With share prices in Shanghai and Hong Kong up and down all day, it would be premature to say that yesterday’s decision by the People’s Bank of China to cut interest rates and make it easier for banks to lend has brought calm to stock markets.

That is especially so after last night’s gyration on Wall Street, when shares lurched downwards towards the close, after being up for most of the session.

Anxiety rules among investors.

And as I said last night on the News at Ten, in some ways I thought yesterday’s events on markets were if anything more disturbing than Monday’s global rout.

Because if share price gains could not hold after the significant monetary easing by China’s central bank, then mistrust about the true state of the world’s second largest economy (actually the number-one economy on the purchasing-power-parity measure of GDP) has become very pronounced indeed.

And another thing, the Chinese interest rate cuts will exacerbate the phenomenon that has caused so much stress in so many different global markets, from commodities, to foreign exchange, to stocks and bond – the fall in the Chinese currency, the RMB, since it was allowed by Beijing to float more freely on 11 August.

Since then, share prices alone – in other words excluding other huge markets such as oil – have lost $8tn in value.

The point is that the cut in Chinese interest rates is likely to speed up the withdrawal of capital from China, putting further downward pressure on the RMB.

And in making Chinese exports cheaper, that causes pain for competitor economies – especially Asian ones, like Malaysia, Thailand and Indonesia – whose own currencies then fall (as they continued to do today).

Construction workers in Kuala Lumpur: Malaysia's economy is likely to feel the fallout from this week's events — Image caption Construction workers in Kuala Lumpur: Malaysia’s economy is likely to feel the fallout from this week’s events

This process of competitive devaluation among emerging economies ends up undermining their growth prospects – which matters to us all, since they account for half of global GDP and most of the world’s growth.

And also means that lower prices or deflation is exported to the rich West.

Now you may say yippee, that we can buy more petrol and food for our pounds, euros and dollars.

But that is a short term windfall. In the long term, it creates less “balanced” growth – it encourages us to live beyond our means, because the weakness of demand in the rest of the world means we can’t sell enough abroad to match all the spending we want to do.

And for those of you with short memories, it was those deficits of the consuming countries like ours, the corollary of giant surpluses of the producing ones like China and Germany, which was such a big contributor to the Crash of 2007-08.

Which is one reason why the influential governor of the Reserve Bank of India, Raghuram Rajan, said – in a BBC interview yesterday – that he feels governments are expecting too much of central banks when it comes to fixing the world’s economic problems.

Raghuram Rajan, the governor of the Reserve Indian Bank — Image caption India’s central bank governor Raghuram Rajan believes too much is expected of central banks

In a slowdown, central banks can give economies a temporary boost by making money cheaper and more plentiful, to encourage spending and investment. But if the fundamental flaws in economies are to do with industrial inefficiency or lack of competition, for example, well those are problems only governments and businesses can fix.

In fact, monetary easing by central banks can make matters considerably worse in the long term, by encouraging excessive lending while governments dither and delay over politically unpopular economic reforms.

So here is the dilemma faced today by the US Federal Reserve and the Bank of England, both of which are desperate to end the era of near-zero interest rates in developed economies, by slowly and gradually increasing interest rates.

They wanted to start raising rates in a matter of weeks and months. But were they to do that at this moment of chronic anxiety about the health the global economy, well they could turn a slowdown into something much worse.

That is why the first rise in interest rates, in the US and UK, is likely to be deferred yet again.

It also explains why the influential economies and former Treasury secretary, Larry Summers, is mooting that the Fed may need to resort to yet more money creation through quantitative easing.

His view is not that of the consensus.

But the fact that he is able to make a credible case for QE shows that even seven years on from the worst crash and recession since the 1930s, the global economy is still some distance from being mended in a structural sense.

Robert Peston Economics editor 26 August 2015 Business

Shanghai investor looks at prices

So, it seems, all of a sudden – despite the permabulls, asset-gatherers, and commission-takers saying otherwise – China matters! As Bloomberg notes, China’s deepening struggles are starting to make a bigger dent in the global economic outlook.

“We’re seeing evidence that the slowdown is broader than expected” in China, said Marie Diron, a London-based senior vice president at Moody’s and one of the report’s authors. “It’s long been clear that there’s a slowdown in the manufacturing and construction sector, but the service sector was more resilient. That’s still the case, but we’re seeing some signs of weakness in the labor market.”

“We continue to believe that the greatest risks to our growth forecasts remain to the downside,” Schofield wrote. Actual growth is “probably even lower” because of “likely mis-measurement in China’s official data,” he wrote.

* * *
Which, is exactly what we have been saying for the last 2 years as the rolling collapse of China’s ponzi becomes ever more evident (and hidden by ever more manipulation)…

Here, for those curious, are links to previous discussions:

And so on and so forth.

In short, stabilizing the currency in the wake of the August 11 devaluation has precipitated the liquidation of more than $100 billion in USTs in the space of just two weeks, doubling the total sold during the first half of the year.

In the end, the estimated size of the RMB carry trade could mean that before it’s all over, China will liquidate as much as $1 trillion in US paper,which, as we noted on Thursday evening, would effectively negate 60% of QE3 and put somewhere in the neighborhood of 200bps worth of upward pressure on 10Y yields.

And don’t forget, this is just China.

…

The potential for more China outflows is huge: set against 3.6 trio of reserves (recorded as an “asset” in the international investment position data), China has around 2 trillion of “non-sticky” liabilities including speculative carry trades, debt and equity inflows, deposits by and loans from foreigners that could be a source of outflows (chart 2). The bottom line is that markets may fear that QT has much more to go.

What could turn sentiment more positive? The first is other central banks coming in to fill the gap that the PBoC is leaving. China’s QT would need to be replaced by higher QE elsewhere, with the ECB and BoJ being the most notable candidates. The alternative would be for China’s capital outflows to stop or at least slow down. Perhaps a combination of aggressive PBoC easing and more confidence in the domestic economy would be sufficient, absent a sharp devaluation of the currency to a new stable.

Either way, it is hard to become very optimistic on global risk appetite until a solution is found to China’s evolving QT.

——

Dow Jones Plummets 885 Points In Two Days, Biggest Decline Since Crash Of 2008

Mainstream Media AWOL
As Stock Market Crashes

Stocks declined 354 points on Thursday (8/20) and 531 on Friday (8/21) for a total of 885 — a 5.1% DJIA decrease in just 2 days

Then the DJIA dropped another 588 points on the folllowing Monday (8/24) and 231 points on Tuesday (8/25) bringing the 4 day losses to 1678 points — a nearly 10% nose-dive

State of the Nation

Super Shemitah Has Begun And There’s No Stopping It

We’ll say it again: if you haven’t already moved your money, especially cash money for liquidity purposes into the safest institutions you can find, then do it asap. Local credits unions may be safe and secure depending on their management.

As for stocks and bonds, mutual funds and municipal bond funds, you had better know exactly what you’re doing from this point forward. Regarding options like puts and calls, commodity and currency trading, derivative and carbon trading; only a very broad and deep trading knowledge base, as well as super-sharp skill set and wealth of trading experience will enable anyone to navigate around the shoals of the Super Shemitah.

Bottom Line

If you want to preserve your principal and lose nothing, this is the time to rearrange your finances so as to protect ALL of your assets. The entire estate ought to be put in such a condition that it is safeguarded from anything and everything that comes down the pike. That includes a stock market or bond crash, a commodity or real estate collapse. Then there is a derivative explosion and debt implosion, each of which can occur during the upcoming Super Shemitah year that officially begins on September 23rd.

Exactly what is the Super Shemitah. So far it is everything the world has been experiencing over the past year, in preparation for the main events that will occur during the Jubilee after Yom Kippur. The Super Shemitah actually began with the beginning of the Shemitah year on September 25th of 2014. And it will intensify – GREATLY – during the upcoming Biblical Shemitah Jubilee this September and October. Because this is the 70th Jubilee, this one and only 70th is known as the Super Shemitah. Yes, this one is going to be very BIG indeed; hence, it is called the incomparable Super Shemitah!

Stock market are crashing EVERYWHERE, not just the USA.

And the Main Stream Media is quite deliberately out to lunch so as not to take the calls.

When the markets — all of them around the globe — are crashing simultaneously, that can mean only one thing. That there is s dire need for a systemwide correction, as in major overhaul of the worldwide gambling casino. In fact the entire Global Economic & Financial System (GE&FS) will require massive intervention during the upcoming Crash and Burn phase. Of course, the GE&FS has already been receiving constant intervention in the form of Quantitative Easing life support from the FED since 2008. Hence, there is not really much more that can be done at this extremely critical stage of GE&FS disintegration, except to alleviate the financial pain and economic suffering whenever possible.

Folks, this is gonna be the ride of your life, and it will take everyone over unknown terrain and unexplored territory. There is simply no precedent for a Super Shemitah (SS) in a somewhat technologically developed modern society that is highly secularized and spiritually challenged. The new lay of the land is such that there will be daunting obstacles at every turn, some of which will be as formidable as they are overwhelming.

The real point here is that the MSM (Mainstream Media) will ignore the real facts in all of their reporting. Journalists are not here to help since the MSM was created, and is only in business, to support the status quo. The MSM works directly for a plutocratic oligarchy of the relatively few 1%. TPTB have carefully chosen this privileged minority over centuries of cherrypicking from the 13 families and other elites. In this way they have ensured that their plan for a controlled demolition of the GE&FS will take place in a manner that no one even knows its taking place … until it’s effectively over.

The caveat here is to not get absorbed by the endless distraction manufactured by the MSM. They are literally hardwired to produce one diversion after another throughout the whole Super Shemitah period. Therefore, it would be wise to seek out trustworthy sources within the alternative news media (ANM). While there is much material that is disseminated throughout the ANM which must be first carefully considered, the truth is there for those are able to correctly discern.

For those who are uninitiated in the phenomenon of the Shemitah, the “Recommended Reading” list which appears below is a good place to start. The many essays and articles are as informative as any body of work regarding the Shemitah on the internet.

State of the Nation
August 22, 2015

Author’s Note

The Shemitah manifests in many and diverse ways. For instance the war in the Ukraine is a Shemitah event, as were the recent apocalyptic explosions in the Chinese port city of Tianjin China. The Greek debt and monetary crises are Shemitah-related, as is the slow-motion collapse of the European Union. Hence, even though many associate the Shemitah year with HUGE economic and financial happenings, it actually affects every sphere of life.

In short nothing remains untouched by the transformative power and tremendous influences of the Super Shemitah. After all we are talking about modern-day biblical events of epic proportions.

Coercion Code - "Dark Times are upon us"

"Brethren, do not be children in understanding; however, in malice be babes, but in understanding be men". – 1 Corinthians 14:20

China’s Woes Ours!

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