Week One 2016: World Markets in Freefall
Is this the year that we are all finally doomed?
It’s been a shaky start to the year for markets across the globe. Chinese growth continues to slow while the Shanghai Stock Exchange plummets through the floor from ridiculous highs. Since holding a huge amount of US foreign debt in the late 2000s, China has gone on to amass some US$28 trillion dollars of debt at a rate that outstrips predicted growth and, in turn, capacity to manage that debt.
In the US, promising employment figures and a move to incrementally lift interest rates look good on the surface, however the reality is that seven years of quantities easing has left the world economy awash with cheap cash and the Treasury so empty they might as well leave the doors unlocked. The DOW marginally down on year-on-year trade which isn't a great outcome following all the optimism.
Australia, as we well know, is being spat out into the unpliant side of the mining boom with pretty much nothing to show for it. This morning the ASX fell below 5,000 points and could have further to go. The dollar has been falling for days, and in down 5% for the week to around US$0.705.
What’s left to hold on to? Pretty much nothing, says George Soros, the billionaire philanthropist who made squillions out of the 1992 Black Wednesday collapse.
“China has a major adjustment problem,” Soros said. “I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008.”
Mind you, he did say the same about the Greek financial crises, and was very nearly right.
Strap yourselves in, folks. 2016 looks like a rough ride.