The export oriented economies of Asia are literally imploding. Leading the pack is Japan. Industrial production there dropped 10% between December and January. Exports in January were 46% lower than a year ago. China, despite their official reports, is now thought to be in serious decline and as Michael Pettis reported is sitting on a property bubble of unimaginable proportions. No country in Asia is escaping the deluge.
From The Telegraph, here is a roundup of the latest factory output numbers for various countries:
Factory output is collapsing at the fastest pace everywhere. The figures for the most recent month available are, year-on-year: Taiwan (-43pc), Ukraine (-34pc), Japan (-30pc), Singapore (-29pc), Hungary (-23pc), Sweden (-20pc), Korea (-19pc), Turkey (-18pc), Russia (-16pc), Spain (-15pc), Poland (-15pc), Brazil (-15pc), Italy (-14pc), Germany (-12pc), France (-11pc), US (-10pc) and Britain (-9pc). Norway sails blissfully on (+4pc). What do they drink up there?
The former Soviet Bloc countries are in such dire shape that various European nations have arranged a 22 billion Euro loan facility for them. The Hungarian government reportedly will tell the EU at a summit on Sunday that they need ten times that much money. The threat of a break-up of the EMU is still a subject on European’s lips.
Just about anyway you slice them the numbers suggest more than a recession. It’s a collapse in economic activity of unprecedented dimensions and self-reinforcing to boot.
Where it goes, I have no idea. My guess is that the U.S. can survive without a great deal more harm to its economy provided the financial system doesn’t get materially worse. The dollar is emerging as the currency of choice (after gold of course) and I suspect that Bernanke can print money at will without immediate harm while Geithner issues government bonds that don’t want for buyers. Thirteen trillion dollar economies are hard to kill.
I doubt, failing a catastrophe that threatens this country directly, that the administration or Congress have the political will to use the country’s balance sheet for anything more than support of the domestic economy. Assuming that is the case then the rest of the world is going to have to rely on an increase in demand in the U.S. and whatever other measures they can individually or collectively arrange to create internal demand. That is a tall order.