• 14 hours 6 Tech Trends Transforming The Travel Industry
  • 1 day Ousted Uber CEO Cashes Out $500 Million In Stock
  • 1 day Trump Prepares For Another Key Tariff Decision
  • 2 days The Free Money Bubble Is About To Burst
  • 2 days The Crushing Reality Of Poverty In America
  • 2 days Should You Buy Into The World’s Largest IPO?
  • 3 days The Infinite Possibilities Of Cosmic Energy
  • 3 days Analysts Link Walking To Economic Growth
  • 4 days Will Japan Turn Its Back On The Aramco IPO?
  • 5 days Global Debt Soars To $188 Trillion
  • 6 days The World's Largest Gold Miners Are Getting Creative
  • 6 days Twitter: The Saudi Spy Tool To Bring Down Dissidents
  • 7 days Broad Commodity Funds Don’t Give Enough Exposure To Gold
  • 7 days Here We Go Again: Another Giant Telecoms Mega-Merger
  • 7 days World's Largest Gold Miner Sees Profits Triple
  • 8 days Microsoft Japan Trials 4 Day Work Weeks, Productivity Soars By 40%
  • 9 days Hedge Funds Lose $4 Billion In Four Days As California Wildfires Rage On
  • 9 days New Viral App May Be A National Security Threat In Disguise
  • 9 days China's $10 Trillion Space Play
  • 10 days Human Energy: Debunking The Matrix
Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

Gordon Long

Gordon Long

Mr. Long is a former senior group executive with IBM & Motorola, a principle in a high tech public start-up and founder of a private…

Contact Author

  1. Home
  2. Markets
  3. Other

The Bull in The China Shop

With Charles Hugh Smith & Gordon T Long

36 Minutes - 21 Slides

Charles Hugh Smith and Gordon T Long share their thinking on current financial developments in China.

The Bull in The China Shop


ISSUE #1 - The World Can No Longer Absorb China's Surplus

The good news is that China produces more than it consumes. This is the opposite of the US which consumers more than it produces.

The bad news is that the world can no longer absorb China's surplus (Production minus Consumption). Global trade has slowed dramatically impacting Chinese exports. The problem is further compounded since China as the new global economic engine, has become the dominate importer of other countries production.

The root cause stems from a "tapped" out American consumer and the "gutting" of the US middle class - the long time global economic engine.

The World Can No Longer Absorb China's Surplus

This economic slowdown has left China with falling growth in FX reserves and has forced the selling of FX reserves to sustain elevated run-rates which were financing massive infrastructure expansion and investment. Construction has been a major employer and absorber of a growing Chinese worker force even though recently more and more have been employed building ghost cities and malls to keep workers employed.


ISSUE #2 - Insufficient New Capital Formation

Additionally, Capital movement has reversed in China. China now faces a "capital flight" versus new Capital Formation coming into the country which has been powering the Chinese Manufacturing and Industrial explosion over the decade and half.

Chine Hot Money Flows


CONSEQUENCE - China Likely Needs to Devalue the Yuan

The consequence is that China needs to stop capital flight and increase exports and foreign capital investment the country is so dependent on.

United States and China GDP Breakdown

China has only a limited number of options which Charles Hugh Smith and Gordon T Long spell with aid of 21 charts.

Devaluation

There is much, much covered in this 36 minute video discussion.

 

Back to homepage

Leave a comment

Leave a comment