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Russell Napier's "Most Important Chart In The World"

Tyler Durden's picture





 

Hopes for an early recovery in the global economy may be overoptimistic, according to CLSA's Russel Napier, as he notes the expansion of China's reserves, which has been an engine of global economic growth, is about to come to a shuddering halt. As eFinancial News notes, Chinese reserves have decelerated dramatically over the last five years and are now close to zero. Napier said of the graph: "It is the most important chart in the world. The growth in Chinese reserves has determined all the key developments in financial markets in the last two decades. It printed lots of currency and artificially depressed the US yield curve. It has been the cornerstone of global growth, and now it's over."

 

 

Via eFinancial News:

...

 

The last time the Chinese reserve growth rate was below 10% was at the end of the 1990s, just before the bursting of the technology stock market bubble and a recession. The recovery in the growth rate from 2001 onwards was followed by the economic boom of the last decade. The growth rate turned down decisively in 2007, just before the onset of the financial crisis.

 

China's reserves have come from a trading surplus, and the Chinese authorities have used the money to buy US Treasury bonds. The finance that China supplied to the US helped fuel economic growth in that country and the rest of the world.

 

Once again, we are reminded that it is the flow not the stock that counts for 'growth' is credit expansion and credit is growth...

 


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Thu, 11/22/2012 - 12:30 | Link to Comment woggie
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the beast is on the gobble and all that matters is we're all headed for it's belly
http://youtu.be/ntmthFyaYzY

Thu, 11/22/2012 - 12:34 | Link to Comment GetZeeGold
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I don't think junking the messenger is going to help all that much.

Thu, 11/22/2012 - 12:39 | Link to Comment vast-dom
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OT: Thanksgiving Prayer William S Burroughs

 

 

http://www.youtube.com/watch?v=s4nSxArk9g8&feature=player_embedded#!

 

 

For John Dillinger
In hope he is still alive
Thanks for the wild turkey and the Passenger Pigeons, destined to be shit out through wholesome American guts
thanks for a Continent to despoil and poison
thanks for Indians to provide a modicum of challenge and danger
thanks for vast herds of bison to kill and skin, leaving the carcass to rot
thanks for bounties on wolves and coyotes
thanks for the AMERICAN DREAM to vulgarize and falsify until the bare lies shine through
thanks for the KKK, for nigger-killing lawmen feeling their notches, for decent church-going women with their mean, pinched, bitter, evil faces
thanks for Kill a Queer for Christ stickers
thanks for laboratory AIDS
thanks for Prohibition and the War Against Drugs
thanks for a country where nobody is allowed to mind his own business
thanks for a nation of finks — yes,
thanks for all the memories all right, lets see your arms you always were a headache and you always were a bore
thanks for the last and greatest betrayal of the last and greatest of human dreams.

WSB

 

Thu, 11/22/2012 - 13:44 | Link to Comment Metalredneck
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I miss ol' Bill.

Thu, 11/22/2012 - 16:05 | Link to Comment strannick
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One reason China's FX Reserves are depleting is because while they are selling Treasuries and buying gold, they havent updated their gold reserve holdings since 2010. This accounting of the sale of Treasuries without accounting for new gold reserves (which when it happens will send gold soaring again like in 2010) of course looks like Chinas FX reserves are severely depleted. Instead if fails to take into account their new gold holdings.

Thu, 11/22/2012 - 14:01 | Link to Comment jimijon
jimijon's picture

It will all be different soon. Life on Mars! And what will that mean?

Free energy! Now we are talking change of Mayan proportion. It is here.

Soon, the USA will free itself from the clutches of London. It is about time since their 99 year lease of destruction is almost over. I mean, haven't we been fighting their wars for the last 100 years? Think about it. Think about what they said about Lincoln's greenbacks. 

Anyway, change is here and coming very fast now.

Cheers

Thu, 11/22/2012 - 14:12 | Link to Comment dizzyfingers
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"Soon, the USA will free itself from the clutches of London. It is about time since their 99 year lease of destruction is almost over. I mean, haven't we been fighting their wars for the last 100 years? Think about it. Think about what they said about Lincoln's greenbacks.  Anyway, change is here and coming very fast now."

Threat, or promise?

Thu, 11/22/2012 - 13:07 | Link to Comment CPL
CPL's picture

Acts 2:17

And it shall come to pass in the last days, saith God, I will pour out of my Spirit upon all flesh: and your sons and your daughters shall prophesy, and your young men shall see visions, and your old men shall dream dreams:

Thu, 11/22/2012 - 14:03 | Link to Comment TPTB_r_TBTF
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so ... are you a young visionary or an old dreamer?

Thu, 11/22/2012 - 14:51 | Link to Comment CPL
CPL's picture

Like everyone else, waiting for a conclusion.

Thu, 11/22/2012 - 12:35 | Link to Comment blunderdog
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Oh.  Well.  That's that, then.

Thu, 11/22/2012 - 12:37 | Link to Comment centerline
centerline's picture

More lines and arrows.  Yeah!  (just kidding).

Thu, 11/22/2012 - 13:18 | Link to Comment blunderdog
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Every once in awhile, it's nice to be reminded just how incredibly SIMPLE everything really is.

Thu, 11/22/2012 - 12:36 | Link to Comment lolmao500
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But but but China is gonna build the tallest building in the world in just 90 days!

Thu, 11/22/2012 - 12:39 | Link to Comment onelight
onelight's picture

right...and the trains will be very fast...right before they run into each other...

Thu, 11/22/2012 - 12:47 | Link to Comment Enslavethechild...
EnslavethechildrenforBen's picture

like when two expanding universes collide, causing time come to an end... (Dec. 21)

Thu, 11/22/2012 - 12:37 | Link to Comment buzzsaw99
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they should convert all their holdings into jpy. lulz

Thu, 11/22/2012 - 12:40 | Link to Comment falak pema
falak pema's picture

If China won't pay for Potus's troop movements in ME, PAx Americana hits the shit can in its aircraft carrier bases. 

"Sir, we're out of oil on HMS--save the world-USA,USA."

"I know that, so why don't you guys fart more often and use that as fracked-gas for your boilers."

'Sir, permission to import a camel brigade on to ship to stoke up our boilers on fracked camel fart."

"Permission granted. And remember, full steam ahead to the next camel station."

 

Thu, 11/22/2012 - 13:02 | Link to Comment Eally Ucked
Eally Ucked's picture

China doesn't have to pay for it, they will print whatever they need and your gov will buy it.

Thu, 11/22/2012 - 13:06 | Link to Comment falak pema
falak pema's picture

the chart implies there is a limit to what "they" can print...that's the logic of this post. 

Thu, 11/22/2012 - 13:24 | Link to Comment Eally Ucked
Eally Ucked's picture

I was talking about Americans

Thu, 11/22/2012 - 13:49 | Link to Comment falak pema
falak pema's picture

that's funny, so was I, and so was the article... which thinks Ben can't pull it out of his ass in total impunity. 

The US/Euro economies need that China gravy recycling or else FED will be left with ALL the US treasuries and that...is dynamite to the market, or whats left of it! 

Thu, 11/22/2012 - 12:43 | Link to Comment Rainman
Rainman's picture

Maybe these Commies should short sell a couple of ghost cities to raise cash

Thu, 11/22/2012 - 12:44 | Link to Comment ebworthen
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And if there is war of any kind over Taiwan or other islands in the Pacific the U.S. can declare any Treasury debt to China null and void.

The bankers and other Wall Street thugs will likely avoid that so they can offshore every type of employment and manufacture possible and skim the profits; at least until it runs out at which time there will be a lot of unemployed kids ready to be drafted and the military industrial complex put into ludicrous high gear.

Thu, 11/22/2012 - 14:43 | Link to Comment spartan117
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And what prevents China from selling said Treasurys in the open market? 

Thu, 11/22/2012 - 19:12 | Link to Comment ebworthen
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Absolutely nothing, though they will likely wait until they infiltrate the South American, Indian, African, and Russian markets further before they allow the U.S. Consumerism market to fail by dumping Treasuries and U.S. Dollar reserve currency status to end.

Thu, 11/22/2012 - 20:28 | Link to Comment lasvegaspersona
lasvegaspersona's picture

well let me ask you Eb...do you really think China expects to be paid (in good money anyway).

Any 4th grader can look at the US situation and say: wow, there is no way they can ever pay that off.

China sees the writing on the wall and thus is going into gold. Everyone is. That there is any movement of physical amazes me.

Thu, 11/22/2012 - 12:54 | Link to Comment Wonder why
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They are swapping cash for gold.

Thu, 11/22/2012 - 14:36 | Link to Comment Anasteus
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That's what I think as well. Most of cash is likely already in gold and new FX cash is being obtained by cautious selling of treasuries. Seems like China is fighting for backing its own currency like crazy.

Thu, 11/22/2012 - 13:00 | Link to Comment Ibird
Ibird's picture

War has many faces. The Chinese economic war (of sorts) against Japan has been very effective and is causing havoc to the Japanese economy.

What happens when China (the really really big "direct bidder") stops placing orders for Treasury auctions? Or better yet, what happens when they actively sell USTs? Now that will be an act of economic war that will have an impact on the US economy and fiscal situation. And represents a key reason why the Fed will NEVER sell a UST out of SOMA... EVER.

Watch Chinese holdings of USTs - perhaps we have seen the first salvo?

Thu, 11/22/2012 - 13:39 | Link to Comment Missiondweller
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What happens when China (the really really big "direct bidder") stops placing orders for Treasury auctions?

 

Its already happened. You'd be forgiven for for not being aware as it has not been hardly reported:

 

Romney: Yeah, it's interesting…the former head of Goldman Sachs, John Whitehead, was also the former head of the New York Federal Reserve. And I met with him, and he said as soon as the Fed stops buying all the debt that we're issuing—which they've been doing, the Fed's buying like three-quarters of the debt that America issues

http://macrowealthpreservation.blogspot.com/2012/09/the-romney-comments-...

Zerohedge reported this two months ago.

Thu, 11/22/2012 - 14:03 | Link to Comment Nadaclue
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Actually, China stopped buying UST in 2010 or 2011, don't recall which exactly. There are several dozen posts on ZH regarding this and Russkies not buying UST and actually liquidating.

There was a post just his week stating that China Tbill holding are at a multi year low and holding steady. As I understand it, Uncle Ben is a big  buyer of Tbills along with Japan, which is the biggest holder as they continue to print like mad.

http://www.zerohedge.com/news/2012-11-17/china-persists-refusing-buy-us-...

http://www.zerohedge.com/news/2012-10-16/china-continues-boycott-treasur...

http://www.zerohedge.com/news/presenting-shocking-source-us-treasury-dem...

 

Thu, 11/22/2012 - 14:18 | Link to Comment dizzyfingers
dizzyfingers's picture

"Actually, China stopped buying UST in 2010 or 2011, don't recall which exactly. There are several dozen posts on ZH regarding this and Russkies not buying UST and actually liquidating."

http://www.silverdoctors.com/obama-begins-push-to-confiscate-iras-401ks/

 

It may be time to take the tax hit and withdraw funds from private retirement accounts before they are forced into long term T-bonds.

The Obama administration is reportedly quickly moving on plans to nationalize private 401k and IRA retirement accounts, and replace them with government sponsored annuities (aka Treasury bonds that the Treasury currently can’t sell to anyone but the Fed).

National Seniors Council Director Robert Crone warns: “This whole issue is moving forward very quickly. Already there is a bill requiring all businesses to automatically enroll their employees in IRA plans in which part of every employee’s paycheck would be automatically deducted and deposited into this account. If this passes, the government will be just one step away from being able to confiscate all these retirement accounts.

All your retirement savings are belong to us:

A recent hearing sponsored by the Treasury and Labor Departments marked the beginning of the Obama Administration’s effort to nationalize the nation’s pension system and to eliminate private retirement accounts including IRA’s and 401k plans, NSC is warning.

The hearing, held in the Labor Department’s main auditorium, was monitored by NSC staff and featured a line up of left-wing activists including one representative of the AFL-CIO who advocated for more government regulation over private retirement accounts and even the establishment of government-sponsored annuities that would take the place of 401k plans.

“This hearing was set up to explore why Americans are not saving as much for their retirement as they could,” explains National Seniors Council National Director Robert Crone, “However, it is clear that this is the first step towards a government takeover. It feels just like the beginning of the debate over health care and we all know how that ended up.”

A representative of the liberal Pension Rights Center, Rebecca Davis, testified that the government needs to get involved because 401k plans and IRAs are unfair to poor people. She demanded the Obama administration set up a “government-sponsored program administered by the PBGC (the governments’ Pension Benefit Guarantee Corporation).” She proclaimed that even “private annuities are problematic.”

Such “reforms” would effectively end private retirement accounts in America, Crone warns. “These people want the government to require that ultimately all Americans buy these government annuities instead of saving or investing on their own. The Government could then take these trillions of dollars and redistribute it through this new national retirement system.”

Deputy Treasury Secretary J. Mark Iwry, who presided over the hearing, is a long-time critic of 401k plans because he believes they benefit the rich. He also appears to be one of the Administration’s point man on this issue.

“This whole issue is moving forward very quickly,” warns Crone. “Already there is a bill requiring all businesses to automatically enroll their employees in IRA plans in which part of every employee’s paycheck would be automatically deducted and deposited into this account. If this passes, the government will be just one step away from being able to confiscate all these retirement accounts.”

Read more:

Please realize that this is 100% about funding $1.5 TRILLION annual deficits using Americans’ retirement funds, as there is simply no other remaining pool of wealth able to soak up $1.5 Trillion in T-bills annually.

If the US government was put in charge of the Sahara Desert, there would not be a grain of sand remaining in 6 months.

Thu, 11/22/2012 - 16:05 | Link to Comment cranky-old-geezer
cranky-old-geezer's picture

 

 

The Obama administration is reportedly quickly moving on plans to nationalize private 401k and IRA retirement accounts, and replace them with government sponsored annuities

I've been warning about this ever since I came to ZH 2 yrs ago.  But most 401kers and IRAers will ignore warnings ...and bitch when their account is confiscated.

Thu, 11/22/2012 - 18:27 | Link to Comment Quinvarius
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Lol.  What a load of horseshit. 

Thu, 11/22/2012 - 20:19 | Link to Comment akak
akak's picture

Quinvarius, have you not been paying attention?  Such talk has been happening in Congress since 2008 (under Bush), if not longer.  And while I agree that it is horseshit, it is also a very real threat.

Politicians rarely publicly discuss measures that they do not ultimately enact (and enforce).

Thu, 11/22/2012 - 19:38 | Link to Comment Mary Wilbur
Mary Wilbur's picture

This is one of the scariest things I've read. I will start making withdrawals from my IRA immediately.

Thu, 11/22/2012 - 21:15 | Link to Comment lasvegaspersona
lasvegaspersona's picture

Mary Mary

way ahead of you

the tax bite really really really hurt but now, unless they just say "everything you own belong to us" I at least have some of what I worked 45 years for.

Thu, 11/22/2012 - 20:09 | Link to Comment Ox
Ox's picture

Can I suggest we start calling it the Obama Regime? Administration is too nice a word and implies some sort of benevolence.

 

"The international community condemmed the Obama Regime today as regime loyal forces used airstrikes against American citizens..."

 

Thu, 11/22/2012 - 20:30 | Link to Comment roadhazard
roadhazard's picture

I'm surprised wingers don't call it the Obama "Junta".  It's got that Kenyan ring to it. heh

Thu, 11/22/2012 - 20:36 | Link to Comment akak
akak's picture

"Cabal" would be more accurate yet.

Fri, 11/23/2012 - 00:58 | Link to Comment Omen IV
Omen IV's picture

total FABRICATION !!!!

Fri, 11/23/2012 - 10:41 | Link to Comment wchild
wchild's picture

I have been very concerned about this for some time as well

Jim Sinclair offers his opinion and sumizes

"Do not act emotionally and pay confiscation tax levels. Cool down and think about things. Nothing so draconian will happen so early in a new Administration – believe me. What was reported is a liberal professor speaking to the left."

http://www.jsmineset.com/2008/11/10/the-targeting-of-private-retirement-...

 

Thu, 11/22/2012 - 13:25 | Link to Comment cranky-old-geezer
cranky-old-geezer's picture

 

 

Seems to be lots of China bashing here on ZH, don't know why.

China is the ONLY engine of growth now, maybe Germany too.

America?  Forget it.  All we export is debt and inflation.

Our consumption (and debt) economy won't go on forever.  It'll stop when the US dollar collapses ...which ain't long now.

China has a production economy.  Biggest trade surplus of any nation now.   It'll continue far past the time our consumption & debt economy dies.

Thu, 11/22/2012 - 13:27 | Link to Comment centerline
centerline's picture

No sense on bashing China.  Bashing on the concept of perpetual "growth" is where it's at!  Growth, growth, growth... everyone signing the same tune without a clue.

Thu, 11/22/2012 - 14:12 | Link to Comment Ajas
Ajas's picture

"Our consumption economy won't go on forever."

"China has a production economy"

You're so close man, now just think one more move ahead!  Oddly, for the incredible machine of production that China's global-boom-forever-crack-supplier business model created, the utopia of 400 years of mercantilism.... they forgot food.

Thu, 11/22/2012 - 14:24 | Link to Comment Mike in GA
Mike in GA's picture

Not only food, but an internal consumption market for the day (like NOW) when their mercantile model implodes.

Oh yeah, and how about vendor financing into a filiing currency?  China ain't perfect and they are FAR from any answers for what ails the US.

Thu, 11/22/2012 - 15:17 | Link to Comment Mike in GA
Mike in GA's picture

s'posed to read, "failing" currency.

Thu, 11/22/2012 - 19:31 | Link to Comment Mary Wilbur
Mary Wilbur's picture

I haven't noticed "lots of China bashing" on ZH. I don't bash China certainly. It kind of makes me laugh when American politicians complain about China manipulating its currency. What the heck is the Fed doing with ZIRP? Manipulating the currency of course.

Thu, 11/22/2012 - 13:40 | Link to Comment DosZap
DosZap's picture

 Here's an Optimisitc view, that might have legs, it they are not (WILL BE CHOPPED OFF)

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/11/21_Billionaire_Wilbur_Ross_-_This_Will_Revolutionize_The_World.html

Wilbur Ross responded, “Yes, that’s true, as long as the federal government doesn’t get in the way with excessive regulation.”

Thu, 11/22/2012 - 14:29 | Link to Comment dizzyfingers
dizzyfingers's picture

"Our consumption (and debt) economy won't go on forever. It'll stop when the US dollar collapses ...which ain't long now.China has a production economy. Biggest trade surplus of any nation now. It'll continue far past the time our consumption & debt economy dies."

"U.S. Census statistics allow us to know that the United States has an aging population, by 2020 the U.S. will have as many people over 60 years old as there will be people under 18 years old." http://www.futuremoneytrends.com/

Diverse realities of our declining population haven't hit us (or U.S.) yet. Not all will be good.

Thu, 11/22/2012 - 14:40 | Link to Comment lunaticfringe
lunaticfringe's picture

China has quit buying UST. They buy a token amount. Japan may have overtaken them. However, I do get the point. We have China's deceleration, and we have an entire corporate world here laying people off by the thousands and positioning themselves pre- Obamacare.

The only thing selling well these days is bullshit.

 

Thu, 11/22/2012 - 15:53 | Link to Comment FischerBlack
FischerBlack's picture

That data series in the chart excludes gold purchases.

Thu, 11/22/2012 - 20:23 | Link to Comment css1971
css1971's picture

We don't need China to expand credit. The FED can do that all by itself these days.

Thu, 11/22/2012 - 22:34 | Link to Comment mt paul
mt paul's picture

that is a spooky chart

reality 101...

 

anybody know how to freebase a turkey

Fri, 11/23/2012 - 06:15 | Link to Comment Danielvr
Danielvr's picture

"Chinese reserves have decelerated dramatically over the last five years and are now close to zero"

Thankfully it's only the growth of their reserves, not the reserves themselves, that have come close to zero.. :)

I doubt if it's only the economic slowdown in the West that's to blame for that -- China is also increasingly doing business in its own currency, and so, simply needs fewer foreign reserves. I don't think that their diversification to gold has anything to do with that, as gold is usually included in the reserves count. Oh, and while China's dwindling appetite for the USD may be very significant to the US, which no longer gets to shop for free, that doesn't make it 'the most important chart in the world'. The US is just 5% of the world after all.

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