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

[jpatter666]

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

ECB next?
[/INDENT]

How about the whole friggin' world....

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.

http://www.federalreserve.gov/newsev.../20111130a.htm

[GRG55]

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

How about the whole friggin' world....

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.

http://www.federalreserve.gov/newsev.../20111130a.htm

Note the immediate $25 pop in the gold price on this announcement...

[astonas]

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

Clever! This way the Fed can create the assets, with the ECB only performing a "currency exchange". Sidesteps all the legal limitations nicely.

[Slimprofits]

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

http://www.guardian.co.uk/world/2011...ge-tesco-store

Striking Chinese workers blockade Tesco store
Tania Branigan in Beijing
Wednesday 30 November 2011 07.35 EST

More than 100 workers have blockaded a Tesco in east China, the latest incident in a wave of industrial action in the country.

Staff occupied the entrances and exits round the clock, preventing shoppers from entering, in a protest over wages and redundancy terms, local media reported. Some held a banner saying: "We want to protect our rights. Return our blood and sweat money."

Thousands of factory labourers and others have gone on strike in recent weeks, amid increasing economic uncertainty.

Workers at Tesco in the city of Jinhua, in Zhejiang province, which is due to close at the end of the year, became concerned it would shut earlier after it began discounting goods. They asked management to pay them the overtime they were due and terminate their contracts so they would receive wages immediately, according to Zhejiang Online.

The workers may have been alarmed by previous cases in China where bosses have closed businesses overnight and fled without paying workers.

It was unclear whether protests were continuing on Wednesday. Phone calls to the store went unanswered and police said they had not heard of such an incident.

The protest is part of a spate of strikes and demonstrations. Last week alone, southern Guangdong province – China's manufacturing hub – saw thousands of workers at a shoe factory protesting outside government offices after losing overtime; hundreds striking over pay at an underwear factory; and around 1,000 walking out of a plant that makes keyboards for Apple, complaining of excessive hours.

[GRG55]

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

Well, here we are a few months later...and all is back to "normal" in China. :-)

As EJ has written this could go on inflating for years yet. But it seems increasingly difficult to deny that there is an ever increasing amount of capital misallocation going on here. However, as Evangelos Venizelos will confirm, it ain't over until the big fat Greek lady with the lyra sings...

China tells banks to roll over local govt loans

SYDNEY | Sun Feb 12, 2012 10:30pm EST


SYDNEY (Reuters) - China has told its banks to start a huge roll-over of loans to local governments, the Financial Times reported, aiming to give itself more time to deal with a $1.7 trillion debt hangover from the global financial crisis.

The move underscores China's determination to contain its 10.7 trillion yuan debt mess and forestall a potential loan crisis in the world's No. 2 economy, analysts say.

As early as June 2011, the Chinese government had vowed to clean up its local debt either by shifting 2-3 trillion yuan of debt off local governments, forcing state banks to take some bad debt losses and selling select projects to private investors, sources told Reuters earlier.

China's mountain of local debt piled up after the 2008-09 financial crisis when Beijing ordered local governments to spend massively on infrastructure projects to buoy economic growth, which they did by borrowing heavily.

Analysts say Chinese banks are already rolling over or restructuring troubled loans to cash-strapped local governments unable to repay their debt. But the amount of loans being rolled over is not known as banks -- and Beijing -- are tight-lipped.

Worse, analysts say Chinese banks are hiding troubled loans by adamantly refusing to mark them as non-performing loans in financial statements before restructuring them, as per global best practice...

[bill]

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

Worse, analysts say Chinese banks are hiding troubled loans by adamantly refusing to mark them as non-performing loans in financial statements before restructuring them, as per global best practice...

Sounds like a USA export product.

Debt processing plant financial experts doing their job in China.

http://www.itulip.com/forums/showthr...465#post145465

http://www.itulip.com/forums/showthr...106#post146106

[GRG55]

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

Misallocated capital? Imagine that. Who could have known...

January 29, 2013 1:55 pm

China averts local government defaults

By Simon Rabinovitch in Beijing

Chinese banks have rolled over at least three-quarters of all loans to local governments that were due to mature by the end of 2012, an indication of the immense challenge facing China in working down its debt load.

Local governments borrowed heavily from banks to fuel China’s stimulus programme during the global financial crisis and are now struggling to generate the revenue to pay them back, a shortfall that could cast a shadow over Chinese economic growth.

Banks extended at least Rmb3tn ($482bn) – and perhaps more – of the roughly Rmb4tn in loans plus interest that local governments were to have paid them by the end of last year, according to Financial Times calculations based on official data...

...Nevertheless, three separate economists said the numbers confirmed that Chinese banks had implemented rollovers on a massive scale to stave off defaults.

“That’s a correct observation and explanation,” said Stanley Li, a banking analyst with Mirae Asset Securities. “Based on the payback period for the infrastructure projects [started by local governments], it will take more than 10 years to pay these loans back.”...

...Stabilising the level of local government borrowing from banks has been touted by the Chinese government as an achievement. “The government debt level is under control, and is safe,” Wen Jiabao, the outgoing premier, said at the national parliament last year...

...With banks all but refusing to lend to local governments, cities and provinces have turned in increasing numbers to non-bank financial institutions, especially trust companies, and to the bond market to raise new debt.

“As the regulators have gotten more careful, they have been able to shift the risk to other sources of financing such as trusts and bonds,” Mr Peng said. “The risk has not gone away. It’s just been spread.”...

[vinoveri]

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

Misallocated capital? Imagine that. Who could have known...

January 29, 2013 1:55 pm

China averts local government defaults

By Simon Rabinovitch in Beijing

Chinese banks have rolled over at least three-quarters of all loans to local governments that were due to mature by the end of 2012, an indication of the immense challenge facing China in working down its debt load.

Local governments borrowed heavily from banks to fuel China’s stimulus programme during the global financial crisis and are now struggling to generate the revenue to pay them back, a shortfall that could cast a shadow over Chinese economic growth.

Banks extended at least Rmb3tn ($482bn) – and perhaps more – of the roughly Rmb4tn in loans plus interest that local governments were to have paid them by the end of last year, according to Financial Times calculations based on official data...

...Nevertheless, three separate economists said the numbers confirmed that Chinese banks had implemented rollovers on a massive scale to stave off defaults.

“That’s a correct observation and explanation,” said Stanley Li, a banking analyst with Mirae Asset Securities. “Based on the payback period for the infrastructure projects [started by local governments], it will take more than 10 years to pay these loans back.”...

...Stabilising the level of local government borrowing from banks has been touted by the Chinese government as an achievement. “The government debt level is under control, and is safe,” Wen Jiabao, the outgoing premier, said at the national parliament last year...

...With banks all but refusing to lend to local governments, cities and provinces have turned in increasing numbers to non-bank financial institutions, especially trust companies, and to the bond market to raise new debt.

“As the regulators have gotten more careful, they have been able to shift the risk to other sources of financing such as trusts and bonds,” Mr Peng said. “The risk has not gone away. It’s just been spread.”...

To me this whole roll-over concept is merely a facade and accounting trick that if done right can go on for decades. In state run china and fiat currency there is nothing to prevent bailout for years to come and system will continue at least Medium-term.

Same with the US. All this talk about student loan debts, states insolvent, etc.. The feds with their fiat can bail-out anyone they choose with little or no consequence (in the near-medium term). There appears to be no accountability, and why should not our politicos be more emboldened to continue - it appears the magic of printing works (at least until it doesn't - and by then we'll all be dead).
Incredible

[GRG55]

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

To me this whole roll-over concept is merely a facade and accounting trick that if done right can go on for decades. In state run china and fiat currency there is nothing to prevent bailout for years to come and system will continue at least Medium-term.

...

Yes, I think this touches on one of the reasons EJ thinks Jim Chanos is wrong. The Chinese don't need to nationalize their banks to bail them out. The People's government already owns all the Chinese banks that really count. As you say, they can keep this game going for quite some time to come. But not "forever"...

[vinoveri]

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

Yes, I think this touches on one of the reasons EJ thinks Jim Chanos is wrong. The Chinese don't need to nationalize their banks to bail them out. The People's government already owns all the Chinese banks that really count. As you say, they can keep this game going for quite some time to come. But not "forever"...

I'm really surprised that most pundits and analysts don't grasp this, especially in light of what has happened over the past few years across the globe.
Wonder if it willful ignorance, cognitive dissonance, or more cynical in that they "know" but need to constantly stoke the "wall of worry"?

[GRG55]

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

From the FT:

February 8, 2013 2:23 pm

Surge in Chinese credit raises fears

Chinese credit issuance surged to a record high in January on the back of a boom in shadow banking, stoking concerns that the economy could overheat.

Total new financing in January reached Rmb2.5tn ($400bn) – up more than 50 per cent from December and more than double the figure a year ago – eclipsing even the start of 2009 when China unleashed stimulus spending to battle the global financial crisis.

Analysts warned that the credit jump could lead to a sharp rise in Chinese inflation and debt levels if left unchecked and said that regulators would be forced to intervene to contain the excesses...

...“In itself this practically guarantees policy tightening in the immediate future,” he added. “This year can be exceptionally risky for markets.”

The explosion in financing was only partly driven by banks, which made Rmb1.07tn in loans. The rest of the new credit – 60 per cent of the total – came from corporate bonds, loans by investment companies, direct lending from companies to other companies and bankers’ acceptances, a popular form of short-term financing in China.

These non-bank sources of lending, which are collectively referred to as shadow banking in China, are controversial. Regulators say they have good oversight of the situation, but ratings agencies have cautioned that the risks are mounting...

...The big increase in credit issuance stems from last year when China slouched to 7.8 per cent growth, its weakest in more than a decade. To revive the economy, the government stepped up the pace of infrastructure investment and gave a green light to banks to provide more funding, including through off-balance-sheet channels.

This succeeded in fuelling a recovery in the final quarter of 2012 and the momentum of that upturn has continued through into the start of this year...

...But the flows have started to take on a life of their own. When the government tried to clamp down on investment companies known as trusts, securities brokerages emerged as new conduits for lending.

In the short term, the surge in credit could lead to impressive economic growth. Zhang Zhiwei, an economist with Nomura, said his forecast of an 8.2 per cent expansion in the first quarter faced “upside risks”...

...Analysts called for caution in interpreting the trade and inflation figures because companies tried to cram as much business as possible into January before work comes to a halt during next week’s Chinese New Year holiday...

...The jump in financing, however, was far more unusual.

“A part of the money and credit surge likely was related to the holiday, but the scale made all past holiday shifts pale in comparison,” Mr Peng said.

[jk]

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

it is easy to get on the tiger, but very difficult to get off.

[ProdigyofZen]

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

From the FT:

February 8, 2013 2:23 pm

Surge in Chinese credit raises fears

Chinese credit issuance surged to a record high in January on the back of a boom in shadow banking, stoking concerns that the economy could overheat.

Total new financing in January reached Rmb2.5tn ($400bn) – up more than 50 per cent from December and more than double the figure a year ago – eclipsing even the start of 2009 when China unleashed stimulus spending to battle the global financial crisis.

Analysts warned that the credit jump could lead to a sharp rise in Chinese inflation and debt levels if left unchecked and said that regulators would be forced to intervene to contain the excesses...

...“In itself this practically guarantees policy tightening in the immediate future,” he added. “This year can be exceptionally risky for markets.”

The explosion in financing was only partly driven by banks, which made Rmb1.07tn in loans. The rest of the new credit – 60 per cent of the total – came from corporate bonds, loans by investment companies, direct lending from companies to other companies and bankers’ acceptances, a popular form of short-term financing in China.

These non-bank sources of lending, which are collectively referred to as shadow banking in China, are controversial. Regulators say they have good oversight of the situation, but ratings agencies have cautioned that the risks are mounting...

...The big increase in credit issuance stems from last year when China slouched to 7.8 per cent growth, its weakest in more than a decade. To revive the economy, the government stepped up the pace of infrastructure investment and gave a green light to banks to provide more funding, including through off-balance-sheet channels.

This succeeded in fuelling a recovery in the final quarter of 2012 and the momentum of that upturn has continued through into the start of this year...

...But the flows have started to take on a life of their own. When the government tried to clamp down on investment companies known as trusts, securities brokerages emerged as new conduits for lending.

In the short term, the surge in credit could lead to impressive economic growth. Zhang Zhiwei, an economist with Nomura, said his forecast of an 8.2 per cent expansion in the first quarter faced “upside risks”...

...Analysts called for caution in interpreting the trade and inflation figures because companies tried to cram as much business as possible into January before work comes to a halt during next week’s Chinese New Year holiday...

...The jump in financing, however, was far more unusual.

“A part of the money and credit surge likely was related to the holiday, but the scale made all past holiday shifts pale in comparison,” Mr Peng said.

Even if they don't roll over the debt, the Sovereign has 3 trillion in US dollars to pay down the debt if need be.

Not only that but the interest rate is at what 6.25%? Plenty of room to get to ZIRP and lower the overall cost of the debt.

One of my good friends is Chinese from Shenzen. I asked him what would China do if there was a collapse?

And he said "it won't happen, the government won't allow it"

[Southernguy]

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

"Chinadoomers" "Synologists", etc
Look at the article below:
Amidst the revelry and aspirations that the Year of the Snake will bring prosperity to China, some might argue it already has. The country's various stock indexes (FXI) are all sharply higher over the past few months, and reports of economic improvement abound. The latest data point, for example, showed a four-fold increase in imports as well as the best month of exports in nearly two years.

And yet, one veteran observer of the country is not all that impressed. Gordon Chang, author of The Coming Collapse of China, paints a much more dour picture that could see this Snake party turning into a Snake bite.
"Yes there will be an uptick. It won't be pronounced though and it won't last long," Chang says in the attached video, "because China is not solving its fundamental economic problems."
For example, he says the country is pouring more money back into infrastructure and property again, something Chang says is ''exactly the wrong thing to do" because it takes China away from its "only sustainable growth model which is a consumption based one."
Add in the fact the he feels the new Communist party conservatives will continue to make the environment very difficult for investors. "Chinese leaders will talk reform but they're not actually going to implement reform," he says.

Chang is also monitoring the impacts of a "negative feedback loop" which he says is hindering growth too. "You have a slumping economy causing a crisis of legitimacy (which is) causing Chinese leaders to fall back on nationalism, which means increasing friction with other countries, and that friction is aggravating China's economic problems," he explains.
Despite its problems, a bad year of Chinese growth would still be a great year for most countries and even Chang concedes that some companies will still do well there. "But not the big ones like Caterpillar," he says, which has already begun downplaying the importance of its business there after taking a big, costly hit."

Well: there is a particularly idiotic comment:"Add in the fact the he feels the new Communist party conservatives will continue to make the environment very difficult for investors. "Chinese leaders will talk reform but they're not actually going to implement reform," he says."
A country with a 45% of GDP investment rate has "very difficult environment for investors". What would the investment rate be if there were not such very difficult...for investors?
This is the average quality of China bashing propaganda.
The other funny argument is "misallocation of capital"
Infrastructure and housing are "wrong" allocations of capital...Instead the Chinese should invest in domestic consumption...
What does housing be if not "domestic consumption"?.
History is demonstrating that China doomers are systematycaly wrong.
I think the real limits for Chinese growth have nothing to do with financial measures-policy.
The limits are up to the availability of natural resources. Oil, iron, water, etc. For the time being there seem to be enough all over the world to sustain Chinese high growth economy.
The rest is shoddy economics. Please beware, my intentions are not to support China privileged and corrupt rulers.
Simply put you can´t make good investment decisions out of poor economic analysis. And China is to big a part of the world for one to afford to misunderstand it.

[GRG55]

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

...And he said "it won't happen, the government won't allow it"

The belief in a perpetual motion machine economy probably goes back almost as far as the belief in unicorns. :-)

I am sure your friend in Shenzen has lots of company. Inside and outside China.