Juggling Dynamite

This morning we have further confirmation of the global downturn spreading with the US ISM manufacturing index contracting to 47.8 in September (50.1 was the consensus expectation); the second month in a row that the reading was under 50 (49.1 in August).  This was the steepest contraction in this reading since the last recession in June 2009.

The US joins China’s factory sector, which also contracted for a fifth month in September and the euro area where German factories experienced their worst month since the depths of the financial crisis.  See:  US factory gauge hits 10-year low as employment wobbles.

At the same time, another major global bellwether South Korean exports, registered a tenth month of double-digit contraction in September (-11.7%, shown in red beside) on a 32% drop in semiconductor shipments and a 22% drop in exports to China.  Consumer prices shocked consensus inflation expectations (in black) with a negative 0.4% read, see:  South Korea’s falling prices flash red-light for global growth.

As debt-fueled demand and inflation have run out of momentum, lower prices are a necessary part of the process needed to clean out massive over-capacity in most goods and many services.  Lower prices also, however, will continue to hurt corporate profits and gross domestic product in most countries and should push lofty corporate stock and debt markets significantly lower as this story unfolds.

Australia cut interest rates this morning for the third time this year.  (Paging Bank of Canada?)  Other central banks will keep doing likewise, but global demand is not bouncing back and disinflation is intensifying.

Price deflation is how I expected this wildly inflated cycle to unfold, but the majority of policymakers and financial forecasters are being caught off guard.  Central banks and their add-more-consumer-debt playbook are out of old ideas here.  As observed by analyst Peter Boockvar this morning:

“I always thought it was going to be a bout of higher inflation that was going to end the central bank monetary madness, but maybe it’s just the realization that you need a functioning banking system in order to have a growing economy.”

Fortunately, there are a lot of new plans to revitalize the world economy that require tons of productive investment and will be highly stimulative to growth and jobs. See Europe’s $13 trillion climate plan might be about to get serious for just one of many examples now being considered. These new initiatives will be paid for by diverting subsidies and tax breaks which have flowed disproportionately to large corporations in the last decade.

No stakeholder can have economic cycles all their way.  This one is now at a secular turning point.  Those who have benefited most to date will be hit most in the give-back phase.

Although plastic is ubiquitous today, it has only been around since the mid-1950’s.

Presently, ninety-nine percent of the plastics in use are made from fossil fuels.  While deemed a revolutionary product from inception, a deluge of studies now confirm that the plastics currently in use are poisoning our atmosphere, water systems, air and bodies.  See  Single-use plastics a serious climate-change hazard study warns:

“Plastic is among the most significant and rapidly growing sources of industrial greenhouse gas emissions,” the report says. “Emissions from plastic emerge not only from the production and manufacture of plastic itself, but from every stage in the plastic lifecycle – from the extraction and transport of the fossil fuels that are the primary feedstocks for plastic, to refining and manufacturing, to waste management, to the plastic that enters the environment.”

Plastics are infiltrating the air we breathe and the water we drink.  See Microplastics ‘significantly contaminating the air’ scientists warn.

A new study from McGill University in Montreal found that fancy ‘silk’ tea bags are plastic and releasing billions of tiny plastic particles into each freshly brewed cup of tea.  See:  Some tea bags may shed millions of microplastics per cup.

In preliminary study, researchers also exposed water fleas — tiny freshwater animals distantly related to shrimp — to the microplastics from the tea bags, which are similar in size to their food, and found that “the water fleas didn’t die, but swam “crazily,” Tufenkji said. “It really stresses them out.”  Could plastic poisoning be contributing not only to cancer and other diseases but also to the rise of mental health problems in our society?

The prevelance of plastics in the beverage industry is ripe for disruption, see Liquid Assets:  How the business of bottled water went mad.

Ending the plague of toxic plastic is one of the most pressing health issues of our time.  Our collective action is required on the following now:

• Immediately end the production and use of single-use, disposable plastic.

• Invest in alternative non-toxic packaging.

• Foster the transition to zero-waste communities.

• Implement systems where polluters pay for the impact of their products – known as extended producer responsibility.

Developing biodegradable, non-toxic packaging types is a huge investment opportunity here and now.   However, it’s important to understand that not all bioplastics are biodegradable.  See Bioplastics:  Dreams and reality for some education.

Newly designed proteins also offer great promise for non-toxic materials, as explained in the recent RethinkX Food and Agriculture Report.  There are smart solutions to all of our present challenges; we just need to insist on and fund their development and implementation, while rejecting the status quo.

Proteins are not just for food. “In the future, proteins will be widely used as a basic industrial material, just as metals, glass, and plastics are used today”https://t.co/Rb0ntCGGIZ

Read more in our report:https://t.co/jxdRcQJgOB pic.twitter.com/WeoVJqZONR

— RethinkX (@rethink_x) September 25, 2019

Our weekend business panel takes a closer look at some of the environmental proposals that have come up along the campaign trail heading into the federal election on Oct. 21.
Here is a direct video link.

Here is a link to the Solutions Project report outlining the steps/specs to achieving 100% renewable energy for Canada as well as 138 other countries.  Updates are available on their website here.  They have also prepared individual specs for large cities like Toronto and Vancouver.  Below is the infographic summary for Canada.  Yes, we will.