Hello Russ, <<… the important China soybean debacle story.
Message 20173267
Xie's comment in second story:
"China has to become either much more energy-efficient or find a substitute for oil." >>
On the soybean issue, the Chinese consumption of soybean is what it is. There was a domestic shortage, and imports were stepped up.
As with all businesses that prove to be profitable in China, be they growing oranges (years of lead-time), fried chicken fast food (inconsequential lead-time), making these furniture widgets, producing those electronic gizmos, or, not surprisingly at all, soybeans, entrepreneurs rush in, so much so that prices collapse.
In such a, as the Americans would call it, ‘dynamic’, ‘economically free’, and ‘flexible’ atmosphere, capital allocation moves at the speed of Internet. Orders are placed on suppliers, double, triple, and quadruple times, in excess of underlying demand.
When real demand is overwhelmed by genuine over-supply, and not so much because of bank intervention, the above mentioned entrepreneurs would inevitably fail to take delivery, because ‘the bank called my loan’ or ‘the dog ate my homework’.
Trading, across borders, is a ‘bank eat dog eat bank world’, dark and murky, sometimes profitable, often dire, full of good cheer and anguished screams.
As in the days of America in the late 1800s and early 1900s, such free and flexible dynamism is a sign of strength, not weakness, and should be embraced. The Central Bank protecting dog variety of neutered capitalism should not be tolerated.
On the energy opportunity, China is in fact charging ahead with a whole host of practical, pragmatic, flexible, and dynamic energy solutions (coal gasification, pipelines, oil exploration, energy resource investment, making ‘friends’ all around, wind, hydro, nuclear, etc), but I for one have no doubt that gasoline price in the US will rise to the required levels to accommodate world energy situation regardless, because oil at USD 40 is simply too cheap. So, either price will adjust and/or demand will fall off, everywhere, except not evenly.
Supply? It is what it is, namely finite.
Chugs, Jay
P.S. I mention energy here … Message 20178427 |
