Societe General economist: S&P will plunge 75% on China deflation

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That’s a bold statement. So bold that if Mr. Edwards turns out to be right it will be one of the greatest calls ever.

The underpinnings of his analysis are sound. Financial assets have been inflated artificially since March of 2009 and we are now (according to Edwards) going to see the deflation of that bubble back to more or less where we were around the time of the Crash.

Such a development would be catastrophic for many, particularly the baby boomers who in various ways have relied on the central bank created inflation to buoy their retirements. A new crash would be a very destabilizing event. At least before we weren’t bruised and banged up like we are now. For many the Great Recession still hasn’t ended. (Despite the rosy picture painted by Obama last night.) Another solid downturn would hurt. A lot.

On the other hand, if we could finally clear markets and get back to something which resembles legitimate organic economic growth it would be worth it. Painful without doubt, but an organic, real economy? Boy that does sound great.

(From CNBC)

A falling Chinese yuan will unleash a wave of global deflation that will send the U.S. into its next recession and pull the S&P 500 back down to 550 points, according to a strategist at Societe Generale…

…”If I am right, the S&P would fall to 550 (points), a 75 percent decline from the recent 2,100 peak. That obviously will be a catastrophe for the economy via the wealth effect and all the Fed’s QE hard work will turn (to) dust.”

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