Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Worst Urban Crisis in History Could be Upon Us

Stock-Markets / China May 24, 2016 - 10:36 PM GMT

By: Harry_Dent

Stock-Markets Like our resident market P.I. John Del Vecchio, Kyle Bass is one of those hedge fund managers who profited in the last crash when he bought credit default swaps to short the housing market.

He’s also one of the few financiers in the market today who says there’s a reasonable chance the U.S. will fall into a recession over the coming months. But he’s really on the money when it comes to China.


Mr. Bass estimates that China’s bad debt exposure is at least five times that of the subprime crisis in the U.S.

Think that’s enough to trigger the next global financial crisis and depression?

You bet it is!

Two things are happening now in China that most people aren’t fully aware of. The country’s on track to create $4 trillion in new debt this year alone, or nearly 40% of its GDP, building houses for no one, while rural migrants are declining for the first time in 30 years.

In other words, the very people it’s overbuilding all these condos and infrastructure for are leaving!

After decades of rapid urbanization, no one saw that coming.

In the first quarter of 2016, China added $1 trillion in new debt, which puts it on track to reach that $4 trillion figure. One trillion is about the same the U.S. did in QE in 2013. It’s the same the ECB did in 2014.

China’s done it in a single frickin’ quarter with an economy 60% our size!

Even if you take the highest level of QE that the U.S., Europe and Japan added in a single year, the most that would add up to is $3.3 trillion.

So at $4 trillion, China is set to rack up more debt in one year than these other major countries did at their peaks, combined.

And it’s mostly by creating money out of thin air.

Countries can do this in a couple of ways. They can expand their bank loans against 10% reserve deposits – basically issuing $10 million when they’ve only got $1 million in the bank – or they can use QE. It’s the difference between 90% money creation with the fractional reserve loans, or 100% for QE. It’s all crack to me!

The developed world has moved more and more to QE to keep the gravy train rolling. It hasn’t worked because we’d already reached saturated debt levels in the great boom into 2007 – what David Stockman who spoke at our last two Irrational Economic Summits calls “peak debt.”

China isn’t doing QE per se, but they’re issuing tons of government-backed loans to corporations at affordable rates, so they can build infrastructure they’ll never use with money they don’t actually have.

It’s like our monetary gods said, “thou shalt be money!”

They think they can keep wishing money into existence without ever having to pay the consequences.

When has a drug addict ever gotten over their addiction without a relapse?

The chart below shows China has expanded their debt growth at 2.35 times their GDP growth since 2008.

China has expanded their total debt 4.8 times just since 2008 and 16.4 times since 2000. This is totally nuts. Debt growth is 379% while GDP growth is just 161% over that period.

Any economist who thinks China can have a soft landing after this is a blooming idiot!

At this rate China is looking at a debt-to-GDP ratio of 292% by year-end, or almost 3:1. Meanwhile, other large emerging countries typically run between 100% and 150%.

If this isn’t a train wreck coming, I don’t know what is.

The assumption is that China needs to keep expanding their infrastructure as more and more people move from the rice paddies to the cities. But like I said, the opposite is now happening!

Urbanization has come to a halt, with urban migrants declining by six million, from 253 million to 247 million in 2015. Why? Crazy real estate prices for one. Massive smog and traffic for another.

And the kicker – slowing jobs and wages. No thanks!

And what do you think a global depression will do to Chinese urbanization growth and job opportunities?
Simple – the greatest urban disaster in history.

If you think demographics will make the situation better now that China has abandoned their one-child policy, not so fast. Demographics make the situation worse as China’s age 15-64 workforce peaked in 2011. Since then, it’s declined by 30 million, from 941 million to 911 million (-3.2%).

Such rates of decline will accelerate after 2025, just when China finally works off the excess building of the past two decades.
Japan was never the same after 1989 due to predictable and rapid aging – and overinvestment and bubbles driven by a top-down government.

China’s drunken excess makes Japan look like a teetotaler.
So I’m with Kyle Bass on this one. China is going to fall like an elephant, making India the next big thing in the emerging world, dominating demographic growth in the next global boom after 2022.
The most affluent Chinese see it. They’re moving their money out of the country, buying real estate and businesses all over the world.

The handwriting’s on the wall. You just have to see it. It’s there.

Harry

http://economyandmarkets.com

Follow me on Twitter @HarryDentjr

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.

Copyright © 2016 Harry Dent- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Harry Dent Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in