We can assume that if three of these four (five) major global 'fracture lines' would appear at the same time, the "collapse of everything" would be likely to begin.
The global business cycle is forecastable around 4-5mo ahead and the provision of liquidity into the financial markets is forecastable around 2-3mo ahead, currently.
The onset of economic crises is much more cumbersome and uncertain to forecasts.
A short 🧵on what's coming. 1/6
The flow of aggregate financing in China sputtered in October and fell of a 'cliff' in Nov/Dec. This implied that
1) This month will see first signs of a renewed decline in econ. indicators. 2) Decline will deepen in March and April.
Past week I promised a (long) thread on global #liquidity and so, here goes!
I have been analyzing the current state global liquidity since early November. Then I warned on possibility of an outright collapse of market liquidity.
🧵1/25 mtmalinen.substack.com/p/global-liqui…
Basically, I re-iterated our original warning from October 2018, when we had discovered that:
1. Global outside-US dollar denominated debt has risen to a record. 2. The role of non-bank institutions on providing funding has increased.
2/
3. The composition of international credit has shifted from bank loans to debt securities.
These straight-forwardly implied that:
"The increased role of non-bank institutions in providing credit means that an increasing proportion of international finance comes..."
3/
Everything you need to know is summarized in this graph. It shows that Chinese business (debt) cycle leads European cycle by around 3-4mo and the global business cycle by around 4-5mo.
In tight turning points (crises), with synchronous response, the lag is shorter. 2/
This relationship was revealed in 2015/2016.
In 2015 Chinese leaders tried to stabilize the economy by tightening the availability of credit especially to the manufacturing sector, which led to a slump in the Chinese housing market, which had already weakened in 2014. 3/
Seven charts to explain, why the U.S. is heading into a #recession (which is unlikely to be "mild"). 🧵
Let's start with the most problematic one: the yield curves. Many read these like the Bible, and they rarely have gotten it wrong. However, this time there's a problem.
1/14
Our first-ever U.S. #recession call, in March 2019, predicting the beginning of an U.S. recession in early 2020, was based on the inversion of the yields of the Treasuries with 10-year and 3-month maturities.
This is depicted in the strange divergence of the 10y/3mo and 10y/2y spreads in early 2022 shown in the figure above. I explained this in detail in my @EpochOpinion piece in May.