China’s Monumental Ponzi: Here’s How It Unravels

China is the greatest construction boom and credit bubble in recorded history. An entire nation of 1.3 billion has gone mad building, borrowing, speculating, scheming, cheating, lying and stealing. The source of this demented outbreak is not a flaw in Chinese culture or character—nor even the kind of raw greed and gluttony that afflicts all peoples in the late stages of a financial bubble. 

Just in the nick of time, as China reeled from the Great Leap Forward, the famine death of 40 million and the mass psychosis of the Cultural Revolution, Mr. Deng learned that power could be maintained and extended from the end of a printing press. And that’s the heart of the so-called China economic miracle. Its not about capitalism with a red accent, as the Wall Street and London gamblers have been braying for nearly two decades; its a monumental case of monetary and credit inflation that has no parallel. 

So China is on the cusp of the greatest margin call in history. Once asset values start falling, its pyramids of debt will stand exposed to withering performance failures and melt-downs. Undoubtedly the regime will struggle to keep its printing press prosperity alive for another month or quarter, but the fractures are now gathering everywhere because the credit rampage has been too extreme and hideous. Maybe Zhejiang Xingrun Real Estate which went belly up last week is the final catalyst, but if not there are thousands more to come. Like Mao’s gun barrel, the printing press has a “sell by” date, too.

DYI Comments:  I've been predicting for almost five years that China will experience a 1930's style great depression lasting 10 to 15 years.  Maybe the cracks are now so big no amount of monetary expansion will extend the debt Ponzi scheme pushing the Chinese economy over the Great Wall.  A major Chinese bust will very likely bring about a world wide recession and bring back to earth many of the high flying stock markets; that includes the U.S. market.  Keep your powder dry better values are ahead for the patience investors.

The Great Wait Continues...

DYI