The brilliant and on-the-ball Ambrose Evans-Pritchard nails it:
Oil price shock means China is at risk of blowing up
The great oil shock of 2008 is bad enough for us. It poses a mortal threat to the whole economic strategy of emerging Asia.
The manufacturing revolution of China and her satellites has been built on cheap transport over the past decade. At a stroke, the trade model looks obsolete.
No surprise that Shanghai's bourse is down 56pc since October, one of the world's most spectacular bear markets in half a century.
Asia's intra-trade model is a Ricardian network where goods are shipped in a criss-cross pattern to exploit comparative advantage. Profit margins are wafer-thin.
Products are sent to China for final assembly, then shipped again to Western markets. The snag is obvious. The cost of a 40ft container from Shanghai to Rotterdam has risen threefold since the price of oil exploded.
Emphasis added by me.
China's factories "were not built with current energy levels in mind", said Mr Jen. The outcome will be "non-linear". My translation: China is at risk of blowing up.
Any low-tech product shipped in bulk - furniture, say, or shoes - is facing the ever-rising tariff of high freight costs. The Asian outsourcing game is over, says CIBC World Markets. "It's not just about labour costs any more: distance costs money," says chief economist Jeff Rubin.
Xinhua says that 2,331 shoe factories in Guangdong have shut down this year, half the total.
Emphasis added by me.
Foreign reserves have reached $1.8 trillion, playing havoc with the money supply. Declared inflation is just 7.7pc, but that does not begin to capture the scale of repressed prices, from fuel to fertilisers. "There is a lot more bottled-up inflation in this economy than meets they eye," says Stephen Green, from Standard Chartered.
Inflation merely steals growth from the future. It defers monetary tightening until matters get out of hand, which is where we are now. Vietnam has already blown up at 30pc. India is on the cusp at 11pc, so is Indonesia (11pc), the Philippines (11pc), Thailand (9pc) - leaving aside the double-digit Gulf.
Emphasis added by me.
The US Commodities Futures Trading Commission is on an "emergency" footing, under orders from the Democrats on Capitol Hill to smash speculators. If it is really true that investment funds have run amok, we will soon find out.
I suspect that the energy markets have fallen prey to their own version of the "shadow banking system" that so astonished regulators when the credit bubble burst.
They're not squashing them fast enough nor enough of them!
Come what may, globalisation has passed its high-water mark. The pendulum will now swing back from China to America.
That sounds optimistic, but forget it!
Look around you. Show me the cheery, work-oriented, learn-oriented, obedient mass of people who will do the cheap labor assembly China and the rest of Asia have been doing.
That mass of people doesn't exist in America.
We all want to be stars (except for the cops -- they want to be superheroes).
I haven't thought it through past that.
It still smells like Doom to me.
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