The world economy still suffers from a global lack of demand. That's what caused the market correction in China that sparked a (temporary?) contagion in the rest of the world. When it comes to the economic basics -- energy, grains and metals, everything's in a bear market. The Daily Beast asked me to write about the markets and I took my stab. Basically, I think that China is deflating too early.
China's economic miracle has been overly hyped. Yes, great strides were made in bringing the percentage of people living on less than $1.25 a day from over 30% to just over 5%. But you don't get people up to such a meager level of income and then declare victory. When it comes to eradicating poverty, we have always set the bar too low by helping people move up from misery to squalor and then not doing much else.
Contemporary China is still a wreck. It has reached a point where it has vast needs for resources but cannot profitably move them to the people who need them most. Yes, China has big export businesses but the real winners of this arrangement are the U.S., European and Japanese companies who utilize the cheaper labor, lower environmental standards and whatever other advantages they can extract in order to expand their own margins. No matter how many parts of your iPhone are made or assembled in China, Apple ultimately wins the spoils.
Of course, US stocks got killed, too. I look around and it's hard for me to believe that most Americans have "made it" to the point where demand for goods and services would slacken here. I think the want is there but that the means are not.
We haven't optimally distributed our capital so that everybody can play and that virtuous cycles can form. That doesn't mean we're in a bear market, but it seems as good an explanation of the last three days as any.