from Zero Hedge:
When one brings up the term “war” people immediately think “WW3” via some form of armed nuclear exchange. I believe that (although the warning signs are there) is where the mistake lies. People are assuming there’s only one way to fight a war today of global proportions. I’m not in that camp. I believe it will come via monetarily – not military. At least at first. For once it takes place all bets are off as to what happens next. The obvious first mover advantage for China (and all its current allies) would be to use the rhetoric coming out of the current U.S. political arena, along with current, as well as proposed monetary policies via the Fed, ECB, and Japan.
Once again – ahead of the G-20 meetings – China’s currency mysteriously abated its incessant plunge suggesting ‘stability’. As Bloomberg notes, history shows that the Chinese currency usually strengthens ahead of major political or economic events, such as President Xi Jinping’s state visits to the U.S. and the Boao Forum.
The People’s Bank of China raised its daily reference rate for the yuan in each of the last three days, spurring speculation it is acting to limit losses in the currency.
Howeber, as Mark St.Cyr notes, lately there have been quite a few warning signs pertaining to China. Yet, concern seems anathema to not only the “markets,” but the media in general. However, I’m of the opinion that is all about to change. And that “change” is not years away, but rather, sooner (and much sooner at that) than later.
To use an analogy, I don’t think there’s a better one than the old “Bull in a china shop.” Sure there’s no broken dishes currently, but that’s because the bull has yet chosen an aisle to venture down. That is – if he chooses to use an aisle at all. And the “markets” are behaving as if the bull can somehow read or cares about the “you break it – you own it!” sign. This pretty much sums up the absurdity of complacency now taking place in the “markets.”
Last week China’s GDP figure was reported to be 6.7, beating consensus by just a tick. However, there was some concern that the print might come in (heaven forbid) below consensus. Why the need for any concern one might ask? After all, when your GDP figure is basically announced well in advance (e.g., 6.5 – 7.0) then hit with statistical precision, report, after report, after report as announced by the politburo of a communist controlled economy. Again, why sweat it? The so-called “smart crowd” weren’t.
Easy: Today, in a market so utterly adulterated and carry trade sensitive via central bank meddling, just a tick lower of the expected 6.6, as opposed to their tick higher beat, has ominous implications. For any movement lower is now suspect or viewed by the outside world as “just how bad is it if they reported lower?” An inline, or even just a tick higher beat is seen as “they must still have some control of their economy.” e.g., Phew…Buy, buy, buy!
Hence lies where the real concern is by those that understand the true, current economic conditions within China. For where that concern truly emanates from is all summed up in those 6 words. i.e, The assumption of “they must still have some control,” emphasis on “still” and “some.”
To understand the underlying concern of what is inferred by using “they must still have some control.” Let’s use another analogy, one of a speeding car with a driver either asleep, or impaired at the wheel. The driver represents chinese consumers. The car represents all those state funded enterprises of all sorts, fueled with artificially produced rocket fuel (i.e., loans.)
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