Monday, February 8, 2016

Three Down, Two To Go...........

Three Down, Two To Go

It's fairly obvious that private credit is contracting in Japan and the Eurozone and stagnant in the U.K.

As for the U.S.: after trillions of dollars in bank bailouts and additional liquidity, and $8 trillion in deficit spending, private credit in the U.S. managed a paltry $1.5 trillion increase in the seven years since the 2008 financial meltdown.

Compare this to the strong growth from the mid-1990s up to 2008.

The chart below makes it clear that the sole prop under the global "recovery" since 2008-09 has been private credit growth in China. From $4 trillion to over $21 trillion in seven years--no wonder bubbles have been inflated globally.

Combine this expansion of private credit in China with the expansion of local government and other state-sector debt (state-owned enterprises, SOEs, etc.) and you have the makings of a global bubble machine. In other words, the faltering global "recovery" and all the tenuous asset bubbles around the world depend on a continued hyper-velocity rocket rise in China's private credit.

What are the odds of this happening?

Aren't the signs that this rocket ship has burned its available fuel abundant?

Three out of the five major economies are already experiencing stagnant or negative private credit growth.

Once private credit rolls over in China and the U.S., the global recession will start in ernest and it is inevitable that that is where we are headed.

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