Money and Credit in China: I’ll Raise You One Sweden

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Let’s Buy Sweden and Put it on our Front Lawn

Or rather, let’s not. As Bloomberg reports, the officially admitted to amount of bad loans in China’s banking system has by now swelled to approx 4 trillion yuan, or $628 billion, which is roughly equivalent to Sweden’s total economic output per year.

 

syr

 

Sweden is a small, but highly developed country which exhibits astonishing rates of monetary and credit inflation at present. It has slightly less than 10 million inhabitants, and its “GDP per capita” on a purchasing power parity basis amounts to approx. $44,000 compared to $12,600 in China. We are mentioning this to make clear that such comparisons have to be put into proper perspective.

 

1-china-loan-growthAnnualized loan growth of China’s banking system. After the huge post GFC surge in bank lending (the government essentially ordered the large state-owned banks to expand credit willy-nilly) it has slowed to a still quite extraordinary 14.4% as of October.

 

In short, bad loans equal to the GDP of Sweden still represent a very low NPL ratio of just 5.5% – and this is including so-called “special mention” loans, which are dud loans that are held not to be complete write-offs just yet, primarily based on assorted extend & pretend schemes. In China this method of masking the extent of bad loans is called “evergreening” loans. Naturally, everything is done to hide the true extent of deterioration, but this is by no means unique to China. Continue reading

Frankenstein’s Monster

Submitted by William Bonner, Chairman – Bonner & Partners

Wisely Staying Out, Once Upon a Time …

PARIS – Paris was calm last night.

We walked across the River Seine…

Pausing to take a photo of the Eiffel Tower along the way.

 

Paris shows its colors

Photo credit: Frank Augstein / AP Photo

 

We were living in Paris in 2003 when President George W. Bush and his team decided to attack Iraq.

 

shock and aweThe menu: Blood, toil, shock and awe.

Cartoon by Steve Bell

 

Our misgivings were recorded in the Daily Reckoning e-letter we were writing at the time. As we put it:

 

“The U.S. invasion was arguably the best thing that ever happened to jihadists. It challenged them. It forced them to grow and adapt. Like an oversupply of antibiotics in a New Delhi hospital, U.S. interference has wiped out the weakest of the terrorists and forced others to mutate into much more lethal varieties.

The war in Iraq led to dozens of experiments and innovations — in the art of insurgency as well as in organizational skills and management. What was just a handful of nut-job jihadists a few years ago, under pressure from the U.S. military, has become far more powerful and much less amateurish.”

 

But the worst thing that could come from an aggressive attack, we warned, would be victory. It would encourage even more stomping around where we have no business. Continue reading

Looking To The Future

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

The problem with Brazil is that its central bank has done everything the monetary textbook requires of it. Setting aside that Banco itself is a literal mishmash of public and private interests (what central bank isn’t?), the freefall in the Brazilian economy of late is simply puzzling to the mainstream. Unlike the US or Europe, at least the descent is being recognized openly, no weather excuses or residual seasonality here, but even that has been shocking in now both the scale and perhaps more importantly the time.

The latest figures from Brazil paint a Great Recession kind of picture for the country, except that this massive depressiveness has been working up in steadily gaining contraction well over a year now. By orthodox “rules”, that isn’t supposed to happen especially where the central bank follows so closely monetary direction. No matter what Banco has tried, the sinking plane of economic reality remains unrelenting. The proportions now in the latter part of 2015 have become staggering:

The Central Bank of Brazil’s IBC-Br index, a monthly proxy for gross domestic product, showed economic activity fell by a 6.2 per cent in September from the same period a year earlier.
That’s the biggest year-on-year drop on record, according to Capital Economics, and points to a third quarter contraction of nearly 5 per cent.

Economists simply don’t know what to do about it. An economic system is not supposed to undertake a slow motion collapse.

A quarterly contraction would be the third in a row for Brazil. The economy shrank 0.7 per cent in the first quarter and another 1.9 per cent in the second.
With Brazil’s economic and political crisis showing little sign of abating, economists have been busy revising down their already gloomy forecasts for Brazil’s economy in recent weeks.

Recent economic accounts apart from GDP have set those expectations. The data is well beyond grim; industrial production has contracted for 19 consecutive months and 21 out of the past 22. Year-over-year IP fell almost 11% in September which isn’t distinguishable by proportion from the worst of 2009.

ABOOK Nov 2015 Brazil IP

Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

• Will $4.6 Trillion Leveraged Loan Market Cause Next Financial Crisis? (Cohan)
• Asia-Europe Container Freight Rates Drop 70% in 3 Weeks (Reuters)
• Nightmare of Mario Draghi’s Crowded Trade (FT)
• The Long, Cold Winter Ahead (Tenebrarum)
• Oil Companies Brace For Big Wave Of Debt Defaults (CNBC)
• Eurozone Agrees Greece Can Get Next Loan Tranche, Cash For Bank Recap (Reuters)
• Half Of UK Care Homes To Close If £2.9 Billion Gap Is Not Plugged (Guardian)
• Report Urges UK Government To Act Now To Avoid Energy Crisis (EAEM)
• How Did a UK Power Plant Get 25 Times the Market Price? (Bloomberg)
• State Of Emergency In Crimea After Electricity Pylons ‘Blown Up’ (Reuters)
• Brazil Dam Toxic Mud Reaches Atlantic Ocean (BBC)
• Deforestation Threatens Majority of Amazon Tree Species (PSMag)
• Saudi Arabia, an ISIS That Has Made It (NY Times)
• The Saudi Connection to Terror (Daniel Lazare)
• Terrorism Links Trigger Greater Scrutiny For Greece (Kath.)
• Chaos In Greek Islands Over Three-Tier Refugee Registration System (Guardian)