Tuesday, September 15, 2009

Sweet and Sour Chicken, Mostly Sour

Retail sales jumped 2.7% in August but 2/3 of that was from cash from clunkers and when you exclude gas station sales the increase was only six tenths of a percent. This increase was mostly from pent-up demand for clothing, electronics and general merchandise with furniture and hardware down sharply. Sales continue to be down more than 5% from a year ago and retail stock prices are down on a gloomy sales forecast.

Wholesale prices took a big and unexpected jump last month. The standard line from the media is that "this is fueling fears of inflation". In reality it reflects the collapsing dollar as imports are climbing in price even faster than the currency trade indicates. Many companies don’t want to be paid in Dollars and are apparently raising prices to get ahead of the inevitable collapse.

More Americans are below the poverty line now at 16% of the population. In total wealth, the US now lags behind Europe as the wealthiest region in the world but we are still well ahead of Africa, for now. Of course most of our wealth is just on paper. Europe was largely a smoking ruin sixty years ago and the US had most of the world’s manufacturing capacity and all the money.

Now we import $4.50 in manufactured goods for every Dollar exported and even that Dollar is heavily loaded with so called "value added" agriculture products like pig intestines the Chinese use to make pharmaceuticals, cosmetics and the like. The rest of our exports are made up of raw materials and crops much as any third world country. We used to export debt but I doubt anybody is really buying any of that anymore but rather it is a sort of shell game managed by the Fed to keep Armageddon at bay.

China is threatening to retaliate for Obama’s tariffs on steel pipe and tires by raising the tariff on chickens coming from the US. Traditionally you raise the tariff on a similar product, but that’s not possible for China since we don’t make anything. To get the attention of one of your third world trading partners, you raise the tariff on bananas or chickens.