The Global Economy

October6

Deflation Warning: The Next Wave

From the article:

We’ve been tracking the deflationary impulse for a while, and declared deflation the winner back in July of this year.

A Failed Strategy

What exactly do we mean by deflation?  Back in 2008 the central banks of the developed world, as well as China, had a choice:

  1. admit that prior policies geared towards encouraging borrowing at a faster rate than income growth were a horrible idea, or

  2. double down and push those failed policies even harder

As we all know, they chose option #2. And so here we are, just 8 years later, with nearly $60 trillion in new debt piled on top of the prior mountain

http://www.zerohedge.com/news/2015-10-01/deflation-warning-next-wave

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Risky Business…..

July7

“This Could Be The Last Straw” 90% Of China Loan Guarantors Bankrupt

From the article:

As The South China Morning Post reports,

 Mainland loan guarantors have found themselves ensnared in the woes of the underground banking sector following a fresh wave of bankruptcies around the country.

Creaking under the weight of bad debts, hundreds of guarantee groups would be unable to bear even more, although their services are critical for the economic system and the millions of small firms that provide the majority of the mainland’s jobs.

http://www.zerohedge.com/news/2014-07-07/could-be-last-straw-90-china-loan-guarantors-bankrupt

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Housing Bubble, Deflating

May2

Leaked Recording Reveals True State Of Chinese Housing Market

Since the U.S. does business with China, anything done economically on a large scale can, and most probably will affect the U.S. That is why in my opinion, I think it’s important to keep an eye on China.

From the article:

The numbers of flats and houses for sale has suddenly doubled. “Many owners are trying to get rid of high-priced houses as soon as possible, even at the cost of deep discounts. As a result, ordinary people who want to sell homes in the secondary market must face deep price cuts,” he said.

http://www.zerohedge.com/news/2014-05-02/leaked-recording-reveals-true-state-chinese-housing-market

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China’s Economy

April22

How China’s Commodity-Financing Bubble Becomes Globally Contagious

From the article:

Chinese buyers may default on a further 1.2 million metric tons (1.32 million tons) of soybeans worth about $900 million being shipped from the United States and South America, to avoid incurring huge losses in a depressed local market, the country’s top soy buyer said.

So,…..the “exporter’s” (anyone China is doing business with) are left holding the bag if China defaults (doesn’t pay).  This isn’t exactly “chump change” (a trivial amount of money).

Also from the article:

“Most of the cargoes were delivered by the seller before receiving letters-of-credit and buyers are unwilling to pay now because they will suffer massive losses,” said Shao, speaking from a hotel suite he uses when in Rizhao in this eastern province.

“If buyers cannot resolve the issue, they may also cancel future shipments.”

http://www.zerohedge.com/news/2014-04-21/how-chinas-commodity-financing-bubble-becomes-globally-contagious 

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Something To Pay Attention To…..

April16

The Richest Man In Asia Is Selling Everything In China

From the article:

Li Ka-Shing was investing in mainland China back in the early 90s, way back before it became the trendy thing to do. Now, Li wants out of China. All of it.

I don’t know about you? But when the richest man in Asia pulls up stakes there is a reason for it. Is he getting out while the getting is good?

Also from the article:

After years of unprecedented monetary expansion that has put the economy in a precarious state, the Chinese government has been desperately trying to reign in credit growth.

The shadow banking system alone is now worth 84% of GDP according to an estimate by JP Morgan. The IMF pegs total private credit at 230% of GDP, jumping by 100% in the last few years.

The Terms: (If you’re not accustomed to financial things. I’m learning too.)

An example of Shadow Banking for instance would be Mortgage Companies, or Money Market Mutual Funds. Financial Institutions outside of regular banking.

The IMF: It stands for International Monetary Fund. This organization has been around since 1944. The IMF’s stated goal was to assist in the reconstruction of the world’s international payment system post–World War II.

Countries contribute funds to a pool through a quota system from which countries with payment imbalances temporarily can borrow monies and other resources.

That’s not all….

Through this fund, and other activities such as surveillance of its members’ economies and the demand for self-correcting policies, the IMF works to improve the economies of its member countries.

The IMF is a self-described “organization of 188 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.” (This information is from Wikipedia)

Also from Wikipedia: Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a year, or other given period of time.

Historically, growth rates of these proportions have nearly always been followed by severe financial crises. And Chinese leaders are doing their best to engineer a ‘soft landing’.

These two lines are the heart of the situation. And…just a bit scary if you consider the Chinese will not be the only ones affected by this. The next two lines are the possible outcomes of this situation. In either of the cases it has worldwide implications.

If they’re successful, the world will only see major drops in global growth, stocks, property, and commodity prices.

I like the way the article says “If” they’re successful and “the world will ONLY see major drops”. Oh, that’s all. (sarcasm) That’s supposed to be the good news.

If they fail,…..the spillover could become pandemic.

That’s the bad news.

http://www.zerohedge.com/news/2014-04-16/richest-man-asia-selling-everything-china

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China: The World’s Second Largest Economy In Trouble

March28

~China’s Liquidity Crunch Slams Importers Who Are Defaulting, Reneging On Deals

I’ve  given you some pieces to the puzzle from the article. It’s definitely worth reading the whole article.  I’m not some financial whiz of course, and I admit that. But what is going on in China is a big deal and does, or at least WILL eventually effect the world economy as a whole.

From the article…..

…..the world’s greatest debt bubble is starting to burst, resulting not only in the first ever corporate default but also in the bursting of the associated biggest ever housing bubble.

…..While apologists of China’s collapse have been quick to point out that China’s credit collapse would be largely a domestic issue…..

(In other words…..mostly affect China)

…..one thing nobody can deny is that if and when Chinese trade routes grind to a halt, the downstream impacts would be devastating, and spread like wildfire as the offshore supply chain is Ice 9’ed.

…..traders at Asian trading firms say they are seeing a sharp rise in canceled contracts this year while other buyers are demanding heavy discounts.

The U.S. Department of Agriculture confirmed that China has canceled orders for 517,000 metric tons of soybeans…..   South American soybean contracts have also been canceled because of weak demand, says trade journal Oil World.

http://www.zerohedge.com/news/2014-03-27/chinas-liquidity-crisis-slams-importers-who-are-defaulting-backing-out-deals
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China Trying to Ease Fear

March26

Banks in Chinese city show stacks of cash to reassure depositors

From the article…

…..the rush for cash appears to be an isolated incident so far.

I’m thinking….so far, so good.

And this?

Huanghai and Jiangsu Shenyan banks declined to comment. An official at Jiangsu Sheyang referred media inquiries to Yancheng city’s propaganda department.

Propaganda Department?  Yeah, that’s where I would go (sarcasm). Uh, not really. Somehow I see people being directed by someone saying, “Please go to our happy, happy, joy, joy, department.”

http://news.yahoo.com/chinas-sheyang-county-says-funds-protected-rumors-spark-010251702–sector.html;_ylt=AwrSyCMARzJTfAUAb67QtDMD

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Ideas that are Becoming Prevalent Worldwide

January29

China’s ghost cities.

I was surprised when I watched this video on China. For me, the surprise had less to do with the Ghost Cities/Economics than with  people’s attitudes.

The first thing is…that the “government” should intervene in their personal lives and provide budget housing. Two, that owning a home is a “basic human right”.  Reminds me of the attitude in the U. S. that people are somehow “owed” things.  I was never told that life is fair. Or else, I missed “What You are Owed in Life-101”.

Maybe the only thing owed to a human being is…..the capacity to earn a living without laws that restrict the individual so much he finds it impossible to do so.

http://www.wimp.com/ghostcities/

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