GLOBAL MARKETS-Stocks, yields tumble after China pushes yuan lower again

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• http://i0.kym-cdn.com/photos/images/newsfeed/000/810/188/a71.jpg

  http://theeconomiccollapseblog.com/archives/23-nations-around-the-world-where-stock-market-crashes-are-already-happening

  https://www.youtube.com/watch?v=TkBMAHUkibY

  IT'S HAPPENING!!1!

• Poppa, the economy was different when The Volcker Shock happened. Rates were jacked then to combat rampant inflation and that's in part because of the change in monetary policy courtesy of Nixon when he put the final nail in the Bretton Woods coffin. The 70s marked this country's economy from one with relatively stable monetary policy, one that was still a producer to one that became more of a service economy starting under Reagan.

  See, we borrowed money to help fund The Vietnam War but our economy overall wasn't that great in the sixties. At the time, countries we borrowed from could seek repayment in gold but when Nixon completely disconnected the dollar from gold, it became a fiat currency backed by nothing but IOUs.

  OPEC got us by the short hairs in the 70s and helped create the wild swings in inflation then until we got in bed with them and together created the petrodollar to help solidify the dollar's position as the world reserve currency.

  We had more stringent taxes and tarriffs in place compared to today which eventually led us to becoming a net importer of goods with a perpetual trade deficit ever since the 80s.

  Then automation started gaining traction more and more in the 80s. Productivity increased at the cost of human labor. You saw fast food industry expand immensely. When I was a kid there was only one McDonald's within twenty miles of us. Where I live now, there are three within 6 miles of us along with all of the other fast food joints.

  You saw the beginning of the decline in mom and pop owned businesses as behemoths like Walmart, Home Depot, Target and so on expanded.

  Then in the 90s you had NAFTA which was basically the death knell for 33% of the manufacturing jobs in this country. The number of manufacturing jobs declines with every recession in the last 25 years. All those good paying jobs were replaced by burger flippers, Walmart greeters and so on.

  Then came Graham-Leach-Bliley, which basically repealed Glass-Steagall, instituted during the great depression to provide a distinction between commercial and investment banks. That helped create the TBTF banks, who started tinkering with all kinds of funky investment packages.

  The markets now are largely being propped up by companies like Apple, Google, Netflix and Amazon and many more are ridiculously overvalued with ridiculous earnings per share ratios.

  All the Fed's ZIRP policy has done is enabled a bunch of banks to borrow dirt cheap from the Fed and invest it in their own companies or loan it to some sucker at 4-5% to buy a house, car or some gadget that they can't really afford.

  All of this in less than fifty years. It isn't Boomers' fault, either. It's the previous generation that sent us down the path to being an over leveraged fake economy predicated on borrowing to buy the biggest house, fanciest car or latest iWhatever. Boomers are the ones that perpetuated it, fed it and helped make it the norm when they should have stopped it. If they had, anyone my age or older wouldn't be sitting around talking about when gas cost a quarter a gallon.

  This country's last real economy was the tech boom and the onset of the housing bubble in the 90s. The reason why the 2001 recession wasn't worse was because it was primarily focused on the tech sector and the housing bubble helped keep things humming along after the tech bubble blew.

  See GDP isn't really about *production* it's about *spending*. All spending, from paying for a pack of gum, a cheeseburger, a movie ticket, TV, car, or a house. Even refinancing an existing mortgage counts in GDP. That's why they pushed refinancing schemes such as HAMP or boondoggles like cash for clunkers. It's all to get people to spend, spend, spend, especially on big ticket items. Now they colluded with insurance companies to launch Obamacare to ensure that they're both getting paid.

  Another byproduct of low interest rates is, it discourages saving. You get next to nothing for interest rates so there's next to no return. Banks used to advertise a slightly higher interest rate than a competitor for savings accounts as a lure to get someone to park their money there. Now they encourage you to borrow and pay them interest. They dangle bonus points in front of you like a carrot to keep you spending because in the long run you'll get some stupid perk like an Amazon gift card or what have you.

  People figure they can't make any money by saving it in an account and they're encouraged by other people to invest in stocks or park their money in a mortgage because houses only go up in value because they are assets. BS. Houses go up as a result of inflation fueled by a devalued, weakened dollar.

  Lower rates are there to encourage borrowing and therefore spending to keep the wheels greased. The markets get whacky at any sign of instability because they're just a house of cards. Investors worry that even a small interest rate will have a domino effect as people stop pumping into the markets and start taking it out.

  One of the reasons prices just keep going up and up and up is because of monetary policy. Throughout history, every economic boom or uptrend is followed by a bust. The good times lead to inflation, the busts introduces deflation, therefore balance. Since we agreed to Bretton Woods after WWII, that was no longer the case. Prices didn't go up appreciably during the 50s and 60s because with the dollar as the reserve currency but still tied to gold, there was still some price stability. Inflation was low and constant with no deflation. Once the dollar lost the tie to gold, it became a free floating currency, weighted against other countries' currencies. Once the easy money era kicked off in the 80s, that's when the real devaluation of the dollar began. That's what helped kick off deficit spending in the 80s. The economy was sluggish so .gov began borrowing to deficit spend to boost the GDP and therefore the economy. Think about it: GDP has puttered along at a rate of increase of around 2-3% since "Recovery Summer" That year, $1.4 trillion worth of GDP was government deficits/borrowing. GDP that year was around 14.5 trillion. That means government borrowing accounted 10% of GDP. Without that deficit spending, GDP/the economy would have contracted. Last year GDP was around $17.5 trillion. The deficit/amount of money borrowed was around $450 billion. That's *still* over 2% of GDP and still enough to account for most of the gain GDP. If people aren't borrowing or banks aren't lending, .gov tries to pick up the slack to make themselves look like geniuses of economic policy. All they're really doing is rearranging the deck chairs on the Titanic while the band plays on.

  Another perspective on inflation. Put it this way: It took the consumer price index sixty-seven years to go from 9.8 in '13 to 40 in '71. In the last forty-four years it went from 40 to over 230. In other words, it took the CPI 67 years to gain 32 points. Now it goes up that much in under a decade. We experienced very slight deflation in 2009. It was the first time any deflation had occurred in over 60 years. If not for government borrowing to produce an illusion of a recovery, the economy would have gone on stagnantly or gotten worse. It doesn't fix anything though.

  We are fvcked until something major changes, boys and girls. In the last forty years, the rich have gotten richer, the poor have gotten poorer, the middle class is being globalized out of existence and the traitors in DC fiddle while the whole thing smolders.

  One more thing about interest rates. They also are used to calculate the interest payments on all of that government debt. Last year that was over $430 billion dollars and *that* is with historically low interest rates. Double the interest rates then do the math. That. Is. Scary. Sh!t.

  That's it. It's late, I'm tired and I now have a headache. Night, ya'll!

• And Congress has the gall to call China a currency manipulator, talk about the pot calling the kettle black. Countries have been manipulating their currencies for decades, Japan, Europe, The US, China, most of the major players.

  For the record, jukin, that would be over a year away(Unfortunately) and they may not be able to unless The Fed decides to rev up the QE machine again. Part of this market panic is over speculation that Yellen will raise rates a little next month but I would be surprised if that happens. If things get bad, QE is the only round she has left in the chamber because rates are already close to zero with nowhere to go but up.

  This crap has been stewing for 25 years. The recession in the early 90s hit, The Fed dropped the fed funds rate from around 8% to around 3%. Once things straightened out, the housing and dot com booms began, the fed raised them back to around 6%. The dot com bubble went pfft, the fed gradually dropped rates back down to 2%. Kept them low for a couple of years then started raising them back over 5%. That helped set off the subprime crisis and before the beginning of that recession was really called, they started dropping rates again eventually landing at around .2%, where they have stayed ever 2008. At no time in the last 60 years, as the FFR ever dropped below .5% but it's been there for Seven. Years.

  A lot of this hubbub in the markets has been over the possibility of a measly .25% rate hike.

  The excrement's going to hit the rotating air circulating device before too long. Many commodity prices are falling, partly supply and demand and partly a dollar that's getting stronger. Earlier this year the USD index hit 100 briefly for the first time in 10 years. Japan's trying to devalue their currency, same with China, Europe is still a clusterfvck.

  It will be interesting to see what they try to pull out of their hat this time. Bail ins for all?

  • Wall Street is run by a bunch of squeamish pussies. If they're freaking out about a .25% interest rise, what will they do if it goes back to 5%? That is a comfortable level IMHO.
    If this scares them so much, then why didn't they all kill themselves when the both inflation and short-term interest rates reached 18 percent in February and March 1980, and the prime rate reached 21.5% in December 1980, the highest rate in U.S. history under any President.
    Obama has the luxury of the lowest interest rates in memory, and still can't turn around the economy!

• The markets are so heavily manipulated one wonders if they continue on as before. Where else does one invest but equities? Real estate and debt markets are all flat. If the day of reckoning does come, so be it. A little reality in the markets is a good thing. That said, my 401(k) is 25% U.S. stocks so I will get hurt in the near term and then recover, but isn't that always the way?

  • Have you looked at indexed annuities? They don't gain as much as equities, but they also don't lose anything.
    Other than that, my son is a sales manager for a company that has been marketing software that has an incredible reputation for predicting the market trends, and the people using it are making a shitload of money. They have a hell of a track record, but the software is expensive, about $3500 to buy the basic program.
    If you want to learn more about it, email me and I'll get you the info.

    • Thanks.

      I think the index annuities are a great part of any portfolio. The guaranteed income and safety outweigh what you may gain with more risk. I don't even trade stocks anymore. No time to do it right and I'm better off with a few fire and forget mutual funds in my 401(k) and I have been keeping more than what one would expect in cash. While it earns almost nothing, I made the conscious decision to make the trade between a return for the liquidity and safety.

      • That's good. I also am hanging on to silver, the kind you keep at home, just because in an emergency, it's much easier to handle and deal with than gold. It may take up more space, but it doesn't need to be shaved, and weighed by the grain, to buy food!

• Not really much different from us devaluing the dollar by printing more. So begins the race to the bottom.

• I am going to have to say that Trump saw this coming for years. He has been blasting China for years and people just didn't want to take him seriously... well... there you go. Just like Mr. Romney talking about Russia and Obama was all like "the 80's are calling and they want their cold war back" crap he spewed.... but Russia got uppity and there you go.

• Trust me all the stops will be pulled out so that the market crash happens after King Barky the Liar of Fecal Touch is out. The only questions is will it be enough and if not how will it not be Obama's fault.

• Please don't tell this to Thomas Friedman as it might further loosen his already tenuous grip on reality.

  • I think that bridge was crossed long ago....Friedman is not even in the same room with reality, in fact the same building, same side of town or same county.

    So the interesting question is to see where Soro's net worth is in a day or two? Did he know in advance like always? And is the Donald worth a billion or so less now?

    And how many of the millionaire's in congress got hurt, and who did not?

    • Soros made all his money shorting the market; therefore, I sure wouldn't count on him being negatively impacted by this. However, everybody's 401(k) will get cleaned out. They have to find a sucker to cover any market shorting; I'll give you three guesses who pays and who rakes in the cash.

      • Yeah, which country was it SpookyDude (I forget, Thailand?) that he made a billion on crashing their economy while selling short and to this day doesn't have the balls to travel there? ←and I don't really blame him for not going, I said he was evil, not stupid.