China Contagion


China’s Meltdown And Contagion Now Spreading As Central Planners Prepare For Global Economic Chaos

Michael Pento of Pento Portfolio Strategies

August 1 – (King World News) – The Chinese stock market recently saw its biggest selloff in eight years …

What’s Happening In China Will Reverberate Around The World

… Even though China’s 260 million trading accounts may be a relatively small percentage of the country’s population, it’s also the richest and most productive portion, which also happens to be equal to the entire U.S. population in 1993. And Chinese GDP growth accounts for a third of total global growth. …

The meltdown in China is already spreading around Asia and the Pacific. For example, Taiwan’s year-over-year export growth has hit multi-year lows due to collapsing trade with China.

But perhaps the biggest indicator of the magnitude of China’s slowdown can be found in the global commodities market. Most pundits are trying to link the recent selloff in commodities strictly to the rising dollar as measured by the Dollar Index (DXY). But that Index is actually down about 3 percent since March. Since then the rout in precious and base metals, energy, and agriculture has greatly accelerated. …

And then we have gold. Last week China dumped 4 tons on the market, causing the price of the precious metal to fall almost 4 percent within a few seconds. This had little to do with the value of the dollar on the DXY, but it was mostly about the waning demand in China from its imploding economy and the need to sell what you can when capital controls are in place. …

The true message of plunging commodity markets is that the Chinese government wasted $20 trillion worth of credit digging holes to ease the fallout from the Great Recession of 2007, primarily creating a huge fixed-asset bubble with little economic viability. And then China forced another $1.2 trillion in margin debt to engender a consumption-based economy, primarily by creating a stock market bubble after the fixed-asset bubble strategy began to fail miserably. …

U.S. GDP is growing at a meager 1.5 percent for the first half of 2015. The second half looks even worse, as an organic U.S. slowdown meets cascading global trade.  …

But here is the most important thing: The arrogance that led the Federal Reserve to believe that… the Fed can now raise rates into a global slowdown … But the Fed … will probably never be able to move much outside the zero-bound range without collapsing markets and the economy. …

So the real money to be made is in fading the massively overcrowded trade that believes that U.S. stocks are immune from the worldwide economic slowdown and that the U.S. dollar will be in a secular bull market.

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About icliks

Biding my time in central ms ... yours too, if ur reading this.
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