Loading ...Friday, April 16, 2021
by Doug Noland
Such a spectacular Credit boom is vulnerable to waning growth momentum. Arguably, the ongoing wild Credit inflation rests on the market premise Beijing support underpins the entire system. As such, China’s now colossal shadowy Credit apparatus collapses without confidence in Beijing’s implicit and explicit backing.
The entire edifice has become “too big to fail” – which markets have viewed in nothing but the most positive light. There’s troubled Huarong and the other vulnerable state-owned AMCs. The solvency of China’s fragile multi-Trillion “small” banking sector has been an issue. Solvency is also a concern for a few Trillion dollars of local government financing vehicles (LGFV) and other local government debt. A tremendous amount is riding on Beijing’s shoulders.
Many believe the “great financial crisis” could have been avoided if only Lehman Brothers had been bailed out. Ben Bernanke and others are convinced the Great Depression was the result of a negligent Federal Reserve failing to print sufficient money to recapitalize the banking system. Dr. Bernanke’s flawed doctrine unleashed the greatest runaway global monetary inflation in history.
Weekly Commentary: Huarong
Credit crises tend to advance at a glacial pace – until something suddenly triggers an avalanche
The Bloomberg guest analyst suggested actual Chinese bank non-performing assets could be 15 to 20% of assets (versus about 2% reported) – which implies a problem approaching $10 TN. And with Bank Loans expanding an unprecedented $4.2 TN over the past 15 months, it’s a fair bet the problem loan issue is poised to get a lot worse. It’s worth repeating the “Terminal Phase” Bubble Dynamic, whereby a rapid rise of Credit of deteriorating quality ensures a parabolic surge in systemic risk.
Such a spectacular Credit boom is vulnerable to waning growth momentum. Arguably, the ongoing wild Credit inflation rests on the market premise Beijing support underpins the entire system. As such, China’s now colossal shadowy Credit apparatus collapses without confidence in Beijing’s implicit and explicit backing.
The entire edifice has become “too big to fail” – which markets have viewed in nothing but the most positive light. There’s troubled Huarong and the other vulnerable state-owned AMCs. The solvency of China’s fragile multi-Trillion “small” banking sector has been an issue. Solvency is also a concern for a few Trillion dollars of local government financing vehicles (LGFV) and other local government debt. A tremendous amount is riding on Beijing’s shoulders.
Many believe the “great financial crisis” could have been avoided if only Lehman Brothers had been bailed out. Ben Bernanke and others are convinced the Great Depression was the result of a negligent Federal Reserve failing to print sufficient money to recapitalize the banking system. Dr. Bernanke’s flawed doctrine unleashed the greatest runaway global monetary inflation in history.
http://creditbubblebulletin.blogspot.com/2021/04/weekly-commentary-huarong.html