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Within our previous posts, we attempted to disclose what we believe to be one of the most critical and potentially damaging economic events in our future. We urge all readers to review (Part I, Part II, Part III) of this multi-part research report to bring everyone up to speed with our thinking. Please take a moment to our earlier posts before continuing.
In this section, we are going to explore the ongoing relationship between debt levels, shadow economic functions, global equity price levels and global economic activity all coincide at this very unique time to present a potentially massive and unprecedented event in human history – a massive economic collapse across dozens of nations and resulting in a potentially cataclysmic economic outcome. We are certain you might be asking, “how could this happen again?”. Well, in some ways the recovery process in the US, Europe and other areas could have prompted a very unique and dangerous setup in China, India and the general Asian region. Why are these areas uniquely at risk? The reason is because China has become a major economic driving force in the region and has become responsible for much of the areas economic advancement. This has been the case since the late 1990s.
In the previous section, we hinted that a downturn in the Chinese property market between 2015 till 2016 in combination with an equity price decline in excess of -15% to -20% and an outflow of capital from the Chinese economy resulting in a massive, $1 trillion, decrease in the Chinese capital reserves. How could something like this result in a total of $1 trillion in reserves to be depleted? The answer is that pressures on the economy at that time resulted in a number of general and corporate debt failures that, if left alone, would have pressured the entire Chinese financial/banking system into a possible crisis. Therefore, the Chinese had to make the problem go away and they did this by diving into their reserves to wash away the debt issues while continuing to prop up their economies and banking institutes. This $1 trillion reserve decrease was the “patch” that was needed to make sure the economic collapse was averted.