One chart tells it all. The US created $2.1 Trillion in new assets of which $2.5 Trillion was new printed money! Say What??? I don’t know about you but it sounds like we lost $400 million in assets, no? But for some of us who are a little more dense, the bottom line is this. The world has really been in a depression since the crash of 2008. Two factors play a major role why that is so. First, you can’t print your way out of a crisis. Secondly, instead of creating money to inject INTO the economy, the FED and the ECB instead printed money that went directly to their crony friends, the banksters. These drug-addled dudes then continued to “play a game” of Casino Royale all contained within the financial industry that did nothing more than allow them to believe they were creating all this imaginary wealth from the fiat money printed by the Fed and the ECB.
In the meantime the people that spend REAL money were further raped of their wealth and demand for real goods and services contracted even further. In China, they didn’t print more money as much as they just extended unbelievable amounts of credit hoping on hope that eventually the economy would again start moving in a positive direction. The whole time data games were played to the hilt and everybody, including all the government agencies responsible for telling the real story of the economic situation, were all in a room blowing smoke up each other’s butts; telling the world we are all fine and everything is moving in the right direction. Nobody, and I mean NOBODY, with any authority stood up and said this is insane!
Well, the world’s most prestigious financial agency – the central banks’ central bank, called the Bank of International Settlements or “BIS” has long criticized the Fed and other central banks for blowing bubbles. The World Bank and top economists agree. So do many others.
As such, it was easy to predict a crash in China when the bubble collapses. China’s period of easy credit was analogous to America’s monetary easing starting in 2001 … and Rome’s in 11 B.C. China is suffering from a lot of the same malaises as the American economy, including corruption, crony capitalism, and failure to disclose bad debt.
International Business Times noted last year that China’s debt-laden steel industry was on the verge of bankruptcy. Quartz reported in December that a huge coal company called Liansheng Resources Group declared bankruptcy with 30 billion yuan ($5 billion) in debt.
Chinese Business Wisdom argues (via China Gaze) that waves of bankruptcies are striking in 10 Chinese industries: (1) shipbuilding; (2) iron and steel: (3) LED lighting; (4) furniture; (5) real estate development; (6) cargo shipping; (7) trust and financial institutions; (8) financial management; (9) private equity; and (10) group buying.
AP notes today:
Chinese authorities have allowed the country’s first corporate bond default, inflicting losses on small investors in a painful step toward making its financial system more market-oriented. A Shanghai manufacturer of solar panels paid only part of 90 million yuan ($15 million) in interest it owed.
Until now, Beijing has bailed out troubled companies to preserve confidence in its credit markets. But the ruling Communist Party has pledged to make the economy more productive by allowing market forces a bigger role. Time asks whether China has reached its “Bear Stearns moment”:
A dangerous build-up of debt and an explosion of risky and poorly regulated shadow banking have raised serious concerns about the health of China’s economy. That’s why the Chaori default — the first ever in China’s domestic corporate bond market — has sparked fears that the country could be headed for a full-blown economic crisis like the one that slammed Wall Street in 2008. “We believe that the market will have reached the Bear Stearns stage,” warned strategist David Cui and his team at Bank of America-Merrill Lynch in a report to investors.
The concern of Cui and others is that the Chaori default will be the tip-off point for an unravelling of China’s financial system. The default could wake investors and bankers to the realization that companies they thought were safe bets are potentially not, and they could begin to reassess other loans and investments to other corporations. In other words, they might start redefining what is and is not risky. That could then lead to a credit crunch, when nervous bankers become wary of lending money, or lending at affordable interest rates. More bankruptcies could result. That eventually causes the financial markets to lock up — and we end up transitioning from a Bear Stearns moment to a Lehman Brothers moment, when the financial sector melts down. “We think the chain reaction will probably start,” Cui wrote. “In the U.S., it took about a year to reach the Lehman stage when the market panicked … We assess that it may take less time in China.”
The Financial Post reported in January:
The U.S. and Europe learned the hard way about the dangers of shadow banks in the financial crisis but, five years later, China appears set to get its own painful lesson about what can happen when large capital flows get diverted to unregulated corners of the financial system. “We estimate that 88% of the revenues of Chinese trust companies is at risk in the long term,” said McKinsey and Ping An.
Billionaire investor George Soros recently wrote on a popular news website that the impending default and the growing fear reflected in Chinese markets has “eerie resemblances” to the global crisis of 2008. The big picture: the $23 trillion dollar Chinese credit bubble is starting to collapse.
As Michael Snyder wrote in January:
It could be a “Lehman Brothers moment” for Asia, and since the global financial system is more interconnected today than ever before, that would be very bad news for the United States as well. Since Lehman Brothers collapsed in 2008, the level of private domestic credit in China has risen from $9 trillion to an astounding $23 trillion. That is an increase of $14 trillion in just a little bit more than 5 years. Much of that “hot money” has flowed into stocks, bonds and real estate in the United States. So what do you think is going to happen when that bubble collapses?
The bubble of private debt that we have seen inflate in China since the Lehman crisis is unlike anything that the world has ever seen. Never before has so much private debt been accumulated in such a short period of time. [Note: Private debt is much more dangerous than public debt.] All of this debt has helped fuel tremendous economic growth in China, but now a whole bunch of Chinese companies are realizing that they have gotten in way, way over their heads. In fact, it is being projected that Chinese companies will pay out the equivalent of approximately a trillion dollars in interest payments this year alone. That is more than twice the amount that the U.S. government will pay in interest in 2014.
As the Telegraph pointed out a while back, the Chinese have essentially “replicated the entire U.S. commercial banking system” in just five years. Overall credit has jumped from $9 trillion to $23 trillion since the Lehman crisis. “They have replicated the entire U.S. commercial banking system in five years,” she said.
The ratio of credit to GDP has jumped by 75 percentage points to 200pc of GDP, compared to roughly 40 points in the US over five years leading up to the subprime bubble, or in Japan before the Nikkei bubble burst in 1990. “This is beyond anything we have ever seen before in a large economy. We don’t know how this will play out. The next six months will be crucial,” she said. As with all other things in the financial world, what goes up must eventually come down.
What has been going on in the global financial system is completely and totally unsustainable, and it is inevitable that it is all going to come horribly crashing down at some point during the next few years. It is just a matter of time.
We think two years is very optimistic, 6 months is more likely. Financial markets right now are like a herd of wildebeests, one twig snaps now and the stampede is on. One has to wonder, what if all of these trillions of fiat monies and credit had actually been put to work raising minimum wages internationally, building factories, and creating jobs, where would we be right now? Besides being grossly criminal and negligent beyond belief, when are we going to hold these idiots accountable and take the keys away these fools?