilityindex (unfunded liabilities) in terms of GDP. The US is worst off by far and has more than 12 years worth of work to do (without any consumption) to make good on promisses made in the past, like pensions and healthcare.
Italy and Germany have zero problems. France is not that bad either. My country Holland is not very good either, due to a gigantic real estate bubble. Britain is worse, Cyprus and Greece are basket cases, no surprises here. But nothing beats the desastrous financial situation of the US, that does not even try to do something about it, other than a flight forward in war and marshall law.
Summing it up: like in 2008, a financial meltdown is going to start in the US and nowhere else and it will take the rest of the global economy with it. Exit globalism. And for every “westerner” (soon a phenomenon of the past) under fifty, pensions are going to be a thing of the past.
Stephen on Tue, 7th May 2013 10:28 am
Maybe a global debt jubilee is what we need to start. I wonder if it would be better to divert tax money AWAY from “interest on the debt” and use it for the transition to a sustainable society. Also, sometimes it takes a crisis to change national policy, which is sad but it is true sometimes.
The policies we need to implement:
* Reverse globalization into localization
* Assemble goods close to home (and maybe less of them)
* Do not allow the bankers, CEOs and investors profit margin be the highest priority in setting national policies. Instead, focus on the costs to society, long term sustainability, and quality of life impact as the highest priority in setting policy.
* We need to implement audits on the quantity and extraction rates of all remaining oil wells, natural gas wells, raw material mining operations, sources of water, etc. This will help us set limits on their usage to force reductions based on decline rate. Implementing taxes on resources past their peak is a good idea too.
* Over time we will need to change the landscape to be sustainable, including converting some suburban developments and strip malls back to farmland.
* Our middle schools, high schools, and colleges need to re-implement long lost electives such as agriculture, sewing, making simple things, cooking, and repair of items again.
* We need a heavy investment in renewable energy.
* Society needs to implement new models to fund public services. These models should not depend on infinite economic growth, nor ever increasing value in the stock market or real estate market. We need models that can be sustained without extreme austerity that can survive, thrive, and generate sufficient tax revenue during long periods of economic decline.
* Policies which minimize fossil use need to be implemented.
* Lastly, we need to rebuild the retirement system of generations Y and Z into a system that can survive economic decline, and does not depend on economic growth or the stock market to work properly. This will take a lot of thinking outside the box to say the least.
BillT on Tue, 7th May 2013 12:54 pm
Ah, but, Arthur. The US can print its way forward for a few more years and give the EU time to collapse under it’s own weight. But you are correct, the West is over. Globalism as we have known it is on it’s last days.
Ah, back to the good old days of the 50s & 60s when there was no internet, cell phones, I toys, air conditioning, strawberries in winter and two cars in every garage. When there was quiet, and no constant connection with the world. When someone actually had to catch you at home near the phone and you didn’t waste hours on the Internet posting what you ate for dinner and the latest celebrity gossip.
Maybe the light pollution will go away and you will be able to see the stars again. I can see them on the farm. Even the Milky Way Galaxy. But the farm is 50 miles from any city lights.
Arthur on Tue, 7th May 2013 3:02 pm
“The US can print its way forward for a few more years and give the EU time to collapse under it’s own weight.”
You are not addressing the arguments I gave you.
“Ah, back to the good old days of the 50s & 60s when there was no internet, cell phones, I toys, air conditioning, strawberries in winter and two cars in every garage. When there was quiet, and no constant connection with the world. When someone actually had to catch you at home near the phone and you didn’t waste hours on the Internet posting what you ate for dinner and the latest celebrity gossip. ”
I am perplexed, what happened to the four horsemen? Now you predict that the US can go back to the sixties, that’s very optimistic?! Probably too optimistic. I think it is more going to be a “Bonanza+”, meaning localized life, many people becoming agrarian again, with some light industrialism, like tools, building materials, IT. No cars, trucks, planes, military-industrial complex. Somewhere between what we have now and a ‘world made by hand’.