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The Reason For China's Epic 1 Trillion Yuan Deleveraging: The Biggest Housing Bubble Ever

Tyler Durden's picture


Those reading Bloomberg stories tonight may be surprised to find for the first time the mainstream media attempts to quantify the epic deleveraging that China - the economy which has only grown in the past decade due to constant and unprecedented credit injection - has decided to undergo in numeric terms in order to forcibly reallocate capital where it deserves to be allocated.

To wit: "China’s money-market cash squeeze is likely to reduce credit growth this year by 750 billion yuan ($122 billion), an amount equivalent to the size of Vietnam’s economy, according to a Bloomberg News survey. The number is the median estimate of 15 analysts, whose projections last week ranged from cuts of 20 billion yuan to 3 trillion yuan. The majority of respondents also said they approve of the government’s handling of the credit crunch and said the episode reinforces their expectations for policy reforms such as loosening controls on interest rates." We shall see how much they approve when the massive deleveraging results in a 3% GDP print as we warned previously, crushing their year end bonuses in the process.

Of course, those who read Bloomberg tonight and who read Zero Hedge two weeks ago, already know just how big the Chinese deleveraging will be (in an optimistic case). On June 23 we said:

The country is about to undergo an unprecedented deleveraging that could amount to over CNY1 trillion in order to force reallocate capital in a more efficient basis.

That's right: a massive deleveraging coming dead ahead in China just in time to shock the market still reeling from the threat of the Fed's tapering. And it is not as if China needs to be spooked any more: "The mood remained jittery at the weekend. When a technical glitch caused by a long-planned software upgrade at Industrial and Commercial Bank of China made cash withdrawals impossible for almost one hour at the bank’s ATMs, many consumers fretted that one of the biggest state lenders was in trouble." Maybe not today, but force deleverage a few hundred billion, and it sure will be.


It also means that there will be no respite for short-term funding, which while maybe not suffering from lack of money, it certainly is suffering from the lack of money in the right place: the first milestone of a failing central-planning regime.


Just as China finally admitted.

At least the mainstream curve is now just down to two weeks behind tinfoil blogs.

However, one question that Bloomberg did not answer is just why is China engaging in the kind of counter-monetarist activity, that would result in an epic market collapse were it to take place in the US, Europe, the UK, Japan, or any other "developed" country whose growth now relies exclusively on central bank generosity.

Presenting Exhibit A: China's residential real estate prices, via JPM.

So there you have it: no matter what China has attempted, no matter how much it has punished the Shanghai Composite, it has been completely unable to offset the endogenous and/or exogenous (Fed, ECB, BOJ hot money) credit from sending the Chinese housing bubble into absolutely stratospheric levels.

It is this bubble that the PBOC is doing all it can to deflate gradually and controlably, lest it pops in the biggest out of control bubble burst in developing market history.

And while we have covered all of this in depth in the past, the Telegraph's  Harry Wilson has done an admirable job of compiling the key aspects that determine the Chinese marginal economy at the moment with "Chinese banking: a Wild West in the Far East?"

 As Government ministers ponder whether to split Royal Bank of Scotland into a “good bank” and a “bad bank”, it is worth remembering that China did something similar with not one big lender, but four at the turn of the millennium.


In October 1999, a month before Fred Goodwin began his ill-fated reign as chief executive of RBS, the Chinese government created four massive “asset management companies” that would eventually take on toxic loans valued at $480bn (£320bn).


Thirteen years on, these bad banks still exist, operating out of office blocks dotted around Beijing and Hong Kong, and continue to hold non-performing loans worth Rmb1.7 trillion (£180bn), according to credit rating agency Moody’s.


Largely unknown to the outside world, they are a reminder that China’s banking system remains as prone to boom and bust as any Western economy and perhaps more so.


As the rescue showed, the “Big Four” banks were, and are, not just “too big to fail”, but the beating heart of the entire Chinese economic system, controlling nearly half the country’s $19 trillion of financial assets.


Taken together, the four largest lenders, Industrial and Commercial Bank of China (ICBC), China Construction Bank, Agricultural Bank of China and Bank of China have a combined market capitalisation of £470bn, about £200bn more than the total value of Britain’s five largest lenders.


ICBC alone has 393m individual customers, the equivalent of a single bank managing the bank accounts of every man, woman and child in western Europe, and this year became the first Chinese lender to top The Banker magazine’s annual table of the world’s biggest banks by market value, with a total capitalisation of $236bn. Ranking the world’s banks by profits made, the top four positions are now taken by China’s behemoths. Hold on everyone, the Chinese are not coming, they have arrived.


Despite paying negative savings rates — the 3.5pc base rate interest on Chinese deposit accounts is generally believed to be well below the real rate of inflation — 70pc of Chinese household wealth is held in cash and bank deposits. Just over a third of India’s private wealth is kept in its banking system.


With this largely captive market, citizens’ savings have been used to fund an infrastructure and property boom on an unprecedented scale and led to warnings of an asset bubble.


While official figures show a 113pc increase in property prices in the past eight years, research by Tsinghua University and the National University of Singapore found prices actually rose by 250pc between 2004 and 2009, a faster increase than was experienced by the US in the lead to the sub-prime crisis.


Carson Block, of Muddy Waters Research, which has laid bare several accounting scandals in Chinese companies, thinks the problems in China’s banking system are more severe than those which kick-started the global crash in 2008. “We believe that the domestic Chinese banking system is a mess, with an enormous amount of bad loans, or loans waiting to go bad. The problems of China’s lenders are greater than those of Western banks on the eve of the financial crisis,” he says.


So, as Chinese lenders take their place at the pinnacle of the world’s banking system, the warning appears to be that things could be about to go very wrong, very quickly.

Continue reading here.


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Sun, 07/07/2013 - 22:13 | 3729589 tsx500
tsx500's picture


Sun, 07/07/2013 - 22:29 | 3729627 TheFourthStooge-ing
TheFourthStooge-ing's picture

Confucius say: Beware blobbing up of hot money citizenism.

Mon, 07/08/2013 - 00:20 | 3729893 Scarlett
Scarlett's picture

Bendover Ben will print in their general direction

Mon, 07/08/2013 - 00:45 | 3729905 LetThemEatRand
LetThemEatRand's picture

Steal avatars much?  

Mon, 07/08/2013 - 02:47 | 3730060 Jack Burton
Jack Burton's picture

I had my" James Cole " screen name lifted by someone on here. But it is not important as I had already switched to Jack Burton. I used Mr. Cole for a number of years though.

Scarlett must be another worshiper of female beauty. She has that exotic beauty, not the cookie cutter type you see so often in the US entertainment industry.

As for China, they have been held up as the modern version of "The Great White Hope". The world economy was said to have nothing to fear as China roared ahead dragging the world with it.

The boom in China makes sense when you consider the postion of Absolute Zero that they started from. But blogs like ZH have been on to the fishy smell coming from China since 2008. Once the communist government intervened to shock the Chinese financial sytem into continued massive growth, the after effects were bound to catch up and be bad. And China had NO correction, instead every corrupt and unwise investment was doubled down on, tripled down on, and so forth.

There are many factors that are catching up on China. The mass corruption and manipulation are out of control as the greedy do anything and everything to snatch up the wealth. The Chinese have also stressed their land, water and air to the breaking point. River systems are in collapse, some ground water systems are in collapse. The desertification of large parts on Western China, stretching all the way to Bejing is well documented.

China has bet that it's move into Africa and South America can provide new markets and resource extraction businesses that can pump new wealth into China. This was their major move for the first half of the 21st century. To go all in in Africa and to partnerships with anti US governments in South America. I am surprised China has not made a big move on Cuba, unless the USA has already warned them off.

I have read about the China housing bubble, and it looks like it is epic. I saw interviews with young people desperate to buy into these giant apartment buildings in the cities, they all said price did not matter, as their investment would rise in value every month. When Joe Chinaman on the street starts talking RE prices and valuations going forward, you know you are at peak housing. When "Price Does Not Matter" to buyers, because they are investing. One couple planned to buy and then begin the search for a higher value property right away in order to cash in on the instant equity boost they would get after the first few months. Not wanting to be left behind on the property ladder, they figured one should always be cashing in the lower price apartment to MOVE UP to the next level and cash in again. People are like sheep, fucking Sheep. They learn nothing from other nations experiences.

Mon, 07/08/2013 - 04:02 | 3730093 chubbyjjfong
chubbyjjfong's picture

+1. The mentality is astonishing.  You buy a house in shitsville thinking that you can sell in 3 months and trade up to a newer, shinier house.  But the fact is, that even with the capital gain, you will still only be able to afford another exact same house in shitsville. Good luck to you if you decide to leverage up on that one.  

Mon, 07/08/2013 - 06:23 | 3730178 negative rates
negative rates's picture

Being beholden to your drug dealer is no way to run a country.

Mon, 07/08/2013 - 07:50 | 3730238 fijisailor
fijisailor's picture

Cuba at this moment is waiting for the Chinese to pour more money in developing offshore oil between Cuba and Florida.  Additionally there are Spanish language institutes in Cuba training Chinese engineers to speak Spanish before these projects kick off.  Maybe never happen though.

Mon, 07/08/2013 - 08:34 | 3730318 BoNeSxxx
BoNeSxxx's picture

That will be soooo worthwhile.  If for no other reason than to hear the chinese attempt to pronounce 'Chili Relleno"


Mon, 07/08/2013 - 11:25 | 3730816 Seer
Seer's picture

The problem, IM[not so]HO, goes back well before 2008 and stems from a clear mathematical problem.  The Chinese govt was pushing for 10+% growth.  I know people get sick of hearing it from me, but perpetual growth on a finite planet is NOT possible.  And, like a druggie, once you shoot up you just don't decide to stop; what happens is external intervention, death or massive rehab.

If one were to really study these things, the "forecasts" of growth, one would see that they vary little from the guaranteed returns from Bernie Madoff's investment entity.  Sure, one can do this when starting out very small and do it for a bit of time, but we're talking about starting from something rather BIG.  Double every 7 years?  Follow that up with doubling again in another 7 years?  And another?  And...

Mon, 07/08/2013 - 01:38 | 3729999 DoChenRollingBearing
DoChenRollingBearing's picture

@ TheFourth

I wonder if our old friend AnAn will show up to defend the homeland...

Mon, 07/08/2013 - 09:14 | 3730412 TheFourthStooge-ing
TheFourthStooge-ing's picture


I wonder if our old friend AnAn will show up to defend the homeland...

I haven't seen him around for awhile. He must have been dragged off for reindoctrination, I mean he must have enrolled in a continuing education class.

Mon, 07/08/2013 - 11:27 | 3730820 Seer
Seer's picture

Or hired by the the US Department of Propaganda?

Mon, 07/08/2013 - 11:34 | 3730842 TheFourthStooge-ing
TheFourthStooge-ing's picture


Or hired by the the US Department of Propaganda?

That would be the US 'american' Department of Propaganda.

Just tryin' to help.

Mon, 07/08/2013 - 11:48 | 3730876 akak
akak's picture


That would be the US 'american' Department of Propaganda.

Whose offuscationary nature and inability to self-indict is eternal.

Welcome to the propagandizingistical world. 
It's an 'american' world, you'll see.


PS: My own theory is that AnAnomalous is off farming the poor and extorting the weak.  Or is is farming the weak and extorting the poor?  I always get those two mixed up.

Mon, 07/08/2013 - 12:07 | 3730938 TheFourthStooge-ing
TheFourthStooge-ing's picture

Of course, his JKC franchise (Just Killed Cat, Chinese citizenism fastfood restaurant chain) might have blobbed up its business as fast as those river pigs he fished out of the river in Shanghai and left out in the sun.

Mon, 07/08/2013 - 12:11 | 3730950 akak
akak's picture

Alas, alas, three times 1.3 billion times alas.

Just have to eat bear gall bladder with it.

Mon, 07/08/2013 - 12:19 | 3730981 TheFourthStooge-ing
TheFourthStooge-ing's picture


Alas, alas, three times 1.3 billion times alas.

Just have to eat bear gall bladder with it.

Ah, ah, stir fried bear gall bladder combo with Shanghai kitten crispy is 2 for price of 1 luncheon special this week at JKC.

Blobbing up taste with blobbing down price - that's JKCTM

Sun, 07/07/2013 - 22:43 | 3729667 CPL
CPL's picture

Ever wonder why China has huge ghost towns that nobody lives in?  

It was a trap all along.  And there isn't an investment house on the planet that doesn't have it as a sizable part of their portfolio gathered indirectly or directly into the scheme.  Those shitty dumps people actually live in, those never 'increased' or 'decreased' in value.  They are mostly long term government squats to begin with, they don't have a value in China, they have a purpose.

Anybody really think that someone making pennies a day on the dollar was going to move in to 600sq ft half million dollar piece of bliss in the an empty ghost town none the less.  It was a really hard pitch to swallow as an offer when things were going 'well'.  Today it'll just seem like someone got drunk 15 years ago and back stopped the exported inflation by betting everything on black.  There were guys running around the planet offering 24-27% return, PER YEAR!  Housing market returns that match a good daytrader's return, not in a million years would that ever happen.

So what the obvious answer was, wrap it and sell it.  The Chinese housing market is about three layers deep in multiple ETF platforms, freedom 55 schemes, federal pensions, all of it wrapped up and sold like burgers at a fast food place.

This is about as ugly as 2007.  This shit is like cancer and it's everywhere along with US bonds.


Sun, 07/07/2013 - 23:13 | 3729752 NoDebt
NoDebt's picture

Wait a minute.  Are you telling me that a Communist country massively mis-allocated resources in a catastrophic and prolonged manner?

I don't believe it.

Mon, 07/08/2013 - 00:42 | 3729921 CPL
CPL's picture

As a long play trap that cost them the health, well being, history and future of their country through a diligent campaign of oversold deals and horribly mismanaged financial instrumentation based on bullshit?

Yes.  The only people on the planet outside of the PM and Commodities brokers that get to resell the same item 40000 times are Chinese real estate agents.  It's infamous for cross selling the same home four or five times across a listed market, it's so much worse when the home doesn't even exist.  Means nobody is actually looking.

And also it's the entire foundation for the entire western world's public sector and public pension funding switch over in 1996 when the old method of pension accounting stopped working.  

All these subtle little changes, a push here, a nudge there, policy change.  Individually they seem like adjustment measures when looking at how the laws have changed in equity requirements (national vs international, lots of sneaky shit going on here), union, employment and pensions over two decades.  Pull back, put all the tiny changes in perspective to the current situation.  Like a bureaucratic trojan horse built to blow up.

Mon, 07/08/2013 - 00:56 | 3729951 Antifaschistische
Antifaschistische's picture

I've been to China...looked at Real Estate, and I wouldn't even mind picking up one of those apartments once the floor falls out of the market.   But, but...they won't let American's own property (directly) so I can't even help them keep their market from falling through the floor.

My recommendation, is that they let American retiree's or people that just want a vacation home in the Orient pick up those ghost apartments.  At least it will bring in some cash.   They certainly don't have to worry about American's overpopulating them and using the democratic process to destroy their country.  Only a completely moronic country would let that happen.



Mon, 07/08/2013 - 01:07 | 3729968 Barry McBear
Barry McBear's picture

With chinese construction standards the floor can literally fall out of those ghost apartments.

Mon, 07/08/2013 - 01:50 | 3730009 macholatte
macholatte's picture



horribly mismanaged financial instrumentation based on bullshit


Hmmm ..... doesn't Goldman have an office in Bejing?

Mon, 07/08/2013 - 11:33 | 3730840 Seer
Seer's picture

Wait a dang minute there!  Are you saying that we cannot get that carrot, that it's tied to a string and held by those whipping us?  No, you're just making up shit! </sarc>

TPTB operate globally.  They have given us freedom of choice- coke or pepsi?  Now then, just one more step and that carrot is ALL MINE, Mine I tell you, Mine!

Mon, 07/08/2013 - 01:57 | 3730021 andrewp111
andrewp111's picture

I'm sure those empty cities will be filled up eventually - with prisoners. When China conquers countries like Australia and New Zealand, they know right where to send the previous inhabitants.

Mon, 07/08/2013 - 04:08 | 3730095 chubbyjjfong
chubbyjjfong's picture

Fuck that... Kim Dot Com will virus their shitty Huawei asses!

Mon, 07/08/2013 - 11:42 | 3730861 Seer
Seer's picture

Yeah, China has always been about invading other countries...

But I have to admit, this time things are a bit different in that they've become addicted to oil/coal.  I suspect that they'll start cashing in USTs in order to fund their habit, and that, despite US outbursts of threats, Australia (New Zealand- huh? Chinese after the sheep?) will continue to sell to the Chinese (because Australia's economy will be tanked).  Support for the US and its phony money starts to unravel big time as all the "feel good" trade rules (favoring the US) will get pitched to the side of the road.

Mon, 07/08/2013 - 00:29 | 3729906 old naughty
old naughty's picture

'65 million and counting'

Is there any comfort to the massive foreclosed inventory elsewhere?

Can they offer them lowly or free to citizenry or else?

Mon, 07/08/2013 - 00:53 | 3729944 CPL
CPL's picture

You wouldn't want to live in them.  Seriously, it's straight up fraud with the usual theft and corruption.  

If they could have been made from cardboard 40 stories tall to cut costs and 'book profits' they would have.  It's why everyone in China that has a warehouse, has all the building materials that should have gone into building those shit piles.  Also why COMEX won't deliver a single ounce of physical, China has been hoovering it, both from traditional sources and our industrial electronic garbage everyone has been exporting.

I know it's pretty funny now, but the 100's of tonnes of cell phones shipped (and we all paid of the privilege in dump fees somewhere) have yielded tonnes and tonnes of silver, gold and platinum for the scavenger market.


Mon, 07/08/2013 - 09:09 | 3730398 Zoran
Zoran's picture

China the biggest bubble ever? I think not!

Ireland had the biggest ever bubble, followed closely by Australia.

But Australia has not popped. Yet. Steve Keen predicts they will fall 70% over the next 20 years...

Australian house prices to fall 70% over 20 years, in line with Japan crash, predicts Steve Keen

That will certainly hurt the negatively geared speculators!

Mon, 07/08/2013 - 13:18 | 3731170 Seer
Seer's picture

Biggest in terms of global impact...

As far as Keen's prediction goes, I'm thinking that he's being generous with 20 years.  As China goes down Australia is going to hemorrhage.

Sun, 07/07/2013 - 22:14 | 3729592 LetThemEatRand
LetThemEatRand's picture

Krugman thinks aliens will save us, and the Chinese think ghosts will save them and inhabit their ghost cities and visit their ghost malls.  They see dead people.

Sun, 07/07/2013 - 22:27 | 3729621 Dr. Engali
Dr. Engali's picture

Do we really need saving? Do we? The world just might be a little better place with a lot less consumption and a little more reality.

Sun, 07/07/2013 - 22:30 | 3729630 LetThemEatRand
LetThemEatRand's picture

As Carlin noted, humanity exists because mother earth wanted plastic.  Our job is done.

Sun, 07/07/2013 - 23:27 | 3729786 chump666
Sun, 07/07/2013 - 22:47 | 3729678 NoDebt
NoDebt's picture

Japan is licking their chops.  A huge contraction in China could mean they retake the #2 position in the world economy!  Cue the Snidley Whiplash music and twirl your moustachio in a "contemplating evil" kinda way.

Sun, 07/07/2013 - 22:50 | 3729693 CPL
CPL's picture

Being king of a deeply broke radioactive shit heap ain't no way to go through life son...



Sun, 07/07/2013 - 22:58 | 3729714 NoDebt
NoDebt's picture

That's funny as shit.  But we're all sitting on a broke-ass radioctive heap.  Nobody in power cares the state of the empire they rule, so long as they are the ones to rule it with utter control.

Sun, 07/07/2013 - 23:49 | 3729833 joego1
joego1's picture

I can here John Lee Hooker beating it out on his sears amp on the street corner.

Mon, 07/08/2013 - 05:07 | 3730134 CharlieSDT
CharlieSDT's picture

The Blues Brothers is not Animal House.

Sun, 07/07/2013 - 22:15 | 3729595 BandGap
BandGap's picture

So what? Really, at this point it has to be someone, somebody, something, somewhere. Let's just like the fucking fuse and get the rave started.

Sun, 07/07/2013 - 22:21 | 3729606 LetThemEatRand
LetThemEatRand's picture

No shit.  I'm running low on glow sticks and Obama smoked all my pot.  There must be some kind of way out of this.

Sun, 07/07/2013 - 22:27 | 3729620 WmMcK
WmMcK's picture

So let us not talk falsely now, the hour is getting late.

Sun, 07/07/2013 - 22:32 | 3729635 LetThemEatRand
LetThemEatRand's picture

Has anyone seen Obama and Hendrix in the same place at the same time?  I rest my case.

Mon, 07/08/2013 - 07:39 | 3730228 Random
Random's picture

Two riders (witnesses) are approaching...

Sun, 07/07/2013 - 22:50 | 3729688 NoDebt
NoDebt's picture

"There must be some kind of way out of this."

Said the Joker to the Thief.  Couldn't help myself.  It was tee'd up.

Sun, 07/07/2013 - 23:00 | 3729716 LetThemEatRand
LetThemEatRand's picture

There's too much confusion.  I can't get no QElief.

Mon, 07/08/2013 - 04:39 | 3730119 StychoKiller
StychoKiller's picture

"Confusion, will be my Epitaph..."

Mon, 07/08/2013 - 08:07 | 3730243 Disenchanted
Disenchanted's picture

+1 King Crimson for the win!

one of the comments @ the video:


One of the most prophetic songs written for those? with no hope, no God, and no future.


Bonus: In The Court Of The Crimson King(full album)

Sun, 07/07/2013 - 22:22 | 3729603 Handful of Dust
Handful of Dust's picture

Food, clothing, etc in China's big cities ae way more expensive then the West. My neighbor used to go there to buy curtains, clothes for her kids, her Chung King relatives fly here and buy up textiles at JCPenny's, Kohls, etc and bring it back to China.


The world is Upside Down crazy. When China's Housing Bubble Blows, the force will be felt across the globe but esp in places like Australia where they have lived off the Fat 'o the Land; namely, exports to China.

Mon, 07/08/2013 - 08:22 | 3730291 thestarl
thestarl's picture

Yep and like you guys all our manufacturing has been offshored.

Sun, 07/07/2013 - 22:24 | 3729617 LeisureSmith
LeisureSmith's picture

ICBC alone has 393m individual customers....if there is a bank run on ICBC, it will be the bank run to end all bank runs.

Sun, 07/07/2013 - 22:26 | 3729618 blindman
blindman's picture

the important question,
"who owns the thin air?"
not the essence of snake oil
the thin air itself.

Sun, 07/07/2013 - 22:51 | 3729696 NoDebt
NoDebt's picture

EPA, natch.  It's got CO2 in it and we all know that's a dangerous pollutant.

Sun, 07/07/2013 - 23:36 | 3729805 blindman
blindman's picture

that is mine, I produce it too.

Sun, 07/07/2013 - 23:41 | 3729815 astoriajoe
astoriajoe's picture

only if you can document that its yours. Do you have your emission identification numbers?

Sun, 07/07/2013 - 23:46 | 3729826 blindman
blindman's picture

if you provide the form I can produce the numbers.

Mon, 07/08/2013 - 01:02 | 3729963 CPL
CPL's picture

No need sir, we only require a finger to be pulled to ID these emissions.

Sun, 07/07/2013 - 22:26 | 3729619 chump666
chump666's picture

Shanghai down 2%

This is a beautiful example of central planners and their cronies losing control.

Watch those yields 10yr is breaking 2007 highs.  Oh yeah I forgot the f*cking recovery is kicking in! hahahahahahaha



Sun, 07/07/2013 - 22:30 | 3729632 Dr. Engali
Dr. Engali's picture

It's the great rotation. People are moving out of bonds and into stocks in this booming economy. Good one huh?

Sun, 07/07/2013 - 22:39 | 3729655 EclecticParrot
EclecticParrot's picture

"... the great rotation."  I believe E.A. Poe wrote about this in 1841, calling it A Descent into the Maelstrom, with a few telling quotes, such as "...the larger the bodies, the more rapid their descent."

Sun, 07/07/2013 - 23:45 | 3729821 blindman
blindman's picture

terrestrial life has terrestrial limitations
and requirements. there may be fundamental
reasons or causes that limit growth, size
and empire (monopoly and imposition).
we remember the dinosaurs and rome.
the point of rejection
maybe not

Sun, 07/07/2013 - 22:30 | 3729637 fonzannoon
fonzannoon's picture

treasuries look bid now chump.

whaddaya think?

Sun, 07/07/2013 - 22:42 | 3729652 chump666
chump666's picture

Age old traders rule of thumb was yields and USD/DXY  bid indicates tight liquidity i.e sell on rallies, or sideline/position for sell off.   Of late, thank to HFTs, correlations have been trumped.  Still HTFs actually work on momo trades, so they will freak on yields breaking higher.  More so the 30yr as it's tied to the 30yr mortgage.   China is the worry, looks like they are going blunt on shadow banking and may force a liquidation which is a brave move ala 1930's:

" Treasury Secretary Andrew Mellon announces that the Fed will stand by as the market works itself out: 'Liquidate labor, liquidate real estate... values will be adjusted, and enterprising people will pick up the wreck from less-competent people'.

Watch Shanghai and HK and futures all need 2% neg selling.

Mon, 07/08/2013 - 00:10 | 3729882 Temporalist
Temporalist's picture

The rupee hit record low.  I wonder if that will make the Indian people like gold and silver.  Probably not, those are falling in price.

Mon, 07/08/2013 - 00:35 | 3729924 chump666
chump666's picture

and their bonds are getting dumped.  Very nasty.  Eventually gold will be the safe haven if bonds collapse and the USD trade finally collpases.  Could be witnessing that if China goes all blunt on the world.

Mon, 07/08/2013 - 02:47 | 3730063 Oh regional Indian
Oh regional Indian's picture

The rupee is getting monkey hammered for one reason.... to keep the top-heavy, bloated software sector afloat.

If rupee/dollar were to come to real value, huge crash in India ensues.

Of course, that is still going to happen, such is how the system is set up. Meanwhile we will pay much, much more for everything, especially Silver/Au and of course Oil. The last of which spikes prices of everything.

India is fucked, royally so, literally and figuratively.


Sun, 07/07/2013 - 22:39 | 3729653 disabledvet
disabledvet's picture

first off a little music: second "our collapse will still be bigger than yours China." third "the collapse is coming and we can only hope and pray the collateral damage is large."

Sun, 07/07/2013 - 22:28 | 3729624 Monedas
Monedas's picture

Love it .... about the size of Viet Nam's economy .... I'll add that to my .... olympic swimming pool full of gold .... measure !  LOL

Sun, 07/07/2013 - 22:28 | 3729625 LetThemEatRand
LetThemEatRand's picture

OT:  Our esteemed Secretary of State's (almost President's) wife is in critical condition following the extended yachting trip.

Per the article:  "Kerry had also spoken of his desire to make his sixth trip to Israel as secretary starting at the end of the week. State Department officials said Kerry’s schedule may now change pending developments with his wife’s health."  

P.S.  How does Kerry have time for a 6th trip to Israel?  



Mon, 07/08/2013 - 01:49 | 3730008 DoChenRollingBearing
DoChenRollingBearing's picture

Smart gal with a smarty-pants attitude...  

Mon, 07/08/2013 - 03:14 | 3730074 Jack Burton
Jack Burton's picture

6 trips to Israel?  Hmmm, I wonder what they are talking about. It must be big, if face to face is necessary in this age of instant and secure diplomatic cummunications. Unless Washington figures they are being hacked to the same extent that Washington is hacking others diplomatic services.

The defeat of the Syrian terror army by the Assad Syrian Arab Army must be on the agenda. It is reported that Israel. last week, carried out another cruise missile strike on a Syrian arms depot that was reported to contain components of the new S-300 Missile System sold to Syria by Russia. But if the Russians are advising Assad, as their military command must be, then most likely Israel dumped a load of expensive cruise missiles onto decoys especially revealed to allow Israel to think they had the real thing in their sights. This practice is classic Russian tactics used to defeat an enemy with complete air superiority. Serbia did this to NATO back in the Clinton bombing campaign. After thousands of strikes, it was found out that NATO hit 90% decoys and did almost no damage to the Serbs military. But anyways, the fact that Israel is still striking Syria means that Israel and Washington are planning more attacks in support of their defeated Foreign terrorist Army fighting Syria.

Kerry must also deal with hezbollah, who have joined the Syrian Army is smashing the NATO proxy forces in Syria. The big fish is Iran, Iran has stepped up to aid Syria. The US and Israel must deal with Syria, Iran, Hezbollah and Russia. This puts Israel and the US in a crisis mode, as they have lost the ground fighting in Syria for 3 straight months now.

Kerry is just a Clinton clone. Paid warmongers, who believe that Americans are too stupid to be allowed to influence the governemnt, it is only the elites like Clinton and Kerry and those who are their masters who can run America's world wide empire.

Obama's Islamic Terrorist Army in Syria is beign defeated in combat. This must have Obama and NATO and Israel searching for a way to intervene directly to aid the FSA Terrorists and the Al-Qaeda foreigners in Syria without triggering a Russian military reaction. Russia has said that a foreign intervention would not stand, as that is the ONLY reason NATO and Washington have not attacked Syria. Israel has attacked Syria, but even they are taking care not to hit Russian personnel and assets in Syria. Even Israel knows that this time Putin is not going to surrender to NATO.

Kerry has his work cut out for him. The Egyptian situation could spin out of control The USA has influence with the Muslim brotherhood and with the Egyptian Army. In fact the USA has great influence on both sides in Egypt. BUT, and the demonstrations showed this, the Egyptian people are catching on to the fact that Washington is controlling both sides and the people are left helpless to Washingtons influence and bribery all across the Egyptian power structure. A "People's revolt" in which the population revolts against US influence in Egypt and against the US power inside the Muslim Brotherhood and the Military. Egyptians showed by their signs on the streets, that they are partly out in protest of US control of all Egpytian political parties. This could be bad news for Kerry. Like in Iran many years ago, an enraged people can throw the entire USA out, if they try hard enough. The last thing America wants is another out of control Muslim country. Iran is bad enough. An anti US Egypt ruled by anti US Islamic groups is the USA's and Israel's worst NIGHTMARE.

Sun, 07/07/2013 - 22:29 | 3729626 Default to Reality
Default to Reality's picture

Watch what the inflation wave hitting that country will do once the crisis escalates........



Sun, 07/07/2013 - 22:30 | 3729634 pachanguero
pachanguero's picture

The Aussies are screwed.

Sun, 07/07/2013 - 22:33 | 3729645 Yen Cross
Yen Cross's picture

  Just sitting here listening to CNBS ASIA, and ROTFLMAO! The trader they interviewed suggested people buy miners (VIA) mutual funds. He sounded so fucking stupid the host asked him about ETF's, so he could "back peddle" to individual miners.

 Asia is so FUCKED!

Sun, 07/07/2013 - 22:38 | 3729651 LetThemEatRand
LetThemEatRand's picture

I just went to and my wife got angry at me.

Sun, 07/07/2013 - 22:42 | 3729666 Yen Cross
Yen Cross's picture

     I highly suggest you stay away from "" then.  ;-) 

 Seriously LTER, the traders in Asia are like the the traders in the U.S. were when QE-1 started!

Sun, 07/07/2013 - 22:54 | 3729701 prains
prains's picture

is this the point when the turd is freely visible in the pool or are we still turtle heading this one?

Sun, 07/07/2013 - 22:55 | 3729704 LetThemEatRand
LetThemEatRand's picture

It's still turtle heading, but China can't believe it ate the whole thing.  Malox moment coming soon.

Sun, 07/07/2013 - 23:07 | 3729738 NoDebt
NoDebt's picture

No, man, it's definitely free-floating in the pool and has been for some time.  Just that the government has been telling everyone it's a Baby Ruth.  Just a silly prank, nothing to worry about.  Still, nobody's vounteering to fish it out.

Sun, 07/07/2013 - 23:14 | 3729755 LetThemEatRand
LetThemEatRand's picture

In that analogy, Ben is Carl (the Bill Murray greenskeeper).

Sun, 07/07/2013 - 23:34 | 3729801 NoDebt
NoDebt's picture

Oh, I'm such a sucker for Caddyshack references.  If we get started on this it could be a very late evening.  I think I'll just give a quick tip-of-the-hat to you and call it an evening instead.


Mon, 07/08/2013 - 00:10 | 3729873 Monedas
Monedas's picture

I was in a public plunge .... some kid from the other side of the tracks .... so to speak .... N-gg-r .... left a turd floating .... they ran us off and drained the pool .... after removing the turd with a leaf skimmer .... imagine .... 100 fillthy cracked .... snot nosed .... measly kids .... all peeing in the pool .... and they ruin my day .... because they found a small turd .... I mean .... if we are swimming in a mixed race pool .... what's the harm of a little turd ? Hmmm ?  I'd better tag this one as humour !     Monedas    1929     Comedy Jihad World Tour

Mon, 07/08/2013 - 00:15 | 3729884 LetThemEatRand
LetThemEatRand's picture

You need to fix your "." key.   And "mixed race pool?"   Jesus/Allah/Mephistopheles man, put down the scotch.

Mon, 07/08/2013 - 00:42 | 3729934 prains
prains's picture

herbal scotch will do it every time

Mon, 07/08/2013 - 06:13 | 3730175 ebear
ebear's picture

Turtles, all the way down....

Mon, 07/08/2013 - 00:54 | 3729946 chump666
chump666's picture

Yen, you watching the EUR! Cracked 1.30 heavy as hell + oil bid. lol Germany is going to love that oil inflation. 

Sun, 07/07/2013 - 22:39 | 3729656 reader2010
reader2010's picture

China believes more productive use of its capital is to build up its military. 

Sun, 07/07/2013 - 22:55 | 3729702 q99x2
q99x2's picture

"Things are about to go wrong very quickly."

Yah fuck you too. I'm still waiting to find out if Greece is going to default. This bullshit never ends and when it does it will come as a DOD energy weapon from space. Similar to the one that has been making the crop circles. Intant toast and there won't be anyone to say things are about to go wrong. It is just going to happen. So don't tell me things are going to go wrong because as long as you're telling me I know things are O fucking K.

I'm wise now. Been reading ZH for 4 years. Jaded like a Mother Fucker.

Sun, 07/07/2013 - 23:50 | 3729836 salami_tsunami
salami_tsunami's picture

yeah good thing I believe everything on here and put my life savings in gold



Sun, 07/07/2013 - 23:56 | 3729841 Race Car Driver
Race Car Driver's picture

Imagine the cell phone in your pocket being a GPS bulls-eye for said space weapon.


you better watch out

you better not cry

better not pout

I'm telling you why

your cell phone is a laser targeting device

they've made a list

they've checked it twice

gonna find out

who lives and who dies

your cell phone is a laser targeting device

it knows when you're sleeping

it knows when you're awake

it knows if you've been bad or good

so be good for goodness sake

oh, you better watch out

you better not cry

you better not pout about the government

I'm telling you why ...

your cell phone is a laser targeting device

Mon, 07/08/2013 - 01:52 | 3730013 andrewp111
andrewp111's picture

The "Space Weapon" will be a directed asteroid strike, and probably strike Iran without warning. It will be bigger than Meteor Crater, but smaller than Chicxulub.

Sun, 07/07/2013 - 23:05 | 3729731 starman
starman's picture

shit dang! here it comes folks take cover!

Sun, 07/07/2013 - 23:13 | 3729753 Hongcha
Hongcha's picture

The professional estimates are between 20 billion and 3 trillion Yuan?  That's quite a spread.  That demonstrates that no one can see into China, nor see what they are going to do next.  China is an enigma to the West.

Mon, 07/08/2013 - 00:18 | 3729889 Non Passaran
Non Passaran's picture

You assume there is someone who will make a decision about the eexact amount.
Why is that?

Sun, 07/07/2013 - 23:47 | 3729827 salami_tsunami
salami_tsunami's picture

I'm afraid for you Tyler. Don't go driving late at night.

Sun, 07/07/2013 - 23:48 | 3729831 WallowaMountainMan
WallowaMountainMan's picture

so i guess this means that the threat of the 'china global reserve' precious currency thing is gone.

the thing that strikes me the most from the chart is the jaggedness of the the swings. i take that to be an indicator of the inefficiency the chinese communistic/ free market hybrid i like to call freecommie.

gotta believe that's where i'd recommend long term investing as a strategy.



Sun, 07/07/2013 - 23:51 | 3729838 joego1
joego1's picture

freecommie and Snoden too.

Mon, 07/08/2013 - 00:02 | 3729867 Rothosen
Rothosen's picture

So China's gdp is only 4 trillion dollars? And their 3% of gdp overvalued real estate market is a huge worry compared to our 25% in 2008? But there's is at "stratospheric" levels. This column lost all credibility to me in the first two paragraphs.

Mon, 07/08/2013 - 05:48 | 3730160 sherryw
sherryw's picture

If you want to deride the credibility of others, better to spell 'their' correctly. So you think I'm nitpicking? Try telling a lawyer it doesn't matter where the comma is!

Mon, 07/08/2013 - 00:36 | 3729925 Mr. Hudson
Mr. Hudson's picture

Does this mean that the Chinese will go back to being starving peasants? Maybe North Korea will bail them out.

Mon, 07/08/2013 - 00:43 | 3729936 tom
tom's picture

So why exactly are we picking on the Vietnamese over this? They know how poor they are. Actually their GDP was up closer to $140b last year. Might make 180 and $2000 per capita by next year. Zoomin.

But seriously all this talk of China's "shadow banking sector" confuses the issue. The trust products are very much part of the banking sector. These are funky banking products that mid-size and smaller banks came up with to skirt banking regulations. It's basically a term deposit, fully controlled by banks and marketed by banks, but kept off their balance sheets, and backed by the trusts' dedicated assets, which may be nothing more than debt liabilities of the issuing bank, and not explicitly backed by the bank's full balance sheet.

Everybody knows these things are heading for bust en masse and nobody knows how the government is going to handle it. My guess is they wipe out between 10 and 20 mid-sized and smaller banks that are most heavily into these things but bail out the depositors. The big four banks are only indirectly exposed. They'll take a hit along just as the whole economy will, but they'll be kept whole come hell or high water.

Mon, 07/08/2013 - 05:00 | 3730128 Debugas
Debugas's picture

how many of those indebted "home owners" will start selling their gold to pay down their debts ?

Mon, 07/08/2013 - 07:32 | 3730219 waldo simon
waldo simon's picture

Not dark yet,but it's gettin' there..

Mon, 07/08/2013 - 07:39 | 3730229 timbo_em
timbo_em's picture

Funny that MSM still has no clue that in our Keynesian World growth = credit. If MSM had a clue they would not have been happy about approx. 8 percent growth in China (including made-up numbers) but would have been concerned that those giant amounts of credit only created 8 percent growth and that there is no way that the money is spent on assets that are productive enough to generate the return that is necessary.

Mon, 07/08/2013 - 08:02 | 3730260 GoldIsMoney
GoldIsMoney's picture

Well I once named  it race to the bottom. It does not matter who arrives first, the others will follow. That's the result of always "knowing" better. Or it's the way of all bubbles. We do not need such and such but we'll build it anyway, we surely need it in the future.


I wrote about the ghost towns and asked, who's going to buy/pay. The answer is well obviously hardly enough and so as winter follows summer, the one which pay the bill are thos living within their small or big budgets, They keep this government afloat and they always can be bleeded. Over and over again, and because they still want to improve their situation, they do work even harder. Just to feed the never satisfied Apparatschiks. 

Anothe thing which I just like to mention. Who's among the richest int the "socialist" China, you can bet the anwer is: The fat cats of the one and only party there is, and who decides who can steal how much before intervention other fat cats. Enough is never enough for them. Enough is always for the "others"....

Mon, 07/08/2013 - 15:16 | 3731588 Digmen1
Digmen1's picture

You are all forgetting one thing.


China still makes and exports the stuff the rest of the world wants and buys.


No mater how hard the Chineses governemnt say they are triyng to "re-balance" their economy into more local consumption, their exports (our imports) keep increasing, and they will do until Chinese wages catch up the rest of the world.


So with all that overseas money coming in the Chinese government has plenty of cash to play with to fix any problems. And they have plenty of real 40 hour week jobs.




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