Business

Below are some excerpts from our latest macro note, "Front Loaded: China, Volatility, and Debt Deflation." The full report with the charts and footnotes is on www.kbra.com.  The key question raised by the comment is this: Do Chair Yellen and the other members of the Federal Open Market Committee actually believe that there is a positive trade-off between the "benefits" of QE and zero rates and the carnage now unfolding in the global capital markets?  

It's official. More than 50% of the "wealth" effect created from the 2011 lows to the 2015 highs has been destroyed (despite the world's central banks going into money-printing overdrive over that period). Almost $17 trillion of equity market capitalization has evaporated in just over 6 months with over 40 global stock indices in bear markets...

As Bloomberg adds,

Via KesslerCompanies.com,

Economic expert, Pepe Escobar, has warned that selected Persian Gulf traders, including Westerners working in the region, have confirmed that Saudi Arabia is secretly unloading $1 trillion in securities in a bid to crash the global economic markets.  According to insiders, a further $12 trillion may be dumped, causing world markets to spiral into a depression, the likes of which we have never seen before.

Despite the collapse in Chinese stocks, Bloomberg reports annual sales of Chinese equity-linked structured notes across AsiaPac rose to a record (prompting Korea's financial regulator to warn investors in August that their holdings had become too concentrated in notes tied to the China H-Shares index). When banks sell the structured products to investors, they take on an exposure that's similar to purchasing a put option on the index...