Monday, May 19, 2014

Insanity is Doing the Same Thing Over and Over and...

Last September, we learned of the existence of numerous Chinese 'ghost towns,' entire cities of towering apartment blocks and sprawling shopping malls that are virtually devoid of life. They are empty shells waiting for people to move in, people who may never come.

We in the West collectively shook our heads and ruminated about the impending collapse of the Chinese economy, one clearly built on the quicksands of overblown real estate speculation.

Now we learn, if proven true, that we in the West aren't much brighter when it comes to economic planning. In fact, we might actually be a whole lot dumber. Eventually those apartment blocks in Zhengzhou and Wenzhou will fill up, taking, on average, some 3 years to reach 82% occupancy, according to CLSA analyst Nicole Wong .

Instead of ghost cities, it appears from satellite images gathered by conspiracy theory writer Vince Lewis that in Europe, at least, and probably also in Asia and Amercia, carmakers are producing way more cars than they need to the tune of tens of thousands, if not millions, that are going, he contends, unsold. Instead as they roll off assembly lines in England, Italy and Spain, they are simply parked anywhere there's room for them: race tracks, runways, docks. There they sit, slowly deteriorating in the sun, wind, rain and sea air. He estimates there are some 57,000 new cars sitting undelivered and unsold at the Port of Baltimore, and the numbers are growing.

Why?

"The car industry cannot stop making new cars because they would have to close their factories and lay off tens of thousands of employees. This would further add to the recession.

"Also the domino effect would be catastrophic as steel manufactures would not sell their steel. All the tens of thousands of places where car components are made would also be effected, indeed the world could come to a grinding halt."

As at least one commentator on the Zero Hedge web site countered:

"I'm not saying there is no overproduction and channel stuffing going on, but if you live near one of these auto distribution centers you would know that this is typical, not the end of the world."

I could see this in the case of parking lots near car plants and shipping docks, but runways where cars are stacked two and three deep as illustrated by the top photo?

Obviously, we have a seriously f*cked up system here folks. We've got much of the world's population living in abject poverty and ignorance, having little or no access to education, much less energy, clean water and sanitation. Meanwhile we're building apartment blocks in Mongolia no one may ever live in and cars no one will ever drive, consuming increasingly precious resources and creating mountains of waste and pollution in the process.

So, why not just dump all these cars on the market: selling them for whatever the company can get for them? For the same reason DeBeers stockpiles diamonds. A flood of cheap cars would mean you could never sell a new car for what it actually cost to produce. That would be economic ruin for carmakers. Which also brings up the question of how in the world are carmakers financing this over-production? Who's carrying the paper on this mess?

At some point, carmakers aren't going to be able to keep this folly going. At some point the system is going to implode. This is a ticking time bomb that no one but Lewis seems to be talking about. How about it, 60 Minutes? Here's a car story you should be talking about.

More importantly, we need to start a serious dialogue on how we stop this madness. How do we transition from a system that produces this level of waste to one that generates a broader level of prosperity for more people, especially those who try to survive in appalling poverty on less than $2 a day?

Anyone have any bright ideas?

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