By now it is clear to everyone [5], even the most hardened neoliberals [6], that what is going on in China is nothing short of the complete collapse of a centrally-planned market into sheer chaos, a bubble which while punctuated by the occasional dead cat bounce, is now finished and it is only a matter of time before all the "nouveau riche" farmers and grandparents see all their paper profits wiped out and hopefully go silently into that good night without starting mass riots or a revolution [7].
Since by some counts there are anywhere between 20 and 40 million of them, it could be a close call, one which the Politburo would dread to see to its fruition and as such the Chinese government together with the People's Bank of China have engaged in the most desperate and unprecedented series of market bailouts, one which puts good 'ole plain vanilla QE in the "quaint" category.
But most curiously, it wasn't until China literally threatened short (or any other for that matter) sellers with arrest last night, that the market finally staged a furious rebound.
Will that rebound hold, or like every other dead cat bounce in history, fade quickly if not quietly into memory, we shall see over the next several days.
In the meantime, for those curious what it looks like when a centrally-planned market devolves into complete chaotic hell despite the relentless intervention of the local authorities and central planners, look no further than the chart below...
[8]
And while it may seem that China has literally thrown the kitchen sink at its "maliciously" crashing stock market (odd how there were no complaints about malicious buying on the way up...), the reality is that China still has quite a few tricks up its sleeve, starting with a plain vanilla rate cut, proceeding to expanded stock buybacks, a complete short-selling bank, and finally culminating with that inevitably Hail Mary of every central bank: "outright share purchasing."
[9]
The good news is that what China is doing should be a lesson to all other global markets, which to a lesser or greater extent, are all as manipulated, rigged and centrally-planned as China's. Seen in this light, China is merely a harbinger of what is coming to a banana market near you...
