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Thread: Will China's bubble burst before the canal comes?

  1. #1
    Para aquí para acá Jonh's Avatar
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    Default Will China's bubble burst before the canal comes?

    Probably, according to one economic analyst.

    By Harry S. Dent Jr., Senior Editor, Survive & Prosper

    Dear Subscriber,


    I have been warning for years that the greatest — and final — bubble to burst, in this century of bubbles, would be China. Now that cracks in the great red dragon's economy are widening, it's time to prepare for the worst.


    China has a unique, state-driven model of capitalism that clueless economists have hailed as the "new model for economic success."


    But I say China’s model (and economy) will fail drastically, proving once and for all that government-planned economies do not work as well as free market capitalism balanced by democracy.

    China has massively overbuilt everything: industrial capacity, housing, offices, malls, infrastructure, you name it.
    It's overbuilt twice as much, and for twice as long, as any other government-driven emerging economy ever has. In fact, the last government-driven overinvestment spree occurred in Southeast Asia, and it resulted in a financial crisis between late 1997 and late 2002. And China has made that situation look puny by comparison.
    There is no way this can end any way other than very, very badly. The question is: when will an economic collapse come? The answer is, sadly: sooner than you'd like.
    Here are the seven signs the end is near...

    Sign #1: Recently, a large Chinese property developer decided, for the first time, to discount condos by 40% when sales stalled.
    The thing is, this is a shocking step to take in China. It's just not done.
    The affluent Chinese line up to buy overbuilt, empty condos at insanely overpriced levels. They don't rent them out because there is no rental culture in the country. Ninety percent of homes are owned. They simply buy the property and let it stand empty... so when a developer cuts prices and thus devalues their investment, they get bitterly angry.
    But this discounting trend is likely to spread rapidly now as more developers are forced to discount prices just to raise cash and avoid bankruptcy.

    Sign #2:
    The richest man in China, with $31.9 billion, is Li Ka-shing. He and his son, Richard, have sold $3 billion of prime commercial properties in the last nine months. That tells me the smart money is leaving before the bubble bursts!


    Sign #3:
    A Bain & Company/Chinese bank survey of affluent households showed that 60% of the rich are considering moving overseas because they don’t trust government or the bubble, pollution levels are getting intolerable, and they want to get their kids an English-speaking education.


    Sign #4:
    A number of major developers have gone bankrupt. These developers are highly leveraged and pose the greatest threat to the banking system, which has grown more through shadow banking and sub-prime lending in the last few years than anything sustainable. The worst new statistic, as developers pull back, is that housing starts in floor space dropped 37% in the first four months of 2013.


    Sign #5:
    Bad loans are rising fast in China. The country's private debt is now higher than that of the U.S. or Europe, as you can see in the chart below. At 190% and rising, it's higher than emerging countries in Asia in 1998, when private debt peaked at 160% before a five-year currency and financial crisis.

    But note that this chart doesn't include financial sector or government debt. When you add those numbers into the pot, my estimates of the country's total debt is around 277% of GDP. That's much higher than other emerging countries like Brazil, which is at 152%, India at 130%, and Russia at 78%.
    Emerging countries don’t have nearly the private debt of developed nations because their incomes are low and their citizens and businesses are less creditworthy. So for China to have a total debt of around 277% is unprecedented for an emerging country.

    Sign #6:
    A major agricultural co-op closed its doors and investors couldn't withdraw their deposits.


    Sign #7:
    A major Chinese solar company defaulted on its bonds — the first to occur in China.

    Thus far, the government has quietly bailed out or covered over the defaults and cracks. But they're now hinting that they're going to let more defaults happen to "slowly let the air out of the balloon."

    The Chinese government simply doesn't have a clue. Actually, no government does. They always think they can deflate bubbles slowly to ensure a soft landing.

    Soft landings never occur in major bubbles.

    Bubbles don't correct. They burst.


    They get so extreme — and China's bubble is the most extreme of all — that once they start to unwind, you get an avalanche of deleveraging and defaults that build on each other.

    Bubbles become black holes.

    I expect major problems in China likely by the summer or fall.

    When China blows, there won’t be an effective stimulus policy from the U.S., Europe, or Japan, to counter such a shock. It will make the U.S. sub-prime crisis look like a
    Sunday afternoon picnic.

  2. #2
    TRN Science officer bill_bly_ca's Avatar
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    Default Re: Will China's bubble burst before the canal comes?

    Apparently it took the US almost 100 yrs (1908 to 2008) to build a 50 Trillion banking system - China took its que from Henry Paulson in 2008 and they created an up to estimated 50 trillion debt based banking system from 4 T.

    Edit ^^^^^^ Ok that is bull $hit... If you watch the BBC bit @ 39 min it is the numbers that I obviously remembered incorrectly..

    Ey yes... The end is nye.. As is free beer...

    This is a good Youtube watch if you have 58 min <-BBC
    Last edited by bill_bly_ca; 05-15-2014 at 08:13 PM.
    ==================================================
    Dude !!!.... Its a Canal !!! Can you Dig it ??

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    Active TRN Member RGV AG's Avatar
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    Default Re: Will China's bubble burst before the canal comes?

    China is behind the scenes pushing the Trans Pacific Partnership, that will be a huge boon for their semi-transformed raw materials. By exporting raw materials and industrial base materials to developing countries like Vietnam and Cambodia, and others, for transformation into duty free goods to the US the base motor of the Chinese economy keeps on chugging, while domestic consumption increases as an outlet for some of their own manufactured goods.

    China is setting themselves up well for the future. They have bought huge support via lobbying and by compromising the huge American retailers, which now really rule the domestic economic-political landscape for the US, save for big energy. The TPP when it goes through is going to hurt Central America in a major way. And Central America is nowhere near ready for anything like this to happen.

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    Para aquí para acá Jonh's Avatar
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    Default Re: Will China's bubble burst before the canal comes?

    But they are ignoring demographic trends, which are easily measurable, predictable and hard to dispute.

    The Baby Boom generation is starting to retire, and therefore spend less money. No more luxury houses, cars, yachts, vacations, college tuition for the kids, etc. for them. The following generations are smaller in number so consumer spending has nowhere to go but down. Consumer demand, too. That suggests deflation and increased employment, unless those cancel each other out. This is the case for all the developed world - the US, Japan, Europe.

  5. #5

    Default Re: Will China's bubble burst before the canal comes?

    Quote Originally Posted by Jonh View Post
    But they are ignoring demographic trends, which are easily measurable, predictable and hard to dispute.

    The Baby Boom generation is starting to retire, and therefore spend less money. No more luxury houses, cars, yachts, vacations, college tuition for the kids, etc. for them. The following generations are smaller in number so consumer spending has nowhere to go but down. Consumer demand, too. That suggests deflation and increased employment, unless those cancel each other out. This is the case for all the developed world - the US, Japan, Europe.
    And thanks to the economy in the US we are years behind developing the robust middle class that put these kids through college (he ones working in Pizza parlors, living in their parents' basements). Some will do well, but it will never be the same as it was, that enormous consumer base sucking up autos, washing machines, wide screens. Much of that was the result of good paying manufacturing jobs. As Bruce Springsteen sang of the Johnstown Factory: those jobs are gone and they ain't coming back.

    And yet, they are all democrats ??? They must be putting something in the water on a national level that is making us stupid.

    We live more and more on borrowed money, and borrowed for all the wrong reasons. There has to be a reckoning. Just an uptick in world economic activity that caused interest rates to rise even slightly and we couldn't service that $17.5 trillion. I don't know how I can put this gently to CookShow: Plant more coconuts. You may never see that SSI check, and if you do it will be worth ten cents of today's dollar.

  6. #6

    Default Re: Will China's bubble burst before the canal comes?

    There are other ways to stimulate your economy, seems to be working for Russia.

    http://www.cnn.com/2014/05/18/world/...hina-tensions/

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