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
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

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