Intrinsically, libertarians of the Austrian School of Economics know all too well what’s afoot across global financial markets. As of Friday, the Dow was at 16,450, down 1,018 points for the week. Yet, search libertarian websites high-and-low and you’ll be hard pressed to find decent commentary on the state of financial markets. Doug Casey and Jeff Berwick agree that financial collapse is imminent, writing that “we are now exiting the eye of the hurricane and rapidly heading towards what he terms the Greater Depression, and Jeff Berwick believes a collapse is being planned for September, moving the world closer to a one world government.”
… Global financial tumult has now attained sufficient momentum so that even U.S. markets can no longer remain comfortably oblivious. Yet, for most in the U.S. there remains little worry: the economy is sound, housing is booming, Silicon Valley is heroic, the banking system is rock solid, and the corporate sector is awash in cash. The U.S. economy is viewed as insignificantly exposed to China’s economic slowdown – and to global issues for the most part. Analysts speak of a “normal” stock market pullback – yet another buying opportunity. There is, however, little normal about current global financial, economic and geopolitical backdrops.
The last seven years have witnessed unprecedented EM debt expansion, led by what should be a frightening ballooning of Chinese Credit. In particular, Chinese and EM banks have coalesced into historic lending growth and balance sheet (assets and liabilities) expansion. This week saw indications of what has the potential to erupt into an Asian and EM banking system crisis of confidence. Faith that Chinese and EM government officials have the situation under control is surely being shaken. This is a game-changer for global finance and for the world economy. Financial conditions are tightening around the world – and this has zero to do with a possible September Fed (“baby step”) rate increase. …
… there’s a recurring theme that is especially pertinent these days. Financial and economic Bubbles invariably prove much more resilient than Bubble analysts presume. And, at the end of the day, the excesses and consequences go beyond what even the hardcore “bears” could anticipate. The adage around our office became: “It’s Always Worse Than You Think.”