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Posts Tagged ‘china crisis’

China Stock Markets Open 2016 With Massive Implosion

January 7th, 2016 Comments off

For the second time in three days, China’s major bourses have had to stop trading in the early part of the trading session due to drastic sell-offs. Automatic circuit breakers suspended trading when the herd-like dumping of shares sent equity prices in a downward spiral at dizzying velocity. The Shanghai Composite Index declined by 7.3 percent; China’s other major stock index, the Shenzhen Index , lost 8.3 percent of its opening value.

During the course of 2015, Chinese stock markets suffered a number of devastating single-session declines, signaling problems with the Chinese economy and their inevitable contagion effect on the overall global economy. As I have noted in an earlier blog article (China Stock Market Crashing and Burning Before Our Eyes  http://www.huffingtonpost.com/sheldon-filger/china-stock-market-crashi_b_7752054.html ), the increasing instability of the Chinese equity markets will have profound  and highly negative implications for all major economies.

What are the likely implications for global economics in the light of the wobbly beginning for China’s stock markets in the new year? To begin with, the volatile character of China’s equity markets is a signal by investors of their deep anxiety over declining Chinese manufacturing alongside the weakening economy of the Eurozone, the largest single market for Beijing’s exports. It also may be a clear sign that a new global recession may be just around the corner.

There never was a real recovery to the catastrophic global financial and economic crisis that arose in 2008. For seven years, central banks have scaled back interest rates to just about zero, while sovereigns accumulated unprecedented levels of public debt to sustain extremely marginal levels of GDP growth, while the real unemployment rate among the major advanced economies stagnated at historically high levels. In effect, all the arrows in the policymakers’ quiver have been expended, leaving sovereigns virtually unarmed if forced to confront a new global recession.

The rout  in China’s stock markets may be the first signs of an annus horribilis for the global economy, with a virulent and economically devastating continuation of the Great Recession that never really ended. The one difference between 2008 and 2016 will likely stem from the implosion of China’s equity markets, as opposed to the sub-prime mortgage collapse in the United States, being the enabler of fiscal and economic crisis and germ of global contagion. An important distinction between 2016 and 2008, in addition to China replacing the U.S. as the center of gravity in a new global recession, is the international climate. The world is experiencing far more instability, multilateral tension and flashpoints than transpired during the initial period of the last global recession.  Geopolitical volatility converging with China’s stock market crash may lead to a global economic contraction that will exceed 2008 in its ruinous impact.

 

DONALD TRUMP 2016: America’s Next President? is available on Amazon: http://www.amazon.com/DONALD-TRUMP-2016-Americ…/…/B0156PAAVM

 

Sheldon Filger's photo.

 

 

China’s Local Government Debt Explodes

January 2nd, 2014 Comments off

While much of the discourse on public debt and deficits among economists and media pundits has been related to  the Eurozone Crisis, especially regarding Greece, or major developed economies such as the United States and Japan, much less has been heard about China’s fiscal status. Yet, one of the most rapidly growing factors of public debt is occurring right now, in China, largely under the radar of the so-called fiscal prophets of doom.

At present, according to always questionable  official statistics from Beijing, China’s total public debt represents 58 percent of the nation’s GDP. This is significantly lower than is the case with Japan and the United States. However, it is the rate of growth of that debt, particularly in connection with Chinese local governing authorities, that may begin to sound alarm bells. It appears that following the global economic and financial crisis of 2008, cities across China embarked on a massive borrowing and spending binge in a super-charged Keynesian effort to sustain China’s traditional  high annual rate of economic growth.

China’s  National Audit Office (NAO), following directives from the national authorities in  Beijing, undertook an extensive accounting and auditing of the books of all of  the nation’s local spending authorities. What they discovered was that in only three years, China’s local public debt grew by a staggering 70 percent, reaching a total of 17.7 trillion yuan, equivalent to nearly three trillion U.S. dollars. Another statistic is sounding alarm bells in China; up to 80 percent of all bank lending in China during the period following the onset of the global economic crisis was to local governments.

The vast spending spree by city governments across China has erected vast quantities of housing stock and commercial edifices that are unoccupied and infrastructure projects that are underutilized. Some economists, particularly outside of China, may defend this massive and largely uncontrolled public debt expansion as enlightened public policy, aimed at preventing high rates of unemployment in China. However, China’s national leadership is clearly worried about this stunning rate of growth in public debt at the local level, far outstripping real economic growth rates.  Beijing knows that seeding official GDP growth rates with an  unrestrained tidal wave of red ink is not a sustainable economic path to pursue. The dilemma for Beijing’s economic policymakers is this; now that they know  they have a serious problem of exploding public debt, what options are open to them that impose the least degradation to their cherished high rate of annual GDP growth? Their ultimate answer will inevitably have profound implications for the entire global economy.

 

If Hillary Clinton runs for President of the United States  in 2016, see the video about the book that warned back in 2008 what a second Clinton presidency would mean for the USA:

 

Hillary Clinton Nude

 

Hillary Clinton Nude

HILLARY CLINTON NUDE

Hillary Clinton Nude