What will the effect of the China crash be on the US?

[Treeshepherd]

Over 40% of Brazil's exports go to China. Brazil is another tanking economy in the news.

The entire world is in quantitative easing mode, seemingly. Every other central bank is attempting to juice their respective economies, which makes me think it's unlikely that the dollar index is going to fall.

Actually most of the world is having real problems with deflation and inflation adjusted populations. Aging populations, innovation, automation and the rest of the drivers such as overleveraged consumers being unable to buy or homeowners unable to sell their property to move to where the jobs all interact.

It's a global liquidity crunch. China is doing a massive liquidity injection. That could make China a smart play for investors if the effect is the same as the QE and stimulus was for US equities after 2009.

The note, by Alain Bokobza, head of global asset allocation, added: “We don’t see why the PBoC should wait any longer before taking decisive action. This is not yet the economic consensus, but it should become so. Don’t be shy of aggressively buying China equities the day the BPoC effectively announces huge liquidity injections, whatever the means they decide to use – and add to the mix proxies in commodities, commodity-currencies and equity sectors linked to commodities.”

Credit Suisse analysts said in a separate note Thursday that they believed the “political will to take outsized policy actions in Beijing today is stronger than that seen in Washington in early September 2008.”

“When a central bank says ‘whatever it takes,’ we think the market should listen,” they added.

Thursday, the Shanghai Composite rose 5.8% to 3709.33 while the smaller Shenzhen market rose 3.8%.

 

[william the wie]

I won't try this for every sector but China's major problem is that it will eventually have to writedown 20-40 T in domestic infrastructure, mostly housing, and who knows how much in overseas investment mostly to secure raw materials for its exports machine. The value of those commodities especially oil will continue to drop because most of the marginal cost of shale oil and gas is debt service with the second biggest fraction being transport costs. Between bankruptcies and pipeline building energy costs could drop to less than $20/bbl.

China has bought with infrastructure a few decades of oil and gas imports at $40-100/bbl. (Their construction of more land in the South China Sea looks like $60+/bbl oil to me but that is just my guess.) This clever pre-payment to avoid price increases will backfire for decades to come.

 

[DarkFury]

I won't try this for every sector but China's major problem is that it will eventually have to writedown 20-40 T in domestic infrastructure, mostly housing, and who knows how much in overseas investment mostly to secure raw materials for its exports machine. The value of those commodities especially oil will continue to drop because most of the marginal cost of shale oil and gas is debt service with the second biggest fraction being transport costs. Between bankruptcies and pipeline building energy costs could drop to less than $20/bbl.

China has bought with infrastructure a few decades of oil and gas imports at $40-100/bbl. (Their construction of more land in the South China Sea looks like $60+/bbl oil to me but that is just my guess.) This clever pre-payment to avoid price increases will backfire for decades to come.

Interesting take. I thought China was using it's interest payments it gets on building itself.

 

[william the wie]

They were but latest reports indicate a shrinkage of reserves. I haven't run the numbers but the Shanghai panic indicates serious problem. I'm not sure I could run the numbers but China has cancelled a lot of contracts this year.

 

[Mikeoxenormous]

Stocks are a disaster waiting to happen Stockman

Stockman, whose past claims have yet to come to fruition, still believes that the excessive monetary policy from central banks around the world has created a "debt supernova," and all the signs point to "the end of the central bank enabled bubble," which could cause a worldwide recession.

I must admit that LIBERALISM does one thing great. It ruins what ever it touches. Detroit, Greece, San Bernardino, Puerto Rico, Illinois, California, are all going bankrupt, and just like the old USSR, eventually liberals run out of other peoples money. Liberalism is all about equality, but to achieve this through liberalism, everyone must be equally poor and equally miserable, unless you are a liberal elite like Warren Buffet(who pays less taxes than his secretary), Bill Gates, Bill Clinton and his wife, Al Gore, and Barack Hussein Obama, who have the millions and billions.

 

[william the wie]

Two one offs this week and PBOC pinkie swears it won't happen a second time,make that a third time.

 

[CoachWitch]

It's recent currency devaluation is said to be turning the jobs scenario little worse..
Yuan and you How China s devalued currency affects U.S. consumers

 

[william the wie]

It's recent currency devaluation is said to be turning the jobs scenario little worse..
Yuan and you How China s devalued currency affects U.S. consumers

Not so much disagreeing with your source as pointing out that this is a much more complex problem than the short-run primary effects that your source covered and definitely stayed with. That's well and good but Chinese capital flight and emigration numbers are unpredictable and likely to be a lot more important in the not too distant future. That could lead to financial/political collapse in China, which is a much bigger deal.

 

[Bill Angel]

The weakening Chinese currency is expected to hurt exports from the USA to China.
For example see the article Weakening Chinese currency could hurt Maryland exporters - Baltimore Sun

Back in 2011 the Port of Baltimore was very active in shipping coal to China.

Also see article from June 11 2011: Coal exports Tonnage through port booming - tribunedigital-baltimoresun

 

[william the wie]

Quite right. The short-run effects, 0-6 months, are easy to predict and are correct within the limits of error. It's the knock on effects and what that will do to US stock prices that is worrisome. Afterall this is the stock market forum.

 

[Bill Angel]

Quite right. The short-run effects, 0-6 months, are easy to predict and are correct within the limits of error. It's the knock on effects and what that will do to US stock prices that is worrisome. Afterall this is the stock market forum.

There is a series of articles on that issue:
The US Metallurgical Coal Industry s Unprecedented Consolidation - Market Realist
Or
"Is It Game Over for US Metallurgical Coal Stocks?"

 

[william the wie]

Quite right. The short-run effects, 0-6 months, are easy to predict and are correct within the limits of error. It's the knock on effects and what that will do to US stock prices that is worrisome. Afterall this is the stock market forum.

There is a series of articles on that issue:
The US Metallurgical Coal Industry s Unprecedented Consolidation - Market Realist
Or
"Is It Game Over for US Metallurgical Coal Stocks?"

Believe it or don't those articles are the happy face of the world coal market. The massive mine reserves in Mozambique and Mongolia is not only alliterative but a huge problem for met coal worldwide. If not for our rail and barge network US coal mining would have died about ten years ago. Aerial and seismic analysis has improved so much over the past 30-45 we are approaching oversupply in all extractive industries.

 

[Mikeoxenormous]

5 reasons stocks will keep sliding

This was no knee-jerk drop on a boring summer day, either. The decline was a long time coming, precipitated by weak corporate earnings, a global economic slowdown and concerns over higher borrowing costs as the Federal Reserve prepares to raise official interest rates.

There was never a recovery as liberalism is all about failure. Global economic slowdown has been going on since B.O. took over, but with the shell game and 20 billion dollars of our tax dollars infused into the Euro , it was just propping up another failed liberal policy. Inflation, which the FED has been saying is at or near zero(0) has been going through the roof, but since Obama hired the FEMALE lickspittle, she has done his bidding to keep playing games to make it look like liberalism works(it never had and never will). So as Reverend Wright said once before, THE CHICKENS ARE COMING HOME TO ROOST. When you take money away from 1 person and give it to another not deserving of that money, pretty soon people resent the THEFT of that money, and it isn't there anymore. Liberals ran Detroit for over 50 years and it is bankrupt. Liberals have taken over California and Illinois, and the states are bankrupt. America had 9 trillion dollars of debt when George Bush left office. Obama took over and has doubled that debt to over 18 trillion dollars. PAIN is coming, many are going to get hurt, those that voted for Obama, not once, but twice, HOW IS THAT HOPE AND CHANGE WORKING OUT FOR YA.

 

[william the wie]

Actually the world is deflating. Lower energy prices in the US is going to reducing debt and therefore the money supply. China, Japan and many other less economically important parts of the world are flat out deflating despite cooking the books to a crisp. Chinese capital flight through the use of fake import invoices is hitting 1T a year by most estimates.

(Ghost cities, fake invoices and other types of book cooking are common in China. That is why Government officials will sometimes declare that the numbers they are using are not cooked. China can in theory export something like 300 T of capital but upto about half of that is known to be worthless and no one is going to be greatly surprised if most of the other half turns out to be smoke and mirrors.)

 

[mamooth]

China is now using their government pension money to prop up their stock market.

China share slide: Pension fund to invest in stock market - BBC News

Oh dear. That's not going to end well.

On the bright side, it will be a teaching moment for those who want to privatize Social Security.

 

[Mikeoxenormous]

Dow futures down as Wall Street preps for meltdown

U.S. stock index futures screamed lower, with Dow futures (@DJ.1) tumbling as much as 350 points, as fears surrounding the health of China's economy multiplied.

With the liberals propping up China, Europe and America with Quantitative Easing, all we did back 7 years ago, was extend the pain to where we are now. The Fed who printed over 5 trillion dollars of FAUX money and has it on their books(those dollars are bank dollars) but nothing to back those dollars, we can no see the markets finally reacting to what liberalism always does, "FAIL". It did for the Nazi's, and later the USSR. Without anything to back up the economy, but lies, soon the economies will tumble. Pain is coming, it will be a disease in the cities, hunger will force those to go after those that have. It will be up to U.S. to make sure that those hungry ones, go after the politicians liberal (R) and (D), who made this mess for America. Someone needs to be held accountable, and the rats will be fleeing to their underground bunkers.

 

[Mikeoxenormous]

CIA Insider Warns: '25-Year Great Depression is About to Strike America'

You will want to remember this date February 25, 2016.

According to one of the top minds in the U.S. Intelligence Community, that is when the United States will enter the darkest economic period in our nation's history.

A 25-year Great Depression.

This is the second time I have heard about this upcoming event. Back after the crash of 1929, America went into a 16 year Great Depression because the liberal in office decided to start a welfare program that made Americans less productive and more reliant on the government causing less people to work themselves out of that depression. So today, with many unemployed and underemployed, we are seeing a repeat once again of history. Problem is today, many of those have no skills to help them out of this tragic event. So we see the liberals once again, moving US closer to "WAR" whether it will be against Islam, China, or Russia, which is their hope to eliminate about 2/3rds of the worlds population. When you vote "LIBERAL" you can bet there will be "EQUALITY", for everyone will be equally poor and equally miserable, unless you are the liberal elites who will send your children into war.

 

[Mikeoxenormous]

Will the Fed Raise Interest Rates Anytime Soon? Investors Say No

The Fed watches financial markets closely, of course. Investors are losing money they might have spent, and falling prices can be an indicator of broader economic problems.

Yeah the problem has been that the Obama administration has been lying to US since he took over. That the lowering of the unemployment rate has been deceiving the American people to think LIBERALISM works. So since Q.E. forever was supposed to end because of the ROARING ECONOMIC RECOVERY,(if liberals say it enough, then it must be true), we see that there is no recovery, but more "STIMULUS, or else. Liberalism is a mental disorder.

 

[Mikeoxenormous]

Why another market plunge may be coming

U.S. equities rebounded strongly early Tuesday -- only to fall again by the end of the day. Despite the continuing volatility, nothing much really changed since the start of the week except investor sentiment. And therein lies the clue to why another crash could be coming.

You liberals who think the ECONOMY is recovering, please throw you money into the stock market. I mean you are all in with Obama, the lower of the oceans, the healer of the planet, this is HIS economy, so you should buy low right now and ride it higher. Of course , it would be a risk if YOUR administration was lying to you and when you put your money in, in the hope he wasn't lying to you, you lost your shirt. LOL , that would be funny as hell, as a fool and his money are soon separated.

 

[Old Rocks]

Mr. anderonjim, I have heard predictions like yours for sixty years. Has not happened yet, is not going to happen. That you wish it would happen is an indictment of your mental prowess.