There is an economic and financial trainwreck rumbling through the world economy. Namely, the Great China Ponzi. In all of economic history there has never been anything like it. It is only a matter of time before it ends in a spectacular collapse, leaving the global financial bubble of the last two decades in shambles. The resulting deflationary spiral will suck the global economy into its vortex. And Wall Street will go down for the count because this time the Fed will be utterly powerless to reverse the tide.
Chinese Devaluation Extends To 3rd Day - Yuan Hits 4 Year Low, Japan Escalates Currency Race-To-The-Bottom RhetoricSubmitted by Tyler Durden on 08/12/2015 23:23 -0400
The "one-off" adjustment has now reached its 3rd day as The PBOC has now devalued the Yuan fix by 4.65% back to July 2011 lows.
PBOC tries to reassure: *CHINA PBOC SAYS YUAN REMAINS STRONG CURRENCY IN LONG-TERM
As we hurtle toward the absolutely critical months of September and October, the unraveling of the global financial system is beginning to accelerate.
"When all the experts and forecasts agree – something else is going to happen."
China has officially gone the "nuclear" route, SocGen says, and the read through for the global economy is not good. Here's how to profit going forward...
The week's weakness started with the surprise yuan devaluation, but the moves in everythingfrom crude oil to U.S. government debt signal that investors and traders are telling the Fed to hold off for now. Will U.S. policymakers listen? Make no mistake: the Fed marches to its own data-dependent drum. These indicators will only tell you if the central bank has the right tempo to support markets.
Scaremongery... or maybe the whole point, as Obama's former chief economist noted, is to lose reserve status. Take That China!!
When a central bank tells you it’s a “one-off” event you may as well take that as a green light!
For financial asset investors in the U.S. and around the world, the immediate question becomes whether the Fed will now relax its guidance and seeming intention to raise its Fed Funds target. We think the Fed will still raise rates.
"They'll Blame Physical Gold Holders For The Failure Of Monetary Policies" Marc Faber Explains EverythingSubmitted by Tyler Durden on 08/09/2015 19:00 -0400
"The future is unknown and we are not dealing with markets that are free markets anymore...now we have government interventions everywhere. [But] in the last say twelve months, I have observed an increasing number of academics who are questioning monetary policies. That's why I think they will take the gold away and go back to some gold standard by revaluing the gold say from now $1000/oz to say $10,000 dollars. An individual should definitely own some physical gold. The bigger question is where should he store it? because... the failure of monetary policies will not be admitted by the professors that are at central banks, they will then go and blame someone else for it and then an easy target would be to blame it on people that own physical gold because - they can argue - well these are the ones that do take money out of circulation and then the velocity of money goes down - we have to take it away from them... That has happened in 1933 in the US."
"This is the big concern because we keep on thinking that lower energy prices are somehow good for the economy. That can't be, because energy prices or commodity prices in general don't drive economic growth. Economic growth drives commodity prices. So there are a lot of telltales out there that this drop in oil prices, this drop industrial metal prices, this is not good. It's a canary in the coal mine that something is not right in the global economy. And that is a concern for us all."
Things are getting downright scary in emerging markets as a "triple unwind" in credit, Chinese leverage, and loose US monetary policy wreaks havoc across the space. Between a prolonged slump in commodity prices and a structural shift towards weaker global trade, the situation could worsen materially going forward.
Will there be a financial collapse in the United States before the end of 2015? An increasing number of respected financial experts are now warning that we are right on the verge of another great economic crisis.
The Fed’s zero interest rate policy has provided a subsidy to investors for the past 7 years. The lure of easy profits from cheap money was wildly attractive and readily accepted by investors. The Fed “put” gave investors great confidence that they could outperform their exceptionally low cost of capital. These implicit promises by central banks encouraged trillions of dollars into ‘carry trades’ and various forms of market speculation. Complacent investors maintain these trades, despite the Fed’s warning of a looming reduction in the subsidy, and despite a balance sheet expected to shrink in 2016. It has been a risk-chasing ‘game of chicken’ that is coming to an end. Changing conditions have skewed risk/reward to the downside. This is particularly true because financial assets prices are exceptionally expensive...There are warning signs and visible market stresses beyond those mentioned yesterday.
'Death of gold' has been greatly exaggerated. It is important to consider gold in local currency terms. In euro, gold is up 2% in 2015, after 13% gain in 2014.