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Great Depressionary Quote of the 21st Century: "Massive Industrial Overcapacity"

The following chart shows industrial capacity per capita (industrial production index adjusted for capacity utilization and population).


Click to enlarge.

That's a 0.998 correlation over 27 years of data (Jan 1967 to Jan 1994). And then... Boom! Trend broken big time. That has to be one of the most impressive trend failures I've ever posted on this blog. It was so incredibly consistent and predictable right up until it wasn't.

It's not where we've been but where we are headed that concerns me most. Now that we have all this extra capacity, what's the worst that could happen from here?


File:Abandoned Packard Automobile Factory Detroit 200.jpg (Albert duce)

It's not just us.

February 17, 2014
China Crackdown Drives Business Off the Books

The accuracy of China's economic estimates faces growing doubts as the government tries to cut industrial overcapacity, recent reports suggest.

February 10, 2014
Guest post: dealing with 500m tonnes of global steel overcapacity

Business models that have emphasised capacity expansion above all other considerations are now very exposed to changing patterns of demand.

January 27, 2014
China’s Aluminum Overcapacity Seen by Fitch Holding Down Prices

Rising capacity at aluminum plants in China, which account for almost half of world output, will weigh down prices this year in a market that’s already over-supplied, according to Fitch Ratings Ltd.

January 23, 2014
PetroChina delays operation of refineries on overcapacity

BEIJING: PetroChina has put off starting up two new refineries and delayed expansion of another to counter the threat of overcapacity as oil demand growth slows in the world's second largest oil consumer, a company official said on Thursday.

China's oil consumption last year grew at its slowest in more than 20 years, calculations on government data showed on Monday, as soft economic growth sliced demand for transportation and industrial fuels such as diesel.

December 11, 2013
Overcapacity Threatens China Growth

The biggest obstacle facing China’s economy? Massive industrial overcapacity is near the top of the list as the country prepares to launch major reforms but seems intent on keeping gross domestic product growth from falling off too quickly.

I have never been more permabearish.

This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart
Posted by Unknown at 15.48, Add Comment
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Industrial Mining Production vs. Real Gold Price (Musical Tribute)


Click to enlarge.

The black line shows the annual average of the industrial mining production index (left scale). Note that it recently set a new record.

The blue line shows the annual average gold price adjusted by the consumer price index (right scale, December 2013 dollars). It grew exponentially starting in 2000 and very nearly set a new record. It has recently backed off though.

Let's zoom in a bit.


Click to enlarge.



Satellite of love, we're gonna fly

September 23, 2007
Productivity Miracle

If I'm wrong to be a stagflationist, this is the sort of thing that would do me in. It is also something one needs to factor in when hoarding hard assets in general.

May 22, 2013
20 Insane Bitcoin Mining Rigs

If you still had any doubt about their commitment to the mining career, the next pictures will show you that they’re here to stay. These next 20 mining rigs are totally insane!

Mining rocks to hoard? Mining bitcoins to hoard? It's all good if it adds to GDP! Right?

This is not investment advice. As always, just opinions.

And on that note, here are a few bonus opinions. I find it insane that we needlessly waste any of the world's resources to mine bitcoins. Is the world really going to be a better place because of it? Is this the kind of productivity miracle that will lead to future prosperity? It's shameful that bitcoins require any energy at all to create. Good grief. At the very least, they could have made a computer game out of it that's fun to play. But no, it's just automated computers (in ever greater numbers) mining virtual bitcoins (in dwindling numbers). Put another way, it requires ever increasing streams of energy to generate fewer and fewer bitcoins. What a frickin' long-term plan of wasted effort that is (not necessarily from a miner's perspective, but for society in general).

At least gold gives you something shiny to fondle once the mining's complete. I say this as one who owned gold from 2004 to 2006. It treated me very well over that period. No complaints. No desire to buy it again though (at these prices anyway). Your opinions may vary of course.

Source Data:
St. Louis Fed: Custom Chart (Long-Term)
St. Louis Fed: Custom Chart (Short-Term)
Posted by Unknown at 16.47, Add Comment
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Industrial Production: Mining


Click to enlarge.

1. Totally sustainable!
2. No malinvestment here!
3. Hyperinflation soon to follow!

It's a sarcastic triple play!

Malinvestment

Austrian economists such as Nobel laureate F. A. Hayek advocate the idea that malinvestment occurs due to the combination of fractional reserve banking and artificially low interest rates misleading relative price signals which eventually necessitate a corrective contraction—a boom followed by a bust.

September 23, 2007
Productivity Miracle

If I'm wrong to be a stagflationist, this is the sort of thing that would do me in. It is also something one needs to factor in when hoarding hard assets in general.

Topic: Large mining equipment


I find it all quite humbling. Don't you?

See Also:
Hyperinflation Theories Poned Again

Source Data:
St. Louis Fed: Industrial Production: Mining
Posted by Unknown at 23.40, Add Comment
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