This page has been archived and commenting is disabled.

China's First Default Is Coming: Here's What To Expect

Tyler Durden's picture


As we first reported one week ago, the first shadow default in Chinese history, the "Credit Equals Gold #1 Collective Trust Product" issued by China Credit Trust Co. Ltd. (CCT) due to mature Jan 31st with $492 million outstanding, appears ready to go down in the record books.

Of course, in a world awash and supported by moral hazard, where tens of trillions in financial asset values are artificial and only exist due to the benevolence of a central banker, it would be all too easy to say that China - fearing an all too likely bank run on comparable shadow products (of where there a many) as a result - would just step in and bail it out. However, at least until today, China has maintained a hard line on the issue, indicating that as part of its deleveraging program it would risk a controlled default detonation, in order to realign China's credit conduits even though such default would symbolically coincide with the first day of the Chinese New Year.

In turn, virtually every sellside desk has issued notes and papers advising what this event would mean ("don't panic, here's a towel", and "all shall be well"), and is holding conference calls with clients to put their mind at ease in the increasingly likely scenario that there is indeed a historic "first" default for a country in which such events have previously been prohibited.

So with under 10 days to go, for anyone who is still confused about the role of trusts in China's financial system, a default's significance, the underlying causes, the implications for the broad economy, and what the possible outcomes of the CCT product default are, here is Goldman's Q&A on a potential Chinese trust default.

From Goldman Sachs: A Matter of Trust

Q. What has happened?

Local and international media (e.g. Caixin, Financial Times) have reported that a RMB 3bn three-year investment trust issued by China Credit Trust Company (CCT) is at risk of not making its principal repayment due investors on January 31 (which also happens to be the first day of the Chinese New Year). The trust assets were used to make a loan to a coal mine company for mine acquisition and related investments, but the company has still not received licenses related to two of five planned mines, and the owner of the company was reportedly arrested in 2012 for illegal deposit taking. It has been reported that ICBC referred the project to CCT, which structured the trust product as a “collective trust” rather than a “single trust” that typically is used by banks to securitize loans. The trust was sold through ICBC to approximately 700 private banking clients, and reports suggest that ICBC will not guarantee investors in the trust against losses. Our China banks team published detailed information on the trust structure, as well as shareholders and financials of the trust company (see “CCT trust product risk; potential scenarios imply slower trust/TSF growth”, January 20, 2014).

Q. What exactly is a Chinese “trust” and how is it structured?

A trust is essentially a private placement of debt. Investors in the trust must meet certain wealth requirements (several million RMB in assets would not be unusual, so the investors are either high net worth individuals or corporates) and investments have a minimum size (e.g. RMB 1mn). The appeal is a much higher yield than can be obtained through conventional bank deposits, in many cases 10% or higher, versus regulated multiyear bank term deposit rates in the low single digits. Trusts invest in a variety of sectors, including various industrial and commercial enterprises, local government infrastructure projects (via LGFVs), and real estate.

As our banks team noted, 29% of trust assets are invested in higher-risk industrial or commercial sectors.

A trust is not to be confused with a “wealth management product” (WMP). WMPs are available to a broader group of individuals, with much smaller minimum investments. They are typically sold through and managed by banks or securities brokers, with or without a guarantee of the payment of interest or principal (WMPs featuring explicit guarantees are booked on banks’ balance sheets; for other non-principal guaranteed products, implicit guarantees may be assumed by some investors). Funds from WMPs may be invested in a range of products including corporate bonds, trust loans, interbank assets, securitized loans, and discounted bills—so WMPs are best thought of as a “money market fund” or pool for other financial products.

Q. How do trusts fit within the “shadow banking” sector in China?

Trust assets total some RMB 10trn as of late 2013. Though small as a share of the total stock of credit in China (Exhibit 1), trust assets have been growing at an annual rate of over 50% in recent years. The net new credit extension from trusts approached RMB 2trn in 2013 based on estimates from our bank analysts, or more than one-tenth of broad credit flow (total social financing) for the year. (Please refer to the “CCT trust product risk” note cited above for further detail on trust asset growth and composition.)

Exhibit 1: Trusts still small as a share of total financing, but growing rapidly

Source: Goldman Sachs Global Investment Research.

Some clients have asked about comparisons between the Chinese trusts and the SIVs (structured investment vehicles, sometimes known as “conduits”) that were prominent in the US financial crisis. The SIVs were off-balance sheet vehicles generally funded with short-term commercial paper (“asset-backed commercial paper”) with a period of a few days to a few months. Initially, these SIVs invested in relatively low risk, short-term receivables, although over time exposures shifted towards more complex, longer-term structured products such as subprime mortgage-backed securities or collateralized debt obligations. As doubts about asset quality began to arise in 2007, market funding conditions for the SIVs quickly deteriorated, requiring sponsoring banks to provide liquidity support and ultimately consolidate these assets on the balance sheet, which exacerbated funding pressures as well as asset write-downs. Similarities to Chinese trusts include the linkages with banks, the off-balance sheet nature of the trusts (true for many WMPs also), and the maturity transformation aspect (though it should be noted this is less extreme in the case of trusts, where investors are often committed for a period of a year or more, than for most SIVs; even WMPs typically have commitments of 3-12 months). Important differences include the relatively simpler assets of Chinese trusts – often loans, as in the CCT example – and the fact that the Chinese banking system is funded domestically (many SIVs raised funding across borders).

Q. Why is the potential default of a trust important?

With a large volume of trust products scheduled to mature this year, who bears the losses in the event of a default could set an important precedent. In our detailed research on the China credit outlook last year (see “The China credit conundrum: risks, paths, and implications”, July 26, 2013), we explicitly identified “removal of implicit guarantees” as one of four potential ‘risk triggers’ for a broader credit crisis. If the realization of significant losses by investors causes others to pull back from funding various forms of “shadow banking” credit, overall credit conditions could theoretically tighten sharply, with consequent damage to growth.
From the perspective of policymakers, the default of a trust under the current circumstances might be seen as having less risk of contagion than some other “shadow banking” products. First, the trust is explicitly not guaranteed by either the trust company or the distributor. Second, the investor base of a trust is typically a relatively small group of wealthy/sophisticated investors (the minimum investment in the CCT trust mentioned above was RMB 3mn). This contrasts with broadly offered wealth management products, which have many more individual investors with less investment experience and more modest personal finances. Third, the particular circumstances of this trust (lending to an overcapacity sector, failure to obtain key business licenses, arrest of the borrowing company’s owner) might make it easier for authorities to portray as a special case. Put another way, if the authorities felt obliged to provide official support to this product, it is not clear under what circumstances they would be comfortable letting any trust or wealth management product default.

Q. What are the options for policymakers?

The fundamental issue for policymakers is how any losses would be distributed among 1) investors, 2) the trust company and/or distributing bank, 3) the government and government-related entities. Potential options include:

  1. Allowing the trust to default (investors take losses). As noted above, this would call into question the implicit guarantees perceived by some trust buyers, thereby increasing the risk that new trusts or other non-guaranteed products such as WMPs face more difficulty obtaining funds, leading to tighter overall credit conditions. On the positive side, it would encourage greater focus on the underlying credit quality and better risk pricing going forward.
  2. Trust company and/or distributing bank provide support (levered institutions take the principal and/or interest losses), making an implicit guarantee explicit. Although legally there are no guarantees of principal from either the trust company or ICBC, to the extent the trust company manager or the distributing bank were obligated by policymakers (or other reputational or legal considerations) to provide support, it could prompt loss recognition, or at the worst a need for capital raising or shrinkage of the balance sheet if losses are substantial. As such, the quality of the underlying assets and due diligence are key to determine whether and how much losses might be taken by these institutions. Investor demand for trusts might rise after such a demonstration of support, but the higher perceived liability on the part of financial institutions would presumably reduce their appetite for issuing such products in the future.
  3. Government-backed entity provides support (government takes losses). In this case, the short-term market reaction would presumably be relief, as refinancing risks would be reduced and both banks and trusts would be off the hook. However, moral hazard for both issuers and investors would be increased, raising the risk of credit problems further down the road. Policymakers might try to minimize this moral hazard by providing support indirectly (via some government-supported entity or third party, rather than publicly and directly) and/or by providing only partial support. An example of the former occurred last year, when an “unnamed party”, possibly the local government which provided some land collateral and guarantees to the trust loans, intervened to purchase the defaulted loans of a steel plate manufacturer, enabling the investors in a CITIC WMP to be repaid fully (see “Latest China bailout reveals risk of local government’s hidden debts”, Reuters, May 7 2013).

Some mix of these options is of course possible, if the financial institutions or government provides partial support. Most observers seem to expect at least a partial bailout of the investors, reflecting a compromise between concerns about moral hazard and concerns about contagion. Unless there is a total bailout explicitly funded by the government, credit conditions in the trust sector seem likely to tighten at least modestly. Some central government level policymakers could be open to seeing a default, as it would encourage more careful risk assessment and help to contain credit growth going forward. However, other central government and many local government policymakers might be more inclined to contain the problem. Local officials in particular may feel more pressure to support key local enterprises that are major employers and taxpayers; in the current case, officials could in theory take actions such as granting mining licenses to make the trust assets more valuable.

Q. What should investors watch to track the broader market impact?

Besides the immediate news on what approach officials take in the case of the CCT trust, investors can watch other financial metrics for signs of stress. As always, interbank rates are useful as an indicator of the marginal cost of bank funding. Spreads to yields on nonbank products may reflect their perceived risk, although they could also be affected by other factors such as tight overall liquidity conditions. While we do not have high frequency data on trust yields, WMP yields have moved higher of late. Finally, data on credit volumes will be important to watch. To the extent conditions tighten, this should become visible in monthly total social financing flows (the trust portion in particular).

Q. What is the potential impact on economic growth and markets?

The growth impact of a trust default is highly uncertain, as it represents the product of two unknowns. The first unknown is the change in overall credit extension which would result from the default, and the second unknown is the sensitivity of economic growth to new credit. In work last year on the relationship between credit and growth (“The ‘credit impulse’ to Chinese growth”, April 11, 2013), we estimated a RMB 300bn change in the average monthly credit flow would have an impact of 80bp on sequential annualized real GDP growth in the following quarter (with further, gradually fading effects in subsequent quarters if the lower credit flow persisted). This is not far from the average monthly flow of trust loans in 2013 implied by our bank analysts’ estimates. So with our assumption on credit sensitivity, a hypothetical sharp tightening in funding conditions that stifled this flow of new credit (not affecting existing trusts) would imply an 80bp hit to sequential (annualized) growth the following quarter, and roughly a 50bp hit to yoy growth over the following year. Intuitively, the modest estimated impact stems from the small size of the trust sector in the overall financial system. We emphasize the very high degree of uncertainty in these calculations—this is a back-of-the-envelope illustration rather than a forecast. On the side of a smaller effect, officials could take steps to reduce the impact on trust lending or other lending channels could pick up the slack; on the side of a bigger impact, spillovers could occur to non-trust lending or to the real economy via effects on business or consumer confidence.

In the credit markets, more willingness to allow losses should lead to greater differentiation between stronger and weaker credits. This is a theme we have emphasized for some time, including in our in-depth work on the China credit outlook last summer.

A policy/credit tightening bias may put pressure on China equities in the near-term, particularly credit-dependent, investment-heavy cyclical sectors. Investors are unlikely to reward either option 1 or option 2 above, as the default option may trigger contagion and risks to growth (thus earnings as well) and the “bailout by financial institutions” option is structurally unappealing (thus risks valuation). Option 3 is probably the only outcome that would support a slight market rebound near-term, in our view, as immediate contagion is averted and listed financial conditions are protected from bearing losses—though at the cost of longer-term moral hazard.


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 01/22/2014 - 21:48 | 4357517 kaiserhoff
kaiserhoff's picture

So who holds the notes on the ghost cities,

  and when does hilarity ensue???

Wed, 01/22/2014 - 21:49 | 4357521 johngaltfla
johngaltfla's picture

Those are not ghost cities. Their purpose is far more insidious.

Wed, 01/22/2014 - 22:23 | 4357629 forwardho
forwardho's picture

I need a good nightmare...

Care to elucidate?

Wed, 01/22/2014 - 22:56 | 4357710 El Oregonian
El Oregonian's picture

Safe to say, your nightmare will begin as soon as you realize you're asleep.

It is when you 'wake up' to the nightmare that this is all an illusion and TPTB have just been herding the cattle down different shoots, deeper into the slaughterhouse.

Thu, 01/23/2014 - 00:30 | 4357954 SafelyGraze
SafelyGraze's picture

green chutes

Thu, 01/23/2014 - 01:45 | 4358042 walküre
walküre's picture

The fact that the event is broadcast means that nothing will happen

Besides 700 investors piled into a $500 mil vehicle ... big deal. That's not even a mil per investor.

What I want to know is how do they get investors to sign up for vehicles that have no guarantees and could turn into a crap shoot. As in this case, the licenses weren't granted. Like WTF? That's a whole 'nother story for another day.

Time to go to China and scour the streets for some buyers of my bridge....

Watch and learn

Thu, 01/23/2014 - 02:25 | 4358078 merizobeach
merizobeach's picture

"What I want to know is how do they get investors to sign up for vehicles that have no guarantees and could turn into a crap shoot."

You're talking about rich, money-addicted people who had 10% possible returns dangled in front of them, so they broke off a smallish chunk of their wad and gambled it; whether they really believed there was any real risk, being possibly blinded by greed, is another matter.

Thu, 01/23/2014 - 03:29 | 4358133 disabledvet
disabledvet's picture

I think the key word here is "rich." sounds like a "monied class smack down" that when it goes down can lead to fire sale prices for a lot of assets. obviously the only asset in China right now is real estate so if the liquidity plug gets pulled it's "down the drain at once."

Thu, 01/23/2014 - 05:34 | 4358203 Occident Mortal
Occident Mortal's picture

Nothing will happen.

A $500m default? So what?

Globally QE is hosing the markets with 300 times that amount every single month.

In all truth, under the current monetary policy if another Lehman went down tomorrow, there would be enough free money slopping around for all the creditors to walk on water.

In this monetary climate bankruptcies are not a threat. That is why these emergency measures were put in place. Remember QE is an emergency measure. It’s like morphine.

The real stick in the throat is that QE was not applied fairly, its application to the system was far far too centralised. A lot of small and medium sized companies did go bankrupt and the political backlash was muted because most people lack the sophistication to understand.

How does all this end? People need to start demanding higher wages to light a fire under inflation expectations. But it seems to me that generation Y have so much escapism at their fingertips that they’re simply not that hungry for money. It’s a kind of Japanification of the West.

Why work harder to buy a shinier car when you can just lose your mind living as a king in some virtual world? As ridiculous as it sounds, that is what you will observe as young adults live out their lives in their parents basements.

The great protestant work ethic on which so much was achieved, has finally worn off (and secretly we all know it).

Thu, 01/23/2014 - 08:14 | 4358230 Manthong
Manthong's picture

you have to pass it to know what's in it..    ha.. ha..  ha.............

oh..gee my lower orifice feels so much better now.

Thu, 01/23/2014 - 02:52 | 4358096 acttang
acttang's picture

The implicit guarantee has been taken for granted by Chinese investors - it has always been like this. Since the day trust products were invented, there have been small scale defaults here and there, and they have been absorbed either by the issuing trusts or the distributing banks, and investors know it well. In this particular case, the bank approached the trust company (the borrower is the bank's corp client) to use its issuing channel only, because the bank doesn't have any problem finding the money. The trust company assumed that ICBC was the implicit guarantor because it represented both the borrower and the investors. That's the real catch in the case - that both parties view themselves as a channel the other party as the risk taker. Investors just never bothered to ask.

Thu, 01/23/2014 - 03:33 | 4358135 disabledvet
disabledvet's picture

yet again "lots of gold but no gold standard." no incentive for the Bank to be fact the exact opposite. Government "caves" and "saves the bank"...until the Government actually caves itself and can't save itself even.

The default setting in China has historically been massive money printing and inflation.

Thu, 01/23/2014 - 04:19 | 4358165 cynicalskeptic
cynicalskeptic's picture

The default setting in China has historically been massive money printing and inflation.

Any different than the current course the West is following?  Seems like China has at least converted much of its wealth into hard assets like gold, mining companies in Australia and South America, farmland in Africa, and domestic infrastructure (including a modern manufacturing base) along with prime real estate all over the world.  

All that wealth in the west is invested where?

Who is better off when it all hits the fan?

Thu, 01/23/2014 - 11:40 | 4358904 Manthong
Manthong's picture

wow.. great exposition.

Thu, 01/23/2014 - 05:42 | 4358205 Martian Tourist
Martian Tourist's picture

"Besides 700 investors piled into a $500 mil vehicle ... big deal. That's not even a mil per investor."

The potential for contagion is the issue though.

Thu, 01/23/2014 - 18:32 | 4360474 LMAOLORI
LMAOLORI's picture


"When you lie with dogs you get fleas"



China bank chief shuts door on burned investors

Thu, 01/23/2014 - 05:12 | 4358189 qmhedging
qmhedging's picture


Industrial & Commercial Bank of China Ltd. and China Credit Trust Co. may together with the government bail out investors in a troubled trust that sparked concern of defaults on high-yield investment products, according to the Time-Weekly newspaper.

ICBC and China Credit Trust may each take responsibility for 25 percent of payments for the 3 billion-yuan ($496 million) trust, the newspaper reported on its website today, citing a person it didn’t identify.


Wed, 01/22/2014 - 22:35 | 4357656 DoChenRollingBearing
DoChenRollingBearing's picture

10% notes of high risk to wealthy Chinese only.  Risky, yes!

But, murky too.  And (Exhibit 1), the Trusts seem to be small vs. the debt.

Still, Chinese debt seems to be like a game of "pick-up-sticks" in its early stages.  They could have a couple of minor mishaps, and perhaps their system could absorb them.  But, it seems unstable too.

I would hate to have the job (and be paid for) of accurately predicting this one...

Wed, 01/22/2014 - 22:55 | 4357724 old naughty
old naughty's picture


squid is all "geared up" !

Damage controls, moar coming?

And, no counter from ZH, yet...hummmmm.

Wed, 01/22/2014 - 23:34 | 4357851 Almost Solvent
Almost Solvent's picture

Nothing to see here.


Move along.

Wed, 01/22/2014 - 22:58 | 4357725 old naughty
old naughty's picture


Thu, 01/23/2014 - 01:18 | 4358014 mc225
mc225's picture

chinese are smart about debt. they know it's all fake. they'll paper this over.

americans believe debt is real.

Wed, 01/22/2014 - 22:48 | 4357697 Crawdaddy
Crawdaddy's picture

Thats is what I thought too. Look more like bug out towns for the worker bees of the elite when the time comes.

Thu, 01/23/2014 - 12:25 | 4359094 Crash Overide
Crash Overide's picture

The ghost cities are for when they evacuate Tokyo?

Wed, 01/22/2014 - 21:54 | 4357532 Bennie Noakes
Bennie Noakes's picture

and when does hilarity ensue???

Hilarity is planning to run in 2016. Don't know about Sue.

Wed, 01/22/2014 - 22:00 | 4357556 TeamDepends
TeamDepends's picture

Sue DerPanzoff is her attorney who will be running interference.

Wed, 01/22/2014 - 23:05 | 4357761 WmMcK
WmMcK's picture

Checked for Dewey Cheatem & Howe.  OK, looks like I might be 1st this time.

Wed, 01/22/2014 - 22:15 | 4357562 darteaus
darteaus's picture

"Sue" Christie is Hilarity's opponent en 2016.  That's why it's "Hilarity en Sue".

Wed, 01/22/2014 - 22:19 | 4357616 NoDebt
NoDebt's picture

Well done, gentemen.  Fine work.  You'll find a little something extra in your paycheck this week.  (No, you won't)

Wed, 01/22/2014 - 22:27 | 4357644 Troll Magnet
Troll Magnet's picture

No Debt, you fuckin' cheapskate! For fuck's sake, at least give'em Obamacare. And by that I mean deduct money from their paychecks.

Wed, 01/22/2014 - 22:35 | 4357661 NoDebt
NoDebt's picture

OK, OK.  You guys can all sign up for Obamacare.  I hear they have many excellent options for your to choose from and subsidies that would make signing up for it a better option than me giving you health benefits as part-time-employees.  Plus, it might endanger my own ZH corporate health care plan, so it's a win-win for all of us.  You're welcome.

Wed, 01/22/2014 - 22:34 | 4357663 new game
new game's picture

we want chelsey! young and witty with all the charm.

Wed, 01/22/2014 - 22:48 | 4357694 willwork4food
willwork4food's picture

They're too smart for screwing around. They'll put in Rand Paul-the son of a famous man that once upon a time actually might have started something. It's really too bad he's a plant.

Wed, 01/22/2014 - 23:03 | 4357754 WmMcK
WmMcK's picture

Beat me to it; I just knew I'd find this comment down thread.

Love ZH.

Wed, 01/22/2014 - 21:53 | 4357535 ncdirtdigger
ncdirtdigger's picture

Just get Janet to print you some yuan. It's all good.

Wed, 01/22/2014 - 22:15 | 4357563 darteaus
darteaus's picture

The Fed does - payback for all those worthless T-bills we make them buy.

Wed, 01/22/2014 - 22:20 | 4357617 forwardho
forwardho's picture

Ding, Ding, Ding.

Chinese retail investors.

Wed, 01/22/2014 - 22:30 | 4357651 Stoploss
Stoploss's picture

"Second, the investor base of a trust is typically a relatively small group of wealthy/sophisticated investors"


LOL!!  Not anymore...

Thu, 01/23/2014 - 00:49 | 4357986 TrustbutVerify
TrustbutVerify's picture

Maybe "formerly wealthy" and formerly known as "sophisticated."  Like those that still held stocks just before 2008.  Oh, and maybe in early 2014. 

Thu, 01/23/2014 - 01:13 | 4358009 prains
prains's picture

Is it just me or does a Chinese "Trust" sound a bit oxymoronic??


note to author: your article smacked a bit of Y2K and look where that went......will you be supplying us an article say on Feb.5 (to give you some time to formulate a rebuttal) when nothing, and I mean nothing happens??

please respond.....

Wed, 01/22/2014 - 22:12 | 4357518 johngaltfla
johngaltfla's picture

What will happen is so unpredictable it is terrifying to anyone with a brain.

However when up and coming powers start to default and need something to kickstart their economies plus distract the starving masses, it usually means a major war is in the near future. Sucks to be the U.S., Japan, or anyone else in the region.

Thu, 01/23/2014 - 04:22 | 4358166 cynicalskeptic
cynicalskeptic's picture

The US has been trying to kickstart WWIII in the Middle East since Bush II.   The generals realize how FUBAR that would be and have been resisting.

Wed, 01/22/2014 - 21:51 | 4357523 Hunter S. Thompson
Hunter S. Thompson's picture

No losses EVAR!

Wed, 01/22/2014 - 21:50 | 4357525 Debtonation
Debtonation's picture


Wed, 01/22/2014 - 21:56 | 4357539 Truther
Truther's picture

It's WAR BITCHEZ.... Get used to it.

Wed, 01/22/2014 - 22:19 | 4357619 BringOnTheAsteroid
BringOnTheAsteroid's picture

I feel sorry for the generals who subscript todays youth. Imagine the whining, soft pizza eating couch potatoes who have spent their entire life playing World of Warcraft . . . . . . . . oh wait, shit, this might get interesting

Thu, 01/23/2014 - 03:36 | 4358138 disabledvet
disabledvet's picture

with a single used aircraft carrier? I don't think so. if this things heads south in a hurry I'd be more worried about the "people's Army" turning inward.

Wed, 01/22/2014 - 21:56 | 4357540 frankTHE COIN
frankTHE COIN's picture

Hey guys sorry I'm late. What's going on ? I just passed a Fat Lady and she was Warming up on a Pitch Harmonica.

Wed, 01/22/2014 - 22:14 | 4357567 darteaus
darteaus's picture

That was Christie.

Wed, 01/22/2014 - 22:50 | 4357706 Crawdaddy
Crawdaddy's picture

Happens every time he sits on a leather couch after the workout. In his case the workout is walking to the leather couch.

Wed, 01/22/2014 - 21:58 | 4357547 carbonmutant
carbonmutant's picture

Markets don't like this...

Wed, 01/22/2014 - 21:59 | 4357552 Kirk2NCC1701
Kirk2NCC1701's picture

"China defaulting".  Good one.  Is this the official word of the NEW owners of ZH?

They simply dump the $2T in US Treasuries and the Run is on. 

Wed, 01/22/2014 - 22:21 | 4357623 Spanky
Spanky's picture

Well, they are quoting the squid...

Wed, 01/22/2014 - 23:13 | 4357792 Crawdaddy
Crawdaddy's picture

Think about it - the holders of debt say never mind and that hurts the issuers of debt how? Bond vigilantes are a figment of history. There is only the fed.

Wed, 01/22/2014 - 23:30 | 4357845 chdwlch1
chdwlch1's picture

Not many mis-spellings (?) like the good old days, aye captain?

Thu, 01/23/2014 - 00:28 | 4357950 BeanusCountus
BeanusCountus's picture

Or maybe sell some gold? Someone, anyone, please tell me why gold would be selling off on this news. Jesus, i give up. Worlds a mess, country is a mess, even my kitchen is a mess. Fuck it, im buying more tomorrow.

Thu, 01/23/2014 - 03:50 | 4358144 matrix2012
matrix2012's picture

@ Kirk2NCC1701 and others

you keep on saying the NEW owner of ZH, dude it just makes me very curious, WHO is the NEW Owner(s) or Co-Owner(s) of ZH ???

an inquiring mind would like to know... believe that most if not all ZHers will feel the same urge as well

Thu, 01/23/2014 - 03:54 | 4358148 satoshi101
satoshi101's picture

Copyright ©2009-2013 Media, LTD; All Rights Reserved. Zero Hedge is intended for Mature Audiences.

Thu, 01/23/2014 - 03:58 | 4358150 satoshi101
satoshi101's picture

abc media is a retail media agency. We provide advertisers with access to millions of consumers via digital networks and traditional POS solutions at retail outlets.

Media fragmentation and changing consumer habits mean that influencing consumer brand decisions is more complex and costly than ever.

The benefits of being able to target consumers at the point of purchase through engaging content, is fuelling the growth of digital retail media as an ever-increasing part of the advertising mix.



Personally I call it the "MORON LIST", the kind of guy who should be targetted 'russian internet girls', or gold mining stocks, ..

The idea is to have highly tuned internet sites,... this one ZH is for morons who think the sky is falling and buy stupid shit from fellow idiots, that is why 99% of the POSTS are insipid, and Ron Paul is the classic 'act of american stupid politics'.


Thu, 01/23/2014 - 04:36 | 4358163 matrix2012
matrix2012's picture

satoshi101  the ABC Media, LTD is nothing NEW here, the entity name has been listed in ZH since two years ago or longer, IIRC

i don't recall that the ABC Media, LTD just showed up here within 2013.

NOPE, i expect to hear some other name whenever i read some ZHer mentions about the NEW owner... lol


ps. but i just got aware of the "new" phrase 'for Mature Audiences', think this is a rather new inclusion... perhaps coming one will metamorphose into 'for Adult viewerships'...

Thu, 01/23/2014 - 07:17 | 4358244 negative rates
negative rates's picture

ABC, feel better now?

Thu, 01/23/2014 - 07:28 | 4358253 matrix2012
matrix2012's picture

of course not, no one will really know who's behind the abc or xyz or whatsoever the three alphabet institutions... lol

Wed, 01/22/2014 - 22:00 | 4357559 JackT
JackT's picture

Nothing will happen. Printing presses are standing by

Wed, 01/22/2014 - 22:04 | 4357569 FieldingMellish
FieldingMellish's picture

Correct. Just like we have not seen the ZH long-expected crash in US markets for the past 2 years. The world is waking up to the realization there is FUCK ALL anyone can do about this. Cash is being printed and paper prices will rise... indefinitely.

Wed, 01/22/2014 - 22:59 | 4357733 willwork4food
willwork4food's picture

Which translates into a deflationary nightmare for the peasants. That's until the real money starts pouring in, then it's off to the races.

Wed, 01/22/2014 - 23:36 | 4357852 Vint Slugs
Vint Slugs's picture

Deflation is not a nightmare for the peasants.

Wed, 01/22/2014 - 23:51 | 4357890 Crawdaddy
Crawdaddy's picture

As a peasant, I welcome the deflation. Which is why i doubt it will happen.

Thu, 01/23/2014 - 02:11 | 4358066 KickIce
KickIce's picture

Maybe briefly when they pull the rug out from under or lose control, but it be short lived as all the sideline money races in to purchase anything that isn't nailed down.

Thu, 01/23/2014 - 09:25 | 4358413 willwork4food
willwork4food's picture


Thu, 01/23/2014 - 05:31 | 4358200 Tall Tom
Tall Tom's picture

So just how much debt are you carrying?




Then you are a fucking LOSER.


Peasants ARE THE INDEBTED. That is the reason that they are enslaved and in SERVITUDE. Debt is Slavery.


Deflation makes it extremely difficult, if not impossible, for those in debt to retire that debt, to pay back that Debt.


If you support Bankruptcy then you support THEFT from the CREDITOR...which makes you a DOUBLE LOSER as you are also an IMMORAL FUCK.


(Now personally I prefer STABILITY as I prefer FAIRNESS. That is HONESTY...something which seems to be lacking here at ZH. Of course STABILITY is REQUIRED to provide the FOUNDATION upon which to build ANY a Economy. Structures built upon UNSTABLE FOUNDATIONS are prone to systemic failure. This just leads to Injury and Death.)


But you can prefer your Money Changing habits. Changing the Purchasing Power of a Currency, whether through Deflation, or Inflation, is acting as a Money Changer. It is EXTREMELY DISHONEST.


You will deserve your Hell...LOSER.

Thu, 01/23/2014 - 11:28 | 4358850 Crawdaddy
Crawdaddy's picture

Zero debt.

Deflation, like inflation, is a decline in the monetary standard. In the aggregate, deflation harms debtors and benefits creditors. Stable prices, or more accurately a stable monetary unit, is exactly opposite of what the money changers want.

Wed, 01/22/2014 - 23:28 | 4357837 Squid-puppets a...
Squid-puppets a-go-go's picture

it kinda seems that nothing can be done about it

but here's an equation that bears examination

if you have global GDP growth of 2%, and the globe is over 100% debt to GDP, and most of that debt is being repayed at least at 2% how long can that risk continue to be tolerated by individual holders of capital?

you can print all you want, but what happens to the printed money? it becomes more serviceable debt

you dont need bond rates to rise to send the global GDP into negative territory - it will get there anyway simply by servicing the interest on the printed money

it therefore cannot work indefinately. Sometime or other, a big player is gonna sit on a chair, then everyone will want a chair, and it matters not a sniffling fuck whether Yellen has turned the music off or not

Wed, 01/22/2014 - 22:17 | 4357594 kevinduhand
kevinduhand's picture

Absolutely right. Why would Xi JinPing collapse the economy of China when his family owns off shore business that makes profit by continuing the current model in China?

the national banks will bailout the lehman products and pay back parts of money to the idiotic chinese investors, and if the investors do organize and protest for full money pay back, Chinese gov will simply silence them, also as everybody knows the media is state controlled like the US, everything will be kept under control

PBOC will keep printing money to fund the zombie Chinese economy to buy more US debt, and your life as a debt slave goes on as usual

Wed, 01/22/2014 - 22:23 | 4357633 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

This is a political hit. Whoever controlled this trust fell out of favor from the party. Time to pay bitchez!!

Wed, 01/22/2014 - 22:27 | 4357641 new game
new game's picture

backstop, allow some loses for max publicity, humilate some bad actors with jail and such and send out an army of regulaors. get the plebs back in line.

central comand economy.

all good, just a blip.

got yuan-goodnite...

Wed, 01/22/2014 - 23:14 | 4357795 WillyGroper
WillyGroper's picture

a hole in yuan?

Wed, 01/22/2014 - 23:16 | 4357801 Crawdaddy
Crawdaddy's picture

Alternative view - throw some Asians overboard to protect the Europeans.

Wed, 01/22/2014 - 22:14 | 4357600 joego1
joego1's picture

DANGER! Long term moral hazard dead ahead

Translation- Your money is gone sucker


Wed, 01/22/2014 - 22:49 | 4357696 BringOnTheAsteroid
BringOnTheAsteroid's picture

The financial and military oligarchs sure have a good system going They get the dumb masses to exchange their labour for little pieces of useless paper and get you to risk your life for shiny medals. I guess you can't blame them for taking advantage of a situation where the masses are dumb enough to go along with it. How different are we from dumb farm animals who are bred, fattened up and then led away to slaughter. We have no compunction doing this to farm animals as the oligarchs have no compunction doing it to us. Essentially we are as dumb as farm animals and that's not even taking account the invisible you know what in the sky that talks inside peoples heads.


Wed, 01/22/2014 - 22:20 | 4357622 gwar5
gwar5's picture

Default is dee new normal.

Wed, 01/22/2014 - 22:20 | 4357624 wisehiney
wisehiney's picture

They gotta spook the Chinese speculators to cool them off. The Chinese consider American assets a safe place to hide. Real estate before, Tbonds next.

Thu, 01/23/2014 - 03:42 | 4358141 disabledvet
disabledvet's picture

State Banks can fail. Once "the People's Force" stops getting paid (i.e. IOU's) then the whole system collapses. There is no reset.

Wed, 01/22/2014 - 22:28 | 4357642 Seasmoke
Seasmoke's picture

It's 2014. If you don't hold it. You don't own it. Learn it. Live it.

Thu, 01/23/2014 - 00:27 | 4357951 NIHILIST CIPHER

Good  advice my brutha !      @Seasmoke       

Wed, 01/22/2014 - 22:29 | 4357647 Bangin7GramRocks
Bangin7GramRocks's picture

500 million! Are we serious here? Who wrote this, Dr. Evil? Bernanke shits that out every 3 hours. In 2014 Dr. Evil, $500 million is not a lot of money.

Thu, 01/23/2014 - 04:46 | 4358179 fijisailor
fijisailor's picture

Yea and Chicom mini-me has proven he can shit 3X what Bernanke could.

Wed, 01/22/2014 - 22:31 | 4357654 new game
new game's picture

dont ya love that word 'trust'

Wed, 01/22/2014 - 22:36 | 4357670 IridiumRebel
IridiumRebel's picture

I await my text: "Dear ZeroHedge Reader, you are engaging in sedition. Your name and identity have been noted."


“Dear subscriber, you are registered as a participant in a mass disturbance.”

That's a text message that thousands of Ukrainian protesters spontaneously received on their cell phones today, as a new law prohibiting public demonstrations went into effect. It was the regime's police force, sending protesters the perfectly dystopian text message to accompany the newly minted, perfectly dystopian legislation. In fact, it's downright Orwellian (and I hate that adjective, and only use it when absolutely necessary, I swear).

But that's what this is: it's technology employed to detect noncompliance, to hone in on dissent. The NY Times reports that the "Ukrainian government used telephone technology to pinpoint the locations of cell phones in use near clashes between riot police officers and protesters early on Tuesday." Near. Using a cell phone near a clash lands you on the regime's hit list. 

See, Kiev is tearing itself to shreds right now, but since we're kind of burned out on protests, riots, and revolutions at the moment, it's being treated as below-the-fold news. Somehow, the fact thatover a million people are marching, camping out, and battling with Ukraine's increasingly authoritarian government is barely making a ripple behind such blockbuster news bits as bridge closures and polar vortexes. Yes, even though protesters are literally building catapaults and wearing medieval armor and manning flaming dump trucks.

Hopefully news of the nascent techno-security state will turn some heads—it's right out of1984, or, more recently, Elysium: technology deployed to "detect" dissent. Again, this tech appears to be highly arbitrary; anyone near the protest is liable to be labeled a "participant," as if targeting protesters directly and so broadly wasn't bad enough in the first place.

It's further reminder that authoritarian regimes are exploiting the very technology once celebrated as a vehicle for liberation; last year, in Turkey, you'll recall, the state rounded up dissident Twitter users. Now, Ukraine is tracing the phone signal directly. Dictators have already proved plenty adept at pulling the plug on the internet altogether.

All of this puts lie to the lately-popular mythology that technology is inherently a liberating force—with the right hack, it can oppress just as easily.

Wed, 01/22/2014 - 22:50 | 4357707 wisehiney
wisehiney's picture

Golly your text  service is slooooooow. I got that message two years ago. I hope that put me at the top of their list as I requested.

Wed, 01/22/2014 - 22:59 | 4357739 WmMcK
WmMcK's picture

We now have no text or data service -- soon not even (ancient) cell phones.  Back to walkie-talkies only. 

Wed, 01/22/2014 - 23:38 | 4357861 Vint Slugs
Vint Slugs's picture

walkie-talkies.  LOL!


Make sure that what you've got is not digital.

Wed, 01/22/2014 - 23:05 | 4357742 therevolutionwas
therevolutionwas's picture


Wed, 01/22/2014 - 23:22 | 4357823 gwar5
gwar5's picture






Wed, 01/22/2014 - 23:21 | 4357824 gwar5
gwar5's picture

Yes that is pretty creepy alright.


The only purpose the Ukrainian government had to send those ominous message is to try to intimidate the protestors into stopping, with the implied threat of future  reprisals.  I don't think they'll fall for it.  

Otherwise, it is counterproductive to let the protestors know they were tagged, and I think this will backfire badly. Ukranians don't want to be pulled back into the old Soviet sphere for this very reason. This probably just confirmed their worst fears and added fuel to the fire. Pun intended. 

I'm sure the NSA is already making plenty of lists in USA.  These serious jackboots will try to secretly round up people and disappear them, which the NDAA allows. 







Thu, 01/23/2014 - 03:43 | 4358142 disabledvet
disabledvet's picture

it's a lot easier to send the threats in the other direction actually.

Wed, 01/22/2014 - 23:43 | 4357871 The Wisp
The Wisp's picture

Like if they could put a Million protesters in Jail they would have done it already ? they can't throw me in a FEMA camp, i have a sense of Humor, they don't want me inciting the troops.. hey guys lets all  push on the fence and see how many bullets they have, or  lets all piss on the  electric fence and watch the fireworks or maybe  everybody they shoot they have to bury don't volunteer for any burial details, and we will see how many guards stick around & eat pizza tonight

Thu, 01/23/2014 - 00:47 | 4357981 TheReplacement
TheReplacement's picture

So you are very long on bitcions right?

Thu, 01/23/2014 - 01:08 | 4358006 IridiumRebel
IridiumRebel's picture

DonkeyPunchCoin is the next big thing.

Wed, 01/22/2014 - 22:41 | 4357679 Wahooo
Wahooo's picture

Nothing will happen until the presses break down. As long as ATMs are spitting up crisp bills, everything is okay.

Wed, 01/22/2014 - 22:43 | 4357685 Oldballplayer
Oldballplayer's picture

Option 3 : the Chicom government eats the loss.

Yes, they will eat the loss. And the chairman's dog will be eating the liver of the clown who ran the trust.

Thu, 01/23/2014 - 05:23 | 4358194 new game
new game's picture

 And the chairman's dog will be eating the liver of the clown who ran the trust.


ah, i sure long for yester year...

dog food. nice

wall street processed into food for dogs

i think i would go out and get a dog!

Wed, 01/22/2014 - 22:44 | 4357686 BaggerDon
BaggerDon's picture


Wed, 01/22/2014 - 22:48 | 4357698 besnook
besnook's picture

for all the bluster it is really not that big a deal. in the end, the .gov is the bank and the bank is .gov. there will some new regulations to codify what the risks actually are for investors causing some turmoil but the chinese will figure out some way without having to fuck around with any useless congress or thieving banking industry that controls the capitol nitwits. and a few people will get hanged for good measure.

Wed, 01/22/2014 - 22:50 | 4357709 Rising Sun
Rising Sun's picture

China is going to default???


So fucking sweet!!!!!

Wed, 01/22/2014 - 22:55 | 4357721 NIHILIST CIPHER

 What effect would this have on the average Joe in the USSA? 

Wed, 01/22/2014 - 22:59 | 4357737 Dr. Engali
Dr. Engali's picture

Huh? What were you saying? I'm gearing up for the count down to the big game so I missed what you said.


Wed, 01/22/2014 - 23:01 | 4357743 wisehiney
wisehiney's picture

That is the scary question. Who get's it this time?

Thu, 01/23/2014 - 00:52 | 4357987 TheReplacement
TheReplacement's picture

Good chance we all die.

Edit:  lol jk.  Probably it gets absorbed and used as a lesson.  Does it matter in the long run (the one where we all die), probably not a lot at this point.  Feel better?

Wed, 01/22/2014 - 22:56 | 4357730 Dr. Engali
Dr. Engali's picture

This is nothing but a bunch of tripe in order to introvert a little fear and lure some shorts into the market. When this turns out to be a non-event the shorts will feel Mr. Yeller's hot poker up their ass.

Wed, 01/22/2014 - 23:00 | 4357741 wisehiney
wisehiney's picture

It has been everywhere for the past couple of weeks. They seem more desperate than usual.

Wed, 01/22/2014 - 23:05 | 4357764 willwork4food
willwork4food's picture

I agree Doctor. If this was the real thing then China would not & could not let that happen. They are not fools. The fund will miraculously be able to pay everyone what is due and reap all the proceeds that shorted them. Kinda like in the good ol' USA.

Wed, 01/22/2014 - 23:08 | 4357773 NIHILIST CIPHER

BINGO DOC        This constant gaming is giving me a headache. Chicoms are on their own.

Wed, 01/22/2014 - 23:22 | 4357821 Dr. Engali
Dr. Engali's picture

That should read introduce not introvert. I hate auto-correct on my iThingy.

Wed, 01/22/2014 - 23:06 | 4357763 syntaxterror
syntaxterror's picture

Will the The Squid sell me credit default swaps on the soon-to-fail-debt so I can bank billions?

Wed, 01/22/2014 - 23:05 | 4357765 chump666
chump666's picture

...and Buffet pre-bailout lineup

A creditor nation (China) about to have a slew of defaults.  Huge credit squeeze will ensure and they are still fighting inflation.  Their buffer is $ reserves...and the so called liquid UST markets. 

Wed, 01/22/2014 - 23:21 | 4357819 WillyGroper
WillyGroper's picture

Well that makes 2 that says Lew's a squawkin. 

Hmmm, NE, The Buffet Coverup?

Wed, 01/22/2014 - 23:11 | 4357782 q99x2
q99x2's picture

Who is .... let me rephrase that, what entity will stop the Goldman Sack, the Janet Yellen or the Mario Draghi  from stealing from their citizens and supplying China with with all the money they need such that the central banks will be able to conquer them as they have the rest of the world?

Wed, 01/22/2014 - 23:16 | 4357803 chump666
chump666's picture

Because China was used by the IMF as the white knight hustler that would buy all the excess Euro bonds.  That mere suggestion by that foul human (head of the IMF), that China would rescue the EU...burnt so many shorts.  If a contagion is set off within China, lol, EU/EUR will crumple.  The debt ridden broken Western world bails out an Asian credit nation that is ready to implode!?!

Load up on a ton of popcorn and vodka.


Thu, 01/23/2014 - 05:33 | 4358202 satoshi101
satoshi101's picture

The FED sent trillions of back door FIAT to Europe, so why not for China?

It's only logical, if your going to rule the world and be 'reserve currency' this is the game, so uncle-nazi-sam steps up and delivers.

No other option since 1972,.... its FIAT to the MOON or BK-DEATH, and we already know for 40 years that FIAT printing can be endless.

Again, nobody on earth wants to be 'reserve currency',... so long as the deal's are 'secret' and the US public is fed Karshashian Twat and her love-pooch on TeeVee, then this can go on forever.


This outcome was predictable, and why Russia/China already approved USA control of the new Post Hillary-2016 IMF-SDR, because its ugly is messy, and no country on earth other than the USA can sell it to their citizens.


Wed, 01/22/2014 - 23:24 | 4357830 NIHILIST CIPHER

q99x2        I'd like to shake down the chinese for one measley USD per person. That would give me 1.3Bil to buy myself membership into "THE CLUB". I'd be in Davos rubbing elbows with all the swells.                                                                                                                                                                                                         PUKE ! Can't think of anything more putrid.

Thu, 01/23/2014 - 07:18 | 4358247 negative rates
negative rates's picture

It's called a UFO.

Wed, 01/22/2014 - 23:15 | 4357798 Yes_Questions
Yes_Questions's picture



wait, Goldman and Matter of Trust with no Muppet reference?


Wed, 01/22/2014 - 23:25 | 4357833 yogibear
yogibear's picture

Let it rip.

Wed, 01/22/2014 - 23:29 | 4357844 TheRideNeverEnds
TheRideNeverEnds's picture
Here's What To Expect

New highs all around?

Wed, 01/22/2014 - 23:43 | 4357872 john milton
john milton's picture

I saw lot of headlines in us papers concerning polluting fumes coming from china, well, if those little particals can travel what about radiation from japan??  keep your testicals up..and glowing

Wed, 01/22/2014 - 23:48 | 4357887 ms8172
ms8172's picture

Unfortunately, I hope something bad happens here so the world can start to get real!

Wed, 01/22/2014 - 23:52 | 4357892 chirobliss
chirobliss's picture

But ZH told me that all trade everywhere was going to be in Renminbi, that the dollar is toast, just like they told me everyone was going to trade all exports in the Ruble.

Damn you Zerohedge, I only hope your advice that gold was going to $5,000 works out coz I went all in at that pullback to $1300 last September.

Thu, 01/23/2014 - 01:14 | 4358011 IridiumRebel
IridiumRebel's picture

Go buy a bunch of Facebook and Amazon and come back to us in 3 years. If these were actual free markets without Fed semen, the calls by ZH and others would be true....but this market is subject to the whims of the oligarchy and their fleet of HFT machines. Go trade, son. I'm sure themarket will go up forever and the dollar and American debt will still be able to perform magic limitlessly.

Thu, 01/23/2014 - 14:22 | 4359610 FeralSerf
FeralSerf's picture

In the final accounting, does it really matter what the mechanism is that steals one's savings? Does it matter whether it's from imagined value of Facebook or Amazon shares or manipulation of the precious metals market? The wealth is gone in either case and can no longer be used to acquire the necessities of life.

How many ounces of gold or silver do you need today to buy that legally required car insurance or pay your tax bill? This is one of the ways the oligarchy will confiscate the last ounce you have stashed.

When you run out of FRNs and you need more ammo, what will you use?

Thu, 01/23/2014 - 00:23 | 4357947 22winmag
22winmag's picture

You think they're talking about this in Davos... or too busy with the hookers and blow?

Thu, 01/23/2014 - 00:45 | 4357980 arby63
arby63's picture


Thu, 01/23/2014 - 01:45 | 4358043 ThirdCoastSurfer
ThirdCoastSurfer's picture

What's the tax situation in China? 25% corporate and 45% individual, right?

Won't this just be a tax write-off for these high net-worth entities?

They've been making a 10% annualized return since inception, so most or all of the principal has been returned and now they'll have a paper loss they can just use against their other investments, right?

This seems like much to do about nothing, except that it's a first for China and shows that they are growing up in the capitalist side of their economy.

Thu, 01/23/2014 - 03:52 | 4358147 disabledvet
disabledvet's picture

"so now the Governmenat is leveraged too." This was exactly the same problem the USA faced in 2008...Governments themselves were leveraged to basically fraudulent financial products "of staggering proportions." Difference is that the USA has a Federal System of government...unlike both Canada and Mexico....States in the USA wield a lot of power. Once the banks defaulted and the Fed's broke the law and monetized the States that could do their own workaround did...and have prospered immensely. Amae goes for Fannie and Fred ironically enough. Besides credit unions you cpuld get actual State Banks suddenly appearing all over the place...and that would mean trillions in lost revenues for Wall Street.

Thu, 01/23/2014 - 07:21 | 4358249 negative rates
negative rates's picture

No, I think the #'s simply overwhelmed them  back then, just like some big foriegn bank failures now could affect some people here in the States.

Thu, 01/23/2014 - 02:03 | 4358054 chump666
chump666's picture

* Shanxi province may provide 50 pct of rescue funds - report    

* ICBC, trust firm could each provide additional 25 pct - report    

* Parties seek to avoid landmark shadow-bank default 

* China Credit Trust in talks with potential white knight (Recasts, adds report on possible bailout)


Thu, 01/23/2014 - 05:44 | 4358206 satoshi101
satoshi101's picture

The only part this story misses is that YELLEN is paying to cover the loss, as under the new terms of USA world dominion, China, Russia, and Europe have said, "If you break it you pay for it", ... much of these 'products' came from USA and likes of GS in the first place.

How long can the USA be the worlds policeman, and the world's BAILOUT last resort pawn-broker?

A long fucking time, until the truth starts coming out.

There have to be some FUCKING nationalist folks in CHINA, and RUSSIA, and EUROPE that don't want to see their country's becoming DEBT bitchds to the insolvent USA.


Thu, 01/23/2014 - 03:07 | 4358113 matrix2012
matrix2012's picture

This could be an execution of an old Chinese saying: "Behead a rooster to put the monkeys in check."

Thu, 01/23/2014 - 05:07 | 4358188 satoshi101
satoshi101's picture

100 monkey rule, have a 100 bad monkey kill one, e.g. slit his throat in front of the others and you will have 99 angelic monkeys for a long time.


In this case its almost Mark Twain twisted, monkeys do bad and get banana's but they're paid for by a third party. Monkeys keep doing bad, and expect 3rd party to purchase bananas's forever.  Monkey's start fighting more often, as they see fighting always means reward. It's in nobody's interest to stop the cycle, the USA outfit supplying the free bananas's is on auto-pilot.

If you told this 100 monkey story to an old timer in China he would say impossible, but like Mark Twain "Truth is always stranger than fiction, fiction MUST make sense".

Now we're talking USA FED/IMF-SDR STUPID and its all on auto-pilot forever, with no end in sight.

Thu, 01/23/2014 - 04:06 | 4358156 satoshi101
satoshi101's picture

So what?

At issue is will CHINA bail them out, or let them go tits up.

Let's hope they NOT do the USA protect the stupid and bail them out.

If they let this thing BK, then it sends the world a SIGNAL that all finance go to CHINA,

Guess what? I think they will and they're playing chess, while the USA is playing pocket-pool.

Thu, 01/23/2014 - 04:54 | 4358159 satoshi101
satoshi101's picture

On the other hand, ... they COULD DO  a FULL USA, ... which should tell you that the world  history is finished, and now that the IMF controls USA and CHINA ... same-same

Industrial & Commercial Bank of China Ltd. and China Credit Trust Co. may together with the government bail out investors in a troubled trust that sparked concern of defaults on high-yield investment products, according to the Time-Weekly newspaper.

ICBC and China Credit Trust may each take responsibility for 25 percent of payments for the 3 billion-yuan ($496 million) trust, the newspaper reported on its website today, citing a person it didn’t identify. The Credit Equals Gold No. 1 product raised money for a coal mining company that collapsed after its owner was arrested. The government of Shanxi province, where the company was based, may take responsibility for the remaining 50 percent, according to the report on the website of Guangzhou city-based Time-Weekly.

Thu, 01/23/2014 - 05:00 | 4358184 satoshi101
satoshi101's picture

Where is this all going?

Here is another version I'm hearing from my finance friends in Beijing. That this will get bailed out as above, but the money will come from the FED in NYC.

The FED doens't want this to blow, cuz it would make the USA look bad if China doesn't bail, but the USA does bail them out at home.

So the USA/FED provides the secret bailout money, no Chinese lose their money the CHINESE save face, the USA saves and doens't give a rat's ass because they can print to infinite.

So the deal here is even sweeter for the Chinese, not only are they to get all the GOLD, but now they're going to get bailed out by the FED to cover their stupid deals.


The problem here is that the Socialist Nazi USA can't appear to be less Capitalist than the Chinese, even though its true.
So during the past 4+ years the USA has been secretely bailing out the EUROPE area, and now its bailing out China.

This should once and for all show all that the USA and/or USD is king for a long time, but behind the scenes men in dark cigar rooms must be shaking their heads and saying "Where is this all going".


Thu, 01/23/2014 - 07:39 | 4358259 matrix2012
matrix2012's picture

satoshi101, your 3rd scenario is an UNBELIEVABLE take but it still fits some senses in this bizarre world... after all the material costs of paper & ink & other printer-related incl. the labor costs are neglectable.


Reminding me of David Stockman!


"The consequences of printing press money are horrendous. If you could make the world rich by having all the central banks print unlimited money, then we have been making a mistake for the last several thousand years of human history." - David Stockman, 2012

Thu, 01/23/2014 - 08:33 | 4358287 Hubbs
Hubbs's picture

Maybe getting too cynical? Nope. I figure the central banks will never let this default happen and will quarantine this and the others set to blow. Taper to 75 billion? I dont think so.

Thu, 01/23/2014 - 04:13 | 4358161 laomei
laomei's picture

Again, look it up... non-insured, high-interest, PR5 investment for multiple years.  With a high buy-in to ensure that if it failed, it would only be a handful of rich people taking the hit.  Sorry gordon chang, you're wrong... yet again... like you always are.

Thu, 01/23/2014 - 04:42 | 4358177 matrix2012
matrix2012's picture

The name such as Gordon Chang is as credible as the Dean Cheng... some parroting clowns seeking a living selling out their souls.

Thu, 01/23/2014 - 04:34 | 4358174 Calculus99
Calculus99's picture

If you lose money on a 'wealth mangement' product sold by a bank then please have the decency to look inthe mirror for the real person to blame when things go wrong.

Also realise that whereas you have losses EVERYONE else got paid...

Thu, 01/23/2014 - 04:48 | 4358180 matrix2012
matrix2012's picture

I have no empathy at the slightest to those high buyers turned into victims of those Wealth Management products... just let them swallow the shits for their blinds and greeds...

Thu, 01/23/2014 - 05:30 | 4358197 vyeung
vyeung's picture

these trust products are dangerous. They openingly sell high yielding products as CD's. They whisper the principle is not guarantee'ed when asked, but shout about the high yield and great return. I could not believe my eyes when ICBC private bank manager tried to hawk these products on us. SHOCKING to say the least. Luckily I understand the principle of "NO FREE LUNCH" so dug deep. These products are sold with a simple black and white photocopy sheet with little to no structure, form or small prints. Heck, most of the time, you can't even clearly see the photocopy since its been redone so many times. Obviously these bank managers are highly incentivised to flog these as they get very good commissions on them. If one goes, the domino effect will be substantial as the faith of secured principle will be rocked as the implicit sell was that. Fact is, it wasn't. It will be a very scary scene and no doubt the PBOC may need to step in at some point for damage control. For it to blow, is a good thing in the long run, but short term pain will be very high.


I'm sure the effects will be felt around the region if not the world. Hong Kong will be impacted substantially.

Thu, 01/23/2014 - 06:13 | 4358213 Dr. Bonzo
Dr. Bonzo's picture

Lol. Same here. I remember back in '07 or so a BOC account manager was trying to push some of this crap on us. He gave a memorized dog and pony show and thought we were ready to sign because I kept saying hmm, yes, okay, hmmm, yes... he was looking at me rather expectingly when he wrapped us his spiel and I said, "I don't understand a word of what you just said." Lol.

A pin prick in the local property bubble would be most welcome. Bring it on.

Do NOT follow this link or you will be banned from the site!