SoT #41 – Wolf Richter: How Will The Global Asset Bubbles Unfold?

Stock bubble, credit market bubbles and housing market bubbles.  Unfettered money printing by Central Banks globally have created massive bubbles of unprecedented proportions across all asset classes.

Once Government and the Central Banks lose the power to stop markets from going down, you’ll have situation that spirals out of control quickly.  – Wolf Richter, The Shadow of Truth

Wolf sees China eventually emerging as the world’s new number one, but believes that first it must “cleanse” the massive excesses – asset bubbles fueled by a massive credit bubble – with a painful financial and economic correction.

He also thinks that there’s a strong possibility that the 30% stock market correction in China is a preview of what is coming to the United States:

I am convinced that it’s very difficult to impossible to make a significant amount of money in U.S. stocks going forward. I think they’re all pretty much overpriced – way overpriced.  – Wolf Richter

The biggest problem Wolf sees with the United States is the Federal Reserve.  The Fed’s money printing has enabled the Government to incur a massive load of a debt and enables Congress to operate free from any budgetary contstraints:

As long as the Fed keeps buying Government bonds, Congress does not need to address this country’s fiscal problems.

Finally, we take a look at the reinflation of the housing bubble by the Fed.  Wolf is one of the few blog writers who offers insightful analysis on the housing market.

We think Wolf’s blog is one of the best alternative media sources of truthseeking and analysis on the internet. You can find his work here: Wolf Street – Howling About Business and Finance

10 thoughts on “SoT #41 – Wolf Richter: How Will The Global Asset Bubbles Unfold?

  1. It’s good to see that the US has now allowed BitGold (debt-free currency) to launch in the USA. Supplementing much needed liquidity with gold can allow debt to be removed and destroyed.

    1. I guess that the only reason for them to allow Bitgold is because they want to give Blythe Masters a possibility to kill it.

      Recently she has showned interest for Bitcoin- I wonder why?

      Watch out for the derivatives ponzi queen!

  2. “The Fed’s money printing has enabled the Government to incur a massive load of a debt and enables Congress to operate free from any budgetary contstraints”

    The problem that criticizers of government spending don’t understand is that money is made from debt and without increased government spending we aren’t going to have additional money to provide for economic growth (in the current system). If the government was to somehow “balance the budget” (which is mathematically impossible as Paul Craig Roberts points out since austerity doesn’t work because the drop in tax revenues exceeds spending cuts), we’d have a massive deflationary crash and instant social chaos. And interestingly, when you correct government spending for real inflation as per Shadowstats, you see that it has actually been going down for 40 years on a per capita basis, and on a gross basis more recently. They are nominally increasing government spending to try to jumpstart the private sector as well and return the US to growth, which for structural reasons will never return, no matter how much government spending cuts they do. Unfortunately, the private sector cannot take up the slack.

    The alternative the Fed has always been running from is massive deflation and unemployment. They were afraid of it 40 years ago and now we are going to have to face it, in the form of hyperinflation and unemployment. Structurally it is baked into the cake; robots have taken too many jobs away from the labour force. The only way to address this is to reduce the work week to spread out the remaining jobs better, but I see zero chance of the authorities doing this since they don’t have a clue what they’re doing.

  3. re “Wolf sees China eventually emerging as the world’s new number one, but believes that first it must “cleanse” the massive excesses”…

    …I have great respect for Wolf Richter, but in this case he’s wrong, about China.

    I lived in China for five years, in the past decade. And unlike most Western expats in China (other than diplomats/spies or journalists, the latter also overlapping with spies), I wasn’t a backpacker-English-teacher nor hack entrepreneur (the latter of which almost alway fail in China in the long run), I actually had some personal connections with China’s Foreign Ministry – NOT as a member of any government, NOR any corporation, but just personally.

    And I lived for some years in Beijing, AND for some time in the countryside in a poor inland province. And based on BOTH of those experiences, for whatever it might be worth, please let me tell you:

    No, Wolf Richter is mistaken. China is a mess, China is WEAK, and shall remain very weak for the rest of this century, or longer. Probably for another one or two thousand years, as usual. (Because even in the periods when China was truly strong – some centuries ago – it was strong only in regional terms, because of its geographical situation, WHICH DOES NOT CHANGE!)

    Look, THIS is the REALITY of China today, in the early 21st century (based on my experiences):

    1. A conversation between me and a New York law student who visited China recently, she said about Shanghai: “It’s such an AMEEZING (sic, amazing) city!” And then I told her: “All those high rise buildings you saw in Shanghai? Guess what: No one lives in them and no one uses them. They’re all a Potemkin Village.” (Being a badly educated Millenial Generation American, she didn’t know what a “Potemkin Village” was.) Then she asked me, “But then why are all the lights on?” I said, “They keep the lights on in the windows to fool foreigners like you.”

    2. The reality of the Chinese COUNTRYSIDE? In other words, the reality of the MAJORITY OF CHINESE, in the early 21st century?:

    2.a Outside of Beijing and Shanghai, 90 percent of the Chinese use horribly worn, threadbare banknotes, falling apart….because the hot money of Beijing and Shanghai never reaches 90 percent of the Chinese. Think about that. MOST Chinese people use worn out banknotes, because the hot money never reaches most Chinese.

    2.b A scene I remember (from a few years ago) in a rural part of an inland province of China: An old lady “illegally” poaching some lotus flower roots (a tasty and nutritious veggie, best when fried) from what remained of what USED TO BE a “common” pond that her village had used for thousands of years…

    …until – IN THE 21st century! Half a century AFTER Chinese Communism began! – a f-cking Communist Party kleptocract STOLE that piece of ancient, commonly held countryside, and then (by the power of the Chinese Communist Party) he began to build (with hyper-leveraged loans) lots of useless and (to this day UN-USED and UN-INHABITED), skycrapers around it!

    And so I watched that old woman desperately harvesting whatever remained of the lotus roots, in her ancient ancestral pond, surrounded by new skyscrapers with no one in them, all for the insane vanity of the Chinese Communist Party…

    …and THAT is what Wolf Richter – and so many other willfully BLIND Americans – think of, as “China’s economy!”

  4. China going to be the pillar of the world economy? LOL. They are corrupt to the core, centrally planned (read: clueless), copy/steal everything they have, have a piss weak military and have little in the way of natural resources, all with a billion mouths to feed. If that sounds like a recipe for success to you, than have at it.

    1. China has “little” in the way of natural resources?!?!

      Of course, I agree that Chinese govt is disgusting, totalitarian & corrupt. But to claim that China has “little” in the way of natural resources proves that you’ve no idea what you’re talking about.

      1. China has an incredible amount of natural resources. They also have a lot of oil it’s just very deep and expensive vs importing to get it out of the ground.

        In terms of Chine being “totalitarian and corrupt,” How is that different from the U.S. now?

Leave a Reply

Your email address will not be published. Required fields are marked *

Time limit is exhausted. Please reload CAPTCHA.