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Moody's July 4 Bomb: Rating Agency Finds 10% Of Chinese GDP Is Bad Debt, Claims "China Debt Problem Bigger Than Stated"

Tyler Durden's picture


The timing on the earlier pronouncement that rating agencies may have found religion could not have been better. Not even an hour later, here comes Moody's with a blockbuster which may put China's "White Knight" status, at least as ar as Europe is concerned, in grave danger. In a report just released, the rating agency not only warns that China's debt problem is "bigger than stated" (i.e., China is hiding a ton of ugly stuff off the books), but goes ahead to quantify it: "Of the RMB 10.7 trillion (about $1.6 trillion) of local government debt examined by the Chinese audit agency, RMB 8.5 trillion ($1.3 trillion) was funded by banks. However, Moody's has identified another potential RMB 3.5 trillion ($540 billion) of such loans that the Chinese auditors did not discuss in their report....we find that the Chinese audit agency could be understating banks' exposures to local governments by as much as RMB 3.5 trillion." Naturally, the implication is that this is an absolutely willing "omission" (thank you central planning), which means that of China's $5.8 trillion GDP (or whatever imaginary number the Polit Bureau is happy with throwing around for mass consumption), $540 billion is debt that is "unaccounted for", most likely due to being, well, bad. That would be equivalent to saying that $1.4 trillion of US corporate debt is delinquent. And lest anything is lost in translation, Moody's drives the steak through the Dragon's heart: "Since these loans to local governments are not covered by the NAO
report, this means they are not considered by the audit agency as real
claims on local governments. This indicates that these loans are most
likely poorly documented and may pose the greatest risk of delinquency.
" So let's get this straight: a country which has 10% of its GDP in the form of bad debt, is somehow expected to be credible enough to buy not only Greek debt, but the EURUSD each and every day? Mmmmk. In the meantime, Dagong downgrades the US to junk status in 5, 4, 3...

Full Moody's release:

"Moody's Investors Service says that the potential scale of the problem loans at Chinese banks may be closer to its stress case than its base case, according to an assessment that the rating agency conducted following the release of new data by China's National Audit Office (NAO).

When considering the apparent absence of a clear master plan to deal with this issue, Moody's also views the credit outlook for the Chinese banking system as potentially turning to negative.

"We assume that the majority of loans to local governments are of good quality, but based on our assessment of the loan classifications and risk characteristics, as provided by the NAO and other Chinese agencies, we conclude that the banks' exposure to local government borrowers is greater than we anticipated," says Yvonne Zhang, a Moody's Vice President and one of the authors of the report.

Of the RMB 10.7 trillion (about $1.6 trillion) of local government debt examined by the Chinese audit agency, RMB 8.5 trillion ($1.3 trillion) was funded by banks. However, Moody's has identified another potential RMB 3.5 trillion ($540 billion) of such loans that the Chinese auditors did not discuss in their report.

"When cross-examining the findings by the June 27 NAO report -- in conjunction with reports from Chinese banking regulators -- we find that the Chinese audit agency could be understating banks' exposures to local governments by as much as RMB 3.5 trillion," says Zhang.

"Since these loans to local governments are not covered by the NAO report, this means they are not considered by the audit agency as real claims on local governments. This indicates that these loans are most likely poorly documented and may pose the greatest risk of delinquency," the analyst adds.

Moody's report estimates that the Chinese banking system's economic non-performing loans could reach between 8% and 12% of total loans, compared to 5% to 8% in the rating agency's base case, and 10% to 18% in its stress case.

In the report, the rating agency examines various scenarios as to how banks could tackle problem loans, including some where the government provides assistance, but Moody's generally expects the Chinese authorities to implement gradual discipline.

Oh, and good luck ECB trying to stop the raters who now suddenly appear overeager to atone for years of utter retardedness.


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Mon, 07/04/2011 - 22:35 | 1425556 malek
malek's picture

The Chinese quickly need to change their accounting rules!
Then officially and openly mark to model and everything is fine.

Mon, 07/04/2011 - 23:21 | 1425708 bankrupt JPM bu...
bankrupt JPM buy silver's picture

Ah yes...the currency war is in full swing like the bears warned.

Mon, 07/04/2011 - 23:26 | 1425719 IQ 145
IQ 145's picture

 If you type "the tragedy of the Euro" into the Google search bar, you'll find on the first page a result which says {PDF} mises institute, something, something; and surprisingly this is a download of the whole book; which is an excellent treatise on the Euro and it's travails by a brilliant young economist. Hopefully this will be of interest to someone here; at least it's not entirely off-topic.

Tue, 07/05/2011 - 00:33 | 1425810 Yen Cross
Yen Cross's picture

 Hey ! I jumped off a tin can @ 42k, and staggered into a town car.  I took one of those "IQ " tests for the fun of it.  It was like teaching a Chimp to birth Beluga Whales. I clipped a good score, 16 hours and some single malt. 


       Point being. Wisdom [ ALWAYS } Supersedes IQ!    Think/postulate about that thought!             


Tue, 07/05/2011 - 01:09 | 1425843 nope-1004
nope-1004's picture

This is part of the fascist propaganda policy the US gov't does by using the TBTF banks as their medium to control the financial world.

Eat it up people.  First, "rare earths" are all of the sudden not that rare.  Second, China is hiding bad debt.

Ummmm...... doesn't Morgan Stanley have more toxic interest rate derivatives than 10 Chinas?

This gov't makes me sick.

More "strong dollar" policy leaked by way of the blogosphere, so that the USD rallies and QE3 gets the green light.

See it for what it is.


Tue, 07/05/2011 - 02:19 | 1425916 macholatte
macholatte's picture

Is everthing a conspiracy theory or false flag? Are Americans the only group of dipshits or are there others? Are the Chinese, Indians, Ruskies pure as the driven snow angels? Or are they all up to the games of deception and bluff?

Even a paranoid can have enemies.
Henry A. Kissinger

Tue, 07/05/2011 - 02:26 | 1425920 Popo
Popo's picture

Yes everyone is as bad as everyone else:   But one can't help noticing that the last two stories on ZH have involved US ratings agencies essentially saying "You're more f*cked than we are" -- once to China,  and once to the ECB.

Coincidental timing?  Or part of a policy approach to supporting the USD?

We mere mortals never get to know the answer to these questions -- but it's worth watching how the ratings agencies become increasingly politicized on the global arena.   In a world swimming in bad debts -- it's certainly notable that the arbiters of debt-quality are American.

Tue, 07/05/2011 - 02:29 | 1425924 macholatte
macholatte's picture

I could feel his muscle tissues collapse under my force. It's ludicrous these mortals even attempt to enter my realm.
Mike Tyson

Tue, 07/05/2011 - 03:00 | 1425951 Problem Is
Problem Is's picture

All the words in the quote were spelled correctly... Tyson is not only a (non)functioning illiterate...

Mikey is a rummy punch drunk incapable of speaking or spelling correctly...

Tue, 07/05/2011 - 05:42 | 1426060 AnAnonymous
AnAnonymous's picture

but it's worth watching how the ratings agencies become increasingly politicized on the global arena.   In a world swimming in bad debts -- it's certainly notable that the arbiters of debt-quality are American.


If boat A sinks, they dont sink.

If boat B sinks, they dont sink.

If boat C sinks, they sink.

Dont know if it is politics but it is a real test of faith to think that the rating agencies will take decisions that could endanger their future.

The market is not ethereal. It is made of people with physical ties. Contrary to what economists claim.

When somebody starts to nuke the world, safest place is just aside that person, it is going to be the last place to be nuked.

Tue, 07/05/2011 - 03:09 | 1425957 macholatte
macholatte's picture
Chinese men have more of a penchant for male handbags partly because they need to carry so much cash.
China’s women show taste for fast cars and whisky


Tue, 07/05/2011 - 06:51 | 1426105 Popo
Popo's picture

Isn't that everyone's penchant?

Tue, 07/05/2011 - 09:09 | 1426240 Cole Younger
Cole Younger's picture

I don't doubt governments are conspiring to give BS economic news and stats. Governments are self serving and do not want to lose control of their citizens.

Tue, 07/05/2011 - 01:55 | 1425888 Yen Cross
Yen Cross's picture

  You are a pussy Junkster. Nothing more. There is no such thing as a "Brilliant" Young economist Timmah!

Mon, 07/04/2011 - 23:42 | 1425742 infotechsailor
infotechsailor's picture

well,, , I was wondering what was going to be the catalyst to force an RMB revaluation.


is that debt measured in RMB or USD? this raises a whole new series of issues. 

Tue, 07/05/2011 - 00:02 | 1425773 johngaltfla
johngaltfla's picture

It won't force it, they'll monetize the debt. Moody's is a tad, well, a wee bit behind the curve as usual:


More Risk Ignored: Local Chinese Government Debt now over $1.65 Trillion
Tue, 07/05/2011 - 00:03 | 1425774 Xibalba
Xibalba's picture

look!  SHINEY!!!  


bait is shiney.

Tue, 07/05/2011 - 00:34 | 1425814 angelsand
angelsand's picture

Listen up.  You can espouse all this bull euro shit and all the China will overtake the US as the largest superpower, and the US is so corrupt and off base on foreign policy in the middle east, and off base on financial policy, you can do all that bullshit, but the bottom line is china is a motherfucking communist country, they are fucking bastards that regulate the genetic evolvement of the human race through government policy, they have Tibet on their resume, they don't give a fuck, and we might be sucking their economic tit, but the bottom line is China and Russia will NEVER be a safe haven for investment, NEVER, for in the end, it will be realized that as fucked up as the US is, it is no where near China.  We should have let Japan wipe China out, now our only hope is to play another superpower like Russia against China, but bottom line, this is all a cherade, when the shit hits the fan, and it will, the US will still be the best play.  It may take 10, 20, 30, 40, or 50 years for me to be proven right, but proven right I will be. 

Tue, 07/05/2011 - 03:07 | 1425851 Mad Cow
Mad Cow's picture

Absolutely. Still, it should be pretty obvious by now, that the next step in the game is a global currency with the US on the chopping block.

Tue, 07/05/2011 - 01:52 | 1425887 Yen Cross
Yen Cross's picture

 +1 (and I minus the 2 commie junks.

Tue, 07/05/2011 - 02:22 | 1425918 macholatte
macholatte's picture

tell us how you really feel.... go for it.


Tue, 07/05/2011 - 05:37 | 1426057 Yen Cross
Yen Cross's picture

  I love to 'hate' you! You are well spoken, and do have valid points.

Tue, 07/05/2011 - 01:39 | 1425871 bankonzhongguo
bankonzhongguo's picture

I guess Moody's is not interested in being active in the Chinese market going forward.

Until anybody sees an indictment on someone or something from the vaulted rating agencies for all the BS AAA MBS, these lack-legged CFAs and their sanctioned reports have zero credibility on any topic.



Mon, 07/04/2011 - 22:35 | 1425558 traderjoe
traderjoe's picture

Paper buying paper. All to thieve and enslave...

Mon, 07/04/2011 - 22:39 | 1425582 Bansters-in-my-...
Bansters-in-my- feces's picture

Debt is mmm...mmm good...

Benny bernanke told me so.

Mon, 07/04/2011 - 22:39 | 1425584 mo gotti
mo gotti's picture

I find it very interesting that Mr. Dohmen has gone on record (McAlvany weekly commentary) as saying that China's blow up leads the next significant leg of the unfinished secular bear market.  Perhaps we shall see this sometime soon?


Go figure......Moody's......"doing God's work" apparently.

Mon, 07/04/2011 - 22:56 | 1425667 Dolemite
Dolemite's picture

I am a long time Dohmen reader and ya he has been saying for like 3 years now that China is going to blow up and be the biggest bubble in human history. He is certainly not moving off of that now that all of this recent stuff has surfaced :).

Mon, 07/04/2011 - 23:56 | 1425766 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

China has years of accumulated garbage on its books. It is not what is good economic sense. It is what serves the Communist gov't at the time. Let the bubble pop!

Tue, 07/05/2011 - 00:11 | 1425783 Oh regional Indian
Oh regional Indian's picture

Interesting. The latest work from Halfpasthuman points to the ratings agencies having a huge role in the coming currency and really everything crisis.

Competitive devaluations and currency controls.

It's going toget very interesting.



Tue, 07/05/2011 - 00:52 | 1425828 Michael
Michael's picture

China has 64 million empty vacant residential properties on its hands.

That's enough to house the entire population of the United States.

Tue, 07/05/2011 - 06:25 | 1425944 Ghordius
Ghordius's picture

And 120 m people without what we would call a proper roof over their heads. They are dangerous to the extreme for the Government of China.

Tue, 07/05/2011 - 05:39 | 1426059 Yen Cross
Yen Cross's picture

 Ahhh. yes.  Those, [Vacant Fields].

Mon, 07/04/2011 - 22:40 | 1425597 Yen Cross
Yen Cross's picture

 Imagine that!  Who would have figured? Must be the Ghosts of Dynasties (cities) past.

Mon, 07/04/2011 - 22:40 | 1425608 flyr1710
flyr1710's picture

china? fraud? nah

Mon, 07/04/2011 - 22:43 | 1425612 ISEEIT
ISEEIT's picture


Maybe I should stop drinking and go watch Braveheart or something?

This is going REALLY fast.

I'm tired.

They probably know that. Fuck it. Let 'em have it.

It's yours now. Have fun.

Mon, 07/04/2011 - 22:44 | 1425613 chump666
chump666's picture

Good stuff ZH!

Mon, 07/04/2011 - 22:50 | 1425637 bob_dabolina
bob_dabolina's picture

This is good news for Oats.

Mon, 07/04/2011 - 22:51 | 1425649 boricuadigm-shift
boricuadigm-shift's picture

Aircraft Carrier, Stealth Fighter, Drone & now Shadow Debt...  China is picking up the pace fast.

Later this week:

Chinnesse HAARP; Chinneesse Krispy Kreme; Chinnesse ITouch!

Ula la!!

Mon, 07/04/2011 - 22:56 | 1425661 bob_dabolina
bob_dabolina's picture

Chinese replica of Greenwich?

“We want to know how to create a good environment to attract the financial industry.” 

Answer: Remove all the Chinese people from that area.

Mon, 07/04/2011 - 23:26 | 1425718 Yen Cross
Yen Cross's picture

 Bob you guys are killing me. I can't stop laughing.  Some one send me a picture of

  Barney Frank, in a double wrap around with Dodd in Jello! Weiner would suffice as a #2.

Mon, 07/04/2011 - 23:33 | 1425734 bob_dabolina
bob_dabolina's picture

Would a Boehner suffice as a last resort?

Mon, 07/04/2011 - 23:51 | 1425750 Yen Cross
Yen Cross's picture

  They can (Judge) a 24 year old on the weekend, but can't  even configure a debt cap? Go Figure.

Tue, 07/05/2011 - 00:13 | 1425788 UGrev
UGrev's picture

He's on the side fap fapping away.. he's a watcher, not a doer.. 

Tue, 07/05/2011 - 02:25 | 1425922 macholatte
macholatte's picture

where's Bonzai when you need him?

Mon, 07/04/2011 - 22:52 | 1425654 LetThemEatRand
LetThemEatRand's picture

Chances are, this will not be mentioned tomorrow on CNBC, Bloomberg, or Fox.  But several months from now, it will be raised as a little known fact that "no one could have anticipated."

Mon, 07/04/2011 - 23:27 | 1425720 Dugald
Dugald's picture

Good Lord, Stone the crows, starve the don't mean a a a Black Swan?????

Tue, 07/05/2011 - 00:13 | 1425789 Cleanclog
Cleanclog's picture

"Transitory, due to weather, as in snow job"

Now back to your regularly scheduled CNBC - let's drill down, what are you buying now, how can youo make money on this right now, taxes are evil, government is evil, greed is good, regulation is evil, banks' self-regulate best, mark-to-market is for putzes, no one should be able to short except hedge funds, etc etc etc.  The market is a level playing field.  Sigh.

Mon, 07/04/2011 - 22:53 | 1425655 The Axe
The Axe's picture

ZH is awesome...always cutting edge....stuff that is no where else...YET....I am always so shocked that financial markets never seem to be fazed by these flaws in the system, in fact the ponzi only moves forward....

Mon, 07/04/2011 - 23:03 | 1425680 island
island's picture


Tue, 07/05/2011 - 00:14 | 1425790 i-dog
i-dog's picture

The Grand Masters Of The Ponzi own the market and own the media ... ipso facto, the media is only used, post facto, to justify to interested readers--all 3 of them--the latest market manipulations.

The current feints against Europe and China by the rating agencies are, IMO, simply ruses to prolong the ponzi into next year. Lulls the American sheep into a false sense of "it'll be OK ... they'll fix it, somehow ... see, [insert country here] is worse than us".

TGMOTP need to keep the US afloat until late next year in order to complete construction of their control grid (DHS, FEMA, TSA, etc).

Tue, 07/05/2011 - 05:22 | 1426053 Yen Cross
Yen Cross's picture

 We ARE the financial TOOL:S!


     I minus the tool that junked you! Keep learning.    Yen.

Mon, 07/04/2011 - 22:55 | 1425666 ISEEIT
ISEEIT's picture

"retardedness"? That is lovely. Actual retards would never be creative enough to scheme like this.

Don't be fooled. evil genius is both evil & genius.

But on a lighter note............Isn't this a proxy for the 'free market' we alll so lust for? I mean seriously. No rules right? Fight club ladies and gentelmen...Step right up.

Mon, 07/04/2011 - 22:59 | 1425673 Yen Cross
Yen Cross's picture

 Austin Powers "BABY" (dot)

Mon, 07/04/2011 - 23:11 | 1425674 bob_dabolina
bob_dabolina's picture

Don't be fooled. evil genius is both evil & genius.

Really. Ever done your history on the Bank Of International Settlements? There's a documentary out there that shows how it was used to launder money for the Nazis....even the teeth of Jews from concentration camps that had gold in them. It's sick when you see the boxes full of teeth being dumped out. I think it's called Banking With Hitler, or something like that. It's been a couple years since I've seen it.

Update: out of my own curiosity, I found it:

Mon, 07/04/2011 - 23:32 | 1425728 Nolsgrad
Nolsgrad's picture

This looks interesting as well

Mon, 07/04/2011 - 23:33 | 1425732 trav7777
trav7777's picture

how many germans starved as a result of the jew confetti economic collapse?  Funny how history started in 1940

Mon, 07/04/2011 - 23:54 | 1425760 bob_dabolina
bob_dabolina's picture

There's never a dull moment with you lol. 

Genocide and hyperinflation are different chapters in my book.

Tue, 07/05/2011 - 00:13 | 1425787 Vic Vinegar
Vic Vinegar's picture

Cool...I'm only 40 min into one of your comments. 

Answer the question dude: what do you think of iCarly?

Tue, 07/05/2011 - 02:54 | 1425942 Yen Cross
Yen Cross's picture

Fleetwood mac. or HP?

Tue, 07/05/2011 - 02:57 | 1425948 Vic Vinegar
Vic Vinegar's picture

I don't get the question dude, but I like Fleetwood Mac.


Tue, 07/05/2011 - 03:16 | 1425962 Yen Cross
Yen Cross's picture

 Obviously! Head out.

Tue, 07/05/2011 - 03:46 | 1425984 Vic Vinegar
Vic Vinegar's picture

X-mas gift is coming for you, man.  Just tell me where to send it.

I heart yen cross.


Tue, 07/05/2011 - 03:55 | 1425987 Vic Vinegar
Vic Vinegar's picture

One more for you gramps...

I am commenting b/c I respect that others have said you know something about fx.

Yet where the fuck is it? 

I have Gaga videos in the meantime:

BTW, I am an fx novice.  Never pretented to be anything other.  Life is too short to bullshit, no?

Yen - you and me could write a bad romance.  Let's git er done!

Tue, 07/05/2011 - 02:54 | 1425945 Vic Vinegar
Vic Vinegar's picture

Ah, trav777, another day where we keep hearing about your  thoughts on black people’s brains and peak oil.

Yet you have not answered the question – what about iCarly?

Keep talking dude. 

You still need to answer the question.

Just being honest, this is my favorite Nick theme song ever:

Tue, 07/05/2011 - 03:19 | 1425964 Yen Cross
Yen Cross's picture

 Hey Ph person. Where are Bund's 10 trading?  Got any news on 3's 5's and 7's?

Tue, 07/05/2011 - 03:25 | 1425971 Vic Vinegar
Vic Vinegar's picture

Thanks for the nonsense.  I was hoping for an answer from you re: that issue.

I guess that's why I am an optimist, here in a sea of perma-doomers and freaks....

F / M / K, yen for the Hanson brothers.  Go now:


Tue, 07/05/2011 - 03:36 | 1425978 Vic Vinegar
Vic Vinegar's picture

Gotta rock, yen.  FWIW, your chick in Singapore wanted to watch me rub one out while you make nonsense comments on Zero Hedge.  Somehow she thought that would move humanity forward and get her off. 

I'm not sure if she's brilliant or not but she has nice tits.

And, FWIW, my answer to the Hanson question is:

F: youngest one

M: middle one

K: oldest one

Tue, 07/05/2011 - 03:57 | 1425989 Yen Cross
Yen Cross's picture

  I'm not in Singapore. Thanks for your support. I came home for the 4th. Family!


    FWIW. I like you. You Just need some  Slewie, and 777 attitude adjustments. Rest assured you will be put in line soon.

Tue, 07/05/2011 - 04:03 | 1425993 Vic Vinegar
Vic Vinegar's picture

See - there can be peace on earth afterall!

I love Slewie.  And as mentioned above, others respect your foreign currency knowledge. ..I look to you to lead in that area... I'm not here to hate on you.

Best regards yen.  Goodgnight (or good day).

Tue, 07/05/2011 - 04:18 | 1425998 Yen Cross
Yen Cross's picture

 Thank you for the complement. As well to you. For the record. I'm catching a jet back over tomorrow.  FWIW The Carly remark, pertains to the Fired EX; CEO of Hewlett Packard, that ran for the California senate, last election.

Tue, 07/05/2011 - 04:03 | 1425995 Yen Cross
Yen Cross's picture

 Regarding F/X. Put a trade out there, and I will try my best. I'm pretty flat and enjoying holiday. The stop hunters are out there.

Mon, 07/04/2011 - 22:58 | 1425672 Wombat
Wombat's picture

Axe, I totally agree with you about ZeroHedge!  We can't find this info easily anywhere else!  Thanks, Tyler!

Mon, 07/04/2011 - 23:07 | 1425685 Yen Cross
Yen Cross's picture

  DO YOU, understand it?

Mon, 07/04/2011 - 23:00 | 1425675 island
island's picture

Really, who thinks any rating agency is truly re-formed? 

Couldn't this just be another tactic to heat up the war between financial terrorists?

Mon, 07/04/2011 - 23:02 | 1425677 Caviar Emptor
Caviar Emptor's picture

He who bails himself out laughs best  -Old Chinese proverb

Mon, 07/04/2011 - 23:14 | 1425702 disabledvet
disabledvet's picture

I just found the American implementation of said proverb right here:

Mon, 07/04/2011 - 23:03 | 1425682 TideFighter
TideFighter's picture

Relax. China is not shovel-ready.

Tue, 07/05/2011 - 00:16 | 1425794 UGrev
UGrev's picture

With all the empty cities they've built, I'd say they've graduated past shovel ready into bulldozer ready to then proceed back into shovel ready.

Tue, 07/05/2011 - 02:10 | 1425904 Hook Line and S...
Hook Line and Sphincter's picture

That's the China strategy my dear UGrev. After the WWWIII thermonuclear smeg rains down upon their 'inhabited' cities, they will climb out of their caves and have shiny new cities to go back to.

Mon, 07/04/2011 - 23:05 | 1425684 camoes
camoes's picture

Annnddd...poof, it's gone!

Mon, 07/04/2011 - 23:11 | 1425687 slewie the pi-rat
slewie the pi-rat's picture

the buffett-moody's-g/sachs connection = takedown, BiCheZ!

tomorrow, the RMB will go straight up, probably, as PPT's speaking 11 different langages "compensate" at once. 

it's scary how fuking good our banksters are.  terrifying, really...

now that china, europe, japan, africa, the ME and russia are in the fiat noodle casserole...

...we'll hafta try extra hard to win the race to the bottom!


Mon, 07/04/2011 - 23:31 | 1425723 Yen Cross
Yen Cross's picture

 Us old schoolers call it [ YUAN].   Long die the yuan!


   However a Deutschmark- will always be a Deutschmark!

Mon, 07/04/2011 - 23:45 | 1425748 slewie the pi-rat
slewie the pi-rat's picture

i know.  tyler was following moody's report & i followed tyler.

now, i'm following you, Y/C!!!

that's pronounced "Juan" right?

Mon, 07/04/2011 - 23:59 | 1425765 Yen Cross
Yen Cross's picture

 YUAN! not  renminbi.   Happy fathers 4th Slewie.      YEN


  U'wan! some shite bitches.  How is that enunciation Slewie?

Tue, 07/05/2011 - 08:24 | 1426179 gall batter
gall batter's picture

YC, I call it rent to yuan.  

Mon, 07/04/2011 - 23:10 | 1425692 I am Jobe
I am Jobe's picture


Thank you for the info. I am amazed that the main stream media as we know it  will never report this and more interested in reporting the golf outing of Obama and everything is peachy story. Keep the masses ignorant.

Mon, 07/04/2011 - 23:33 | 1425693 Bay of Pigs
Bay of Pigs's picture

Moody's? Now there's a credible source. 

No problem, I'm sure the Chinese will just take this lying down. 


Mon, 07/04/2011 - 23:12 | 1425696 azusgm
azusgm's picture

"Moodys drives the steak through the Dragons heart"?

Wow. Triglycerides applied directly to the coronaries...that's getting serious.

Mon, 07/04/2011 - 23:17 | 1425703 yabyum
yabyum's picture

Would you like fries with that?

Mon, 07/04/2011 - 23:15 | 1425700 chinaguy
chinaguy's picture

Worth repeating...about 7 years ago Ernst & Young was asked by the BOC to perform an "independent audit", Their conclusion was that China was sitting on about one trillion USD of bad loans.

Beijing raised hell and E & Y (who wanted offices in China) re-wrote their report with Beijing's number of something like USD 350 billion in bad loans....

So now, seven years later, anyone paying attention should not be surprised by trillions of bad loans in China....and no outside firm has ever been asked to do an audit again.......



Mon, 07/04/2011 - 23:21 | 1425711 I Got Worms
I Got Worms's picture

I'm shocked, but this news is actually being reported on Yahoo's front page right now.

Mon, 07/04/2011 - 23:27 | 1425722 jonjon831983
jonjon831983's picture

It's ok, either just cover to show everybody's ratings are going into the shitter.  As long as everybody else gets crappy ratings it will confuse everybody and the party goes on.

Alternatively, this is a war between US/China rating agencies.

Mon, 07/04/2011 - 23:30 | 1425725 almost_have_a_name
almost_have_a_name's picture

The Chinese debt is the best debt.

Banks and paper... it never ends

Mon, 07/04/2011 - 23:33 | 1425729 zorba THE GREEK
zorba THE GREEK's picture

 It's on Bloomberg too.

Mon, 07/04/2011 - 23:37 | 1425736 SmoothCoolSmoke
SmoothCoolSmoke's picture

Do the Rating Agencies see the edge of the cliff approaching........ and want to prove they are not worthless?



Mon, 07/04/2011 - 23:39 | 1425739 SmoothCoolSmoke
SmoothCoolSmoke's picture

Wow!  NZD just fell out of bed.

Mon, 07/04/2011 - 23:40 | 1425743 Quantum Nucleonics
Quantum Nucleonics's picture

Chinese local government debt has been an issue for years.  It feels like the housing bubble.  It's just a question of when it pops.  Is 2011 the next 2007?  Or will it be 2012?  Broken systems last far longer then anticipated.

Tue, 07/05/2011 - 02:56 | 1425943 A Man without Q...
A Man without Qualities's picture

I suspect a load of it is loans to local politicians cum property moguls, who've been buying up hundreds of properties.  The loan from the government is treated as the deposit when they get the rest of the loan from the bank.  

The fact is, there is a property bubble in China, but the idea it is all the "middle classes" driving it is bullshit, it's mostly corrupt local officials and factory owners who employ all sorts of magic tricks with their balance sheet to make them look more profitable than they are.

So, when the central government worries about inflation and tries to tighten liquidity, the regional and local leaders and the banks do whatever they can to ignore it, because they are balls deep in the leverage mess and they need prices to keep going up, or they are toast.

Mon, 07/04/2011 - 23:53 | 1425759 MFL8240
MFL8240's picture

Change the name and the numbers and guess who that would be?

Mon, 07/04/2011 - 23:55 | 1425764 zorba THE GREEK
zorba THE GREEK's picture

  Chinese housing bubble dwarfs US's. They had to keep 

  their masses busy and the new houses they built are

  way out of reach for the average citizen. They have been

  trying to let the air out slowly raising rates but have a 

  a long way to go. If that bubble burst, it will have

  far reaching repercussions.  

Tue, 07/05/2011 - 00:08 | 1425779 Cleanclog
Cleanclog's picture

Except when you think about the 3-4 million new households created every year by migration from farm to urban . . . and that about 1/3 of adults live with their parents but would like not to . . . and that the average GDP earnings per capita has increased almost 3 fold in the past 8 years . . . and that China wants to increase domestic consumption, but people live in too small of living spaces to put acquired things, so China wants new residential construction to accommodate these changes.

The residential demand is high, it's the commercial construction that is a joke.  But developers did so in order to get the residential permits which are actually profitable.

There is a real estate bubble, but I don't think you'll see the residential r.e. burst just yet.

Tue, 07/05/2011 - 03:01 | 1425952 A Man without Q...
A Man without Qualities's picture

You forget something - the migration into the cities is about 80% workers brought in to work on construction sites, not "families" and they certainly don't earn enough to afford the homes they are building...

Tue, 07/05/2011 - 05:46 | 1426061 AnAnonymous
AnAnonymous's picture

and they certainly don't earn enough to afford the homes they are building...

A usual case in Smithian Economics.

Tue, 07/05/2011 - 09:42 | 1426293 Cleanclog
Cleanclog's picture

1 person is a family in China where the 1 child policy persisted.

The migrators aren't commuting except for the month of New Year's, they need shelter near the construction - which mostly hasn't been residential for the migrators - it has mostly been infrastucture projects like bridges, rail, ports, airports, and large complexes.  Also, many many migrators work in factories making cheap s--t Americans have a ridiculous proclivity to purchase.  These people need shelter when they move.  Yes, many live in cramped spaces with many others . . . but the government wants that to change.  They want the migrators to remain urban where their labor translates into much more GDP than if they remained on the land.  The government WANTs them to have bigger homes and more consumption.

You bet it sounds like the American policies of recent decades, so it will eventually end badly, but it will be commercial real estate first.  There are just too many people that need shelter not yet available in China.  Not so in USA.  Here we overbuilt for population.  Built here like every family should have a primary residence, at least one vacation home, and a few rentals to boot.

Tue, 07/05/2011 - 00:21 | 1425801 tiger7905
tiger7905's picture

ABC News tries to retract '10 mile Evacuation around Fort Calhoun' news story from the entire internet, good luck.

Tue, 07/05/2011 - 00:27 | 1425804 RobotTrader
Tue, 07/05/2011 - 00:43 | 1425822 Yen Cross
Yen Cross's picture

 Of course they are. The rinse wash U.S. markets are closed.

Tue, 07/05/2011 - 00:33 | 1425812 pamriallc
pamriallc's picture

And yet the biggest problem isn't the bad debt in China but the fact that unlike the USA Chinese GDP isn't 70 percent consumption of which 30 percent is bad debt..... So the USA has 21 percent of GDP as bad debt which equates to THREE TRILLION IN IPAD DEBT while the PRC has debt attributable to high speed rail?

Tue, 07/05/2011 - 00:49 | 1425831 Missiondweller
Missiondweller's picture

I just don't get where Jim Rogers is coming from. He's seems to be neaarly blind to all of China's problems. I have enormeous respect for the guy but on this i think he is just missing the corruption of the government and its businesses.

China Bears Have It Wrong: Jim Rogers


Tue, 07/05/2011 - 01:24 | 1425856 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

He is using false logic:

US bad, China good.

He is failing to see outside of the box.  Outside, all governments are corrupt and screwed, because they have all doubled down on the fiat ponzi.

Tue, 07/05/2011 - 01:31 | 1425861 chump666
chump666's picture

he is long China.

but, they crash which is on the cards, we all go into an economic ice-age -  two years max.  Unless they want hyperinflation, which they don't.  So it's take the pain.

Or Faber's war cycle...

Tue, 07/05/2011 - 07:14 | 1426116 YHC-FTSE
YHC-FTSE's picture


Tue, 07/05/2011 - 05:37 | 1426058 squexx
squexx's picture

Most of the economic boom is on the coast and in HK. That's where Rogers lives, that's all he must see. Of course, he is a partner of the evil waste of flesh joo Soros. Maybe he's just a shill.

Tue, 07/05/2011 - 01:22 | 1425850 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Oh China, we hardly knew ye.

Tue, 07/05/2011 - 01:27 | 1425858 chump666
chump666's picture

China is probably already crashing.  That would be bad, but inevitable.  6mths of share-market warnings (Shanghai A/B),


Tue, 07/05/2011 - 01:42 | 1425877 pamriallc
pamriallc's picture

Solutions are simple.....followership is the problem.....

Tue, 07/05/2011 - 02:07 | 1425901 SAME AS IT EVER WAS

give me a 250 point s&p rocket-fuck yeah!

Tue, 07/05/2011 - 02:30 | 1425925 Yen Cross
Yen Cross's picture

 Aim that Rocket SOUTH!

Tue, 07/05/2011 - 03:07 | 1425955 SAME AS IT EVER WAS


Tue, 07/05/2011 - 02:16 | 1425911 SAME AS IT EVER WAS

seriously though, when someone uses the C-Word(china) in a non conquerer of the world context, you can hear a bulls asshole pucker up tighter than a nuns cunt.

Tue, 07/05/2011 - 05:29 | 1425927 Yen Cross
Yen Cross's picture

 Personally, I don't agree with you.  


                If you mention PBOC, then I want to rent Steam shovels, and wish for earth quakes.


       I did not,nor will I ever Junk any poster on this site. I respect comments, and big GIANT BALLS! Look @ my past. I have NEVER JUNKED ANYONE.  Post your thoughts people. I respect them.     YEN

Tue, 07/05/2011 - 02:47 | 1425936 Jovil
Jovil's picture

They say a picture is worth a thousand words, well it is true. This is real neat.

Tue, 07/05/2011 - 05:04 | 1426046 Orly
Orly's picture

Removed by user...

Tue, 07/05/2011 - 05:51 | 1426063 Yen Cross
Yen Cross's picture


Tue, 07/05/2011 - 02:47 | 1425937 Jovil
Jovil's picture

They say a picture is worth a thousand words, well it is true. This is real neat.

Tue, 07/05/2011 - 04:56 | 1426042 Global Hunter
Global Hunter's picture

This is bullish, when the next economic indicator reaches expectations the Dow will rally 250 points. 

Tue, 07/05/2011 - 11:33 | 1426045 oldman
oldman's picture


Tue, 07/05/2011 - 05:22 | 1426054 alexdg
alexdg's picture

Next week : Moody's downgrades Gold! Hidden tungsten is more toxic than eating bad debt, warns : you can't eat Gold.

Tue, 07/05/2011 - 05:34 | 1426056 squexx
squexx's picture

10% of loans are bad?!?! I'd bet the REAL number is MUCH higher than 10%!

Tue, 07/05/2011 - 05:50 | 1426062 Yen Cross
Yen Cross's picture

 Look @ reserve requirements. Need we say more?

Tue, 07/05/2011 - 07:11 | 1426114 qussl3
qussl3's picture

And yet the money flows.

Gold and silver will be wacked out by the time this is done.

Only a couple more steps before it becomes necessity for social stability to stamp out property speculation completely.

Wonder where all that extra liquidity is going to end up.

Well maybe Jade lol, has anyone seen the cuckoo prices paid for green stones?

Tue, 07/05/2011 - 05:54 | 1426068 writingsonthewall
writingsonthewall's picture


Tue, 07/05/2011 - 06:18 | 1426079 slackrabbit
slackrabbit's picture

Amazingly surreal

this one is very good - pity you cant see the slides but Chanos' numbers say it all - especially at minute 28


Tue, 07/05/2011 - 06:31 | 1426088 thepigman
thepigman's picture

Heck, all you have to do is look at the tail of the fish (Chinese reverse mergers) to get a good idea of what's going on at the head of the fish. Rotting at both ends, I'd say.

Tue, 07/05/2011 - 06:48 | 1426103 nathan1234
nathan1234's picture

Chinese Accounting Standards Board (CASB or whatever they choose to call it)) can change the rules so they need not show bad loans. Just like the FASB changed the rules for value of assets. LOL

What did Moody's & others do when the FASB changed the rule?

Sweet Fu..old!!

So who the F..k is Moody to comment on the Chinese!

Tue, 07/05/2011 - 07:01 | 1426112 YHC-FTSE
YHC-FTSE's picture

Fitch, Moody and S&P. Well, aren't they the same bullshit agencies that stamped AAA on all those toxic bundled MBS and CDS? Trust them at your peril.


Tyler wrote: "That would be equivalent to saying that $1.4 trillion of US corporate debt is delinquent."

Why would you write that? It's only $540 Billion (Apparently, by Moody's conjecture) and making it $1.4 trillion by a ratio to GDP is not going to make it 1.4 trillion. Besides, you already said they were local government debts, so the equivalent would be $1.4 trillion US local government/municipal debts, which doesn't sound quite as bad as reality in the US: over $2.3 Trillion and counting, most of it bad. 


If the Chinese didn't discuss the $540 billion in their report, then it's for state security, or suspect loans to corrupt officials and their cronies we've all been hearing about, or the NAO couldn't be fucked to list every piece of shit deal that comes across their desk from local governments that administer to 1.3 billion people. That certainly would explain "Poorly documented loans" which is anathema to the tight ass bureaucracy of Chinese officialdom. Whatever, dude. You might as well believe the Chinese are crap at maths. 

Tue, 07/05/2011 - 07:30 | 1426128 Yen Cross
Yen Cross's picture

 Good job! You put them all in one {nest}

Tue, 07/05/2011 - 10:01 | 1426330 thefedisscam
thefedisscam's picture

very well said!


Tue, 07/05/2011 - 08:10 | 1426172 casey13
casey13's picture

Seeing as all major financial and media institututions in the US today are more or less arms of the US government I take all these reports with a grain of salt. Nothing gets reported unless they want it to be. Although I am sure there is truthiness to the reports the timing of the releases and subsequent extent of the media play always get me thinking.

What is thier goal in this one? 

Tue, 07/05/2011 - 09:03 | 1426231 proLiberty
proLiberty's picture

Credit expansion augmented by foreign reserves of instruments that are themselves the product of expanded credit.  What could possibly go wrong?   von Mises warned that the expansion of credit causes "the appearance of prosperity".  

Tue, 07/05/2011 - 09:39 | 1426287 cranky-old-geezer
cranky-old-geezer's picture

If China's a shitcan, why has Timmah been going over there kissing ass begging them to re-value their currency against the dollar?

Wed, 07/06/2011 - 09:38 | 1429338 Monk
Monk's picture

It's not always "central planning" that's involved, as seen in the U.S., and in the global economy.


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