Dismiss these warnings at your peril.
Will it happen today? Tomorrow? In the next year? Next 3? No one knows for sure. But we are feeling increasingly extended in world markets (and not just in stock markets).
Yet there is deep value driving some of the economy too. There is no doubt about that.
That the EU types have been rebuffed with Brexit and Trump are positives – despite what you’ve heard – for the world economy. There is a sense that the world isn’t in fact marching toward SorosClintonBrusselsdistopia. There is hope. And this counts for a lot and is a big part of the “Trump Bump.”
However China and its re-re-re inflated property bubble looms. Just a bit of a cooling of the Red Dragon’s fire a couple of years ago was enough to send Brazil (with some domestic help) spiraling. What will we see if things really implode around Beijing? The implications both politically (how will the Communist Party react?) and economically are immense. (Of course politics and economics are not silos, especially in China, the Ultimate Crony Capitalist State.)
Again, as we said a couple of weeks ago, – Watch Puerto Rico. Watch the California pension system. Watch the big cities. Watch China.
(From The Independent)
A new financial crisis is brewing in the emerging economies and it could hit “with a vengeance”, an influential group of central bankers has warned.
Emerging markets such as China are showing the same signs that their economies are overheating as the US and the UK demonstrated before the financial crisis of 2007-08, according to the annual report of the Bank for International Settlements (BIS).
Claudio Borio, the head of the BIS monetary and economic department, said a new recession could come “with a vengeance” and “the end may come to resemble more closely a financial boom gone wrong”.
Of course our question for Mr. Borio is – “When DOESN’T a recession look like a ‘financial boom gone wrong?'”
Central banks create a boom by unnaturally manipulating interest rates. This encourages MALINVESTMENT. Then, this malinvestment topples on itself and we have recession or depression. Then the central banks panic and do it again.