Looking for Sanity in an Insane World
Why has China become so important? Largely because global investors are in this transition mode and do not understand how or why the foundation of everything is changing beneath them. The market turmoil in China spread around the world on Thursday as global investors took their lead from China as a contagion unfolded with no real understanding. Some try to justify this by saying China is a casino and not a real market that is trading on speculation rather than solid earnings. Those types of statements reveal the lack of knowledge of the speaker since ALL markets trade on anticipation — NOT on earnings (anyone remember the DOT.COM bubble?).
So global markets look for direction and make up excuses as they go to try to make it sound logical. As we have been warning, China is in an economic decline into 2020. Sorry, but that is the way it is. There is no dark conspiracy to suppress metals — it’s a deflationary wave since commodities became addicted to the Chinese demand that is now retreating. The rest of the world is in the same boat of deflation set in motion by rising taxes and tax enforcement as governments suck an ever-larger portion of wealth to sustain themselves at the expense of the private sector.
The euro has paused, not because of any reversal in trend, but simply because everyone became too short and it forced liquidations on what they assumed was a one-way street based solely upon fundamentals. Yet, the euro has been unable to rally to reach key resistance just yet. The Japanese yen has not risen because of a bullish change in trend, which is just capital retrenchment as markets decline. Never forget, the higher a currency rises, the greater the economic deflation. The ONLY WAY to turn the U.S. economy down is for a dollar rally — not a decline.
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