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Recession (coming To A Planet Near You, Soon)

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America is lone bright spot as fund managers flee stocks

By Ambrose Evans-Pritchard

Last Updated: 10:51pm BST 16/07/2008

Fund managers across the world are dumping stocks and retreating to cash in a mood of extreme pessimism, fearing that the looming economic crunch is an even greater threat than inflation.

The latest survey of investors by Merrill Lynch shows that an unprecedented 41pc now think that a world recession is either likely or very likely. The majority dismiss hopes of double-digit earnings growth next year as "fantasy".


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How can these people continually get double digit growth and not get inflation as a result of their actions?

Particularly as the Chinese government are PRINTING YUAN, quite literally, to buy US treasuries and suppress their currency. To sterilise these money printing games, they issue IOUs to themselves. So China has huge US dollar surpluses and huge Yuan debt. This only stokes inflation further and it has to stop.

The Chinese are NOT a nation of savers, or at least, a nation of savers large enough to buy $500 billion of US debt.

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Some good charts of money supply

The key measures of US cash, checking accounts, and time deposits - M1 and M2 - have been contracting in real terms for several months. A dramatic slowdown in Britain's broader M4 aggregates is setting off alarm bells here.


Paul Kasriel, chief economist at Northern Trust, says lending by US commercial banks contracted at an annual rate of 9.14pc in the 13 weeks to June 18, the most violent reversal since the data series began in 1973. M2 money fell at a rate of 0.37pc.

"The money supply is crumbling in the US. There was a very sharp lending contraction in the second quarter lending. If the Federal Reserve is forced to raise rates now to defend the dollar, it would be checkmate for the US economy," he said.

Leigh Skene from Lombard Street Research said the lending conditions in the US were now the worst since the Great Depression. "Credit liquidation has begun," he said.


The M3 growth is still 10.5pc, down from 11.5pc in January. However, the data has been badly distorted by the closure of the capital markets. Firms have been forced to draw down existing credit lines from banks, which shows up as M3 growth. (It is the same story with America's M3 since the collapse of the Commercial Paper market).

The last couple of months have seen the figures get sharply worse with the stock market, there probably even worse now, maybe a top in oil will coincide with the start of general price deflation.

Edited by domo

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  • 396 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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