by Pepe Escobar
25 Aug, 2015
RT.com

So what’s the real story behind the made in China Black Monday (followed by a Blue Tuesday)?

Shares in the Shanghai/Shenzhen soared a whopping 150 percent in the 12 months up to mid-June. Small investors – almost 80 percent of the market – believed in a never-ending party, and often borrowed heavily to be part of the “get rich is glorious” bonanza.

There had to be a correction. Those shares – which had hit a 7-year peak – were obviously overvalued. Couple it with a mountain of data showing essentially a Chinese economic slowdown, and the result was predictable; Shanghai and Shenzhen lost all their gains so far in 2015 – and engineered a massive global sell-off. Even notorious billionaires lost, well, billions in a flash.

Welcome to China’s new normal; or our brave (miserable) new normal world.
The crisis of the Neoliberal Disorder

The sharp correction in the Shanghai/Shenzhen is part of the end of a cycle. Goodbye to China relying on investment rates of 45 percent of GDP. And goodbye to China’s unchecked thirst for commodities.

The problem is China’s tweaking of is economic model is directly linked to the persistent coma of the neoliberal disorder, in effect since 2007/2008.

You don’t need to be Paul Krugman to know the new normal is anemic global trade; a severe crisis in most emerging markets; Europe’s absolute stagnation cum recession; and “factory of the world” China selling less to the rest of the world.

Meanwhile, the hyper-valued US dollar is strangling US exports; up to 3 percent decline in the first semester alone. Imports also fell by 2.2 percent; and that ties in with the structural corrosion of America’s dwindling middle class spending power.

Everywhere we look, the whole structural landscape screams crisis of the neoliberal disorder. When the Chinese engine of turbo-capitalism faces (relative) trouble that glaringly reveals how the global financial casino enjoys no dynamic support anywhere else.

Over $5 trillion in paper money has been wiped out since Beijing (modestly) devalued the yuan on August 11 – triggering the global sell-off.

Now the Fed may postpone raising interest rates for the first time in almost a decade until the end of 2015. Still, no one dares to predict a rosy growth scenario, considering an ultra-strong US dollar, a relatively devalued yuan and a steady fall in oil prices.

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