The beginning of the end for the Eurozone: US Treasury Auction Disaster

Kevin Gonzalez79 said:http://www.bbc.co.uk/news/business-15850569

I'm not sure if anyone else has picked up on this, but manufacturing output in China has hit its lowest level in 32 months. It’s glaringly obvious that the industrial engine has run out of buyers for its surplus goods. I fear we are all deeply interconnected; those fools cheering for the collapse of the European Union are essentially celebrating their own impending downfall.

At this rate, our greatest national assets might end up being nothing more than a patch of dirt in the countryside and a decent set of heavy-duty tools.

China is facing two major headaches. First, there's the absolute mess currently happening in the primary markets of the USA and the European Union. Second, there's the issue of wage convergence, which has eroded China's low-wage advantage so much that manufacturing is actually starting to migrate toward India, Vietnam, South America, and even Eastern Europe. Both of these are structural issues, not just some temporary cycle that's going to snap back to the old way of doing things.

When a single country enjoys nearly two decades of uninterrupted boom time—basically snatching the lion's share of global manufacturing—it’s pretty obvious you can't sustain that forever. A huge chunk of China's manufacturing growth has come directly at the expense of the rest of the world (if you do the math, roughly global GDP growth minus China's GDP growth equals the manufacturing lost elsewhere, about 5%). So, while demand for labor stays high in China, the rest of the world is losing its manufacturing base, causing labor costs to drop—which in turn tanks purchasing power while boosting competitiveness elsewhere. People have been talking about this for years, and frankly, I always found those predictions about what China would look like in 2050 hilarious, mostly because they were based on linear projections from the last twenty years. By the 2020s, the Chinese economic model will have to look fundamentally different than it did in the 2000s or 2010s.

Kevin Gonzalez79 said:http://www.bbc.co.uk/news/business-15850569

I'm not sure if anyone else has picked up on this, but manufacturing output in China has hit its lowest level in 32 months. It’s glaringly obvious that the industrial engine has run out of buyers for its surplus goods. I fear we are all deeply interconnected; those fools cheering for the collapse of the European Union are essentially celebrating their own impending downfall.

At this rate, our greatest national assets might end up being nothing more than a patch of dirt in the countryside and a decent set of heavy-duty tools.



Nothing is going to change until the Europeans finally decide to dig through the American mess—something nobody has bothered to deal with for the last century, which is why it’s started spilling over into Europe because apparently, it’s cheaper to just pay Chinese people to dig up their own ground back in China.
To start things off, I guess Europe could try collecting what they're owed from the USA by digging for oil in Texas; meanwhile, the Chinese creditors might also want to collect so they can actually get their manufacturing and sales moving again within the European Union.

darkhawk43 said:China is facing two major headaches. First, there's the absolute mess currently happening in the primary markets of the USA and the European Union. Second, there's the issue of wage convergence, which has eroded China's low-wage advantage so much that manufacturing is actually starting to migrate toward India, Vietnam, South America, and even Eastern Europe. Both of these are structural issues, not just some temporary cycle that's going to snap back to the old way of doing things.

When a single country enjoys nearly two decades of uninterrupted boom time—basically snatching the lion's share of global manufacturing—it’s pretty obvious you can't sustain that forever. A huge chunk of China's manufacturing growth has come directly at the expense of the rest of the world (if you do the math, roughly global GDP growth minus China's GDP growth equals the manufacturing lost elsewhere, about 5%). So, while demand for labor stays high in China, the rest of the world is losing its manufacturing base, causing labor costs to drop—which in turn tanks purchasing power while boosting competitiveness elsewhere. People have been talking about this for years, and frankly, I always found those predictions about what China would look like in 2050 hilarious, mostly because they were based on linear projections from the last twenty years. By the 2020s, the Chinese economic model will have to look fundamentally different than it did in the 2000s or 2010s.

I agree. Even the textile industry has largely migrated to Bangladesh.
And here in the States, we see our own local industries attempting to stage a miraculous comeback...

India is also capturing a significant portion of the market and is catching up demographically to China, which possesses a much older average population.

look at China
0-14 years: 20.1% (male 142,085,665/female 125,300,391) (2008 est.)
15-64 years: 71.9% (male 491,513,378/female 465,020,030) (2008 est.)
65-over: 15% (male 50,652,480/female 55,472,661) (2008 est.)

And India

0-14 years: 31.1% (male 190,075,426/female 172,799,553) (2009 est.)
15-64 years: 63.6% (male 381,446,079/female 359,802,209) (2009 est.)
65-over: 5.3% (male 29,364,920/female 32,591,030) (2009 est.)

But then again, the Chinese have begun large-scale military exercises in the Pacific.

http://www.bbc.co.uk/news/world-asia-china-15866989
The Chinese are seeing an aging population increase while their youth demographic shrinks...

The biggest fallout—assuming this mess actually gets worse—from the potential slide in German debt is that the core AAA nations led by Germany might technically lose the ability to bail out the rest of the Eurozone as they start sinking.

"If Germany has to pay higher costs for its borrowing, it's obvious it cannot help the entire euro zone. If German bond yields keep rising, that could even be a trigger for break-up of the euro," said Makoto Noji, a senior strategist at SMBC Nikko Securities.

.......

While those annoyingly low yields were a huge factor, some folks in the market are starting to sweat that Germany might be losing its legendary "safe haven" status, especially with the looming shadow of rising bailout costs as more Eurozone countries get hammered by the market.

Up until now, whether or not to bail out the periphery was mostly a question of whether the Germans actually had the political stomach to pull the trigger on transfers to indebted nations. For the Germans, keeping the Euro intact is pretty much essential; if things fall apart, forecasts suggest their currency would skyrocket, which is a total disaster for an export-heavy economy like theirs. Because of that, everyone assumed that if the crisis really hit the fan, the political will would eventually show up. But now that we're seeing signs the market doesn't even trust Germany's capacity to prop up the Eurozone, the whole game is changing. We're moving away from the political circus and staring straight at the actual structural rot within Eurozone countries. Even France's strength has been a massive question mark for a while now, thanks to sluggish growth and French banks being way too exposed to Italian debt and other struggling spots.

Meanwhile, elsewhere in the empire:

Belgian bond yields' spread over German bonds soared to a new euro lifetime high also as the country -- without a formal government since elections last June -- struggles to agree on a deficit slashing budget for next year.

"Belgium has been torn by the division between the (Flemish speaking) north and the (French-speaking) south and is politically paralysed. It just looks like a microcosm of the entire euro zone," Noji said.

Investors were already unnerved by reports that Belgium is leaning on France to pay more into emergency support for failed Lender Dexia under a 90 billion euro ($120 billion) rescue deal that had appeared to have been agreed.

Global reaction:

Commodity currencies, unsettled by weak Chinese factory data, recouped some of the steep losses made on Wednesday but lacked momentum.

The Australian dollar slid to a seven-week low of $0.9664 on Wednesday before recovering to $0.9740 in Asia on Thursday.

"The underperformance in commodity currencies highlights the dominating concerns over global growth," BNP Paribas analysts said in a note.

http://online.wsj.com/article/SB1000...309231698.html

LONDON—Euro-zone bond markets suffered another selloff Tuesday, with investors especially dumping short-term debt after Spain was forced to pay a heavy price to auction its latest brace of Treasury bills

copperhound122 said:

Nothing is going to change until the Europeans finally decide to dig through the American mess—something nobody has bothered to deal with for the last century, which is why it’s started spilling over into Europe because apparently, it’s cheaper to just pay Chinese people to dig up their own ground back in China.
To start things off, I guess Europe could try collecting what they're owed from the USA by digging for oil in Texas; meanwhile, the Chinese creditors might also want to collect so they can actually get their manufacturing and sales moving again within the European Union.

That’s an interesting take, but who exactly is going to be the first one to try and shove it up the Americans' ass? You? 🙂
We all saw the perks of joining the European Union, but now we're seeing the downsides even clearer than before.
And this disastrous policy of crawling on hands and knees, selling everything off, and forcing integration into the European Union... well, hey, look at the results we're getting! 😉

Andrew Booth29 said:The Federal Reserve always jumps in to play savior and organizes bailouts for the EU... Now we just wait to see if they reopen those currency swaps, assuming they haven't already. 😬

"The wave-like motion hitting the economic system—those repetitive cycles where booms are inevitably met by depressions—is simply the unavoidable consequence of trying, over and over again, to force down market interest rates through credit expansion. There is no way to dodge the ultimate collapse of a boom fueled by credit expansion. The alternative is only whether the crisis should come sooner or later." - LvM

🧐

There you go—the conspiracy theorists are actually right for once. The Federal Reserve stepped in to rescue the European Union, just like everyone predicted. 🤣

Andrew Booth29 said:🧐

There you go—the conspiracy theorists are actually right for once. The Federal Reserve stepped in to rescue the European Union, just like everyone predicted. 🤣

Spot on prediction. 👍