Biggest New Port in the World Will Be In...?

Not the US. Not even China.

Wait for it.

Brazil.

Wait, what? Brazil? Why?

China is expected to overtake Japan as the world's second largest economy this year and may already be the world's greatest energy consumer. Now it is set to become Brazil's top foreign investor, with its companies plowing $20bn into the country in the first six months of 2010, compared with $83m in 2009. A recent study by Deloitte predicted that Chinese investments in Brazil could hit an average of about $40bn a year between now and 2014, with companies throwing money at sectors ranging from telecommunications, infrastructure and farming, to oil, biofuels, natural gas, mining and steel manufacturing.

China will need raw materials, and Brazil is eager to export those same materials. So the expansion of the Panama Canal will lead to increased trade between China and Brazil, something I did not think about.

Ghost Cities of China

If this is real, it is both amazing and rather depressing.

These are satellite images of huge developments in China. Developments in the middle of nowhere, meant to house people that don't live there and parking lots for businesses that don't exit.

How do you know there is no economic activity? No cars, empty roads, no trucks bringing goods to stores, no smoke from the factories, no trash in the streets, no children in the schools.

We saw this kind of thing in Soviet Russia, where towns were built not because of economic necessity, but because of central planning. The result was that after the fall of the Soviet Union, these towns were abandoned as people left to pursue a life elsewhere. Will the same fate fall on China or are they just setting the stage for massive future growth?

Time will tell, but the market will direct economic activity better than any city planner or government bureaucrat.

Panama Canal Reopens

From CNN:

The Panama Canal reopened Thursday after heavy rains and flooding prompted its closing for only the third time in its storied 96-year history.

Officials closed the canal around noon Wednesday after heavy rain in the Chagres River area, caused water behind the Gatun Dam -- which creates Lake Gatun, a significant part of the canal -- to rise.

The canal was reopened 17 hours later.

The last time the canal closed was in 1989, after the United States invaded Panama to topple strongman Manuel Noriega.

Landslides forced the canal to close for several months from late 1915 to mid-1916, just months after it opened.

The 48-mile canal is a key conduit for shipping between the Pacific and Atlantic oceans. The canal was built from 1904 to 1914 by the United States, which had sole control over the channel across the Panamanian isthmus until 1979. Then, after 20 years of joint U.S.-Panama control, the Panamanian government assumed administration on December 31, 1999.

3 times in only 96 years? What a hard working canal! These heavy rains would be very infrequent, only once in a hundred years or so. But you have to wonder if they would become more common in the future.

If it wasn't funny, it might be scary

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Jack Kyser Dies

RIP: Economists never die, they just lose their equilibrium.

Jack Kyser, the longtime “guru” of the Los Angeles economy, died over the weekend after a long illness. He was 76.

For 25 years as chief economist with the Los Angeles County Economic Development Corp., Kyser was the go-to person for the media, business leaders and elected officials who needed information and analysis of the local economy.

200 Countries over 200 years in 4 minutes

Beige Book

Just released from the Federal Reserve.

Some highlights from the 12th District (the entire West Coast).

1. Wages and prices are down. This means that inflation is not an issue. Some exceptions were raw goods such as aluminium and some materials sourced from China, namely apparel.

2.Retail trade for this holiday season will be better than last year by 3-7 percent.

3. Manufacturing demand was up for aircraft and metal fabrication, down for wood products.

4. Agriculture and raw goods extraction demand were up due to the low dollar and strong export demand for corn and livestock.

5. Real estate and construction were down.

6. Financial institutions were down due to consumers continuing to deleverage and the struggling credit quality of some banks.

Overall, this is what the recovery will look like.

If you want to get really depressed, look at the 11th District, where high cotton prices, beef prices and energy prices look more like a "real" recovery.