Flash Crashes and China’s Currency Devaluation by AL MARTIN (AL MARTIN RAW)
(8-31-15) The recent market declines represented a tremendous shorting opportunity for investors and brought the markets from what had clearly been an overbought condition to something more correct around the S&P 1850 level. We now have substantial bounce off that level thanks largely due to the effects that the global central banks led by China have had.
China reduced its interest rates again and reversed its ban on short selling. We saw similar moves to increase market liquidity from the ECB and this was able to turn the markets around. This also points out the fundamental problem in the global economy that these dynamic sell-offs are going to continue because the global economy is recovering without continuous quantitative easing from the central banks.
It’s the same problem again and again: the global central banks are full of economic academics and not real-world business people. That has been the problem in the entire post war regime.
People have asked -- was it a “real” crash or was it a “fake” crash? The central banks have done a good job in maintaining a state of overvaluation in the planet’s equity markets.