Yes Virginia...It's a Bubble...

[vinoveri]

Re: Yes Virginia...It's a Bubble...

I assume you mean "not as much as they used to"; lending is in fact occuring just not in the amounts that allow the rate of growth to approach pre-crash levels - and remember that we always have the "lenders of last resort" if private capital becomes too Spartan.

Whether one makes $10k or $1MM per year, one now depends on the status quo of infinite liquidity and that is why their is muted objection to the insanity that one day will end in reset; keep the music going and worry about it later (b/c we'll all be dead) - Bastards!

[ProdigyofZen]

Re: Yes Virginia...It's a Bubble...

There has been plenty of liquidity in the system as the SHIBOR rate shows. The problem is no one is lending..........

[vinoveri]

Re: Yes Virginia...It's a Bubble...

Zombies Spreading Shows Chaori Default Just Start: China Credit

By Bloomberg NewsMar 6, 2014 11:07 PM MT

The number of Chinese companies with debt double equity has surged since the global financial crisis, suggesting the first onshore bond default won’t be the last.

Publicly traded non-financial companies with debt-to-equity ratios exceeding 200 percent have jumped 57 percent to 256 from 163 in 2007, according to data compiled by Bloomberg on 4,111 corporates...

...Total debt of publicly traded non-financial companies in China and Hong Kong has surged to $1.98 trillion from $607 billion at the end of 2007. Some 63 companies have a debt-to-equity ratio exceeding 400 percent, compared to the average of 73 percent. In latest filings, 351 have negative ratios of earnings before interest, taxes, depreciation and amortization to interest expenses, while 409 have coverage of less than 1. Renewable energy, materials, household appliances and software companies dominate the rankings...

But debt doesn't matter!!!

The fact is that while debt does in fact matter in the long run (e.g., real wealth, real claims etc) , in a world of carefully managed fiat capital/money, where liquidity can be provided in a technically unlimitedly amount (think CBs) - all debt can in principle be rolled over indefinitely. This is the insanity of the current system - and it does not need to collapse unless and until CONfidence in fiat money collapses. The economists and C bankers control the world! Get on the runaway freight train of "growth" and leverage up or you will be run-over. Insanity.

[GRG55]

Re: Yes Virginia...It's a Bubble...

4.5 on the Richter scale?

"The next default will be likely to happen in overcapacity industries..."
Hoocuddaknown...

Chaori Can’t Make Payment in China’s First Onshore Default

By Bloomberg NewsMar 7, 2014 4:06 AM MT

A Chinese solar-cell maker failed to pay full interest on its bonds, leading to the country’s first onshore default and signaling the government will back off its practice of bailing out companies with bad debt.

Shanghai Chaori Solar Energy Science & Technology Co. (002506) is trying to sell some of its overseas plants to raise money to repay the debt, Vice President Liu Tielong said in an interview today at the company’s Shanghai headquarters. The company said March 4 it will only be able to pay 4 million yuan ($653,990) of an 89.8 million yuan coupon due today...

Zombies Spreading Shows Chaori Default Just Start: China Credit

By Bloomberg NewsMar 6, 2014 11:07 PM MT

The number of Chinese companies with debt double equity has surged since the global financial crisis, suggesting the first onshore bond default won’t be the last.

Publicly traded non-financial companies with debt-to-equity ratios exceeding 200 percent have jumped 57 percent to 256 from 163 in 2007, according to data compiled by Bloomberg on 4,111 corporates...

...Total debt of publicly traded non-financial companies in China and Hong Kong has surged to $1.98 trillion from $607 billion at the end of 2007. Some 63 companies have a debt-to-equity ratio exceeding 400 percent, compared to the average of 73 percent. In latest filings, 351 have negative ratios of earnings before interest, taxes, depreciation and amortization to interest expenses, while 409 have coverage of less than 1. Renewable energy, materials, household appliances and software companies dominate the rankings...

[GRG55]

Re: Yes Virginia...It's a Bubble...

4.5 on the Richter scale?

"The next default will be likely to happen in overcapacity industries..."
Hoocuddaknown...

Chaori Can’t Make Payment in China’s First Onshore Default

By Bloomberg NewsMar 7, 2014 4:06 AM MT

A Chinese solar-cell maker failed to pay full interest on its bonds, leading to the country’s first onshore default and signaling the government will back off its practice of bailing out companies with bad debt.

Shanghai Chaori Solar Energy Science & Technology Co. (002506) is trying to sell some of its overseas plants to raise money to repay the debt, Vice President Liu Tielong said in an interview today at the company’s Shanghai headquarters. The company said March 4 it will only be able to pay 4 million yuan ($653,990) of an 89.8 million yuan coupon due today.

The number of Chinese companies whose debt is double their equity has surged since the global financial crisis, suggesting this first onshore bond default won’t be the nation’s last. Publicly traded non-financial companies with debt-to-equity ratios exceeding 200 percent have jumped 57 percent since 2007, and Chaori Solar may become China’s own “Bear Stearns moment,” prompting investors to reassess credit risks as they did after the U.S. securities firm was rescued in 2008, according to Bank of America Corp.

“There will be more defaults in China’s onshore bond market,” said Qiu Xinhong, a bond fund manager in Guangzhou at Golden Eagle Asset Management Co., which oversees 13.9 billion yuan in assets. “The next default will be likely to happen in overcapacity industries, such as steel, nonferrous metals and coal. Bond investors will shun private companies with heavy debt burdens because they’re the most at risk.”...

...China Citic Bank won’t help Chaori Solar make any interest payment on its bonds because they weren’t guaranteed, the 21st Century Business Herald reported March 6 on its website, citing an unidentified person from the lender. An earlier liquidity support agreement between the bank and the company can’t be interpreted as a bond guarantee, the report said...

...Companies in China have postponed or delayed at least 6.6 billion yuan of bond sales over the past three days, according to data collected from ChinaBond, China Money and Shanghai Clearing House websites.Four pulled domestic notes sales on the Chaori Solar news. Suining Chuanzhong Economic Technology Development Co. will delay a 1 billion yuan offering due to “serious fluctuations in the bond market,” it said on ChinaBond’s website March 5. Taizhou Kouan Shipbuilding Co., Xining Special Steel Group and Qunsheng Group Co. scrapped offerings for similar reasons...

[Polish_Silver]

zero real bound

I seriously doubt it. I don't think they have any intention of taking away the punchbowl, despite AEP's assertions otherwise. EVERY single time the Chinese have the smallest indication of a slowdown after they half heartedly "tighten", they blink. They take the still open money spigot and crank the valve wide.

I haven't seen numbers, but people claim China has a lot of inflation. Therefore, although nominal interest rates may seem high, they may be low to negative real rates. What I am thinking is that they cannot lower much without risking even worse inflation. They probably understand that, but the committee could be split along hard /soft currency lines or something. Likewise, if debt levels are high, they cannot raise nominal or real rates.

Scylla or Charybdis?

[ProdigyofZen]

Re: Capital MisAllocation...

I seriously doubt it. I don't think they have any intention of taking away the punchbowl, despite AEP's assertions otherwise. EVERY single time the Chinese have the smallest indication of a slowdown after they half heartedly "tighten", they blink. They take the still open money spigot and crank the valve wide.


This was then (January 15, 2014):

China bank lending slows as PBOC walks policy tightrope

BEIJING, Jan 15 (Reuters) - China's new bank lending slowed more than expected in December and broad money supply growth also eased, highlighting the policy tightrope the central bank must walk as it tries to contain risky debt levels without braking the economy too hard.

There is little sign of a sharp tightening in monetary policy, but rising money market rates and bond yields in recent months indicate the People's Bank of China is committed to removing excessive debt from the economy to head off potential financial risks...

And this is now (February 15, 2014):

China January New Credit Rises to Record as Bank Loans Surge

Bloomberg News

Feb 15, 2014 11:01 am ET

Feb. 15 (Bloomberg) -- China’s broadest measure of new credit rose to a record last month as lending surged, indicating the central bank will allow enough funding to sustain economic growth amid a crackdown on shadow financing.

Aggregate financing was 2.58 trillion yuan ($425 billion), in January, the People’s Bank of China said yesterday, exceeding the 1.9 trillion yuan median estimate in a Bloomberg News survey and the previous high of 2.54 trillion yuan a year ago. New local-currency loans were 1.32 trillion yuan, 23 percent more than a year earlier and the highest monthly figure in four years, while trust loans halved amid default concerns...

We still have to answer the question: How does a Chinese crisis play out and does the rest of the world know it before it is too late and their crisis takes everything with it?

Here in the US we have measurable statistics to understand and pinpoint a coming crisis as EJ has demonstrated for over 15 years, but we have very little with regards to China and their FIRE economy dwarfs ours. I believe they have created 9 trillion worth of debt since Q1 2009. Since 2001 the US has only sent 13 trillion to the entirety of the EM market.

[GRG55]

Re: Capital MisAllocation...

Does China get to the zero lower bound/ZIRP policy? They have a long way to go with regards to interest rates to get there.

Could this be China's great depression? Does this make the US, England in 1929?

I seriously doubt it. I don't think they have any intention of taking away the punchbowl, despite AEP's assertions otherwise. EVERY single time the Chinese have the smallest indication of a slowdown after they half heartedly "tighten", they blink. They take the still open money spigot and crank the valve wide.


This was then (January 15, 2014):

China bank lending slows as PBOC walks policy tightrope

BEIJING, Jan 15 (Reuters) - China's new bank lending slowed more than expected in December and broad money supply growth also eased, highlighting the policy tightrope the central bank must walk as it tries to contain risky debt levels without braking the economy too hard.

There is little sign of a sharp tightening in monetary policy, but rising money market rates and bond yields in recent months indicate the People's Bank of China is committed to removing excessive debt from the economy to head off potential financial risks...

And this is now (February 15, 2014):

China January New Credit Rises to Record as Bank Loans Surge

Bloomberg News

Feb 15, 2014 11:01 am ET

Feb. 15 (Bloomberg) -- China’s broadest measure of new credit rose to a record last month as lending surged, indicating the central bank will allow enough funding to sustain economic growth amid a crackdown on shadow financing.

Aggregate financing was 2.58 trillion yuan ($425 billion), in January, the People’s Bank of China said yesterday, exceeding the 1.9 trillion yuan median estimate in a Bloomberg News survey and the previous high of 2.54 trillion yuan a year ago. New local-currency loans were 1.32 trillion yuan, 23 percent more than a year earlier and the highest monthly figure in four years, while trust loans halved amid default concerns...

[jk]

Re: Capital MisAllocation...

Does China get to the zero lower bound/ZIRP policy? They have a long way to go with regards to interest rates to get there.

Could this be China's great depression? Does this make the US, England in 1929?

england fared a lot better than the u.s. during the great depression. i've seen that analogy drawn from time to time over many years. china:u.s. now = u.s.:u.k. early 20th century. i have no idea whether it works out that way, though the parallels are obvious: rising power vs established hegemon,higher production vs lower production, higher growth vs. slower growth, and so on until you get to the question of whether the yuan replaces the dollar just as the dollar replaced the pound as the global reserve and trading currency. there's a long way to go to get there, though, since the yuan isn't convertible, but moving only slowly in that direction.

[ProdigyofZen]

Re: Capital MisAllocation...

What goes around, comes around...

World asleep as China tightens deflationary vice

8:00PM GMT 12 Feb 2014

China's Xi Jinping has cast the die. After weighing up the unappetising choice before him for a year, he has picked the lesser of two poisons.

The balance of evidence is that most powerful Chinese leader since Mao Zedong aims to prick China's $24 trillion credit bubble early in his 10-year term, rather than putting off the day of reckoning for yet another cycle.

This may be well-advised for China, but the rest of the world seems remarkably nonchalant over the implications. Brazil, Russia, South Africa, and the commodity bloc are already in the cross-hairs.

"China is getting serious about deleveraging," says Patrick Legland and Wei Yao from Societe Generale. "It is difficult to gently deflate a bubble. There is a very real possibility that this slow deflation may get out of control and lead to a hard landing." ...

...What is clear is that we are dealing with a credit expansion of unprecedented scale, equal in size to the US and Japanese banking systems combined...

...Societe Generale has defined its hard landing as a fall in Chinese growth to a trough of 2pc, with two quarters of contraction. This would cause a 30pc slide in Chinese equities, a 50pc crash in copper prices, and a drop in Brent crude to $75...

...The tell-tale signs are obvious in the central bank's handling of reverse repos and maturing bills. The yield on corporate AA 1-year bonds has jumped 272 basis points to 7.15pc since June. "We think the PBOC intends to raise the whole spectrum of interest rates to push deleveraging," he said.

This will be a rough ride. JP Morgan's Haibin Zhu says the shadow banking system alone has jumped from $2.4 to $7.7 trillion since 2010, and is now 84pc of GDP. To put this in perspective, the total US subprime debacle was $1.2 trillion.

Haibin Zhu says there is mounting risk of "systemic spillover". Two thirds of the $2 trillion of wealth products must be rolled over every three months. A third of trust funds mature this year. "The liquidity stress could evolve into a full-blown credit crisis," he said...

Does China get to the zero lower bound/ZIRP policy? They have a long way to go with regards to interest rates to get there.

Could this be China's great depression? Does this make the US, England in 1929?

[jk]

Re: Capital MisAllocation...

What goes around, comes around...

World asleep as China tightens deflationary vice

8:00PM GMT 12 Feb 2014

China's Xi Jinping has cast the die. After weighing up the unappetising choice before him for a year, he has picked the lesser of two poisons.

The balance of evidence is that most powerful Chinese leader since Mao Zedong aims to prick China's $24 trillion credit bubble early in his 10-year term, rather than putting off the day of reckoning for yet another cycle.

This may be well-advised for China, but the rest of the world seems remarkably nonchalant over the implications. Brazil, Russia, South Africa, and the commodity bloc are already in the cross-hairs.

"China is getting serious about deleveraging," says Patrick Legland and Wei Yao from Societe Generale. "It is difficult to gently deflate a bubble. There is a very real possibility that this slow deflation may get out of control and lead to a hard landing." ...

...What is clear is that we are dealing with a credit expansion of unprecedented scale, equal in size to the US and Japanese banking systems combined...

...Societe Generale has defined its hard landing as a fall in Chinese growth to a trough of 2pc, with two quarters of contraction. This would cause a 30pc slide in Chinese equities, a 50pc crash in copper prices, and a drop in Brent crude to $75...

...The tell-tale signs are obvious in the central bank's handling of reverse repos and maturing bills. The yield on corporate AA 1-year bonds has jumped 272 basis points to 7.15pc since June. "We think the PBOC intends to raise the whole spectrum of interest rates to push deleveraging," he said.

This will be a rough ride. JP Morgan's Haibin Zhu says the shadow banking system alone has jumped from $2.4 to $7.7 trillion since 2010, and is now 84pc of GDP. To put this in perspective, the total US subprime debacle was $1.2 trillion.

Haibin Zhu says there is mounting risk of "systemic spillover". Two thirds of the $2 trillion of wealth products must be rolled over every three months. A third of trust funds mature this year. "The liquidity stress could evolve into a full-blown credit crisis," he said...

aep is always full of good cheer and optimism.

[GRG55]

Re: Capital MisAllocation...

What goes around, comes around...

World asleep as China tightens deflationary vice

8:00PM GMT 12 Feb 2014

China's Xi Jinping has cast the die. After weighing up the unappetising choice before him for a year, he has picked the lesser of two poisons.

The balance of evidence is that most powerful Chinese leader since Mao Zedong aims to prick China's $24 trillion credit bubble early in his 10-year term, rather than putting off the day of reckoning for yet another cycle.

This may be well-advised for China, but the rest of the world seems remarkably nonchalant over the implications. Brazil, Russia, South Africa, and the commodity bloc are already in the cross-hairs.

"China is getting serious about deleveraging," says Patrick Legland and Wei Yao from Societe Generale. "It is difficult to gently deflate a bubble. There is a very real possibility that this slow deflation may get out of control and lead to a hard landing." ...

...What is clear is that we are dealing with a credit expansion of unprecedented scale, equal in size to the US and Japanese banking systems combined...

...Societe Generale has defined its hard landing as a fall in Chinese growth to a trough of 2pc, with two quarters of contraction. This would cause a 30pc slide in Chinese equities, a 50pc crash in copper prices, and a drop in Brent crude to $75...

...The tell-tale signs are obvious in the central bank's handling of reverse repos and maturing bills. The yield on corporate AA 1-year bonds has jumped 272 basis points to 7.15pc since June. "We think the PBOC intends to raise the whole spectrum of interest rates to push deleveraging," he said.

This will be a rough ride. JP Morgan's Haibin Zhu says the shadow banking system alone has jumped from $2.4 to $7.7 trillion since 2010, and is now 84pc of GDP. To put this in perspective, the total US subprime debacle was $1.2 trillion.

Haibin Zhu says there is mounting risk of "systemic spillover". Two thirds of the $2 trillion of wealth products must be rolled over every three months. A third of trust funds mature this year. "The liquidity stress could evolve into a full-blown credit crisis," he said...

[GRG55]

Re: Capital MisAllocation...

Where to put all that surplus steel and cement? Why bury some of it underwater of course...now why didn't we think of that...

China rail, material stocks soar on investment optimism

Tue Jul 23, 2013 8:20am IST

(Reuters) - Shares in Chinese rail and building material companies bounced higher on Tuesday morning fuelled by optimism that plans to boost railway expansion would ease a glut in sectors such as steel and cement.

The Chinese government planned to use investments in high-speed railways to help reduce overcapacity in those and other construction material sectors, the official Shanghai Securities News reported on Tuesday.

By 0220 GMT, shares of China Railway Construction jumped 5 percent in Hong Kong and 6.1 percent in Shanghai.Anhui Conch Cement rose 1.1 percent in Hong Kong and 1.4 percent in Shanghai. The Shanghai materials sub-index was a standout outperformer among sectors, rising 3.2 percent.

The report, along with reported comments from the country's Premier Li Keqiang and Vice Premier Zhang Gaoli, helped lift stock markets in Hong Kong and China in rising volumes. The China Enterprises Index of the top Chinese listings in Hong Kong jumped more than 3 percent.

The newspaper said, citing unnamed sources close to the government, that the railway department had completed only one third of its planned investment in the first half of this year, so there would be room for a quicker pace of investment in the second half of this year.

The investment could include the world's longest undersea tunnel across the Bohai Strait, linking China's eastern and northeastern regions, worth 260 billion yuan ($42 billion) as previously reported, the newspaper said...

One chart that sums it all up:

[GRG55]

Re: Yes Virginia...It's a Bubble...

Goods imports from China are around 20% of the 11.4% of GDP in goods imports, or 2.3% of GDP.




Countries that export the most to the U.S.

A LOT of seasonality to the imports flows from China. Christmas season trinkets one assumes?

If so, or something similar, implies China has a comparatively high dependence on just a few sectors in the US consumer market??

[EJ]

Re: Yes Virginia...It's a Bubble...

So what? Do you actually believe that Wal Mart is the American economy? Or even closely reflective of it?

Some Economyths need to busted. Wal Mart clocked $264 Billion in US sales in 2012. The US economy was more than $15 Trillion.

From the Federal Reserve Bank of San Francisco (full study available at the link):

The U.S. Content of “Made in China”

Galina Hale and Bart Hobijn

Goods and services from China accounted for only 2.7% of U.S. personal consumption expenditures in 2010, of which less than half reflected the actual costs of Chinese imports. The rest went to U.S. businesses and workers transporting, selling, and marketing goods carrying the “Made in China” label. Although the fraction is higher when the imported content of goods made in the United States is considered, Chinese imports still make up only a small share of total U.S. consumer spending. This suggests that Chinese inflation will have little direct effect on U.S. consumer prices.









Of course the US Dollar is a problem. The good thing, to paraphrase the late John Connolly, is that it's their problem. The manipulated currency of a corrupt kleptocracy is hardly part of the solution...unless of course one is part of the manipulation, the corruption and the kleptocracy. Unfortunately China and USA are hardly different in that regard any longer...

Goods imports increased from 6.7% of GDP in 1993 to a high of 12.5% of GDP in 2008 with the peak in oil prices and oil imports.
Reduced oil imports and lower oil prices have reversed the trend since 2011 to 11.4% of GDP in 2013.





Goods imports from China are around 20% of the 11.4% of GDP in goods imports, or 2.3% of GDP.




Countries that export the most to the U.S.




Countries that the U.S. exports the most goods to.