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Market Panic Goes Global as China Impacts the World

Business

Alarm bells rang across world markets on Monday as a near 9 percent dive in China shares and a sharp drop in the dollar and major commodities panicked investors.

European stocks were almost 3 percent in the red and Wall Street was braced for similar losses after Asian shares slumped to 3-year lows as a three month-long rout in Chinese equities threatened to get out of hand.

Oil slumped another 4 percent, while safe-haven government U.S. an German bonds and the yen and the euro rallied as widespread fears of a China-led global economic slowdown and currency war kicked in.

“It is a China driven macro panic,” said Didier Duret, chief investment officer at ABN Amro. “Volatility will persist until we see better data there or strong policy action through forceful monetary easing.”

Many traders had hoped that such support measures, which could include an interest rate cut, would have come from Beijing over the weekend after its main stocks markets slumped 11 percent last week.

With serious doubts now emerging about the likelihood of a U.S. interest rate rise this year, the dollar slid against other major currencies.

The Australian dollar fell to six-year lows and many emerging market currencies also plunged, whilst the frantic dash to safety pushed the euro to a 6-1/2-month high.

“Things are starting look like the Asian financial crisis in the late 1990s. Speculators are selling assets that seem the most vulnerable,” said Takako Masai, head of research at Shinsei Bank in Tokyo.

As commodity markets took a fresh battering, Brent and U.S. crude oil futures hit 6-1/2-year lows as concerns about a global supply glut added to worries over potentially weaker demand from the normally resource-hungry China.

U.S. crude was last down 3.6 percent at just below $39 a barrel while Brent lost 3.7 percent to $43.74 a barrel to take it under January’s lows for the first time.

Copper, seen as a barometer of global industrial demand, tumbled 2.5 percent, with three-month copper on the London Metal Exchange also hitting a six-year low of $4,920 a tonne. Nickel slid 6 percent to its lowest since 2009 at $9,570 a tonne.

GREAT FALL OF CHINA

The near 9 percent slump in Chinese stocks was their worst performance since the depths of the global financial crisis in 2009 and wiped out what was left of the 2015 gains, which in June has been more than 50 percent.

With the latest slide rooted in disappointment that Beijing did not announce expected policy support over the weekend, all index futures contracts slumped by their 10 percent daily limit, pointing to more bad days ahead.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 5.1 percent to a three-year low. Tokyo’s Nikkei ended down 4.6 percent and Australian and Indonesian shares hit two-year troughs.

“China could be forced to devalue the yuan even more, should its economy falter, and the equity markets are dealing with the prospect of a weaker yuan amplifying the negative impact from a sluggish Chinese economy,” said Eiji Kinouchi, chief technical analyst at Daiwa Securities in Tokyo.

There was further evidence that developed markets were becoming synchronized with the troubles. London’s FTSE which has a large number of global miners and oil firms, was down for its 10th straight day, its worst run since 2003.

The pan-European FTSEurofirst 300 was last down 3.7 percent at 1,382.15 points, wiping around 300 billion euros ($344.61 billion) off the index and taking its losses for the month to more than 1 trillion euros.

U.S. stock futures also pointed to big losses for Wall Street’s main markets, with the S&P 500, Dow Jones Industrial and Nasdaq expected to open down 2.8, 2.5 and 4 percent respectively.

It could tip the S&P 500 and Nasdaq formally into ‘correction’ territory – meaning stocks, at their lows, are 10 percent off their 52-week highs.

“We are in the midst of a full-blown growth scare,” strategists at JP Morgan Cazenove said in a note.

Yahoo



35 Comments on "Market Panic Goes Global as China Impacts the World"

  1. joke on Mon, 24th Aug 2015 8:07 am 

    Fed needs to hold its nerve now. There is no answer for this, except more QE, but not combined with rate cuts, ‘damn, out of ammo’!
    Good news for cheap money oil bubbles though like shale, no end in sight for zero interest rates.
    Don’t go looking for a dividend from apple this year. But Iphones should get cheaper, yeeee!

  2. ghung on Mon, 24th Aug 2015 8:12 am 

    Is the great global debt deleveraging being triggered? As Ilargi at TAE mentions, all of this so-called wealth that was created from nothing will necessarily return to nothing. Only worthless shadows and remnants of its faux-existence will remain. Price discovery will have its day.

  3. Makati1 on Mon, 24th Aug 2015 8:57 am 

    ghung, I think you have the answer. The Great Wall Street Bubble has met the Chinese pin. Now the question is how low will it go before it bottoms out? I have read numbers as low as DOW 5,000.

    That is going to put a crimp in the 301ks, mutual funds and other ‘retirement’ dreams based on stocks and bonds. I don’t see it returning to last months levels ever, unless it is with worthless dollars and faux statistics. I’m glad I have nothing invested in the ponzi scheme. But with every drop in the Philippine peso, I get more buying power as I buy few American products. It is now P46.6 to $1. It was just P44.6 to $1 not too long ago.

    This is also going to increase the negative balance in exports/imports for the US. Cheaper imports just mean more expensive exports that will NOT be shipped to Asia, South America or the other affected countries. Contraction is gaining speed. Hold on!

  4. GregT on Mon, 24th Aug 2015 9:24 am 

    What caused the global market rout?

    “Two words: Oil and China. While many have dismissed the decline in oil prices as nothing more than a supply glut, my view has been that oil was signaling a global economic slowdown.”

    “Energy is the economy — nothing is produced, shipped, sold or consumed without energy. This is precisely why oil is the most widely traded commodity in the world and why falling oil prices are a signal of a slowing economy. The supply glut in oil was a signal of overcapacity in the global economy — the Chinese economic miracle caused a tremendous buildup in commodity production. There is not just overcapacity in oil, but also in steel, copper, iron ore, and shipping to name a few. In order to correct this overcapacity, the global economy must recede – this is the exact function of a recession – to align supply with demand.”

    http://www.cnbc.com/2015/08/24/the-only-thing-that-can-save-this-market-commentary.html

  5. paulo1 on Mon, 24th Aug 2015 9:33 am 

    @ Greg

    Watch out Greg.

    Re: While many have dismissed the decline in oil prices as nothing more than a supply glut, my view has been that oil was signaling a global economic slowdown.”

    Some oil people on this site reckon low oil prices indicate an imminent economic boom.

  6. BobInget on Mon, 24th Aug 2015 9:40 am 

    Dead People Improve Air Quality

    Air pollution has decreased dramatically in parts of the Middle East in the past five years – partly due to armed conflicts since the Arab Spring.

    A new study suggests the improvement is the result of the conflicts, economic recessions and human displacement suffered across the region.

    The findings state: “A combination of air quality control and political factors, including economical crisis and armed conflict, has drastically altered the emission landscape of nitrogen oxides in the Middle East.”

    Jos Lelieveld of the Max Planck Institute for Chemistry in Mainz, Germany, was the lead author of the study, which was published in Science Advances.

    Between 2005 and 2010, the Middle East had the world’s fastest-rising air pollution emission levels.

    A similar increase took place in East Asia, most likely due to economic and industrial growth.

    “However, [the Middle East] is the only region where this pollution trajectory was interrupted around 2010 and followed by a strong decline,” Professor Lelieveld said at a press conference,” the study said.

    The research used satellite platforms to observe the emissions of nitrogen oxides in Middle Eastern countries over the last 10 years.

    The results which show a sharp decrease could not have been predicted, the study says.

    Prof Lelieveld said that “large changes of NO2 have occurred” in the Middle East in a “unique worldwide.”

    In Syria, the level of nitrogen dioxide over Damascus has fallen by 50 per cent since the start of the civil war in 2011.

    “It’s proportional to people, so if emissions have gone down in Syria by 50 per cent, I’d expect that 50 per cent of the people might have been displaced, as indeed they have,” Prof Lelieveld said.

    The findings “disagree with scenarios used in prediction of air pollution and climate change for the future,” he added.

    The study is the first to show the relationship between political stability and environmental factors in the Middle East.

    By Alice Harrold

    بالعربيه
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    Home » Editor’s Choice » Armed Conflict: Bad For Humanity, Great For Reducing Air Pollution!
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    The defendants face 20 years in a maximum security prison. (AFP/File)Egypt: eight Muslim Brotherhood members sentenced to 20 years in prisonThe air campaign will provide support for what Washington deems as moderate Syrian rebels in northern Syria.US, Turkey to launch ‘comprehensive’ air campaign against DaeshNegotiations are allegedly underway for the release of the four Hamas members. (AFP/File)Hamas holds Egypt responsible for kidnapped membersIn this file photo, the outlawed Kurdistan Workers’ Party (PKK) militants are seen gathering to listen to the speech of the PKK leader on April 25, 2013 in the Qandil mountain, the PKK headquarters in northern Iraq. (AFP/File)Turkey accuses PKK of kidnapping more than 300 children in two yearsLebanon’s International Security Forces said police detained 32 people after anti-government protests in downtown Beirut. (AFP/File)Lebanese security: 32 protesters arrested after Beirut clashes UK Foreign Secretary Philip Hammond shakes hands with his Iranian counterpart Mohammad Javad Zarif during a joint press conference in Tehran, August 23, 2015. (AFP/File)UK must tread carefully in new deal with Iran: British Foreign SecretaryThousands of families have arrived by sea to Greece after fleeing war in Syria. (AFP/File)Three refugees die trying to reach GreeceThe UN agency only announced last week the school year would go ahead as scheduled. (AFP/File)UNRWA school staff go on strike in GazaThe bus carrying policemen was targeted in the Beheira region. (AFP/File)Two police officers killed, 27 injured in bus blast near CairoJordan’s border guards detained two people who tried to enter the country from Syria over the weekend. (AFP/File)Jordan arrests two over the weekend for infiltrating border from SyriaTwo Gulf countries advised their citizens on Monday to avoid traveling Lebanon as protests and police clashes intensify. (AFP/File)Kuwait, Bahrain issue Lebanon travel warningsLebanese protesters carry an injured girl during clashes with riot police following a demonstration, organized by Injuries from Beirut protest clashes rise to over 400Ultra-Orthodox Yishai Schlissal was charged with one count of premeditated murder and six counts of attempted murder. (AFP/File)Jerusalem gay pride parade stabber indicted for murderIsraeli security service Shin Bet has been cracking down on Jewish extremists following a number of terrorist attacks in the West Bank. (AFP/File)Israel bans ten Jewish extremists from entering the West BankOnce complete, the wall will separate parts of Beit Jala’s Christian community. (AFP/File)Palestinians protest against separation wall in Beit Jala
    Armed conflict: bad for humanity, great for reducing air pollution!
    Published August 23rd, 2015 – 08:20 GMT via SyndiGate.info
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    A bird is pictured flying in front of buildings in the polluted skyline of the Iranian capital Tehran. (AFP/Atta Kenare)A bird is pictured flying in front of buildings in the polluted skyline of the Iranian capital Tehran. (AFP/Atta Kenare)
    Follow > Damascus, Jos Lelieveld, Mainz, Max Planck Institute for C …
    Air pollution has decreased dramatically in parts of the Middle East in the past five years – partly due to armed conflicts since the Arab Spring.

    A new study suggests the improvement is the result of the conflicts, economic recessions and human displacement suffered across the region.

    The findings state: “A combination of air quality control and political factors, including economical crisis and armed conflict, has drastically altered the emission landscape of nitrogen oxides in the Middle East.”

    Jos Lelieveld of the Max Planck Institute for Chemistry in Mainz, Germany, was the lead author of the study, which was published in Science Advances.

    Between 2005 and 2010, the Middle East had the world’s fastest-rising air pollution emission levels.

    A similar increase took place in East Asia, most likely due to economic and industrial growth.

    “However, [the Middle East] is the only region where this pollution trajectory was interrupted around 2010 and followed by a strong decline,” Professor Lelieveld said at a press conference,” the study said.

    The research used satellite platforms to observe the emissions of nitrogen oxides in Middle Eastern countries over the last 10 years.

    The results which show a sharp decrease could not have been predicted, the study says.

    Prof Lelieveld said that “large changes of NO2 have occurred” in the Middle East in a “unique worldwide.”

    In Syria, the level of nitrogen dioxide over Damascus has fallen by 50 per cent since the start of the civil war in 2011.

    “It’s proportional to people, so if emissions have gone down in Syria by 50 per cent, I’d expect that 50 per cent of the people might have been displaced, as indeed they have,” Prof Lelieveld said.

    The findings “disagree with scenarios used in prediction of air pollution and climate change for the future,” he added.

    The study is the first to show the relationship between political stability and environmental factors in the Middle East.

    By Alice Harrold (the Independent)

  7. BC on Mon, 24th Aug 2015 9:47 am 

    The proximate cause of the equity meltdown is the same as it ever was: MASSIVE bubbles in non-self-liquidating leverage and asset prices (encouraged by central bank and TBTE banks) diverging far beyond supporting underlying fundamentals.

    But this time around the bubbles were everywhere, including commodities; unreal estate; rents; trophy properties; collectibles, vintage cars; farmland; emerging markets corporate and sovereign debt and equities; non-financial corporate debt; margin debt; bank reserves; equities; bottled water; craft beers; price of Starbucks coffee; price of sports franchises; medical insurance premia; price of cable bundles; and Kim Kardashian’s ever-expanding bubbly a$$.

    Mass insanity on a global scale.

  8. ohanian on Mon, 24th Aug 2015 9:51 am 

    This is the most peaceful of days.

    I guarantee you that China will not start a physical WAR in the next four weeks.

  9. BobInget on Mon, 24th Aug 2015 9:55 am 

    Sorry about that double copy/paste.
    These publications are getting sneaky.

    Ha, Ha, Markets are selling off crude again, secure in the knowledge ‘we won’t be needing
    oil anymore’.

    I seriously thought, our energy sector was already so beaten-up crude wouldn’t go much further South. WRONG!

    Crude, before 11:00 Eastern has come back
    to $39. What I believe to be some sort of
    agreed on benchmark.

    Meanwhile Chinese car sales, China is all that matters apparently, China’s car sales are today greater then any other nation save the US.

  10. BC on Mon, 24th Aug 2015 9:57 am 

    @joke: “Fed needs to hold its nerve now. There is no answer for this, except more QE, but not combined with rate cuts, ‘damn, out of ammo’!”

    Right. The Fed now has the excuse it required not to raise rates and to resume QEternity if the economy decelerates further.

    BTW, the decline for the SPX constitutes a mini-crash with evidence of capitulation selling via the VIX, up-down volume, highs-lows, and daily momentum indicators.

  11. JuanP on Mon, 24th Aug 2015 10:02 am 

    I created a Black Monday thread on the forum section here at PO for people to post links and comments related to this subject because I am having trouble finding good things to read about it online. Thanks for your contributions!
    The Black Monday thread: http://peakoil.com/forums/viewtopic.php?f=33&t=71758

  12. BobInget on Mon, 24th Aug 2015 11:28 am 

    Sorry, If you need to panic and sell, move quickly, shares are rapidly recovering.

    I was wondering how shorts managed this huge US coup. Watch, next step will be another bull run till the next ‘correction’.

    Mom and Pop Chinese investors
    consult astrologers before buying and selling.
    Chinese love risk, gambling. ‘Real and fake ‘insider information’ is rampant as is corruption.
    We knew all that. But, because actual growth slowed from 10% to around 6.5% commodity
    prices went down the porcelain parkway.

    No new birth control chemical got injected into drinking water.

    India’s economy keeps growing, easily taking up Chinese slack.

    Americans are baaack buying monster pick-up trucks with gasoline engines no less. GM and Ford have had to lay on extra shifts.

    Muscle cars are back.
    Miles driven, higher then 2008.
    US Adds 100,000 barrels consumption daily.

    Americans are driving down yellow brick roads.

    Shale oil depended on almost constant new drilling. Ultra deep water depends on funding,
    lots of funding. Bankers are buying $20 oil predictions. Believe me, $20 oil is fruitcake.

    Housing starts, best in a decade.
    Unemployment down again.

    All this good news wiped out in a few days because some astrologer pushed the sell button.

    Watch out for shortages.

  13. BC on Mon, 24th Aug 2015 12:04 pm 

    Bob, there is ZERO probability that China is growing 6% real. NOT A CHANCE.

    China’s economy is growing no more than 2% real per capita. Potential real GDP per capita hereafter is near 0%, which is the average trend rate since 2007-08 for the US, Japan, and the EZ.

    China’s “growth miracle” was not an organic phenomenon but was driven primarily by US and Japanese firms’ foreign direct investment, capital goods, trade credits, and tech transfer, and then by unprecedented levels of credit, money supply, and fixed investment to GDP.

    One constantly hears that China has to “rebalance” their economy, as if it is a matter of planning an economy for 1.3 billion people. The economy will “rebalance”, but not because of planning but by default because of a collapse in FDI from the US and Japan, a collapse in exports, plunging fixed investment and production, and energy and food imports reducing GDP.

    The “rebalancing” will occur at a secular trend rate for real GDP per capita of ~0% with consumer spending making up a larger share of smaller GDP by default over time.

    IOW, the “rebalancing” will occur for the same reasons it happened in the US after 1930: a debt-deflationary depression, massive dislocation, and gross misallocation from gov’t panicked intervention.

    Also, Bob, payroll receipts vs. reported wages and salaries imply that US employment is overstated by as much as 1%.

    US auto sales are being driven at the margin by subprime auto loans, which make up 30-35% of sales. Without these loans, auto sales would be 11-12M instead of 17M.

    Finally, US housing starts are responding yet again to artificial price signals from bubbly conditions, as the real median house price is again at the levels of 2005-07 (and the late 1970s and late 1980s) vs. real wages and salaries per capita.

    Then again, the eCONomy and financial markets are influenced primarily by socially conditioned messaging and the resulting mass-social beliefs, desires, and the herd seeking affirmation for their previous decisions, and by the self-reinforcing effects, not by actual conditions and empirical data/facts.

    One last thing. If one takes the sum of real per capita, after-tax profits, incomes less transfers, and total gov’t receipts and then subtract increasing health care costs, the income and spending for firms, households, and gov’ts turned historically recessionary as long ago as Q4 ’14, which is likely when a recession began, although we don’t know it.

    But this also occurred in late 2000 and early 2001, as well as in late 2007 and early 2008. The stock market did not roll over and crash for 2-3 quarters after the economy entered recession, making the stock market a lagging indicator and not even a coincident indicator, let alone a leading indicator.

    This has to do with the hyper-financialization of the economy via financial markets and the extreme wealth and income inequality to the top 0.001-1% to 10%. The top 1-10% are largely insulated from the real economy and thus don’t begin to perceive economic weakness for the rest of society until the stock market craters, which now occurs long after the underlying economy decelerates to “stall speed” and then contracts.

  14. BC on Mon, 24th Aug 2015 12:31 pm 

    BTW, Bob, you mention India. Do you know what India’s growth contributes to global GDP? Hint: practically nil.

    India imports all of its oil consumption in a world of contracting net available oil exports and growth of trade having slowed to near 0%.

    India was hoping to become a cheap industrial labor economy like China, but accelerating automation via robotics and global real GDP per capita slowing dramatically is rendering that objective non-viable.

    In addition to the intractable caste system and political corruption, India’s water shortages, deforestation, poverty, waste, and pollution are just plain grim.

    India is 40-45 to 80-100 years too late to fossil fuel-based industrialization and then post-industrialization.

  15. HARM on Mon, 24th Aug 2015 12:31 pm 

    “Americans are baaack buying monster pick-up trucks with gasoline engines no less….
    Muscle cars are back.
    Miles driven, higher then 2008.”

    And that’s a *good* thing?

  16. HARM on Mon, 24th Aug 2015 12:34 pm 

    No worries on stock or RE markets. If prices refuse to obey their mandated perpetual upward trajectory, the Fed will simply cut rates from 0.25% to 0.0%, followed by QE4. China’s not the only country with a ‘command economy’ y’know.

  17. BC on Mon, 24th Aug 2015 12:45 pm 

    HARM, point taken, and I suspect that QEternity n+1 . . . is likely, including the Fed printing trillions more dollars to buy whatever their rentier-socialist (descriptive, no disparaging) TBTE bankster benefactors perceive needs buying to prevent, or postpone, the implied debt-deflationary wipeout.

    But the US economy is approaching, or has reached, a cyclical profits/income/receipts and investing/spending constraint at the post-2007 trend rate. Most observers are expecting a rate hike and eventual yield curve inversion before a recession is even remotely likely. However, as in Japan since the 1990s and the US in the 1830s-40s, 1890s, and 1930s-40s, recessions and bear markets occur without tightening bank reserves and bank lending. Rather, recessions occur because of lack of growth of business, household, and gov’t income less debt service and other costs, as well as the deceleration of trend growth making the economy more susceptible to shocks, such as energy, labor actions, natural disasters, geopoltical events, etc.

  18. Jerry McManus on Mon, 24th Aug 2015 1:26 pm 

    Financial markets and what passes for so-called “money” can disconnect from real wealth for only so long, people much smarter than I am have tirelessly pointed this out for many years now. Sadly, only to fall on mostly deaf ears.

    GDP is very tightly correlated to energy use, and real wealth is derived from what can be extracted out of the natural capital of the earth. Fish, forests, fiber, food, and yes, all those precious fossil fuels.

    All of which are increasingly in short supply even as the population and consumption continue to grow.

    Does anyone really believe that is going to have a happy ending?

  19. HARM on Mon, 24th Aug 2015 2:36 pm 

    @BC & Jerry,

    5 years ago, I would have agreed that fundamentals matter and cannot forever be manipulated out of existence. Lately, I’ve come around to the realization that “real” markets do not actually exist, except in theory, and possibly never did. Despite assurances to the contrary, the “economy” is far from being an empirically tangible and exogenous thing that obeys some immutable Laws of Nature (‘Supply-and-Demand’ supposedly being akin to the laws of gravity or thermodynamics).

    I’ve come to realize that all those devotees to Adam Smith, Mises, Simon, Rand etc. are really naive utopians who are deluding themselves. There is no “real” economy or “pure” capitalism just waiting to emerge from the shackles of crony/state socialism, ready to enrich everyone. Unfettered market-based capitalism, as we’ve seen, just inevitably leads to dictatorship, where a tiny elite owns/controls everyone and everything else. In that respect, it’s not much different than any other “ism” taken to its logical extreme –communism, fascism, monarchism, mercantilism, etc. The only difference is, the elites get there mainly through bribery and corruption vs. overt force.

    All the so-called economic theories and laws are really just elaborate smoke-and-mirrors designed to hide and legitimize the absolute power enjoyed by the elites over everyone else. It doesn’t really matter what the system is called: democracy, socialism, communism, meritocracy –in the end, it’s always about who has the power and who doesn’t.

    5 years ago, I would have agreed that the banksters could not kick the can this far or this long. Now that I realize there really is no “market” aside from fraud, theft and corruption, I see I was wrong. Fraud theft and corruption *are * the market, and continue as long as the “people” can be fooled and pacified –which, in the U.S., appears to be a very long, long time.

  20. HARM on Mon, 24th Aug 2015 3:26 pm 

    “Markets can remain irrational longer than you can remain solvent.”
    –John Maynard Keynes

  21. GregT on Mon, 24th Aug 2015 3:36 pm 

    @Harm,

    Very good post above.

  22. BobInget on Mon, 24th Aug 2015 4:41 pm 

    Thank you; BC, Harm, Jerry M, any reading your posts came away with a clear understanding of our current situation.

    I’ll continue to take a more bullish view here. If for no other reason then suicide prevention.

  23. HARM on Mon, 24th Aug 2015 4:59 pm 

    @BobInget,

    Hey, don’t let us get in the way of your suicide plans!

  24. Davy on Mon, 24th Aug 2015 5:15 pm 

    Bob, bullish looks foolish but I believe sober would be a good word for what attitude one should have. This is not the end of the world but it is likely the beginning of the end of the world as we know it.

  25. Makati1 on Mon, 24th Aug 2015 8:39 pm 

    Obvious to see who is ‘invested’ (IRAs, 401ks, mutual funds or own stocks)…lol.

  26. Davy on Mon, 24th Aug 2015 8:49 pm 

    Mak, they are still better off than you are living on a social security check. Your crowing like you got something but you are just a poor retiree in a third world country. Not much to crow about except for someone unhappy and worried and trying to feel better.

  27. BobInget on Mon, 24th Aug 2015 9:16 pm 

    Way clearing for Energy East pipeline reversal.
    http://money.cnn.com/news/newsfeeds/articles/marketwire/1213838.htm

    ‘What oil gets shipped east ain’t gonna get shipped south”
    bobinget

    Oh, I forgot, We, Hamericans won’t be needing
    any more dirty Canadian oil.

    Never mind.

  28. BobInget on Mon, 24th Aug 2015 9:21 pm 

    Listen you guys, I’m the one whose supposed to be in a lousy mood. Cut the crap.

    Asian markets looking up.Them Chinese fellas was just funnin us.
    10:20 Eastern

  29. HARM on Tue, 25th Aug 2015 1:19 am 

    @GregT,
    Thanks!

  30. Davy on Tue, 25th Aug 2015 1:27 am 

    BREAKING
    Shanghai Composite Falls below 3,000 for First Time in 8 Months

    http://www.bloomberg.com/

  31. GregT on Tue, 25th Aug 2015 2:22 am 

    Wow, Shanghai Composite closes down another 7.61%.

    German DAX down 4.7%. France CAC 40 down 5.35%. Vienna down 4.68%. Athens down 10.79%.

  32. GregT on Tue, 25th Aug 2015 2:35 am 

    I’m sure that the PPT will be putting in a bit of overtime tonight. Myself? I’m going to continue reading my newly gifted to me book; The Self Sufficient Gardener.

  33. Davy on Tue, 25th Aug 2015 7:26 am 

    We should expect all kinds of knee jerks in the coming weeks out of the markets. They have destabilized and the central bank are left with tools that are at their limits and suffering marginal benefits to implementation and likely outright damage. The important point to understand is collapse is a process and likely our markets now are the beginning of a bumpy descent. Once these disturbances gain momentum they run a course.

    During normal financial times with price discovery we could expect a normal business cycle with understood responses to understood market dynamics. We are no longer in that type of financial situation. This is all about rate repression and command liquidity or better their trap . This cannot work in the long run because you can’t force a business cycle just as you can’t force any system cycle that is self-organizing and “mega”.

    The problem we have now is multiple bubbles within a deflationary real economy. The bubbles are the results of system forcing. We have reached a dangerous path that must be taken but to take it will leave the system likely in failure. We must go into a recession but going into a recession will unleash dangerous systematic deflation. That deflation is currently latent and real in the actual economy. The bubbles are maintaining our critical financial nodes within this latent deflation.

    The problem with these bubbles are the excessive debt, leverage, and repression of bad debt. Deflation will sweep away much of this widespread and systematic debt. Much of the recent investments with this debt was mal-investment in overcapacity or non-productive asset creation. Ghost cities, unneeded steel mills, and excessive retail space will not produce productive GDP that will feed, house, and propel an overpopulated world. Mal-investment must be eliminated by bankruptcies and write-offs.

    We as a global people have kicked the can with extend and pretend. These policies are subject to limits and marginal returns to their tools of action. We are at limits at every level from systematic, to resource, to ecosystem, to climate, and social fabric. When you have such a systematic background then a market disruption like we are seeing now will end growth.

    It is likely that China’s growth and Asia by extension will go low or negative. The credit creation and market bubbles will overwhelm the authorities and we will see a disorderly retreat. The rest of the world will feel the contagion and likewise slip into recession unleashing the deflation that will destroy the system. Demand destruction and supply destruction is the name of the game now.

    I am thinking this will play out for a time but it will not be pretty. We are in good shape on oil supply and food supply within the current beginning of the demand destruction cycle. Yet, this is just muscle atrophy. We will cannibalize our system, our infrastructure, and our resource production capabilities. That will buy us some time. I leave you with this profound paragraph from zero hedge on the Chinese monkey trap:

    The PBOC cut itself was not surprising, considering the PBOC now has to juggle and micromanage every aspect of the economy, from its sliding currency, to the bursting stock bubble, to record capital outflow, to soaring real interest rates, to the slowing economy. In fact, bulls around the globe will welcome the latest central bank bailout. Which also happens to be the worst aspect of today’s intervention, because one can once again toss all the talk that China would finally stop intervening in asset pricing, with today’s decision merely perpetuating the market’s reliance on central banks

  34. Kenz300 on Tue, 25th Aug 2015 10:29 am 

    The Chinese stock market is back to the level it was at in March 2015……. it had an unsustainable rise and now has fallen back to reality……..

    The scary part was how fast it rose….. it is still much higher than it was only one year ago……

    http://www.profitconfidential.com/wp-content/uploads/2015/08/Shanghai-Composite-Index-Chart.jpg

  35. HARM on Tue, 25th Aug 2015 12:30 pm 

    @BobInget,

    Sorry, that one went a little over the top.

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