June 23, 2019
China's market is about to implode in a manner similar to the Lehman collapse which triggered the Great Recession in the U.S.
According to Asia Times Online:
That’s the thing about credit-market cracks. They tend to emerge with little warning and spread quicker than even the bears imagined. September 2008, when Lehman Brothers imploded, is a case in point.
Risks are even greater in an opaque, developing nation like China. The black-box nature of China Inc. warps yield levels, credit spreads and the sober allotment of credit ratings. Along with censoring the media and Internet, Beijing discredits or blacklists overseas researchers highlighting risks.
Earlier this month, China began allowing local governments to increase borrowing even further for infrastructure. It also will allow municipalities to use proceeds from bond sales as equity in certain projects, including highways and railways. This alone could raise already precarious risk profiles around the nation.
The upshot: when China’s debt markets do crater, it will come out of nowhere for even the savviest of investors.
China has been monumentally successful over the last couple of decades precisely because Western elites decided they should be. They have had sweetheart deals with no pushback when they misbehave. Now that they are being squeezed the vulnerability of their command economy is starting to show. This should surprise no one; we saw this in the old Soviet Union, which the "experts" assured us was an economic powerhouse until the day it collapsed. China may well go the same way.
Posted by: Timothy Birdnow at
10:15 AM
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