China Created A Record Half A Trillion Dollars Of Debt In January

Tyler Durden's picture

Yes, you read that right. Amid a tumbling stock market, plunging trade data, weakening Yuan, and soaring volatility, China's aggregate debt (so-called total social financing) rose a stunning CNY3.42 trillion (or an even more insane-sounding $520 billion) in January alone.

In fact, since October, China has added over 1 trillion dollars of credit... and has nothing but margin calls, ghost-er cities, and over-supplied commodity-warehouses to show for it... oh and even-record-er debt-to-GDP ratio.

This is what the unprecedented addition of half-a-trillion dollars in one month looks like - Hyman Minsky called, he wants his chart back.

For context, consider this...

 

In the process of this gargantuan debt creation, China has smashed its recently record debt/GDP of 346% pushing it to even more ridiculous levels.

Why is China doing this? Because as we showed three years ago, China needs ever greater stimuli to achieve the same effect:

This is what else we said back in April 2013 which by now seems painfully (and plainfully) obvious:

What should become obvious is that in order to maintain its unprecedented (if declining) growth rate, China has to inject ever greater amounts of credit into its economy, amounts which will push its total credit pile ever higher into the stratosphere, until one day it pulls a Europe and finds itself in a situation where there are no further encumberable assets (for secured loans), and where ever-deteriorating cash flows are no longer sufficient to satisfy the interest payments on unsecured debt, leading to what the Chinese government has been desperate to avoid: mass corporate defaults.

This could be the end as the last bubble standing (in China corporate debt) has begun to burst amid the over-supply of credit.

 

What happens next?

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Blythes Master's picture

We're gonna need moar guillotines.

remain calm's picture

Gold under 1200. They won again.

slicker's picture

Only if you are speculating.  If you are buying for the long haul, BACK THE TRUCK UP!!

Oldwood's picture

We're all going to be rich I tell ya. With that kind of money floating around, it just has to trickle down to the rest of us eventually.....don't it???

COSMOS's picture

https://www.yahoo.com/tech/ancient-silk-road-back-business-173609137.html

The first train connecting Iran and China loaded with Chinese goods arrived in Tehran Monday, reviving the ancient Silk Road trade route and highlighting the economic possibilities for Iran since the lifting of international sanctions, AFP reports. The 5,900-mile trip from eastern Zhejiang province took 14 days, or 30 days less than a typical sea voyage between Shanghai and the Iranian port of Bandar Abbas

Dont look good for the dollar.

Eirik Magnus Larssen's picture

Capital flight is certain to strenghten the dollar further.

NidStyles's picture

I almost vomitted reading that headline.

 

China is attempted to beat the US by printing itself into wealth and making it's future citizens pay for the devaluation...

Squid-puppets a-go-go's picture

I think this is fantastic! This is china saying to the US "If you print money out your arse to prop up your millitary adventures and your fuck-up banks, we'll print money out of nowhere, too. You call bullshit on us, you're just calling bullshit on yourself. Wanna go back to something sound? Sure - we're prepared, stocked up, ready to go."

Gold under $1200 means nothing in the context of these kind of excesses. It hastens the day of disabusement of all fiat

 

random999's picture

tyler what does (inv) mean? inverted,? are bonds yielding 3.5 on average and from what?

sorry i just hate graphs that i dint understand ;)

Urban Redneck's picture

China CANNOT displace the US financially without printing several trillion in Chinese and CNY denominated debt.

The problem with their approach, is that they need to be ADDING foreign customers for their crappy fiat, not LOSING them.

This adds significant risks, but since they have "a bit" more insight into the Chinese economy than we do, perhaps they really do need to accelerate their fiat bubble game to prop up the local economy NOW, even before the head to head matchup with the Oompa Loompa of the Washington Generals...

(Yes, THOSE Washington Generals)

Raffie's picture

They did not win.

If you have gold/silver in your possession that is great.

You should only cash in the gold/silver in dire straights.

The price is irrelevant and should not be looked at because when the current fiat currency crashes and the new one comes out, then you will want to cash it in.

Just hold on to it.

Ouagadoudou's picture

Here is your Minsky moment of the great credit cycle. Buy gold 1200 or 700, in five years it will make no (huge) difference. There will be the have and the have nots again.

tarabel's picture

 

 

How about if we just upgrade to the new multi-user models?

Budnacho's picture

So....Bullish?

 

ZoroAustrian's picture

No matter how much debt they create, we keep borrowing from them, by virtue of our never ending bilateral trade deficit.
Hard to make sense of all the stats, and there a giant problems everywhere but the western focus on china, after the west has done nothing to fix its much longer-running and entrenched bubble economies, is really hard to stomach.

nmewn's picture

Its impossible for a communist to be truthful, its much worse.

macholatte's picture

As Barry the Great once said:

If I say "I'm lying" can you believe that I'm lying? Or does the fact that I'm admitting I'm lying negate the fact that I'm lying because, in fact I am telling the truth about lying. And thus, I'm really lying because I'm telling the truth.

 

Seasmoke's picture

Sell all your Gold you fucking Communists bastards.

Sword61's picture

Meh Why sell the gold when some dupe is willing to sell the gold to them for paper(digital) promises as meaningful as a smile from the lady in the red light district.

One And Only's picture

"What happens next?"

Stocks go up and credit spreads tighten. Who said markets were rational?

new game's picture

financed stocks, self fulfilling loop of prosperity. keep buying til rich, everybody in can get rich, with unlimited credit with no rational collateral. we can be the greatest, china, china...

just copy catting mericia the greatest. cb blueprint round the world...

HardlyZero's picture

Zimbabwe!  Weimar Republic!  Here they come...first in line.  (when?)

nakki's picture

When the Chinese get done printing they're going to make the BoJ look like Austrian's

Ouagadoudou's picture

+1 Nakki. And Chinese people know that. Buying gold, physical (but in China there is "outside of the banking system / state".????. 

Tu use the already common bet on the yuan, imagine 4% of the population convert 50 000 USD in physical ? More than the value of all gold on earth.

Unintended consequence I hear ?

Wile's picture

Clearly unsustainable.

MrGekko's picture

Short SSE the trade of the year? 

Soros prob coming out billions richer at the end of this mess

papaswamp's picture

So the concept of economics is really just a farce....

One And Only's picture

economics is like religion. it's REAL IF you believe. do you believe in god?

Oldwood's picture

You don't have to believe in any law of god or economics if you are capable of feeding yourself, otherwise you best be praying every night to the god of economic tyrant of your choice.

Yen Cross's picture

  If you hide it and kidnap people... I guess it's all good?

 That's the Chinese way. Has anyone looked at Qualcom stock lately?

COSMOS's picture

FREE JOHN CORZINE....

I guess the American model is just let them walk free and slash and burn accounts of normal folks...

I can think of quite a few people that would like to kidnap John Corzine and show him some bondage love with some strategically placed wet towels......

wow thats is crazy's picture

Or Tell the world you have 9000 tons of gold and drive the price up into the stratosphere!

 

Sure we have all this debt be we got gold to back it up!

iggenFlot's picture

I apologize for what follows.  It is off-topic.

Many of the posts I make here are a bit tongue-in-cheek.  Some of you have caught on to that, others not so much.  So in penance to those I’ve offended, I offer a tidbit to make amends:  free silver!  I should quickly disabuse you if you’re thinking I have any plans on disgorging my own personal hoard into your hands.  However, this may be even better for those of you who have over the years heaped opprobrium on “the banksters.”  Because the free silver I speak of will be paid for by these folks.

So please read on if you’re earnest in your desire for 150 ounces or so of free silver in 3 months or less.  I have zero financial interest here – just trying to share what I’ve learned.

What I advise you to do is exactly what I have done numerous times over the past several years.  Go to www.creditcards.com or a similar aggregator site and peruse the various ads for credit cards (you can also go directly to sites for Chase, Citi, Capital One, etc.).  In the case of the CreditCards site, pay particular attention to the cards listed under the Rewards and Cash Back tabs.  Then have at ‘er, applying for as many cards as you can stomach.  I usually go until I start getting real-time rejections. 

Here are several current examples:

Capital One® Venture® Rewards Credit Card

 ·         Enjoy a one-time bonus of 40,000 miles once you spend $3,000 on purchases within the first 3 months, equal to $400 in travel 

Chase Sapphire Preferred® Card

 ·         Earn 50,000 bonus points when you spend $4,000 on purchases in the first 3 months from account opening. That's $625 in travel when you redeem through Chase Ultimate Rewards® 

Chase Freedom®

 ·         Earn a $150 Bonus after you spend $500 on purchases in your first 3 months from account opening

 Blue Cash Preferred® Card from American Express

·        

Get $150 back after you spend $1,000 in purchases on your new Card in your first 3 months. You will receive $150 back in the form of a statement credit.

The idea is to milk the card issuers for the rewards, then simply close the accounts.  Keep in mind that the average application/approval/issuance is quite costly to banks, so they’ll definitely be on the losing end of this strategy.

Simply:

(a)   

Apply for and open the account online;

(b)  

Jump through all the requisite hoops to earn the free $100, $200, $400 or whatever enticement is being offered to sucker you into greater debt slavery;

(c)   

Redeem and collect the reward;

(d)  

Close the account; and

(e)   

Lather, rinse, repeat after a year or so.

 In the interest of full disclosure, you should know that:

(a)   

Your FICO score will drop 100 points or so temporarily;

(b)  

Attention to detail is crucial, so you’ll need to dot all your Is and cross all your Ts so you don’t inadvertently screw yourself by missing a payment, not complying with all the terms of the offer, etc.;

(c)   

This isn’t a good idea if you’re about to apply for credit you actually need (e.g., a home loan).

Ideally, you and the missus (if applicable) would both apply under separate accounts – twice the rewards.  Based on the offers I currently see available on the CreditCards aggregator site, I come up with a back-of-the-envelope figure of $3,150 for the cards I looked at.  I typically apply for 20 or so cards at once for myself and on behalf of my wife.

Take care and good luck!

fowlerja's picture

No apology needed..you are a boots on the ground level swindler..wall street does it all the time...I mean it pays to be a winner..

Jerky Miester's picture

Your apology is just as genuine as your message.  Take care of yourself, sales weasel.

Yen Cross's picture

Fuck Off, you credit pimp!

fowlerja's picture

Hey... don't knock the Chinese... they probably needed to pay for the deserted cities and built up islands...you know to help the construction companies free up some cash for the working masses.. sounds like a plan to me... probably buried somewhere in their 5 year economic plans...

joego1's picture

Everthing is fine.

wealthcycler's picture

Is there a good short hedge worth considering in all this mess, like short FXI??

MSimon's picture

What you need is a long hedge and a hedge trimmer.

 

It is relatively easy to turn a large fortune into a small fortune.

Vlad the Inhaler's picture

When this shit hits the fan, you can be short anything and you will make out like a bandit.  

kiwimail's picture

When this shit hits the fan, you can be short anything and you will---- have a difficult time collecting anythging. 

There, fixed it for you Vlad!

pitz's picture

That'll be one hell of a deflation once it all goes bad.  Yuan to the moon!

Bull Bear Nice Pair's picture

PBOC probably wanted to create ample liquidity for the economy in preparation for the Chinese New Year. It's not such a big deal. Retail sales during this Chinese New Year grew 11%+ by the way.

Dr. Bonzo's picture

Stupid fucks. In for a penny, in for a pound. A trillion here, a trillion there, pretty soon we're talking real money.

I hope they fucking burn.

Global Observer's picture

Economic growth needs growth in money supply. In a debt-based monetary system, growth in money supply comes from growth in debt. But if debt grows too fast, debt servicing costs outpace growth in incomes and ever accelerating growth in debt is necessary to achieve the same level of economic growth. China has reached this phase where ridiculous growth in debt is needed for achieving even small amounts of economic growth.

The only way out is for China to create debt-free money to bring down the aggregate levels of debt. That will also create inflation and possibly depreciate the currency. Not bad by themselves, but not a good idea to do it right away when other fiat currencies rule the roost in international payment settlements. China can resort to it after global payment settlements swicth to gold. After that, it doesn't matter that China's currency depreciates against gold, since there won't be any capital outflows into other currencies, just investments into gold domestically. 

Wilcox1's picture

HehHeh, Thats how you deal with NPL's in a centrally planned market economy!

U4 eee aaa's picture

I used to believe in the wisdom of the Chinese. They produced great thinkers like the Buddha. They have done some great things over the millennia. Then I look at this current crop of 'leaders' in their face saving gestures and I wonder what happened to this once great nation. Did Mao's purges wipe out all the smart ones? They are now run by a bunch of face saving morons!