An Omen of Global Collapse

Sunday, January 29, 2017
By Paul Martin

BY BRIAN MAHER
DailyReckoning.com
JANUARY 27, 2017

While the media fixate on Dow 20,000… who’ll build “the wall”… and Trump’s latest treason against the decencies… the next global financial crisis may be quietly unspooling.

“The world doesn’t realize it yet,” fears independent analyst Steve St. Angelo of the SRSrocco Report. “But the implosion of the global markets has started and can’t be stopped… While this may be slow at first, it will pick up speed over the next several years.”

Why’s this fellow croaking such a brassy tune? The answer shortly. But first, a check of the markets…

Today brings news that U.S. GDP growth slowed to 1.9% in last year’s final quarter. Analysts expected 2.2%. So 2016 marks the 11th year running that annual growth failed to crack 3%.

Stocks took a random walk into red territory today. Dow, S&P, Nasdaq, all down. But not much. The Dow’s still holding the line north of 20,000.

Oil’s off a hair. Gold’s down a few bucks.

Back to that implosion of global markets… the one that can’t be stopped…

In the absence of a gold standard, the modern economy runs largely on credit. The Daily Reckoning’s Richard Duncan argues for example that credit must increase 2% to avoid recession.

But Fitch Ratings reports that global credit growth slowed last year to its lowest level since the financial crisis in 2009.

And St. Angelo thinks the contraction represents “the popping of the massive inflationary asset bubble” that began inflating after 1971. That, curiously enough, is the year Nixon closed the gold window and ended Bretton Woods.

Jim Rickards has recently raised hackles by showing that China’s going broke burning through its dollar reserves. It’s doing so to support the yuan and halt capital flight out of the country. Jim says China may have only about a trillion dollars left in spendable reserves. The rest are tied up.

Why’s all this important?

Foreign countries build dollar and other currency reserves to support their own currencies and power domestic growth. They sustain credit growth. As investor Hugo Salinas Price notes, “All ‘money’ today represents debt: fiat money comes into existence as the counterpart to the creation of a credit.”

And a lot of that money meandered its way into the financial sector and inflated the stock market. What’s the Dow again?

The Rest…HERE

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