China just did the unthinkable.
I don’t think it is remotely normal for a government to inject $1,100,000,000,000 into its economy in a single day. That’s a gargantuan sum!
The reason this has been implemented is that the world’s 2nd largest economy, the fastest growth engine of the past 40 years, is slowing down to a 28-yr low, in terms of growth pace.
When 1.4 billion people answer to one government, the likelihood of civil unrest is real, when recessions hit. China is signaling to the rest of the world that its economy can absorb $1.1T stimulus. It is flexing its muscles, showing Washington that the printing press goes both ways.
The problem for the Chinese is the same as the problem a person eating his dinner in the steakhouse experiences after enjoying a prime rib cut.
The main course could be incredible, but if you’ve already had dessert, even if the chef himself comes out with a perfectly-grilled fillet mignon, you’d probably pass because you’re full.
Debt works in the same way. At first, it helps you to grow your lifestyle and pays for items you couldn’t otherwise afford, but as your balance sheet fills-up with obligations, more debt isn’t that appealing as that first chunk anymore. Even if it comes with low-interest rates, there is little appetite for it – like a free steak after you’ve already had your dessert.
That’s exactly the Chinese problem at the moment – low credit impulse.
The fact of the matter is that the global economy is confusing because, on the one hand, stocks are trading near all-time highs, unemployment is super-low in the U.S., but on the flip side, most people have become poorer in the past 10 years.
In other words, whoever is calling this an economic expansion doesn’t know the first thing about our current predicament – yes, the U.S. economy is doing well, but the beneficiaries of the rewards are less than 15% of the population, which control the vast majority of the wealth and equity. A nation can grow, collectively, because the individual parts are working hard, but are paid pittance for the value thy produce.
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It’s a giant wealth transfer, not a case of a rising tide that lifts all boats.
It doesn’t surprise me in the least to see that people haven’t got the slightest idea what world governments are going to do next.
The elite thrive in recessions and in downturns. They consolidate and prey on others’ weaknesses and misfortunes.
Don’t worry about the super-rich. It’s yourself and your family that you need to look after when push comes to shove.
How have you been preparing these past 10 years to come face to face with a slowdown?
Do you own income-producing assets? Is your career on the path of success?
There will be no middle-class in America by 2022, period.
Because of this wildly bullish kick-start to 2019, the market believes the FED is considering hikes, which is the reason gold has sold-off, but any shocking news could curtail this optimism.
If the mainstream media begins to give a platform and legitimacy to news about President Trump being a Russian operative, the markets could nose dive, even when it turns out to be bullshit.
On March 1st, tariffs are scheduled to increase with no resolution on the horizon thus far.
Then, you have these 800,000 workers, who aren’t contributing to the economy in Q1, which will hurt growth stats.
Don’t get suckered in yet. After 20% drops, like the ones we experienced in December, markets don’t normally recover this swiftly. Stay focused, and leave your emotions out of it.
Research Partner, PortfolioWealthGlobal.com
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