When it comes to reckless money creation, China is the king. Over the past five years Chinese bank assets have been fueled by the greatest private debt binge that the world has ever seen. Unfortunately for China (and for the rest of us), there are lots of signs that the gigantic debt bubble in China is about to burst, and when that does happen the entire world is going to feel the pain. Let me explain.
So says Michael Snyder (theeconomiccollapseblog.com) in edited excerpts from his original article* entitled China Is On A Debt Binge And A Buying Spree Unlike Anything The World Has Ever Seen Before.
[The following is presented by Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com and www.munKNEE.com and the FREE Market Intelligence Report newsletter (sample here – register here). The excerpts may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Snyder goes on to say in further edited excerpts:
Chinese bank assets have grown from about 9 trillion dollars to more than 24 trillion dollars. In just five years:
- the amount of money that has been loaned out by banks in China is roughly equivalent to the amount of debt that the U.S. government has accumulated since the end of the Reagan administration and
- Chinese bank assets dwarf the assets of the U.S. Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England combined. You can see an amazing chart which shows this right here.
- Putting the rate of change in perspective, while the Fed was actively pumping $85 billion per month into US banks for a total of $1 trillion each year, in just the trailing 12 months ended September 30, Chinese bank assets grew by a mind-blowing $3.6 trillion!
What has China been doing with all of that money? [China is Buying Up the World – Big Time! Take a Look and China’s Foreign Investment Spending ($443 Billion) by Country]
Well, they have been on a buying spree unlike anything the world has ever seen before:
- According to Reuters, China has essentially bought the entire oil industry of Ecuador…
- They are buying up California housing [to the extent that, if they like a house they are shown]…they are willing to outbid anyone else no matter what the cost…[As such,] when you hear that housing prices are “going up”, you might want to double check the numbers. Much of this is being caused by foreign buyers that are gobbling up properties in certain “hot” markets.
- They are making substantial investments in commercial real estate too, particularly in New York city.
- The Chinese have just bought up the largest pork producer (Smithfield Foods) in the entire country…Just think about what the acquisition alone will mean. Smithfield Foods is the largest pork producer and processor in the world. It has facilities in 26 U.S. states and it employs tens of thousands of Americans. It directly owns 460 farms and has contracts with approximately 2,100 others. Now that a Chinese company has bought it for $4.7 billion it means that the Chinese will now be the most important employer in dozens of rural communities all over America.
- For many more examples of how the Chinese are gobbling up companies, real estate and natural resources all over the United States, please see my previous article entitled “Meet Your New Boss: Buying Large Employers Will Enable China To Dominate 1000s Of U.S. Communities“.
- More than anything else, however, the Chinese seem particularly interested in acquiring real money and by that, I mean gold and silver. [China Converting U.S. Dollar Debt Holdings Into Gold At Accelerating Rate] In recent years, the Chinese have been buying up thousands of tons of gold at very depressed prices. Meanwhile, the western world has been unloading gold at a staggering pace. By the time this is all over, the western world is going to end up bitterly regretting this massive transfer of real wealth.
Unfortunately for the Chinese, it appears that the unsustainable credit bubble that they have created is starting to burst. According to Bloomberg, the amount of bad loans that the five largest banks in China wrote off during the first half of this year was three times larger than last year…and Goldman Sachs is projecting that China may be facing 3 trillion dollars in credit losses as this bubble implodes…
The Chinese are trying to get this debt spiral under control by tightening the money supply. That may sound wise, but the truth is that it is going to create a substantial credit crunch and the entire globe will end up sharing in the pain… [Indeed, it] could ultimately be a much bigger story than whether or not the Fed decides to “taper” or not.
It has been the Chinese that have been the greatest source of fresh liquidity since the last financial crisis, and now it appears that source of liquidity is tightening up so as the flow of “hot money” out of China starts to slow down, what is that going to mean for the rest of the planet and when you consider this in conjunction with the fact that China has just announced that it is going to stop stockpiling U.S. dollars, [China’s Reining In of U.S. Treasury Purchases Will Precipitate U.S. Dollar Collapse] it becomes clear that we have reached a major turning point in the financial world.
2014 is shaping up to be a very interesting year, and nobody is quite sure what is going to happen next.
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
*http://theeconomiccollapseblog.com/archives/china-is-on-a-debt-binge-and-a-buying-spree-unlike-anything-the-world-has-ever-seen-before (Copyright © 2013 The Economic Collapse)
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