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And the next debt crisis; China

BenBurch

Gatekeeper of The Left
BenBurch
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http://www.reuters.com/article/2011...US+/+Top+News)&utm_content=Google+Feedfetcher

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China's local governments have piled up a mountain of bad debt, some of it to finance bridges to nowhere and other white elephant projects, which now threatens to constrict growth at a time when the global economy is sputtering. It is adding to other systemic risks in China, including a sharp downturn in the property market and a rapid rise in problematic loans.

Local governments had amassed 10.7 trillion yuan in debt at the end of 2010. The government expects 2.5 to 3 trillion yuan of that will turn sour, while Standard and Chartered reckons as much as 8 to 9 trillion yuan will not be repaid -- or about $1.2 trillion to $1.4 trillion.

In other words, the potential debt defaults could be even larger than the $700 billion U.S. bail-out programme during the 2008 crisis.
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An absolutely fascinating article. There was one part that I thought was quite revelatory about their attitude towards the public:

"Perhaps for that reason, city officials found a novel if unpopular way to pay for the three new bridges they have built across the Yangtze, adding to the seven already spanning the world's third-longest river after the Amazon and Nile.

Besides the usual bridge tolls, Wuhan requires residents with cars to cross them at least 18 days a month, at 16 yuan a round trip."

The residents may not have asked for the bridge, but by gub, they're going to pay for it!

Michael
 
They have spanking new cities, completely unpopulated for multiple years.

Get ready for the biggest real estate bubble in recorded history.
 
Eddie Dane said:
Dude, that said HUMAN history originally.

There just no pleasing some people. Sheesh.

Check this out:
http://www.youtube.com/watch?v=pbDeS_mXMnM

I have to say, an empty city that can house 12.000.000 people standing vacant is actually as eery as Chernobyl. And I didn't even invest in that mofo.
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Astonishing. You see images of that city Stalin developed in the wasteland and then abandoned and you think "Wow, nobody could do that again." and you'd be wrong! These people built a thousand times more vacant housing.

Now, if WE defaulted to China, there would be a Problem. What do you bet that there will somehow be NO problem (externally) when China defaults?
 
Eddie Dane said:
Dude, that said HUMAN history originally.

There just no pleasing some people. Sheesh.

Check this out:
http://www.youtube.com/watch?v=pbDeS_mXMnM

I have to say, an empty city that can house 12.000.000 people standing vacant is actually as eery as Chernobyl. And I didn't even invest in that mofo.
Click to expand...

Someone needs to tell the movie studios. Imagine having a city back lot that large, with no one there to interfere with filming. George Romero could have a field day.
 
I heard a couple years ago that China will be facing an economic meltdown in 2-4 years. Sounds right on schedule.

Basically, they can't keep the price of the yuan artificially fixed the way it has been without causing internal collapse, and can't fix the internal problems with out causing collapse in their artificially fixed price of the yuan.

They'll probably have to sell us our debt back at a deep discount.

Looks like The West Shall Rise Again!
 
Wow I am shocked to know what China has been doing to increase its GDP growth. Now it all makes sense and puts the world economy in a more vulnerable situation.
I have always thought that as long as China mantain a growing stable economy, the world would go on. The reason is I thought GDP's growth was based on manufactures, so it could satisfy the world demand in recession times for other economies. However, this information has shocked me and think that if things go bad in China, then a world crisis is round the corner. Scary.
 
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Every country that has been boomed has collapsed or is in decline. Egypt was a local super power for 3,000 years. Then they could not pay the people who built the pyramids, so the builders paid themselves by robbing the pyramids. The British Empire has existed several times, the last one was weakened by WW1 then was ended by WW2. The USA started to rise to power after WW1, was strengthen by WW2, but things started to go wrong after 9/11. Got into serious trouble when the property market collapsed. Japan did well until the 1990s when something happened and they have been in or near recession since. Now it looks like China could go the same way. It just needs the money to run out. It could save itself by stopping wasting its money. Sell the housing at rock bottom prices and change the way things are done so that this does not happen again. But I cannot see what would make the Chinese Government do this before the money runs out.
 
BenBurch said:
Now, if WE defaulted to China, there would be a Problem. What do you bet that there will somehow be NO problem (externally) when China defaults?
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It would be pretty bad for us if China is no longer in a position to buy any more of our dollars or export more goods that fuel our own consumer driven economy.
 
ravdin said:
It would be pretty bad for us if China is no longer in a position to buy any more of our dollars or export more goods that fuel our own consumer driven economy.
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Sorry, wasn't clear. I mean in terms of retribution. We will go out of our way to make sure they recover from any collapse, and I don't see the reverse as being true.
 
There is still a win-win situation in China's housing bubble, somewhere.

They have millions of people looking for a home and millions of empty houses.

All that overpriced, empty property is in the hands of speculators.
They are going to have to wake up to the reality of losing money at some point.
 
casebro said:
I heard a couple years ago that China will be facing an economic meltdown in 2-4 years. Sounds right on schedule.

Basically, they can't keep the price of the yuan artificially fixed the way it has been without causing internal collapse, and can't fix the internal problems with out causing collapse in their artificially fixed price of the yuan.

They'll probably have to sell us our debt back at a deep discount.

Looks like The West Shall Rise Again!
Click to expand...

I think that the West has pretty good cards. Not in terms of world domination as we have had in the last 500 years, but in continued prosperity and innovation.

We need to stop kicking the can down the road and bite the bullet on our debt problems.
Once we restructure debt we can go back to enjoying the fact that we live in stable democracies in fertile lands with an educated population.

Beats living Egypt, I tell ya.
 
BenBurch said:
Now, if WE defaulted to China, there would be a Problem. What do you bet that there will somehow be NO problem (externally) when China defaults?
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You mean like calling back all the loans they've made to the US as they flail about in their death throes?
 
Eddie Dane said:
There is still a win-win situation in China's housing bubble, somewhere.

They have millions of people looking for a home and millions of empty houses.

All that overpriced, empty property is in the hands of speculators.
They are going to have to wake up to the reality of losing money at some point.
Click to expand...

It is not only a housing problem, the root of the problem is how the government kept printing money and building ghost cities only to "promote" economic growth. It was an illusion, many people´s wages kept the economy going but as soon as that strategy stops then the whole thing will collapse.
 
Sword_Of_Truth said:
You mean like calling back all the loans they've made to the US as they flail about in their death throes?
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Eehn, it's a little more than a trillion dollars. They're welcome to sell them on the open market and deflate the value of the bond for a short period of time, but it won't have any lasting harm.
 
Newtons Bit said:
Eehn, it's a little more than a trillion dollars. They're welcome to sell them on the open market and deflate the value of the bond for a short period of time, but it won't have any lasting harm.
Click to expand...

Depends, it would lower the dollar some and help the US with it's trade deficit.
That could be harmful to China.
 
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