Credit Exhaustion Is Global

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Credit Exhaustion Is Global

Europe is awash in credit exhaustion, and so is China.

The signs are everywhere: credit exhaustion is global, and that means the global growth story is over: revenues and profits are all sliding as lending dries up and defaults pile up. 

What is credit exhaustion? Qualified buyers don't want to borrow more, leaving only the unqualified or speculators seeking to save a marginal bet gone bad with one more loan (which will soon be in default). 

Europe is awash in credit exhaustion, and so is China. China's situation is unique, as credit expansion has been propping up the entire economy, from household wealth to corporate speculation to the export sector. 

Echoing Tolstoy, every economy in a credit-fueled boom is happy in a similar way, but every economy in a credit-exhaustion decline is unhappy in its own way. The euro's internal contradictions and the EU's political "irreconcilable differences" are about to manifest in a unique way, and China's credit bubble bursting is about to deflate bubbles in shadow banking, housing, speculation and confidence in China's central planning model.

DYI:  I’ve been saying for far longer than I care to admit that China’s economy is a ticking time bomb.  When the collapse occurs they will experience their version of our 1930’s Great Depression.  If the author is correct maybe for the first time China’s arriving Great Depression will be sooner instead of later. 

The EU is an ongoing basket case and will get worse as their social programs continue to blow sky high as their birth rate is below replacement with fewer and fewer workers supporting those on relief or retired.

 

All of the same things are in place for European banks barely staying afloat.  Deutsche Bank is the worldwide 300 pound gorilla in the room with 1.77 trillion in assets.  If they fall a very possible cascade event could happen triggering other failures worldwide as well.  To say the least the happy days of borrowing money appears to be over and soon to come is the hangover.

DYI