Juggling Dynamite

More postcards from the real economy: enormous global overcapacity is proving a formidable headwind to growth expectations. World trade has been falling since 2010 and the world is awash in overcapacity and oversupply: this is the same “huge misjudgment of the market” embedded in overly optimistic stock prices today.

Bloomberg Europe Editor David Tweed takes you to Germany’s deepest shipping port, which sits nearly empty due to the global slowdown in the container shipping trade.Here is a direct link.

Despite surging prices for homes and equities, consumer spending is contracting, registering its biggest monthly decline since September 2009. Quite simply, the wealth effect is rendered moot by languishing incomes.

No wonder yoy U.S. import growth has also plunged into negative territory, whether or not oil imports are included. In recent decades, this has happened only during U.S. recessions. Notably, unlike data for GDP and jobs, imports data are not revised substantially, long after the fact.

Some are surprised that inflation has failed to take off despite massive amounts of quantitative easing. The explanation is simple: recession kills inflation…

See: What wealth effect?

Germany is known as Europe’s stronghold, but Germany’s investment freeze calls into question its real economic strength and future growth prospects. Here is a direct video link.

Germany is part of a global trend over the past few years for companies to use cash on hand for non-productive short-term incentives like higher perks for executives, and stock price levers like buying back shares and increasing dividends, but all of this only weakens future prospects for the companies, as it reduces their focus and investment in growing a longer term business model.