China

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Off The Cuff: A Dependable Crash Indicator Is Now Flashing

RV sales are signalling signs of a blow-off top
Thursday, August 3, 2017, 10:36 PM

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

  • Trade Wars
    • Suddenly arising with Russia and China
  • Modern Monetary Theory
    • A delusion that dates back to the days of John Law
  • A Great Crash Indicator
    • RV sales are sending a warning sign
  • Risky Real Estate
    • Private equity will sell fast when times get bad

Chris and John discuss the looming trade wars with Russia and China, the long-term implications of the worldwide credit binge, and the indicators that will presage a systemic correction. John shares his assessment of one of his most trusted crash indicators, RV sales:

This is a typical cycle for RVs. It’s a big toy and people are cocky now because they’ve been working for a little while. They have extremely easy credit. Interest rates are incredibly low. If you’ve got a decent credit score you can buy an RV for 2 or 3% interest and a lot of people are taking advantage of that, just as they spent the last three or four years taking advantage of incredibly cheap car loan terms, and running, basically, an auto sales bubble. They’ve kind of shifted to RVs now, which is yet another sign that the cycle is nearing an end.

This "recovery" is 8 years old now. The typical recovery is 6 years. So we already have an expansion that’s a couple of years longer than normal. It’s actually the third longest since World War II. Which means that, everything else being equal, we should be pretty close to the end of this cycle and ready for a downturn. And now you’ve got indicators like RV sales going just parabolic, indicating that, at least in that little section of the market, money is incredibly easy and buyers are euphoric. And that’s also a sign that things are nearing the end. There are lots of other signs, but that’s one.

Every time there’s a bubble in an asset class, there’s always a new reason for it that appears to explain it. But historically the explanation never holds. The cycle still reasserts itself at some point. And things go back to normal. And I suspect that’ll be the case with RVs at some point.

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today.
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Everything You Need To Know About The Credit Impulse

And why it's signalling a coming recession, likely this year
Friday, June 16, 2017, 7:23 PM

Executive Summary

  • The case of the missing credit impulse
  • The credit impulse is the worst its been in recent history
  • How the situation is deteriorating fast
  • Why a credit impulse-driven recession is nigh

If you have not yet read Part 1: The Pin To Pop This Mother Of All Bubbles? available free to all readers, please click here to read it first.

The Case Of The Missing Credit Impulse

An enormous oversight of nearly every major economist is the role of debt in both fostering current growth but also stealing from future growth. 

It seems like such a simple concept, and it’s one I covered in great detail back in 2008 in the original Crash Course, but it remains a mysterious oversight of most here in 2017.  The concept is easy enough; if I borrow money to increase my spending here today, it probably makes sense to take note of that if you're an economist responsible for tracking spending.

My debt-funded spending today is my lack of spending in the future when I pay down the debt. 

Professor Steve Keen has this topic nailed beautifully. In it, he explains how even simply keeping a massive pile of previously accumulated debt at the same level as last year is a net negative on economic growth. A very simple and a very profound concept that still is not a part of conventional thinking.

Now here where things get interesting. And frightening. If we look at... » Read more

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Steen Jakobsen: 60% Probability Of Recession In The Next 18 Months

The world economic engine is slowing to a standstill
Sunday, June 11, 2017, 6:46 PM

Steen Jakobsen back on, Chief Investment Officer of Saxo Bank, returns to the podcast this week to share with us the warning signs of slowing economic growth he's seeing in major markets all over the world.

In his view, the world economy is sputtering badly. So badly, that he's confident predicting a global recession by 2018 -- or sooner. » Read more

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Estimating Bitcoin's Fair Value

Spoiler alert: It's much higher than its current price
Friday, January 6, 2017, 11:13 AM

Executive Summary

  • Why No Nation Truly Has Full Control Over Its Currency
  • Why Sovereign Efforts To Control Currencies Is Driving Capital Into Digital Currencies
  • The Driver's Of Digital Currency & Value
  • Calculating Bitcoin's Fair Value

If you have not yet read Part 1: Why The U.S. Dollar And Bitcoin Keep Rising available free to all readers, please click here to read it first.

In Part 1, we reviewed the dynamics of demand and utility that drive the valuation of any tradeable good, service, commodity and currency.  We established that it’s impossible to understand how a fiat currency such as the U.S. dollar can retain a value above its tangible value of zero unless we accept its utility value and its non-tangible sources of value, i.e. the wealth and wealth generation of the issuing nation and state.

We now turn to the second half of the question posed in Part 1: Why isn’t the market value of a digital currency such as bitcoin zero?

Or perhaps more interestingly: How high might the price of bitcoin go?

To answer this question, we must investigate another question: Can any state control the value of its currency and its place in the global economy? I suggest the answer is no. Beneath a surface veneer of status quo continuity, nations and states are losing the ability to control their role in the global economy and thus the utility of their currency.

To understand why, we turn to socio-historian Immanuel Wallerstein.

Who Controls a Rapidly Changing World-System?

Wallerstein is recognized for advancing the concept of world-system, his term for what I call a global Mode of Production, i.e., the political, social, financial and economic system that governs the relations of power, labor, capital, trade and resources (broadly speaking, our understanding of Nature and the extraction of its resources).  In a recent essay China is Confident: How Realistic?, he observed that "countries (have lost the ability) to control what happens to them in the ongoing life of the modern world-system."

These two paragraphs get to the essence of his analysis... » Read more

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Off The Cuff: A Lot Of Bubbles Are Beginning To Burst

China, home sales, auto loans...
Friday, December 30, 2016, 5:18 PM

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

  • The Traumatized National Psyche
    • Will 2017 see a healing?
  • Bursting Bubbles Multiplying
    • China, home sales, auto loans...
  • QE For The People
    • It's coming, and we'll all regret it
  • The Pension Time Bomb
    • Insolvency is a "when", not an "if"

John Rubino joins Chris this week to discuss the biggest trends most likely to define the course of 2017. He sees populist spending programs, deflating asset bubbles, and the slowdown of China at top of the list. » Read more

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2016 Year In Review

A Clockwork Orange
Thursday, December 22, 2016, 9:03 PM

Every year, friend-of-the-site David Collum writes a detailed "Year in Review" synopsis full of keen perspective and plenty of wit. This year's is no exception. As with past years, he has graciously selected PeakProsperity.com as the site where it will be published in full. It's quite longer than our usual posts, but worth the time to read in full. » Read more

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Learnings From My Recent Trip To Hong Kong & China

Our message is being very well received there
Monday, October 24, 2016, 5:57 PM

On October 5th at 1:45 in the morning I got on a Cathay Pacific flight to Hong Kong. 

If you recall, I'm participating in an Advisory Group for the United Nations. On this trip I also had a chance to deliver the Crash Course to an audience in Shenzhen. So we can now say The Crash Course has been heard on the Chinese mainland! 

It was one thing for me to read about China’s explosive growth and quite another to go there and see it and feel it for myself. It's real, and its scale is massive. » Read more

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Off The Cuff: Topping Markets

To avoid a fall, we'll need a bigger stimulus program...
Friday, October 14, 2016, 11:48 AM

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

  • The Rush To War
    • Tensions with Russia continue to mount
  • Odds Of A Fed Hike Rising?
    • Even if the Fed wants to, can it?
  • Recession Warning Signs
    • It's getting harder to argue we're not already in one
  • Topping Markets
    • To keep them elevated, we're going to need a bigger stimulus package...

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today. » Read more

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The Marginal Buyer Holds The Pin That Pops Every Asset Bubble

So it's important to watch him very closely
Friday, August 19, 2016, 2:01 AM

Those of you who took an Economics class in college may remember the saying that prices are set "at the margin". That's a fancy way to say that prices are set by the person (or people) willing to pay the most.

This person willing to pay top dollar is called the "marginal buyer". Most of us don't really think about him, but he (or she) is very, very important.

Why? Because the marginal buyer not only determines price levels, but also their stability and degree of volatility. The behavior of the marginal buyer, as well as the degree of competition for his/her "top dog" spot, sets the prices of nearly every asset class held by today's investors. » Read more