David Stockman warns of Shrinking GPP (Gross Planet Product):
For years now the dollar has been a “funding” currency in the global casino—-something the gamblers borrowed or effectively sold short in order to pile into higher yielding EM debt, equities and commodities until they peaked awhile back.
But the fantastic global credit bubble summarized below has now reached its apogee. China and the EM economies are rolling over into a debilitating deflation, thereby catalyzing the mother of all margins calls. This time subprime is lettered in Chinese and speaks with a Portuguese accent.
In fact, it is already happening, even by the lights of the IMF. The world’s nominal GDP has dropped 5% in dollar terms during the past year, and that’s what counts because the world’s $225 trillion tower of debt is heavily denominated in dollars, or linked to it through exchange rates, most especially the Chinese RMB.
Translation: There’s increased risk the US dollar will continue to strengthen and the US stock market crash, as well as financial sector risk.
Inventory levels are also rising, and manufacturing is down. Also, falling commodities are generally seen as a warning sign.
The recent dip in stocks (oil driven) might recover near-term. No one knows. I simply wish to post on the warning signs. Stocks are considered a relatively risky asset class.
“I’m not as concerned about the return on my money as I am the return of my money.”