Tuesday, July 7, 2015

I'm watching economic events unfold . . .

. . . and they're not looking very encouraging right now.

1.  China.  The country's two major stock exchanges are in serious trouble, with no relief in sight.  Recent articles worth reading include:

To put the crisis in China into monetary perspective:

Since Monday’s close, more than 200 companies have halted trading in their shares, joining a growing number of businesses trying to shield themselves from the market tumble.

According to the Securities Times, 760 companies — more than a quarter of all A-share listed companies on the Shanghai and Shenzhen exchanges — had suspended trading in the past week. That has frozen $1.4tn worth of equity, according to Bloomberg calculations — about a fifth of China’s stock market value. The sell-off that began on June 12 has wiped roughly $3tn off the market, in the country’s steepest decline since 1992, according to data from Bloomberg.

That's three trillion dollars of paper value, wiped out in less than a month - and the commodity markets, driven largely by Chinese demand, are also showing signs of crashing.  If that doesn't sound warning bells in every economist's and financier's and investor's brain, nothing will.

2.  Greece.  There's no sign of any resolution to the crisis.  Both sides are digging in their heels and refusing to budge.  Given such intransigence, I doubt there can be any movement.  Mohamed el-Erian lists " 10 Consequences of Greece's 'No' ".  They don't make for happy reading.

Very intriguingly, there may be a serious scandal underlying much of the European Central Bank's maneuvering over the Greek crisis, if Zero Hedge is correct.

Considering the crisis of the (not so) single currency is very much "inflamed" right now as it is about to be proven it was never "irreversible", perhaps it is time for at least one aspiring, true journalist, unafraid of disturbing the status quo of wealthy oligarchs and central planners, to at least bring some closure to the Greek people as they are swept out of the Eurozone which has so greatly benefited the very same Goldman Sachs whose former lackey is currently deciding the immediate fate of over €100 billion in Greek savings.

Because something tells us the reason why Mario Draghi personally blocked Bloomberg's FOIA into the circumstances surrounding Goldman's structuring, and hiding, of Greek debt that allowed not only Goldman to receive a substantial fee on the transaction, but permitted Greece to enter the Eurozone when it should never have been allowed there in the first place, is that the person who oversaw and personally endorsed the perpetuation of the Greek lie is none other than Goldman's Vice Chairman and Managing Director at Goldman Sachs International from 2002 to 2005. The man who is also now in charge of the ECB.

Mario Draghi.

There's more at the link.  Thought-provoking indeed!

3.  USA.  The crisis in Puerto Rico gets worse by the day as many economically mobile residents set off for the mainland, rather than remain in a fiscal ruin.  As they leave, they further diminish an already depleted tax base on the island.  What does the future hold?  Nothing but problems, as far as I can see . . .

Furthermore, in an update to its earlier reports, USA Today states baldly that 'States face shaky financial futures; pensions at risk'.  It provides this helpful graphic.

I highly recommend that you read its report in full.  Furthermore, if you live in a state ranked 'Low' or 'Poor', may I seriously suggest that you urgently consider moving to a higher-ranked one?  If you don't, you might find yourself in a mainland version of Puerto Rico . . .

Folks, there's not much no good news out there on the economic front.  We're in a critical situation where multiple storms are raging in different parts of the world.  If we get a domino effect in the financial markets, where one storm gets out of control and takes a second with it, and then those two take a third . . . things could get very hairy, very quickly.  Keep your eyes open.



Sam Hall said...

The Chinese market is still above what it was a year ago. This is just a correction.
See chart here: Shanghai Stock Exchange Composite Index

Bob said...

Oh hell yeah...

A three TRILLION dollar correction.

Happens all the time, just move along folks...

Anonymous said...

Fear, FIRE, Foes ,zombies, flood, too hot, too cold, too bright, too dark. The Nazis are coming , The Commies are coming. The economy is crashing , the war, the rumor of war, Obama's Queer Kingdom, ISIS, gun control , thought control, they put a poofta in charge of top gear and Ebola is gonna kill us all, if the zombie mutant space alien lot lizards don't eat us first. Did I miss any part of this years panic attack? CILLAX Rev. all this poodo will sort out how it sorts out and not one thing we plebs can do about it but hang on,and hang the royals after the fall---Ray

lemmiwinks said...

I believe Ray has nailed it with his last sentence.

More broadly, this is a result of worshipping at the altar of "growth". Exponential growth doesn't work in a closed system (i.e. planet earth) people. The busts we are witnessing are not only built in but they're a requirement.

Never mind, after the dust settles we'll busily start ramping up exponential growth again ASAP.

kamas716 said...

ND has almost always under estimated it's revenue. It sometimes makes funding departments difficult, but in the long haul it ends up meaning we haven't had an 'Oh Cr@p!' moment on suddenly realizing there is a shortfall that needs to be funded. And when the oil boom hit a rainy day fund was set up that can't even be touched yet, so when lean years come up in the future we'll have less of a shock to deal with. I'm not always happy with my state government, but they have at least been fiscally responsible.

freddie_mac1 said...

Note the error in the graphic! While Wyoming is shown as white on the map, Montana (light green) is shown as #6 in the table. Either the table is wrong or the map is wrong, but we have yet another reminder that idiots who write for national papers are oblivious to "flyover country".

Unfortunately I'm in a very high state due to work, but I'm planning on bugging out as soon as feasible.

freddie_mac1 said...

Edit: in this conversation "high" = "good", but "low" = "bad". So, I'm in a very low-rated state due to work.

Joe in PNG said...

Scandinavia and the World nails it again: http://satwcomic.com/a-zorba-slowing-down

WhiteKnightLeo #0368 said...

I live in Florida, so I'm good.

As for Ray -

Exponential growth does not occur in a closed system, it's true. But that only applies to physical growth. And no human-crafted system grows exponentially. Few actual systems grow exponentially.

Any real system would occasionally experience faults. But in a self-regulating system, those faults would fix themselves in short order. More likely, they would only get so bad to begin with, because enterprising individuals would devise institutions for the purpose of behaving like fuses in an electrical circuit; intended to break so that the system doesn't.

Banks used to be like this. The credit supply used to be directly tied to the savings rate, thus when the savings were all used up banks tightened their lending standards. This often prompted a short-lived recession, but because banks knew they would be responsible for their own liabilities, the standards weren't all that loose to begin with.

The creation of a central bank is intended to remove that process. Our Federal Reserve was specifically intended to circumvent the bust by circumventing the savings limit on credit. Obviously, it doesn't work in practice, because the standards have to be tightened at some point. But the fact that the new institution is less tied to the consequences of poor judgment than the old system was means that things can get much more off course than they used to before the correction is finally applied.