China's Growth Story: Running on Vapor (Musical Tribute)

The following chart shows the US trade deficit with China divided by the price of crude oil (annualized billions of barrels).<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgy3V0gnDdfGa6qb8oWMnpWLQQsPtnbuNWIx_xVnyio_oQpcQJGoXTtjhXZfIeRgrMNUHToXS-65TN5rpVZhNNqLW97mP5fDbwOO19JiJ5Rvi4LGY_0HNl9U5sjezKW-haIiqtxZpB9LZI/s1600/China%2527s+Growth+Story+-+Running+on+Vapor.jpg" imageanchor="1"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgy3V0gnDdfGa6qb8oWMnpWLQQsPtnbuNWIx_xVnyio_oQpcQJGoXTtjhXZfIeRgrMNUHToXS-65TN5rpVZhNNqLW97mP5fDbwOO19JiJ5Rvi4LGY_0HNl9U5sjezKW-haIiqtxZpB9LZI/s320/China%2527s+Growth+Story+-+Running+on+Vapor.jpg" /></a><br /><span style="font-size: x-small;">Click to enlarge.</span><br /><br />It shows the amount of oil China could buy if they were to use their entire trade surplus with us to do so. That's assuming the price of oil would not be driven even higher in response to increased purchases of course, which is no doubt a bad assumption.<br /><br />The next chart plots the natural log so that constant exponential growth can be seen as a straight line.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgHB86O9CPyf2LVL7KNZau4DA9Mz4x8pZ6q0tZQSjslQNQGP6k7S10XvuLYwY8Yewovofhl11cL2pXxabck0FZnQEckJ_8Fa9PPw5uZJw9ipOC6iuDONEVtcAl6I3ERmy0OA21o36CU-Tw/s1600/China%2527s+Growth+Story+-+Running+on+Vapor+%2528Natural+Log%2529.jpg" imageanchor="1"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgHB86O9CPyf2LVL7KNZau4DA9Mz4x8pZ6q0tZQSjslQNQGP6k7S10XvuLYwY8Yewovofhl11cL2pXxabck0FZnQEckJ_8Fa9PPw5uZJw9ipOC6iuDONEVtcAl6I3ERmy0OA21o36CU-Tw/s320/China%2527s+Growth+Story+-+Running+on+Vapor+%2528Natural+Log%2529.jpg" /></a><br /><span style="font-size: x-small;">Click to enlarge.</span><br /><br />China "sent" us ever increasing amounts of stuff that we want, yet we do not seem to be returning the favor by sending them ever increasing amounts of the stuff that they want (barrels of oil). Note that I used "sent" instead of "sends." The next chart explains why. It shows the annual growth rate of imports from China.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj1hbFLfMltgoOmYPEdeAn62ImRwb_NBaqpkgXlH3UmWHBFVIfRYDMjj9AyluZWKVrJLyuBf7KOaQnG8DjuxOUevqBBptdi048Z7ef_vVwL5fD4HvmZrmcFSZ5qGaiKEY-DyJ-gMW336BE/s1600/Imports+from+China+%28YoY+Growth%29.jpg" imageanchor="1"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj1hbFLfMltgoOmYPEdeAn62ImRwb_NBaqpkgXlH3UmWHBFVIfRYDMjj9AyluZWKVrJLyuBf7KOaQnG8DjuxOUevqBBptdi048Z7ef_vVwL5fD4HvmZrmcFSZ5qGaiKEY-DyJ-gMW336BE/s320/Imports+from+China+(YoY+Growth).jpg" /></a><br /><span style="font-size: x-small;">Click to enlarge.</span><br /><br />As seen in the chart, the nominal growth rate is just about dead now. The growth rate in the middle of the channel is roughly 0%, which oddly enough is what the Fed feels short-term interest rates should be over an "extended period."<br /><br /><b>ZIRP-a-Dee-Doo-Dah</b><br /><iframe allowfullscreen="" frameborder="0" height="236" src="//www.youtube.com/embed/6bWyhj7siEY" width="420"></iframe><br /><br />For what it is worth, I am not even remotely bullish on China (<a href="http://news-these-days.blogspot.com/2007/11/savvy-chinese-know-exactly-when-bubble.html">nor have I been since starting this blog in 2007</a>). I also don't believe that I will ever feel the need to bribe a border guard to let me on the last plane to China. You know, as a desperate attempt to protect my future standard of living and freedoms (Patriot Act notwithstanding). Sigh.<br /><br />This is not investment advice.<br /><br /><b>Source Data:</b><br /><a href="http://research.stlouisfed.org/fred2/graph/?g=saw">St. Louis Fed: Custom Chart #1</a><br /><a href="http://research.stlouisfed.org/fred2/graph/?g=sax">St. Louis Fed: Custom Chart #2</a><br /><a href="http://research.stlouisfed.org/fred2/graph/?g=saE">St. Louis Fed: Custom Chart #3</a>

China's Growth Story: Running on Vapor (Musical Tribute)

The following chart shows the US trade deficit with China divided by the price of crude oil (annualized billions of barrels). Click to enlar...

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