Debt Rattle March 18 2015

[Raúl Ilargi Meijer]

DPC Station at foot of incline, American Falls, Niagara Falls 1890 • The US Economy Just Keeps Disappointing (Bloomberg) • ‘Hell Will Break Loose’ If
[See the full post at: Debt Rattle March 18 2015]

[Raleigh]

Mish had a good video presentation from Anne Stevenson-Yang on China – from about the 4:00 minute mark to 28:00 minutes. Very interesting. She does not see the growth that China is saying they have – new credit comes from rolling over old loans. There’s nothing left after that. She believes shadow banking is about 55% of funding. “Nobody really has a good grip on who owns all that debt. So allowing debt instruments to go belly up can create this chain of consequences that any government would be terrified to be confronted with. Therefore, you keep everything rolling over. Right now the amount of capital that’s required to keep it rolling over has reached a dangerous level. We’re putting about 1.2 trillion renmimbi into the system every day just to keep the banks liquid, and that creates all sorts of opportunities for failure.”

My math is probably wrong, but I come up with $192 billion U.S. dollars into the banks every single day just to keep it rolling over. No wonder fortune cookies everywhere are saying, “I see a big trip coming your way. You will be leaving for overseas markets with big suitcases.”

I feel for the current leader. No doubt he made his fortune skimming just like the rest of the elite, but he can’t exactly escape. The last few leaders put on one hell of a party, they were all making out like bandits, having bought up most of the world’s good real estate, and the ball is being kept in the air because they all fear their own necks. The lady in the video presentation even talks about being chased by a mob of people who had been forced off their land (where they had citrus groves) for some ridiculous project that never did get off the ground. But a lot of foreign capital went into that project, and the owners are now living in a mansion in San Francisco.

The ordinary citizens of China are going to be left with one hell of a mess when this all blows up, and the rest of the world gets to have their property prices pushed to the moon by a bunch of crooks. As Ilargi says, “monopoly money”.

https://globaleconomicanalysis.blogspot.ca/2015/03/reality-check-how-fast-is-china-growing.html

[John Day]

Bravo, Bolivia!

@Raleigh,
What is the secret Chinese Plan-B? Plan-C? Plan-D?
It’s a rhetorical question.
These guys are versed in 3200 years of continuous written history of their civilization, and archeology going back way farther.
That’s good and bad, and Chinese history is replete with the “paralysis of analysis”, but not really the lack of analysis…
“We shall see”, as the story about good or bad luck in the sequential events of life keeps repeating.
(Man finds fine horse: Good luck
Son breaks leg falling from horse: Bad luck
Soldiers come to take young men to war and leave son: Good luck
Rinse and repeat)

[Raúl Ilargi Meijer]

The China numbers are just about what I’ve been saying all along. But even then. China’s latest move is to allow local governments to roll short term into long term debt, but that doesn’t cover shadow banks. And 55% is still a low number at that particular level. Local officials have been making their numbers look good thru shadow loans for a long time. Much of it in roads to nowhere and land/real estate speculation.

[Raleigh]

Thanks, Ilargi. So these shadow banks are probably larger than 55% of funding, and they’d be wanting higher returns on their loans. How are these SOE’s paying for these loans because, God knows, they aren’t paying for themselves (they’re all sitting empty and wouldn’t be garnering any income)? The government is allowing the short-term loans to be rolled into long-term loans. Is the government supplying U.S. $192 billion PER DAY just to allow the local governments to pay off the shadow banks?

$192 billion X 365 days per year = get out of town fast! I don’t care what anyone says, but this can’t be maintained.

[Author]

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