The US index for new orders is at a sixty year low. Korea’s manufacturing output is shrinking faster than in the Asian crisis. China, Japan and Europe are all looking at manufacturing contractions too.
Over at Seeking Alpha, Edward Hugh has a collection of graphs showing the declining in manufacturing all over the world.
This can’t keep up for too long without serious problems.
Another exception is New York. Prices in New York are only off 11.4% even though New York is part of the Zoned Zone. New York had a price bubble, but until recently prices had held up pretty well. This probably means New York house prices will decline by a larger percentage over the next year or two than other bubble areas …
Calculated Risk is talking about New York City, not New York State. Still, it has amazed me how well New York State real estate prices have held up compared to the rest of the country. Many places in upstate New York have not even seen as big as drop in prices as New York City has.
As American dairy farmers increased their shipments of powdered milk, cheese and other dairy ingredients to foreign markets, their incomes rose. And the demand surge helped drive up the price of milk for American families. The national average for whole milk peaked at $3.89 a gallon in July, up from an average of $3.20 a gallon in 2006.
But now, demand for dairy products is stalling amid a global economic slowdown and credit crisis, even as supplies have increased. The result is a glut of milk — and its assorted byproducts, like milk powder, butter and whey proteins — that has led to a precipitous drop in prices.
The price of powdered skim milk, used in infant formula, dairy products and processed foods, has fallen to roughly 80 cents a pound today from about $2.20 in mid-2007. Other dairy products have declined as well. Whole milk at grocers has not declined as rapidly as wholesale powdered milk, but it has dropped to $3.67 a gallon, down nearly 6 percent from the peak.
While consumers are undoubtedly pleased by the lower prices, dairy farmers are struggling.
Before I read this article, I had not realized that so much milk was being exported. I always thought it was mostly consumed in house. Which I guess it was until recently.
The Russian energy company is poised to cut off the gas supply to Kiev as disagreements regarding debt repayment and pricing persist.
With negotiations between Russian energy company Gazprom and Ukraine at an impasse just a few hours before the firm’s midnight deadline, it looks increasingly likely that Kiev residents will start 2009 without supplies of gas. Gazprom engineers are prepared to make good on a threat to shut down the gas pipelines in the absence of an agreement.
Russia wants Ukraine to pay more for the gas, yet Ukraine can’t afford to pay the gas bill it has already. One can hardly blame the Russians in this case though. They need the money badly and they are still charging Ukraine below market rates.
Still, you can’t get blood out of stone. And Russia has no way of getting the gas to Europe except through Ukraine. But then Russia is not limited to playing nice. War?
Even if things don’t get that bad this time around, they are almost bound to before long. Ukraine is going to get increasingly desperate as time goes on. And the only bargaining chip they have is the pipe line.
For more on how ugly Ukraine’s position is, look at this post by Edward Hugh.
From Las Vegas Business Press…..
Hill also criticized the PERS system.
“We are the only state with no minimum age,” he said.
Nevada requires 20 years on the job to qualify for the pension.
What a deal if you can get it. But it is the type of thing that will bankrupt a state.
The United States and NATO are planning to open and expand supply lines through Central Asia to deliver fuel, food and other goods to a military mission in Afghanistan that is expected to grow by tens of thousands of troops in the months ahead, according to American and alliance diplomats and military officials.
If you read the whole article, you will see that this is almost a non story. The other routes they are trying to open up are going to have such severe restrictions as to be almost useless. But at least they are trying to do something.
“I can describe the Russian economy as water in a sieve,” Yulia L. Latynina, a commentator on Echo of Moscow radio, said of the chronic waste in Russian industry.
“Everybody was thinking Russia had succeeded, and they were wondering, how do you keep water in a sieve?” Ms. Latynina said. “When the input of water is greater than the output, the sieve is full. Everybody was thinking it was a miracle. The sieve is full! But when there is a drop in the water supply, the sieve is again empty very quickly.”
Meanwhile, there is this from Bloomberg….
Standard & Poor’s cut Russia’s credit rating this month for the first time in nine years on concern the country is wasting its foreign currency reserves defending the currency. Russia has used about a quarter of its reserves, the world’s third largest, to defend the ruble since August.
Actually, it turns out that the Fed was happy to let GMAC become a bank regardless of whether or not the tender offer succeeded. In the game of chicken, neither the bondholders nor Cerberus needed to blink, since the Fed simply climbed down from its previous stance. Bloomberg reports today:
The Federal Reserve last week approved GMAC’s application to become a bank holding company. GMAC said yesterday that the Fed’s approval didn’t hinge on the debt swap.
Yep, a 180-degree about-face from its stance a couple of weeks ago. Back then, it was crucial that the debt swap go through in order to get Fed approval; now, it really doesn’t matter either way.
It’s actually worse than that, though. The Fed clearly spent a large amount of time approving GMAC’s application to become a bank holding company: the order announcing the fact is 15 pages long, and densely-argued. But it looks very much as though the Fed delayed making the announcement until the bond exchange was all but over: it essentially conspired with GMAC to keep the decision secret so that GMAC could continue to threaten bondholders with the Fed’s earlier statement and thereby get them to tender into the exchange.
This is bad enough all by itself. But the long term effects are even worse. After this, no bond holder is ever going to voluntarily take a hair cut for fear of looking like the sucker.
Naked Capitalism and Calculated Risk have more.
As I am sure readers know all too well, that sort of thing is quietly prevalent in investment banks (well, except for being so indiscreet as to have your implements on view), as coke-snorting traders and institutional salesmen were sufficiently common in the 1980s so as to become a staple of fiction and magazine articles. Even in the seemingly innocent early 1980s, a member of Goldman’s corporate finance department was known to use uppers and downers on what was presumed to be a daily basis. He made partner. A attorney buddy realized how naive he was when on a deal, with all too great frequency, the room where negotiations were being held would empty itself. It took him a couple of days to figure out everyone else wasn’t making urgent phone calls, but repairing to bathrooms, and not to have sex with each other, either. I’ve also been told of very high level IT guys (the kind who built and ran mission critical systems, and made seven figures in the peak years) having meth habits. (Based on my very very limited anecdotal sample, meth does appear to live up to its billing and leads to much more rapid personal train wrecks than other stimulants).
And this is the world from which our current Treasury Sectary comes from.