Category Archives: Financial Crisis

Is Another Global Financial Crisis on the Horizon? – Bloomberg Business

Capital Dynamics Chief Executive Officer Tan Teng Boo discusses the China stock rout and why he’s predicting another global financial crisis. He speaks to Bloomberg’s Angie Lau and Rishaad Salamat on “Asia Edge.” (Source: Bloomberg)

Is Another Global Financial Crisis on the Horizon? – Bloomberg Business

Ghosts of 1997 financial crisis return to haunt Asia

Eighteen years after a financial crisis ripped through Asia, toppling governments, bankrupting companies and generally wreaking havoc, the region’s currencies are once again coming under intense pressure.

Malaysia and Indonesia, in particular, appear to be in trouble. Over the past year, the Malaysian ringgit has lost nearly a quarter of its value against the dollar. Indonesia’s rupiah has shed 15% over the same time period. Both currencies are now at their weakest level since the Asian financial crisis, and losses continue to pile up.

Related: U.S. dollar’s breathtaking rally vs. other currencies

Adding to concerns, Beijing has devalued the yuan in recent days, a move that some think was designed to boost the country’s exporters. If that view finds traction among regional governments, retaliatory actions could spark a currency war in the region, further degrading the rupiah, ringgit and other vulnerable currencies.

Ghosts of 1997 financial crisis return to haunt Asia

ALBERT EDWARDS: Chinese devaluation is leading to ‘a financial market rout every bit as large as 2008′

Societe Generale Economist Albert Edwards might have finally out-beared himself. He says the China devaluation is a step towards “a financial market rout every bit as large as 2008.”

In his latest note, Edwards says the Chinese currency devaluation is the beginning of a period of serious foreign exchange weaknesses in Asia.

This will force down import prices into the US and EU economies, cause a deflationary cycle that hits corporate profits decline, ending in a Lehman-style crisis:

ALBERT EDWARDS: Chinese devaluation is leading to ‘a financial market rout every bit as large as 2008′ – Business Insider

A Death Cross, Wild Market Swings And A Currency War – And We Haven’t Even Gotten To September Yet

Things continue to line up in textbook fashion for a major financial crisis by the end of 2015.  This week, Wall Street has been buzzing about the first “death cross” that we have seen for the Dow since 2011.  When the 50-day moving average moves below the 200-day moving average, that is a very important psychological moment for the market.  And just like during the run up to the stock market crash of 2008, we are starting to witness lots of wild swings up and down.  The Dow was up more than 200 points on Monday, the Dow was down more than 200 points on Tuesday, and it took a nearly 700 point roundtrip on Wednesday.  This is exactly the type of behavior that we would expect to see during the weeks or months leading up to a crash.  As any good sailor will tell you, when the waters start getting very choppy that is not a good sign.  Of course what China is doing is certainly not helping matters.  On Wednesday, the Chinese devalued the yuan for a second day in a row, and many believe that a new “currency war” has now begun.

So what does all of this mean?

Does this mean that the time of financial “shaking” has now arrived?

Let’s start with what is happening to the Dow.  When the 50-day moving average crosses over the 200-day moving average, it is a very powerful signal.  For example, as Business Insider has pointed out, if you would have got into stocks when the 50-day moving average moved above the 200-day moving average in December 2011, you would have experienced a gain of 43 percent by now…

A Death Cross, Wild Market Swings And A Currency War – And We Haven’t Even Gotten To September Yet

China losing control as stocks crash despite emergency measures

Margin debt on the Chinese stock market has reached $1.2 trillion. ‘We suspect that it’s a matter of time before banks may have to face the music,’ Bank of America says

Chinese equities have suffered the sharpest one-day crash in eight years, sending powerful tremors through global commodity markets and smashing currencies across East Asia, Latin America and Africa.

The violence of the moves unnerved investors worldwide, stirring fears that the Communist Party may be losing control after stoking a series of epic bubbles in property, corporate investment and equities to keep up the blistering pace of economic growth.

China losing control as stocks crash despite emergency measures

The New Japan: Will China’s Economy Implode? | The National Interest

With the formerly red-hot economy now on the cusp of  “structural recession and deflation,” analysts are now warning of a “Xi shock” that could mean the end of China’s recent rise. As Japan’s experience demonstrates, the recovery process could be slow and painful.

The risk of “Grexit” may have rattled financial markets, but for the Asia-Pacific region, an even bigger and closer threat is giving policymakers sleepless nights. Memories of Japan’s bubble-to-bust have been revived by China, which like its neighbor has enjoyed a massive stock and property bubble that is now rapidly deflating.

And with the communist giant currently the world’s second-largest economy and major trading partner to most of the countries in the region, the fallout from China’s downturn could be extremely damaging, hitting sectors from commodities to property, curbing investment flows and likely dragging down the rest of the region with it.

The New Japan: Will China’s Economy Implode? | The National Interest

Does stock market turmoil signal the beginning of the next crisis? | South China Morning Post

In his Pulitzer-Prize-winning book, Lords of Finance, economist Liaquat Ahamed tells how four central bankers, driven by staunch adherence to the gold standard, “broke the world” and triggered the Great Depression. Today’s central bankers largely share a new conventional wisdom – about the benefits of loose monetary policy. Are monetary policymakers poised to break the world again?

The unprecedented period of coordinated loose monetary policy since the beginning of the financial crisis in 2008 could be problematic. Indeed, the discernible effect on financial markets has already been huge.

The first-order impact is clear. Institutional investors have found it difficult to achieve positive real yields in any of the traditional safe-haven investments.

Investors have responded to near-zero interest rates with unprecedented adjustments in the way they allocate assets. In most cases, they have taken on more risk, particularly by increasing allocations in equities.

The resulting second-order impact could ultimately prove devastating. The equity bull market is now six years old. Even after the volatility following the crisis in Greece and the Chinese stock market’s plunge, valuations appear to be high.

But large-scale policy responses always produce unintended consequences, typically sowing the seeds for the next full-blown crisis. Given recent market turmoil, the question now is whether the next crisis has already begun.

Does stock market turmoil signal the beginning of the next crisis? | South China Morning Post

China expected to post worst growth since financial crisis – CNNMoney

There’s no question about it: After years of breakneck growth, China’s economy, the world’s second-largest, is now slumping. Economists say the government has no choice but to continue working to stimulate the economy, especially as data points continue to disappoint and risks keep piling up.

The numbers are expected “to show another tepid growth in real activity,” said UBS economists Harrison Hu and Wang Tao. The “sluggish economy … is prompting the authorities to escalate policy supports.”

China’s central government has already cut interest rates three times this year — most recently, just two weeks ago. Experts say the rate cut came earlier than expected, likely as a defense against a worrying stock market plunge over recent weeks.

China expected to post worst growth since financial crisis – CNNMoney

China’s Stock Market Bubble Bursts | Stratfor

“… China’s leaders run a political risk of losing the confidence of citizens but also, and perhaps more concerning, members of the upper echelons of the Communist Party and government apparatuses.”

“And if such a loss of confidence materializes, it could well change China’s fate.”

Finally, in trying and visibly failing to stem the stock market decline, China’s leaders run a political risk of losing the confidence of citizens but also, and perhaps more concerning, members of the upper echelons of the Communist Party and government apparatuses. China is approaching a period of unprecedented economic change and hardship. The economic slowdown of the past year is merely the start of a much longer process of economic restructuring being forced on China by a confluence of factors. Weathering that process, and enacting and enforcing the reforms needed to ensure that China comes out stronger at the other end, will require the country’s central leadership to have a firm grasp of the political structure. It will also require the confidence of the tens of millions of low- and mid-level politicians who constitute the machinery of daily governance.

Though there is no reason yet to believe that Chinese President Xi Jinping or any other central leaders have lost the Party’s or the people’s confidence because of the government’s troubles with the stock market, the risk remains. And if such a loss of confidence materializes, it could well change China’s fate.

China’s Stock Market Bubble Bursts | Stratfor

I wonder if the leaders are having nightmares about revolution yet? Maybe they should be. And maybe we should be having nightmares about an unstable China.

Let me see: Nationalism,

China stresses nationalism in war anniversary propaganda push | Reuters

“By highlighting the spirit of patriotism, uprightness and heroism in their creations, artists can help the public to strengthen their values on history, nationalism and culture, (and) therefore increase their self-confidence and dignity as Chinese,” Vice Minister of Culture Dong Wei said in written remarks before a news briefing.

At least five new films have finished shooting and will be screened at major cinemas beginning in early September, Tian Jin, vice minister at the State Administration of Press, Publication, Radio, Film and Television, told reporters.

Dong, Tian, and several other officials, including those from the People’s Liberation Army (PLA) and the State Archives Administration, declined to answer a Reuters question on concerns whether the works would stoke regional tension.

Many of the works will highlight the efforts of China’s ruling Communist Party in the war against Japan.

China stresses nationalism in war anniversary propaganda push | Reuters

the dictator,

Xi Jinping: the growing cult of China’s ‘Big Daddy Xi’ – Telegraph

A growing cult of personality surrounds Chinese president Xi Jinping as he seeks to cement his position as a Putin-style strongman determined to realise his “China Dream”

The construction of a cult of personality around president Xi represents a dramatic direction change for a country that sought to rule collectively after the devastation wrought during Chairman Mao’s three-decade monopoly on power.

Before Xi took office, “there had been a taboo and long-standing party norm: don’t hold yourself up as a personality,” said Carl Minzner, an expert in Chinese law and governance from New York’s Fordham Law School.

“Big Daddy Xi” has shredded that rulebook. “In two years he has managed to amass a level of power that we haven’t seen in one person in quite some time,” said Prof Minzner.

The message from Beijing’s spin-doctors was crystal clear. “Xi is the top dog.”

Xi Jinping: the growing cult of China’s ‘Big Daddy Xi’ – Telegraph

China’s expansionist foreign policy,

The South China Sea’s Ticking Time Bomb | TIME

Beijing is bulldozing sand into the eyes of the world

When it comes to international relations, there are many ways to change the situation on the ground. But the Chinese are trying a new one far off their coast: they are creating new ground.

It’s part of Beijing’s plan to extend its claim to 90% of the South China Sea, and now the Chinese government is ordering the U.S. and other nations to steer clear, or at least to seek permission before visiting the neighborhood.

The South China Sea’s Ticking Time Bomb | TIME

China’s expansionism echoes history | The Australian

In searching for historical parallels, the current Chinese regime most resembles the Nazis and the Japanese militaristic regime of the 1930s-40s. All three regimes became intensely nationalistic.

China’s leaders use nationalism because they believe it gives them legitimacy. Yet, government-sponsored protests against Japan are not always easy to control and can create popular nationalist demands which Beijing cannot meet.

Second, strong dictatorship characterises all three regimes. Even non-violent protest leads to jail. The Nobel Peace Prize winner Liu Xiaobo is only one well-known case among thousands.

Third, racism is at the heart of all three regimes. China today makes appeals to people in Taiwan and internationally as having “the same flesh and blood” and “shared blood vessels”. Chinese law states that a Chinese who becomes a citizen of another country no longer has Chinese citizenship, but the Chinese state still considers such people as Chinese with an obligation to the fatherland. Minorities such as Tibetans and Uighurs face constant and systematic discrimination.

Fourth, all three regimes set up vast prison camps for political prisoners and others who were seen as threatening. Some might argue that China does not have “death camps”, but the Nazis only created these in 1941, quite late in their regime.

Like the Nazi and the Japanese regimes in the 1930s, the Chinese today have become territorially expansionist. Like the Nazis and the Japanese militarists in World War II, the Chinese today perceive “appeasement” as weakness on the part of their opponents and push their claims with even more inflexibility.

Finally, all three regimes have used Hitler’s theory of the “Big Lie” which Goebbels implemented so successfully. The Chinese “Big Lie” has proven partially successful in convincing several former Australian political leaders, among others, that China does have claims to the East China Sea islands.

China’s expansionism echoes history | The Australian

and the fascism.

IS, Russia, China: all fascist states

The regimes in Russia, China and the so-called Islamic State are all fascist. The defining characteristics of fascists? First, they are authoritarian. Freedoms are curbed. The people are allowed no rights to resist the will of their rulers. Dissent is crushed, and crushed violently if necessary.

Second, power is highly centralised. Third, the nation is exalted above the people. Hypernationalism or jingoism is powered by a sense of historical grievance or victimhood. Putin says the West is intent on “tearing out the claws and teeth” of the Russian bear. His chief cause is restoring Russia to greatness.

China is overcoming its “century of humiliation” at the hands of Western imperialism. To this day, Chinese children are exhorted to “never forget national humiliation”. IS has declared its purpose is to “restore the caliphate”. Its leader and self-declared caliph, Abu Bakr al-Baghdadi, announced that “the West has reduced the Islamic world to nothing”. His aim: “We want to restore the greatness of Islam.”

IS, Russia, China: all fascist states

What happens when a fascist state gets in trouble?

Fear China’s stock-market earthquake – BBC News

For all my obsession with the probable exit of Greece from the euro and the most important social-security-cutting and tax-reforming UK budget for many years, there is an earthquake happening in China that may end up touching our lives as much.

It is the plunge over the past month of Chinese shares – whose value has dropped by around a third since the high of 12 June.

So to make an apple-and-pears comparison: the loss in the value of Chinese companies at more than $3 trillion is about 20 times what most economists expect the write-offs of Greek government debt will ultimately turn out to be.

The difference, of course, is that the $3 trillion loss is divided among around 90 million Chinese people, rather than a handful of European governments.

Fear China’s stock-market earthquake – BBC News