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Bernanke’s Balderdash
Bernanke’s Balderdash
The US and world economies are drifting inexorably into the next recession owing to the deflationary collapse of commodities, capital spending and world trade. These are the inevitable “morning after” consequence of the 20-year global credit binge which has now reached its apogee.
The apparent global boom during that period was actually a central bank driven excursion into the false economics of household borrowing to inflate consumption in the DM economies; and frenzied, uneconomic investing to inflate GDP in China and the EM.
The common denominator was falsification of financial prices. By destroying honest price discovery in the financial markets, the world’s convoy of money-printing central banks led by the Fed elicited a huge excess of financialization relative to economic output.
The central manifestation of that was $185 trillion of debt growth during the past two decades——a stupendous explosion of credit which amounted to 3.7X the expansion of global GDP.
And even that ratio is an understatement. That’s because measured GDP has been artificially bloated by the monumental worldwide malinvestment and excess capacity arising from the credit bubble. That is, phony “growth” which under the laws of economics will be liquidated in due course.
But you wouldn’t have known that the global economy is about to hit the skids from Monday’s action. Bernanke kicked off the day in a Wall Street Journal op ed taking a bow for “saving the world”.
Then the stock market completed a rally from Friday’s post-NFP low, which amounted to 84 points (4.5%) on the S&P 500 during a seven-hour span of trading. That was even less time to “mission accomplished” than last October’s three-day Bullard Rip.
So here we are again circling the 2000 mark on the S&P 500—a level first crossed 440 days ago. Undoubtedly, the casino is knee-jerking upward because Goldman has already made an unsecret audible call, instructing the Fed to substantially defer lift-off well into next year.
…click on the above link to read the rest of the article…
The Most Astounding Credit Binge in History
The Most Astounding Credit Binge in History
Stripped Gears
DELRAY BEACH, Florida – “The Donald” breathed a sigh of relief yesterday. He and other rich people got a break from the beating they’ve been taking: Stocks bounced, with the Dow ending yesterday’s session up more than 600 points.
The gears have been stripped, and they look rusty…
Photo credit: Jonathon Cianfrani
Yesterday’s bump confirms the mainstream view: There is nothing to worry about. The recent sell-off is just a case of nerves, not a sign of an epizootic.
DJIA: don’t worry, be happy? – click to enlarge.
Here is U.S. Trust, a private bank for the ultra-wealthy, reassuring its customers:
“The action in the past few days has been based on fears that we will revisit the market environment from 1997 to 1998, in which the Asian currency crisis led to a sizable correction in world equity markets. A second breakdown in energy, a continued fall to record‐low prices in many commodities, and a deep drop in emerging market currencies and equities are sparking fears that a global growth recession is coming our way. And add to that the fact that investors are worried that the Federal Reserve may tighten into a large-scale slowdown is increasing the flight to safety.”
U.S. Trust, like Donald Trump and much of the media, blames the Chinese for the recent sell-off. Emerging market economies are slowing, they say, as the U.S. and developed economies are moving into “higher gear.” Higher gear? As near as we can determine, the gears have been stripped.
…click on the above link to read the rest of the article…
“The Most Astounding Credit Binge in History”
“The Most Astounding Credit Binge in History”
But is the bounce to be trusted?
“The Donald” breathed a sigh of relief. He and other rich people got a break from the beating they’ve been taking: Stocks bounced, with the Dow ending yesterday’s session up more than 600 points.
But is the bounce to be trusted? And are there better, more tangible, alternatives to investing in stocks? We’ll try to answer both questions in today’s update… We’ll also respond to a reader’s feedback on Mr. Trump in today’s Mailbag.
Stripped Gears
Yesterday’s bump confirms the mainstream view: There is nothing to worry about. The recent sell-off is just a case of nerves, not a sign of an epizootic. Here is U.S. Trust, a private bank for the ultra-wealthy, reassuring its customers:
The action in the past few days has been based on fears that we will revisit the market environment from 1997 to 1998, in which the Asian currency crisis led to a sizable correction in world equity markets. A second breakdown in energy, a continued fall to record‐low prices in many commodities, and a deep drop in emerging market currencies and equities are sparking fears that a global growth recession is coming our way. And add to that the fact that investors are worried that the Federal Reserve may tighten into a large-scale slowdown is increasing the flight to safety.
U.S. Trust, like Donald Trump and much of the media, blames the Chinese for the recent sell-off. Emerging market economies are slowing, they say, as the U.S. and developed economies are moving into “higher gear.”
Higher gear? As near as we can determine, the gears have been stripped.
…click on the above link to read the rest of the article…
The Scale Of The Chinese Real Estate Crash Is Terrifying
The Scale Of The Chinese Real Estate Crash Is Terrifying
We hear a great deal about the credit binge in advanced economies that helped lay the foundation for the 2008 financial crisis and is also widely blamed for holding back the pace of the recovery. Well, while the West has been unwinding some of this excess borrowing in recent years, emerging markets have been seeing their own credit boom.
And it’s a huge risk — particularly in China, where growth has normally pushed along the economies of several other countries.
Growth is slowing in China and its debt overhang is growing as a result. That’s a problem because countries ought to be able to grow their way out of debt. But that era may be coming to an end. And now China has a developing real estate crash of its own.
Here are the figures as provided by J.P. Morgan. (Note Hong Kong in particular):
…click on the above link to read the rest of the article…
