Australia

The United States lags far behind other developed countries in terms of personal, civil and economic freedoms, according to a study released this month. Its neighbor to the north, for example, ranked 14 spots ahead of the so-called “Land of the Free.”

After a 5 day tumbling streak, which saw Chinese stock plunge well over 20% and 17% in just the first three days of this week, overnight the Shanghai Composite was hanging by a thread (and threat) until the last hour of trading. In fact, this is what the SHCOMP looked like until the very end: Up 2.6%, up 1.2%, up 2.8%, up 0.6%, up 2%... down 0.2%. And then the cavalry came in: "Heavyweight stocks like banks and insurance companies helped pull up the index, and it’s possibly China Securities Finance entering the market again to shore up stocks," Central China Sec. strategist Zhang Gang told Bloomberg by phone. Net result: the Composite, having been red just shortly before the close, soared higher by 156 points or 5.4%, showing the US stock market just how it's down.

The idea of a change towards a domestic consumption-driven economy is being revealed as a woeful disaster. You can’t magically turn into a consumer-based economy by blowing bubbles first in property and then in stocks, and hope people’s profits in both will make them spend. Because the whole endeavor was based from the get-go on huge increases in debt, the just as predictable outcome is, and will be even much more, that people count their losses and spend much less in the local economy. While those with remaining spending power purchase property in the US, Britain, Australia. And go live there too, where they feel safe(r). I fear for the Chinese citizen. Not so much for Xi and Li. They will get what they deserve.

• China’s Central Bank Cuts Interest Rates (WSJ)
• Chinese Stocks Crash Again to Extend Biggest Plunge Since 1996 (BBG)
• China cuts rates, reserve ratio to aid economy as stocks sink (Reuters)
• Wall St. suffers worst day in four years, S&P confirms correction (Reuters)
• Europe's Stocks Head for Best Day Since 2011 (BBG)
• Market turmoil clouds Fed rate outlook (FT)
• For All Its Heft, China’s Economy Is a Black Box (WSJ)

So now comes the era of gluts, shrinking profits and a drastic deflation of the giant financial bubble that the world’s central banks have so foolishly generated. And this time they will be powerless to stop the carnage. Yet the beleaguered central bankers will launch desperate verbal and market manipulation ploys to brake the current sell-off and thereby preserve the bloodied remnants of their handiwork.  When in response the gamblers make their eighth run at buying a dip that is now rapidly turning into a crater, it will be an excellent time to sell anything in the casino that isn’t nailed down.

And News That Matters

"It is an old saying in commodities that the best cure for low prices is low prices. Market participants are now asking how much further prices need to fall and how long they need to stay there to bring supply and demand back in to balance and halt the price declines across a broad swathe of different raw materials markets. The fear is that just as the upside of the supercycle brought an unprecedented and long period of historical price highs, the plunge to the downside is shaping up to be equally dramatic and may yet have a way to run."

While some, perhaps not California farmers, will disagree with NOAA's assessment of the world's atmospheric conditions, earlier today the National Oceanic and Atmospheric Administration declared that July was the warmest month ever recorded for the globe and was also the record warmest for global oceans, putting a full stop to a year that has been characterized by numerous perplexing atmospheric outliers around the globe but perhaps none other more so than NOAA's earlier assessment that the winter of 2015 was also the warmest on record despite the much discussed US winter, where for the second year in a row the economic slowdown was blamed on a colder than usual winter. Go figure: perhaps here too we need double seasonal adjustments.

Husbands and wives across the world are waking up to their partners' extramarital affairs after, as AP calls it, a catastrophic leak at adultery website Ashley Madison spewed electronic evidence of infidelity across the Internet. Online forums were buzzing Thursday with users claiming to have found evidence that their significant others were on the site. But it's not all doom and gloom... as Reuters notes many professions stand to benefit from the unfolding saga, from lawyers to therapists to cyber security firms. Prominent divorce lawyer Raoul Felder said the release is the best thing to happen to his profession since the seventh Commandment forbade adultery in the Bible, "I've never had anything like this before." So hey, those cheating spouses are now helping the economy grow...

It's human nature for us to want to keep our wealth close at hand. Trouble is, you have all your wealth in one jurisdiction, and should that jurisdiction find itself in an economic crisis, all that “diversification” will be seriously at risk. If we’re being really truthful with ourselves, governments pose a greater threat than the average thief, as they can steal legally. Much of the world has gone on a massive spending spree and has, in effect, used a credit card to do so. Soon, that bill will need to be paid and the jurisdictions that are in debt will unquestionably be revealed to be insolvent. The economic crisis, when it hits, will be sudden and will be devastating.

If Washington does not cancel its planned military exercises with South Korea, North Korea has issued new nuclear threats and says it is ready to us its latest weapons, which "are unknown to the world." The drills, called Ulchi Freedom Guardian, are due to start Monday are designed to "protect the region and maintain stability on the Korean peninsula." However, as expected Pyongyang is not happy, "If [the] United States wants their mainland to be safe," said state TV, "then the Ulchi Freedom Guardian should stop immediately."

China, Australia, Brazil, Canada, Sweden - it is beyond us how anyone can declare the crisis isn’t spreading. Be prepared – there are going to be lots of opportunities to both make and lose money. But first, you have to recognize what is happening.

In 2013, Samoan Air became the world's first airline to charge passengers according to their their weight. Now, two years later, Uzbekistan Airways has gone one further than the pay-by-weight model. The Tashkent-based airline has installed special weighing machines in the departure gate zones to weigh people and their hand luggage, noting that some overweight people could be excluded from busy flights on smaller planes if limits are exceeded... "We are not selling seats, we are selling weight."