Wednesday, May 18, 2016

Ambrose Evans-Pritchard — China's Communist Party goes way of Qing Dynasty as debt hits limit

Nobody rings a bell at the top of the credit supercycle, to misuse an old adage. Except that this time somebody very powerful in China has done exactly that.

China watchers are still struggling to identify the author of an electrifying article in the People's Daily that declares war on debt and the "fantasy" of perpetual stimulus.

Written in a imperial tone, it commands China to break its addiction to credit and take its punishment before matters spiral out of control. If that means bankruptcies must run their course, so be it.…
Could be a game-changer, not only for China but also the global economy.

The Telegraph
China's Communist Party goes way of Qing Dynasty as debt hits limit
Ambrose Evans-Pritchard


Matt Franko said...

Looks like theyve figured out how to hack libertarianism....

Andrew Anderson said...

What's the problem? Are the debts not owed in juan? So do a Steve Keen-like juan distribution to all Chinese citizens equally and ban further credit creation till the debts are paid down sufficiently and the banks are 100% private with 100% voluntary depositors.

What's not to like?

Seve141 said...

What the PTB in China need to do is force the write down of private sector debts to their net realizable value.

Financial institutions that were subject to lax or nonexistent regulations and in their pursuit of profit made irresponsible credit decisions should be held accountable for those actions. If this means becoming insolvent, so be it. If that is what China is contemplating, then good on them.

If they had faithfully practiced this policy, there would be no such as concern over "debts" and "credit".

In the US / West the policy was and is that no creditor should ever suffer a loss ----- therefore, the State underwrote the private banking sector and socialized those real private sector losses.

Roger Erickson said...

Nothing Marriner Eccles didn't show how to handle, back in 1932.

Of course, Marriner wasn't happy with how things turned out after that, even here.

Ryan Harris said...
This comment has been removed by the author.
Tom Hickey said...

The West looks at this as a debt problem. China views it as part of a needed reform to transition from an export-led to a consumer-based economy, which requires deep structural reform, reducing bureaucracy, and reducing corruption.

It's a very different issue there than the West assumes.