David Stockman Warns, ‘Don’t Forget About the Red Swan’
The comments above & below is an edited and abridged synopsis of an article by David Stockman
Given current anti-Trump sentiment, Stockman believes that a Swan is coming. If that doesn’t dissuade the dip buyers, perhaps the impending arrival of a Red Swan will give them pause.
China’s fixed investment chart puts the lie to the latest Wall Street belief that the global economy is accelerating, and that surging corporate profits justify the market’s latest manic rip.
A short-lived global credit/growth impulse is coming from China. Beijing panicked last year and opened up the capital expenditure spigots at the state-owned enterprises for fear that China’s great machine was heading for a stall.
But the sell-by date has expired on China’s latest credit impulse. During the first quarter of this year, total social financing reached $4 trillion per annum (nearly 1/3 of China’s GDP), and politicians are reeling in China’s debt machine.
The great China Debt Retrenchment is coming. Expect a global braking that has the potential to drastically weaken the global economy, and the effect on corporate profits should not be underestimated.
Beijing probably cannot orchestrate a soft landing. It will not permit the nation’s debt load to quadruple again during the next 8 years, meaning that China’s days as the world’s ultimate stimulus machine are over.
China’s slowing growth shows that most countries have been swimming naked from a fiscal perspective, leaving the world vulnerable to a renewed wave of funding crises as central banks attempt to launch monetary normalization.
During the last 19 months China propagated a false upturn in the global economy that is now reversing, and at the same time central banks are bringing their printing presses to a halt.
Central bankers realize that their balance sheets have become egregiously extended. China is the epicenter of the world’s 2-decade plunge into central bank monetary fraud, and they have destabilized the global economy.
So even as the Orange Swan stumbles toward the White House, there is a Red Swan following closely behind.