A Week In The Life Of A Topsy-Turvy, Wildly Whirling World

 

By Germán Torreblanca (Own work) [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons

Let’s review this past devilishly wacky week to see if we can divine the way the world is turning and why the markets are churning. It was 2019’s worst week in stocks and, well, just about everything economic all across this crazily spinning planet. Volatility lifted its head back out of the water like Loch Ness’ monster while the citizenry took flight to treasury safe havens, bringing treasury yields down again to the five-year’s lowest point of the year. North Korea’s Rocketman returned to his rocketry, and the Chinese threw up their hands and ran as far from Mar-a-Lago as they could…or maybe they just threw up from too much chocolate cake.

The China syndrome is back

Most notably all over the world, bad news finally moved back to just being bad news, even as it arrived in cloudburst after cloudburst. Gold popped as money dropped and China flopped. Chinese exports fell 20%, outstripping the worst prediction four fold. The central bank of the billions of people of China mainlined major yuan jolts into the Xi dynasty’s tiring economy, and yet the Sino stock market fell off the mountain, taking a full panda bear plunge in one week. Apparently the nouveau riche Chinese ghost-city dwellers are wising up to all this easing and just realized talk of more of the same as far as the eye can see simply means the economy is finished more than it means refreshed hope waits on some distant horizon. 

Trump talked and China walked

The best boast Trump could bluster from his tweet blaster was that the stock market would rise again if China would only deal; China chose, instead, to cancel Chairman Xi’s second coming at Mar-a-Lago. Most market makers are saying the Chinese trade wars now have more downside than upside. Markets have priced in Trump’s repeated wafting of wistful hopes that a deal will be struck any day. His twittering about had the lightness of ether this week. If it happens that China does sign a grand bargain, the market money is already riding on that deal, so it won’t bring a lot more lift. If it doesn’t happen, on the other hand, the tablecloth gets pulled out from under the Mar-a-Lago gold settings, and one can only hope all the crystal doesn’t shatter as Xi walks away without his chocolate cake.

Central bankers on parade

The European Central Bank joined all other major central banks in twirling away from the tightening it had just promised and rushing back to renewed rounds of easing via mega loans to banks because it got schooled in a hurry to the awakening that it cannot ever unwind its balance sheet. It made this stunning pivot when reality forced it to admit the European economy is stalling. The ECB forecast prerecessionary growth of just 1.1% for 2019. To finish the dance, reports came in after Chairman Draghi’s announcement that some ECB thinksters didn’t think their central bank downgraded the economy far enough.

And, so, the bank that once promised it would do anything to save the Franco-German Empire will return to doing what hasn’t worked so far. As happened in China, this new round of promised profligacy was not greeted with the now customary market ecstasy. Exasperated European investors dwelled instead, on what the ECB’s flash reversal revealed about Europe’s economy. 

And, so, the old regime returned in which bad news is just bad news. It was almost as if exhausted investors felt Central Banker Draghi’s sudden ankle twist indicated central bankers are clueless since only a couple of weeks ago Draghi was boldly certain his central bank needed to torque up financial tightness. Suddenly, he and his banker troop were break-dancing on their bonnets in the streets of Belgium. 

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