- As I understand it, the Saudis and Russians are pumping more oil to maintain cash flow in the face of falling prices. This pushes prices down even more.
- The Chinese are finally seeing the end of government stimulus-related demand. After all, you can only build so many empty cities.
- The Baltic Dry Index is way low. That means that shipping is very weak, which means that international trade is shrinking.
- Every major nation has destroyed their equity and debt pricing mechanisms by printing huge amounts of money.
Where does this leave one of my favorite basket-case economies, Japan?
- They've shown a willingness to print money to buy things that the market won't buy, be they stocks or roads and bridges.
- Their debt is monstrous, but pretty much internal.
- As Japan's economy is very dependent on exports, if international trade falls off, their exports will fall off and their big companies will see reduced profits or even losses.
- That will cause ... the Japanese Central Bank to print more money and buy more things?
When does this lead people to dump the yen and cause a full-blown currency crisis? Does anyone outside of Japan hold enough Japanese anything (bonds, stocks, etc) to cause a Yen-dumping?
More broadly, countries all around the globe have masked the effects of recession by printing money and creating false demand. What does the end of this cycle look like? How can you see it coming? Is this market drop the start of it as people and firms sell off assets to get cash to pay bills they can't pay as they no longer make money through business transactions?
Hmm. Maybe in a future post, I'll look at a family budget analogy and see how far that takes me. This one has too many moving parts and is too far outside of my ken to make sense.