Tuesday, March 04, 2014

Coming Liquidity Shocks - Russian Stocks Recovery Mildly From Five Year Low As Ruble Hits All Time Low

I’m updating this post with a topic that has nothing to do with its title.   It is an extreme absurdity that is worthy of mentioning.  Back to the post.

I noted that Russia was experiencing a very serious slowdown late last year.  The Russian Trading System has been trending downward for many months.  And, as a result of this economic situation, the ruble has gone with it.   The Crimea/Ukraine crisis will only hasten what is already underway in Russia. 

It has been probably half a dozen years since the words coming liquidity shocks were penned on here.  Russia joins India, Turkey, South Africa, Argentina and countless other countries experiencing varying degrees of currency crises.   More on this as I roll out my upcoming series of posts but I wrote this was going to happen heading into the 2008 collapse.  And it did.  Although this situation is far more global and dire.   My oft written remarks that future crises would be far more severe outside of the U.S. is starting to come to pass.  Let me say this for now.  The global economy has been experiencing widespread liquidity shocks for some months now.  This is the first time we have seen such dynamics since the 2008 collapse.  Currency crises=liquidity shocks.   They are popping up everywhere. 

As noted ad nauseam on here, the dollar is not going to collapse unless the entire world repudiates dollars.  This as every other currency than the dollar is in crisis.   All currencies may become worthless but that can happen through many dynamics other than collapse.  The dollar will, without some exogenous dynamic, eventually rise violently as this system freezes up, collapses or whatever it is going to do.  Again, written on here ad nauseam.  Dollar bears base their analysis either on emotion or a lack of understanding of how the world actually works.  By the way, Russia’s threats to dump the dollar should be expected, as should other threats to the dollar as this system reaches some degree of crisis.  But, Russia would almost certainly suffer far greater than the U.S. in their actions. 

On that note, I would also like to state that many futures markets dynamics including eurodollars are experiencing record leveraged bearishness.  We also see that there is a record level of belief that the yuan will supplant the dollar as the world’s reserve currency.  This again is based on ignorance.   Do you honestly believe a communist central-planning bureaucratic control system is going to inherit the mantle of humanity?  Capitalism has created bizarre bedfellows where its mythical free market brilliance has, more often than not, sided with communism over human freedom.  This is akin to GE’s CEO remarks that the U.S. should be more like nations in the Middle East right before the 2008 collapse.  Capitalism’s “genius” is similar to believing in Soviet Union genius.   The notion itself is utterly absurd and this recent survey of capitalists and Chinese regarding the yuan becoming the reserve currency is just another data point in that reality.

I have written many times for at least half a dozen years that China’s currency is worthless and the commies just don’t know it yet.  We are starting to get a glimpse of this over the last nine months or so as the communists try to paper over the mess they have created with their Whac-A-Mole point-based responses.  You know, the same game the Federal Reserve, Wall Street and Washington play for a living.    By the way, China’s money supply has grown at rates magnitudes more than the U.S. and the belief that they are going to back their currency with gold as believed by many is utterly preposterous.   Doing so would collapse their economy.   Now, they may be forced to offer a gold-backed yuan if their economy collapses because no one will then give them more than toilet paper for the currency, but that’s entirely another issue.

By the way, the yuan too recently fell more than at any time in the last ten years even though it is pegged to the dollar.   I wrote long ago that the communists were either going to have to devalue the yuan or it would collapse under its own weight as this system unwound.  Prognosticators are trying to explain the drop in the yuan as a “test” for a greater trading range.  Even though there is no evidence of this.  I suspect reality is far more sinister.   It has been years since I have written of it, but I believe the U.S. and China are in a Nash Equilibrium.   That equilibrium will exist until it doesn’t.  Sooner or later the yuan will break the buck.  Well, and the U.S.-China dynamic will become much more ugly than it already is.   We see signs of this already.   Again, this recent penning in the Financial Times was written of as a future outcome on here many years ago.   The world continues to unfold as I anticipated.  

The only way the yuan is going to become the world’s reserve currency is if Obama publicly declares himself a communist and Congress and the American people follow him over the cliff as they all move to China.  Come to think of it,  free market capitalist Jim Rogers did just that right before the Chinese stock market bubble collapsed.  In a world of endless absurdities, anything is possible.

I expect to spend a little time in coming weeks starting to roll out my promised series of posts.

posted by TimingLogic at 12:38 PM

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