Bottom Suddenly Falls Out of Demand in China in Many Sectors

“What we witnessed in November and December was just extraordinary.”

“I’ve been a manager for almost half a century, but this is the first time I’ve seen such a large single-month drop in orders for us,” said Nidec CEO Shigenobu Nagamori. “What we witnessed in November and December was just extraordinary.”

Nidec, a Japanese company with $14 billion in revenues last year, makes a wide range of electric motors, from tiny devices that make the iPhone vibrate to industrial motors. It’s the world’s largest manufacturer of motors for disk drives. For the automotive industry, it makes things like engine and transmission oil pumps, coolant pumps, control valves, and fans and blowers. It makes motors for industrial robots, etc.

It’s a supplier to Apple, other electronics makers such as hard-drive makers, but also appliance makers, automakers, robotics manufacturers, industrial equipment manufacturers, etc. In other words, the company is a key supplier of advanced parts to Chinese factories.

The company slashed production at the end of 2018 for Chinese automakers and appliance makers by over 30% because of weak demand, Nagamori said.

“We saw big slumps in November and December,” he told reporters. “We have faced extraordinary changes.”

Nidec reversed its previous forecast of record revenues and profits, lowering its revenue forecast by 10% for its fiscal year that is almost over (ending March 31). The revenue forecast leads to the first year-over-year revenue decline in nine years.

And not just in China: “Orders, sales and shipments in all business segments around the world saw major shifts,” he said.

But one of the sectors that is still strong in China is demand from EV makers, Nidec said. EV production is surging, propped up by heavy government incentives. Nidec has been building a factory in China for its newly developed EV traction-motor systems. Last month, it announced that it would also build factories for these systems in Poland and Mexico, and not just China as previously planned, hoping that this strategy will get it around the US-China trade dispute.

Nidec’s debacle in November and December isn’t based on smartphones, where there had been a slew of warnings from Apple and Samsung on down, with Apple warning two weeks ago that it “did not foresee the magnitude of the economic deceleration.”

Components for smartphones aren’t a large part of Nidec’s revenues. Instead, the company is getting rattled by manufacturers in the automotive sector, the home-appliance sector, and other sectors. So this is far broader than just smartphones.

And other companies have chimed in.

Yaskawa Electric Corp., one of the world’s major manufacturers of industrial robots, including for the auto industry, cut its earnings forecast a week ago for the second time in three months, this time by 10%, blaming weak demand from China and the semiconductor industry.

Kuka Group, the biggest German industrial robots manufacturer — 95% of which was acquired by a Chinese company in a hostile takeover — issued a second profit warning on January 10, after having already warned at the end of October. It blamed “primarily” the “stronger slowdown in the automotive and electronic industry in the fourth quarter 2018, ongoing uncertainties in the Chinese automation market and negative impacts from the project business.”

On Thursday, Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker, warned that revenues would fall over 9% in the quarter compared to a year ago, the largest year-over-year decline since 2009.

The company blamed an “overall weakening of the macroeconomic outlook, including seasonally weaker demand for mobile products and high inventory levels.”

CEO C.C. Wei cited a “sudden drop in demand” for high-end smartphones, according to the Nikkei, and lamented the plunge in demand for chips used in cryptocurrency mining.

Among its customers are Apple, Huawei’s semiconductor arm HiSilicon Technologies, Nvidia, Qualcomm, Broadcom, AMD, MediaTek, NXP Semiconductors, and Xilinx.

CFO Lora Ho told reporters after the conference that TSMC had imposed a “hiring freeze” and is implementing strict cost controls in response to this situation.

The situation with the suddenly weakening demand in China has now transcended company-specific issues, such as Apple’s new generation of iPhones being too expensive or a sudden reluctance by Chinese consumers to buy American brands.

It has spread to the industrial sector that is supplying Chinese consumers with all kinds of Chinese-branded products, including electronics, cars, and appliances. This situation has deteriorated over the past few months at whirlwind speed, taking these companies by surprise, and creating deeply worrisome signals for the Chinese economy going forward.

In December, light new-vehicle sales in China plunged 13%, the fourth months in a row of double-digit year-over-year declines. Despite a stronger first half, auto sales for the whole year fell 4.1%, the first annual decline going back to 1990. Welcome to the big club of saturation and decline. Read...  China’s Consumers Rattle Global Automakers as Sales Plunge 
 

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  93 comments for “Bottom Suddenly Falls Out of Demand in China in Many Sectors

  1. Dm
    Jan 19, 2019 at 1:53 pm

    Buy TSLA, sell AAPL?

    • MCH
      Jan 19, 2019 at 2:52 pm

      More like sell everything and buy a mattress to hide your cash under.

      So much for the vaunted Chinese consumers. It is hilarious that us companies keep clamoring for the Chinese markets to open up. But when it finally does, all the money would have long since moved on.

      That’s what you’d call irony.

      • alex in san jose AKA digital Detroit
        Jan 19, 2019 at 5:02 pm

        Bank of Sealy, Bank of Serta.

        Maybe this is why Mattress Firm is doing so well!

        Where I am it’s dead, dead, dead. Our Ebay sales are really slow. Downtown’s dead.

        There are a lot of Chinese people here in the San Jose area and I don’t mean several-generations Americanized Chinese, I mean recent immigrants and I wonder if a slowdown in the old country is an explanation for the slowdown around here? I’d been blaming the gov’t shutdown and that’s got to be part of it but if things are bad in the old country, you’re not gonna spend on the local economy; you’re gonna tighten your belt to send money back to the folks back in the old place.

        • MCH
          Jan 19, 2019 at 8:14 pm

          I don’t think a lot of current first generation immigrants are sending money back. Mostly, the Chinese community that has immigrated has some means. And while some might be very thoughtful and caring where their parents are concerned, most do not fit in that mold.

          Now, this is a bit of a commentary on the most current generation of Chinese (think Millennials, China style), not their immediate predecessors or any of the older generations. But the current generation are possibly the most spoiled, and laziest batch of Chinese to have come out during recent history. They are even more entitled than their counterparts in the West. They’ve mostly benefited from the harder work of their parents, and I doubt most of them (at least the middle class) have a clue what real hardship is like.

        • Boatwright
          Jan 20, 2019 at 10:31 am

          Ebay as a core leading economic indicator?

          Considering the breadth of what one can buy and sell on Ebay, I note your comment on slow sales may be a canary in this gas filled coal mine.

        • Clete
          Jan 20, 2019 at 12:16 pm

          MCH: A Cuban-American friend of mine here in America’s Wang says the same thing about the current generation of post-Communist Cubans. He can’t hire them, because they never learned how to work.

          Now the third generation is well-represented among the Miami d’bags that are moving over here to The Other West Coast.

        • Iamafan
          Jan 20, 2019 at 12:42 pm

          I’ve seen the Chinese buy small and large businesses here, buy homes especially in the coasts, and raid our schools. The latest development is that I see them in Costco. I guess they want our way of life more than we want theirs.
          But there is one place I have not seen them yet. I spent a month in my hospital (stroke) but I didn’t see a single Chinese. I guess they are not here yet for medical tourism. That will be the day when Mr. and Mrs. Smith is squeezed out by Mr. Chan who can pay more. I hope this never happens. I am not a bigot but I hope people can make their own countries better rather than flee to another one. But sometimes that is very hard.

        • Hank
          Jan 20, 2019 at 6:46 pm

          @Iamafan

          Yes, Indeed your ancestors really should heed your caution. They really should stay in their own country, and leave the native Indians alone. Everybody should be more in peace that way.

    • mike
      Jan 20, 2019 at 1:47 am

      According to other articles and sites, Chinese businesses are often in a similar position to many U.S. companies: they may not be able to service their debts in future or will not be able to get enough purchasers of their debt to refinance their current debts. If the economy is going down so much in China, this may accelerate.

      I wonder what is causing this. Supposedly, the U.S. is only a small part of the markets that China sells to, so could U.S. threats of sanctions and the modified NAFTA now touted, have really caused this?

      Wolf, I read here and in other sites of the over use of debt in China. Perhaps, more than in the U.S., I do not know the numbers. However, would the fact that their economy is still growing, even at a reduced rate, not allow the debtors to service the debt given the government’s protective stance?

      What other factor could be causing this downturn in China? Could Chinese consumers not be overreacting due to fear and causing this downturn? Unfortunately, I think that the world economy is like a huge spiderweb and a pull on one, far off end of that spiderweb, may ultimately come to have consequences in the U.S.

  2. CoCosAB
    Jan 19, 2019 at 1:56 pm

    If China is going down that’s very good for America…

    • Old Codger
      Jan 19, 2019 at 2:07 pm

      Not for Australia, we sell a HUGE amount of iron ore, bauxite, and coal to our peace loving Chinese brothers.

      • Steppenwolf
        Jan 20, 2019 at 9:33 am

        Time to brace for a little recession coming your way after a 28(?) year expansion, surely on the back of that of China? Russia is often mocked as being not much more than a natural resource exporter. Would that be more appropriately directed at Australia’s economy? Russia’s exposure to China is tiny compared to Australia’s.

      • Auld Kodjer
        Jan 20, 2019 at 4:51 pm

        Looks like I have a nom de plume doppelganger, right down to the penchant for irony.

        Battleships and PRC officers uniforms still need iron ore and wool.

    • 2banana
      Jan 19, 2019 at 2:56 pm

      Final push for the cliff for property values in Melbourne and Sydney!

      • William Smith
        Jan 19, 2019 at 6:24 pm

        I hope so! The house prices need to fall at least 50% How can housing in a nowhere backwater be comparable to NY or London? The criminal (aus) Reserve Bank will be forced to put up interest rates (from ridiculous 1.5%) as the stupid aus dollar falls due to “peace loving” china declines. australia is *nothing* but a big hole in the ground for china (and recently india). Successive govts have successfully eviscerated all local manufacturing, and over regulation means it is impossible to start or run a business. But they don’t care : “she’ll be right”

        • GBCredit
          Jan 22, 2019 at 10:36 am

          William Smith wrote:

          “Successive govts have successfully eviscerated all local manufacturing, and over regulation means it is impossible to start or run a business. But they don’t care : “she’ll be right””

          Look around the globe my friend, this statement applies to almost any formerly productive country. Seems government serves government and no one else.

    • curiouscat
      Jan 19, 2019 at 2:59 pm

      You have no idea what you are talking about.

    • Mike G
      Jan 19, 2019 at 5:32 pm

      That’s a very shortsighted viewpoint. China’s imports from the US have plunged hard as well.

    • Ed
      Jan 19, 2019 at 5:52 pm

      I don’t think the economic game is zero sum.

      Growth in China is good for the U.S. People would just like that growth to be more organic and less organized and leveraged by the Chinese Gov’t to the direct disadvantage of the U.S.

    • Briny
      Jan 19, 2019 at 7:13 pm

      No, it isn’t, especially from a historical perspective. If you’ve bothered to look at the record for the last five hundred, or so, years, countries that are under internal distress have an annoying tendency to engage in external wars. Everyone in my family, extended and in-law, has served in uniform, some still are so I have kin that I’d rather not get shot at. All of us are subject to recall, so I’d be more than a little ticked at finding myself back in uniform just as would I am sure would be the case for the rest.

      If you’ve been reading the Asian press, their editions not what is for international consumption, the PRC is already shifting to a war footing. I’ve seen a numerous justifications and that’s just what they are. The historical record over the last several hundred years is also clear that countries that start wars lose them. Loss at the level that would probably happen in these “modern times” can be expected to be catastrophic and I’m not thinking of just China.

      So, this isn’t “very good for America” at all, assuming we are still around for the end of it.

      [I’ve enough medals for participation in various conflicts. We all have. No more, thank you oh so very much.]

    • MCH
      Jan 19, 2019 at 8:09 pm

      Sure, if you want America to go down with it, that would be a good thing. In fact, it is what Vladimir would love to have. China goes down economically, drags the US down. The Chinese leadership feels like this is too irrational, and an economic attack for no good reason, so they get belligerent, and all of sudden things go kinetic.

      Who would benefit from that the most? Vladimir.

      The truth is that the US really benefits if China played by the rules, but the timing of this effort is frigging awful. In the long run, so does China. What Trump is doing now is something that Obama should’ve done five years ago. When comrade Pooh hadn’t consolidated power. But the big O had neither the foresight, the imagination, or the guts to have taken things down that road. And let’s face it, nobody in their right mind should trust our current leader even if he was as good as negotiator as he claimed.

      • Lion
        Jan 19, 2019 at 11:04 pm

        America declared economic war against Japan in the late 30’s. Paid a high price for it, but eventually won. Hopefully DC remembers the lesson learned ?

        • MCH
          Jan 20, 2019 at 3:07 am

          Yeah, it remembered that it won WW2, and managed to own the rest of the 20th century.

        • Jdog
          Jan 20, 2019 at 12:17 pm

          That was because it possessed the ability to manufacture on a scale where it could supply the rest of the world. Today if the same senario were to happen, it is China that is in that position.
          A fact I am sure China is well aware of.

        • MCH
          Jan 20, 2019 at 2:16 pm

          @Jdog

          You are assuming rationality where none might exist. China is not in the position of the US as it had been at the start of WWII.

          But the mind set of our current government is all about how it is still the leading power in the world. Whether you like the orange haired fool or not, the fact is that he pulled on a thread that no entrenched politician on either side of the isle would’ve pulled, not Hillary, not Bernie, not any of the Republican runner ups. This was in part because he didn’t know better about what could happen, but more scary was that in part, he did know better that the timing was about as good as you can get for this little kerfuffle.

          It didn’t help that Comrade Pooh made a huge mistake with his China is coming out party. It alerted the west, all you have to do is see what is happening with Huawei to see how wary everyone has become. Things may yet turn out well for both sides. But the middle point where the world is in balance will be the hardest thing to achieve with the current leadership around the world.

        • Wisdom Seeker
          Jan 21, 2019 at 9:47 am

          @JDog “Today if the same senario were to happen, it is China that is in that position.” [ Having the industrial base to dominate a global war. ]

          I used to worry about that, but I think actually it’s not true. China has the assembly factories, but they don’t have the raw materials nor many of the precision components. And they don’t yet have the navy to capture what they would need (e.g. Australia, Taiwan, and Japan).

          Perhaps the saving grace of globalization is that no one really has domestic sourcing of everything it takes to wage a major war.

          But the trend towards nationalization means China has every incentive to in-source the necessary manufacturing base, and they now have the skilled workforce, so it may be only a matter of time. Unless they implode economically under their own debt burden and poor governance, and reveal themselves to be, not the “Next USA” but the “Next Japan”.

    • MaggieD
      Jan 19, 2019 at 8:09 pm

      It’s this myopically diseased ilk of (lack of) thinking that perpetuates the recursive cycle of penny(ante)-wise tribal fetishism causing crashes and recessions, that leave taxpayers and sane economic parties cleaning up the great wake of fiscal mess.

    • Mike
      Jan 25, 2019 at 2:18 am

      I agree that China has really misbehaved and deserves to suffer say some punishment for years and the imposition of retaliation if they try to steal more technology. I would not cry any tear if the murderous communist government there fell to a democratic or at least less blood thirsty government. A gradual fall of the communists and their replacement by a moderate government like in Spain with Franco would be great.

      However, when such a large part of the world economy suffers decline others that trade with it may suffer unless that country was hermetically sealed and did not have significant imports nor significant use of services from other countries AND was not a major supplier to the worlds manufacturers. Unfortunately, China is not completely sealed and it’s decline would affect many in major economic consequences that I cannot estimate.

      Most importantly, no matter how bad China (or Russia) behave we must always keep our fundamental interests first. Even a small nuclear exchange would be catastrophic. Japan attacked the US when we cut off their oil.

      The Chinese communists are just as bad as the imperial Japanese government. A small war caused by communists trying to take Taiwan to bolster their national popularity in China and retain the “mandate of heaven” (and their murderous, corrupt, evil heads) can escalate too easily.

      If some Chinese general nuked a US carrier group would we nuke Shanghai? I fear the way that economic war could become a nuclear war. George H.W. Bush was a GREAT president because he did not exult at those Russian communists’ downfall but gently talked them down without causing them to react and feel threatened by us.

      Statistically, it may be inevitable that humanity will knock itself down given the risk of nuclear war and the grievous consequences for the world of even a small, limited nuclear exchange: e.g. India v. Pakistan. Most people are not aware that the effects of even such a small, nuclear exchange would cause the collapse of or dramatic damage to the world economy or even civilization. I hope we can delay the occurrence of that small risk of any nuclear war.

  3. Old Codger
    Jan 19, 2019 at 2:05 pm

    Are “government incentives” the same as “taxpayer subsidies”?

  4. Atu
    Jan 19, 2019 at 2:10 pm

    So I’m reading that Chinese exports have declined recent months, which is part of a longer trend

    https://www.theglobaleconomy.com/China/Exports/

    and that notwithstanding a rush by US to stock up before tariffs. On the other side China imports from the US dropped 38.5% in December, the article from Nikkei Asian review said for the month, not sure if year on.

    Where that all is heading to is a guess, I guess, but I won’t….yet at least.

  5. Jan 19, 2019 at 2:11 pm

    I just read Doug Noland and credit in China is up on all accounts.

  6. OutLookingIn
    Jan 19, 2019 at 2:22 pm

    Global Economic Downturn and Reset

    Too much of everything.
    The world is super saturated in literally everything economic, with the largest segment being debt. Debt that will NEVER be paid. The second and most worrisome item, is fiat currencies that continue to grow.
    The world has never been here before. This is unexplored ground. The central banks and governments around the globe, have been conducting an economic experiment of gargantuan proportions.

    The experiment is now yielding results and they are not good. Complex systems, breakdown in complex ways. eg: Trump combats negative trade surplus with China by imposition of tariffs. This panics both importers and exporters to jump in ahead of tariff deadlines and stock up there warehouses. Demand for goods falls because of concerns for future economic recession caused by the downturn. Both producers and merchants, reduce their workforce, in the face of reduced demand.
    This now becomes a negatively induced, self reinforcing circle.
    Up next? TMOAC The Mother Of All Crashes. Then a reset.
    Or? The game table is turned upside down. Go directly to war.

    • MD
      Jan 19, 2019 at 2:48 pm

      Hopefully a better and more equitable system will emerge from the mess – one that rewards the productive, not the speculator.

      Key to that will be keeping as many politicians and financiers out of the discussion as possible…

      • 2banana
        Jan 19, 2019 at 2:59 pm

        It is not really that hard.

        Money is expensive and not easy to borrow.
        Money that is tied to “something”
        Bankers go to jail for fraud.
        Enforce GAAP.

        Basically – the way of the world for 2000 years until about 40 years ago…

        “Hopefully a better and more equitable system will emerge from the mess – one that rewards the productive, not the speculator.”

        • Jdog
          Jan 20, 2019 at 1:14 pm

          You have a skewed view of history.
          While I am all for a monetary system that ends inflation, it is not the cure for the worlds ills. There were plenty of credit generated economic crises under the gold standard. The wealth gap existed under the gold standard as well. The rich have always gotten away with murder, and they have always owned government.
          The gold standard is not a cure for flawed human nature.

        • polecat
          Jan 20, 2019 at 1:52 pm

          I see a need for American lampost production to go into high gear !

        • char
          Jan 20, 2019 at 2:12 pm

          Inflation in T-bills has been very low. That should be seen as the real money. Dollar bills should be akin to a debit card, for those you also pay for the ease-of-use.

          There is also the question of why you want no inflation. I understand why you would want low, predictable inflation but i don’t see why no inflation would be good.

      • OutLookingIn
        Jan 19, 2019 at 3:56 pm

        “more equitable system”

        Something has been absent in the global monetary system for the past forty years. Can you guess what that something is?
        It is something that has underpinned ALL fiat currencies, for over two thousand years. Except, these last forty years.
        If you said gold, you are correct. Not gold futures contracts, not gold ETF’s, not gold bank lending etc. Actual physical gold bullion only.
        The coming historic reset will include gold as the foundation. Why do you think China, Russia, India, and others are buying all the gold they can lay their hands on?
        It all comes down to the golden rule:
        They who have the gold, rule.

        • Mike G
          Jan 19, 2019 at 5:39 pm

          The gold standard failed as well, which is why we’re not still on it.

          It’s not enough to say it would have worked except for greed and human frailties, because those are the cause of the current sickness.

        • JZ
          Jan 19, 2019 at 6:53 pm

          Encourage wealth creation and discourage wealth transfer….
          Why do you think .gov exist? It exist because it is human nature to get OTHERS to farm while I am eating THEIR food and sleeping with THEIR spouse. Can you fix that? Those who own GUNs rule, those who own GOLD persuade.

        • rhodium
          Jan 19, 2019 at 7:13 pm

          The gold standard didn’t fail so much as it was politically targeted. For one, Central Banks would be severely limited under a gold standard, so tick one, it sucks for the bankers and progressive economists. Tick two, economic growth means deflation and that makes debt all the more painful. Governments love debt, banks love debt, and plenty of citizens love debt too. Inflation makes it manageable over the longer term due to a steadily rising balance sheet at the CB so a gold standard is opposed for the sake of debt. Tick three, under a gold standard trade imbalances would have much more potent effects on currency valuations. Some countries cannot, for whatever reason, make themselves competitive and without the ability to control their money supply under a gold standard would very quickly import themselves to being gold broke. Perhaps you wonder why it’s actually all that different now if you just work the money value adjustments properly. Well there it is, in this fiat system it’s far easier to screw people out of value when the units of measurement are constantly in flux. The gold standard requires above all responsibility to work in modern economies. Good luck getting that out of the human race, the chaos will continue in the meantime.

        • Jan 19, 2019 at 7:28 pm

          In 1933 France was had the 2nd greatest concentration of gold in the world and it did nothing to save France from the great Depression. Gold backed money is a perfect vehicle to prevent inflation but the perfect vehicle if you want deflation. All economists know that once deflation takes hold it’s almost impossible to break free.

          By the way, a fiat currency is one no longer hinged to gold or anything else..

        • Jdog
          Jan 20, 2019 at 12:24 pm

          The gold standard never failed. It did what it was supposed to do, maintain the value of the dollar… period. Anyone who thinks a gold standard can somehow prevent recession or depression does not understand the first thing about economics. Recession and depression are caused by debt, and being on a gold standard does not prevent excessive debt.

    • curiouscat
      Jan 19, 2019 at 3:06 pm

      The saturation is the result of the beginning of world wide decline in populations who consume. That decline, and ageing, is everywhere except India and Africa. It is especially bad in Europe. Fewer people to consume means excess production capacity and general deflation. This is likely to be the pattern over the next ten years. It is not apparent that any economy has figured out how to accommodate this change without significant economic disruption. It ain’t gonna be pretty.

      • Billy Boy
        Jan 19, 2019 at 3:13 pm

        Oh come now – Wolf has stated that population does not need to increase to have prosperity. Don’t be silly!!!

      • alex in san jose AKA digital Detroit
        Jan 19, 2019 at 5:06 pm

        That’s the essential problem right there: How to peacefully manage a global decline in population to 1 billion or less.

      • Jan 19, 2019 at 5:09 pm

        curiouscat,

        Demographics play out over decades, not over November and December.

        • Chris
          Jan 19, 2019 at 6:04 pm

          @ Wolf,

          you are correct demography plays out over decades…but the start of this demographic cliff began in 1989 when annual births collapsed over a five year period from nearly 31 million annually to just over 12 million by 1996…and never since recovered above 18 million/yr.

          So, this huge air pocket in demand has been coming toward the Chinese economy for decades…and is now moving into the adult population at a time when there is already huge overcapacity. This is just the start of a new normal for China as this 50%+ fall in annual population driven demand moves into the economy.

        • MCH
          Jan 19, 2019 at 8:17 pm

          Yep, that is so true, but when that does play out. Expect an explosion. Glorious China is well on its way to becoming the world’s largest senior care facility. For all of Deng’s economic miracles, the one child policy is going to create havoc in ways people can’t even begin to dream of in another twenty to thirty years.

          All of comrade Pooh’s posturing can’t fix those issues.

      • Jdog
        Jan 20, 2019 at 12:29 pm

        Yes, they have figured it out. Replace the declining populations with populations that are still still increasing. Why do you think you see immigrants in ever increasing numbers?

  7. Bobby
    Jan 19, 2019 at 2:36 pm

    To sum things up, Nidec is the canary in the coal mine. It will be interesting to see where inflation goes in the next couple years? A recession will bring it down, but debts and a flood of money (that will never be paid back) should pull it up?

    • Mike G
      Jan 19, 2019 at 5:46 pm

      The stock of their competitor Johnson Electric has dropped 35% since August.

  8. 2banana
    Jan 19, 2019 at 2:54 pm

    You cannot create wealth and property with cheap and easy money tied with a fiat money.

    All though history – this method has been tried and it always ends in disaster – usually misery, pain, bankruptcy, a change in government and war.

    See the ancient Greeks, Romans, Genghis Khan up to modern day Zimbabwe, Venezuela, Argentina, etc., etc. etc.

    • Jan 19, 2019 at 7:34 pm

      Not one of those ancient cultures you’ve named had a fiat based currency. All were tied to gold, silver, copper, or bronze. https://en.wikipedia.org/wiki/List_of_historical_currencies#Ancient_Greece

      • 2banana
        Jan 19, 2019 at 7:56 pm

        They ALL had fiat currency in the end.

        The Roman’s so devalued their currency that it hardly contained any gold or silver in it.

        Plus clipping and shaving existing coins…

      • Gandalf
        Jan 19, 2019 at 10:07 pm

        You missed the part where the greedier Roman Emperors ran out of gold and started debasing the gold coins with cheaper metals to mint more coins. This resulted in inflation, just like Weimar Germany and Zimbabwe printing more fiat money

        Also, for all you gold fanatics, gold is still fundamentally a commodity, its value subject to supply and demand, just like pork bellies and copper futures.

        Gold has rarely been subject to sudden rapid increases in supply enough to sharply drop its value- that’s because it is fairly rare on the surface of the earth and hard to extract and that’s how it always has been

        The Spanish Empire, though, did experience a large gold based inflation when the conquistadors started sending back massive quantities of gold acquired/stolen from the Americas. Supply exceeded demand

        If tomorrow, somebody discovered an enormous and nearly endless source of gold, the value of gold would drop drastically again. It could become cheaper than aluminum.

        Yep, Earth actually has a huge amount of gold, it’s just sunk deep below the crust. Almost all current gold mines are the result of ancient volcanoes spewing the gold out from deep inside, followed by interactions with water leading to concentrated alluvial deposits.

        It’s been shown many times in the last couple of decades that active volcanoes, whether on land or underwater, spew out mineral rich lava that contain all sorts of valuable metals, including gold. The technology to mine this stuff from underwater lava flows or on land in an active volcano just hasn’t been developed. But it will be.

        Did you know that the top of the Washington Monument was capped with a pyramidal block of….. solid aluminum? That’s because in 1880, pure aluminum was exceedingly difficult to produce and was more expensive than gold. Just a few years later, the electrolysis method was developed and aluminum became so cheap we use it now to wrap baked potatoes

        Maybe someday we’ll be wrapping baked potatoes in gold foil

        • Kenny Logins
          Jan 20, 2019 at 7:27 am

          Fact of the day.

          If you took all the gold on/in our planet, it’d form a layer 1ft deep across its entire surface.

  9. LouisDeLaSmart
    Jan 19, 2019 at 3:33 pm

    \\\
    Excellent article, very elegant and to the point.
    \\\
    There is an ancient tale in China of several wise men who lived in a time of great turmoil and constant warfare called the “Age of Three Kingdoms”. They were sickened by the shortsightedness and stupidity of day-to-day conflicts and chose to go and live in a bamboo forest. There they dined, drank, discussed and played games far from the everyday intrigues.

    Now and then, when I read an article on wolfstreet (and other wise sites) I feel like being in that very bamboo forest.
    \\\
    Today I read in the Panchatantra and there was a story about a man who went on a journey, but not before he left a large commercial steel measurement scale to a friend for safe keeping. When he came back, the friend said the mice ate the scale. He then took the friends son and hid him away (today’s term is kidnaped). When the friend noticed his son missing, he ran and found his friend. Once asked, he replied that an eagle came and took his son. The friend grabbed him by the hand and dragged him to court, and told what had happened. When the court asked the perpetrator how is it possible that an Eagle could take away a child he answered: “Well surely in a place where mice can eat steel scales, and eagle can cary an elephant away.”

    We live in a time when mice eat steel and eagles cary away entire elephants. At this point to pursue logic is a debatable course of action.
    \\\

  10. Iamafan
    Jan 19, 2019 at 4:09 pm

    Probably many businesses relied on or miscalculated that demand was really driven by debt. Many of these business are probably producing pure consumer goods that ain’t that productive. Say good riddance.

  11. Gold is just..gold
    Jan 19, 2019 at 4:17 pm

    This time it really IS different…

    Many expect some or even a lot of financial dislocation, then business as usual after gubermunts come to the rescue in some as yet undefined, possibly even magical way.

    I think not. Everywhere you look, it’s hitting the fan; the going around is coming around and there’s no escape, this time. The Fourth Turning is upon us.

    China – and others – accumulating physical gold at a rapid rate will hold the key to the re-set, when it comes. The West will learn a painful lesson. from which it may take a few hundred years to recover. (Oh wait! There’s all that shiny stuff in Fort Knox; we’re saved!)

    • TXRancher
      Jan 19, 2019 at 5:08 pm

      The Fourth Turning implies large scale war or similar catastrophe. And there is nothing implied about physical gold.

      • Jdog
        Jan 20, 2019 at 12:39 pm

        As it has been said before, gold is simply a commodity. It’s real value would only be significant if an event happens which makes the US government vulnerable. In such case, the resulting chaos would make other things much more valuable such as food, arms, and the necessities of life. You cannot eat gold.

        • polecat
          Jan 20, 2019 at 2:03 pm

          “You cannot eat gold.”

          They do in Manhattan ! .. Some are even known to wrap it around chocolate, before ingestion.

  12. Rowen
    Jan 19, 2019 at 4:39 pm

    Because of the maturing populations in the West, China has been the kitchen sink of global consumer demand since the GFC, so this should be good…

  13. kk
    Jan 19, 2019 at 5:38 pm

    I get the feeling reading some of the comments here that if this was 200 years ago some would be condemning the steam engine as a great mistake that was sure to go wrong and that everyone would regret investing in the cotton gin as hand picking seeds was so much better. The US has grown richer every decade since the revolution and will continue to do so for the next two centuries l imagine.

    • Faziel
      Jan 19, 2019 at 5:50 pm

      kk……please….put your bong away.

    • Javert Chip
      Jan 20, 2019 at 12:25 am

      KK

      What you say is not wrong (doesn’t mean there aren’t risks).

      On the other hand. Faziel …knows a lot about bongs.

      • polecat
        Jan 20, 2019 at 2:09 pm

        Righttt … because ‘Progress’ is only a one-way linearity, with no downside !

        Ok … pull the other one ..

    • MarkinSF
      Jan 20, 2019 at 2:12 am

      How is your opening statement an analogy of the ideas emanating from this board? Or is it an analogy? And the US has not gotten richer every decade. Not sure how you’re coming up with that one.

    • Jdog
      Jan 20, 2019 at 12:52 pm

      Richer? Really? I guess it depends how you define “richer”. I see very few rich people today. What I see mostly are people who’s debts exceed their assets. I see people who live in a state of perpetual debt slavery. If you want to say they live a life where machines do much of what used to take human labor, that is true, but that is simply a consequence of technology.
      If the average working person prospered from technology and increases in production in equal porportion to corporate interests, the average worker could retire at 35. Instead you have a situation where half the working population live in perpetual poverty where they have less than $500 in savings and will never be able to afford to retire.

  14. James
    Jan 19, 2019 at 7:15 pm

    Would Nidec be a good investment with the EV market going strong?

  15. Jan 19, 2019 at 7:58 pm

    I am amazed to read some comments gloating over this slowdown in China as if that’s a good thing for the US. Well, it’s not. Much credit (some say blame) has gone to various central banks in keeping the 2008 crash from becoming another great depression but the real driver was the insatiable demand in China for everything. Not just commodities but also US debt in the form of treasuries and cooperate bonds. If China slows, the world slows which is becoming self-evident.

    If China really does go into recession does anyone think their exports to the US will stop? If anything their prices will fall right along with their economy which probably means their imports will fall and their exports get cheaper. .

    If anyone was expecting to see some relief in the form of tariffs that hasn’t happened with our trade deficit higher than ever with the tariff tax passed along to the final consumer.

    • Bobber
      Jan 19, 2019 at 9:07 pm

      I think honest hard-working people are excited to see the negative impacts of QE, funny money, and artificial wealth creation. Central bankers around the world need to be tarred and feathered for their mindless speculation and rigging on behalf of the .1%.

      China knows how to create funny money with the best of them. If China brings down the entire funny money gang, it’s people will benefit in the long run. It’s time for serious sustainable economies to develop, so that wealth is properly allocated to those who truly earn it.

      • HowNow
        Jan 20, 2019 at 7:41 am

        Look to Congress, not the Fed, for our problems. Until campaign financing is under control – stopped in the extreme degree it now is – you can blame my house pet as well as the Fed for all the “legal” financial shenanigans. If campaign donors write the rules, you can be sure they won’t be writing them for the muppets. Tax breaks galore and laws that allow leveraged buy-outs that later drive companies into bankruptcy, are just two examples.

        Both political-party doors lead to the same room.

        • timbers
          Jan 20, 2019 at 8:47 am

          Good point.

          One of our duopoly parties said “corporations are people” (and the Ivy League zombie brains on the Supreme Court said yes that’s true, so legal constructs are entitled to have people rights but actual people aren’t in many instances).

          Then, the other of our duopoly parties responded by pushing for the TPP and related trade deals, which in affect said “No, corporations are not people…THEY ARE GODS to which actual people will bow down to worship and obey, for these Gods will be given more power than sovereign governments and control/change/void/penalize laws enacted by governments, thru courts staffed by their own hand picked lobbyists as judges and jurors, to override government law.

    • Jdog
      Jan 20, 2019 at 12:58 pm

      I guess it depends who’s flag you want to live under in the future. If China’s growth continues at its current pace it will become the worlds preeminent economic and military power. If you think the Chinese would be magnanimous and generous when they reached that point, you are deluded. At the point where China can militarily dominate the rest of the world, it will, and it will do it with extreme prejudice.

  16. MaggieD
    Jan 19, 2019 at 8:29 pm

    Apparently, those ghost cities can’t service China’s trillions debt and reserve dumps with ghost yuan. Being that the “if China sneezes” axiom is manifestly true, and tendentious geisha media narratives aside – a vicious global economic flu epidemic is inevitable. I know it’s only opinion but it’s feeling very April-May desperate bull spike of 2008 before the Great Bush Recession delivered the coup de grace.

    • HowNow
      Jan 20, 2019 at 7:44 am

      Had to look-up tendentious. Good word…

  17. raxadian
    Jan 19, 2019 at 9:03 pm

    *Bottom Suddenly Falls Out of Demand in China in Many Sectors*

    Cue the sexual jokes.

    More seriously, this shows how much cheap debt affected every business and why the FED rake hikes are such a huge deal.

  18. Gershon
    Jan 19, 2019 at 11:28 pm

    Contrary to what the Keynesian fraudsters at the central banks would have us believe, it appears we can’t print our way to prosperity.

  19. KPL
    Jan 19, 2019 at 11:49 pm

    “Bottom Suddenly Falls Out of Demand in China in Many Sectors”

    While I am not sure why it should happen in Nov and Dec, the tactics of the central bankers to pull forward the demand using cheap debt (to peddle an illusion of growth) was always bound to create a vacuum in future demand at some point in time. After all debt needs to be paid from future income throttling demand in the future and also there are limits on how much debt you can take on.

    Simply put, we need a better economic mechanism that creates organic demand today and tomorrow without creating a vacuum in the future. The present one (put in place by Gereenspan in 1987) is past its expiry date.

  20. sushi1sam
    Jan 20, 2019 at 12:32 am

    “Would Nidec be a good investment with the EV market going strong?”

    Take a look at the chart for the shares and you’ll that they both moved up strongly over the last ten year period.

    YASUKAWA (not Yaskawa) did even better until the start of 2018 and then fell back to match Nidec’s performance as of its recent close.

    Both these shares illustrate what has happened across the Japanese share market as many non-Japanese pundits continued to bemoan the ‘lost decades’ in Japan: huge share price increases.

    https://stocks.finance.yahoo.co.jp/stocks/chart/?code=6594.T&ct=z&t=ay&q=l&l=off&z=n&c1=6506&c2=&c3=&c4=&bc=

    PBR ratios for both are in the low to mid three range and the PE ratio for Nidec is 32 something. Yasukawa is around 17.

    Both pay dividends – Nidec’s yield is just under 1% and Yasukawa’s is at 1.72%.

  21. WES
    Jan 20, 2019 at 1:09 am

    Noticed in the article there was no mention of said companies sales data in the US.

  22. Iamafan
    Jan 20, 2019 at 10:17 am

    Other than the usual dogma, can someone honestly explain why we Americans should be interested with what is going on in China. I mean why should I really care? If they sell their Treasuries, our Fed can always find a QE-like solution. There are other “real” savers who buy USD from Asia and elsewhere albeit smaller countries. Obviously these are comments from a person who doesn’t care much about China. The problem to me is that US Firms moved their factories to China for low cost slave labor. Well that is their problem, not mine or maybe yours. If we do not like the young Chinese students spending their money here in universities, well we can always limit the visitor types of visas. Of course, the schools will complain. I think we should be more concerned with American Debt and the deterioration of our system rather than anyone else’s. We have our own problems to fix. Sorry, I did not mean to rant but too many things are going unsolved lately.

    • timber
      Jan 20, 2019 at 10:59 am

      “…why we Americans should be interested with what is going on in China…”?

      Maybe because China, just another excuse for QE? Just a thought.

      • Iamafan
        Jan 20, 2019 at 11:52 am

        Yeah, let’s wait and see how the Fed plays its cards. China can dump the USD and add to its awesome Malinvestments. Empty cities for one thing.

    • MCH
      Jan 20, 2019 at 2:20 pm

      I do agree that there are far too many problems with the US now that needs to be solved. But the idea China is in bad shape probably goes hand in hand with the idea that misery loves company. It’s what our leadership wants us to think. “You think you’re suffering? just be glad you’re not like those guys in China.”

      US now is in far worse shape than it was at the beginning of the 90s. It’s just a simple lesson that someone is bound to remember one day. Just because you won this war, it doesn’t mean the next one isn’t right around the corner. If you’re number one, there are always people looking to knock you off that perch.

    • char
      Jan 20, 2019 at 2:37 pm

      Because China is the biggest economy in the world so it will effect the economy of number 3.

  23. Godfree Roberts
    Jan 20, 2019 at 1:23 pm

    Anecdotes are interesting but trends are your friends:
    China’s rail freight volume grows by 9.1 pct in 2018

    China’s SOE profits grow 17.7% in 2018

    China’s electricity use increased 8.5 percent year on year to 6.8 trillion kilowatt hours,

    China’s manufacturing wages grew 8.8% in 2018

    Tibet’s economy enjoys twenty-seventh year of double-digit growth

    • Jan 20, 2019 at 5:27 pm

      OK, read the article again. This wasn’t about the year 2018. It was about the deterioration in November and December. And with car sales about Sep-Dec. The first half of 2018 was fine, everyone agrees on that.

    • Shane From Melbourne
      Jan 21, 2019 at 6:17 am

      China’s rail freight volume grows by 9.1 pct in 2018
      – could be an indicator

      China’s SOE profits grow 17.7% in 2018

      – China’s SOE profits are anything the Chinese government tells them they are. All Chinese economic statistics are opaque

      China’s electricity use increased 8.5 percent year on year to 6.8 trillion kilowatt hours,

      -depends upon whether the electricity usage increase is due to domestic consumption or industrial consumption. Heck, it could be down to cryptocurrency mining and we all know how speculative that activity is…..

      China’s manufacturing wages grew 8.8% in 2018

      – This will accelerate the transfer of manufacturing to places like Vietnam and India

      Tibet’s economy enjoys twenty-seventh year of double-digit growth

      – Not surprised at that. Tibet is a special province of China that the Chinese government lavishes a lot of attention and resources upon as an occupied province. Doesn’t make it a particularly useful indicator of economic growth in China as a whole.

  24. Gorbachev
    Jan 20, 2019 at 2:08 pm

    Slowing demand is never good.However if exports are down

    in China because their customers (U.S.A-U.K. etc)

    are manufacturing their own products then jobs have

    just shifted -then no worries.

  25. d
    Jan 27, 2019 at 8:51 am

    Wisdom Seeker

    There is another Major component necessary for high-level state on state warwar. china still does not have that the US and Germany both had before WW 1.

    The multi generational engineering high level skills require, for successful High tech war fight machinery production and maintenance..

    Proof of this.

    They still can not build and maintain, their own front line, top level, fighter jet engines, that perform and live.

    They still have to buy them from, and have them serviced by, Russians. This indicates. A major skill set deficiency. You can not fight modern war without.

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