"China Is Not Contained" Credit Market Screams

Tyler Durden's picture

We have seen this pattern before, and it did not end well. While the most mainstream indications of China's "stability" are droned on about as indicating some level of control (i.e. Yuan volatility suppression), the fact is that no matter how hard China tries to centrally plan the entire world, segments of the credit market are screaming "uncontained."

First, China was forced to inject the most liquidity in three years... and it's still not helping support risk...


The last time China supressed FX volatility, in the desperate hopes of holding the balloon underwater long enough for everything to be fine, China's sovereign CDS market was screaming that devaluation was coming... and it did - and large. Now, we see the same pressures building...


And finally, despite record amounts of liquidity being spewed into China's financial markets, China's largest bank - ICBC - is seeing its credit risk explode...


Do these pictures look like China is "contained" as Bernanke and Dalio believe?

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DogeCoin's picture

As long as confidence can be maintained then it is contained.

jcaz's picture

"Confidence", "Fraud"-   tomato, tomatoe.......

Soul Glow's picture

Jaime Dimon made $27 million this year.  How about that for running a bailed out institution?

Jtrillian's picture

The race to the bottom has begun.  Soon China will reveal it's strength (precious metals backed currency) calling the global fiat currency bluff.  But not before pulling the global economy down with it to expose the weakness of it's competitors (ahem USA).  When our congress will not even allow an audit of the FED, let me ask you how much gold do you think WE have to back our currency if needed?  They sure act as though they have something to hide despite widespread voter support for an audit.

China has the problem of a terrible 6% GDP.   This would be a western economies wet dream.

China went into debt and actually built stuff... highways, dams, entire cities.  All we did was quadruple down on the same banksters who created systemic risk via OTC derivatives (which STILL aren't regulated).

China has been preparing for this scenario.  They are pretending to be weak when they are strong (Art of War).  They will soon call our bluff.

If the US had long term vision instead of short term greed, we would have stayed competitive with our manufacturing industry.  Our leaders would have realized that it was a mistake to become over reliant on a nation who wished to compete with rather than cooperate with us.  Instead we took advantage of our reserve currency status and traded paper money for goods of all kinds from China.  As a result, most of the items in your home are made in China. We squandered future generations when we created an unpayable 18+ trillion dollar exponential debt that will inevitably result in hyperinflation and finally default.   We should have broken up the big banks, repealed Glass-Steagall, curtailed OTC derivatives, and used QE to create a second new deal to rebuild the middle class and facilitate real growth.   Instead we just added to our decline by making greedy bankers richer at the expense of everyone else. 

Now are losing reserve currency status (and this has been happening at an increasingly rapid pace since 2008).

With global DEMAND falling, it appears that our middle class (the LIFEBLOOD of the US economy) has reached a tipping point.  More people live in poverty than ever which puts a strain on an already stressed system.   The historic wealth inequality all but guarantees significant social unrest in the days ahead and we know who the military and police will be working with (it will soon be hard differentiate between the two).

While no government is perfect and all eventually come to an end, China is in far better shape than the US economy.  Very soon, this will be crystal clear to everyone except the insane or the dead. 

Kefeer's picture

The US middle class was the main barrier to the changing of the guard..the only real barrier left is the 2nd Amendment, the rest is a done deal as soon as they steal the pensions and other retirement accounts via market meltdown.

Stainless Steel Rat's picture
Stainless Steel Rat (not verified) Kefeer Jan 21, 2016 9:08 PM

The difference between Hillary and Trump is Trump would have negotiated a better bribe from Goldman Sachs.

gould's fisker's picture

You should look up Potemkin villages. The Chinese have invested their treasure on a facade, a mirage to keep hundreds of millions of people employed. Now there are mass layoffs taking place across the country and they have an industrial over capacity that will take years to burn off. It doesn't really matter which country wins, in an inter connected global economy everyone loses.

East Indian's picture

The US exported its paper currency (and digital currency) - both as dollars and treasuries, to China, Saudi Arabia and other countries in return for oil and goods. Those paper currencies will return to the US some day, and foreigners will buy whatever they can with those papers. Unless the US Govt repudiates those papers. But if the US repudiates those IOUs, those who hold those papers will be very annoyed...


And foreigners will buy whatever they can, at whatever rates, because something is better than nothing.


Owned. Literally.

Yen Cross's picture

 He's richer than ALL of us. But Satan is coming for him.

MSimon's picture

Satan =  the other guy's god.

tarabel's picture



On a galactic scale, sure.

On the basis of "Do I want these guys doing this shit next door to me"? Probably not. 

Soul Glow's picture

So they injected $20 billion of liquidity last week and $60 billion this week, so that means $180 billion next week?  The question is when do their reserves run dry?  Also, why not just corner the gold market?

stant's picture

Depeg already . Let her float. Be war by early summer anyway

Soul Glow's picture

You got me thinking.  What if the House of Saud jumps from being pegged to the dollar to being pegged to the yuan and then the yuan does float.  How about that for a guess?

Winston Churchill's picture

Great minds think alike, and add the ruble into it as well,

The US would be the isolated one.

I wonder.

Kefeer's picture

The Saudi's have been meeting with the Chinese and Russians at very high-levels for several months and many trade deals have been made.  The Saudi depeg will shake the western world when it happens, maybe before the end of March, unless the CIA and MI6 can disolve the House of Saud and install their own puppet, but I do not htink so since the Russians showed the US psychopaths some tech that made them do 180 degrees on middle-east strategy.  Yes some of the agreements will be between the Ruble, Yuan and Rupee, as India has been meeting as well. 


Just wait for it.

nmewn's picture

"Nothings wrong with China! Don't sell China! China's fine!!!" Chinese Communist Party Propaganda Department spokesman Li Ying Krammer

gould's fisker's picture

This isn't that complicated except if you are representing the financial establishment and trying to keep the house of cards built since 08 (for the public good)/from blowing away. The argument that the Chinese stock market is too small to impact other markets is a canard, because it indicates clearly that the Chinese economy is in trouble. Where is everyone like Tom Friedman of the NY times who called this the economic miracle, or Krugman. It wasn't a miracle, it was a communist party elite pretending they were capitalists indulging in a central planning orgy of over production which not only created bubbles in China, but made entire countries into bubbles from Australia to Canada, a big part of South America and Asia, etc. So the second biggest economy has set up these dominoes with European economies and banks in the line of fire. And all we seem to be waiting for as the central bankers try to do anything they can to prevent economic gravity from taking effect, is which straw will break the back of the whole worldwide rotten edifice. Who knows exactly when, but how can years of economic malpractice end any other way with so little growth?

Kefeer's picture

Having no external debt, patience and over 25K tonnes of gold helps.

gould's fisker's picture

They've taken on approximately $30 trillion in debt over the last decade. Just because they don't account for a good part.of thru shadown banks and informal credit instruments doesn't mean such debt doesn't exist. And anybody who believe their numbers to begin with when they harass and threaten to.jail market partipants, go ahead and believe their statistics. They are a dictatorship, as Russia is becoming, and I know some commenters' knees go weak on this site admiring China and Russia. I don't really give a rats ass, except.I'm not investing on their data. Go ask putin how the ruble is doing, after all these stories about how China and Russia would rule the world economically. How's that working out?

MSimon's picture

There was a time when Japan (production miracles) was going to rule the world.

Jstanley011's picture

Hmm. Eight years ago it was, "Subprime is contained." Now it's, "China is contained." Is it just me or has the size of this bubble inflated to proportions several orders of magnitude bigger than the last one within just one business cycle?

NotApplicable's picture

"Cross-cascading defaults, Bitchez!" -- Bubbles Greenspin

U4 eee aaa's picture

I guess this is why the wide volatility swings are being predicted. With the huge cash injections, the algos will bob and weave around them. So they will short until the CBs screams and pumps, Then when the injections flood the market, the algos will duck out at the speed of light driving the indexes back up to ridiculous levels. The algos will come screaming back in driving them right back down again. Rinse and repeat.

The CB's may as well just cut the algo firms a check because if they think they can counter automated, speed of light trading, they will get their heads handed to them every time.

New and improved bear 2.0

Wild Theories's picture

so... lets see... March?

after Chinese New Year, just before or after the next Fed hike?

am87's picture

China is contained for the folks surprised by Dilma's savage destruction of brazil.  Europe is converting to hell thanks to sanctions designed to ruin their economy... Do you want to own austrian stocks when the ruble collapses? Do you want chilean banks when brazil erupts into violence?   Contagion is not in the vocabulary of msm propaganda mills.   

am87's picture

Who is the worlds biggest champion of china?  Nicolas Maduro... 2nd place Lagarde

Aussie Battler's picture

Lemme they'll do whatever "guess whatever it takes"

How RETARDED are Central Bankers to allow crack-up booms but no recessions.

Like expecting to be able to drink a bottle of tequila without a hangover. No wonder the financial system is screwed, too much distortion of consequences, can-kicking and genuine BULLSHIT. 

Yen Cross's picture

 China is just getting slowed down.

  When I read articles about copper getting cornered, then do the extraction numbers, kinda like Aluminum.

 I see massive surpluses, and phantom stockpiles.


Yen Cross's picture

 There's NO way those credit default swaps will ever get covered.

 Welcome to the Ponzi Circus.

12357111317's picture

:-)   MSM are saying the enormous market of China needs to drop, but everyone should buy stocks anyway.  :-)