Japanese Exports Rise
Whew. With all the pigs flying around, it’s hard to keep your eye on the important things in life. Hysteria, while once considered an uncommon disorder of uterine function, is now so widespread, traversing the sexes and affecting all age groups, that if you are not in a panic about Swine Flu, then people think you should have your head read. Meanwhile, other, more real things are happening to the world.
If you beat a dead horse hard enough, it will probably move a few inches. Actually, if you hit it with a freight train, it will probably roll a few hundred meters. That can look rather dramatic, especially if you ignore the freight train. In the news today, it is reported that Japan’s industrial output rose by 1.6%, on the back of continuous sharp declines over the last year or so. It’s like a flicker of light in the dark, which would once have been considered dire news. Instead, today it’s seen as the flicker of sunlight over the horizon at the crack of dawn. In the land of the rising sun, no less.
Until now, Japan’s production was practically at a stand still, with people laid off work, factories shut down, nothing in, nothing out (or at least, not much). This has reached the point that basic items, the demand for which can only dip for a time, are running out. Yes, companies are delaying the purchase of new fleet cars and others are holding onto their used cars a little longer, but in the end, people are still driving around everywhere, and mechanical objects wear out and die.
What can be expected is something of an economic recovery in manufacturing nations such as Japan and China. The stimulus money being distributed around the world is of such a massive sum that it cannot but have some effect, but the situation has changed from one that may have existed during previous recessions. The meaning of fiat money is being called into question like never before. The world is realigning itself, political and economic powers are changing rapidly and severe imbalances are developing.
If all else were equal, if the US dollar maintained its value, one could expect a recovery sometime soon (if you expand the money supply and put it into everybody’s pockets without there being any inflation, suddenly everyone thinks they are richer). However, the laws of mechanics are analogous to all natural systems, in that every action invokes an inverse reaction to maintain equilibrium. Spreading out the money supply only dilutes its value, and the US dollar cannot logically maintain its current value without some kind of extraordinary pressure on other nations to pretend that it does. If nature takes its course, we can reasonably expect an economic recovery only when the US accepts its loss of superiority as an economic power and takes a back seat, allowing other markets to emerge. That could take many years.
But this is not a natural system. The US will probably not want to accept a peaceful and graceful decline, but will throw itself into turmoil and take others with it. In the meantime, it will try to bully itself out of the mess it is in, Swine Flu notwithstanding. Rather, Swine Flu is a very convenient distraction at the moment, since it’s a disaster that has no obvious human cause. It allows the American public to forget a much greater threat, but only for a time.