With 30% of Venzuelans eating two or fewer meals per day, social unrest is mounting rapidly in President Nicolas Maduro's socialist utopia. As WSJ reports, soldiers have now been deployed to stem rampant food smuggling and price speculation, which Maduro blames for triple-digit inflation and scarcity. "Due to the shortage of food... the desperation is enormous," local opposition politician Andres Camejo said, and nowhere is that more evident than the trampling death of an 80-year-old woman outside a state-subsidized supermarket.
The economic slowdown in China was set in motion a long time ago when the yearly rate of growth of the money supply fell from 39.3 percent in January 2010 to 1.8 percent by April 2012. The effect of this massive decline in the growth momentum of money puts severe pressure on bubble activities and in turn on various key economic activity data. Any tampering with the currency rate of exchange can only make things much worse as far as the allocation of scarce resources is concerned.
...as soon as credit expansion stops, the piper must be paid, and the inevitable readjustments must liquidate the unsound overinvestments of the boom and redirect the economy. And, of course, the longer the boom is kept going, the greater the malinvestments that must be liquidated, and the more harrowing the readjustments that must be made.
News That Matters
Demand Surge and Shortages of Bullion as Stocks Fall Sharply, Gold Outperforms All Assets In August
Crash waves are notoriously volatile – several of the biggest one day rallies in history have occurred before and during crash waves. This makes short term forecasting even more of a coin flip than it normally is. However, we believe it is important not to lose sight of the forest for the trees; stock markets around the world have been in bubbles driven by extremely loose monetary policy, which ipso facto allows us to identify them as an example of artificial price distortion. Such bubbles always collapse sooner or later – unless the monetary authority decides to simply destroy the currency it issues, as has happened in Zimbabwe and is currently happening in countries like Venezuela and to a slightly lesser extent Argentina. We don’t expect the central banks of the developed nations to follow suit, at least not yet.
Aggressive Chinese Intervention Prevents Another Rout, Sends Stocks Soaring 5% In Last Trading Hour; US Futures JumpSubmitted by Tyler Durden on 08/27/2015 06:48 -0400
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.
A half-century ago, America - and then the world - was rocked by a mighty stock-market crash that soon turned into the steepest and longest-lasting depression of all time. Those who ignore the lessons of history are doomed to repeat it - except that now, with gold abandoned and each nation able to print currency ad lib, we are likely to wind up, not with a repeat of 1929, but with something far worse...
As asset bubbles are in the way of the Fed’s policy, a decline in stock prices removes the equity market bubble and enables the Fed to print more money and start the process up again. On the other hand, the stock market decline could indicate that the players in the market have comprehended that the stock market is an artificially inflated bubble that has no real basis. Once the psychology is destroyed, flight sets in.
The reason given by our rulers for suppressing cash is to keep society safe from terrorists, tax evaders, money launderers, drug cartels, and other villains real or imagined. The actual aim of the ?ood of laws restricting or even prohibiting the use of cash is to force the public to make payments through the financial system. This enables governments to expand their ability to spy on and keep track of their citizens’ most private financial dealings, in order to milk their citizens of every last dollar of tax payments that they claim are due.
A non-bombastic discussion of market forces and what to expect next
Even if it is short term oversold, this is actually a quite dangerous market – caveat emptor, as they say.
At the risk of sounding like a broken record we'd like to say a bit more about economists' tendency to get their monetary history wrong; in particular, the common myths about the gold standard. If there's one monetary history topic that tends to get handled especially sloppily by monetary economists, not to mention other sorts, this is it. Sure, the gold standard was hardly perfect, and gold bugs themselves sometimes make silly claims about their favorite former monetary standard. But these things don't excuse the errors many economists commit in their eagerness to find fault with that "barbarous relic." The point, in other words, isn't to make a pitch for gold. It's to make a pitch for something - anything - that's better than our present, lousy money.
When we see guys like Bernie Sanders get visibly angry at guys like Alan Greenspan it behooves all of us to go beyond the entertainment of it or some prima facie agreement and to truly understand why the anger is justified. If we were to all take the responsibility to understand the lifeblood of our American existence i.e. the economy, we will most certainly be moved to remove not only the policymakers but the system that together serve only those at the top of the economic food chain and at a cost to the rest of us. When we do we will be asking why in the hell is no one yelling at Janet Yellen??