<laws against exporting scrap and new steel?>
So much for curing the trade imbalance huh <ng>. This just illustrates what an emergency this is developing into. The Chinese will have to "retaliate" by repegging their currency higher, which will allow them to continue to outbid the US and Japan for scarcer and scarcer input goods. Once the Japanese start to see they are at a bidding disadvantage with the Chinese they will let the Yen trade higher. And the US being the weaker currency just continues to get locked out of the world commodity and input markets. That will show up in higher and higher USD priced commodity prices. If the US fails to defend it's currency, then it just gets worse too. Unless China and Japan decouple from the USD pricing, they will go under fast. So rather than a race to the bottom of the currency heap, suddenly these symbiotic players scramble to salvage the purchasing power of their money.
And screw the idea of selling at a loss to Wal Mart to "keep market share", it'll be about rationalizing business to stay above water. The Asian will just say, here's the new price, take it or leave it, cause we're going under if we sell at the old price. And if WMT hesitates, the next time they call, the phone will be off the hook.
Here's the key phrase in the wholesale inventory report
btmna.com
that show how vulnerable the US is to this. We aren't geared up for inventory replacement, and even if we were they would have to start from step one on input procurement, can't be done:
"The fact that wholesale inventories increased less than sales suggests an increase in exports, as we have already seen. Year-over-year growth in wholesale inventories is 25 percent of the pace of wholesale sales, likely signaling an increase in inventory building. "
It will be a two month process: March-April to play this out. Please everybody, keep the relevant stories coming in. If you're a lurker, we need you now, this is a community and these will be very challenging times. The US consumer side of this story is important too. If there are signs of demand collapse we need to stay on that story too. We need data and examples though please!!! |
