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Deflation Warning: The Next Wave

The global economic slump is accelerating
Wednesday, September 30, 2015, 11:36 PM

The signs of deflation are now flashing all over the globe. In our estimation, the possibility of an associated financial crisis is now dangerously high over the next few months. » Read more


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From Deflation To Hyperinflation

Expect a market crash followed by helicopter money
Wednesday, September 30, 2015, 11:36 PM

Executive Summary

  • China is rolling over
  • Contagion will eventually take down the core economies, including the US
  • We are witnessing a full-blown collapse of the commodity complex
  • Deflation will win the day over the next year, but then get ready for helicopter money hyperinflation

If you have not yet read Part 1: Deflation Warning: The Next Wave available free to all readers, please click here to read it first.

The Chinese GDP Lie

Right off the top, China is not growing anywhere near the 7% it claims.  That’s just a politically useful lie that the Chinese tell to the world as much as they tell to themselves.

Fortunately, hardly anyone is falling for that particular fib any longer.  Let’s start with the completely obvious manufacturing slump that has hit China:

Chinese Factory Gauge Slumps to Lowest Level Since March 2009

Sept 22, 2015

A private Chinese manufacturing gauge fell to the lowest in 6 1/2 years, underscoring challenges facing the economy as its old growth engines splutter.

A global sell off in riskier assets gained pace after the preliminary Purchasing Managers’ Index from Caixin Media and Markit Economics dropped to 47.0 in September. That missed the median estimate of 47.5 in a Bloomberg survey and fell from the final reading of 47.3 in the previous month. Readings have remained below 50 since March, indicating contraction.

Premier Li Keqiang’s growth target of about 7 percent for this year is being challenged by a slowdown in manufacturing and exports even as services and consumption show resilience.


The way a PMI reading works is anything over 50 indicates expansions and anything under 50 indicates contraction.  Anybody care to explain to me how China can be sporting sub-50 readings every month since March -- that’s five full months -- and still be claiming to be aiming for a 7% annual growth target?  You know, because China is... » Read more



Buy Gold While You Still Can!

An important update on the supply of physical gold
Friday, September 25, 2015, 2:56 PM

This report centers on preponderance of fascinating data revealing the extent of the West's massive dis-hoarding of physical gold, for the first time, begins to allow us to start estimating the range of end-dates for the flow to the East.

Here’s the punchline: there’s an enormous and growing disconnect between the cash and physical markets for gold. This is exactly what we would expect to precede a major market-shaking event based on a physical gold shortage. » Read more


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Off The Cuff: Look Out Below!

We're on the cusp of major asset deflation
Thursday, September 24, 2015, 4:15 PM

In this week's Off The Cuff podcast, Chris and Mish Shedlock discuss:

  • The Periphery Is Collapsing Fast
    • Emerging market currencies are falling hard vs the US dollar
  • China Is Running Off The Rails
    • We're witnessing a bust in progress
  • Europe's Black Swan Has Landed
    • A migrant crisis no one saw coming this quickly
  • The US Is Sliding Back Into Recession
    • The data is bad and getting worse

Anthony Aneese Totah Jr |

Buckle Up, The Ride Is Going To Get Wilder

High probability of greater market turmoil ahead
Tuesday, September 1, 2015, 4:01 PM

The recent stock market and financial turbulence is going to get worse -- possibly a lot worse. This will be true even in the 'core' countries (US, Europe, Japan), while peripheral countries are suffering unusual levels of turmoil.

It’s nothing personal. This is simply how things were always destined to end. » Read more



Here's Why The Markets Have Suddenly Become So Turbulent

A perfect storm of failing trends
Friday, August 28, 2015, 1:28 PM

When stock markets are free-falling 10+% in a matter of days, it’s natural to seek some answers to the question “why now?” » Read more



Marc Faber: The Global Economy Is Entering An Epic Slump

Losses are going to get ugly, fast
Sunday, August 23, 2015, 5:32 PM

Famed investor and author of the Gloom, Doom, Boom Report, Marc Faber, returns to the podcast this week to discuss the slowdown in the global economy, signs of which he claims are multiplying fast all around the world.

He predicts the next year is going to be an especially bruising one for investors, and recommends a combination of diversification and defense for those with financial capital to protect. » Read more



Off The Cuff: Currency Turmoil

China is the latest to enter the currency wars
Thursday, August 13, 2015, 11:17 PM

In this week's Off The Cuff podcast, Chris and John Rubino discuss:

  • Currency Turmoil
    • What a yuan devaluation means
  • China's Credit Crisis
    • Why the growth of the past decade is over
  • Deflation Everywhere
    • The whole world economy is slowing
  • Lower prices ahead!
    • "All that's missing is a stock market crash"

Is China’s “Black Box” Economy About to Come Apart?

A China crisis will de-stabilize the world
Friday, August 7, 2015, 11:37 AM

After 30 years of torrid expansion, perhaps the single most consequential factor in China’s economy is how much of it is a “black box”: a system with visible inputs and outputs whose internal workings are opaque.

That black box is looking increasingly like a Pandora's box. What will happen if it breaks apart? » Read more



Why China Is Extremely Vulnerable Now

The majority of household wealth is at risk of vaporizing
Friday, August 7, 2015, 11:36 AM

Executive Summary

  • Too much of China's wealth is tied up in housing
  • The Obvious Risk: Declines in demand will crush prices
  • The Less Obvious Risk: housing in China is very illiquid
  • China's extraordinary vulnerability

If you have not yet read Part 1: Is China’s “Black Box” Economy About to Come Apart? available free to all readers, please click here to read it first.

In Part 1, we looked at the factors that render China’s economy a black box: the inputs and outputs are visible, but the internal workings are often opaque. Though there is an abundance of data on China’s housing market, it too is opaque in critical ways.

Let’s dig into what makes China’s housing bubble so risky.

Chinese Household Wealth Is Mostly In Housing

The percentage of household assets in real estate varies from source to source, but however it’s sliced, China’s household wealth is extraordinarily concentrated in housing.

This means any reduction in housing values will have an outsized impact on household wealth and the perception of wealth, i.e. the wealth effect: people who own assets that are rising feel wealthier and tend to spend more freely as a result. Those with assets that are declining in value tend to feel poorer, even if their day-to-day life in unaffected by the drop in wealth. This is the negative wealth effect.

While middle-class households’ wealth is in their primary residence, upper-middle class households tend to put the family wealth in additional homes as investment properties. Anecdotally, it is not uncommon for middle-aged people with secure employment to own three flats: one for their residence and two as nest eggs. The practice of buying third homes was subject to restrictions a few years ago, but the resulting drop in housing demand scared authorities into... » Read more