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JPMorgan Warns "Avoiding China Defaults Now Will Amplify The Future Problem"

Tyler Durden's picture


Investors in China have been running scared of a default on a high risk trust product; but, as Bloomberg's Tom Orlik notes, they should embrace it. The implicit guarantee that no investments will go sour is one of the key problems with China’s financial system as Orlik adds it encourages reckless lending often to borrowers whose only merit lies in backing from a deep-pocketed government. Crucially, as JPMorgan warns in a recent note, "avoiding defaults is not the right answer, as it will only delay or even amplify the problem in the future."

A default that encourages lenders to price in risk would be a positive development and the CEG#1 was an ideal product to 'fail' with its 11% yield and clear idiosyncratic company problems. However, regulators won't have to wait long for a second chance as JPM warns "There will be a default in China’s shadow banking industry this year as economic growth momentum slows."


Via Bloomberg's Tom Orlik,

Investors Should Embrace Defaults in China’s Fragile Financial System




In the years before the 2008 financial crisis, nominal growth outstripped the lending rate. Outstanding credit relative to GDP was low, keeping a lid on the burden of repayment. Against that backdrop, most borrowers were able to cover their costs and the chances of a default were low.



The situation today is different. Nominal growth has more than halved to 9 percent in 2013 from close to 23 percent in 2007.


Borrowers from trusts and other parts of the shadow financial system face interest rates in excess of 20 percent. An explosion in lending has increased the burden of repayment to more than 30 percent at the end of 2013 from about 19 percent of GDP at the end of 2008.


Lower growth, higher borrowing costs and mounting repayment costs mean defaults by borrowers and even bankruptcy at some small lenders are likely. After initial turmoil, that could actually be beneficial.



And JPMorgan adds:

  • China may narrowly escaped the first default in its shadow banking industry
  • Absence of default has become a major market distortion
  • The challenge is to contain the contagion risk if a default happens


...local media reported that the China Credit Trust has reached a last-minute agreement with investors, with all principal and most accrued interest to be repaid. That means China will again narrowly escaped the first default in its shadow banking. However, the worries remain.


The absence of default has become a major distortion in China’s shadow banking, and we believe that default will happen in 2014 amid economic slowing. The concern is that, if a default occurs, whether investors will walk away and put the whole shadow banking market into a liquidity-driven credit crisis.

But contagion is possible...

The concern about the contagion risk is not groundless. In the past several years, non-bank financing (or the so-called shadow banking) has grown rapidly.


We estimate that the gross amount (i.e. with possible overlapping among sub-components) of non-bank financing in China reached RMB 36 trillion by the end of 2012 (or nearly 70% of GDP), compared to RMB 18.3 trillion in 2010 (or 46% of GDP).


Non-bank financing continued to grow fast in 2013. An update of our estimate suggests that nonbank financing has further increased to RMB 46.7 trillion by September 2013 (or 84% of GDP). The increase was most dramatic for trust assets (an increase of RMB 2.66 trillion in the first nine months of 2013), wealth management products (an increase of RMB 2.82 trillion), entrust loans (an increase of RMB 1.8 trillion) and bank-security channel business (i.e. banks use security firms as a channel to extend loans, which more than doubled in the first three quarters in 2013 and reached RMB 2.79 trillion).



The rapid growth in non-bank financing activities, especially for trust loans, WMPs and banksecurity channel business, has been driven by the perception of implicit guarantee from product issuers and distributors. The absence of default confirmed such perception.




In addition, there is substantial overlap between interbank assets and other components, for instance WMPs investing on interbank assets or claims on trust assets being traded in interbank markets. Nonetheless, banks are closely connected to shadow banking activities, hence possible turbulence in shadow banking will also affect the banking system.

We believe that default will happen in 2014 as the growth momentum slows down, and it will help restore market discipline and mitigate the moral hazard problem in the long run. However, the challenge is how to contain the near-term negative impact, as there could be three possible outcomes (in the order of increasing severity) if a default occurs.

The first possibility is that it is perceived as an idiosyncratic event, i.e. no spillover at all. This is the least likely outcome.


The second possibility is that the contagion risk is contained within a manageable level, i.e. only to similar products or sectors. For instance, if "Credit equals Gold No 1" defaults, investors will move away from collectively trust products that are only sold to wealthy individuals (but not affecting WMPs that are sold to retails investors); investors will worry about the credit quality of similar loans (non-SOE borrowers in mining industry), but not spillover to other products (e.g. local government debt, real estate companies and SOEs); investors question about the safety of trust companies but not banks. We can call it "limited spillover".


The third possibility is a “systemic spillover”. In a mild scenario, it will affect the vulnerable components such as trust loans (48% of trust AUM), WMP investment on non-standard credit products (estimated to be 35-50% of total WMPs) and bank-security channel business. In a worse scenario, it will affect the whole trust industry, WMPs and channel business (with a total gross size of RMB 23 trillion). Rollover of trust products (we estimate 30-35% trust products will mature in 2014) and WMP (64% WMPs has maturity less than 3 months) becomes extremely difficult. The liquidity stress could evolve into a full-blown credit crisis.

What can the government do? In our view, avoiding defaults is not the right answer, as it will only delay or even amplify the problem in the future. Meantime, there are measures the government can take to contain the contagion risk.

First, let defaults happen but establish a transparent legal process (rather than under-table arrangements) to resolve the dispute between different parties.


Second, regulators should tighten supervisory and regulatory framework to contain regulatory arbitrage activities, and clarify the responsibilities in various shadow banking products. The uncertainty in regulatory and legal responsibility behind each product is an important caveat in the market, and could amplify the contagion risk.


Third, impose hard budget constraints on local governments and SOEs, so as to avoid crowding out of credit to other business borrowers and establish risk-based pricing practices.


Finally, avoid defaults that could be easily linked to systemic concerns, such as the default of banks (rather than non-bank financial institutions as the perception of government protection on banks is stronger) or local government financial vehicles or SOEs. Similarly, the default of a WMP could have a bigger impact than a trust product, as the latter does not have maturity mismatch problem and are sold to wealthy individuals rather than retail investors. In that sense, China may miss an "ideal” first default if “Credit Equals Gold No 1” gets bailed out.

Investors in China have been running scared of a default on a high risk trust product; but, as Bloomberg's Tom Orlik notes, they should embrace it.

And they are going to get a chance again soon as there are considerably more of these maturing in the next quarter...


Perhaps that is why 3mo SHIBOR has been rising 9 days in a row...


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Wed, 01/29/2014 - 23:08 | 4382948 ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture
"Avoiding China Defaults Now Will Amplify The Future Problem"


Funny how we can see it in everyone but ourselves.   Now, those Japanese and their zombie banks and their ZIRP what are they thinking?   Am I right people?

Wed, 01/29/2014 - 23:13 | 4382961 nope-1004
nope-1004's picture

This is a rich piece of work.  A 100% wholly insolvent bank commenting on the debt problem of a country.  lol.


Wed, 01/29/2014 - 23:16 | 4382973 LetThemEatRand
LetThemEatRand's picture

"That's why I'm richer than you."  -cufflinks

Wed, 01/29/2014 - 23:17 | 4382977 THX 1178
THX 1178's picture

JPM is starting to sound a lot like Peter Schiff. I'm not sure if that is a good thing or the scariest thing imagineable.

Wed, 01/29/2014 - 23:29 | 4383005 NoDebt
NoDebt's picture

A bit of both, but mostly the latter.

Thu, 01/30/2014 - 01:36 | 4383271 SafelyGraze
SafelyGraze's picture

"JPMorgan Warns "Avoiding China Defaults Now Will Amplify The Future Problem""

I will be using this as an example of "ironic" for the Common Core exam next month that will determine my future

Alanis Morissette

Thu, 01/30/2014 - 04:09 | 4383364 Tall Tom
Tall Tom's picture

Jaime Dimon and the rest of you fuckers at JP Morgan...


TAKE A GOOD LOOK IN THE MIRROR. And bring your Barf Buckets as you will soil the carpets of your new Chinese Owners.


That statement by JP Morgue has got to be the epitome of Hypocrisy.


It is American Financial Institutions that are TBTF. God forbid that the Chinese have that option available.


They are some really blind jerks.

Thu, 01/30/2014 - 05:34 | 4383404 new game
new game's picture

fucking illusion theater...

Thu, 01/30/2014 - 06:38 | 4383434 negative rates
negative rates's picture

When it's over in a heart beat, no one cares about the future problem, cause it never arrives until it's too late. And for them it aint never too late, of course until it is too late.

Wed, 01/29/2014 - 23:35 | 4383020 DoChenRollingBearing
DoChenRollingBearing's picture

I do not know the motives of either, but I would lean more towards taking Schiff's advice.  Buy gold, before JPM takes it all and sends it to China...

Thu, 01/30/2014 - 02:20 | 4383303 disabledvet
disabledvet's picture

that's too much gold. not that it's better than zero but "China" is very quickly becoming the largest economy in the world...with "teething pain."

Sustaining a "skyscraper complex" is not easy. New York City defaulted many times prior to WWII.

It's now building out the largest Underground Railroad movement and terminal system in the world.
This will/does connect the subway systems of Boston and Washington DC.

I can't say I agree with any of it but the project has been underway now for over a decade. And it is MASSIVE.

What China...and East Asia in doing strikes me as far more complex: building an entire civilization "in the sky."

As Detroit and Chicago (et al?) have shown...this is not necessarily a "slam dunk." Los Angeles is interesting because they only built a downtown recently. very interesting the battle between the pedestrians and the cars ou there..."the cars were there first"'problem.

Thu, 01/30/2014 - 00:00 | 4383098 JLee2027
JLee2027's picture

Plausible deniability


JPM is starting to sound a lot like Peter Schiff.

Thu, 01/30/2014 - 00:00 | 4383025 Ignatius
Ignatius's picture

"That's why I'm richer than you." -cufflinks

I'm trying to remember.  Did he twirl his Presidential cufflinks when he testified before Congress?

Wed, 01/29/2014 - 23:15 | 4382974 NoDebt
NoDebt's picture

Read down the thread.  As of this writing, have you ever seen such unanimity of opinion?  A CHINA problem??  Just CHINA??  You gotta be kidding me.  It's far from just China.

Wed, 01/29/2014 - 23:34 | 4383013 DoChenRollingBearing
DoChenRollingBearing's picture

Yes, almost every country I follow is having big bad problems.  And in the USA, just as an earlier thread mentioned, all you have to do is go to second tier cities to see the rot here.

Prepare, hard landing ahead.  I cannot say when...

Wed, 01/29/2014 - 23:18 | 4382981 yogibear
yogibear's picture

It should be an export on being a insolvent bank.

Wed, 01/29/2014 - 23:22 | 4382989 KickIce
KickIce's picture

Is there such a thing as a pot-kettle-black moment?

Wed, 01/29/2014 - 23:48 | 4383065 FreeMktFisherMN
FreeMktFisherMN's picture

just what I was thinking. JPM BOA GS etc should all have gone bankrupt.

Thu, 01/30/2014 - 08:44 | 4383543 Confused
Confused's picture

Of course this is all just super ironice, but the really amusing part is this:


Investors in China have been running scared of a default on a high risk trust product


So by nature they knew what they were getting into. Fuck them.

Thu, 01/30/2014 - 01:10 | 4383244 Antifaschistische
Antifaschistische's picture

"A default that encourages lenders to price in risk would be a positive development"


LOL...maybe we should try that in the US!!! 

Thu, 01/30/2014 - 01:47 | 4383284 satoshi911
satoshi911's picture

Subsitute "Goldman Sachs" for "JPM", and then this story makes some sense.


Goldman wants to do a 'bear stearns' on JPM, by making this look like JPM problem, rather than GS problem.

Who owns ABC-MEDIA? Goldman Sachs or JPM?

Who was the original "TYLER" a GS or JPM employee?

Thu, 01/30/2014 - 02:23 | 4383305 thestarl
thestarl's picture

Yeah the irony of it.

Thu, 01/30/2014 - 07:03 | 4383452 Vice
Vice's picture


Thu, 01/30/2014 - 13:32 | 4384460 Pickleton
Pickleton's picture

I heard he was a crew member aboard an Asiana flight that crashed, along with his buddy Sum Ting Wong.

I didn't know he survived.

Thu, 01/30/2014 - 13:31 | 4384461 Pickleton
Pickleton's picture

I heard he was a crew member aboard an Asiana flight that crashed, along with his buddy Sum Ting Wong.

I didn't know he survived.

Wed, 01/29/2014 - 23:40 | 4383033 The Vineyard
The Vineyard's picture

Much ado about nothing.  The Chinese government will just print more paper like everyone else.  Bastards.  But it should be good for gold.

Thu, 01/30/2014 - 08:02 | 4383500 taketheredpill
taketheredpill's picture



Japan didn't do it.


The US didn't / couldn't do it.


Maybe the Chinese will do it...



Thu, 01/30/2014 - 13:26 | 4384439 Loucleve
Loucleve's picture

Yes, OBVIOUSLY this applies to everyone in the world EXCEPT us.

And these morons can actually say this with a straight face.  Laughable.

Wed, 01/29/2014 - 23:09 | 4382950 Al Gorerhythm
Al Gorerhythm's picture

Wow. Sanctimonious polished turds.

Thu, 01/30/2014 - 01:21 | 4382988 KickIce
KickIce's picture

And no matter how expensive the suit they still can't mask the stench.

Wed, 01/29/2014 - 23:09 | 4382951 TeamDepends
TeamDepends's picture

Shut up, you!

Wed, 01/29/2014 - 23:17 | 4382976 LetThemEatRand
LetThemEatRand's picture

Shut up and jump.  You fuckers.

Wed, 01/29/2014 - 23:36 | 4383001 NoDebt
NoDebt's picture

They are in London.  And it's BANKERS.  Yeah, can you believe it?  That's how you know something wicked this way comes when bankers are leaping to their deaths.  When you're used to winning ALWAYS, failure is NOT an emotion you're equipped to handle.

Wed, 01/29/2014 - 23:37 | 4383026 DoChenRollingBearing
DoChenRollingBearing's picture

Hmm.  I'll try to be watching for "Bankers Falling" signs in our cities.

Thu, 01/30/2014 - 01:18 | 4383225 LMAOLORI
LMAOLORI's picture


"Shut up and jump."


LOL I posted that video on another article today - though I just think it's funny I really would prefer the corrupt bankers were prosecuted and made to serve lengthy prison sentences and abused by their fellow inmates.

Wed, 01/29/2014 - 23:09 | 4382953 BoNeSxxx
BoNeSxxx's picture


Wed, 01/29/2014 - 23:21 | 4382993 Death By Cold S...
Death By Cold Steel Report's picture

I was about to say; this is the definition of the POT calling the Kettle Black! 


PS for the Politcial Correct reading this you can see my face  by looking up the Death By Cold Steel Report via YouTube lol...

Wed, 01/29/2014 - 23:32 | 4383008 HulkHogan
HulkHogan's picture

Thanks buddy. I fell for your PS BS. I won't get that image out of my mind for awhile.

Wed, 01/29/2014 - 23:12 | 4382960 fijisailor
fijisailor's picture
China Warns "Avoiding JPMorgan Defaults Now Will Amplify The Future Problem"

There.  Fixed it for ya

Wed, 01/29/2014 - 23:13 | 4382963 Maxter
Maxter's picture

"avoiding defaults is not the right answer, as it will only delay or even amplify the problem in the future."

Same can be said about the united-states

Wed, 01/29/2014 - 23:13 | 4382964 Wahooo
Wahooo's picture

JPM of all squids calling for Chinese funds/institutions to fail for the good of the whole. Jaimie that swoosh you hear is the blade.

Wed, 01/29/2014 - 23:12 | 4382967 esum
esum's picture

sidestepping the issue in the ussa at taxpayer expense = OK

sidestepping the issue in china = NOT OK


Wed, 01/29/2014 - 23:17 | 4382980 Eyedroppedthewater
Eyedroppedthewater's picture

ForWhom you hit the nail on the head!

Wed, 01/29/2014 - 23:17 | 4382982 fijisailor
fijisailor's picture

China is buying the gold.  JPMorgan is losing the gold.  The Chinese will sacrifice the paper tiger at the altar of Keynes and then rule the world with gold.  They have many years of experience with paper money.

Wed, 01/29/2014 - 23:20 | 4382987 LetThemEatRand
LetThemEatRand's picture

Translation -- JPM offloaded their China default derivatives to the Fed (meaning we taxpayers get the bill) and now JPM is on the short side of the China credit trade, so let it burn.

Wed, 01/29/2014 - 23:21 | 4382992 stant
stant's picture

i should have bought the co that makes the nets for foxcon . and then cut cost on materials

Thu, 01/30/2014 - 08:12 | 4383506 Offthebeach
Offthebeach's picture

"Mommy, where does pink slime come from?"

Wed, 01/29/2014 - 23:28 | 4382996 The_Ungrateful_Yid
The_Ungrateful_Yid's picture

Sharpen the fucking guillotines already

Wed, 01/29/2014 - 23:33 | 4383016 NoDebt
NoDebt's picture

Somebody had to say it.  Might as well be you.

For future reference, the proper format to post that thought is as follows (according to the ZH code of conduct):

"Roll the fucking guillotines, already.  Until then, nothing changes."

Thu, 01/30/2014 - 00:58 | 4383217 RaceToTheBottom
RaceToTheBottom's picture

Nope, keep them dull.  I want to watch them have trouble cutting the scum's heads off

Thu, 01/30/2014 - 07:02 | 4383454 Wahooo
Wahooo's picture

Trade the guillotines for machetes. Bring the banksters eye to eye with the Rage.

Wed, 01/29/2014 - 23:30 | 4382998 Yen Cross
Yen Cross's picture

   J.P.Morgue is so full of shit! They should clean their own outhouse before they start flinging crap to pump their book. I'm no China fan but at 7-7.5% growth J.P Morgue doesn't have any room to talk when the U.S. struggles for a measley 2-3% in comparison. They're just a bunch of asswipes talking their short Asia book, and nothing more.

Wed, 01/29/2014 - 23:32 | 4383003 LetThemEatRand
LetThemEatRand's picture

Sadly, the asswipes are We the People.  The ass is JPM, and it's got a dirty bottom.   JPM screams, and we all run in and change it and give it a new toy.  It's the eTrade baby and we feed it.

Wed, 01/29/2014 - 23:28 | 4383000 HulkHogan
HulkHogan's picture

Completely OT, but since the NSA is cataloging every post on ZH to be used in the future trials of its members, I know this post will be saved for eternity. I lost a dear friend today who, sadly, died way too young. God willing, in my remaining years I hope I can be at least half as nice of a person as you were. I love and miss you deeply.

Wed, 01/29/2014 - 23:33 | 4383010 nope-1004
nope-1004's picture

sorry to hear HH......     :(

Thu, 01/30/2014 - 00:09 | 4383126 Sinnedi
Sinnedi's picture

Sorry hh

Thu, 01/30/2014 - 00:10 | 4383127 Sinnedi
Sinnedi's picture

Sorry hh

Thu, 01/30/2014 - 08:15 | 4383509 Offthebeach
Offthebeach's picture

Trial? You have any idea what overhead that is?Google-trial will do a metadata comment/voice search and a totally fair automated program will text you your guilty verdict and camp reporting date.

Wed, 01/29/2014 - 23:29 | 4383002 suteibu
suteibu's picture

We are living in "Bizarro World."  There is simply no other explanation for it. 

Watch out for evil Superman.

Wed, 01/29/2014 - 23:33 | 4383012 williambanzai7
williambanzai7's picture

This is the example to use when explaining the "pot and kettle" idiom to a Chinese student learning English.

Wed, 01/29/2014 - 23:41 | 4383038 Dr. Venkman
Dr. Venkman's picture

Exactly. And in 20 years a Chinese professor will read this to his class to uproarious laughter like in that spooky commercial the Red team was running a few years back.

Wed, 01/29/2014 - 23:36 | 4383023 Its Only Rock N Roll
Its Only Rock N Roll's picture

PBOC warns "JPM should mark-to-market not mark-to-fantasy their holdings so they do not amplify future problems"

Thu, 01/30/2014 - 00:59 | 4383220 RaceToTheBottom
RaceToTheBottom's picture

The bastardization of the Accounting profession should not be forgotten

Wed, 01/29/2014 - 23:37 | 4383027 Kirk2NCC1701
Kirk2NCC1701's picture

Bullish for US jobs, until you realize that instead of using cheap Chinese labor in China, companies will import that cheap labor.

More H1B1 visas! /sarc

Wed, 01/29/2014 - 23:52 | 4383076 gwar5
gwar5's picture

JPM said that?? Look who's fucking talking! 


We should have let the criminal predator banker class in the USA and EU collapse, put jamie Dimon and the cabal in jail, and sold the banks off in pieces over time.

Thu, 01/30/2014 - 00:17 | 4383141 Al Huxley
Al Huxley's picture

It's very important that trust products and banks be allow to fail, to preserve the integrity of the system and proper pricing of risk - says the fucking Too Big To Fail bank.  The fucking hypocrisy is mind-blowing, how do these guys sleep at night?

Thu, 01/30/2014 - 00:20 | 4383144 Dr. Engali
Dr. Engali's picture

Wow the hubris these fuckers have is amazing. What's you're position on the trust you Tarp taking bankrupt bastards?

Thu, 01/30/2014 - 00:24 | 4383149 Music101
Music101's picture

To me, this is still a WORLD OF DEBT!! Must See Video Below "WORLD OF DEBT" -- Funny Too!

Thu, 01/30/2014 - 00:36 | 4383170 abgary1
abgary1's picture

It's too bad the developed nations didn't take that advice in '08/09.

Thu, 01/30/2014 - 00:48 | 4383199 RaceToTheBottom
RaceToTheBottom's picture

I cannot trust anything that JP Morgan says.  All WS firms are not to be trusted.

Thu, 01/30/2014 - 01:32 | 4383242 satoshi911
satoshi911's picture

Trust Goldman Sachs,

They used to own ICBC, and goldman-sacks sold the worthless shit to the chinese, ... and the USA aka FED will bail the Goldman-Sacks shit out.

Last May 2013 Goldman-Sacks sold their interest in ICBC, but the Chinese don't forget.

The FED bailed out EUROPE, and now they're bailing out the CHINESE.

JPM is just jealous they don't rule the world, I mean the FED.



Most-Profitable ICBC Led Goldman Sachs Under his 13-year leadership, ICBC was transformed from a  Goldman Sachs Group Inc. in May ended a seven-year investment in 2013, ... when Goldman Sachs decided to 'cut & run' from CHINA.
Yes, if  the FED doesn't bail out ICBC investors in CHINA, then GOLDMAN-SACHS is finished in CHINA, and JPM win's,... its that battle of the Titans, but either way the USA and its citizens only exist as cannon-fodder and FED fiat creation. * Can you imagine the Goldman-Sacks to CHINA "Never mind we fucked you, its all good FED will cover, and if you don't like the outcome, will engineer a war and turn the clock back 100 years for CHINA?
Guess what OUTCOME China will choose? Take the FED money and SHUT-UP.

Thu, 01/30/2014 - 06:50 | 4383443 negative rates
negative rates's picture

You must have set that bit coin bag down in a puddle of water and lost some of your coins on the way home.

Thu, 01/30/2014 - 02:11 | 4383293 TheCosmicTaco
TheCosmicTaco's picture

Transparency??? In CHINA???????

Hahahahahahahahahahahaha. Local government officials and politicians in Asia don't become multimillionaires by being transparent, friend. You be smoking some strong shit if you believe those Chinese lies... quit bogarting and pass that joint over here, I need to get funny...

Thu, 01/30/2014 - 04:40 | 4383380 CHX
CHX's picture

Summary: "When we (the western/US banks) got bailed out from bankrupcy that was a good thing, but China banks now should be allowed to fail"

Thu, 01/30/2014 - 04:59 | 4383387 Rodders75
Rodders75's picture

Wilbur Ross says it's time to buy China. And he's no dummy. He got Ireland and shipping exactly right. 


China banking worries 'way overblown': Wilbur Ross

Tom Demark says buy oppty is appearing.

There is a lot of fear around.

You ZH guys are always so f---ing negative.

Thu, 01/30/2014 - 07:31 | 4383469 1stepcloser
1stepcloser's picture

Yeah Let me know when the Ghost Cities near capacity, then maybe.  Round Eye not as stupid as he rooks

Thu, 01/30/2014 - 05:37 | 4383407 GoldIsMoney
GoldIsMoney's picture

Oouch, a default in China should be embraced, and a default in the USA? Well don't let me start thinking.....

Thu, 01/30/2014 - 05:54 | 4383413 Tic tock
Tic tock's picture

This China-thing couldn't have come at a better time, China to publicly announce some sort of State-protection for Bad-debt...really.

Every time these dominoes fall, Capitalists codge some half-assed excuse-for-a-plan, a card here or preserve the Global Financial System. ...and then what, without sufficient employment, with over-production, without yield, with $100 Oil, - anyone can see where the problems are, except elected politicians. How the fuck do they make people so Stupid? Does the term 'Structural Reform' ring a bell? ...Fuck me, let's call the system 'Capitalism', it's broken...that means that one could introduce a total Nationalization of the Banking and Finance Sector (which is effectively what a Fed.Reserve system is) and implement nationwide Price controls...and that would be 'Structural Reform. It would be half-arsed and then some, but that's the scale we're talking of; there are two parts to it, Macro and Micro in one big, single policy. 

The next step will be to ring-fence London and New-York and manage Sovereign Financing without them, or Europe, not because we can, but because any people don't believe in their 'quality-of-life'.   

Thu, 01/30/2014 - 06:43 | 4383439 Rising Sun
Rising Sun's picture

China no default.


You pay now.

Thu, 01/30/2014 - 08:01 | 4383498 SystemOfaDrown
SystemOfaDrown's picture

LOL JPM! Yup, "The pot calling the kettle black."

Thu, 01/30/2014 - 08:09 | 4383505 slackrabbit
slackrabbit's picture

So what JPM are really saying:

"China please let your banks fail so we can take over. The last thing we need is a another year trying to hold our own shit togehter."

Thu, 01/30/2014 - 08:21 | 4383513 MFLTucson
MFLTucson's picture

And everyone knows that Jamie Dimon and company can be believed.  There such an honest group!

Thu, 01/30/2014 - 08:47 | 4383549 esum
esum's picture

The implicit guarantee that no investments will go sour is one of the key problems with China’s financial system..... whereas in the ussa we let the capitalist system function.... just ask chrysler bondholders, the TARP recipients AIG etc... 

Thu, 01/30/2014 - 09:27 | 4383637 bugs_
bugs_'s picture

but china has so much gold.....

Thu, 01/30/2014 - 09:28 | 4383646 unplugged
unplugged's picture

I call bullshit - there will be no default - not allowed.   Ain't.   Gonna.   Happen.   Period.

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