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Presenting SocGen's "China Syndrome": "The Vicious Cycle Of Lower Demand, Prices And Commodity Currencies"

To be sure, there have been no shortage of narratives that we’ve been keen on presenting, perpetuating, and explaining this year as the series of global ponzi schemes that have been built in the seven years since the crisis continue to unravel. 

Of course what’s important to understand here is that contrary to what our mainstream media critics - some of whom are now effectively jobless - will tell you, we aren’t in the business of spinning the narrative. 

We’re in the business of helping to explain how things actually work on the Street as well as helping readers get to the bottom of what can sometimes be an impossibly complex geopolitical news cacophony designed to make you believe what the world’s most powerful governments want you to believe. So when we run headlines like this one: “Bloomberg’s Commodity Index Just Hit 21st Century Low”, it’s important to understand that we’re not using hyperbole for the sake of using hyperbole. We’re simply alerting those who frequent these pages to a very serious dynamic that in fact is now one of the driving forces behind global economic outcomes.  

In short, the global commodities rout that's unfolded in the wake of the death of the petrodollar and the demise of the Chinese growth machine has served to wreak havoc on EM commodity currencies and now threatens to plunge the world into crisis and forever delay "liftoff" in the US.

Through it all, one thing that readers and (some) analysts have noted is that even as it becomes clearer and clearer that central banks and the paper they print are on their way to having zero credibility with anyone, commodities (so, the things people actually use and the things that actually have intrinsic value) have literally collapsed when priced in terms of worthless fiat paper.

SocGen calls this the “China Syndrome” and we present the following analysis for readers to consider on the way to determining if the rout in the prices for materials that the world actually needs is justified, or whether perhaps it is just a casualty of another nefarious feedback loop gone awry...