Martin Armstrong Discussion

[OROBTC]

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tabnloz

There is so much that is interesting about the Yuan devaluation.  The first and obvious effect is that Chinese exports will become cheaper, although marginally so in our case (our company imports automotive bearings from Asia into Peru, including Chinese).

Armstrong today has his comments on the devaluation:

http://www.armstrongeconomics.com/archives/35842

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Agree that a devaluation will only hurt China's (now ceased?) efforts to include the Yuan into the SDR.  The IMF (and Europe and the USA, not to mention Japan -- a prime victim of China's devaluation) will look dimly on China now...

China does continue to build its gold reserves, which is about the ONLY good news coming from China lately.

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And how do Korea and Japan react to this?  We buy bearings from all three countries, so our costs will go down.  But, if Peru's own currency joins "The Currency War" and also devalues, that is a net minus (pay in dollars, receive local currency for sales).

[username18333]

Interesting as this comes just a week or so after the IMF announced that China's joining to the SDR basket will be delayed until next September.

http://www.imf.org/external/pp/longres.aspx?id=4975

What odds China was maintaining the unofficial Yuan peg to show it can toe the line even in the midst of a declining economy (and using as many alternative to devalue as needed)? Now that it is delayed they've decided to act swiftly and a new round of currency wars begin......

...this devaluation has a similar impact to raising interest rates to stem speculation. Foreign capital just lost 2%.

If Yuan should not be more immediately "join[ed] to the SDR basket" (tabnloz), "[f]oreign captial" (Armstrong) will be made to suffer more losses. That incentivizes "the IMF" (tabnloz) to expedite the Yuan's induction into "the SDR basket" (tabnloz).

[tabnloz]

Interesting as this comes just a week or so after the IMF announced that China's joining to the SDR basket will be delayed until next September.

http://www.imf.org/external/pp/longres.aspx?id=4975

What odds China was maintaining the unofficial Yuan peg to show it can toe the line even in the midst of a declining economy (and using as many alternative to devalue as needed)? Now that it is delayed they've decided to act swiftly and a new round of currency wars begin......

...this devaluation has a similar impact to raising interest rates to stem speculation. Foreign capital just lost 2%.

If Yuan should not be more immediately "join[ed] to the SDR basket" (tabnloz), "[f]oreign captial" (Armstrong) will be made to suffer more losses. That incentivizes "the IMF" (tabnloz) to expedite the Yuan's induction into "the SDR basket" (tabnloz).

Nice point, but how much does the IMF care about foreign capital losses? (look at the Swiss removing their Euro peg). I'm not guessing why the IMF delayed the decision, but China can devalue now, behave later, and be comforted by the fact that they will be heading up the g20 next year and so reserve currency status is pretty certain for them (plus it helps stabilise their economy somewhat*)

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[username18333]

Nice point, but how much does the IMF care about foreign capital losses? (look at the Swiss removing their Euro peg). I'm not guessing why the IMF delayed the decision, but China can devalue now, behave later, and be comforted by the fact that they will be heading up the g20 next year and so reserve currency status is pretty certain for them (plus it helps stabilise their economy somewhat)

Devaluation is merely an alternative maneuver to prevent the further inflation of another currency or currencies. Fusion of the national currency with that currency or those currencies (into a "basket currency") would seem a primary one. (Note: without "inflation à la carte," the N.A.T.O. cannot retain its "good standing" within the plutocracy.)

[TPTB_need_war]

The purpose of the Yuan devaluation is likely to be that the investment opportunities in the local economy had dried up and this was causing rampant speculation. Many were finding they could make more money betting short against the stock market than investing for example in export industry. Also there was a carry trade of borrowing abroad and bringing the money into the local economy to speculate with.

This is designed to boost competitiveness of the export and industrial sector, which will also diminish some of the speculation. This is an admission of defeat on the short-selling ban.

We should view this as a sign of massive global deflation and the coming stampede into the US dollar and US dollar denominated investments such as the stock market.

This is a reflection of the China's collapsing manufacturing sector, which has I believe two consecutive readings below 50. It was turning into a rout. Also labor costs have risen so much in China and the Yuan had appreciated so much that China has become uncompetitive globally with manufacturing costs being about on par with the USA.

Overall this is an ominous sign of the collapsing global economy.

[TPTB_need_war]

Trump is a Trojan Horse. He is for big business and military-industrial DEEP STATE power:

http://journal.ijreview.com/2015/08/246266-dont-fall-for-a-fake-conservative/

Notice how no one cares what he is really about.

Dumb ass Americans being lead to their fate of full spectrum dominance by big business and the military industrial state which Trump will empower with steriods.

[OROBTC]

The purpose of the Yuan devaluation is likely to be that the investment opportunities in the local economy had dried up and this was causing rampant speculation. Many were finding they could make more money betting short against the stock market than investing for example in export industry. Also there was a carry trade of borrowing abroad and bringing the money into the local economy to speculate with.

This is designed to boost competitiveness of the export and industrial sector, which will also diminish some of the speculation. This is an admission of defeat on the short-selling ban.

We should view this as a sign of massive global deflation and the coming stampede into the US dollar and US dollar denominated investments such as the stock market.

This is a reflection of the China's collapsing manufacturing sector, which has I believe two consecutive readings below 50. It was turning into a rout. Also labor costs have risen so much in China and the Yuan had appreciated so much that China has become uncompetitive globally with manufacturing costs being about on par with the USA.

Overall this is an ominous sign of the collapsing global economy.

Yes.  I just read that China devalued AGAIN tonight.

Exporting deflation.  I can hardly wait to see if our next bearing quotation from China reflects their devaluation.  If it does for small companies such as ours, then it's on like Donkey Kong.

[TPTB_need_war]

2015.75 baby! Right on time, here comes the acceleration.

Anyone still doubting MA's model.

[macsga]

2015.75 baby! Right on time, here comes the acceleration.

Anyone still doubting MA's model.

Well, we're certainly on track for the SHTF situation we've all expected for. To what extend, is certainly something we'd be better know sooner than later. Voices are yelling for the same thing though; it's not only MA anymore:

THE UPCOMING, CATACLYSMIC, FINANCIAL BIG BANG TO END ALL BIG BANGS

No, America won’t disappear.  However, it’s once global dominance will disappear in all but a handful of niche areas.  Which sounds not so bad, until one realizes its power stems largely from said “reserve currency”; and more importantly, the rest of the world’s five decade willingness to finance it.  In other words, 21st century Americans are living further above their means than any other people ever have – at a time when its finances, economic outlook, and political leadership have never been worse.  Which is why, undoubtedly, the “transition” from global dominance to mere ordinariness will be extremely painful – political, socially, and economically.  As for “King Dollar” – which in currency terms, trades at the equivalent valuation of a $100,000 hybrid automobile amidst plunging energy prices – all we can say is this.  Holding dollars instead of Precious Metals at prices well below their respective costs of production – in a world where Federal Reserve money printing is going parabolic (heck, even Bloomberg admits it) – can only be described as financial suicide.

[..]

In Europe, where the days of the unified Euro are counting down like a rocket at Cape Canaveral, we’re now told – seemingly, out of the blue – that not only will Greek “bailout #3” be completed in time to meet its August 20th €3.2 billion cash call from the ECB, but should be done by tomorrow – in roughly the $96 billion amount discussed since Alexis Tsipras betrayed Greece by ignoring the people’s decisive “OXI” vote.  Which, by the way, will cause Greece’s “published” debt/GDP ratio to surge from 175% to 200% – amidst an economy in all-out freefall; and its actual debt/GDP ratio, considering its €300 billion of “off balance sheet” debt, to explode above 300% – making it the most highly indebted nation on the planet.  Meanwhile, as Alexis Tsipras himself assures us such a deal is imminent, National Bank of Greece stock is trading near its all-time low; and paraphrasing the words of Finnish Finance Minister Timo Soini, who vehemently opposes said “bailout”, “we should admit this isn’t going to work.”

http://blog.milesfranklin.com/the-upcoming-cataclysmic-financial-big-bang-to-end-all-big-bangs

 

[bigtimespaghetti]

http://blog.milesfranklin.com/the-upcoming-cataclysmic-financial-big-bang-to-end-all-big-bangs

 

I find it very hard to take any precious metal dealer's blog very seriously.

[macsga]

http://blog.milesfranklin.com/the-upcoming-cataclysmic-financial-big-bang-to-end-all-big-bangs

 

I find it very hard to take any precious metal dealer's blog very seriously.

Regardless of the cause, he states some pretty solid stuff in there. He's definitely on an agenda of his own, but still...

[TPTB_need_war]

I know of Miles Franklin. He was reasonably close with Jason Hommel, whom I had befriended in 2006.

He is correct about everything he wrote, except he is wrong about the Fed doing another QE and continuing ZIRP. The world's capital is going to be rushing into the dollar for 3 reasons:

• Safe haven.
• The world is awash in dollar debt (due to the carry trade & booming debt economics from the $trillions in QE), thus short the dollar, thus must buy dollars as their exports crash, meaning a spiraling up effect on stampede into the dollar. They will buy dollar denominated assets such as the US stock market driving it up past 32,000 maybe even 48,000 by 2017.9. You really should buy the DJIA at the bottom of the correction underway now.
• USA interest rates will go up, attracting more capital.

Gold bugs think the world will print away the debt obligations, thus QE forever. Nope. The debt is a noose TPTB designed to take control over the world with. They increased the debt with QE to maximize the control they get when they crash the global economy and the people will be on their hands and knees in deflation with matching totalitarianism and skyrocketing taxes and interest rates.

Why would the Fed do QE when the DJIA is booming and capital is rushing into the USA? They will use that opportunity to raise interest rates so that pension funds do not go bankrupt. The Fed did QE for domestic policy reasons. The QE ended up abroad as carry trade. The Fed caters to Wallstreet, financial institutions, and banks, not Mainstreet. This domestic policy excuse allows TPTB to turn the rest of the world into a debt-enslaved wasteland as the dollar appreciates from October 2015 to 2017.9.

You will beg for hyperinflation because what is coming is 100 times worse.

Note India and Asia (and perhaps all the BRICs and NICs) will bottom 2020 after a waterfall 4 year correction. After that, they will grow and become the financial center of the world by 2032. Because they don't have the social programs (unfunded acturial liabilities) that the West has and they have more youth than elderly. The elder Asia countries (Japan, Korea, China) can leverage the high birth rates in their junior neighbor and trading NICs nations.

Europe and the West will decline and decline and decline through 2032, losing their place in the world.

[TPTB_need_war]

MA's model was correct on India:

http://www.armstrongeconomics.com/archives/35864

[TPTB_need_war]

I corrected MA's typo and clarified his intent as follows...

http://www.armstrongeconomics.com/archives/35858

The dollar rally and the devaluation of the yuan is not a fluke and it most certainly is not a one-time event. The dollar declined[appreciated] against the yuan for 19 years during the same timing that saw gold decline from 1980 to 1999. The major low on an annual closing basis at 2013 and 2014 was an outside reversal to the upside for the dollar. The Yearly Bullish Reversal stands at 683 and technical resistance stands at 658. The dollar filled the gap that existed prior to 1994 and is yet another confirmation that the dollar rally is underway.

Yes, the world trade is contracting and will get much worse after October.

...we see capital still pouring into the USA from both China and Europe. The real estate cycle has/or will peak with this turning point around the world from Switzerland, Britain, Canada, to Asia right down into India and Australia.

The dollar rally is unfolding despite the fact people do not understand why. They look only at the USA debt and assume the dollar must crash, when in fact, the problem we face is on a global scale and $18 trillion in U.S. debt is simply not the large enough for international capital to hide[runaway from the USA as a safe haven]. The future is going to be anything but a textbook move.

[username18333]

Gold bugs think the world will print away the debt obligations, thus QE forever. Nope. The debt is a noose TPTB designed to take control over the world with. They increased the debt with QE to maximize the control they get when they crash the global economy and the people will be on their hands and knees in deflation with matching totalitarianism and skyrocketing taxes and interest rates.

Synchronous, international default should void both any and every economic liability (i.e., both any and every “sovereign debt”) that does not serve the plutocrats.

TN;DC: A plutocrat seeks (at least, circa the present) to confiscate nongovernmental capital through “sovereign default.”

[TPTB_need_war]

The Chinese are gearing up for something. First it was the "correction" on the stock markets and then they partnered up with the BRICS countries to create their own little circle of friends and now they are

devaluating the Yuan. It's as if they are preparing for a strategic move in the economic market. I would be worried if I was in debt to them at this moment.  

Do anyone else see this pattern or am I delusional? Break the economy and win the war before it started?  

I guess they would sooner break their neck. It may look as if they are up to something when essentially they may be just desperate in their efforts to save their own economy from collapsing...

Deep inside I never believed in China's economic miracle

I read today that Argentina (one of the countries they were signing deals with) has 1/3 of their foreign reserves denominated in Yuan, so this devaluation is hurting those who partnered on the Yuan as a reserve currency diversification (at least in the short-term but remember Armstrong's model is the $USD will peak 2017.9 or 2020.05).

Asia's economic miracle is still in place, because their debt is only at the corporate or LGO level and not unfunded social welfare liabilities to the tune of for example $125 trillion the USA owes the boomers. The West is demographically bankrupt, Asia is demographically fertile.

This Minsky moment correction for Asia will be completed by 2020 and Asia will lead up in growth while the wheels fall off the West from 2020 forward until Singapore and Shanghai replace New York and London as the financial capitals of the world by 2032.

The Yuan devaluation is more of a reflection of the death of the West (massive deflation) than it is a statement about Asia.

Asia was primarily an exporter to the West. This collapse will ween Asia of that role and set it up to lead the world as a consumer and producing for its own constituency. The West needs to die as a consumer in order for that transition to occur.

Don't be fooled.

[macsga]

The most significant article I've read the last couple of days comes from Graciela Kaminsky on http://ineteconomics.org/. More or less she states that the last 150 years there were about 67 bankruptcies of countries. One third of them had something in common. They happened TOGETHER! Correlating the 1990s crisis with this one is totally bogus, since the two periods are completely dissimilar.

We cannot compare the Euro crisis to the crises in the 1990s in Asia, Latin America, Russia, and Turkey. The Euro crisis erupted in the aftermath of the financial panic in the United States in 2008, with international capital markets collapsing and the world economy coming to a standstill. In contrast, the crises of the 1990s erupted in the midst of highly liquid international capital markets with a healthy financial center and a growing world economy, with vulnerabilities only present in the crisis countries. Crises triggered by a meltdown in the financial center are different, but, what are the characteristics of these crises? And how do they differ from crises erupting from just home-grown problems?



TL;DR: Greece is only the tip of the iceberg. More countries are going down the drain soon. She also has a paper called “Systemic and Idiosyncratic Sovereign Debt Crises,” - you can find it here.

Complete article: http://ineteconomics.org/ideas-papers/blog/is-it-just-a-greek-problem

[OROBTC]

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macsga

That is a very interesting article, I recommend it to anyone interested in debt defaults.

Reinhart & Rogoff wrote a book (This Time is Different) on defaults over the last 800 years, IIRC they say much the same: that many defaults occur in clusters.  The book is just about an encyclopedia on sovereign defaults...  Highly recommended!

[macsga]

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macsga

That is a very interesting article, I recommend it to anyone interested in debt defaults.

Reinhart & Rogoff wrote a book (This Time is Different) on defaults over the last 800 years, IIRC they say much the same: that many defaults occur in clusters.  The book is just about an encyclopedia on sovereign defaults...  Highly recommended!

Thanks for the heads up! To be honest, I've heard about it from another friend, but never got the chance to read it. I'll look for it ASAP.

BTW: Today's the vote from the Greek parliament for Memorandum III. The IMF refuses to give more money if the debt doesn't get a haircut (they declared it multiple times now). News has it that there will be a deep schism between the SYRIZA party since most of the far left wing will vote against it (rumors claim that Yanis Varoufakis will also be against).

My guess is that we're heading for new elections within September.

[username18333]

Greece is only the tip of the iceberg. More countries are going down the drain soon.

Synchronous, international default should void both any and every economic liability (i.e., both any and every “sovereign debt”) that does not serve the plutocrats.