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When (not if) China blows up what are the consequences?

March 31, 2014 Leave a comment

It’s coming.  No doubt.

But what are the consequences?

A lower $A.  A housing bust in Australia.

I’ve been waiting for the next 2008.  It’s gotta come.  With the system we have it’s inevitable every 5 years or so.  So we’re overdue.

Looks like China is going to be the “blow up” candidate this time around.

 

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A$ dying

January 24, 2014 Leave a comment

Something is going on.  Developing countries’ currencies are dying (see Argentine peso).  A$ decline is relentless.  Chinese banking system is in some trouble (to what degree only God knows).  The US is still agitating a brain dead irradiated and polluted Japan to pick a fight with China.

I feel something is brewing.  Perhaps a “hit” on China to force the money (and gold) back to “safe haven” US?

Nothing to do other than get some money into US$ and some money out of A$.  Nothing crazy but definitey I see the $A continuing to decline in this environment.

Categories: Best assets to sell

What does the blow up look like?

September 26, 2013 Leave a comment

For those interested to know what Armageddon-like event I’m waiting for, Jim Willie explains it well:

The major currencies will be  forced to scurry like cockroaches in the dark to find and source gold bars for  renovation of the currencies themselves. The crumbling sovereign debt serves as  flawed foundation for the major currencies. The climax blow will be the  conversion of USTBonds and EuroBonds and UKGilts and JapGovtBonds into Gold  bullion that kills the current system and opens the door to the new system. With  great disruption, the new Paradigm Shift is in progress, unstoppable, but  offering hope for a better day, a better system, a more fair system, with  participants and savers given a just system. For three decades, Gold has had a  nemesis in the USTreasury Bond. The USTBond is dying, a wreck in progress. As  the old pillars fall and the new pillars rise, The Price of Gold will be set  free. It will reach $3000/oz when the COMEX defaults from empty inventory and Shanghai arbitrage, then  reach $5000/oz when the great conversion begins in earnest from USTBonds to  Gold bullion, then reach $7000/oz when the Gold Trade Settlement is installed  in its full glory. It is written. It shall be done.

Jim has been right on the overall picture, but wrong on market timing.  I don’t know when, but I know how and I know why and I know it will happen.  We could be dead before we know when though….

A$ down and staying down

The Aussie dollar is going down and staying down.  Why?  We blew our largesse from the commodity boom on a Labor government.  That was hopelessly corrupt and did nothing.

Now we pay.  I see the dollar going to 80 cents.  I want out of this country.

Some commentators “get it” – 99% of us screwed, 1% has to flee!

September 18, 2012 Leave a comment

A trickle of dire warnings will soon turn to flood when the US dollar really tanks and gold and silver stop trading on the physical markets.

Here is the start of the avalanche.

Thank God, I’ve found someone equally as disheartened by the world as myself

September 17, 2012 Leave a comment

I’ve found someone who knows what’s going on and can’t look away.  He’s been screaming “WRONG WAY, GO BACK!” for 14 years.  No result.  Zero.  Nada.  Zip.  And he keeps yelling, but no one can hear him scream.

Doug Noland knows what’s going on.  Some quotes:

If I can chuckle perhaps it will hold back the tears.  It’s difficult not to be reflective – to ponder how things could ever have come to this.  Thursday was another historic day for policymaking, for markets and for the perpetuation of history’s most spectacular financial mania.  In the past I’ve noted that, in comparable circumstances, I have viewed my 14-year weekly chronicle of history’s greatest Credit Bubble as pretty much a great waste of effort.  I have tried to warn of the dangers of an unanchored global financial “system.”  I’ve done my best to illuminate the dangerous interplay between an unwieldy global pool of speculative finance and aggressive “activist” central bankers.  I have forewarned of the perils of discretionary (as opposed to rules-based) policymaking – in particular highlighting the (long ago appreciated) fear that too much discretion ensures that monetary policy mistakes will only be followed by yet greater mistakes.  I took strong objection to Dr. Bernanke’s doctrine and framework when he arrived at the Fed in 2002 and protested in vein when he was appointed Federal Reserve Chairman in early-2006…

Never at the time could I have imagined the extent to which the Bernanke Fed would be willing to inflate history’s greatest Bubble.  Chairman Bernanke has gone from resorting to radical policies during a period of acute financial crisis to one of imposing only more radical policymaking three years into recovery.  He has gone from trying to stem Credit contraction to aggressively promoting rapid (non-productive) Credit expansion.  Dr. Bernanke has evolved from radical liquidity injections meant to reverse marketplace illiquidity, to pre-committing to years of open-ended money printing in the midst of heightened inflationary pressures and dangerously speculative financial markets.  Of course, justification and rationalization are everywhere.  History will be unkind…

There’s no reasonable justification for Dr. Bernanke taking such extreme risks with financial and economic stability.  And I struggle to understand how he doesn’t see the likely consequences.  After the cult of Greenspan, I thought we had learned a lesson from having one individual exert such power and influence.  Indeed, the Federal Reserve has now grossly overstepped its role.  Never was it anticipated that the Fed would resort to massive purchases of Treasury bonds and mortgage-backed securities in a non-crisis environment.  Never was it contemplated that our central bank would resort to pre-committing to massive ongoing money printing in the name of reducing the unemployment rate.

I’ll state what others hesitate to admit: this week our central bank took a giant leap from radical to virtual rogue central banking.  If Bernanke’s plan was to leapfrog the audacious Draghi ECB, our sinking currency – even against the euro – is confirmation of his success.  If his goal was to provide markets a Benjamin Strong-like “coup de whiskey” – he should instead fear the dangerous instability central bankers have wrought on global markets and economies.   And I am all too familiar to the adversities of being a naysayer in the midst of Bubble mania.  I’ve read about it, I’ve lived it and I’m ok with it – and actually am motivated by it.  I highlighted last week the ominous divergence between world fundamentals and the markets.  And this week, well, global markets enjoyed just a spectacular time of it.  Away from the Bloomberg screen, it sure seemed like a less than comforting week for the world at large.

As an analyst of Bubbles, I often quip that they tend to “go to incredible extremes – and then double.”  Timing the bursting of a Bubble is a very challenging – if not nearly impossible – proposition.  Yet this in no way should cloud the harsh reality that the longer a Bubble is accommodated the more devastating the unavoidable consequences.  It is, as well, the nature of speculative manias for things to turn crazy in the destabilizing terminal-phase.  The past few weeks – with more than ample Bubble accommodation and craziness – really make me fear that eventual day of reckoning.

2012 Trends

December 31, 2011 Leave a comment

1. Continuing worldwide recession, with fireworks in Europe and the US and – this time – Australia, with the $A finally taking a beating.  Stocks down again.

2. Gold slightly up – or slightly lower.  Silver the same.

3. Bonds – very risky.  Great returns in some pockets (US short term).  Some other pockets will blow your trousers off, especially in Europe.

4. Credit crunch in first half of 2012.

5. At least one major environmental catastrophe.  Possibly two or three.  All man made, and all potentially avoidable.

Sweet dreams.  And to understand the dynamics for the next 10 years, see this suckling video from Max Keiser: