So the great mining boom is over, and also the derivative explosion of ship-building, especially the materials hauling dry-bulk carries and oil tankers. The taper thus tumbles down the industrial food chain. In recent months the order books of the great ship-building centers in North China and Korea have literally ionized, meaning that when current backlogs are built-out demand for the previous massive tonnages of plate steel will disappear. Then China’s absurdly over-grown steel industry with more than 1 billion tons of capacity will begin barfing up a tidal wave of cheap steel on world markets, causing prices to wilt and protectionism to soar.
Meanwhile, the order books of the global miners have melted down and with it their stock prices: the giant Brazilian miner, Vale, for instance, was the most leveraged to the China iron ore play and its now down 65% from the peak. Anytime soon, the Big Three miners’ capex budgets will be back to 2009 levels or below. And that means, in turn, export shipments from the American heavy machinery trio will plunge back to the where they started, as well.
And this goes right to the heart of the matter. The Keynesian narrative, which is pretty much embraced lock, stock and barrel by the mainstream financial press, holds that we are in just another one of those endemic capitalist business cycles that can be remedied and revived by sufficient application of stimulus from the fiscal and central banking branches of the state.
But folks, this isn’t capitalism at work! This is Bernanke, Yellen, Draghi, Carney, Kuroda, and Zhou–along with the lesser central banker culprits—-bicycling the global economy in a reign of money printing madness. There is nothing linear, organic or sustainable here: Today’s Keynesian central bankers inflate, inflate and inflate global borrowing, spending, investing and speculation until the markets collapse under the sheer weight of it—like housing and consumer credit in the US in 2008 and the central banker fueled EM/China infrastructure and building binge which is collapsing now.
So the US will not export its way back to Keynesian full employment. Check the export numbers: there has been no great surge in exports of consumer products, autos, machine tools, and most certainly not in computers, semi-conductors and all of the related branches of technology. What has been booming temporarily is surf-riders on the central bankers’ global boom: petrochemicals and processed material from natural gas-based feedstocks, which have a fleeting advantage over the inflated cost of world-price crude oil based feedstocks, heavy machinery which has surfed the mining wave, and even coal from America’s high cost eastern mines.
