China Banking 2.0 “Crash of the Titans”
Tuesday, August 31st, 2010Author Mike Rough
Those of you who keep an eye on things will not be surprised when you hear the following.
China is on the verge of financial collapse.
I have been following China closely since the Beijing Olympics boldly tried to dispel the world’s notion that it was still an overgrown, backwater, 3rd world nation. It’s desperate bid to “Face” itself to the world through rapid construction of overly large venues and infrastructure has left an impressive legacy of disuse and disarray that will continue to burden the country for generations to come.
Let me tie it together. China believes image is everything. If the government says that things are great, the citizens believe them as long as they can “see” proof. Herein lies the problem and inevitable collapse of China and entombing with it the rats who fled our investment opportunities, cursing capitalism along the way.
Like the U.S banking industry, Chinese banks take in deposits from companies and citizens, who unlike us, have very few investment alternatives, causing the Chinese to accrue some of the highest savings rates in the world. The banks, all state owned, lend the citizen deposited money to large state-backed borrowers to build factories, steel mills and real estate.
Does this sound familiar to Fannie Mae, Freddie Mac and FDIC to you?
The vast majority of China’s bank profits come from the difference between the interest rate they pay depositors and the rate they charge borrowers which is set by the central bank in order to protect the banks from cut-throat competition.
Sounds like interbank lending policies and the Federal Reserve.
Ironically enough the Chinese call this paradigm “eating capital” because the more banks lend the more they make on the interest spread until they reach the maximum lending amount and then turn to the capital markets for funds in order to continue lending.
Again the similarity between China and U.S. banking pre-collapse is nearly identical.
Although China is sprinting down the path plowed by the U.S., the government has tried to slow lending growth since the start of the year, in what can only be seen as an attempt to slow the onrushing wall of collapsing government backed financial instruments.
Even Chinese bankers are quick to admit that not all of the lending in the past two years was to viable, creditworthy projects and that a significant portion may never be repaid.
Compounding the currently irresponsible lending environment are the remnants of the decade old stimulus fueled near collapse of it’s banking system which is still lingering in the form of Rmb720bn worth of 10-year, non-transferable bonds that were given to ICBC, BOC and CCB in exchange for a chunk of their bad loans 10 years ago.
Like the U.S. and it’s bailout, and we can see how well it’s going… Beijing believes it has delayed the reckoning for its previous bank bail-out by another decade, but in reality, 10 years from now the banking sector will likely be burdened with another stack of bad loans if it hasn’t already completely collapsed.
One only needs to look at the dog and pony show being trotted out world wide by the great market destroyers Goldman-Sachs to promote the Rmb as the financial currency of choice to know that the end is near. As Goldman-Sachs has proved time and time again the only thing they are good for is fleecing fools out of their Gold and putting it in their Sachs.
The question is if the rest of the world will see through China’s smiling facade and save their assets.
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Steve Foste says:
August 31st, 2010
4:06 am
Though I couldn’t really prove it, I felt that China was a big part of the asset bubble that formed in 2007, and I had suggested prior to the olympics to look out below once the Olympics ended. China’s push to put on the greatest show on earth was played a major role in pushing commodity prices skyword all over the world.
Woriing in the steel industry there were even rumors of ships heading to America with steel that was literally turned around and sent to China there needs were so great to build out the Olympic infrastrucure. True or not I don’t know, but the prices for steel were astronomical in relation to history, much like the 13.00 wheat and the 7-8 dollar corn. Of course GW”s mandate for Ethanol was a pretty big driver of corn prices.
But My premis was just watch and see what happens to China once the dog and pony show is over and see where it goes. I think the world, combined with the financial crisis paid a big price for this show, and it has yet to play out.
Will China’s banking industry crash? | Budos World says:
August 31st, 2010
8:44 am
[...] Will China’s banking industry crash? Posted on August 31, 2010 by Patrick Budowski The Texas Ring has been watching the Chinese banking industry for a while according to Mike Rough who is the author of the article"China Banking 2.0""Crash of the Titan’s" [...]
Linda Brady Traynham says:
September 2nd, 2010
1:40 pm
Splendid, Mike, and just what Steve and I were thinking for other reasons since I didn’t know about the banks. Ooooh! BIG crash of (real) thunder, which is money in the bank if you raise crops or cattle. Without being disloyal, how can I put this? Dang, I wish you’d sent me this one first because I would have shopped it to W&G!
admin says:
September 2nd, 2010
11:02 pm
Thanks Linda! I was skimming through some news headlines and it occurred to me that China was doing a full court press on their currency and wondered why. Like any heavy tapestry China just needs a few key strands to fail before the entire covering shreds under it’s own weight exposing the rough unfinished wall of socialist economics.
David Franklin says:
September 3rd, 2010
3:38 am
Dear Mike,
History proves the people of any nation…will always “believe” and act upon the propaganda of the state. This insures the execution of the most heinous of crimes, and massive of theft of the peoples modern money.
The Japanese were by culture, meticulous savers. By the late 80′s, the average family of four had savings in excess of 50,000 USD. And what happened to their savings?
ANSWER: the Central bank collapsed the Japanese stock market from over 40,000 to 10,000, and in so doing, confiscated all those savings.
WHY? To balance the trade deficit with the US! HOW SO? because for over a decade the Japanese produced high quality electronics (transistor radios, VCR’s, TV’s etc.) and sold them to the US for mere pieces of paper.
WHEN..the Japanese people realized they had been robbed, and had traded their hard labors and work products for mere pieces of paper, they began buying up PRIME US REAL ESTATE with the paper from the US. At least that way, the Japanese would have REAL WEALTH to show for their industry. I lived in that time..and I remember the headlines in the papers, which read as follows:
“WILL THE JAPANESE END UP OWNING AMERICA?”
So… to secure the 100% theft of Japanese electronics, and to stop the Japanese from actually getting some Thing REAL..for the worthless paper they now held…………..
AND…most important of all, to prevent domestic inflation by all those Japanese held “US DOLLARS” coming back into circulation in the US, the Japanese Central Bank collapsed the NIKKI, taking away from the Japanese workers and savers, all their hard earned savings, so they could no longer obtain ANY REAL WEALTH in return for their labors, especially in the US, where it would have caused inflation.
I hope..but seriously doubt readers here comprehend this broad picture I am presenting here. The reality to all this is as follows:
There is NO SUCH THING as a sovereign nation that runs it’s own central bank. All Central Banks are the same, and “run” by one world authority: THE IMF and the World Bank.
It is the WORLD BANK and IMF that determines all domestic monetary policies worldwide, in every country, without exception!
Thus, the idea that Mr. Bernanke has any power at all is false. He is merely a bureaucrat following orders from higher up.
All this came about since 1913, and later at Bretton Woods, wherein all Central Banks became subservient to the powers stated above.
It was at BRETTON WOODS, wherein the US “transferred” it’s Article I, Section Monetary power to the IMF and WORLD BANK.
The result? US interest rates and US domestic monetary policy are DICTATED TO…the private central bank….in the US. Same for all the other countries in the world. My research proves all of the above to be true.
IF….you “believe” anything otherwise, without proof, I will sell you my “deed” to the Brooklyn bridge.
If any one…merely “believes” without proof, they can be stolen from as easy as taking a bottle from a baby.
Serious yet Sincere Regards to all at TTR,
Dave
David Franklin says:
September 3rd, 2010
3:41 am
PS.
SO…the China Central Bank WILL…end up doing the same thing the Japanese Central Bank did: Confiscating the electronic savings of all Chinese workers, in order to cancel and balance the current US Trade deficit.
I may be dead by the time this happens, but try to remember that you read it here from me, someone who KNOWS….the Truth.
admin says:
September 3rd, 2010
1:08 pm
I can’t agree with you more David. I have just posted your Three Part “Titanic Forces” series and feel that everyone who is interested in seeing where the rabbit hole truly ends needs to read them.
Linda Brady Traynham says:
September 3rd, 2010
8:30 pm
I’m as proud of you people as if I had invented you. Dave is not just one of us and a friend, he really knows his stuff. Now off to see how his article turned out. Chuckle…when he submitted it the first time I think I asked him to put it in English and terms we mere mortals could understand! Do NOT miss Peter Pan’s Dad’s comment over on W&G about his father. Wow. Hugs, L
Desertrat says:
September 13th, 2010
11:35 am
Per today’s “Daily Pfennig”, China’s industrial production has risen, as have her exports. This has strengthened the Yuan in international currency markets. It has also helped the currencies of commodity-exporting nations such as Australia and Canada as well as Chile and Brazil.
It is reported that there is enough vacant housing in China for one-half the US population. The big “however” is that it’s but a small part of their overall economy. During the housing bubble in the US, residential/commercial construction was a far larger percentage of the total economy…