- China's appetite for US Treasury bonds is on the wane;
- China is ramping up its overseas development programme for both financial and geopolitical reasons;
- The promotion of the Renminbi as a global currency "is gradually liberating Beijing from the Dollar zone".
- Which country is the world's largest sovereign miner of gold?
- Which country doesn't allow an ounce of that gold to be exported?
- Which country has advised its citizenry to purchase gold?
- the overwhelming current and future oversupply, and
- the utter lack of endorsement from one of their largest foreign holders.
"In 1919-1921, 1929-1932, 2000-2003, 2007-2009 it was not a resurgence in wages, Fed-controlled interest rates or corporate taxes which produced a collapse in corporate profits and a bear market in equities. On those four occasions equity investors suffered losses of 32%, 85%, 41% and 51% respectively despite the continued dormancy of labour, creditors and the state. It was deflation, or the fear of deflation, which cost equity investors so much. There is a simple reason why deflation has always been so damaging to corporate profits and equity valuations: it brings a credit crisis."Investors forget at their peril what can happen to the credit system in a highly leveraged world when cash-flows, whether of the corporate, the household or the state variety, decline. In a deflationary world credit is much more difficult to access, economic activity slows and often one very large institution or country fails and creates a systemic risk to the whole system."The collapse in commodity prices and Emerging Market currencies in conjunction with the general rise of the US$ suggests another credit crisis cannot be far away. With nominal interest rates already so low, monetary remedies to a credit seizure today would be much less effective. Such a shock, after five and a half years of QE, might suggest that the patient does not respond to this type of medicine."