STOCK MARKET WATCH -- Monday, 29 October 2012

[Demeter]

18. Charting The Undoing Of Credit-Fueled Globalization

http://www.zerohedge.com/news/2012-10-28/charting-undoing-credit-fueled-globalization

For two decades the rate of growth of world trade volumes considerably outstripped that of industrial production as credit-fueled globalization created huge imbalances in the world. As Diapason Commodities' Sean Corrigan indicates in these three simple charts, all that vendor-financed circular exuberance has come to an end. The bottom-line is that forced deleveraging (not least of which in Europe) is crushing the credit-fueled (and unsustainable) dream of endless growth as debt saturation has been reached (on private and now public balance sheets). To wit: Global Trade Volume growth is deep in the danger zone and about to turn negative; as the hopes of so many Sinomaniacs and Pollyannas is slowly peeled back to a righteous recognition of reality.

The ratio of Global Trade Volumes to Industrial Production remained in a relatively stable uptrend as imbalances fueled by credit averaged 3.4% annually more trade than production. All that ended when whatever Keynesian Endpoint or Debt Saturation barrier we hit in 2008 and the impossible was proclaimed entirely possible.



What this means - simply - is that without credit expansion, world trade volumes are decelerating rapidly.



With Europe on a path to considerable deleveraging (as is clear below)...



...things do not look set to get better any time soon - and expectations for world trade to enter contraction any minute now is highly likely.

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