Is the Chinese bubble bursting ?! Perfect storm ahead

Thursday was a very bad day for China’s economy, the world’s second-largest and a crucial pillar of the global economy, with credit markets freezing up in an unnerving parallel to the first days of the U.S. financial collapse.The Short term borrowing rates in China have soared to record highs as credit dries up ! Looking at this people are fearing the liquidity is on the verge of drying up .

The indicator for this was Shibor (Shanghai Interbank Offered Rate) was at one point up over 29%! This could be the start of the end of the Chinese machine ? The central bank refused to do anything to calm the market .

Perfect Storm
As the Fed prepares to taper its bond purchases (QE) at the same time as tightening the spigot of worldwide dollar liquidity also with the ECB pulling liquidity out the market .

Chinese leaders appear to be causing this problem deliberately, likely to try to avert a much worse problem. And, second, if this continues and even it works, it could see China’s economy finally cool after years of breakneck growth, with serious repercussions for the rest of us.

The effects are felt across the world mainly in the commodity export economy ( Russia , South Africa and Australia ) Australia is looking it could be having its first recession in 25 years!

Fed chairman Ben Bernanke has brought forward his QE exit by lifting the unemployment target from 6.5pc to 7pc. He dismissed the looming threat of deflation as a “transitory” effect.

In my opinion the party’s not over but it’s slowing , and as such I am out you can never go broke by taking profits .

What people forget os that the Latin America’s debt crisis of the early Eighties and East Asia’s crisis in the Nineties were both triggered by turns in the US credit cycle. We never learn ,

China has so much excess in the shadow banking system its scary ! This can make the financial crisis look like a little shower !

China has credit worth $23 TRILLION ! Double the economy , or the same as USA and The whole European Union economy combined !!

When in doubt get out , re focus and re align your thoughts .

Happy Friday

Tony Evans

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