deflation
by
Chris Martenson
Executive Summary
- Why the debt market is the powder keg that will blow things sky-high
- The most dangerous asset bubbles to watch and avoid
- The implications of a collapse in the bond market
- Where will money then go?
If you have not yet read Part 1: Hell To Pay available free to all readers, please click here to read it first.
Economic Deformations
The big problem with central bank policies, besides driving the largest wealth and income gaps in all of recorded history, is that they’ve massively deformed the financial and economic landscape.
Too-cheap money has distorted just about everything, and has badly warped corporate incentives. There’s literally no place one can look and not find an economic or financial distortion. “Gains” (such as they are) have gone to holders of financial assets, and corporations have opted to buy back their own shares and to not re-invest in property, plant, equipment or people.
All of this will work right up until the day it doesn’t. And then we'll experience a financial and economic crisis likely to be the largest we ever live through.
And these distortions are not only everywhere, but they are all at record levels. As in never higher in human history.
Just looking at the corporate data alone ought to scare the pants of off every investor on the planet. As the chart below makes clear…
Prepare For The Global Deflationary Deluge
PREVIEW by Chris MartensonExecutive Summary
- Why the debt market is the powder keg that will blow things sky-high
- The most dangerous asset bubbles to watch and avoid
- The implications of a collapse in the bond market
- Where will money then go?
If you have not yet read Part 1: Hell To Pay available free to all readers, please click here to read it first.
Economic Deformations
The big problem with central bank policies, besides driving the largest wealth and income gaps in all of recorded history, is that they’ve massively deformed the financial and economic landscape.
Too-cheap money has distorted just about everything, and has badly warped corporate incentives. There’s literally no place one can look and not find an economic or financial distortion. “Gains” (such as they are) have gone to holders of financial assets, and corporations have opted to buy back their own shares and to not re-invest in property, plant, equipment or people.
All of this will work right up until the day it doesn’t. And then we'll experience a financial and economic crisis likely to be the largest we ever live through.
And these distortions are not only everywhere, but they are all at record levels. As in never higher in human history.
Just looking at the corporate data alone ought to scare the pants of off every investor on the planet. As the chart below makes clear…
by
Chris Martenson
The deflation monster was evident across the global markets today, and the possibility of a market crash remains as high as ever.
In the overnight session on Tuesday, everything fell apart.
We can now clearly see the tracks of the deflation monster stomping across the world stage. While a retreat into bonds (safety) has happened, that’s just the normal first reaction to such a terrible financial situation. However, those bonds will prove to be roach motels as the next stage of this monster will be massive bond defaults of all varieties.
And…..It’s Gone!
PREVIEW by Chris MartensonThe deflation monster was evident across the global markets today, and the possibility of a market crash remains as high as ever.
In the overnight session on Tuesday, everything fell apart.
We can now clearly see the tracks of the deflation monster stomping across the world stage. While a retreat into bonds (safety) has happened, that’s just the normal first reaction to such a terrible financial situation. However, those bonds will prove to be roach motels as the next stage of this monster will be massive bond defaults of all varieties.
by
Chris Martenson
Executive Summary
- There are too many signs of deflation to deny it's winning the day
- Why China's weakening will accelerate the global economy's decent
- Why this next crisis will be worse than 2008
- What will it look like if things really get out of control (how bad could things get?)
- The best investments to be making now, before the rout
If you have not yet read The Deflation Monster Has Arrived, available free to all readers, please click here to read it first.
Too Many Warning Signs To Talk About
The deflationary monster is here and there are almost too many warning signs to list, let alone fully describe.
So I’ll just list and link them…you can follow up on the details if you want, it’s the ‘general vibe’ I want to get across.
Here are the signs of a weak economy that we are dealing with:
- Oil in the $20’s (!!)
- Copper under $2
- Baltic Dry Shipping Index at the lowest ever at 383 and down ~50% in the past year.
- Wal-Mart closing 269 stores, 154 in the US.
- Business inventories to sales at new cycle highs
- U.S. freight volume falls for first time in almost three years
- US retail sales fall 0.1% in December
- Empire State index weakens to recession lows.
- South African rand hits new all-time lows in 2016
- Brazil’s Real Falls Sharply Against Dollar
- Brazil Unemployment Rate Rises to 9%
- Canadian Dollar Hits 13 Year Low Against US Dollar
- U.S. Energy Junk Bond Spreads At Record Width
- Nigeria’s Currency Plummets On Open Market
- Mexico’s Peso Hits New All-Time Low
- Chinese Stocks Enter Bear Market (again)
- European Stocks Enter Bear Market
The pattern here is one of rapidly slowing economic activity and mounting pain starting “from the outside in” as emerging markets and the poor people within the core countries bear the brunt at first. Things always get rolling to the downside starting with the weakest, peripheral elements first.
Copper and oil are providing very clear signs that economic activity is not just slow, but in rapid retreat. Wal-Mart tells us that its shoppers are having trouble. The fresh all-time lows in a variety of currencies, plus massive weakness in others, is telling us that the virtuous portion of the liquidity cycle that the Fed, et al., unleashed on the world has entered the vicious part of the cycle.
The pain will spread to the center with increasing speed. The main question is if the authorities can stop that before the momentum becomes too great to halt? And what will happen if they cannot?
The answer to that is…
Why This Next Crisis Will Be Worse Than 2008
PREVIEW by Chris MartensonExecutive Summary
- There are too many signs of deflation to deny it's winning the day
- Why China's weakening will accelerate the global economy's decent
- Why this next crisis will be worse than 2008
- What will it look like if things really get out of control (how bad could things get?)
- The best investments to be making now, before the rout
If you have not yet read The Deflation Monster Has Arrived, available free to all readers, please click here to read it first.
Too Many Warning Signs To Talk About
The deflationary monster is here and there are almost too many warning signs to list, let alone fully describe.
So I’ll just list and link them…you can follow up on the details if you want, it’s the ‘general vibe’ I want to get across.
Here are the signs of a weak economy that we are dealing with:
- Oil in the $20’s (!!)
- Copper under $2
- Baltic Dry Shipping Index at the lowest ever at 383 and down ~50% in the past year.
- Wal-Mart closing 269 stores, 154 in the US.
- Business inventories to sales at new cycle highs
- U.S. freight volume falls for first time in almost three years
- US retail sales fall 0.1% in December
- Empire State index weakens to recession lows.
- South African rand hits new all-time lows in 2016
- Brazil’s Real Falls Sharply Against Dollar
- Brazil Unemployment Rate Rises to 9%
- Canadian Dollar Hits 13 Year Low Against US Dollar
- U.S. Energy Junk Bond Spreads At Record Width
- Nigeria’s Currency Plummets On Open Market
- Mexico’s Peso Hits New All-Time Low
- Chinese Stocks Enter Bear Market (again)
- European Stocks Enter Bear Market
The pattern here is one of rapidly slowing economic activity and mounting pain starting “from the outside in” as emerging markets and the poor people within the core countries bear the brunt at first. Things always get rolling to the downside starting with the weakest, peripheral elements first.
Copper and oil are providing very clear signs that economic activity is not just slow, but in rapid retreat. Wal-Mart tells us that its shoppers are having trouble. The fresh all-time lows in a variety of currencies, plus massive weakness in others, is telling us that the virtuous portion of the liquidity cycle that the Fed, et al., unleashed on the world has entered the vicious part of the cycle.
The pain will spread to the center with increasing speed. The main question is if the authorities can stop that before the momentum becomes too great to halt? And what will happen if they cannot?
The answer to that is…
by
Chris Martenson
Executive Summary
- China is rolling over
- Contagion will eventually take down the core economies, including the US
- We are witnessing a full-blown collapse of the commodity complex
- Deflation will win the day over the next year, but then get ready for helicopter money hyperinflation
If you have not yet read Part 1: Deflation Warning: The Next Wave available free to all readers, please click here to read it first.
The Chinese GDP Lie
Right off the top, China is not growing anywhere near the 7% it claims. That’s just a politically useful lie that the Chinese tell to the world as much as they tell to themselves.
Fortunately, hardly anyone is falling for that particular fib any longer. Let’s start with the completely obvious manufacturing slump that has hit China:
Chinese Factory Gauge Slumps to Lowest Level Since March 2009
Sept 22, 2015
A private Chinese manufacturing gauge fell to the lowest in 6 1/2 years, underscoring challenges facing the economy as its old growth engines splutter.
A global sell off in riskier assets gained pace after the preliminary Purchasing Managers’ Index from Caixin Media and Markit Economics dropped to 47.0 in September. That missed the median estimate of 47.5 in a Bloomberg survey and fell from the final reading of 47.3 in the previous month. Readings have remained below 50 since March, indicating contraction.
Premier Li Keqiang’s growth target of about 7 percent for this year is being challenged by a slowdown in manufacturing and exports even as services and consumption show resilience.
(Source)
The way a PMI reading works is anything over 50 indicates expansions and anything under 50 indicates contraction. Anybody care to explain to me how China can be sporting sub-50 readings every month since March — that’s five full months — and still be claiming to be aiming for a 7% annual growth target? You know, because China is…
From Deflation To Hyperinflation
PREVIEW by Chris MartensonExecutive Summary
- China is rolling over
- Contagion will eventually take down the core economies, including the US
- We are witnessing a full-blown collapse of the commodity complex
- Deflation will win the day over the next year, but then get ready for helicopter money hyperinflation
If you have not yet read Part 1: Deflation Warning: The Next Wave available free to all readers, please click here to read it first.
The Chinese GDP Lie
Right off the top, China is not growing anywhere near the 7% it claims. That’s just a politically useful lie that the Chinese tell to the world as much as they tell to themselves.
Fortunately, hardly anyone is falling for that particular fib any longer. Let’s start with the completely obvious manufacturing slump that has hit China:
Chinese Factory Gauge Slumps to Lowest Level Since March 2009
Sept 22, 2015
A private Chinese manufacturing gauge fell to the lowest in 6 1/2 years, underscoring challenges facing the economy as its old growth engines splutter.
A global sell off in riskier assets gained pace after the preliminary Purchasing Managers’ Index from Caixin Media and Markit Economics dropped to 47.0 in September. That missed the median estimate of 47.5 in a Bloomberg survey and fell from the final reading of 47.3 in the previous month. Readings have remained below 50 since March, indicating contraction.
Premier Li Keqiang’s growth target of about 7 percent for this year is being challenged by a slowdown in manufacturing and exports even as services and consumption show resilience.
(Source)
The way a PMI reading works is anything over 50 indicates expansions and anything under 50 indicates contraction. Anybody care to explain to me how China can be sporting sub-50 readings every month since March — that’s five full months — and still be claiming to be aiming for a 7% annual growth target? You know, because China is…
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