Mar

1

Russia was the erstwhile leverage cyclotrone, selling its primary produce the commodities below cost of production. Went bust.

China the next cyclotrone is even more aggressive. Not only the highest operating leverage anywhere in the world as an economy but the Chinese Gummint facilitated layers and layers of cross holdings and paddings within all balance sheets.

Today it's a house of cards. It can collapse. Everyone knows this can bit.

Question is how probable that is and what sort of time for the dragon to roll crumbling on the floor?

Peter St. Andre writes: 

What are the measures for "going bust"? Unless we have criteria, we'll be stuck in the domain of subjective opinions.

(I leave aside for now the question of whether the CCP provides accurate measures of economic activity.)

Jeff Rollert writes:

Suggestions:

1) Abandoning their managed currency;

2) Significant nationalization of lending institutions;

3) Direct monetization.

Sushil Kedia writes: 

Going burst has a simple definition: unwillingness and /or inability to fulfill contractual obligations.

1st Failure has happened: They dug roads out of Wuhan and left their own people to die. Its the worst form of bankruptcy any state can ever undergo. Tell-tale signs that if they can kill their own with impunity, they will have no shame in reneging on any contract that they are compelled to.

A list of further signs would be, not necessarily in any order of gravity:

a) Letters of Credits issued by Chinese Importers lapsing & banks denying their fruition. (Is there some place on the net where it can be tracked?) b) Abandoning the currency peg would be of course a public confession of admitted weakening of their financial juggernaut & not a true case of going bust but a strong warning sign that the bust is coming round sooner. c) Failure to meet with any contracts for imports or exports by a Government agency or a Government backed enterprise.

Its simple. Mr. Tweeter should let the FED front-run the Chinese hoard of US Treasuries & send the US Yield Curve hurtling, now. As the Chinese are left with nothing else to pay with except their US Treasury holdings extricate a Trade Deal of the Millennium, offering support to the Chinese via a "friendly" QE.

And by the time its voting time he can tweet "Make America Great Yet Again" and push the S&P500 from 2200 back to new all time highs in a rocket like move. 

anonymous writes: 

I'm told that Chinese contracts with "force makeup" clauses are worthless, here and in China.

Tracking those is impossible, as far as I know, as they are usually very private. 

J.T writes: 

Can you even imagine the nuclear winter if they liquidated their holdings in U.S. debt? Not going to happen but it would make a great script.

Art Cooper adds: 

Cf. the 1981 thriller, "Rollover".


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