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China Blowing Even Bigger Credit Bubble Puts World at Greater Risk, Says Global Strategist

China is blowing an even bigger industrial-growth bubble, central banks are attempting to prevent a global shock, and, meanwhile, all eyes are on the US dollar for clues as to which way things will go. So says Worth Wray, Global Macro Strategist at STA Wealth Management, in a recent interview with Financial Sense, who also notes that we may just be in the “eye of a hurricane” before things heat up later this year.

Here’s some of what he had to say in Wednesday’s podcast:

“The last time we spoke back in January the world was I think very close to going off the edge. I think we had a close of a call with a global financial crisis and a global recession as we did in 2012 with the European debt crisis. It was very, very close…but then the dollar proceeded to peak out in late January. [Prior to then] we were in a position where the European Central Bank and the Bank of Japan needed to significantly ramp up their easing programs…and that could’ve gotten very ugly. Those were the big catalysts for a breakout in the dollar and that would’ve put a great deal of pressure on China…to float the renminbi and it would’ve been a global shock…

[However] I think what happened was some kind of a deal. You can call it an accord, you can call it a detente, you can call it a time out for all I care but it looks like there was a truce called in this global currency war on the sidelines of this G-20 meeting that happened in February. And when the central bankers and finance ministers of the four major economies of the world—the US, Europe, Japan, and China—sat down and we know for a fact—it was reported by Bloomberg—that there was a separate meeting of those economies…[to form] a pact to talk to one another before making any policy changes that might affect foreign exchange balances or foreign exchange trading…”

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