by Mish

Farmers produced, and the state paid more for cotton than farmers could get elsewhere. Worldwide supplies soared, but the cotton was withheld from the market.

Bale of a Tale of State Planning

Please consider China Cotton: Bale of a Tale

It is never easy to put a positive spin on buying high and then selling low. Then again, the cotton that China plans to start selling from its vast state reserves this week, at a price below what it paid for this year’s harvest, might be rather hard actually to spin, period. Cotton can go brittle if stored for a long time. The China National Cotton Reserve will be auctioning bales that came off farms in 2011.
Still, what a marvellous monument to state planning has been created, even if the buying programme might finally end overall next year. China started its stockpiling to encourage farmers to plant cotton when prices looked set to go south two years ago (price volatility threatened a crisis for the nation’s cotton industry). But it has ended holding about 10m tons, or more than half of global inventory. It is now considering direct subsidies to cotton farmers instead.
Australia took a decade to get rid of every last thread of its wool reserves after ending its own farmer support policy in 1991. In the process, the farming industry suffered plenty of damage. But free-market innovation won out over state control in the end. The Australians probably made the fine merino wool in your suit. Not to spin a tale, but perhaps a similar process can work for the Chinese.

State Central Planning

In autumn of 2011, a clothing importer told me the price of clothes was about to soar because of a huge shortage of cotton. Clothing prices rose a few percent, but nothing like what many expected.

But there never was a cotton shortage. Rather there was huge accumulation of cotton by China at ridiculous prices. So now, what to do with it?

If China holds on to the cotton long enough, the matter will take care of itself as the “cotton balls go rotten”.

Money does not go rotten in the same way, but rotten results from Fed and central bank money manipulation policies are eventually headed this way. Centralized state planning of anything never works over the long haul.

Huge boom-bust bubbles in housing and the stock market are proof enough.

Mike “Mish” Shedlock

Interactive Map of Public Pension Plans; How Badly Underfunded are the Plans in Your State?

According to a report by the American Enterprise Institute, public pensions are underfunded by more than $3 trillion. Following is a state-by-state interactive map I put together from the report. Note: Please give the map a few extra seconds to load.

White Anger: Fed Helped Elect Trump; Tale of Two Job Markets

Lakshman Achuthan and the ECRI posted some interesting charts about the uneven jobs recovery since 2007.

UPS Fears $3.8 Billion Liability Over Bankrupt Central States Pension Plan

In 2007, UPS dumped its pensioners into the Central States Pension Fund, a fund now destined for bankruptcy.

Is California Going Bankrupt?

History is about to repeat in California as the State’s cash flood may be receding.

Tale of Two Economies: Industrial Production vs Retail Spending

Retail sales in July rose more than expected albeit from negative revisions. Industrial production is another matter.

Killing the Trade Golden Goose: Farmers Rattled by Trump’s NAFTA Rescinding Plans

It’s fair to presume NAFTA is not the sole cause of the increase in trade, but it is also fair to presume that NAFTA helped.

New Nothingness: Central Banks are Powerless “They Should Go Away” Steen Jakobsen

In a “Trading Floor” interview, Saxo Bank CIO and chief economist Steen Jakobsen, discusses the role of central banks in the global economy with Saxo Bank’s Michael McKenna.

Brexit and the Three Pigs: A Modern Fairy Tale

MPs will vote on 2 amendments. The 1st will let pigs fly up to 10 ft off the ground. The 2nd only 20 ft and higher.

Amazon Plans Robotic Supermarket Staffed by 3; Chinese Factory Eliminate 90% of Humans, Defects Drop

Trump blames Mexico, China, and even Germany for taking US jobs and for US trade imbalances.