It's Alright Ma We're Only Bleeding.

Reading the various news items this morning I can't help but feel like the Earth itself is moving under our collective American feet.  When I think about our changing place in the world, a picture comes to mind of a high school "Big Man On Campus", now two to three years out of high school.  At one time, the BMOC ruled all that he surveyed.  All the girls wanted him and all the guys wanted to be like him.  Success at sports came easily to him and so did the cheerleaders and friends.  Homework was never a problem because somebody usually did it for him.  Teachers idolized him and let him slide by their classes.  It was like a unwritten contract.  BMOC would bring glory to the school on the field and protection in the 7-Eleven parking lot on Saturday nights. Life was great and it was going to go on forever.

The BMOC got a full ride to college to play ball and at first everything was fine.  In fact it was more than fine.  College was like high school except he had even more freedom to have more fun.  However, as a year or so passed, BMOC started noticing that he was slipping.  It seemed like ages ago that he used to get up on his own at 5am and do his running and lifting before school.  He starts wondering, "When was the last time I did anything on my own initiative that didn't involve having fun?  When is the last time I sacrificed ANYTHING?"

The thoughts are subtle though, like a passing chill.  Everything is still great, BMOC is on top of the world.  However, it's now sophomore year in college.  A fresh new wave of kids have come to play ball and BMOC suddenly realizes that he can't get by on his natural ability alone.  He falls down the depth chart and suddenly plans are being made that don't involve him.  BMOC is sliding fast.  He's becoming just a regular guy who has no idea how to operate like a regular guy.  Suddenly sports aren't the answer and academics..well, BMOC hasn't really studied..ever!

However, BMOC isn't a homeless person.  He's still very strong, he still looks good and he's not a dope. Instead he just got lazy.  The question is, can BMOC recognize that he his going to have to wake up and use all the skills he was blessed with to get back on top?  If he owns up to his failings and gets his ass back to work, he definitely can.

I'm sure you can see where I'm going with this.  America is somewhere in that sophomore college season.  The world is starting to figure out how to do things without us.  The United States does not have a inalienable right to be number one.  Countries like China are seeing the future and it doesn't necessarily begin and end with the United States.  Currently, the Chinese are taking their dollars and buying tangible goods like oil, gas, iron, nickel, copper, etc.  Chinese Seek Huge Stake in Nigerian Oil 

A Chinese state-owned oil company is in talks with Nigeria to buy large stakes in some of the world's richest oil blocks in a deal that would eclipse Beijing's previous efforts to secure crude overseas.

The bids could pitch the Chinese into competition with western oil groups, including Shell, Chevron, Total and ExxonMobil, which partially or wholly control and operate the 23 blocks under discussion. Sixteen licences are up for renewal.

CNOOC, one of China's three energy majors, is seeking to acquire 6bn barrels of oil, equivalent to one in every six barrels of the proven reserves in Nigeria, sub-Saharan Africa's biggest crude producer and a major supplier to the US.

Meanwhile there is this from THE Chairman Volcker Says China's Rise Highlights Relative U.S. Decline.

This is like your wise and battle hardened Dad sitting you down for a reality check;

Former Federal Reserve chairman Paul Volcker said the rise of China and other emerging economies has underscored a decline in the comparative economic and intellectual leadership of the U.S.

“I don’t know how we accommodate ourselves to it,” Volcker, an economic adviser to President Barack Obama, said in an interview with PBS’s Charlie Rose taped yesterday in New York. “You cannot be dependent upon these countries for three to four trillion dollars of your debt and think that they’re going to be passive observers of whatever you do.

Meanwhile, we have the Japanese allowing the Yen to find its fair value to the dollar, despite the hackles of its huge exporting companies.  Maybe, the Japanese have had enough of the model that keeps both themselves and us on a debt-consumption driven crack high.  The old model is broken. Time to find a new one.  

What is perhaps the most frightening is this from Zero Hedge USD Strength: A Rally is Shaping Up

Investors are long commodities as a placement AGAINST the value of the USD, and banks and governments around the world borrow in USD. Germany and Austria have recently issued debt that is USD denominated, and they were soon imitated by... Venezuela. That to me is a sign the short-USD trade is ripe for a reversal, when basically even the biggest idiot in the house is short. The ultimate pain trade would certainly be renewed USD strength. Maybe if it happens the Fed will have the pleasure this time of bailing Venezuela with cross-currency swaps.

The frightening thing for me is other sovereigns are borrowing in USD.  I guess if it's good enough for the United States to inflate its way out of debt (or die trying) it's good enough form the rest of the world too! That is some scary sh*t!

Anyway, like the fallen BOMC above, if we level with ourselves (although I have seen nothing to show evidence of this.  The FDIC is borrowing from its member banks to fill the depleted reserve fund by advancing payment of future fees!  Not to worry though, the banks will not have to record the prepaid fees as a expense) and deal with reality, we can be the BMOC again, albeit a smarter and better one.  Until then though, as my favorite Dylan song goes;

Advertising signs that con you

Into thinking you're the one

That can do what's never been done

That can win what's never been won

Meantime life outside goes on

All around you.

 

Comments

[mike]

well said...