China’s critical role in keeping the party going (and why China is in a weaker position this time)
Despite current stock prices, the economic data is awful and fast getting worse
A recession is near-unavoidable at this point
What to do if you’re not in the top 0.1%
If you have not yet read Part 1: It’s 2016 All Over Again. Or Is It?, available free to all readers, please click here to read it first.
It took a massive amount of central bank firepower to steer the global economy away from a well-deserved rest. Hey, recessions happen – nothing is meant to be awake 24/7 never sleeping, never resting or recovering.
So oodles of artificial stimulus were applied and that worked for a while.
Now it seems to have run its course and the world is again teetering on the verge of a recession, which we’ve been tracking for a while.
My intention in bringing this to your attention is so that you can be prepared for whatever might come next. Again, it’s possible that ‘they’ can rescue all this again, and they are certainly working very hard to horse-whip the financial markets higher.
But what if they fail? What if there’s not enough political cover to print as much as is necessary this time? What if there are not more useful borrowers to lend to this time around?
We think this ends very very badly:
We might be wrong, but we’re not confused. Credit bubbles do more harm than good.
The lesson the authorities learned, unfortunately, was not the one we hoped they would learn. We’d hoped that the first two massive credit cycle bubbles in 2000 and 2007 would have cured us of trying any such things ever again. Alas, that was not to be.
Instead, central bankers learned in 2016 that they could print with abandon and seemingly make problems go away. So, unsurprisingly, here they are trying it one more time.
After all, why not? It might work and as everybody knows now is never a good time to face the consequences of prior bad decisions. Later is always better.
You might note, however the arc of this story. More and more stimulus is required to get less and less real, productive output. The stimulus injections work for less time and require more input. This cannot continue forever.
China Did It!
Some of the heaviest lifting in 2016 was done by China, whose government feared (and still…