Tag Archives: China

Who’s winning the China vs. USA economic competition? China is. Here’s why.

China owns nearly one-third of US debt.  Owning US treasury notes helps China’s economy grow by keeping its currency, the yuan, weaker than the dollar.

This practice keeps Chinese exports cheaper than US products, which is an ideal situation for China, since the top priority for China is creating jobs for its 1.4 billion people.

Why does China want the yuan to be weaker than the dollar?  A weaker currency makes China more attractive to traders in global markets.  This is part of the Chinese economic strategy, because it keeps Chinese export prices competitive.  The nation does this by holding the yuan at a fixed rate compared to a currency “basket” in which most currencies are pegged to the US dollar.  This is nothing less than deliberate currency manipulation.

China’s position as one of America’s main lenders also gives the country huge leverage.  If China called in all of its debt at once, demand for the dollar would plummet.  This would severely disrupt international markets along with the entire American economy.

China’s debt-holder strategy is working wonderfully for China’s benefit.  This low-cost competitive approach has enabled the Chinese economy to grow 10% annually for the past three decades.

Is there a risk in allowing China to be such an important “banker” to the USA?  Of course there is a risk, and it could easily be a huge risk.  But at this point the USA has no way to reduce that risk. None.

 

[From an article published by AMAC.COM]

 

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As always, posted for your edification and enlightenment by

NORM ‘n’ AL, Minneapolis
normal@usa1usa.com
612.239.0970

 

 

 

 

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The pillars of our economic recovery are crumbling…

When historians sort out this era of once-a-decade financial bubbles, they’ll marvel at how dissimilar the drivers of each boom were. The junk bonds of the 1980s were essentially leveraged tools for extracting wealth from companies. The dot-coms of the 1990s were vehicles for exotic new technologies and untested business models. The sub-prime mortgages and credit default swaps of the 2000s were semi-fraudulent fee-generation schemes.

All, in retrospect, were strange, unsteady foundations on which to build a global economy. But they look positively sane compared to the pillars of the current expansion: China and fracking.

As the true extent of China’s debt binge becomes apparent, the only reasonable reaction is awe. To cook the story down to its essence, the world’s biggest developing country decided to become developed in the space of a few years, borrowing nearly as much money as the entire rest of the world and using the proceeds to buy up every conceivable kind of industrial commodity. The result was a natural resources boom that, for a little while, floated the global economy on a rising tide of leverage. For much more detail, see this long Zero Hedge analysis.

Then, as all debt binges eventually do, this one ended in a tangle of malinvestment and evaporating cash flows. China’s excess capacity in basic industries like steel and cement is now epic. Mass layoffs are being announced daily. Its velocity of money — a measure of the tempo of economic activity — is the lowest in the world. And external trade is collapsing, with February imports and exports falling 13.8% and 25.4%, respectively.

Now in damage control mode, China is spending its foreign exchange reserves in a probably-futile attempt to keep its currency from plunging, while capital is pouring out of the country in search of safe havens and hedge funds are placing billion-dollar bets on a big yuan devaluation.

China forex reserves March 16

China, in short, has become a drag on the global economy rather than its savior. And much, much worse is coming.

Now on to fracking, which involves pumping toxic industrial chemicals into the ground to free up hard-to-reach oil and gas reserves. For a while, this was the Internet of the energy business, captivating bankers and entrepreneurs and igniting a scramble for prime drilling rights.

Between 2006 and 2014, US natural gas production rose from 64 billion cubic feet a day to 90 billion while oil production rose from 5 million barrels a day 9 million. Along the way, fracking produced millions of well-paying jobs, lifting whole US regions from bust to boom and generating massive tax windfalls for favored states.

But this too was a leveraged mirage. The surge in supply swamped a global market that was already slowing due to China’s bursting credit bubble. The result was a crash in oil and gas prices and a bloodbath in the US oil patch.

Rig count March 16

All those now-idle rigs cost someone a lot of money, much of it borrowed from banks and junk bond investors. So unless oil and gas return to 2012 levels in short order, the year ahead will see a rolling wave of bankruptcies and huge write-offs for lenders, pension funds and yield-seeking retirees. All of which, like China, constitute a drag on growth.

In a system that seems incapable of functioning in the absence of bubbles, the question now becomes: What can the monetary authorities convert into the next bubble? And the answer is not at all clear. A case can be made that the rush into negative-coupon German and Japanese bonds is bubble-like. But this doesn’t seem to be generating jobs or income for anyone — just the opposite. Buying a negative interest rate bond is a bet on shrinking capital.

In the US, cars were hot for a while but subprime auto lending is already hitting a wall and will likely go the way of China and fracking in the year ahead. Solar power? Maybe, but growth there comes at the expense of coal and natural gas, so it’s a wash in the short run. Finance? Forget it. Negative interest rates are an existential threat to traditional lending, and the big banks are all retrenching. Government funded infrastructure? That’s a liberal politician’s dream, but it sounds a lot like what China just did, and bubbles tend not to repeat in this way.

The terrifying conclusion is that other than a major war, there’s nothing out there capable of generating another global bubble. And absent another bubble, there’s nothing between us and the abyss.

 

(by John Rubino, writing for DOLLARCOLLAPSE.COM)

 

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As always, posted for your edification and enlightenment by

NORM ‘n’ AL, Minneapolis
normal@usa1usa.com
612.239.0970

 

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Important global economic perspective…

Introduction: Forecasting trends since 1980, Mr. Gerald Celente is publisher of the Trends Journal®, Founder/Director of the Trends Research Institute® and author of the highly acclaimed and best selling books, Trend Tracking and Trends 2000 (Warner Books). Using his unique perspectives on current events forming future trends, Gerald Celente developed the Globalnomic® methodology, which is used to identify, track, forecast and manage trends. His on-time trend forecasts, vibrant style, articulate delivery and vivid public presence makes him a favorite of major media. The Trends Research Institute has earned its reputation as “today’s most trusted name in trends” for accurate and timely predictions. On the geopolitical and economic fronts, Celente and The Trends Research Institute are credited with predicting the collapse of the Soviet Union, the last two economic recessions, the dot-com meltdown, the 1997 Asian currency crisis, the 1987 world stock market crash, increased terrorism against America, “Crusades 2000,” the quagmire in Iraq … before war began and much more. The Trends Journal is on YouTube here.  (Interviewed by Anthony Wile of The Daily Bell.)

 

Anthony Wile: Hello, Gerald. Thanks for speaking with us today. Let’s dig in. You sent out a Trend Alert this afternoon entitled “Broken China, Global Meltdown.” At The Daily Bell, we featured an article just this morning about China. Share with our readers the focus of your email and why you felt the issue was important enough to send an alert.

Gerald Celente: China is the canary in the global economy’s mineshaft and when you look at China and see the growth that it’s had, for example, their debt level just as they were joining the World Trade Organization in 2001/2000 it was about $2 trillion. Now we’re talking almost $30 trillion.

All China did is the same thing that the United States did, that Japan did, that Europe is doing. That is, they have a different name for quantitative easing and Ponzi schemes. They built a good part of their economy on borrowed money, leverage and speculation. As China built itself you saw the emerging markets, particularly the resource-rich ones, become richer as they were selling China natural resources because China gobbles up essentially 45 to 50 percent of a lot of the world’s raw materials. For example, look at iron ore. At the peak in 2011 iron ore was selling for almost $200 a ton; now it’s selling for around $50 a ton. If you look at the index of commodities, they’re hovering around 1999 levels.

China is really the country to look at, not that they’re the ones that are causing the decline but with so many countries dependent upon China for exports, for China to buy their product, whether its finished product or raw materials, you can see how the implications are going worldwide.

But as I said, China’s only part of it because you look at the United States, you look at Europe and you look at Japan, for example, with all their quantitative easing and record-low interest rates here in the States and in Europe – Europe has in some places negative interest rates – it has done nothing really to build the fundamentals of the economy; all it did was juice the equity markets.

What’s going on is very important, not only on a geopolitical scale but on a whole other level. China’s greatest fear beyond America’s pivot to Asia and the war talk is what’s going on among the people there. They used to report – they’ve stopped reporting now – they had about 30-, 40,000 incidents, public protests and strikes against the Chinese government, yearly. We’re still seeing some of those, particularly in the western provinces with, for instance, the Uyghurs who are looking to break away again. They killed 50 people there in one day and even the locals didn’t know about it, the people that were rebelling against the Chinese government. They have 1.2, 1.3 billion people – that’s their greatest concern, is citizen revolts. They have to do everything they can to keep their economy afloat.

Number two, in China with the weak numbers coming out, nobody believes their numbers. According to many economists and financiers, their growth rate is really more around the 4 to 5% range, if that high, rather than the 6.97% range.

Anthony Wile: I’d like to discuss a couple of the trends in focus in your Summer Trends Journal and then discuss how they fit into some areas of additional interest we’ve been pointing out to our readers. I’ll throw some phrases at you from the Journal and let you respond with a description of why such a trend might be important from a social and investing point of view.

The first is from, “Seven years of rigging the game,” an article that talks about banking and an “acceleration toward extreme market fallout” – worldwide. Can you elaborate on this, and talk about both the ramifications and the causation?

Gerald Celente: The ramifications are that we have a concentration of wealth because of record-low interest rates and quantitative easing, and when you look at all the numbers, the tens of trillions of dollars that the Federal Reserve and central banks have pumped into the system since the great recession at the worst levels of it in 2008, 2009, it’s really only gone to boost the equity markets. In the rest of the world, you have places like Greece austerity measures, Portugal austerity measures, Ireland austerity measures. “Austerity measures” is really just a word to fine people and tax them to pay off bad loans the banks made.

When you look at the numbers and why the equity markets are high it’s because they’ve been borrowing money for nothing. That’s why you see merger and acquisition activity now at record levels, going to surpass the hype back in 2007. They’re borrowing money for nothing. The same thing with stock buybacks. You’re borrowing money for nothing. It’s a carry trade. You buy back your stock, you drive up the prices and the people at the top get richer.

Is this speculation? No. The facts are all there. When you look at the implications it affects the everyday person because of the concentration of wealth. You’re looking at 85 people in the world – 85 people in the world – have more money … you ready? Than 3.5 billion. You’re looking at the gap between the rich and the poor now in the United States at levels that are worse than it was during the Gilded Age, with the concentration of wealth in the hands of so few.

That’s why, going back to China, this is a supply and demand issue. If the United States and Europe aren’t buying things, China’s not making them. If China’s not making them, resource-rich nations, particularly countries such as Brazil, Bolivia, Chile, Russia, Niger, Nigeria, Ghana, are not selling their natural resources. If they’re not selling their natural resources, if American and European economies are flat and China’s not making things, you have a global recession/depression setting in.

With the money concentrated in the hands of a few, with production and exports and imports slowing down around the world, you have fewer people with money to buy product. It’s supply and demand. That’s why you’re seeing all of these commodity prices go so low.

Go back a year ago when oil prices started to decline, and now they’re down some 50% from essentially a year ago, this summer. What was the first reaction? “They’re doing it to punish the Russians.” Then you’d hear, “No, no, no, the Saudis want to control more of the market so they’re putting more money out there.” No. It’s supply and demand. It’s not only in oil; it’s in zinc, aluminum, copper, iron ore, across the board. It’s a supply and demand issue.

The last seven years have made the filthy rich filthy richer. I don’t blame them. I’m not saying they’re wrong. I’m saying they could go to the casino and gamble. The regular people can’t; they have to play Lotto.

Anthony Wile: Another trend that attracted my attention is “energy diversification.” Please explain the importance of this trend … especially from an investment standpoint.

Gerald Celente: Ironically, energy prices for fossil fuels are declining at the same time there are more advancements in what they call alternative energies. Go back 100 years ago and coal was the dominant energy. Then oil became the dominant energy. Before that, people rode around in horse and buggies. There was no such thing as refrigeration. It was the iceman.

What we’re looking at is that kind of change. We’re moving from fossil fuels, but beyond wind, solar, geothermal, biofuel. We’re going into a whole new era and this is just the beginning of it. Ironically, it’s happening at a time when commodity prices for fossil fuels are declining rapidly.

We believe that one of the big fields to look at, which we write about frequently, are the new breakthroughs, whether it’s in hydrogen or thorium, zero-point energy, whatever new fields are there. Everybody can laugh at these things but they laughed at the other inventions, too. We believe that we’re going to see some major breakthroughs. You’re also seeing price declines happen, too, as advancements in solar and other energies keep growing. Fossil fuels are going to become a very fossil thing in the past.

As for other implications of this, do you think the United States foreign policy in the Middle East will change? Do you think anybody will care about Saudi Arabia, the beheaders-in-chief worldwide? What is it, 175 people they’ve beheaded already this year? Do you think anybody will care about any of these Middle East countries, Qatar or Bahrain, if there’s no oil? Do you think the United States would have invaded Iraq and destroyed Libya if their major export was broccoli? Of course, Syria, too. It’s about pipelines running through, too. The whole Middle East program changes and so, too, do world economies. Really, it could be the wildcard that puts us back on a path to prosperity, actually.

Anthony Wile: That’s a hopeful assessment. Finally, there’s “Millennials and their fears.” My question: What are they afraid of and how are they coping?

Gerald Celente: Millennials are very interesting. It’s probably the most ego-inflated generation because when they were little kids they were told how amazing and special they were, like they were going to split the atom or something. They were kids!

Our CEO was just telling me a story. He grew up in Queens; I grew up in the Bronx and Yonkers. His mother was a dancer with the Ukrainian dancers back in the day. The great Ukrainian dancers escaped Stalinist Russia. They were performing at Carnegie Hall and one day they were practicing. Of course, the mother took him with her. He was a little kid, eight years old. All of a sudden this Ukrainian guy throws something at him and tells him to shut up as he’s carrying on. You could never do that today.

Anthony Wile: I bet he shut up, though.

Gerald Celente: Of course. He said he was scared out of his wits, this guy screaming at him. Of course, the mother didn’t say anything; the kid wasn’t behaving.

Now, we have this generation that grew up where everybody won. There were no losers at games. Everybody got trophies. Their egos were blown up with how amazing and special they were. Now they come out of college, those who went, and their debt level is greater than consumer debt, at about $1.3 trillion. They can’t get good jobs, many of them, and they don’t have a lot of dreams.

Again, I began with the mergers and acquisitions activity. There’s been a consolidation of industry that we’ve never seen before in this country. The mom-and-pops can’t compete. The entrepreneurs have difficulty competing because the playing field has been tilted in favor of the multinationals. From the NAFTA trade agreement to Obama’s new Trans-Pacific Partnership, it’s about the multinationals. They’re growing up in this time.

It’s very interesting that we find in our research that they don’t have great visions for hope in general. However, that’s in general. There’s still a leading edge among them that see the future very differently and understand that they can make it anything they want.

Every generation thinks they’ve discovered something that’s very old. My generation, the Baby Boomers, we discovered health food. This generation thinks that they’re discovering farm-to-table and buy local but it’s very big in the consciousness of a lot of them and they’re doing a lot to make that happen.

Look at the Occupy movement they put on. At first glance, it didn’t amount to much. But in fact, it accomplished a lot because it accomplished the understanding of the 1% that own so much. If that’s all it did, it did a lot. It’s actually not 1%; it’s .01%. They brought that consciousness out. If you talked about the 1% before, you would be considered a socialist and that you were against capitalism.

By the way, this isn’t capitalism. I mentioned it’s the merger of state and corporate power. It’s fascism. As a matter of fact, look at the so-called debates. Who are they sponsored by? Who runs them? Corporations. ABC, CBS, NBC, Fox. Oh, they’re “networks”? They’re not networks; they’re corporations. You can put a different name on it but it’s still corporations. If you call a whorehouse a brothel it’s still a whorehouse. In fact, I would call it a brothel because the people running them are presstitutes.

It’s a corporate controlled election. They decide how the game is going to be played and who’s going to play it. Democracy? Save it for the kids in high school and the stupid kids that are paying to hear it in college.

That’s the implications of the Millennials. And by the way, it’s not up to them to change things. It’s up to all of us. The Founding Fathers weren’t Millennials. They were seasoned. That’s what we need. We need a combination and integration if we’re going to have positive change. It’s about all of us.

It’s every generation, by the way. I remember generation Y. The marketers would say, “These are very savvy kids. You just can’t sell to them in the same way.” Yeah, right. They gulp down Red Bull. They’ll drink phosphorescent Slurpies, and you’re telling me how brilliant they are? Look at the crap they eat and how they look.

Again, they try to do this to every generation. There’s nothing special about people – sex, gender, race – It’s individuals, not generations.

Anthony Wile: It seems to us the Millennials do seem to have a generalized mistrust of government and generally a disbelief of what they’re told. Is that an accurate perception?

Gerald Celente: That’s accurate, but it’s accurate across the board. Look at the studies coming out. Nobody believes it. Only the people that work for it or believe it anymore or the people who are too stupid to think for themselves. That’s what I’m trying to say. They’re not alone. Join the club.

Anthony Wile: Another poll recently showed that, regarding the media. Are Millennials, then, opting out of participating in using the government to create change, looking to the state for change? Do you see them building an alternative way of making change?

Gerald Celente: Again, it’s not up to them. It’s up to all of us. You can’t do it on your own. Look at the Podemos Party in Spain. It began as a younger movement, and then it just faded out. It has to be a collaboration of all generations, a generation blending. What they do with all of this is try to separate the generations. These children who don’t believe what they’re hearing are no different than the rest of us in the sense of who believes this stuff? You’ve got to be an imbecile to believe it.

Anthony Wile: How much of that do you attribute to what we call the Internet Reformation, access to other-than-mainstream media?

Gerald Celente: Oh, it’s a big part of that. Oh, yeah. However, while it’s the information source and it’s opened up people to different ways of thinking, the corporate media – of which six companies own 90% of the mass media – is still the voice. They still set the tone. We can use the Internet for alternative information and to widen our perspectives, but the big corporations still call the shots.

They’ll throw out the buzzwords that people will buy. If you want to hate Putin, tune in any of the major media and they’ll throw out the buzzwords to hate them. If you want to hate Assad you could use the major media for that. Look how the major media sold the lie of the Iraq War. The major media still plays the major role. The Internet gives us the freedom to learn more about different things, but at this point it doesn’t have the power to drive elections. But that could change.

Anthony Wile: As part of this awakening or expanding consciousness, across the board, do more people now understand the value of gold and silver, buying land, participating in pre-public opportunities like cannabis that’s now opening up, these sorts of strategies? Are they looking at things differently enough that they’re moving toward these shifts?

Gerald Celente: A small minority. It’s always the minority, and it’s a very small percentage of the awake and the aware.

Anthony Wile: What about the growing numbers of people leaving the US and even renouncing their citizenship? What do you make of that?

Gerald Celente: When you look at the number, it’s not really that great a number. The problem becomes where do you go? Where do you go? That’s why I was looking to leave the country in 2010. I went down to Uruguay, Argentina, Chile, and I’ve been around a lot of the world. I realized, you can’t run away. There are freaks everywhere.

This is my country. I want to do what I can to make it the way it was when it was the land of opportunity. When people say, “Love it or leave it,” I say, “No, you leave it. I love it. You’re the guys who are changing it and screwing it up. ” That’s why I bought these historic buildings on the most historic four corners of the United States, the 1750, 1763, and 1774 Academy. I realized after being in Berlin and seeing the destruction there that happened during the reign of Hitler, why didn’t the people stop this? What took them so long? It was going to end. Why didn’t they end it before it was all destroyed?

I could never be me if I was born in Italy. I could have never had the freedom to be me. This is my country. Just because I’ve got a bunch of little freaks running the show doesn’t mean they’re going to either intimidate me or rule my life. As I say, my blood is Italian but my heart’s American.

Anthony Wile: That’s a dilemma many struggle with, whether to continue trying to make massive change or get themselves and their families out, or at least make preparations to do so, now. On that note, let’s wrap up with an update on your September Occupy Peace conference and rally, which we discussed in our last interview. How did it go? What came of it? What do you see carrying forward from the weekend?

Gerald Celente: Our speakers were Ralph Nader, Gary Null, Cindy Sheehan and Dr. Robert Thurman, Uma Thurman’s father who’s a big peace advocate. We closed down the streets with the mayor’s permission. Anyone can go to the website, OccupyPeace.us, and watch the video there. We’re making a documentary of it.

Ralph Nader’s very excited about this. He stayed around another an hour and a half after the rally and we spoke, then he invited me to Winsted, Connecticut for the opening of his new museum he’s opening there. Then he invited me again to another talk, recently. He’s very interested in keeping this going. So is Gary Null, who has progressive radio and is very well known in his work in nutrition, healing, alternative remedies and on and on, for a long, long time, and Cindy Sheehan, as well.

What makes OccupyPeace different is that it’s a program. There was no ommmming and praying for peace here. We have a program: Close the bases overseas, bring the troops home, secure the homeland, put them to work rebuilding our rotted infrastructure rather than highways in Afghanistan. By the way, we spent more money in Afghanistan “rebuilding” it than we did during the Marshall Plan, when adjusted for income.

The other one is to force Congress to vote to go to war. The United States right now is in violation of international law with the bombing of Syria. It’s a sovereign nation. We have not been invited in there. So we want to force Congress to vote to go to war with a little caveat: We want to get on each state ballot a referendum where we the people will tell Congress how to vote, because we pay for the war with our money and our lives.

Can you imagine? Listen to these clowns. Listen to that doughboy, Christie, or little Marco Rubio, or Teddy Cruz, these little kids. You put all these guys and women in a paper bag and they couldn’t fight their way out of it, and they’re talking about how we’ve got to get tough with this one and that one? Who are these little clowns? I’m offended by it.

And guess what? Donald Trump’s kid won’t go to war. He didn’t go to war. Hillary Clinton’s little girl won’t go to war. Obama’s girls won’t go to war. Marco Rubio’s kids won’t go to war. All these little people talk so tough while they send others to go do their fighting for them. They are traitors to this nation and disgusting individuals. OccupyPeace wants to change this, and this is just the beginning, and we need all the help we can get.

Anthony Wile: Well, we can certainly help by letting readers know. The website is at www.OccupyPeace.us. Thank you so much.

 

[posted on The Daily Bell 11.1.2015]

 

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As always, posted for your edification and enlightenment by

NORM ‘n’ AL, Minneapolis
normal@usa1usa.com
612.239.0970

 

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World economy getting sicker…

World economy sick and getting sicker...

If you are looking for a “canary in a coal mine” type of warning for the entire global economy, you have a whole bunch to pick from right now.  “Dr. Copper” just hit a six year low, Morgan Stanley is warning that this could be the worst oil price crash in 45 years, the Chinese economy is suddenly stalling out, and world trade is falling at the fastest pace that we have seen since the last financial crisis.  In order not to see all of the signs that are pointing toward a global economic slowdown, you would have to be willingly blind.  In recent months, I have been writing article after article detailing how the exact same patterns that happened just before the stock market crash of 2008 are playing out once again.  We are watching a slow-motion train wreck unfold right before our eyes, and things are only going to get worse from here.

Copper is referred to as “Dr. Copper” because it does such an excellent job of indicating where economic conditions are heading next.  We saw this in 2008, when the price of copper started crashing big time in the months leading up to the stock market implosion.

Well, now copper is crashing again.  Just check out this chart.  The price of copper plunged again on Wednesday, and it is now the lowest that it has been since the last financial crisis.  Unfortunately, the forecast for the months ahead is not good.  The following is what Goldman Sachs is saying about copper…

“Though we have been bearish on copper on a 12-mo forward basis for the past two and a half years, we have maintained a more bullish medium to long-term stance on the assumption of Chinese copper demand growth of 4% per annum and a major slowing in supply growth around 2017/2018 … we substantially lower our short, medium, and long-term copper price forecasts, on the back of lower Chinese copper demand growth forecasts (we have been highlighting that the risk has been skewed to the downside for some time), increased conviction in copper supply growth over the next three years, and increased conviction in the outlook for mining cost deflation in dollar terms.”

It is funny that Goldman mentioned China so prominently.  Even though China’s fake GDP figures say that everything is fine over there, other numbers are painting a very dismal picture.

For instance, Chinese electrical consumption in June grew at the slowest pace that we have seen in 30 years, and capital outflows from China have reached a level that is “frightening”

Robin Brooks at Goldman Sachs estimates that capital outflows topped $224bn in the second quarter, a level “beyond anything seen historically”.

The Chinese central bank (PBOC) is being forced to run down the country’s foreign reserves to defend the yuan. This intervention is becoming chronic. The volume is rising. Mr Brooks calculates that the authorities sold $48bn of bonds between March and June.

Charles Dumas at Lombard Street Research says capital outflows – when will we start calling it capital flight? – have reached $800bn over the past year. These are frighteningly large sums of money.

Just last month, the Chinese stock market started to crash, but the crash was interrupted when the Chinese government essentially declared a form of financial martial law.

And I don’t think that “financial martial law” is too strong of a term to use in this case.  Just consider the following excerpt from a recent article in the Telegraph

Half the shares traded in Shanghai and Shenzhen were suspended. New floats were halted. Some 300 corporate bosses were strong-armed into buying back their own shares. Police state tactics were used hunt down short sellers.

We know from a vivid account in Caixin magazine that China’s top brokers were shut in a room and ordered to hand over money for an orchestrated buying blitz. A target of 4,500 was set for the Shanghai Composite by Communist Party officials.

So a stock market crash was halted, but in doing so Chinese officials have essentially destroyed the second largest stock market in the world.  China’s financial markets have lost all legitimacy, and foreigners are going to be extremely hesitant to put any money into Chinese stocks from now on.

Meanwhile, there is no hiding the fact that trade activity in China and in most of the rest of the planet is slowing down.  In fact, world trade volume has now dropped by the most that we have seen since the last global recession.  The following comes from Zero Hedge

As goes the world, so goes America (according to 30 years of historical data), and so when world trade volumes drop over 2% (the biggest drop since 2009) in the last six months to the weakest since June 2014, the “US recession imminent” canary in the coalmine is drawing her last breath

World Trade Volume - Zero Hedge

As Wolf Street’s Wolf Richter adds, this isn’t stagnation or sluggish growth. This is the steepest and longest decline in world trade since the Financial Crisis. Unless a miracle happened in June, and miracles are becoming exceedingly scarce in this sector, world trade will have experienced its first back-to-back quarterly contraction since 2009.

As you probably noted in the chart above, a decline in world trade is almost always associated with a recession.

That was certainly the case back in 2008 and 2009.

Another similarity between the last crisis and what is happening now is a crash in the price of oil.

According to Business Insider, we have just officially entered a brand new bear market for oil…

Oil is officially in a bear market.

On Thursday, West Texas Intermediate crude oil futures fell more than 1% to settle near $48.55 per barrel in New York.

A bear market is roughly defined as a 20% drop from highs. Crude has now fallen by about 20% in the last six weeks.

So what does all of this mean?

All of these signs are indicating that another great economic crisis is here, and that a global financial implosion is just around the corner.

At this point, even many of the “bulls” are sounding the alarm.  For example, just consider what Henry Blodget of Business Insider is saying…

As regular readers know, for the past ~21 months I have been worrying out loud about US stock prices. Specifically, I have suggested that a decline of 30% to 50% would not be a surprise.

I haven’t predicted a crash. But I have said clearly that I think stocks will deliver returns that are way below average for the next seven to 10 years. And I certainly won’t be surprised to see stocks crash. So don’t say no one warned you!

For those that don’t know, Henry Blodget is definitely not a bear.  In fact, he is one of Wall Street’s biggest cheerleaders.

So for Blodget to suggest that we could see the stock market drop by half is a really big deal.

The closer that we get to this next crisis, the clearer that everything is becoming.

[by Michael Snyder, writing for The Economic Collapse Blog]

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As always, posted for your edification and enlightenment by

NORM ‘n’ AL, Minneapolis
normal@usa1usa.com
612.239.0970

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US allies humiliate Obama as they rush to join China’s new bank…

The rush to join the China’s new development bank for Asia has become a stampede, with even longtime U.S. allies such as Georgia, South Korea, Australia and even Taiwan now saying they are ready to join despite the clear reservations of the Obama administration.

China is putting up half of the planned $100 billion initial capitalization for the Shanghai-based Asian Infrastructure Investment Bank (AIIB), designed to help finance trillions of dollars in infrastructure projects needed for the booming East Asian region in the coming decades.

At least 42 countries are now expected to be “founding members” of the AIIB, up from 21 when China and a group of Asian and Middle East countries formally signed a memorandum of understanding to open the bank last October, including Germany, Britain, France, Switzerland, Turkey and Russia. Beijing has pressed countries to join by the March 31 deadline, saying only founding members will have a say in setting up the AIIB’s initial structure and lending guidelines.

“As one of the founders, you have a better position to influence, like steering [the bank] towards sustainable investments,” said Swedish Finance Minister Magdalena Andersson Monday, shortly after Stockholm became the latest European power to sign on with the bank.

The U.S. has never formally opposed the AIIB idea, but was noticeably cool to the concept. Obama administration officials said they feared the bank would duplicate the work of the World Bank and Asian Development Bank, dominated by the U.S. and its allies, while potentially undermining lending standards on such issues as the environment and corruption.

China and other emerging economies complain they are underrepresented in the existing international organizations such as the World Bank and IMF, and that Asia’s public financial needs are simply not being met by World Bank and ADB.

To date, the U.S. and Japan are the only two major players on the outside as the AIIB comes together.

Treasury Secretary Jacob Lew, in a possible attempt to mend fences, was in Beijing Monday for talks on a range of economic issues with Chinese Premier Li Keqiang and other officials. Mr. Lew gave no sign that Washington was ready to join the AIIB, but said the Obama administration was willing to work with the bank once it was established.

“We very much welcome China’s increased participation in infrastructure investment, and the concerns we’ve raised about the need for standards continue,” Mr. Lew said, according to The Associated Press, saying talks between Washington and Beijing on the AIIB have been “cooperative and collaborative.”

“The initial decisions of what kinds of projects are invested in will obviously be a very important signal as to how they’ll proceed,” Mr. Lew added.

Chinese officials have been careful not to gloat about the spectacle of longtime U.S. allies ignoring Washington in the rush to have a stake at the new bank, in no small part because China’s massive reserve, huge domestic market and global clout are too attractive to ignore.

“The AIIB is expected to increase investment, boost demand and spur economic expansion in the region,” said Zhu Min, a former top official at the People’s Bank of China and now deputy managing director of the IMF.

But outside observers say the episode marks a clear diplomatic defeat of the U.S. and an equally clear sign of a shift in the global economic pecking order. British Prime Minister David Cameron began the rush of top powers to join the AIIB earlier this month, giving little advance warning to the U.S. or to Britain’s European Union partners.

“Confusion is the result, and further friction and conflict inside the EU, in the G7 and across the Atlantic are foreseeable,” wrote Volker Stanzel, a senior adviser at the German Marshall Fund of the United States in a new analysis of the AIIB fight. “‘Divide and rule’ is an art mastered long ago by Beijing.”

 

[by David R. Sands, writing for The Washington Times]

 

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As always, posted for your edification and enlightenment by

NORM ‘n’ AL, Minneapolis
normal@usa1usa.com
612.239.0970

 

 

 

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Obama legacy likely to be huge US financial collapse…

Just before Obama began his first term, and before the Financial Crisis of 2008, the national debt represented 62 cents of every dollar of this nation’s Gross Domestic Product, or GDP.

Simply put, GDP is the total amount of goods and services produced by a country. If you looked at a country like a business, their GDP would be their gross sales.

Last year – for the first time ever – the national debt exceeded the U.S. GDP.

This means that we, as a nation, owe more than we produce.

We are now part of a very “unique” group of countries in the world that have a debt-to-GDP ratio greater than 1. We now rank number 6, right behind Ireland, Portugal, Italy, Greece and Japan.

This is NOT a list the most prosperous nation on earth should be on.

US heading to third-world financial status

What is even more troubling is not only the size of the debt but how fast it’s been growing compared to the economy, and that is what’s keeping lots of us up at night.

If the economy grew faster than the rate the government borrowed money… the debt wouldn’t be as much of a problem.

But we are now on an unsustainable path. Under the ‘leadership’ of Barack Obama, our deficit is growing at eight to ten percent per year while the economy is growing at only two to three percent per year.  How is this economically sustainable?

We are now at the tipping point… when government debt is greater than its ability to repay that debt.

The next step in this debt disaster is even more terrifying.

That’s because the cost of paying the interest on this debt has become astronomical. In order to keep current on our interest payments right now…the cost is more than $415 billion!

This amount — $415 billion — is almost as much as the government spends on Medicare…and it’s the same percentage of the U.S. budget that is spent on education.

So we’re spending just as much to educate the nation’s children as we are simply to maintain our debt at its current level.

But here’s the dangerous part:

For the past few years, the Fed has maintained a near-zero interest rate policy…and for good reason: The U.S. currently pays an interest rate of just 2.4% on its $17.6 trillion in debt.

Every 1% rise in interest rates would increase the debt payment by more than $170 billion!

In other words, a simple 1% increase in the interest rate we have to pay on our debt would mean the total cost would climb to more than $600 billion – almost as much as the entire U.S. defense budget!

So far, the Fed has been able to “manage” the cost of this debt by keeping interest rates low.

But the Fed could have to raise interest rates – and soon – in order to help the U.S. economy avoid a crippling inflation that would resemble the 1970s or early ‘80s.

Or – even worse – the decision could be out of the Fed’s hands entirely…

Here’s where the situation goes from disappointing… to dire. Why? Because the United States is no longer in control of the interest rate it pays on its debt.

That’s because foreign investors now own a whopping 48% of U.S. debt…up from just 19% back in 1990.

US Debt Held by Foreigners

In other words – we’re now at the mercy of China and Japan – the two largest holders of U.S. debt.

If either of those nations demand higher interest rates…the U.S. will be forced to comply. And – as I just showed you…the impact on the U.S. budget will be devastating.

If rates go up by 1% — where will we get the more than $170 billion needed to finance a 1% rise in rates… the $255 billion needed to finance a 1.5% rise… or the $340 billion needed to finance a 2% increase?

Every 1% rise in interest rates would increase the debt payment by more than $170 billion!

We don’t have the money – that’s the point. So government spending will have to be cut…in a big way.

American citizens got a small taste of spending cuts when Obama shut down government services during the first two weeks of October 2013:

800,000 federal employees were furloughed 1.3 million were required to work without pay Government contractors such as United Technologies were preparing to lay off 2,000 workers, Lockheed Martin, 3,000.

Shelters for domestic abuse victims across America had trouble paying their bills and closed down.

More than 19,000 low income school children lost access to programs that provides nutritious meals and medical screening.

Even our nation’s brave heroes — individuals who fought for our freedom in Vietnam, Korea… even World War II — were denied access to the national memorials erected in honor of their fallen comrades.

Simply put — it was sickening to watch.

But it also shows you that if Obama and our government are willing to stoop so low as to treat the men and women who have protected our freedom so poorly during a short-term squabble over money…

They’ll do anything when a real crisis strikes.

The barricades put up around the World War II Memorial in Washington have become a symbol held up by both Democrats and Republicans as an example of what’s wrong with Washington.

If millions of Americans were impacted by the last, brief government shutdown…

How long would it take before there would be chaos and riots in our cities in the event of more drastic – and more prolonged – spending cuts?

Before looting and gangs roam the streets of our major cities?

The bottom line, folks, is this: Our beloved USA is no longer in control of its own destiny. Our future can easily be controlled by Russia and China…and these countries are already well on their way toward dictating that future.

[from a report prepared by Stealth Stocks Online]
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As always, posted for your edification and enlightenment by

NORM ‘n’ AL, Minneapolis
normal@usa1usa.com
612.239.0970

 

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Cartoonist Lisa Benson shares her considerable talent…

Lisa Benson 1 of 5...

Lisa Benson 2 of 5...

Lisa Benson 3 of 5...

Lisa Benson 4 of 5...

Lisa Benson 5 of 5...

As always, posted for your edification and enlightenment by

NORM ‘n’ AL, Minneapolis
normal@usa1usa.com
612.239.0970

 

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