Wednesday, May 25, 2016

Globalization Is Going Out of Business

When one corporation outsources production to the next cheaper locale, they increase profits. When they all do it, they go out of business. But ceteris paribus, no EconoDunce saw that coming...

Today's financial alchemists who know absolutely nothing about creating a sustainable economy have pinned their "reflation" hopes on Emerging Market Demand. Despite the fact that they have systematically monetized global demand for eight years straight via increased profit margins. In other words, they conveniently make zero connection between the health of the economy and their monetization of labour:

"Sorry folks, we have to make the quarter"
About 25,000 workers joined Microsoft as a result of the company’s acquisition of Nokia’s handset business. In 2014, Microsoft announced it was cutting 18,000 jobs, most of them related to the Nokia deal. Last year, it eliminated an additional 7,800 jobs.

In other words, aggregate corporate profit margins have systematically destroyed aggregate global revenue.

In related news overnight, China is now publicly announcing their concern over Fed policy:

In an interview on Bloomberg, investor Wilbur Ross asserted that China has 30% overcapacity in steel, the export of which has eliminated roughly 40,000 EU jobs in the past few years. Meanwhile their ship building industry will be idled this year as two thirds of the order book rolls off. Throw in construction of ghost cities and these are the most labour intensive industries in the country.

Trump asserts that the Chinese Yuan is undervalued relative to the dollar, and he may well be right. However, what matters to Globalization is the Yuan's valuation relative to the rest of the Emerging Markets:

Rock and hard place visualized:
Yuan / EM Currency Fund (red) with CNY (Yuan / dollar):

"I only shop on Amazon and I only buy the S&P 500, nothing risky..." - U.VA full retard