fixed

Ffor whatever reason starting in the last hour of trading and continuing until the close, the Shanghai Composite - after trading largely unchanged - went from red on the day to up 4.9% after hitting 5.9% minutes before the close - the biggest one day surge since March 2009 - and nearly erasing the 6.1% drop from the past two days in just about 60 minutes of trading, providing a solid hour of laughter to bystanders and observers in the process.

Usually, we don’t stop to think about how the whole economy works together. A major reason is that we have been lacking data to see long-term relationships. What we are doing now is building debt to unsustainably high levels, thanks to today’s high cost of producing energy products. This can be turned around. To do so would require immediate production of huge quantities of incredibly cheap energy products - that is oil at less than $20 per barrel in 2014$, and other energy products with comparably cheap cost structures. Of course, such a low-price, high-growth scenario isn’t really sustainable in a finite world either.

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Seven years ago today, Lehman Brothers failed. But it is what took place just over two weeks prior that is of interest for the scope of this article.

It seems increasingly likely the next Global Financial Meltdown will arise in the FX/currency markets. The core paradox - that central banks can't control both domestic and global FX markets with the same set of policies - cannot be resolved by printing $1 trillion, or even $5 trillion. Printing money to fix one problem leads to another set of problems that are only made worse by additional money-printing.

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While any moves in the US stock market ahead of Thursday are largely irrelevant, as only Yellen's statement in 4 days will unleash epic algo buying or short covering (yes, according to JPM the Fed statement is bullish no matter what), it is what happened in China that is concerning, because while we had expected Chinese stocks to go nowhere in particular now that index future trading volumes have plunged by 99% or perhaps rise on hopes of even more easing after the latest terrible economic data, the Shanghai Composite dropped 2.7%, but it was the retail darling Shenzhen Composite which tumbled 6.7% - its worst selloff since August 25, while China's Nasdaq, the ChiNext crashed -7.5%.

· Thursday brings the much anticipated FOMC rate decision, with analysts split in their forecasts as to whether the central bank will hike rates after recent volatility in global markets

· A number of other events take place this week including rate decisions from the BoJ and SNB as well as releases of the German ZEW survey and the latest UK inflation & employment data

"More than 96% of respondents to the latest Wall Street Journal survey of 64 economists–not all of whom answered every question–said China’s gross-domestic-product estimates don’t accurately reflect the state of the world’s second-biggest economy. None of the respondents said China’s GDP was expanding 7% or more."

In the past year, we have extensively profiled the collapse of ground zero of Canada's oil industry as a result of the plunge in the price of oil. Since then it has only gotten far worse. As Mark Thornton of the Mises Institute points out, in a report from the Financial Post shows that Calgary in Alberta Canada now has 1.7 million square feet of empty office space, the most in North America with another 5.2 million under construction! But that's just the beginning, because for many recent millionaires, the real cash crunch has finally arrived which means business is thriving for at least one industry: pawn shops.

While the massive, $19.2 billion outflow in the week of the August 24 flash crash was understandable, as the market's record complacency was shaken by days of violent selling, as was the snap rebound inflow of $5.8 billion the following week resulting from oversold conditions, the fact that EPFR reported that in the week ended September 9 equity outflows once again surged, rising to a total of $19.4 billion - greater than two weeks prior, and the largest of 2015 - will cast doubt that the recent market correction is a one and done event, especially if the selling becomes a self-fulfilling prophecy.

• One Volatile Week Could Seal Fed Stance After Years of Low Rates (BBG)
• Fed to dominate week of central bank meetings (Reuters)
• 30 years on, parallels with Plaza but currency universe very different (Reuters)
• Wal-Mart's Suppliers Are Finally Fighting Back (BBG)
• China's Rising CPI, Deepening PPI Deflation Challenges PBOC (BBG)
• Petrobras spending plan already obsolete, new cuts likely (Reuters)
• Bank of Montreal to Buy GE Capital’s Transportation-Finance Unit (WSJ)

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Spoiler alert: none of these scenarios end well...