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China's "Minsky Moment" Is Here, Morgan Stanley Finds

Tyler Durden's picture




 

From Morgan Stanley's Cyril Moulle-Berteaux and Sergei Parmenov, who pick up where our simple chart showing China's "debt nightmare" left off.

We have described in detail over the past two years how we believe China’s twin excesses (excessive investment funded by excessive debt) will inevitably unwind, causing a substantial slowdown in China’s economy, significantly below market expectations. In recent weeks, a trip to the region and further research into China’s shadow banking system have convinced us that China is approaching its “Minsky Moment,” (Display 1) which increases the chances of a disorderly unwind of China’s excesses. The efficiency with which credit generates economic activity is already deteriorating, as more investments are made in non-productive projects and more debt is being used to repay old debts.

Based on our analysis, our baseline case is that China may slow from the current level of 7.7% Gross Domestic Product (GDP) growth to 5.0% over the next two years. A disorderly unwind could take Chinese growth down to 4% in a shorter time frame with potentially disastrous consequences for levered Chinese assets (banks, property) and the entire commodity supply chain (commodity stocks, equipment stocks, commodity-sensitive countries and their currencies).

The consensus is more optimistic and expects China’s economy to grow by 7.4% in 2014 and 7.2% in 2015. Most market participants have concluded that the Chinese economy, despite its excesses, will slow only moderately as the government successfully manages to “soft-land” the credit and investment boom and that, as a result, the impact on global GDP growth could be moderate and is not likely to derail the global developed-market-led expansion. However, one of the more controversial conclusions of our analysis is that global economic growth could be impacted severely enough to cause a global earnings recession.

 

Hyman Minsky was a neo-Keynesian economist who developed a theory called the Financial Instability Hypothesis, similar to the Austrian school of thought, about the impact of credit cycles on the economy. In his 1993 paper entitled “The Financial Instability Hypothesis,” Minsky identified three financing regimes that economies can operate under: the first, which he called hedge finance, is a regime in which borrowers have sufficient cash flows to meet “their contractual obligations,” i.e. interest payments and principal repayment, usually by having a large equity component in their capital structure; the second, speculative finance, is a regime under which borrowers have cash flows that are sufficient to pay interest but not to repay principal, i.e. they must roll over their debts; the third, Ponzi finance, is a regime in which borrowers have insufficient cash flows to pay either principal or interest and therefore must either borrow or sell assets to make interest payments.

Minsky stated that “it can be shown that if hedge financing dominates, then the economy may well be an equilibrium-seeking and containing system. In contrast, the greater the weight of speculative and Ponzi finance, the greater the likelihood that the economy is a deviation amplifying system.” His paper draws the following two conclusions: 1) that “the economy has financing regimes under which it is stable, and financing regimes in which it is unstable” and 2) “that over periods of prolonged prosperity, the economy transits from financial relations that make for a stable system to financial relations that make for an unstable system.” In essence, the longer an economic expansion goes on, the greater the share of speculative and Ponzi finance, and the more unstable the economy becomes.

Our analysis indicates that China’s economy has arrived at that unstable state where speculative and Ponzi finance appear to dominate. From a macroeconomic perspective, very few economies have ever created as much debt as China has in the past five years. China’s private sector debt has increased from 115% of GDP in 2007 to 193% at the end of 2013.3 (Display 2) That 80% increase over five years compares to the U.S.’s 26% in 2000-2005. In recent years, only Spain and Ireland have achieved debt growth greater than China’s. Every year, China is now adding $2.5 trillion of private sector debt to a $9.7 trillion GDP.

There is evidence that this debt growth has become excessive and non-productive. It now takes 4 renminbi (RMB) of debt to create 1 renminbi of GDP growth from a nearly 1:1 ratio in the early and mid-2000s. After the massive stimulus and more than doubling of new bank loans in 2009, the government attempted to stabilize credit growth, but the growth of the shadow banking system exploded instead. Shadow banking now accounts for more than a fifth of total credit in China—or about 40% of GDP from a base of 12% just five years ago. The shadow banking system funnels credit to borrowers who can no longer get loans from the formal banking sector, such as Local Government Funding Vehicles, the property sector, and companies in sectors with massive overcapacity and low or negative profitability such as coal mining, steel, cement, shipbuilding, and solar. Work by Nomura’s Chief China Economist indicates that more than half of Local Government Funding Vehicles, which borrow money on behalf of local governments to invest in infrastructure, have insufficient cash flows to pay interest or principal; the exact manifestation of Minsky’s Ponzi finance regime. Total local government debt adds up to RMB17.9 trillion (nearly $3 trillion) according to the latest, likely understated, national audit. In addition, estimates show that up to one third of all new borrowings are currently being used to roll over existing debt, and that interest payments on debt represent nearly 17% of Chinese GDP—a staggeringly large number (which excludes principal repayments) and which is nearly double the level that the U.S. reached in 2007. (Display 3)

It is clear to us that speculative and Ponzi finance dominate China’s economy at this stage. The question is when and how the system’s current instability resolves itself. The Minsky Moment refers to the moment at which a credit boom driven by speculative and Ponzi borrowers begins to unwind. It is the point at which Ponzi and speculative borrowers are no longer able to roll over their debts or borrow additional capital to make interest payments. Minsky states this usually occurs when monetary authorities, in order to control inflationary impulses in the economy, begin to tighten monetary policy. We would add that this monetary tightening often begins to occur at the time when the size of speculative and Ponzi borrowings have become so large that the demand for additional capital to keep these borrowers afloat becomes greater than the supply of such capital. We believe that China finds itself today at exactly this juncture.

The People’s Bank of China (PBOC) has been slowly tightening credit for nine months. This can be seen in the steady uptrend in interbank financing costs (the one-month Shanghai Interbank Offered Rate, or SHIBOR, is up 220 basis points since last May). The PBOC’s latest Q4 Monetary Policy Report indicates it intends to continue to tighten liquidity in order to control the excessively fast growth of shadow banking credit.

Of the $1.8 trillion in Trust Loans provided by the shadow banking sector, nearly $600bn, or RMB 3.6 trillion will come due in 2014. (Display 4 shows maturities for a sample of half of collective trust loans, which represent one quarter of total trust loans)

Defaults or near-defaults have begun to occur with regularity over the past three months and are likely to pick up in quantity significantly over the next year. As it is becoming more clear that investors may not get all of their money back, interest rates on trust products, wealth management products (WMPs), corporate bonds, and bank loans have risen by roughly 200 basis points in the last year. (Display 5)

So at the same time that large amounts of debt come due and borrowers are increasingly stretched, growth is slowing, monetary policy is being tightened, and market rates are beginning to rise, making new borrowings even more expensive and difficult. The combination of these factors indicates to us that China’s Minsky Moment is approaching.

The unwind of this credit boom is likely in progress, and we expect it to pick up speed over the coming months and quarters. It will likely involve a steady drip of defaults and near-defaults as insolvent borrowers finally become illiquid. Market rates for all assets except central government bonds and central bank bills will likely continue to rise, reflecting increasing market fears of default by shaky borrowers. Asset values will likely begin to deteriorate as stressed borrowers attempt to sell assets to stay afloat. As a result, banks and other financial entities could begin to increase provisioning for bad debts and to reduce credit availability by gradually tightening credit standards. This could lead to a credit crunch where credit to the economy is choked off for all but the safest borrowers.

This rise in defaults, non-performing assets, and credit standards could exacerbate a significant slowdown in economic activity concentrated in the areas most dependent on debt, such as local government infrastructure spending and the sectors with the greatest overcapacity mentioned above.

The impact would therefore be most visible in the fixed investment side of the economy, particularly in infrastructure, real estate construction and related industries (cement, steel, machinery, etc.).

In time, the slowdown in growth and the increase in defaults could become significant enough that the government would intervene and ease policy to moderate the downturn. This policy easing would likely involve a combination of monetary easing and extraordinary liquidity by the PBOC and possibly, some fiscal stimulus. But until then, the impact on assets that are dependent on China’s debt growth and investment spending growth could be severe.

We recognize that it is extremely likely that the Chinese government will attempt to stave off the unwind or at least keep it orderly in an effort to achieve the ever-elusive soft landing. One way that the government could attempt this would be by stepping in to bail out borrowers on the verge of default. A version of this occurred in January, when the well-publicized default of a RMB3 billion China Credit Trust product was averted when an unknown entity stepped in to pay the principal due to investors, though not the remaining interest due (worth approximately 7% of principal). The unknown entity is likely to have been either the local government of Shanxi, home of the coal mining company that defaulted on the underlying trust loan, or the Ping An insurance company, parent of China Credit Trust. The benefit of the government or other entities stepping in to bail out borrowers is that it helps prevent investors from losing money, maintaining their faith in the financial system and ensuring they continue to buy trust products offering rates five times above deposit rates. The drawback is that credit continues to be extended to weak or insolvent borrowers, potentially leading to an even higher level of bad debts in the future. The problem is not eliminated, it is simply postponed. Interestingly, growth is likely to be negatively impacted whether or not the government steps in frequently to prevent borrowers from defaulting. First, scarce capital is being provided to prevent default by insolvent borrowers (“zombies”) rather than being channeled toward productive investments. Second, in order to limit the cumulative size of the bailouts, the government is likely to continue to restrict the growth of shadow banking and lending to these uncreditworthy borrowers. Lastly, market rates are likely to continue to rise, reflecting increasing market unease with the growing number of near-defaults.

Most other analyses we have seen conclude that China could slow more than currently expected by the consensus, but that the global economy is well-positioned to withstand such a slowdown. Our conclusion is a bit more pessimistic. We have found that every 1% of Chinese GDP deceleration could reduce global economic growth by 60 basis points. On a current dollar basis (i.e., not purchasing power parity, or PPP), the global economy is expected to grow about 3% in 2014 and 2015. (Display 6)

Therefore, if the Chinese economy were to slow by 200 basis points to 5.4%, from current expectations of 7.4% for 2014,13 (Display 7) global economic growth would slow to 1.8%, substantially below potential of 2.8%. This could have a significant impact on global equities, as our analysis shows that the global economy needs to grow at least 2.5% for global corporate profits to grow. Thus, a 1.8% pace for global GDP growth would result in earnings down roughly 13%, a huge miss compared to current expectations of 11% earnings growth. At this point, this is not our base case but a risk scenario we are closely monitoring.

 

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Wed, 03/19/2014 - 12:08 | 4567980 So Close
So Close's picture

What?  No Ctrl-P?

Wed, 03/19/2014 - 12:14 | 4568010 Evil Peanut
Evil Peanut's picture

Surprised the Chinese haven't taken a page from the FED's playbook and pull numbers out of thin air

Wed, 03/19/2014 - 12:48 | 4568166 TruthInSunshine
TruthInSunshine's picture

typing this from tiny smart shitty phone - trust me, China has been pulling numbers out of its collective asshole in a quantity and of a margin of misrepresentation that would make anyone at the Fed, Treasury, CBO or BLS positively blush...

...it is coincidental I had a long meeting this morning where there were 5 Chinese citizens here on business and that I was able to discuss this general topic with them and they are in open acknowledgment that China is completely screwed, and that without using the expression of the Minsky Moment, they would agree that everything described therein is precisely what's happening in China j. Real time.

Just wait until this thing gets a full head of steam.

Wed, 03/19/2014 - 12:51 | 4568185 Ban KKiller
Ban KKiller's picture

Long crooked accountants? 

Short MSG? No, make that long MSG as they need something to make the rice noodles taste good. 

Yep. 

Wed, 03/19/2014 - 20:24 | 4570139 macholatte
macholatte's picture

 

 

but does THIS guy care?

This is what a $2 million puppy looks like

http://theweek.com/article/index/258267/speedreads-this-is-what-a-2-mill...

 

now those gotta be some really big turds.

Wed, 03/19/2014 - 12:55 | 4568204 semperfi
semperfi's picture

may we live in interesting times !

Wed, 03/19/2014 - 13:10 | 4568292 maskone909
maskone909's picture

So this is what is refered to as a Minskey Black Hole . Its a debt singularity in which countries collapse under the weight of its own debt.

Wed, 03/19/2014 - 13:36 | 4568407 StupidEarthlings
StupidEarthlings's picture

In any normal universe I would agree.. but these are different times..

I'm wondering if countries even CAN collapse anymore..lorde knows theres sev6that should have by now.   :/

Wed, 03/19/2014 - 13:43 | 4568447 maskone909
maskone909's picture

Like japan! Exactly!

http://youtu.be/dsCzqqvIOms

In the above video around 20 mins or so steve keen breaks down what he refers to as the perpetuall event horizon that japan seems to be stuck on
Oh yeah and lauren lister is in the vid too lol mmmmm

Watch the whole vid to get a concept of the minksy singularity concept with alot of good background info

Wed, 03/19/2014 - 19:36 | 4569990 disabledvet
disabledvet's picture

Japan does not have nuclear weapons or a "PLA."
And...Lake Wobegon!..."borders are being rearranged."

on the one hand you have historical animosities and grudges, on the other hand you have people trying to create these things "where none exists to begin with."

overlay with "internet" and presto! "instawar!"
so no...unfortunately this is not like Japan but it sure looks...a lot like Europe 2008-2012!

Wed, 03/19/2014 - 13:20 | 4568316 TruthInSunshine
TruthInSunshine's picture

I would like everyone to notice how the financial MSM talks about the 100 trillion in global gov't debt & the Chinese RE/debt crisis in the following days, weeks as if these things are a nasty surprise of some kind (when ZH and others have been stressing how unsustainable they were as long as a year or more ago).

Some surprise, riiight...Chinese defaults are going to take the Chinese economy down with a resounding sonic boom, as there is no way the authorities can balance their massive bad debt liquidation, interest rates & inflation inputs in any orderly way.

Now that equity suckers are lined up in their pens, with as many of the sheeple as their ever would be buying the "market," the'financial MSM is going to open up some taps of truth, and leak some disturbing facts, and yell
"SURPRISE!"

Westerners shouldn't gloat b/c there is literally tens of trillions of western investment in the form of factories, plants,'R&D centers, etc., that are now "hostages" to the Chinese crisis.

p.s. I loathe Wall Street, including its two bit criminals which include the likes of Margin Stanley, but this analysis (which was probably written many months ago and is purposefully just now being released) does a great job of explaining the daunting rock-meet-hard-place predicament the Chinese Authorities find themselves in.

Wed, 03/19/2014 - 13:21 | 4568342 maskone909
maskone909's picture

Our first clue that the patient is terminal is when the parisites start fleeing the host(chinese purchase tons of RE everywhere but china ect)
They will have to cntrl-p like a motherfucker or attack the dollar ORRRR invade japan? Its anyones guess

Wed, 03/19/2014 - 19:01 | 4569904 Oracle 911
Oracle 911's picture

China will attack the dollar, it is the easiest thing because Russia is on the board and Iran is on the board, not to mention the pissed Saudis.

Thu, 03/20/2014 - 00:47 | 4571162 old naughty
old naughty's picture

That's the general consensus?

after all, a chimera is a beast with two-heads and one ass.

Key is in the USD holdings. Who's going to btfd, on the way down?

I'd look for an alternative scenario...May be ZH101 had a point?

Wed, 03/19/2014 - 13:41 | 4568439 centerline
centerline's picture

There has been alot of "truthiness" lately.  Hard not to notice.

Wed, 03/19/2014 - 14:04 | 4568552 BandGap
BandGap's picture

All I have to do is wonder why Chinese are not buying Chinese real estate. They know the fucking place is going to blow and they want out.  Chinese society has little pity for those who steal from them, and if inflation ever kicks in the cities will be filled with many hungry peasents.

Go on take the money and run.

Wed, 03/19/2014 - 19:03 | 4569916 thestarl
thestarl's picture

You know TIS has no one learned from history its a command economy run by some of the most corrupt cunts on the planet this was never gunna end well man.

Wed, 03/19/2014 - 21:33 | 4570398 thestarl
thestarl's picture

https://www.youtube.com/watch?v=YW3h4wv8_ko

Also when you watch this check out the smog/pollution this is a fucking disaster  financially enviromentally and then think to yourself this: 

1.Oil 100usd/barrel

2.China net energy importer

3.Average Chinese fucking wage(how on fucking earth i ask can the fucking Chinese flip the swith to consumerism when they can't afford to buy property and secondly spend in excess of half their wages on food and rent ).

4.Water scarcity

5.Top 1% control i'm guessing over 50% of the wealth

6.When its in TPTB over there vested interests to maintain the status quo

When you try to explain to the sheeple the scene over there the response is well India will be the next powerhouse at which point i start laughing uncontrollably 

 

Wed, 03/19/2014 - 12:43 | 4568144 Stuck on Zero
Stuck on Zero's picture

Can you spell: re - hi - paw - the - kaya - shun?

 

Wed, 03/19/2014 - 19:42 | 4570009 disabledvet
disabledvet's picture

that's easy. http://en.wikipedia.org/wiki/Too_big_to_fail

of course "what happens when that doesn't work" means you're still not asking the right question.

google "Hyman Rickover" instead of Hyman Minsky.

Wed, 03/19/2014 - 12:47 | 4568163 booboo
booboo's picture

Anyone named Hymen can't be wrong.

Wed, 03/19/2014 - 13:30 | 4568371 rqb1
rqb1's picture

Almost anything published by ms for public view is worthless.

Wed, 03/19/2014 - 13:32 | 4568395 holmes
holmes's picture

Bring it.

Wed, 03/19/2014 - 12:09 | 4567983 DavidC
DavidC's picture

What about the USA?

DavidC

Wed, 03/19/2014 - 12:12 | 4567998 Tyler Durden
Tyler Durden's picture

US is bad from a "stock" perspective, courtesy of those several hundred trillion in derivatives, which however need modest credit creation (at least from a China perspective) to be kept afloat. China, however, is much, much worse from a flow standpoint.

Wed, 03/19/2014 - 12:14 | 4568007 So Close
So Close's picture

Tyler.. Can you point us at articles discussing, defing, etc. "Flow."

Wed, 03/19/2014 - 12:19 | 4568032 Tyler Durden
Tyler Durden's picture

This article, written long before QEternity was announced, is a good start.

This may also help: Fed purchases of government debt: Flow-share versus stock-share, bu then again it was written by the Fed at a time before the Fed realized it was all about the flow.

Wed, 03/19/2014 - 12:30 | 4568090 So Close
So Close's picture

Thanks buddy!

Thu, 03/20/2014 - 00:58 | 4571181 old naughty
old naughty's picture

Thanks for that, TD...

finally got back on the human touch.

Wed, 03/19/2014 - 12:43 | 4568140 Kirk2NCC1701
Kirk2NCC1701's picture

Tyler, I'm amused that your IT guy(s) have you as "new".

Wait... what happened?  It was fixed after I posted this.  WTF?

Wed, 03/19/2014 - 13:12 | 4568303 maskone909
maskone909's picture

New is akin to new post not new membership. Wait did i just get "/sarc'd" again?!? Damnit

Wed, 03/19/2014 - 12:29 | 4568081 centerline
centerline's picture

Is like a highly leveraged business... all that matters is flow.  And when it dips below a critical threshold, shit gets funny really quick.

Considering that actual collateral is so far removed (in most cases terminally seperated from actual financial instruments), all that remains in most of the global economy is flow... even if it is at the barrel of gun.  The spice must flow.

Wed, 03/19/2014 - 19:48 | 4570023 disabledvet
disabledvet's picture

so the "flow" into Ukraine or North Africa is not a surprise at all then.

Why is the media changing the subject again?
http://en.wikipedia.org/wiki/Operation_Torch

Wed, 03/19/2014 - 12:20 | 4568035 gjp
gjp's picture

There's a lot more people consuming a lot more and producing a lot less in America than in China.  Surely that requires more new credit flow?  I don't believe any macro stats anyway, the biggest bubble is in the tottering overfed and complacent old empire, not the new upstart.  It's common sense.

Love how MS identifies China's Minsky moment, but not a peep from any of these sage and very well-rewarded economists about the utter rot at home ...

Wed, 03/19/2014 - 12:24 | 4568049 ebworthen
ebworthen's picture

Margin Stanley does not have any rotting skeletons in their closets, promise.

They are all in China (*cough*).

Wed, 03/19/2014 - 12:26 | 4568050 LawsofPhysics
LawsofPhysics's picture

Yes, but compare the population density of asian cities with that of american cities.  I bet it would look a lot like Tyler's chart.  In addition, the Chinese has passed americans in terms of the consumption of many things already, so be very careful what you wish for.

Wed, 03/19/2014 - 12:27 | 4568066 gjp
gjp's picture

Undoubtedly they've got their problems too, in spades, but we depend on the bubble far far more than they do.  Their elite may fall, but their populations are used to harder times, not endless bread and circuses.  The reckoning / come-down figures to be worst where the denial is greatest: at the heart of the empire.

Wed, 03/19/2014 - 12:31 | 4568093 LawsofPhysics
LawsofPhysics's picture

Bullshit.  A day of reckoning is akin to shutting off the power/energy supplies.  Doing so in an American city will be no different than doing so in an asian city.  Please. Pull your head out of your ass and get out of the basement.

no man is an island (in america or china).

I have been long sharecropping and a dependable tribe for quite some time now.  I suggest you do the same.

Wed, 03/19/2014 - 12:41 | 4568138 gjp
gjp's picture

um, ok, i think we're on the same page here, regardless of your confrontational approach and whatever personal strategies we've employed

agreed it all comes down to energy and that picture is bleak for China

but it ain't too pretty for the US either regardless of the lies spewed about energy abundance - and we've been paying for energy imports with funny money, while China at least has paid for them with value-added manufactured goods.  Who's energy situation is going to be messier when the status quo keels over?

Wed, 03/19/2014 - 13:05 | 4568268 LawsofPhysics
LawsofPhysics's picture

"Who's energy situation is going to be messier when the status quo keels over?" - You seem to be ignoring the massive amount of energy that is required to simply feed 7+ billion people (much less manufacture anything).

The answer to your question is NO ONE.

At least no one within driving distance of a major city.

hedge accordingly.

Wed, 03/19/2014 - 12:55 | 4568205 Bioscale
Bioscale's picture

I think gjp is right, there is a big difference between an american city and a chinese one. Chinese don't have guns and militarized police with drones.

Wed, 03/19/2014 - 13:09 | 4568289 LawsofPhysics
LawsofPhysics's picture

Yes, Chinese history is very clear on that and the "regime du jour" in China has committed genocide numoerous times before.  They do not have an armed populace, but they do very much have "militarized police with drones".

Are you another fool willing to turn in you weapons for "security"?

Good luck with that.

Wed, 03/19/2014 - 13:44 | 4568378 TruthInSunshine
TruthInSunshine's picture

If any American thinks our government is oppressive (and I'd agree it is growing more so even if I'm using that term on a VERY relative basis)they don't have the first clue as to how cheaply Asian countries, and in particular, ones like China, view human life.

Chinese Officials view their citizens' lives as LITERALLY disposable - as in the equivalency of stray dogs.

I'm not big on defending the creeping police state that the USA increasingly
infringing on Americans' RIGHTS under what is supposed to be a government restrained - not ENABLED - by a Constitution, but even today, Chinese have literally no safeguards against complete abuse whatsoever, and when viewed by that relative metric, Americans still have much hope.

Wed, 03/19/2014 - 14:25 | 4568701 BandGap
BandGap's picture

Guns? they don't need guns. Just ask the 30 or so people on the wrong end of the blade in China a few weeks ago.

As far as drones, when you have a police force that takes their tactics from swarming ants and could give two shits about your Miranda Rights, I think that's a wash, too.

Wed, 03/19/2014 - 19:57 | 4570054 Apostate2
Apostate2's picture

Sorry sport. They have both. 

Wed, 03/19/2014 - 19:40 | 4570002 FreeMktFisherMN
FreeMktFisherMN's picture

the effects of the malinvestment there will be felt for sure, but they are used to frugality and saving, and foregoing consumption. And they don't have a policy of promoting multicultural PC like the Western states do, so there is more cohesion. Them letting the bad businesses go bankrupt is capitalist and better in the long run.

Wed, 03/19/2014 - 12:32 | 4568102 Dollarmedes
Dollarmedes's picture

1) China has 4x the population of the US. What is lacking in quality is made up for by quantity.

2) The biggest bubbles happen where there is the largest/most rapid growth. That isn't the US, it's China.

3) The Fed created $4 trillion in 5 years. The PBoC created $15 trillion in 5 years. Then, there's all the shadow banking credit...

Wed, 03/19/2014 - 12:44 | 4568150 Dollarmedes
Dollarmedes's picture

Regarding point #2: I think the S&P 500 (including dividends) was up 32.39% last year. Of course, I don't really count the stock market as "the US," but the same logic applies there. Hmmm...there might be a correction in the future.

Wed, 03/19/2014 - 12:47 | 4568162 gjp
gjp's picture

But they consume less than a quarter per capita than what Americans do.

you want to believe all the banking stats spewed out by our lords and masters?  Not for me.  Most of that Chinese credit stats is probably a byproduct of all the bullshit USD washing up on their shores.  Wonder what Belgium's credit stats look like now that they are the biggest buyer of treasuries of late ... it's all bullshit and it's all USD-basd.

We have a massive trade deficit three decades running that we pay for with credit.  China, not so much ...

 

Wed, 03/19/2014 - 13:18 | 4568332 Dollarmedes
Dollarmedes's picture

There are lots of stats that are phony, but not all of them. Also, the Chinese government has a reputation for "fudging" the truth, which is why people go there to see things with their own eyes.

Were these observers imagining the mountains of ore and coal sitting outside the plants? Were they imagining the mostly-empty "ghost cities?" (or maybe they were paid shills of the NWO!)

Or do you think the Fed is responsible for not only pumping up the #1 world economy, but the #2 economy as well?

Wed, 03/19/2014 - 12:36 | 4568115 McMolotov
McMolotov's picture

It's the blobbing up of American Citizenism. Make me laugh.

Wed, 03/19/2014 - 12:47 | 4568161 centerline
centerline's picture

Cue an Anon sighting!

Wed, 03/19/2014 - 14:08 | 4568581 24KGOLD FOIL HAT
24KGOLD FOIL HAT's picture

True, the old empire is much more debt laden than the past but The Matrix wants the US to dominate for a while.  Its military is useful to it.  Capital will flow to safety[mainly $ and US] from the BRICS in the next recession. 

A Chinese lady gave me the Chinese view: The US is the top of the pyramid militarily and financially.  China is farther down.  When US owes China $1trn, China is more vulnrable to US temp freezing of UST CUSIPS.  Not totally accurate but in the chess game arena, she has a point.

Did China conquer world manuf. markets or was it given them by the Matrix?  China exists as an export power at the pleasure of the Matrix.  Could China ebb as Japan did in 1990's?

I'm a Martin Armstrong fan.  [He did 9 years in the klink.  Means more than 2 days on the porch.]  He calls for hot money to slosh back to US Canada North Europe shortly. [2 or 3 yrs]

The Chinese even admit they are always behind the west.  They just started reducing the workload on the younger kids of the elite.  Mandatory 2 hours of play during the day, less of that robotic number crunching and memorization.  "You will be creative, princeling. [or else]

Wed, 03/19/2014 - 12:55 | 4568206 SheepDog-One
SheepDog-One's picture

But Tyler's, the bankster overlords promised they learned their lesson about derivatives and promised they'd never ever pinkie swear for reels they'd never mess us up with that again as long as the taxpayer pulls their nuts out of the fire.

Wed, 03/19/2014 - 12:10 | 4567987 cossack55
cossack55's picture

Would love to see the "Minsky Moment" as a musical.

Wed, 03/19/2014 - 12:17 | 4568025 DavidC
DavidC's picture

I don't know why (well, I probably do!), but that made me giggle. Very funny!

DavidC

Wed, 03/19/2014 - 12:25 | 4568052 McMolotov
McMolotov's picture

Minsky Moment: "A young girl's strange, erotic journey from Milan to Minsky."

This is just one more item to file in the "alarming convergence of bad events" box. It's getting pretty full.

p.s. I can think of nothing more unfortunate than a kid growing up with the name Hyman. Mr. Minsky had some sadistic parents. No wonder Hyman Roth was such a bastard.

Wed, 03/19/2014 - 13:25 | 4568356 WillyGroper
WillyGroper's picture

Then there's Rickover. ;)

Wed, 03/19/2014 - 13:01 | 4568245 BigJim
BigJim's picture

 Would love to see the "Minsky Moment" as a musical.

I, for one, think it would make an excellent name for a brand of after-dinner mints. 

Wed, 03/19/2014 - 12:12 | 4567995 LawsofPhysics
LawsofPhysics's picture

It really isn't that complicated folks.  Let me be clear, NO FAITH=NO CREDIT

Tick tock motherfuckers...

Wed, 03/19/2014 - 12:17 | 4568020 Winston Churchill
Winston Churchill's picture

Coming soon to a theatre ,of war, near you.

Wed, 03/19/2014 - 12:16 | 4568018 fijisailor
fijisailor's picture

China is well known for taking decisive action.  Being the inventors of paper money and with a different philosophy on economics we can expect a response much different from what Japan or the West have done.  Something like line the fuckers up and shoot them all.

Wed, 03/19/2014 - 19:59 | 4570061 The Wisp
The Wisp's picture

Hey i Like the Line em Up and Shoot them Fix.. has a catchy, catch on kind of Ring..

Wed, 03/19/2014 - 12:17 | 4568019 narnia
narnia's picture

The extension of credit to no-collateral (state directed ghost cities & other projects that had no business being done) caused the problem.  The fact no lender will step up to the plate to help them refinance black holes is a consequence of that.

Wed, 03/19/2014 - 12:21 | 4568040 ebworthen
ebworthen's picture

Military expansion in the Pacific region fits in here somewhere...

Wed, 03/19/2014 - 12:25 | 4568053 Let them eat iPads
Let them eat iPads's picture

Dr. Copper has declared China dead on arrival.

Wed, 03/19/2014 - 12:32 | 4568100 drinkin koolaid
drinkin koolaid's picture

Wrong.

Wed, 03/19/2014 - 12:36 | 4568120 drinkin koolaid
drinkin koolaid's picture

Google Chrome sucks!

Wed, 03/19/2014 - 12:38 | 4568125 drinkin koolaid
drinkin koolaid's picture

My apologies Let them eat iPads.. Google chrome fuck up.

Wed, 03/19/2014 - 12:25 | 4568054 semperfi
semperfi's picture

And this is how China brings down the Western financial system, well planned out, well timed.  When all the world's paper burns to ashes (including their own), the only thing left standing thru the ashes will be gold (and silver) - of which China and Russia will have the tallest pile.  And the West will be left with just a pile of ashes.  The new rulers of the world financial system will then be China & Russia.  Game over for USA, UK, EU.

Wed, 03/19/2014 - 12:28 | 4568072 LawsofPhysics
LawsofPhysics's picture

And I will sell my farm produce to them in exchange for gold.  Sounds great!

Wed, 03/19/2014 - 13:16 | 4568325 Divided States ...
Divided States of America's picture

You better make sure your farm is well fortified and you have people you can trust who will be protecting it. Otherwise, its just fair game and gonna get overrun.

When people are backed in a corner, (hungry, cold), they will risk their life for anything.

Wed, 03/19/2014 - 13:20 | 4568337 LawsofPhysics
LawsofPhysics's picture

No shit sherlock, we are a sizable farming Co-op of mostly active duty soldiers and verterans.

We remain long sharecropping and physical assets of all kinds.

Wed, 03/19/2014 - 13:35 | 4568403 Divided States ...
Divided States of America's picture

Hey Laws, I agree with you but you seem to be a bit cranky today. Is it because J-bitch Yellen is testifying today?

Wed, 03/19/2014 - 13:54 | 4568495 centerline
centerline's picture

Cool stuff LOP.  Have to say I wish I was in such a position.

Historically, those who leave the big cities did the best in face of collapse (social, economic, war, etc.).  Have a feeling we are going to repeat this on a scale never before seen.

Of course, real skills and adaptability are the key.

Wed, 03/19/2014 - 13:57 | 4568525 Carl Popper
Carl Popper's picture

I will trade my medical skills for your gold and produce lol.  I got plenty of guns and bullets but will also accept bullets, young women, and other forms of payment. 

Wed, 03/19/2014 - 12:51 | 4568183 ebworthen
ebworthen's picture

And China and Russia will also have the functioning factories and workers.

Wed, 03/19/2014 - 13:21 | 4568344 jackstraw001
jackstraw001's picture

Game isn't over until all the ammo is spent, missiles have been fired and the bombs dropped.  And we have a shit load of all of them.  We've started shooting wars for lesser reasons than this.

Wed, 03/19/2014 - 14:20 | 4568659 24KGOLD FOIL HAT
24KGOLD FOIL HAT's picture

Romes colonies broke away before the city fell.  The BRICS will hit recession before the US.  Capital flows to US "safety".

Wed, 03/19/2014 - 12:26 | 4568061 youngman
youngman's picture

The Chinese guy that will win this game is the guy that can find a tenant for all his vacant houses...condos..apartments he owns...

Wed, 03/19/2014 - 12:27 | 4568070 GrinandBearit
GrinandBearit's picture

Don't worry... I'm sure this (in some way, shape or form) will be bullish for the US markets.

Wed, 03/19/2014 - 14:28 | 4568688 24KGOLD FOIL HAT
24KGOLD FOIL HAT's picture

10-4 Grin.  Who gots da best military?  Flow the money there for a while when BRICS have a correction.  US is cleanest dirty shirt.

Wed, 03/19/2014 - 12:29 | 4568082 bvrulez
bvrulez's picture

How is it possible that debt is a problem, when every debt dollar is someone else's asset? may zerohedge please explain this.

Wed, 03/19/2014 - 12:50 | 4568181 The Most Intere...
The Most Interesting Frog in the World's picture

Under "normal" conditions, it's only a problem to the degree the assets become worthless and security interest must be liquidated.  It's a natural phase of any business cycle.  This is heads you win, tails you lose.

Unfortunatly, under the current heads you win, tails you win, world we live in - nobody in the world knows exactly what "risk" is.  To GS it means they temporarily lose value until the federal government and Fed bail them out.  In China, they have been bailing out investors as well.  These bailouts have caused a huge amount of speculation and increased credit - with no risk of loss why not lend - to anyone???.  The "moral hazard" of not letting the natural process work...

If China, as they have recently done, no longer backstops the loans, credit expansion will and should stop dead in it's tracks.  Fear of loss and long lost rationality will return.  Absent massive currency printing, this resultant credit decline would be massively deflationary...  cash is king... and everything else DOWN...

Wed, 03/19/2014 - 13:00 | 4568231 Mike in GA
Mike in GA's picture

The "asset" side is a promise to repay.  What if the promise is not honored?  What if the value of the repayment is not equal to the value at time of "asset creation"?  All a debt holder has is a promise and maybe some non-performing collateral.  (if it were performing there would be no prob with repayment)

What if your government borrows 40% of every dollar they spend?  What if the debt service alone consumes evermore every year of the people's tribute?  What if every government around the world is so indebted and creditworthiness declines raise interest rates to the point that even without a single dollar more being spent the debt service increases?  What happens to the last guy that buys the last bond sold by an about-to-default government?

Wed, 03/19/2014 - 13:08 | 4568282 iLiquid
iLiquid's picture

The problem lies in the mismatch of assets and liabilities, not the debt per se.

When Lehman was finally liquidated there was a residual of 5b (if memory serves) in net assets.  The company failed not because its debt outweighed assets.  It failed because the assets couldn't match the liabilities in duration and liquidity.  Hence disorderly liquidation ensued.

Adding to China's problem is the currency mismatch by ponzi borrowers.

Wed, 03/19/2014 - 16:19 | 4568295 BigJim
BigJim's picture

 How is it possible that debt is a problem, when every debt dollar is someone else's asset?

Every 'debt dollar' gets extinguished on repayment, remember. But the chief problem is that every debt dollar has to be 'rented', via interest payments to the creditor. If those 'debt dollars' were borrowed to finance poor investments, then the interest cannot be paid.... hence default. And as debt is now repackaged and used as collateral for more debt creation, if you start getting people unable to pay their debts, you start a cascade of default throughout the banking system.

This is why 'deflation' is so systemically dangerous in our present system; not price deflation, but monetary deflation, as an economy finds it harder and harder to meet debt repayments if the amount of money in an economy starts shrinking. By definition, too, as our economies' money is all debt, the only way to stop GDP falling is either by the creation of more debt, or an increase in the velocity of money.... and in a recession/depression, people cut spending, so there goes the velocity.

Edit: I forgot to add that as the debt gets repaid, the pool of currency with which to pay the inetrest shrinks; this is another reason why declining velocity is so disastrous in a debt based monetary system - when a lender lends $100 at (say) 10% interest, only $100 has been created, but more than $100 is required to pay it off. This extra currency 'exists' only in the sense that interest payments get recycled through the bank back out into the economy, and, hopefully, back to the debtor so s/he can pay interest. Declining velocity? Inability to pay interest = more defaults.

Wed, 03/19/2014 - 13:56 | 4568517 centerline
centerline's picture

Thanks for the link Seer.  Bookmarked that site.  Will check it out later today.

Wed, 03/19/2014 - 16:10 | 4569278 ThroxxOfVron
ThroxxOfVron's picture

"How is it possible that debt is a problem, when every debt dollar is someone else's asset? may zerohedge please explain this."

 

Imagine that each person in the system believes that a distinct, unique and indentifiable debt/asset belongs soley and wholly to them; but, there is only enough real assets or cash money to pay a small fraction of the outstanding debt assets.

 

Some debts are uncollectable, unenforceable; -bad debts.

One day only a small number of debt payments in a great many can be made.  

Much debt is in danger of being defaulted as the underlying collateral/property/cash/guarantee does not exist or cannot be procurred or cannot be acted upon for whatever reason(s).  -Many debt assets are discovered to be worthless.  

Only priviledged and politically connected persons can trade their debt assets for new money or are allowed to sell the assets at any justifieble price or have them guaranteed for payment by captured central banks/governments.  

Systemic crisis: collapse.  

Just because a debt asset/bond/IOU exists does not mean that it can be called or collected on or sold for any amount approaching anything resembling par either in the immediate or ever...

Wed, 03/19/2014 - 12:30 | 4568091 Charles Wilson
Charles Wilson's picture

"This could lead to a credit crunch where credit to the economy is choked off for all but the safest borrowers..."

(The above should not be considered a solicitation or invitation to contribute to any Ponzi-Nomics Scheme in China or any area controlled by Communist Party Apparatchiks...)

LIKE HELL IT AIN'T!!

The Ghost Cities, "Malinvestment" of Chinese Assets, etc., were all funded for "The Safest Borrowers".  That was the Point!  This tells me that what is happening now is not the finished product.  There is still blood to suck out of any given set of Proles and the only people who should really worry are those who stole massive amounts and now run the risk of getting caught.

"...But I was on the Chairman's Good Side...I coulda' been a contender...I coulda' been somebody..."

"Off to the Slag Heaps, criminal...". 

"Say, comrade, those slag heaps give me an idea.  If we could get the Party to fund this idea, we could make a fortune..."

 

*Sigh*

Wed, 03/19/2014 - 12:36 | 4568117 Squids_In
Squids_In's picture

All of this means ... more QE ... so ... BTFNH !!!

Wed, 03/19/2014 - 12:36 | 4568118 deepsouthdoug
deepsouthdoug's picture

That's a big frickin Minsky Moment!

Wed, 03/19/2014 - 12:37 | 4568124 kristian01
kristian01's picture

This report is at least a month old (http://citywireglobal.com/news/alt-ucits-star-ups-china-bank-short-ahead...) ...It would be great if ZH could give some indication about the timeliness of their 'breaking news' alerts...

Wed, 03/19/2014 - 14:10 | 4568595 roadhazard
roadhazard's picture

Any more current links from you would be appreciated.

Wed, 03/19/2014 - 12:38 | 4568130 besnook
besnook's picture

the chinese is the perfect fiat ponzi. the pboc is a black hole of credit. it can give as much credit as it wants to while absorbing as much bad debt as it needs to keep the whole thing afloat. the chinese were smart enough to structure their "capitalism" model so the money is owed to themselves and not a private parasite central bank.in other words, who cares if i owe myself a trillion dollars?

besides the chinese economy still has a several hundred million person cushion to absorb all the moneyflow on the street level and a lot of gold to back it up in the case of a dollar collapse, which will happen first for minsky reasons.

Wed, 03/19/2014 - 12:50 | 4568178 Byte Me
Byte Me's picture

Good job the armed forces of the PRC have about 5 million inductees, they may soon really need theem.

Wed, 03/19/2014 - 12:53 | 4568180 falak pema
falak pema's picture

Cyril Moule Bertaux...is that belgian or is it french fries?

As for Parmigiano cheese I feel like saying "smile" when the bulb lights up.

The Minsky moment, as anybody who has ever been to Minsk knows, is when the furry brown mink from the north pole meets head on with  russian white sable.

Belarussian mink is better than anything that Peking can imagine in false shadowbanked fable.  

Never buy chinese fable when you can buy Minsky mink or russian sable stamped genuine by Putin himself as if made in Gorky park.

Some moments are eternal. "Parce que vous le valez bien". 

Wed, 03/19/2014 - 13:00 | 4568230 Quinvarius
Quinvarius's picture

But the Yuan is the reserve currency for 25% of the world's poplulation, because that is how big China's population is.  Therefore, according to American MSM logic, it is impossible for anything to happen but growth and skittles for everyone.

Wed, 03/19/2014 - 12:59 | 4568232 Quinvarius
Quinvarius's picture

double post

Wed, 03/19/2014 - 13:03 | 4568255 Kirk2NCC1701
Kirk2NCC1701's picture

Fine.  This seems to suggest that Free-Market forces will actually be allowed to play out in China, which will results in Winners and Losers.

But, ultimately, their system (inflated as it is) will be allowed to self-heal, rather than remain on life-support in ICU.  Imagine that!

If we brush the paper-games aside for a minute, and compare the fundamentals, I still see China as a place where:

> China has a HUGE domestic consumer market, for real and potential

> China has much lower wages than the US.

> China has no real foreign debt.

The US has unvarobale demographics: aging population, that requires ever-increasing health care and elder care.

> Health care and Elder care costs in the US are "out of this world".  It's a total racket (e.g. an arrested Jersey rabi bought a kidney for $10k, sells it for $160k).  NOT sustainable.

> US Education costs are sky-high and also a racket.  University operating costs did not rise nearly as fast.  Their finance guys decided to "invest" the cash on Wall St, and took a beating in 2008/2009.  Upshot?  They decided to increase tuitions, to cover their tracks.  What a racket!

> When US stock and bond markets finally get corrected, so do their leveraged Derivatives markets -- which would crash proportionately faster and harder.  So, the key to keep the Derivatives from going "ballistic", is to "control" the stock markets in the US and EU.  But this can happen only as long as no Black Swan political event swamps their ability to control.

This reminds me of someone trying to convey that "Rome is much better off than those Barbarians outside the City.  We got it all, they are dirty and hungry".  Yeah, sure, keep saying that to the Plebeian Masses, while the Elite and Senators plunder Rome and set up their wealth in a variety of coon-to-come City States all over the Empire. 

History sure does rhyme:  Expect our Elite, Oligarchs and Senators to become Citizens of soon-to-come Neo-Feudal regimes.  Keep stocking, packing, and stacking.  The Barbarians will come, the Deluge will come.

Wed, 03/19/2014 - 13:05 | 4568265 shovelhead
shovelhead's picture

Say what you will about China's precarious situation but at least they won't die a slow death like America with the Ebonic Plague.

Whole cities are succumbing to it's unshakeable death grip.

Wed, 03/19/2014 - 13:31 | 4568390 LFMayor
LFMayor's picture

but... but...   They said diversity was our STRENGTH!

Wed, 03/19/2014 - 13:35 | 4568406 Seer
Seer's picture

Inbreeding works really well, just look at the Brits...

Wed, 03/19/2014 - 19:09 | 4569937 Cthonic
Cthonic's picture
Pfff, they got nothin' on Cuyahoga.
Wed, 03/19/2014 - 13:10 | 4568285 drinkin koolaid
drinkin koolaid's picture

As I stated in a previous comment earlier today about HG. The downtrend in HG is ending as of today because of the selling climax All the bad news is being discounted. Maybe more importantly, bullish for SILVER also, as HG has been weighing on silver. I'll be watching to go long the Shanghai also, not yet though.  I haven't bought Chinese stocks, via FXI, since Dec. of 2008. Market trends don't last forever.

Wed, 03/19/2014 - 13:14 | 4568298 The Most Intere...
The Most Interesting Frog in the World's picture

holy shit man... someting wong...

Wed, 03/19/2014 - 13:16 | 4568322 Seer
Seer's picture

Roller coaster rides are fun!

Wed, 03/19/2014 - 13:16 | 4568323 Seer
Seer's picture

Hey, where's the USS Minsky?

Wed, 03/19/2014 - 13:17 | 4568326 NOTaREALmerican
NOTaREALmerican's picture

Cash flow? 

I thought they printed cash flow?

Wed, 03/19/2014 - 13:30 | 4568382 Carl Popper
Carl Popper's picture

Lol there is a limit.  

 

China is very opaque but I suspect they long ago printed past the point of no return. 

Wed, 03/19/2014 - 13:28 | 4568369 Carl Popper
Carl Popper's picture

 

 

While I love to gloat and smack down china lovers this Minsky moment will affect us too.  

 

No telling how exposed our own banks are. 

Wed, 03/19/2014 - 13:30 | 4568383 Seer
Seer's picture

Banks and, in general, most all businesses.  Gale pretty much outlines it here:

http://ourfiniteworld.com/2014/03/11/reaching-debt-limits-with-or-withou...

Wed, 03/19/2014 - 13:28 | 4568372 pashley1411
pashley1411's picture

I was surprised to see how the Chinese economy is now so closely correlated to world growth.    With every other economy dead-in-the-water, Chinese slowing/retenching will capsize alot of boats.

Wed, 03/19/2014 - 13:31 | 4568386 Seer
Seer's picture

"I was surprised to see how the Chinese economy is now so closely correlated to world growth. "

Did you miss that they were/are a HUGE exporter?

Wed, 03/19/2014 - 13:33 | 4568397 katchum
katchum's picture

The U.S. still has more total credit market debt as a % of GDP than China.

Wed, 03/19/2014 - 13:38 | 4568421 Seer
Seer's picture

Keep in mind that it's all on paper.  However, though it's only paper it's observance, or non-observance as would be the case with defaults, what really matters is PHYSICAL.  The "test" would be to analyze each country's ability to fucntion should their borders be closed down.

Wed, 03/19/2014 - 18:35 | 4569793 Cthonic
Cthonic's picture

 "The 'test' would be to analyze each country's ability to function should their borders be closed down."

After chopping, which half of a siamese twin squirms longer?

Wed, 03/19/2014 - 13:37 | 4568420 moneybots
moneybots's picture

" The question is when and how the system’s current instability resolves itself"

 

How?  Crash.  1+1 ALWAYS = 2.

Wed, 03/19/2014 - 13:39 | 4568428 Seer
Seer's picture

It's like the System reanimates itself after a crash that'll be as big as we're going to see!  Um, no...

Wed, 03/19/2014 - 13:47 | 4568463 NOTaREALmerican
NOTaREALmerican's picture

Re:  1+1 ALWAYS = 2.

Not so.   This is ONLY true amongst the semi-autistic math geeks.

You are forgetting the bullshit rule:   Anything + bullshit = $ ** bullshit

sex + bullshit = romance
morals + bullshit = religion.

Money to the power of bullshit.  Bullshit, ask for it by name!

Wed, 03/19/2014 - 14:04 | 4568556 Carl Popper
Carl Popper's picture

Looks like we are gonna need a helluva lot more bullshit. 

Wed, 03/19/2014 - 14:21 | 4568604 NOTaREALmerican
NOTaREALmerican's picture

Re: Looks like we are gonna need a helluva lot more bullshit.

Literally...  The BEST people in the entire WORLD are working on this "challenge" right now (in a going forward space).

Gentlemen, failure is not an option! 

Wed, 03/19/2014 - 18:59 | 4569897 HardlyZero
HardlyZero's picture

Will Yellen be the spoke (just asking) ?

Wed, 03/19/2014 - 13:44 | 4568448 Seer
Seer's picture

Oh, WAIT!  It's going to be just fine:

 

CEO optimism on the rise! How to play a cap-ex boom

http://finance.yahoo.com/blogs/breakout/ceo-optimism-on-the-rise--how-to...

Wed, 03/19/2014 - 13:47 | 4568461 Toolshed
Toolshed's picture

"a huge miss compared to current expectations of 11% earnings growth."

Rose colored glasses much? Where do these overpaid ass kissers think 11% earnings growth would come from? Have the .1%'ers announced they will all upgrade their private jet and yacht fleets this year? More stock buybacks with interest free fed funding? Huge export surge to Martian consumers? HFT skimming? What nonsense.

Wed, 03/19/2014 - 14:04 | 4568553 Seer
Seer's picture

So, I'm taking it that you have some reservations? </sarc>

Growth is dead.  All we've been doing is stealing/borrowing from the future (in hopes that unicorns will appear and save us).

Wed, 03/19/2014 - 13:49 | 4568470 youngman
youngman's picture

I would think some of the lenders in the gray market are not very nice guys..do not follow the rules..and will get paid back with either your life or something else...Mob mentality rules in China...

Wed, 03/19/2014 - 14:17 | 4568649 Seer
Seer's picture

And this is different than in the "white" market, how? (pay up commrade!)

Wed, 03/19/2014 - 14:09 | 4568586 Armed Resistance
Armed Resistance's picture

"The world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payments on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title."

-Anonymous

Wed, 03/19/2014 - 15:05 | 4568936 Seer
Seer's picture

Nobody does it better than Clarke and Dawe:

http://www.youtube.com/playlist?list=PLDB223DCE781D0606

They're all great, but I really like this one:

http://www.youtube.com/watch?v=9ZdBF0sA0vw&list=PLDB223DCE781D0606

Wed, 03/19/2014 - 19:09 | 4569934 mumbo_jumbo
mumbo_jumbo's picture

"will slow only moderately as the government successfully manages to 'soft-land'"

 

cause as out of touch and inefficient as governments are that is the one thing that the Chinese government can get right......LOL.

Wed, 03/19/2014 - 19:50 | 4570029 The Wisp
The Wisp's picture

China explained in one sentence...

  Please lend me Money to pay back somebody I owe money to, I swear i will pay you back.

Wed, 03/19/2014 - 20:15 | 4570108 real
real's picture

BUT in the END jbm or any other government stooge,comes up empty. Why ? because when all these currencies are valued and reduced based on ability to produce, WE LOSE. simply becuase WE let our congress to sell everything we had to the bankers/wall st. so... where are we now? 

Wed, 03/19/2014 - 20:17 | 4570111 real
real's picture

and by the way  russia knows this and thats why i lean towards germany finally joining russia and china 

FUCK THE PLANE

Wed, 03/19/2014 - 20:17 | 4570112 elwind45
elwind45's picture

I have heard Belgium since early last night and need clarity. When you say Belgium don't you mean Swiss banking? Since Swiss peg euro would it be European to swap Belgium dollars for Swiss Euro's? And if so why you crying?

Wed, 03/19/2014 - 20:18 | 4570120 ExAureus
ExAureus's picture

Whoever wrote this article got it wrong. Minsky was a post-Keynesian, not a neo-Keynesian.

Wed, 03/19/2014 - 20:22 | 4570136 elwind45
elwind45's picture

Maybe because Russia selling gold for Swiss/Belgium/us dollars and not doing something against its interests? Stealing from your legacy is a Yankee thing to do?

Wed, 03/19/2014 - 20:30 | 4570156 jubber
jubber's picture

China Securities Journal commentary: Corporate debt default risks have multiplied  Wow

Wed, 03/19/2014 - 20:46 | 4570196 NeverForgetSilver
NeverForgetSilver's picture

I have been waiting for China to crash. For the last 30 years, every day China has been on the verge of collapse according to our media. I really like to pick up some cheap investment. I even went there last year. Can these people stop bullshitting if this prediction fails again, like the rest?

Wed, 03/19/2014 - 20:54 | 4570230 kahunabear
kahunabear's picture

 "speculative borrowers are no longer able to roll over their debts or borrow additional capital to make interest payments"

 

China or US?

Wed, 03/19/2014 - 21:04 | 4570269 fattail
fattail's picture

China uses their upcoming recession and the flight to quality to unload their US treasurys on the rest of the bag holders.  Geo politics gets alot more interesting.

Thu, 03/20/2014 - 01:43 | 4571274 evernewecon
evernewecon's picture

 

 

How interesting that they describe

those dynamics and label it a Minsky

moment.

 

We're still paying for our Minsky

moment.

 

We're going on year 6 still waking up to

real negative interest rates on

proceeds from selling our banks'

bubble.

 

We don't have the legitimate dynamics.

 

And the people knowingly sucked in

with 5/10% down should have non-recourse.

 

 

 

Sun, 03/23/2014 - 00:26 | 4581724 caconhma
caconhma's picture

Printing money out of thin air is not always bad:

* If this funny money is invested in creation of efficient  capabilities and infrastructure to enhance economic flexibility and vitality then it is investment grade investments.

* On other hand, if new out-of-thin-air money is printed exclusively to increase consumption and for debt writing off purposes, it is a bad news since it is corrupting and destroying productive economy drivers. 

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