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Guest Post: The $23 Trillion Credit Bubble In China Is Starting To Collapse – What Next?

Tyler Durden's picture




 

Submitted by Michael Snyder of The Economic Collapse blog,

Did you know that financial institutions all over the world are warning that we could see a "mega default" on a very prominent high-yield investment product in China on January 31st?  We are being told that this could lead to a cascading collapse of the shadow banking system in China which could potentially result in "sky-high interest rates" and "a precipitous plunge in credit".  In other words, 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.  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.

Over the past several years, the U.S. Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England have all been criticized for creating too much money.  But the truth is that what has been happening in China surpasses all of their efforts combined.  You can see an incredible chart which graphically illustrates this point right here.  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.

And right now January 31st is shaping up to be a particularly important day for the Chinese financial system.  The following is from a Reuters article...

The trust firm responsible for a troubled high-yield investment product sold through China's largest banks has warned investors they may not be repaid when the 3 billion-yuan ($496 million)product matures on Jan. 31, state media reported on Friday.

 

Investors are closely watching the case to see if it will shatter assumptions that the government and state-owned banks will always protect investors from losses on risky off-balance-sheet investment products sold through a murky shadow banking system.

If there is a major default on January 31st, the effects could ripple throughout the entire Chinese financial system very rapidly.  A recent Forbes article explained why this is the case...

A WMP default, whether relating to Liansheng or Zhenfu, could devastate the Chinese banking system and the larger economy as well.  In short, China’s growth since the end of 2008 has been dependent on ultra-loose credit first channeled through state banks, like ICBC and Construction Bank, and then through the WMPs, which permitted the state banks to avoid credit risk.  Any disruption in the flow of cash from investors to dodgy borrowers through WMPs would rock China with sky-high interest rates or a precipitous plunge in credit, probably both.  The result?  The best outcome would be decades of misery, what we saw in Japan after its bubble burst in the early 1990s.

The big underlying problem is the fact that private debt and the money supply have both been growing far too rapidly in China.  According to Forbes, M2 in China increased by 13.6 percent last year...

And at the same time China’s money supply and credit are still expanding.  Last year, the closely watched M2 increased by only 13.6%, down from 2012’s 13.8% growth.  Optimists say China is getting its credit addiction under control, but that’s not correct.  In fact, credit expanded by at least 20% last year as money poured into new channels not measured by traditional statistics.

Overall, M2 in China is up by about 1000 percent since 1999.  That is absolutely insane.

And of course China is not the only place in the world where financial trouble signs are erupting.  Things in Europe just keep getting worse, and we have just learned that the largest bank in Germany just suffered " a surprise fourth-quarter loss"...

Deutsche Bank shares tumbled on Monday following a surprise fourth-quarter loss due to a steep drop in debt trading revenues and heavy litigation and restructuring costs that prompted the bank to warn of a challenging 2014.

 

Germany's biggest bank said revenue at its important debt-trading division, fell 31 percent in the quarter, a much bigger drop than at U.S. rivals, which have also suffered from sluggish fixed-income trading.

If current trends continue, many other big banks will soon be experiencing a "bond headache" as well.  At this point, Treasury Bond sentiment is about the lowest that it has been in about 20 years.  Investors overwhelmingly believe that yields are heading higher.

If that does indeed turn out to be the case, interest rates throughout our economy are going to be rising, economic activity will start slowing down significantly and it could set up the "nightmare scenario" that I keep talking about.

But I am not the only one talking about it.

In fact, the World Economic Forum is warning about the exact same thing...

Fiscal crises triggered by ballooning debt levels in advanced economies pose the biggest threat to the global economy in 2014, a report by the World Economic Forum has warned.

 

Ahead of next week's WEF annual meeting in Davos, Switzerland, the forum's annual assessment of global dangers said high levels of debt in advanced economies, including Japan and America, could lead to an investor backlash.

 

This would create a "vicious cycle" of ballooning interest payments, rising debt piles and investor doubt that would force interest rates up further.

So will a default event in China on January 31st be the next "Lehman Brothers moment" or will it be something else?

In the end, it doesn't really matter.  The truth is that 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.

 

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Tue, 01/21/2014 - 19:46 | 4353618 rsnoble
rsnoble's picture

The suspense is killing me.  And everyone else. Literally.

Tue, 01/21/2014 - 19:48 | 4353625 PacOps
PacOps's picture

I can be content with a year or so more to keep stacking.

Tue, 01/21/2014 - 20:39 | 4353792 DoChenRollingBearing
DoChenRollingBearing's picture

Yeah, I hear you.  More time means more accumulating.

Debt is a killer!  Avoid.

Tue, 01/21/2014 - 20:56 | 4353851 johngaltfla
johngaltfla's picture

The good news is the NSA is spying on their citizens too and can flag the guilty culprits for immediate execution for this massive economic implosion.

The bad news the real guilty parties are at the .gov, GSJPMCBACWFCetc, and the Fed and they have all the drones and hellfire missiles.

Tue, 01/21/2014 - 22:40 | 4354209 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

When things like this go down in hellholes like China, someone pissed off the politburo. My guess is this was coming for months. Finally, the whipping boy was found.

Wed, 01/22/2014 - 20:28 | 4357236 N2OJoe
N2OJoe's picture

Nonsense, It's all the fault of those racists preppers and stackers!

Sincerely, Eric Holder.

Tue, 01/21/2014 - 19:48 | 4353626 frankTHE COIN
frankTHE COIN's picture

Let me consult my Fortune Cookie.

Tue, 01/21/2014 - 19:48 | 4353628 XenoFrog
XenoFrog's picture

It's like watching a really predictable horror movie that never ends.

Wed, 01/22/2014 - 00:37 | 4354467 prains
prains's picture

...this however has a slight porn element to it that adds to the intrigue

Tue, 01/21/2014 - 20:16 | 4353729 Carpenter1
Carpenter1's picture

If we can see it coming, its not the big one.

Tue, 01/21/2014 - 20:53 | 4353835 Obchelli
Obchelli's picture

Whatch for Market rally like crazy on Feb 1 with headlines how China avoided collapse. It's same as actualy problems in Greece contributed to at least 2000 dow up points ano headlines every other day how Greece (was/is/will) be saved which where appearing every other day

Tue, 01/21/2014 - 22:54 | 4354241 Gnonannon
Gnonannon's picture

It's literally as if literally doesn't mean literally anymore.

Tue, 01/21/2014 - 19:46 | 4353621 DaddyO
DaddyO's picture

So What!

The CB's will pick up the slack and transfer the risk somewhere else...

The backs of the workers in the case of China looks promising.

DaddyO

Tue, 01/21/2014 - 20:00 | 4353672 CrashisOptimistic
CrashisOptimistic's picture

Why do you guys continue to get this wrong?

Nothing is going to happen.  If the Chinese society is threatened by this, the debt will be declared non existent, and no that won't be a default event.  The debt holders will be ordered to forget it, and they'll be made whole with some new money.

MONEY IS ILLUSORY.  It has no value.  Gold is no different.  It can all be changed by decree.

The only things that are real are food calories and oil joules that carry food calories to shelves.  The rest is hand waving bullshit.

Tue, 01/21/2014 - 20:06 | 4353697 CheapBastard
CheapBastard's picture

Those loans [aka, debt] has already been secreted out of the country into RE all over the world I suspect from reading China Daily and other news reports a bout the amount flooding out of that country by the super wealthy. Even Yahoo had an article about this a few days ago saying over 1/3 of China's people with wealth over $16 million have already moved it out to Canada, Australia, USA, etc.

Good luck getting it back.

Tue, 01/21/2014 - 20:08 | 4353707 Oxbo Rene
Oxbo Rene's picture

This is so true .....
I get all caught up in reading about all this coming
gloom and doom, then, your post just brings me back to reality. = Only thing of importance in this world is your health, everything else is just "stuff' ...

Tue, 01/21/2014 - 21:13 | 4353920 ReactionToClose...
ReactionToClosedMinds's picture

.... until the 'system' (here financial system .....which is all the politicians & 'leaders' care about) freezes up ......then it is all about who to blame.  In that instance , 'health' is secondary as you have a 'survivla' (or survive in current form) issue on your hands

Wed, 01/22/2014 - 05:27 | 4354784 CSA
CSA's picture

The only thing that matters in this world is what happens after this world.

Tue, 01/21/2014 - 20:35 | 4353782 El Vaquero
El Vaquero's picture

They can declare whatever they want.  If it hurts their ability to import oil due to other nations looking at their willingness to honor their deals skeptically, it becomes more than just bullshit.  The US is in the same boat.  We are dependant on the rest of the world for a huge chunk of our oil. 

Wed, 01/22/2014 - 00:38 | 4354465 angel_of_joy
angel_of_joy's picture

That's why they grab pretty much every ounce of gold they could get their hands on.

Unlike Americans, their government knows that their fiat curency is crap.

Besides, they know how to manufacture stuff... quite useful when you try findind something to sell in exchange for oil.

Wed, 01/22/2014 - 03:12 | 4354689 Tulpa
Tulpa's picture

All they know how to manufacture is cheap plastic shit (eg iCrap) and pirated DVDs.  The quality of their so-called "durable" goods is shoddy as hell.

Buick, the armpit of GM, is the #1 car brand in the PRC.  That should be suspicious for those hailing PRC as a manufacturing leader.

Wed, 01/22/2014 - 00:02 | 4354391 TheReplacement
TheReplacement's picture

Who actually owns the debt?

Wed, 01/22/2014 - 05:32 | 4354786 CSA
CSA's picture

A little bit from investors from China and other countries.  Some of it pretends to be banks (which won't fail), some of it pretends to be china.gov, but all of it is truly by people through taxes to support failures and bureaucrats. 

Wed, 01/22/2014 - 00:42 | 4354472 prains
prains's picture

china is the economic model we're all being forced to adopt.... believe it or perish is their motto

Wed, 01/22/2014 - 05:06 | 4354773 mumbo_jumbo
mumbo_jumbo's picture

by that measure 2008 should have never happened.....then what did?

Tue, 01/21/2014 - 19:46 | 4353622 starman
starman's picture

Fortune cookies anyone? I'm full thanks.

Tue, 01/21/2014 - 19:50 | 4353638 frankTHE COIN
frankTHE COIN's picture

You are quick.

Tue, 01/21/2014 - 19:52 | 4353647 akarc
akarc's picture

"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."

 

"economic activity will start slowing down significantly and it could set up the "nightmare scenario" that I keep talking about."

And when?????????

"and it is inevitable that it is all going to come horribly crashing down at some point during the next few years."

"On a long enough time line the survival rate for everyone drops to zero"

Tue, 01/21/2014 - 20:02 | 4353678 Hedgetard55
Hedgetard55's picture

Fucking Chinks are going to find that there is no flee runch. Fuck them.

Tue, 01/21/2014 - 20:03 | 4353686 rustymason
rustymason's picture

I guess it can just go on like this  f o r e v e r   . . .

Tue, 01/21/2014 - 20:21 | 4353741 cougar_w
cougar_w's picture

Yes, for all values of "forever" that are less than 6 months.

Tue, 01/21/2014 - 20:03 | 4353687 Julian
Julian's picture

If you know there is going to be a large default on January 31 and liquidity may be severely impacted, what do you do now to avoid this? Are we seeing it?

Tue, 01/21/2014 - 20:09 | 4353711 Rising Sun
Rising Sun's picture

Hang on a sec and I'll go ask one of the dead floating pigs that is meanering down the river.

Tue, 01/21/2014 - 20:57 | 4353853 NoDebt
NoDebt's picture

Huge default?  It's $490MM.  It's an insignificant speck that is being announced as the small noise that will start the large stampede.  Who knows?  Maybe it will.  But I wouldn't bet on it.

If we start seeing similar defaults in rapid succession or increasingly large defaults in semi-rapid succession, yeah, you might have a problem.  But not from this one alone.

Wed, 01/22/2014 - 00:06 | 4354401 TheReplacement
TheReplacement's picture

It is a crisis that can be used to build confidence.  Half a bill, lotsa warning and build up beforehand.  They pull it out.  All is and will be well.  BTFATH!

Then BOOM!  You dead.

Tue, 01/21/2014 - 20:04 | 4353690 pirea
pirea's picture

Now, this is a good reason to buy some gold. No wander the gold is going that direction.

Tue, 01/21/2014 - 20:06 | 4353692 OC Sure
OC Sure's picture

"Did you know that financial institutions all over the world are warning that we could see a "mega default" on a very prominent high-yield investment product in China on January 31st?"

So then this is already priced in? I forget but back in the fall of 2007/2008 were financial institutions all over the world warning of a mega default the size of a Lehman event?

Tue, 01/21/2014 - 20:06 | 4353698 q99x2
q99x2's picture

Call me when there are pictures of blood in the streets. I ain't going for any of this "if" shit anymore. I'm still waiting for Greece to default.

It is possible that the Goldman Sach could conceivably want to take down China at this time as a means to take over its government as it did with the United States of America and the EU.

GS may also be worried that China will target Western Oligarchs.

Tue, 01/21/2014 - 20:12 | 4353717 Hughing
Hughing's picture

The only "if" to keep in mind is if the CB's stop printing, then, the shit hits the fan. They will never stop printing.

Tue, 01/21/2014 - 20:14 | 4353722 stocktivity
stocktivity's picture

You got it...same shit for 5 years running. Now we're at all time highs. It's all Bullshit!

Tue, 01/21/2014 - 20:24 | 4353756 Poor Grogman
Poor Grogman's picture

After 2008 turbo timmah visited china, and shortly afterwards credit creation in China exploded!

Now China has overtaken uncle sugar as the worlds biggest oil importer?

It sure would be a shame if china now suffered a massive credit contraction and had to stop using all uncle sugars oil, for years and years?

Ask yourself, who benefits today if China's economy implodes?

Tue, 01/21/2014 - 20:42 | 4353803 DoChenRollingBearing
DoChenRollingBearing's picture

The beneficiary?  The Central Bank of DoChenRollingBearing?

Tue, 01/21/2014 - 20:46 | 4353814 El Vaquero
El Vaquero's picture

 

Ask yourself, who benefits today if China's economy implodes?

Certainly not retailers in this country, as they won't be able to get cheap chinese crap to sell to consumers. 

Tue, 01/21/2014 - 20:59 | 4353863 Poor Grogman
Poor Grogman's picture

I don't see Chinese credit contraction being the end of Chinese plastic crap exports.

It didnt do much to stop Japanese exports at least in the earlier part of their credit contraction.

HOWEVER....If the Chinese economy were to implode, how would this effect domestic consumption of AU .???

Also where would it leave their world reserve currency aspirations???

Now who benefits?.??

Tue, 01/21/2014 - 21:12 | 4353913 SDShack
SDShack's picture

Don't forget that China was allowed to be a direct bidder for US treasuries in May 2012. That alone tells me there is much more to this relationship then meets the slant eye. That's why I don't think China is really interested in dumping treasuries. There is sum ting wong here.

Tue, 01/21/2014 - 21:16 | 4353932 ReactionToClose...
ReactionToClosedMinds's picture

they are buying gold .....they are biding their time for their currency moment or whatever suits their fancy.  They know the West thnks they are over a barrell .......they have to pay attention to domestic politics and their 'transition' first

Wed, 01/22/2014 - 00:08 | 4354409 TheReplacement
TheReplacement's picture

That fits with my multiparty, state/non-state power struggle.

Tue, 01/21/2014 - 20:07 | 4353702 Rising Sun
Rising Sun's picture

Fuck this shit.  I'm ordering some take out.

Tue, 01/21/2014 - 20:12 | 4353719 buzzsaw99
buzzsaw99's picture

they won't count the losses there either

Tue, 01/21/2014 - 20:17 | 4353731 cougar_w
cougar_w's picture

Tanks in the street, really 4 realz.

I don't think the Peoples' Army will handle a serious banking crisis nearly the same way Hanky Paulson did.

Tue, 01/21/2014 - 20:22 | 4353747 GrinandBearit
GrinandBearit's picture

Yes, there is a major real estate bubble in China.

Yes, they have lots of debt... a bulk of it is US dollars and US treasuries.

If/when they back their currency with all that gold they've been buying, it becomes a completely different game.... the end game.

Tue, 01/21/2014 - 21:40 | 4354009 andrewp111
andrewp111's picture

Are you so sure the Chinese Gubbermint is buying all that gold? I'd bet that a lot of purchases are private. In a country where a half trillion pounds of Cu are stashed in warehouses to store wealth, how can you be sure who is holding the Au?

Tue, 01/21/2014 - 20:36 | 4353785 Son of Captain Nemo
Son of Captain Nemo's picture

"Over the past several years, the U.S. Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England have all been criticized for creating too much money.  But the truth is that what has been happening in China surpasses all of their efforts combined.'...

Just remember who started it. 

Not exonerating China one iota but the fact of the matter is that USD was (and still is) the world reserve currency. You could say China is attempting to beat the West to the mat printing "promises"?... What other choice do they have with a population of 1.3 billion?

No this certainly does not end well at all!

Tue, 01/21/2014 - 20:39 | 4353795 evernewecon
evernewecon's picture

 

 

The main thing in privatizing banks

there will be avoiding monopolizing

monetary policy and the revolving 

door.

 

It seems a fair guess the CCP has 

friends in high places in the larger

banks though.

 

If the banking sectors were serving

democratic aims around the Pacific,

then sovereign debt mutually owed

walking dead banks could be mutually

cancelled, with that not actually

constituting default.

 

But the banks on each side of the 

Pacific would have to enter some

flavor or Resolution Trust.

 

The U.S. and Japan probably have

the most low lying fruit available

for that.

 

 

Tue, 01/21/2014 - 20:41 | 4353805 Paracelsus
Paracelsus's picture

I used to work down under in Oz and every Friday we would play the same game.

The big boss would take off at lunch and not come back.The next in line would bugger off at 2pm,and so on and so on until the rest of us stokers would amble out the door a half hour early,before quitting time.

The Chinese buying property in the US and elsewhere are preparing a bolthole,this is not in doubt.They will then try to orchestrate events from overseas.Good luck with that.The Party Bosses (the Expats) will be ordering the military,by overseas phone,to do another Tianmen square.Problem becomes when the military command realize they have all of the power and none of the power at the same time.This is when they will find it is better to cut a deal.Also it will be interesting to see if the gold reserves have been flown out,effectively looting the country at the last minute.

Tue, 01/21/2014 - 21:19 | 4353944 ReactionToClose...
ReactionToClosedMinds's picture

Also it will be interesting to see if the gold reserves have been flown out,effectively looting the country at the last minute. <<<<<<<<<

bravo.... all of us tend to think PRChina are not completely human .........that is a definite scenario that has to have a probability assigned to it.  Thank you for re-acquainting me & others here of typical human 'frailties' ......

Tue, 01/21/2014 - 21:34 | 4353990 andrewp111
andrewp111's picture

A lot depends on how much of the gold going into China is going into official "reserves" and how much is private purchases. It would not surprise me if a good portion of the private purchases leak out quietly as rich people escape with their loot.

Tue, 01/21/2014 - 21:49 | 4354049 Grouchy Marx
Grouchy Marx's picture

We could offer to build the Chinese central bank a facility exactly like Fort Knox, so their gold would be really secure!

 

 

Tue, 01/21/2014 - 21:26 | 4353962 andrewp111
andrewp111's picture

The gold could actually have been leaking out all along. We have official stats on gold imports to China thru HK, and they are huge for the last 2 years. However, we don't know how much gold is smuggled out quietly as rich Chinese diffuse out around the world.

Wed, 01/22/2014 - 00:59 | 4354514 RafterManFMJ
RafterManFMJ's picture

They could just store their gold in FT. Knox; there likely is plenty of room.

Tue, 01/21/2014 - 20:50 | 4353828 BanksterSlayer
BanksterSlayer's picture

But don't you think the Western investors (JPMorgan, Goldman) are anxious to spreadh this "China Is Falling!" meme because the BRICS nations currently stand on the threshold of rendering the Petro Dollar powerless? Isn't the bottom line still this:

 

China and Asia have all the gold.

America does NOT have gold.

 

Wed, 01/22/2014 - 00:16 | 4354430 TheReplacement
TheReplacement's picture

China is like a rope salesman.  China stood there hawking its wares when along came USA.  USA liked the rope and couldn't pass up the price.  As USA walked away with the new rope China kept feeding it out knowing that USA would eventually hang itself.

Tue, 01/21/2014 - 20:56 | 4353852 sunny
sunny's picture

"It is just a matter of time."

I am so sick of reading/hearing/seeing this.  What isn't a matter of time?

sunny

 

Tue, 01/21/2014 - 21:44 | 4354027 Grouchy Marx
Grouchy Marx's picture

The other three dimensions, Luke.

Tue, 01/21/2014 - 21:03 | 4353876 MollyHacker
MollyHacker's picture

A little shift in blame is due the politicians for not having robust budgets and secondary currency implantation plans. They want the default.

Tue, 01/21/2014 - 21:14 | 4353903 walküre
walküre's picture

The "best outcome" would be the Japanese disease of a deflationary death spiral.

LOL

23 trillion of Mao paper and nothing backing it.

Beijimar or Weimaijing is more like it? With every consequence from that chapter of debt slavery and Jewry which followed? The moneychangers are offering China warbonds at 40% as we speak. Go to war with Japan and the moneychangers make money. The moneychangers have made a deal with Japan already.

What else do you think guys is going on? This is a repeat of the same old same old that's been going on for centuries.

Shit always floats on top.

Wed, 01/22/2014 - 01:14 | 4354537 RafterManFMJ
RafterManFMJ's picture

Let's see here... 23 Trillion is 6.8 Trillion USD.

If China has accumulated 5000 metric tons of gold that's 160 million Troy ounces, so 6.8 T / 160 M yields a gold price of $42,500.00!

Now, I'm off to start a way cool website I'll call ROFOFOA

(Reader Of)

Wed, 01/22/2014 - 02:26 | 4354636 ACasey
ACasey's picture

That's not true.  China is the world's largest buyer of gold at 1,000+ tons a month.  China is shoring its finances up and the volatility in its currency is linked more to entanglements in global financial markets so overrun with fraud and theft the entire system is at the verge of collapse.  Germany denied is 1,500 tons of gold held in trust at the US Federal Reserve reveals the scope of the stealing;  the US cannot deliver because they do not have it anymore.  China is holding heavy and increasing its positions monthly.  Get out of US currency.

Tue, 01/21/2014 - 21:15 | 4353928 silentboom
silentboom's picture

The Chinese also have a 50 something percent savings rate, we have piss for savings.

Tue, 01/21/2014 - 21:48 | 4354048 all-priced-in
all-priced-in's picture

50% savings rate -- all tied up in annuity contracts to some shadow banking / insurance company combined with 20% inflation per week will make average Chinese guy very unhappy.

 

 

 

Wed, 01/22/2014 - 02:05 | 4354607 FreeMktFisherMN
FreeMktFisherMN's picture

hence the reason they like gold so much, to store the value they have created and make sure their foregone consumption is saved. They are industrious and thrifty, much like Americans used to be in the 19th and early 20th century when America was an industrial powerhouse. 

Tue, 01/21/2014 - 21:20 | 4353942 darteaus
darteaus's picture

Don't be the last one to drain you bank account, or catch the last flight out.

It's going to be a STAMPEDE!

http://www.youtube.com/watch?v=RWwhA2v9UFQ

Tue, 01/21/2014 - 21:20 | 4353945 Dingleberry
Dingleberry's picture

Doesn't their central bank have a printing press? Ink? 

I imagine they even make the shit that our fed uses here.

Unless someone can explain why they cannot print to trillions like our motley crew does, I am unconvinced.

 

Tue, 01/21/2014 - 21:25 | 4353959 Ulterior
Ulterior's picture

so there is hope to dump losing gold positions at 1400$ after all?

Wed, 01/22/2014 - 02:19 | 4354626 ACasey
ACasey's picture

Don't even think about dumping gold. 

All the signs are there showing gold held in trust at the US Federal Reserve and the Bank of England is missing.  The inability to deliver gold held in trust, lack of inspection & inventory, and no audit of account point to gold's inevitable  bounce to levels of correction. There is a serious shortage and tremendous demand.  General Math.

Gold prices are artificially held down by fraudulent naked-short selling by the US Federal Reserve; amounts that exceed global supply dumped and bought back using HFT [high frequency trading].  Keep physical gold.  Get out of paper positions.  If its not in hand its not real.  Buy gold for exchange value in the pending global banking collapse.  Strap in!

Tue, 01/21/2014 - 21:38 | 4354007 TheRideNeverEnds
TheRideNeverEnds's picture
Guest Post: The $23 Trillion Credit Bubble In China Is Starting To Collapse – What Next?
 the e-minis go higher thats what. 

 

 

Tue, 01/21/2014 - 22:03 | 4354085 americanspirit
americanspirit's picture

What do I think will happen when that bubble collapses? Since you ask, I think that there will be hundreds of very swift, very secret trials and then a whole lot of public executions. And all that money the 'princes' have stashed in the Caribbean, where criminal 'bankers' think they are safe from the law? How safe are they from PRC-commissioned bounty hunters - hmmmm? I'm stocking up on (non GMO)popcorn. From Boulder Popcorn Company, if anyone cares. Organic Ryder's Red is the best popcorn ever.

Tue, 01/21/2014 - 22:31 | 4354175 European American
European American's picture

FYI - 

There is no genetically modified popcorn (kernels) currently available for sale in domestic or international markets. Research and development of popcorn varieties derived from modern biotechnology could be available in the future.
Wed, 01/22/2014 - 01:04 | 4354524 Jugdish
Jugdish's picture

I'm stocking up on as much GMO shit as possible because when this shit goes down I wanna be a fuckin sick freeeaaak son. Tattoos piercngsgender switches GMO corn all that shit. Fuckin crazy son.

Tue, 01/21/2014 - 22:01 | 4354090 hairball48
hairball48's picture

Some believe the CB's can "print" forever and somehow stay ahead of the game. I don't believe it. At some point the sea of liquidity will become so deep that "someone" will drown...dragging many others under as they sink in that giant cesspool of fiat money and credit.

Tue, 01/21/2014 - 22:16 | 4354141 W74
W74's picture

There is no end game, merely game-changers.  Check.  Never mate.  Pawns get reborn, knights get commissioned, bishops get re-ordaned and rooks get built anew.

Wed, 01/22/2014 - 00:04 | 4354395 hairball48
hairball48's picture

Until then can't.

Tue, 01/21/2014 - 22:33 | 4354192 ms8172
ms8172's picture

I have a quesiton for the community.  If CHina goes through a Credit problem and collapse.  Would they put their GOLD up for sale in the world markets to survive.  If that's the case...would it drive prices lower because of a huge supply?

Wed, 01/22/2014 - 00:10 | 4354415 Cdn1
Cdn1's picture

Also the population is 'unlike anything the world has ever seen'.

"what goes up must come down" ? that is Newton's law of finance? please clarify.

Wed, 01/22/2014 - 00:27 | 4354444 TheReplacement
TheReplacement's picture

You have a choice, fight or starve.  China cannot feed its people with domestic production.  China has(?) had the male dominant one child policy for a long while.  They have the motivation.  They have the numbers in a lot of ways.  They have men, lots and lots of men.  Do you starve your people or do you let them fight for a chance at a new beginning?

Glad I don't live on the west coast for more reasons every day.

Wed, 01/22/2014 - 01:47 | 4354578 combatsnoopy
combatsnoopy's picture

There are enough Asians and Asian interest in the West Coast to Thwart that threat. 

Wed, 01/22/2014 - 01:46 | 4354577 combatsnoopy
combatsnoopy's picture

I call bullshit on China's story.  If they were in danger, if the ICBC is illiquid- why did they just buy up a record number of U.S. Treasuries so Congress can pass that $1 trillion spending bill? 

 

Wed, 01/22/2014 - 02:05 | 4354604 ACasey
ACasey's picture

I don't know.  When I look at $23 Trillion divided by 1+ Billion people, it just takes on a different perspective for me.  Debt bubbles and collapses seem like dominoes falling linked to a greater cause;  entanglement in a corrupt global bank system.

Specifically fraud, global bank fraud by the 15 largest banks is the root of the collapse in all finance linked in anyway to it.  Standard Charter and HSBC linked to drug trafficking and funding terrorism.  Jamie Diamond of JP Morgan Chase paying out $23 billion in fines enough to buy Dell Computer, Royal Bank of Scotland, and others are committing fraud at a scale never seen before. 

Libor rate rigging, naked-short selling gold that now apparently does not exist, and now Germany can not get their gold back indicates a serious case of theft by the US Federal Reserve.  No one is allowed to inventory the gold.  No one is allowed to audit the accounts.  And now the bank will not deliver gold held in trust all point to theft; straight up stealing.

Missing in all this any criminal prosecutions.  How do you figure that? USAWatchdog has another good interview with Former Treasury Assistant Paul Craig Roberts explaining the stolen gold held in trust and guest Professor William Black detail the crimes of fraud, not as exception but a rule, at the core of the global banking.  http://usawatchdog.com/

China has something the US lacks, gold to back its currency.  Bubble Insurance.  China is "hoovering" up gold faster than supply can provide and when it stops getting its gold for payment on US debt, the bubbles are all going to pop and blood, bombs, and bullets will settle all accounts.

 

Wed, 01/22/2014 - 09:29 | 4354955 BruntFCA
BruntFCA's picture

Yawn.

People forget that China issues it's own currency, it's not as if China owes all this money to the USA in dollars that it can't create itself.

It has already happened that the Chinese central bank has just written off the money, ie, digital 10010100 tokens backed by nothing and are not scarce in a real sense, like Bitcoins.

The tone of the article is as if China is a 3rd World African country that has taken on debt in a foreign currency that it can't generate itself.

Most likely scenario is that they just keep printing, writing off, printing, printing, printing...until they get mega inflation. Who's gonna stop printing now? It would be suicide. Better a slow death than jumping off a cliff.

Wed, 01/22/2014 - 12:45 | 4355612 Chicken_Little
Chicken_Little's picture

Alot of times the best and most accurate comments are on the last pages that most readers don't ever get to. To those who are leaving them, kudos.

I'm about to go back to Thailand where all hell is about to break loose in Bangkok. Why would I leave a calm USA to go back there? Well there are more pieces of the sky falling here than anywhere in S.E. Asia. Since warning that the sky is falling is my job, I have to pick up the pieces and find out where they're coming from and also research history back to the Roman empire when the sky first officially fell in what I call recorded history. Empires with big armies like to use them, and governments that turn the corner from serving the people to the people serving them always fail and their sky falls upon them.  The pieces of the sky always have money printing/coin clipping at the root. Just look at what countries have made the most social obligations that can't possibly be met, are running up the biggest deficits, and are printing the most money and the pieces of the sky that are falling now have their ID # on them. I see Japan, China, USA, and many other "first world" countries about to have the sky fall on them.

I have a really tough job as Chicken Little. It would be easier to be the Boy that Called Wolf or one of Humpty Dumpty's pick up guys. Peter Schiff was the boy who called wolf in 2006, and it finally came, but he was banned from being on CNBC because Maria made fun of his predictions. But now my job is getting easier because of Eric Snowden and Tyler(s) and other ZH posters. Alot of the posts left here years ago about governments, big banks, and big money interests have turned out to be true. ZH is the best go to site about what pieces of the sky are falling.

As a historical Chicken and the Chickens before me, they all say it comes to humanity and unless we evolve into a more "evolved" state, history will rhyme. We Chickens look at the animal (cave men) part of us and also the best  https://en.wikipedia.org/wiki/Maslow%27s_hierarchy_of_needs

 

The 95% of Thai people are mostly farmers and just enough to get by. The other 5% are the ones that have money and live in Bangkok. How many Latin American countries and others is this so true?  As Chicken Little, I see that human nature in any country in any type gov will always end up in the same wealth split of 95% poor and 5% elite. Look at Argentina in 2000 and 2001. It always happens and is happening in almost everywhere. The 5% rule and the rest of us are slaves. Just look at H Ross Perot's campaign in 1992 which was our last chance to fix things. Now we have nothing fixed and out of control debt monetation via Janet at the Fed...her computer. In Thailand, most daughters in the rice farm areas are tought that all Farangs (foreighner older males) have unlimited money and we are their only road to riches. Now the Thailand 5% are rebelling because the other 95% want their tax money and gov programs. Socialism never worked because of human nature.  Humans like to spend other peoples money and it's a constant struggle to keep what you have.

Be good :)   and BTW, WOLF WOLF!

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