David Stockman predicts a global recession. His article starts with the vivid image of a bull crashing; where the bull represents the "coddled" and "intravenous liquidity injected" stock market that has been kept nearly alive for two decades. The instability of the U.S. stock market is not alone, but one of the many in a long list facing the effects of the decaying Chinese economy. As Stockman often sarcastically points out, we are not "decoupled" from the global deflation that is occurring. Our S&P conditions are similar to that of 2007, just prior to the 2008 recession. Stockman warns that this recession will be worse due to its global effects on "every significant central bank on the planet."
I think David Stockman got his point off very clearly. Though I am limited in sources, David Stockman establishes credibility and develops his argument for a global recession. How, then, are news channels like CNN broadcasting news at 2AM (or was it PM?) without a note of panic? Do most economists agree with Stockman?
From what I took away, stocks that were once considered giants in their fields are falling. An example is Glencore, a giant in the oil industry, with a hefty debt of $29.5 billion (which lead to decreases in the commodities market). The stock market is no doubtfully becoming unstable just like the Chinese economy and now economies worldwide.
Some questions I have are the following:
1.) How is the CDS market a way for traders to bet on a stock's collapse?
2.) Stockman said that China's largest steel company has led to price reductions in steel due to their idleness. This would cause a decrease in supply. How then, does this translate to price reductions? (similar to the graphs we've been analyzing in Chapters 4-5).
3.) How will the recession be the fall of "the cheap money era?" What exactly does this mean?
4.) Is Red Chip to the Chinese stock index as Dow Jones to the United State's stock index?
5.) Who will most likely be the next "Red Ponzi?"
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