The Great Recession
It’s not just China.
Private non-financial sector debt hit all-time highs in Canada, France, Hong Kong, South Korea, Switzerland and Turkey.
As interest rates begin to increase, borrowers might start to feel pain even though the ratio of debt-to-GDP has fallen as growth accelerated.
“We’ve seen the world leverage up,” said Tim Adams, the institute’s president who will be in Davos. “It’s been an incredibly low rate environment which I suspect is going to change.”
China risks 'Minsky Moment' as debt reaches saturation
China’s lending boom since the downturn in early 2015 is comparable to the massive stimulus after the Lehman crisis.
The IMF warned in its Global Financial Stability Report that the smaller and medium size banks rely on short-term funding to cover 34pc of their total lending, and most of this is on maturities of three months or less. This exposes them to a “funding shock” if conditions suddenly tighten, forcing them to sell assets into an illiquid market at fire-sale prices.
This is what happened to Northern Rock, Lehman Brothers, and AIG in the global financial crisis when the wholesale capital markets seized up.
China’s Debt Bomb - Danger or Dud?
To doomsayers, China's $27 trillion pile of public and private debt is a threat to the global economy.
America hardly makes any of the stuff it buys from China anymore
US policymakers should worry about China’s capital account, not its current account.
China devaluation risk is rising
Stimulus was comparable in scale China's post-Lehman blitz,
Net capital outflows accelerated last month to the highest level since the currency panic a year ago.
China is in trouble, but this is not yet a 'Lehman' moment for world economy
3. “The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade,” by David Autor, David Dorn and Gordon Hanson
This is the paper that shook the world of economics.
The vast size of China’s debt mountain — which stands at over 250 per cent of gross domestic product,
Before 1971, US global hegemony was predicated upon America’s current-account surplus with the rest of the capitalist world,
Lack of Chinese capital may well force the US to pay a steeper price for external financing,
The Chinese Communist Party is now officially worried about mounting debt.
The author of the commentary was identified as “an authoritative person,” usually code for the top leadership.
China is likely to experience greater financial turbulence than it has seen recently,
The writer is an associate at Oxford university’s China Centre and a senior economic adviser at UBS
I mistakenly took Squawk Box off mute this morning.
Even then, the overwhelming share of this explosion of new credit went to pay interest on the existing mountain of IOUs.
China debt load - $25tn - reaches record high as risk to economy mounts
Beijing has turned to massive lending to boost economic growth, bringing total net debt to Rmb163tn ($25tn)
While the absolute size of China’s debt load is a concern, more worrying is the speed at which it has accumulated — Chinese debt was only 148 per cent of GDP at the end of 2007.Full text
/China/ consumed more cement during three years (2011-2013) than did the US during the entire twentieth century.
Enabled by an endless $30 trillion flow of credit from its state controlled banking apparatus and its shadow banking affiliates,
If you want an analogy, 6.6 gigatons of cement is 14.5 trillion pounds.
The apparent prosperity is not that of a sustainable economic miracle; its the front street of the greatest Potemkin Village in world history.
China has become a credit-driven economic madhouse.
The world economy is in no position to absorb another big deflationary shock.
China’s got problems, but it won’t run out of reserves
Here Comes The Red Swan And Other Reasons To Be Very Afraid
The regime is in a horrendous bind because it has played out the greatest credit spree in world history.
Hysteria over China has become ridiculous
Articles are appearing across the world debating whether Mr Soros and his putative wolf pack will succeed in doing to the People's Bank of China (PBOC) what he did to the Bank of England in 1992 - in the latter case with entirely positive consequences.
China is not a $10 trillion growth miracle with transition challenges;
It cannot be slowed, stabilized or transitioned by edicts and new plans from the comrades in Beijing.
"Letting renminbi float is better than tightening controls"
There are two very good contrarian points one might make against this by-now-conventional narrative.
What is really happening is that the public sector is financing a redenomination of private claims from renminbi into dollars and other hard currency.
China Stocks Enter Bear Market as State-Fueled Rally Evaporates
The Shanghai Composite Index sank 3.5 percent to 2,900.97 at the close,
China has since spent tens of billions of its foreign-exchange reserves in an effort to keep the currency from falling
This contradiction at the heart of the party’s economic and financial reforms was laid bare in August, when China’s central bank surrendered its power to set the renminbi’s “daily fix” against the US dollar wherever it wanted and instead tied it to the previous day’s close.
China’s forex reserves drop by record $108bn in December
It is in this context that we might reflect on the recent announcement of a $512bn fall in currency reserves in 2015.
George Magnus is an associate at Oxford university’s China Centre and senior economic adviser to UBS
Some of this was capital flight.
The US Federal Reserve and other western central banks have failed to anticipate this deflation environment,
Heed the fears of the financial markets
You may wonder why we are worrying about defence of the Chinese currency at all when China still has $3.33?trillion of foreign exchange reserves to throw at the problem.
It would only take three or four more months of this before China’s once mighty arsenal looks less than adequate for such a large economy.
Be Scared of China's Debt, Not Its Stocks
This shadow banking system has enabled a large buildup of bad debt, much of it related directly or indirectly to real estate.
Though most Austrians on the Internet spend their time flogging gold, hyperventilating about inflation and calling various people communists,
Investors have become much more concerned that a larger devaluation may be in the works,
That would indeed be a severe shock to global markets, since it would effectively export the deflationary forces that are overpowering the Chinese manufacturing sector to the rest of the world, and would probably require direct measures to restore the health of the Chinese financial system. But it still seems unlikely to happen, for now at least.
Relative to US levels, China’s GDP per head is where South Korea’s was in the mid-1980s.
If China became as rich as Korea, its economy would be bigger than those of the US and Europe combined.
This is a case for long-run optimism. Against it is the caveat that “past performance is no guarantee of future performance”.
Recent events must be seen in the context of a deeper concern.
The Chinese market is not a normal one. Even more than most markets, this is a casino in which each player hopes to find a “greater fool” on whom to offload overpriced chips before it is too late. Such a market is bound to be extremely volatile. But its vagaries should tell one little about the wider Chinese economy.
Accommodative monetary policy was supposed to spur investment in productive activities
Show steel and raise rates or the financial system will fracture
Accommodative monetary policy was supposed to spur investment in productive activities at home.
Jan 19, 2015
TIMELINE: The Chinese yuan's tumultuous decade
Though most Austrians on the Internet spend their time flogging gold, hyperventilating about inflation and calling various people communists,
Moody’s last week, as they reiterated an earlier warning about the risks in the rapid expansion of Hong Kong banks’ lending to mainland Chinese entities. The exposure of Hong Kong to the mainland grew by 29% in 2013 to 2.3 trillion Hong Kong dollars ($297 billion), accounting for 20% of total banking assets, Moody’s said.
The overall trade-weighted value of the renminbi has not changed in the past decade
After almost two decades of nearly unceasing increases in real estate prices and construction across China,
Housing starts plummeted 25 percent last month from a year ago, the Chinese government announced on Tuesday
Prices have begun falling for new apartments and old ones, and the volume of deals is drying up.
Chinese property is the most important sector in the global economy
I’ll eat my hat. The St Louis Federal Reserve – the last bastion of monetary orthodoxy in the Fed family –
The growth in lending at the Hong Kong subsidiaries of China’s largest banks
Credit Suisse last week downgraded the shares of HSBC,
In particular, Credit Suisse pointed to the potential unwinding of the increasingly popular renminbi carry trade,
"It is difficult to gently deflate a bubble."
"China is getting serious about deleveraging," says Patrick Legland and Wei Yao from Societe Generale.
Wealthy Chinese mainlanders are voting with their feet in eye-popping numbers and preparing to emigrate
First it was reported that mainlanders made up 91% of all applications for investment visas going to Australia since the scheme was launched in 2012. But this was small beer compared to Canada, as it was disclosed there was a backlog of 57,000 applications from China for investment-immigrant visas. The South China Morning Post reported 45,000 mainlanders were seeking to emigrate to British Columbia alone, with an estimated minimum combined wealth of not less than 90 billion Hong Kong dollars ($11.6 billion).
"We've Created A Global Debt Monster" China
Deutsche Bank credit strategist Jim Reid has been on fire lately with his assessment of the Greece situation.
China’s credit-fueled bubble economy is falling to pieces before our very eyes.
To give this number some perspective, China’s GDP is a little over $7 trillion. So China today has a credit market well north of 300% of its GDP.
There is simply no other way to view this than as a bubble.
Indeed, we see all of the clear signs of a bubble in the real estate markets today with countless ghost cities, massive empty malls, and other excess capacity.
The Rockefeller Group sold control of Rockefeller Center to the Mitsubishi Estate Company of Tokyo,
Om att inte förstå Kina
High Road to China, The Movie
Holdings of Treasuries in China, the largest foreign lender to the U.S., fell in June
In May, surging imports pushed the US trade deficit up by 12 per cent to $45bn, which was the largest jump in five years.
De senaste 20 åren av kinesisk dominans på tillväxtmarknaden har sin förklaring i oljekonsumtionen.
Fitch says China credit bubble unprecedented in modern world history
Offshore vehicles and other forms of irregular lending make up over half of all new credit.
Concerns are rising after a string of upsets in Quingdao, Ordos, Jilin and elsewhere, in so-called trust products, a $1.4 trillion segment of the shadow banking system.
Mrs Chu said the banks had been forced to park over $3 trillion in reserves at the central bank, giving them a "massive savings account that can be drawn down" in a crisis,
Overall credit has jumped from $9 trillion to $23 trillion since the Lehman crisis.
The ratio of credit to GDP has jumped by 75 percentage points to 200pc of GDP,
compared to roughly 40 points in the US over five years leading up to the subprime bubble,
or in Japan before the Nikkei bubble burst in 1990.
The agency downgraded China's long-term currency rating to AA- debt in April but still thinks the government can handle any banking crisis, however bad.
"The Chinese state has a lot of firepower. It is very able and very willing to support the banking sector.
China Reserves Pass $3 Trillion
Policy Challenge for G-20
Bloomberg 14 april 2011
Det är en del, företrädesvis fastighetsmäklare och bankekonomer, som försöker intala sig själva och oss andra att bostadspriserna kan plana ut.
China wants to break the ultimate taboo and buy into Western companies such as Apple, Boeing and Intel
Mr Wen said he had spoken to José Manuel Barroso, the president of the European Commission, laying the conditions for Chinese intervention.
"I made clear to him that we are confident Europe will overcome its difficulties and make a full recovery. We have on many occasions expressed our readiness to extend a helping hand, and that we are willing to invest more in European countries."
"At the same time, we need bold steps to give redirection to China's strategic objective. We believe they should recognise China's full market economy status," he said, referring to World Trade Organisation (WTO) rules.
"To show one's sincerity on this issue ... is the way a friend treats another friend," he said, answering a question after his speech.
Det senaste året har kineserna blivit allt mer irriterade och öppet mästrande gentemot Washington. Det är ju trots allt Kina som tagit ansvaret för att hålla igång världsekonomin när USA och Europa sanerar på hemmaplan. Förra året växte Kinas BNP med 10 procent och takten håller i sig i år.
Unscientific but entertaining estimates of how long citizens would need to work
USA hotar med tullar och extremt expansiv penningpolitik
Samtliga faktorer som gjorde dollarn till världsvaluta har försvagats.
Dagens finanskris har avslöjat oroväckande brister i USA:s ekonomi och finansväsende.
Euron blev en framgång. Den är i dag efter dollarn den främsta reservvalutan.
Kina har behövt USA som marknad för sin export och USA har behövt Kina som finansiär av sina underskott – alltmedan de globala obalanserna obönhörligt cementerats.
Vägen till friare växelkurser och kapitalflöden – den värld som Cassel drömde om – är farofylld. Men större flexibilitet i det internationella valutasystemet krävs för att undvika en ”ödeläggelse” i stil med 1930-talets. I denna nya värld kommer världsvalutor som den amerikanska, europeiska och kinesiska kunna leva i fredlig konkurrens och samexistens.
By a vote of 348-79, Democrats and Republicans alike put aside their acrimonious differences and agreed, at least for a moment,
The office AFL-CIO union leader Richard Trumka issued a statement that encapsulated the thinking behind the bill: "the House of Representatives voted to put an end to the Chinese government's currency manipulation, which has destroyed millions of good American manufacturing jobs. For more than a decade, the Chinese government has deliberately manipulated the value of its currency, ballooning our trade deficit with China and costing American communities good jobs....Working people continue to mobilize to elect candidates who will put America's workers first and are committed to rebuilding an economy that values working people. This November we will send a powerful message that we will support those who vote for an economy that works for everyone."
The idea is that there is direct line between China, its currency, its exports of lower-cost goods to the United States, and the erosion of middle-class life and now soaring unemployment. But U.S. manufacturing has been bleeding jobs for decades, since the early 1970s, when the Rust Belt began to decay faced with competition from the likes of Japan and Germany. That continued almost unbroken for the next decades, as countries ranging from Taiwan to Mexico became the low-cost producers (remember Ross Perot's famous warning about NAFTA in 1992 and "the giant sucking sound" of jobs heading south-of-the-border?). California and the state of Washington were hit hard by cuts in defense spending in the early 1990s, and industry throughout the country shed jobs as technology and robotics allowed fewer workers to do more. China is simply the latest example of these trends and hardly a cause.
Of course, reason and fact aren't driving these measures. Emotion, anger and frustration are. There are good reasons to be angry with the state of affairs in this country and frustrated by the inability of the political class to do more than contribute to the confusion
John Connally, Nixon’s secretary of the Treasury, famously told the Europeans that
This is not the first time for such currency conflicts. In September 1985, now 25 years ago, the governments of France, West Germany, Japan, the US and the UK met at the Plaza Hotel in New York and agreed to push for depreciation of the US dollar.
China may post its first trade deficit in six years
The Chinese currency policy is, in effect, a development policy that works by subsidising foreign consumers who buy Chinese goods.
China and Germany unite to impose global deflation
Premier Wen Jiabao calls China’s economic growth path “unbalanced, uncoordinated, and unsustainable.”
Wen, 67, will give what amounts to China’s State of the Union speech tomorrow to the National People’s Congress in Beijing.
Wen says China’s growth model - emphasizing investment, manufacturing and exports over consumption - is creating economic distortions.
He told an online audience on Feb. 27 that 2010 would be “the most complicated year for the country’s economy” as the government sought to control property prices and inflation stoked by $1.4 trillion in new lending last year.
China’s property-market data may be masking the degree that
China property sales also jumped 75.5 percent to 4.4 trillion yuan last year, led by the eastern cities of Zhejiang and Shanghai. The boom follows an unprecedented 9.59 trillion yuan of new loans being extended last year, flooding the economy with cash.
China: 'Dubai times 1,000'?
Now Mr Chanos, America's pre-eminent short-seller, is working to bust the myth of the biggest conglomerate of all: China Inc.
As most of the world bets on China to help lift the global economy out of recession, he claimed that that China's hyperstimulated economy is headed for a crash.
"I find it interesting that people who couldn't spell China 10 years ago are now experts on China," said Mr Jim Rogers, who co-founded the Quantum Fund with George Soros and now lives in Singapore. "China is not in a bubble." THE NEW YORK TIMES
“Bubbles are best identified by credit excesses, not valuation excesses,” Chanos said in a recent appearance on CNBC.
Having accumulated $2,273bn in foreign currency reserves, China has kept its exchange rate down, to a degree unmatched in world economic history.
China Signals That It May Allow Currency to Rise Against Dollar
China sent its clearest signal yet that it was ready to allow yuan appreciation after an 18-month hiatus, saying on Wednesday it would consider major currencies, not just the dollar, in guiding the exchange rate.
In its third-quarter monetary policy report, the People's Bank of China departed from well-worn language on keeping the yuan "basically stable at a reasonable and balanced level." It hinted instead at a shift from an effective dollar peg that has been in place since the middle of last year."Following the principles of initiative, controllability and gradualism, with reference to international capital flows and changes in major currencies, we will improve the yuan exchange-rate formation mechanism," the central bank said in a 46-page monetary policy report.
China’s central bank warned that its counterparts in developed nations face difficult choices
China is growing incredibly fast.
Yet with the dollar at a multi-year low -- and with the RMB still effectively pegged to the dollar -- China ends up getting a stimulus from the external side precisely when it doesn't need external stimulus. Right now, China's authorities want less growth, not more. China's premier famously called China's current pattern of growth unstable, unbalanced, uncoordinated, and unsustainable ...
If it is not too much of an intellectual stretch to say that China is part of the monetary union that is called the United States
Who's the most powerful economist now?
After spending Sunday afternoon in meditation on this subject - that whoever is the most important economist in the world is a smart guy. He's not going to do anything stupid. After all, he didn't get to where he is by being dumb.
Saudi Arabia is running the U.S. economy.
By the Fed's own admission, the growth of global liquidity has reduced the U.S. central bank's ability to control interest rates -- and thus the economy -- in the United States. Think about this: The Fed raises short-term interest rates relentlessly from their 1% low in June 2003, and yet long-term rates sink as global cash flows overwhelm the Fed's domestic policy shifts.
The G7 should, instead, be replaced by a multilateral body that can address such issues more effectively.
The Shanghai market has dropped 20 per cent in a week from the record high of 4,334.92 points it reached last Tuesday.
Alan Greenspan said he was concerned Chinese stocks might undergo a ``dramatic contraction''
When Mr. Greenspan spoke at the annual dinner of the American Enterprise Institute in Washington The Dow Jones Industrial Average had crossed 5000 in November 1995 and 6000 in October 1996. On the day of Mr. Greenspan's speech, the Dow industrials stood at 6437, more than twice the level it reached only four years earlier.
Dated perceptions of China
The U.S. Commerce Department announced Friday that it will reverse its decades-long policy and begin to impose trade tariffs on some subsidized imports from China.
The growing mood in Congress for passing trade protection legislation that could start a series of retaliatory actions around the world that could result in a trade war, a la Smoot Hawley in the 1930s.
Stephen Roach, Chief Economist at Morgan Stanley, writes a rather chilling description of his recent testimony before the Senate Finance committee. He noted that as he entered the room, he looked up and saw a picture of Senator Reed Smoot on the walls, as Smoot was a former chair of the committee and the co-sponsor of the Smoot-Hawley Tariff Act of 1930, largely responsible for the Great Depression.
Roach also accurately notes: