Posted on 01/20/2014 4:31:17 AM PST by tired&retired
On Friday, Chinese state media reported that China Credit Trust Co. warned investors that they may not be repaid when one of its wealth management products matures on January 31, the first day of the Year of the Horse.
The Industrial and Commercial Bank of China sold the China Credit Trust product to its customers in inland Shanxi province. This bank, the world’s largest by assets, on Thursday suggested it will not compensate investors, stating in a phone interview with Reuters that “a situation completely does not exist in which ICBC will assume the main responsibility.”
(Excerpt) Read more at forbes.com ...
I had to smile that it will happen the first day of the "Year of the Horse." Here come the Revelation comments!!!
Reminds me of the “Who’s Line is it?” game:
“This can’t be good.”
Sorry for typo in title
Perhaps Jan. 31 will introduce The Year of the Sucker.
Title should be “Mega Default In China Scheduled For January 31”
This default won’t affect the balance of payments between China and the US, will it?
When is the major default in the United States scheduled for?
For almost a decade, coal was the other black gold. Then prices crashed, taking with them the fortunes of over-leveraged coal companies. It’s astonishing that a bond mutual fund was this exposed to a single sector/company. If the current regime wants to stay in power, it had better get regulators working on this right away.
The Fed will simply convert China into a “bank holding company”, and give them a bailout with TARP and Stimulus funds, or buy their bonds every month.
A billion dollar default? The Fed could swoop in and absorb that in a heart beat.
However, a poor country like China can grow out of debt problems. Japan's debt became a problem in the early 90's because it had caught up with the US in terms of per capita GDP. Further growth would be a tough slog, since it was easier to rip off American technology and production methods than to pioneer new ones. China's nominal GDP per capita is 1/7 or 1/8 of the US number. There are decades of growth left.Observers make the logical argument that “to have a market meltdown, you have to have a market” and China does not have one. Instead, Beijing technocrats dictate outcomes.
That’s correct, but that is also why China is now heading to catastrophic failure. Because Chinese leaders have the power to prevent corrections, they do so. Because they do so, the underlying imbalances become larger. Because the underlying imbalances become larger, the inevitable corrections are severe. Downturns, which Beijing hates, are essential, allowing adjustments to be made while they are still relatively minor. The last year-on-year contraction in China’s gross domestic product, according to the official National Bureau of Statistics, occurred in 1976, the year Mao Zedong died.
Why will China’s next correction be historic in its severity? Because Chinese leaders will prevent adjustments until they no longer have the ability to do so. When they no longer have that ability, their system will simply fail. Then, there will be nothing they can do to prevent the freefall.
Revelation? I bought my place where I now live two weeks before Obama was elected in 2008 in the spirit of Revelation 18:4.
I am more sure it was the right thing to do with every passing month. This thing is as clear as seeing the edge of a hurricanes storm front just out to sea and approaching shore. Those that have not prepared are going to be in a world of hurt. Even those of us who have prepared are by no means out of the woods (if I may mix metaphors).
When is the major default in the United States scheduled for?
Oh... we don't have to worry. We'll just borrow some more money from China.
It has started.
... and if China has no money to lend?
There may be massive cuts in Government spending on the horizon. “Hopefully” the Fed may be able to mitigate the effects of deflation that will occur. Prices will fall, wages will fall, everything will fall. Once the dust settles, if we avoid a collapse, America may be able to afford to hire factory workers again and produce goods and services that are both affordable and competitive.
It could be the best thing that could possibly happen if we survive...
“Undoubtedly” /s
Excellent comments.... I thought you were describing the Clinton presidency!!!
That’s correct, but that is also why China is now heading to catastrophic failure. Because Chinese leaders have the power to prevent corrections, they do so. Because they do so, the underlying imbalances become larger. Because the underlying imbalances become larger, the inevitable corrections are severe. Downturns, which Beijing hates, are essential, allowing adjustments to be made while they are still relatively minor.
... and if China has no money to lend?
They call their marker from the USA. And we will just have the Fed print more money and give it to them. And they will raise their prices to us as our money is worthless!!!!
And, And, And the snowball starts rolling.
The money involved in these wealth management products ($2t) is peanuts in the larger scheme of things, against an annual Chinese GDP of $7t. Chang is talking about a $500m default becoming the want of a nail that leads to the loss of a kingdom. Lehman alone had outstanding derivative contracts with a face value of $35t against an annual US GDP of $15T. I like Chang, but I think he's a little less numbers-oriented than he could be. His background as a lawyer may be a handicap - instead of looking at comparative numbers, he looks for rhetorically nice-sounding arguments. That might win over a jury, and that's all that matters in the courtroom, where a win is a win is a win. Economic predictions require more rigorous analyses, because when you predict economic doom and doom keeps getting postponed a full decade after your prediction was made, it's clear that you were wrong, and wrong repeatedly. Chang predicted malaise for China but it was Russia, India and Brazil that encountered it.
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