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America’s Energy Revolution Transforms International Relations  |  Peak Oil News and Message Boards

America’s Energy Revolution Transforms International Relations  |  Peak Oil News and Message Boards.

North America’s energy revolution is remaking all aspects of the global economy and international relations in what has turned out to be the most profound shift in the second decade of the 21st century.

Policymakers and climate scientists prefer to talk about the transformational potential of clean technologies like wind, solar and electric vehicles.

But in reality the biggest shifts in economic relations and the balance of power at present stem from changes in the production of decidedly old-fashioned and polluting fossil fuels such as oil and gas.

Hydraulic fracturing, coupled with tougher fuel-economy standards and increased use of biofuels, has reversed the growing dependence of the United States on energy imports in less than 10 years.

If fracking has not yet made the United States “energy independent”, it has certainly created a crucial source of competitive advantage and given policymakers much more room to manoeuvre.

Trade Transformed

By the start of the century, the cost of importing energy was one of the largest burdens on the U.S. trade balance, and threatening to worsen in the medium term.

Crude oil and refined petroleum products such as gasoline accounted for most of the imported energy, but there was growing concern that the country would also become a big net importer of natural gas within a few years.

In 2008, the United States ran a net energy trade deficit with the rest of the world amounting to $411 billion, 2.8 percent of GDP.

Crude petroleum and refined products accounted for around one-third of the record trade deficits which the United States ran between 2004 and 2008.

But 2008 proved to be the high-water mark for the net cost of energy imports.

Since 2008, net energy imports have almost halved, to just $217 billion in the first 11 months of 2013.

There is no mystery about the cause of the U.S. energy revolution.

The quadrupling of oil prices between 2000 and 2008 was directly responsible for the biofuel-blending mandates and fuel efficiency standards contained in the 2005 Energy Policy Act and 2007 Energy Independence Security Act passed by the U.S. Congress.

It also indirectly supported the swift rollout of fracking technology, first in natural gas and from 2008 onwards in oil, as well.

But the consequences of the energy revolution are only now being felt fully.

Rippling Outward

For years, policymakers and commentators have played down the revolution’s impact, or even denied there is a revolution at all, because it clashes with climate policies and threatens to re-arrange international relations in ways that are uncomfortable to many of those concerned.

Sceptics first suggested the upsurge in energy production would prove temporary, then that it would be limited to gas, and now that it will be contained by restrictions on U.S. oil exports or environmental campaigns to keep fossil fuels underground unburned.

Doubters say it cannot be repeated in other countries because of their very different geological conditions as well as political and commercial environments.

But the revolution’s impact has spread far beyond the United States.

The United States is set to become a significant exporter of natural gas. It is already the world’s fastest-growing exporter of gas liquids such as propane.

Coal exports have risen as the country’s own power stations turn to cheaper gas. And U.S. refiners are becoming increasingly important exporters of diesel.

Energy trade is already finding ways around the patchwork of antiquated restrictions on exports of oil, gas and condensates.

Comparative Advantage

At the same time, the United States depends less and less on imported energy, especially from outside North America.

In 2013, the country is expected to have imported the fewest barrels of crude oil since 1994.

Even that probably understates the speed of the transformation and its impact on the trade deficit. In real terms, the trade deficit in petroleum and related items in November 2013 was the narrowest for well over two decades.

The economic impact has been profound. Abundant supplies of cheap domestic energy are now a crucial source of competitive advantage compared with rival economies in Europe and Asia.

A decade ago, U.S. policymakers and commentators were worrying about the loss of manufacturing to China based on cheap labour.

Now cheap energy is encouraging talk of bringing some of that manufacturing back. By contrast, expensive energy and inefficient fuel consumption are a seen as a growing threat to China’s competitiveness.

European manufacturers, too, worry they will be significantly disadvantaged by more expensive energy bills.

Loosening Ties

The energy revolution’s impact on international relations has been even greater, and nowhere is it more visible than in the Middle East.

For years, the foreign policy establishments in both the United States and in capitals around the Gulf have insisted shale production will not loosen the close ties between Washington and its regional allies, especially Saudi Arabia.

But the scale of the shift has become too obvious to deny.

Speaking to a security conference in Tel Aviv on Tuesday, Israel’s outspoken Defence Minister Moshe Yaalon complained that the United States is “detaching” itself from the Middle East, according to reports carried in the Jerusalem Post.

Saudi Arabia’s leaders clearly fear their own alliance with Washington is being downgraded as the Obama Administration pursues detente with Iran.

Tensions between Washington and Riyadh erupted into the open last year when Saudi Arabia declined to take up its seat on the UN Security Council and undertook a series of other carefully calculated diplomatic moves to signal its displeasure with the White House.

Such an open breach between the two close allies would have been unthinkable in 2005 or 1995 let alone 1985 or even 1975, when the United States felt its dependence on Saudi oil exports keenly.

Even more remarkably, U.S. foreign policymakers have largely ignored the protests coming from Tel Aviv and Riyadh, and forged ahead regardless.

Ultimately, it is the energy revolution that has emboldened U.S. policymakers to pursue a very different course in the Middle East.

The idea of the United States exporting fossil fuels to the Persian Gulf would have laughable five years ago. But in what has to be the supreme irony, the United Arab Emirates is now openly talking about importing cheap shale gas from the United States to meet its surging electricity demand.

Energy Insecurity

Middle East oil producers are not the only countries that have been disconcerted by the shale revolution. It is also altering the relationship between China and the United States.

In effect, the two superpowers have swapped places. In 1973, the United States perceived its growing reliance on imported crude from the Middle East was a key strategic weakness, while China’s rapidly developing Daqing super-giant oil field promised greater energy independence.

Now U.S. reliance on the Middle East is loosening, while China is increasingly aware of the risks of relying on importing oil from unstable parts of the Middle East and Africa via long supply routes through the straits of Hormuz and Malacca and the South China Sea.

Once again, shale, and the energy revolution more broadly, lies at the heart of the fundamental shift in the balance of power.

China’s own policymakers attach the highest strategic priorities to developing their own domestic energy production (including from shale), cutting energy consumption through improvements in energy efficiency, and protecting foreign supplies by projecting diplomatic and military power into key supply regions and along supply routes.

Just like the discovery of oil in Pennsylvania in the 1850s and the Middle East between the 1920s and 1950s, the North American energy revolution is remaking the world order.

RIGZONE

Charles Hugh Smith: What If Nations Were Less Dependent on One Another? | Peak Prosperity

Charles Hugh Smith: What If Nations Were Less Dependent on One Another? | Peak Prosperity.

Autarky is more than a ten-dollar word for self-sufficiency, as it implies a number of questions that “self-sufficiency” alone might not.

Autarky vs. Self-Sufficiency

The ability to survive without trade or aid from other nations, for example, is not the same as the ability to reap enormous profits or grow one’s economy without trade with other nations. In other words, ‘self-sufficiency’ in terms of survival does not necessarily imply prosperity, but it does imply freedom of action without dependency on foreign approval, capital, resources, and expertise.

Freedom of action provided by independence/autarky also implies a pivotal reduction in vulnerability to foreign control of the cost and/or availability of essentials such as food and energy, and the resulting power of providers to blackmail or influence national priorities and policies.

Where self-sufficiency might suggest a binary state – you’re either self-sufficient or you’re not – autarky invites an exploration of which parts of one’s economy and political order are self-sufficient and which ones are critically dependent on foreign approval, capital, resources, and expertise.

In terms of military freedom of action, some nations are able to commit military forces and project power without the aid or approval of other nations. These nations have military autarky, though they might be entirely dependent on foreign countries for critical resources, capital, expertise, etc.

In this case, though their military may be self-sufficient in terms of capabilities (power projection, control of airspace, etc.), any dependency in other critical areas introduces an element of political, financial, or resource vulnerability should the key suppliers disapprove of a military action. These vulnerabilities impose often-ambiguous but nonetheless very real limits on freedom of action.

The key take-away from this brief overview is that autarky has two distinct states. One is absolute: i.e., Can a nation grow, process, and distribute enough food to feed its population if trade with other nations ceased?, and the other is relative: Is the we-can-feed-ourselves self-sufficiency of the subsistence-survival variety that requires great sacrifice and a drastic re-ordering of national priorities and capital? Or is it relatively painless in terms of national sacrifices and priorities?

Clearly, relative autarky invokes a series of trade-offs: Is the freedom of action and reduction in vulnerability gained by increasing autarky worth a national re-ordering of values, priorities, and capital, and quite possibly broad-based, long-term sacrifices?

There is an additional issue raised by autarky: Is the self-sufficiency a matter of being blessed with abundant resources, or is it the result of conscious national policy and resolve?

Autarky as Policy

Consider petroleum/fossil fuels as an example. Nations blessed with large reserves of fossil fuels are self-sufficient in terms of their own consumption, but the value of their resources on the international market generally leads to dependence on exports of oil/gas to fund the government, political elites, and general welfare. This dependence on the revenues derived from exporting oil/gas leads to what is known as the resource curse: The rest of the oil-exporting nation’s economy withers as capital and political favoritism concentrate on the revenues of exporting oil, and this distortion of the political order leads to cronyism, corruption, and misallocation of national wealth on a scale so vast that nations suffering from an abundance of marketable resources often decline into poverty and instability.

The other path to autarky is selecting and funding policies designed to directly increase self-sufficiency. One example might be Germany’s pursuit of alternative energy via state policies such as subsidies.

That policy-driven autarky requires trade-offs is apparent in Germany’s relative success in growing alternative energy production; the subsidies that have incentivized alternative energy production are now seen as costing more than the presumed gain in self-sufficiency, as fossil-fueled power generation is still needed as backup for fluctuating alt-energy production.

Though dependence on foreign energy has been lowered, Germany remains entirely dependent on its foreign energy suppliers, and as costs of that energy rise, Germany’s position as a competitive industrial powerhouse is being threatened: Industrial production is moving out of Germany to locales with lower energy costs, including the U.S. (Source)

The increase in domestic energy production was intended to reduce the vulnerability implicit in dependence on foreign energy providers, yet the increase in domestic energy production has not yet reached the critical threshold where vulnerability to price shocks has been significantly reduced.

Assessing the Trade-Offs

This highlights the critical nature of the autarchic thresholds of systemic costs and freedom of action. Above a difficult-to-define threshold, the trade-off required to increase self-sufficiency to the point of being meaningful is too high in sacrifice or cost to the economy or society; the trade-offs required aren’t worth the gain in freedom of action and self-sufficiency.

Put another way: Below a difficult-to-define threshold, an increase in self-sufficiency does not yield either lower or more reliable economic costs, nor does it decrease the nation’s vulnerability to blackmail, price shocks, etc.

In other words, though dependence always has potentially negative consequences, it can also be cheaper, more convenient, and more profitable than autarky.

The diffused benefits of autarky are often overshadowed by the presumed burdens of increasing self-sufficiency. But this trade-off can be illusory. Though the status-quo players benefiting from dependence on foreign markets, trade, and capital will shrilly claim that the nation is doomed should their foreign-derived profits be sacrificed in favor of increasing autarky, a desire for more autarky often pushes the economy and society into a highly positive and productive search for greater efficiencies and more productive uses of capital.

Is the sacrifice needed to reach self-sufficiency as steep as presumed, or is a new order of efficiency enough to meaningfully reduce dependence on foreign resources and capital?

A Thought Experiment in American Autarky

If we look at America’s consumption of fossil fuels and its dependence on oil imports to feed its consumption, autarky forces us to ask: Exactly how difficult would it be to lower consumption enough to eliminate the need for imported oil? Would the economy suffer a death-blow if vehicle, heating, and appliance-efficiency standards were raised, and business travel declined in favor of telecommuting and teleconferencing, etc.?

The answer of those profiting from the status quo is, of course, “Yes, the U.S. will be fatally harmed if energy consumption declines,” but the reality is that such creative destruction of wasteful inefficiencies and consumption is the heart of free enterprise and the rising productivity that creates widespread prosperity.

If the U.S. had listened to the 1970s-era defenders-of-the-status-quo doomsdayers, who claimed that environmental codes and higher energy-efficiency standards would doom the nation, the U.S. economy would in fact be doomed by the absurdly inefficient energy consumption of that era. The U.S. economy has remained vibrant and productive precisely because the defenders-of-the-status-quo doomsdayers lost the political conflict between the forces of improved efficiency and productivity and the defenders of the inefficient, wasteful, and diminishing-returns status quo.

There is one other element in the calculus of dependence, vulnerability, and freedom of action implicit in any discussion of autarky. Despite the rapid increase in production of oil and gas in the U.S., America remains dependent on imports of oil. But not all foreign sources of oil, capital, expertise, etc. are equal; some suppliers may be stable, close allies, and share borders and standards of trade (for example: Canada, Mexico, and the U.S.), while others may be distant, unstable, and unreliable.

In other words, autarky may not be worth the cost if a nation is dependent on stable, close neighbors, but the value of autarky rises very quickly when a nation’s survival is dependent on distant, unstable nations with few ties other than the profitable export of resources.

Though a survey of America’s relative dependence and self-sufficiency would require a book, let’s look at a few charts to get a taste of America’s declining dependence on foreign-supplied oil.

Declines in consumption have the same effect in terms of reducing dependency as do increases in domestic production. Has the U.S. economy imploded as miles driven have declined? Or has the increased efficiency this implies boosted productivity?

U.S. imports of petroleum have declined:

U.S. domestic crude oil production has increased:

U.S. natural gas production has risen:

The U.S. oil/gas rig count is still far lower than the peak in the 1980s:

There are many issues raised by these charts, including the sustainability of increased production, the possibility of further declines in consumption, policies that affect production and consumption, and so on, but similar charts of grain, capital, expertise, goods, etc. would help to fill out the complex set of issues raised by declining consumption and increasing domestic production and productivity.

In finance, dependence can mean dependence on other nations for capital and/or profits. What is the consequence of rising autarky for an economy such as America’s that is heavily dependent on foreign markets and trade for the stupendous profitability of its corporations?

In Part II: The Consequences of American Autarky, we discuss this and other ramifications of America’s rising autarky.

America’s ability to project power and maintain its freedom of action both presume a network of diplomatic, military, and economic alliances and trading relationships which have (not coincidentally) fueled American corporation’s unprecedented profits.

The recent past has created an assumption that the U.S. can only prosper if it imports oil, goods, and services on a vast scale. Could the U.S. shift production from overseas to domestic suppliers, and reduce its consumption of oil and other resources imported from other nations?

Click here to access Part II of this report (free executive summary; enrollment required for full access).

Are we trading away our rights and environment? | Science Matters | David Suzuki Foundation

Are we trading away our rights and environment? | Science Matters | David Suzuki Foundation.

Photo: Are we trading away our rights and environment?

(Credit: Gord McKenna via Flickr)

By David Suzuki with contributions from with contributions from David Suzuki Foundation Communications Manager Ian Hanington.

Global trade has advantages. For starters, it allows those of us who live through winter to eat fresh produce year-round. And it provides economic benefits to farmers who grow that food. That could change as oil, the world’s main transport fuel, becomes increasingly scarce, hard to obtain and costly, but we’ll be trading with other nations for the foreseeable future.

Because countries often have differing political and economic systems, agreements are needed to protect those invested in trade. Canada has signed numerous deals, from the North American Free Trade Agreement (NAFTA) to several Foreign Investment Promotion and Protection Agreements (FIPA), and is subject to the rules of global trade bodies, such as the World Trade Organization (WTO).

Treaties, agreements and organizations to help settle disputes may be necessary, but they often favour the interests of business over citizens. With Canada set to sign a 31-year trade deal with China, a repressive and undemocratic country with state-owned corporations, we need to be cautious.

Should we sign agreements if they subject our workers to unfair competition from lower-paid employees from investor nations, hinder our ability to protect the environment or give foreign companies and governments excessive control over local policies and valuable resources? Under some agreements, basics like protecting the air, water and land we all need for survival can become difficult and expensive.

One recent case could put Canada on the hook for $250 million. Quebec has put a hold on fracking pending a study into the environmental impacts of blasting massive amounts of water, sand and chemicals into the ground to fracture rock and release gas deposits. A U.S. resource company plans to sue Canada under Chapter 11 of NAFTA, claiming compensation for the moratorium’s damage to its drilling interests. Similar disputes have already cost Canada millions of dollars.

Ontario also wants assurances that fracking is safe before it allows the practice. That province is facing costs and hurdles because of another conflict between trade and environment. Japan and the European Union filed a complaint with theWTO, claiming a requirement under the Ontario Green Energy Act that wind and solar projects must use a set percentage of local materials is unfair.

Many of the problems arise because of an investor-state arbitration mechanism, which is included in NAFTA, as well as the proposed Canada-China FIPA, Canada-European Union Comprehensive Economic and Trade Agreement and Trans-Pacific Partnership. It allows foreign investors to bring claims before outside arbitrators if they believe their economic interests are being harmed by a nation’s actions or policies. So economics trump national interests.

This has caused many countries, including Australia, South Africa, India and several in Latin America, to avoid signing deals that include the investor-state arbitration mechanism. In Australia’s case, the country recognized the pitfalls when tobacco companies, including Philip Morris, attempted to claim damages under a bilateral investment treaty after the federal government introduced a science-based law requiring cigarettes to be sold in plain, unappealing packages.

According to Australian National University law professor Thomas Faunce, Philip Morris then lobbied the U.S. government to include a similar mechanism in a new trade agreement it was negotiating with Australia. In an article for Troy Media, Faunce wrote that, with such a mechanism, the International Centre for the Settlement of Investment Disputes “would, in effect, become the final arbitrators on major Australian public policy questions concerning mineral royalties, fossil fuel and renewable energy, water, telecommunications, banking, agriculture and power.”

The 31-year trade agreement between Canada and China is worrisome, with its 15-year opt-out clause (compared to just six months for NAFTA), but the inclusion of the mechanism in other agreements is also cause for concern. At the very least, we could be on the hook for millions or billions of dollars if our environmental, health, labour or other policies were deemed to harm the interests of those investing in or trading with Canada.

The government’s desire to expand global trade may be understandable, but we mustn’t give away too much. We must tell our elected representatives to at least delay the Canada-China FIPA until it has been examined more thoroughly, and to reconsider the inclusion of investor-state arbitration mechanisms in all trade deals.

Why Canada Should Demand Sustainable Trade Practices From Its Partners | David R. Miller

Why Canada Should Demand Sustainable Trade Practices From Its Partners | David R. Miller.

The Trans-Pacific Partnership has been described by negotiation countries as one of the most ambitious 21st century trade agreements. However, today’s leak of the agreement’s draft environment chapter reveals deeply concerning limits to that ambition. And it is these limits that could significantly undermine the sustainable use of the world’s resources as well as the long-term economic benefits of trade.

For nearly four years, a dozen nations including Canada, the U.S., Mexico, and a number of Pacific Rim countries have been quietly negotiating this deal. Last fall, WWF along with 23 other environmental organizations called for the inclusion of a number of critical measures to ensure the long-term sustainability of the world’s seafood and timber, and to curb the illegal trade of wildlife. Even though legally enforceable environmental provisions are a mandatory part of all U.S. trade agreements, that’s precisely where the leaked chapter (penned, it turns out, by Canada) fails. In short, the environmental provisions have no teeth.

The global environmental issues cited by WWF and others are implicit in this trade agreement. The countries included in the Trans-Pacific Partnership represent about one-quarter of the world’s global seafood catch (Canada is both a major exporter and importer of seafood). They account for 34 per cent of world’s timber and pulp production. And they include some of the globe’s largest consumers of illegal wildlife products. In other words, this agreement represents a once-in-a-generation opportunity to significantly address the overfishing of our oceans, the devastation of our forests, and the illegal poaching and trafficking that is driving rhinos, elephants, sharks and other species to the brink of extinction.

That’s what’s slipping through our fingers here. And the implications are far-ranging. Unsustainable resource trade weakens the ability of law-abiding businesses to compete, and threatens jobs in countries who follow the rules. Take “pirate” fishing for example (fishing that’s illegal, unregulated, and unreported). This global epidemic accounts for about 20 per cent of the world’s seafood catch, costing the industry as much as $23 billion per year. It’s also a major driver of overfishing, which includes unsustainable shark finning.

Canada has actually become an international leader in the fight against “pirate” fishing. Shouldn’t we be demanding that same level of leadership from others? Shouldn’t we be at the table pushing for an agreement that makes strong, legally-binding environmental legislation the foundation for a prosperous and sustainable global economy? Doesn’t that speak both to our historic role in international negotiations as well as to our values as Canadians?

Sadly, today’s leaked report shows us doing the opposite: standing in the way of proposals for stronger environmental enforcements. That, too, is a very disappointing missed opportunity — for Canada, for the world, and for our country’s our place in it.

Follow David R. Miller on Twitter: www.twitter.com/@iamdavidmiller

Ponzi World (Over 3 Billion NOT Served): Put A Fork In It: The Collapse in Globalization Is Well Underway

Ponzi World (Over 3 Billion NOT Served): Put A Fork In It: The Collapse in Globalization Is Well Underway.

It took five years of Extend and Pretend, but global thought dealers have finally squandered enough financial resources to kill the globalized ponzi model for posterity. All of Harvard’s frat boys plus 520 global interest rate cuts combined with $33 trillion of fiscal and monetary stimulus, can’t put Humpty Dumpty together again…

Capacity Utilization is Falling
The vast majority still believe that interest rates have been falling (Treasury bonds rallying) these past years, due to Central Bank stimulus programs. Therefore, according to conventional wisdom, the Fed’s tapering of monetary stimulus MUST cause interest rates to rise:
“The search for bond alternatives is urgent. Interest rates almost certainly will rise this year as the Federal Reserve continues scaling back its massive stimulus program — and bond prices fall as interest rates rise”
Unfortunately, even a one-eyed man looking sideways can see below that interest rates (red) fall EVERY time the Fed ends one of its quantitative easing programs. The economy is in a state of deep underlying deflation. Therefore every time the Fed takes its foot off the gas, deflation accelerates and risk assets sell off aka. stocks and interest rates fall.
The Mother of All Output Gaps
The longer-term view of interest rates (below) is the scariest chart on the internet. The implications of this chart have even me wanting to change my underwear. Despite trillions in monetary inflation, forward inflation expectations are still falling. The bond market has already determined that deflation is inevitable. Central Banks can’t save globalization from cannibalizing the world economy and leaving nothing in its wake except massively expanded supply capacity and collapsed demand i.e. the mother of all output gaps.

The Mystery of the Missing Jobs
Therefore, the real reason there are no jobs is simply because there is too much global spare capacity and under the fundamentally imbalanced globalization paradigm, the output gap just keeps growing.

 
Long-term interest rates over the past 20 years:
The trend in interest rates is still down even though the money supply and economy are still expanding. Totally unbelievable. Wait until that black line (S&PCasino) collapses; as we see in 2008, interest rates went straight down with the stock market. This time nominal interest rates will go firmly negative, even if real (deflation-adjusted) rates remain positive:
 
 
Game Over, Man
The Fed did its best (below) to save globalization from self-imploding, but they can’t save something that is totally imbalanced and unsustainable from collapsing. With respect to jobs and debt-adjusted GDP, The underlying economic collapse is already well advanced despite what the public at large has been led to believe.
 
Low interest rates are only confirming what the jobs market is clearly saying about spare capacity.
The Labor Force Participation Rate – now at a fresh 35 year low – is the best indication that the globalized pseudo-economy is throwing off massive amounts of spare capacity aka. people. It was either this, or lower profits, so DowCasino took priority…

Obamanation

Using 2008 as a baseline for GDP and the deficit, then we see that debt-adjusted incremental GDP is firmly negative. This implies a Keynesian/Fiscal economic multiplier of less than 1 i.e. a negative ROI for each dollar of debt. Conventional demand (and supply) side economic theory is irretrievably broken. We are in uncharted territory on a rudderless ship.

The illusion-formerly-known-as-the-economy is 120% borrowed money. We can thank the grandchildren for giving up their future so that today’s shrink-wrapped zombies could have a few more years of shopping sprees:

 
China “Won” the Globalized Trade War – A Totally Pyrrhic (Empty) Victory
Over two decades ago, the Chinese Communist Party set out to create the leading capitalist economy on the planet. You can’t make this shit up. Fast forward and they have now surpassed the U.S. in global trade as of just this week.
It was text book export mercantilism. China ran the long game against America’s political attention deficit retards. No different than how England amassed Spain’s gold back in the 1600s:
The Balance of our Forraign Trade is The Rule of Our Treasure
“We must always take heed that we buy no more from strangers than we sell them, for so should we impoverish ourselves and enrich them.”

U.S. (Im)balance of Trade:
Lesson learned: No nation is obligated to be mercantilist in its trade relations, however, those that are not mercantilist certainly can’t trade with those that are.

America is Run by Political Retards
Apparently people four hundred years ago were not this stupid…

In any event, China is now Communist in name only and have thereby become the world’s largest Fascist state followed by the U.S. and Russia both of which are puppet democracies owned by and for ultra wealthy oligarchs. China’s *reward* for this metamorphosis is a society populated by millions of factory wage slaves making $.80/hour minimum wage, unsustainably polluted cities, trillions of non-amortizingunsecured foreign (Ponzi) debt and what will ultimately prove to be thousands of idled factories closely followed by widespread discontent.

Congratulations. You finally made it.

China Overtakes US As World’s Largest Trader (Except With Japan) | Zero Hedge

China Overtakes US As World’s Largest Trader (Except With Japan) | Zero Hedge.

Overnight China reported disappointing export data, missing expectations of +5%. The gvoernment explained this on the basis that they were losing their competitive edge since the Yuan has strengthened to 20 year highs but perhaps most telling is that fact that, as the FT reportsChina became the world’s biggest trader in goods for the first time last year – overtaking the US for all of 2013. We suspect the powers that be are starting to get nervous as this comes soon after China’s surge to become the world’s largest oil importer marking a notable shift in the world’s most powerful nations – as trade with the rest of Asia and increasing flows with the Middle East represent a shift in power away from the US.

 

There is one exception.. of course – net imports with Japan continues its 3 year trend lower as tensions between the two nations sour further.

 

 

Via The FT,

 

The total value of China’s imports and exports in 2013 was $4.16tn, a 7.6 per cent increase from a year earlier on a renminbi-adjusted basis, according to figures released by the Chinese government on Friday.

 

The US will release its full-year figures in February but its total imports and exports of goods amounted to $3.57tn in the 11 months from January to November 2013, making it a virtual certainty that China is now the world’s biggest goods trading nation.

 

Some historians argue China was the world’s largest trading nation during the Qing dynasty – which lasted from 1644-1912 – despite the ambivalence of Chinese emperors toward foreign trade.

 

This is a landmark milestone for our nation’s foreign trade development,” said Zheng Yuesheng, chief statistician of the customs administration.

 

Mr Zheng said he expected a stronger showing in 2014, thanks to an improving world economy, the impact of structural reforms in China and a lowered outlook for commodity prices, which would help offset rising costs of labour and financing for Chinese manufacturers.

 

One can only note that nothing lasts forver…

 

 

However, as always with China, there is a caveat…

The Chinese government itself has expressed some concern about Chinese trade data in late 2012 and early 2013. Statistics officials have acknowledged that during that period export numbers in particular were distorted by a huge amount of fake invoicing by companies and individuals evading China’s strict capital controls to move cash in and particularly out of the country.

 

That will probably lower growth figures for the first months of this year.

 

We should be prepared for a period of low headline year-on-year export growth due largely to the faked exports data between December 2012 and April 2013,” said Lu Ting, China economist at Bank of America Merrill Lynch.

How Wall Street Manipulates Everything: The Infographics | Zero Hedge

How Wall Street Manipulates Everything: The Infographics | Zero Hedge.

Courtesy of the revelations over the past year, one thing has been settled: the statement “Wall Street Manipulated Everything” is no longer in the conspiracy theorist’s arsenal: it is now part of the factually accepted vernacular. And to summarize just how, who and where this manipulation takes places is the following series of charts from Bloombergdemonstrating Wall Street at its best – breaking the rules and making a killing.

Foreign Exchanges

Regulators are looking into whether currency traders have conspired through instant messages to manipulate foreign exchange rates. The currency rates are used to calculate the value of stock and bond indexes.

Energy Trading

Banks have been accused of manipulating energy markets in California and other states.

Libor

Since early 2008 banks have been caught up in investigations and litigation over alleged manipulations of Libor.

Mortgages

Banks have been accused of improper foreclosure practices, selling bonds backed by shoddy mortgages, and misleading investors about the quality of the loans.

* * *

And in the latest news on manipulation, according to the FT, “The UK’s financial regulator is probing the use of private accounts by foreign exchange traders amid allegations they traded their own money ahead of clients orders, in a serious twist in the global probe into possible currency market manipulation. The Financial Conduct Authority has asked several banks to investigate whether traders used undeclared personal accounts, two people close to the situation said.”

Investors and foreign exchange traders have been speculating for a while that less scrupulous colleagues might have used private accounts at spread betting firms to gain advantages from their inside knowledge.

Hiding personal accounts is viewed as a clear breach of the rules. “If someone was [using a PA] to sell or buy ahead of the fix, I have no sympathy for him,” said one trader.

Personal accounts – or “PAs”, as traders call them – generally have to be declared to the bank and usually to a trader’s boss. Each individual trade then also has to be declared – often through an automatic email that is sent out when a trade is made.

Regulators are focusing their investigations on possible manipulation of a crucial benchmark, the 4pm WM/Reuters fix, in an affair that is echoing the Libor benchmark rate-rigging scandal.

Guess what they are going to find…

Average:

5

 

Peru police clash with student protesters – Americas – Al Jazeera English

Peru police clash with student protesters – Americas – Al Jazeera English.

 

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