Things just keep getting wackier in The Ultimate Crony Capitalist State.
Hey, why not just have the government come in and buy up the stock market? That ought to do the trick. Nothing could possibly go wrong with that. It’s not like this whole crash was precipitated by central planning and malinvestment or anything.
Isn’t this fun!?
The good news is the market is up right now. The bad news is the Dow was up yesterday for most of the day but then closed 200 points down.
It should be remembered that even in tumultuous moments like the one we are in the market rarely goes straight down.
At the start of the day everyone had “plunge protection team” in the back of their minds. (Even if they wouldn’t say it.) It looked as if the short term fix was in. But it turned out to be more short term than many expected. When the dust cleared we were down, again, for the 6th day in a row.
Not sure when this screen shot was taken today but you get the point.
China down 8.5% FOR THE DAY. Europe down broadly, 3-4% on huge volume. And on Bloomberg everyone is asking, why?
Why? Because China (just China?) is in deep trouble. Because the Chinese central bank has intervened big time and has failed. The market has overwhelmed a large central bank and that is new.
I’m guessing that there were more than a few meetings at the Federal Reserve over the weekend.
August is supposed to be quiet.
Here’s a good dose of gloom for you. The author is not saying it will happen, but he is arguing that Dow 5000 is not completely crazy. Frankly I’d be for it. If we could carve out all of the central bank fluff created post-2008 and returned to a real live market such a crash would be worth it. (It might not be so great for all those baby boomers who have ridden the Fed induced rally right before retirement however.)
I wouldn’t say that a crash on this scale or a re-institution of real, at least close to honest pricing in equities is likely. But I would say the both are possible. (OK, perhaps one is possible.)
In the meantime go cook a steak on the grill. It’s supposed to be nice weather in most of the USA this weekend. Monday can wait.
The point we’ve made with China, The Ultimate Crony Capitalist State, is that much of the “growth” the country has seen has been driven by central planning, which in the end is doomed to fail. One can not centrally plan an economy the size of China’s over the long term.
Self dealing. Fiat declarations from on high. Accounting which probably barely passes for accounting. The problems are immense. The Chinese “miracle” isn’t looking so miraculous.
Are we saying that China is now going to revert back to the 3rd World? (Though much of China is still very much 3rd World.) No, definitely not. But we are saying that China faces a systemic crony capitalist problem and that the gaps within the Chinese economy which are filled with lies will and must collapse if China is to go forward in the way China wants to go forward.
Please note that I say how CHINA wants to go forward, not how the Chinese Communist Party wants to go forward.
“Kind of a debt supernova.”
It’s a bold statement from a guy who makes bold statements. He’s of course been bearish for a good long while as readers of this site know. However, he is speaking in broad terms here. He is putting together pieces on a global scale. Plus he understands that the market booms we’ve experienced, driven by central banks are not fundamentally sound. That is the key.
It should be noted that when aspirational countries hit economic brick walls they often do not react well. Suddenly power shifts, as do markets and political perspective – in policy circles and in the general population. This creates instability, which threatens the powers that be. The powers that be then react.
This would be fun to watch if it wasn’t for the fact that an unstable China creates a number of problems for us, the USA, economically and perhaps in other ways. But here’s a good bit of advice from the author of the attached article.
When Shanghai was peaking at 5,000 in June, I gave you five words of advice: Get. The. Hell. Out. Now.
To which I’ll add five more: And. Stay. The. Hell. Out.
Click here for the article.
Well China stocks are cascading. Now the NYSE has suspended trading and may for the rest of the day? Yeah, things are fine. Totally cool.
We are told that the NYSE is “rebooting” now. But it’s been 2 hours and that’s a long bit.
The Chinese stock market is crashing hard. Over half of all the companies on the Shanghai Exchange have been suspended from trading. The government is directly intervening in the market and has failed to even slow the selloff.
We are beginning to see the Great Experiment, the post 2008 Crash experiment, disintegrate. A crack here. A crack there. A hairline fracture. A fissure. The underpinnings of printed money have always been unsound, but now the edifice appears to be unstable. Will a hard Greek gale bring the thing down, or will winds from somewhere else finally do this fiat superstructure in?
Guess we’ll find out soon enough.