Eric Peters: "If China And The World Bank Are Right, We're Headed For A Depression"

Tyler Durden's picture

From the latest weekend notes from Eric Peters, CIO of One River Asset Management

"Some people blindly invested offshore and were in a rush to do so,” explained China’s central bank chief, justifying his recent capital controls.

“Some of this outbound investment was not in line with our own policies and had no real gain for China.” No doubt he’s right. The tycoons fleeing Chinese capital markets have done so selfishly. “So to regulate capital flows, I think it is normal,” concluded the central banker.

Chinese credit relative to GDP has doubled in the past decade to 300%. Which remains less than the US at 350%, but the rate of Chinese credit growth is as unsustainable as it is difficult to reverse -- without tanking the economy. The tycoons are running from this dynamic. Because such loops almost always end badly.

Anyhow, after so many years of secular stagnation fears, global investors have grown conditioned to run. They’ve been running away from fear for so long, they’ve forgotten how to run toward greed. Which has left them blindly holding over $10trln of bonds, which yield negative interest.

Now, this might make sense in a deflationary depression. But the global economy has not seen such strong synchronized cyclical growth in years. Inflation is likewise firming everywhere.

But China lowered its growth target again. As the World Bank warned that today’s strong global upswing in confidence and financial markets are not enough to pull the world out of a “low-growth trap.” If they’re right, we’re surely headed for depression. Because all this new debt requires robust economic strength to shoulder the weight.

But European debt markets are still largely priced for depression. And with JP Morgan’s CEO Jamie Dimon announcing the return of animal spirits in America’s economy, it seems more likely that this cycle ends like every other. With a blind run toward greed.

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Belrev's picture

We have been in Depression since 2008. These experts are way behind.

pitz's picture

More like 2000-2001.  The housing 'bubble' temporarily masked it 2003-2008.

Belrev's picture

Jobs disappeared for good in 2008. Before that you could still find decent work.

JRobby's picture

Hello!

It is all going south quick!

Look at the auto dealer lots (AND overflow lors)

MAXED CREDIT CARDS. TAP CITY!!!!! DONE!!!!

knukles's picture

Next up; the UN has declared that there are more airplanes in the oceans than submarines in the sky.

acetinker's picture

Wait, what?  I thought it was the BIS!  You're a funny fucker when you wanna be. +1000

The IYI's (all credit to Taleb) look at all the wrong metrics and declare their deductions, via their intellectual superiority mind you, that what you see with your own eyes cannot possibly be true.

And here I thought Alice in Wonderland was a children's fable.

flicker life's picture
flicker life (not verified) acetinker Mar 12, 2017 7:37 PM

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM

acetinker's picture

What in the actual fuck?  I musta used a trigger word.  It was probably deduction.

Taken out of context, like a bot would do...

Your programmers are idiots compared to the likes of Knuks.

Funny, I was once an Amway rep.  No shit!  Funny also that I met two people, without a complete set of teeth between them, in Arkansas, eagerly writing me checks- expecting to be millionaires.

I quit on the way back to the airport.

Fuck off!

UmbilicalMosqueSweeper's picture

The Cheshire cat is on acid, and grinning at the coming shit-storm.

rejected's picture

Ain't that the truth. Wife and I noticed that the other day,,, lot after lot after lot of cars. LOL.

canisdirus's picture

In some places the mask was only around 2005-2007, which was the last period during which most of flyover country had a decent economy.

There are some exceptions that are partaking in web 2.0, 3.0, or whatever they're calling the current tech folly these days. Of course, this will end just as badly as the dot-com bubble and there really isn't anything to fall back on like there was back then.

the artist's picture

It would be awesome if what we were in was a recession. 

It would be cause for celebration if what we were in was merely a depression. But depressions, by definition, rise again at the end of their cycle. 

What we are currently facing is the worlds first, greatest and perhaps only ever Global Contraction

That is what all of this mass cognitive dissonance has been...the wars, the obfuscation, the globalization push, carbon tax push, shitty healthcare push, the energy grab in the MENA etc etc etc. All because they cant possibly tell us the truth, that their Ponzi scheme has come to a predictable end. They need to hand us less than we paid for in every instance. 

2% inflation dont sound like much 100 years ago but we are at the hockey stick end of that curve and all of these things we are witnessing now are a direct result of that Creature from Jeckle Island. 

In Ze No's picture

The 1930s did experience a global contraction.  First bank failure was in Austria.  Interesting read here:  Rothchild owned, later taken over by Deutsche bank.  

In the late 1920s, a principal debtor, the Steyr-Werke AG faced financial difficulties, with bad loans leading to a drain on finances. In October 1929, the Schober government compelled the allegedly well-financed Credit-Anstalt to assume liabilities, which together with the simultaneous Wall Street Crash led to the financial imbalance of the then-largest Austrian credit provider.

Creditanstalt had to declare bankruptcy on 11 May 1931. This was one of the first major bank failures that initiated the Great Depression.[2]:2–3 [3][4] Chancellor Otto Ender rescued Creditanstalt by distributing the enormous share of costs between the Republic, the National Bank of Austria and the Rothschild family

...

Following the Austrian Anschluss to Nazi Germany in 1938, Creditanstalt-Bankverein was targeted for both financial and racial reasons. Louis de Rothschild was immediately arrested and imprisoned for the losses suffered by the Austrian state when the bank collapsed. Deprived of his position and property, he emigrated to the U.S. in 1939 after more than one year in custody.

In Ze No's picture

From Wikipedia, btw.

Credit-Anstalt Bank

markpower49's picture

But this time I want starvation of the poor and destruction of cities by fire. Progressives should be hunted for sport.

Dan'l's picture

Yes, run them to ground with hungry dogs and then use the flamethrower to make them re-surface and Pop, Pop! Watch them twitch!

UmbilicalMosqueSweeper's picture

We have been in bankruptcy since 1933.

BritBob's picture

Things could take a downturn if it all kicks off in the South China Sea.

The South China Sea – China is acting like it owns the whole of the South China Sea but all states are entitled to claim up to 200 miles EEZ (Exclusive Economic Zones) whereby they have title to all resources.

The ICJ has already determined at an earlier tribunal that No delimitation between states with opposite or adjacent coasts may be affected unilaterally by one of those states. And , The delimitation of the exclusive economic zone between states with opposite or adjacent coasts shall be affected by agreement on the basis of international law.

For that and some other interesting judgments on territorial seas (3 pages) and to gain an understanding as to how the world court deals with such disputes Google: ''Falklands – Territorial Waters Academia'' Or use link:

 

https://www.academia.edu/10574593/Falklands_Islands_Territorial_Waters

knukles's picture

Possession is 9/10's of the Law

Theosebes Goodfellow's picture

~"Possession is 9/10's of the Law"~

Possession is 10/10ths of zero counterparty risk.

Just sayin'....

;-)

UmbilicalMosqueSweeper's picture

Unless you are a Viking, Bolshevik Jew, or nigger parasite. Then what's yours is theirs.

Chris88's picture

Impossible, protectionism is going to work for the first time in history and growth is going to be astronomical despite increased govenrment and debt.  MAGA! 

the artist's picture

The best we can hope for is that we do better than all others. I have no problem with that. There will be winners and losers coming up here pretty soon. MAGA means we make sure we are the winners. 

TheVoicesInYourHead's picture

Thankfully, prognastications from both the World Bank and China are always wrong.

general ambivalent's picture

Or a prederepressioncession?

the artist's picture

Or a pederastodepression- A depression handed to you by the pederasts who rule over you. 

Youri Carma's picture

China is my Favourite Restaurant!
Sep 1, 2016 serpentza
https://youtu.be/EDFJhe9MKHg?t=8m22s

“Things have changed in China recently. Things in China for foreigners have been getting worse. And it’s ever since that stock market crash. It’s ever when the economy started to slow down. The attitude of the average China people towards foreigners is different. There is less money to throw around and since there is less money to throw around people are starting to point blame. The country is starting to close up. There’s a lot more protectionism going on …”

RabbitOne's picture

People have all sorts of fancy gauges as to why things will go bad in the future. I don’t. You only need a couple of items to have a clear view. The first is America self sufficient? Nope. Just look our balance of payments. We are living on credit. The second is American government responsible and self sufficient. Nope. We are living on credit. The third is the American public  responsible and self sufficient. As a whole nope.  We are living on credit. It does not take a genius to see what is going to happen from living on too much credit. I don’t care about predictions of when it is going to suffer a set back.  I just don’t worry about it anymore...

GlobalMapper's picture

I agree with much of your post Rabbit, but it was not the people that placed our Country in this untenable condition, it was our government.  And before you tell me that it is our fault for letting this happen, explain to me how we were supposed to stop it.  The good people of this Country who know what is going on did the best thing that they could do by voting for Trump hoping to get a leader that would extract us from this israel worshipping, neocon, social justice bullshit trap that we have been living in.

I don't worry about it too much; only for my children.  But I am well prepared for whatever may come down the pike as a result of this insanity.

Wulfkind's picture

According to our Constitution and 220 years of history tbe people have placed other Americans into OUR government.

You can't blame a government Of the people, By the people and For the people without blaming the people.

As to your question about how you were supposed to stop it.....apart from bloodshed like our Founding Fathers were compelled to do...there us nothing you can do.  Once a nation of corrupt people like us have the power to vote we will vote in corruption.  Time and time again.

 

Herdee's picture

Can the big trading desk at the Fed that has unlimited magin hold up the manipulated markets? Or will they plan a huge sell-off?

yogibear's picture

The central banks have been injecting liquidity in whatever areas were showing signs of imminent  to prevent areas from collapsing.

Frikin zombie economy.

Held together by central bank masking tape. 

Speculation that there is software that's used in determining which companies, banks are in dire trouble to rescue.

Notice no falures since 2009. And interest rates have been kept at emergency low levels even though they say the economy is healthy?

If your a bank or large company drive it into the ground, offshore the money and let the fed's program boost your stock or bail you out if your a bank.

Fed's infinite money paradigm will just keep throwing trillions of printed money at the largest failing banks/businesses. 

Mena Arkansas's picture

The 2008 depression never ended for the former middle class.

50% of the country is still barely hanging on by their fingernails.

If things go south again expect to see a lot more poverty and homeless.

Not that the top 10% who own the majority of the assets gives a fuck.

They've been getting QE welfare thanks to the zio-fed ever since the jew bankers destroyed the economy.

The 10% will continue to happily blame the victim and wallow in their own superiority.

yogibear's picture

The central banksters will make sure they continue transferring wealth.

Only way to topple the central banksters is to exposed their game through a currency crisis.

jangojango's picture

Of course we are headed for the worse depression the world has ever seen.  Not only because we can see the signs in the economies of the world, but because end times prophecy has already stated that:  "a day's wages for a few loaves of bread".  This is where we are headed which is hyperinflation or crash, or both.  Are you ready for it?   You can get ready here.   ItsHisStory.com  

UmbilicalMosqueSweeper's picture

My End Tmes Tea Leaves say the sun will rise and fall tomorrow. My crystal ball concurs.

bshirley1968's picture

Well, Duh!  We've known this for some time, Eric.  Where the hell have you been?

Psssst, don't tell anyone, but I don't even know what China and the World Bank said.  Not wasting my time to read about it either.  Don't have to.

Batman11's picture

Twelve people were officially recognised by Bezemer in 2009 as having seen 2008 coming, announcing it publicly beforehand and having good reasoning behind their predictions.

They all saw the problem being excessive debt with debt being used to inflate asset prices (US housing).

They all think you can’t use debt to solve a debt problem.

They all think that as we have used debt to solve a debt problem a bigger crash is coming in the future.

“We cannot solve our problems with the same thinking we used when we created them.” Albert Einstein.

2008 – “How did that happen?”

The current experts showed they were clueless.

The real experts showed themselves by seeing 2008 coming and we stayed with the same half-wits that caused the problem in the first place. These numptys insisted it was a “black swan”.

More debt doesn’t solve a debt problem.

Batman11's picture

2008 – “How did that happen?”

Not a black swan.

This is the build up to 2008 that can be seen in the money supply (money = debt):

http://www.whichwayhome.com/skin/frontend/default/wwgcomcatalogarticles/images/articles/whichwayhomes/US-money-supply.jpg

Everything is reflected in the money supply.

The money supply is flat in the recession of the early 1990s.

Then it really starts to take off as the dot.com boom gets going which rapidly morphs into the US housing boom, courtesy of Alan Greenspan’s loose monetary policy.

When M3 gets closer to the vertical, the black swan is coming and you have an out of control credit bubble on your hands (money = debt).

The theory, which relies on understanding money and debt.

Irving Fisher produced the theory of debt deflation in the 1930s.

Hyman Minsky carried on with his work and came up with the “Financial instability Hypothesis” in 1974.

Steve Keen carried on with their work and spotted 2008 coming in 2005.

You can see what Steve Keen saw in the graph above, it’s impossible to miss when you know what you are looking for.

The hidden secret of money.

Money = Debt

Money is created from loans and destroyed by the repayment of those loans.

https://goldsilver.com/hidden-secrets/episode-4/ 

From the BoE if you don’t believe it:

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

If you paid off all the debt there would be no money.

Money and debt are opposite side of the same coin, matter and anti-matter.

The money supply reflects debt/credit bubbles.

hendrik1730's picture

My 5 year old grandson already knows that. But the DC morons and the banksters don't. They are the "experts" - at our expense.

hendrik1730's picture

My 5 year old grandson already knows that. But the DC morons and the banksters don't. They are the "experts" - at our expense.

the artist's picture

Noriel Rubini is one. Peter Schiff is the another. Rubini is now a globalist douche-bag. Schiff is still prescient.

artichoke's picture

No of course it doesn't solve the problem.  But to a significant extent it buys time for you to think of a magical solution.

Have we thought of a magical solution now?  Discuss.

marcel tjoeng's picture

 

 

Bunch of humbug

Chinese state financing, or rather the Chinese investment bank financing is a whole different world on its own.

When China says it is lowering its growth target, this mostly means that China is rearranging it's accounting practices .. again, which effect might be a lower growth number, but in the complexity of things that doesn't really mean much, but some window dressing for investor eyes, probably to lower expectations.

The debt portfolios of Chinese banking is so much off this world, which is known, but where all the details are not really known.

A depression coming?

I doubt it, not in China, the rest of the world maybe, for other reasons, like the new BIS rules, that are contracting the money supply, which is a really bad really really bad idea.

 

 

Dr. Bonzo's picture

A depression coming? I doubt it, not in China...

Ooooooh, when Chinese manufacturing slowly starts to crumble to dust, those 50 million to-be unemployed Chinese industrial workers will just go sit on their couches and quietly play computer games, drawing from China's lavish welfare scheme. And the other 500 million rural Chinese who are already iiving on subsistance incomes are all going to smilingly watch basic foods prices sky rocket as the renminbi tsunami finally hits........

Riiiiight. SMFH.