Here We Go Again
“Stimulate” until things get precarious again. That’s the way governments and central banks operate.
From naked capitalism, Chinese Banks: “An Accident Waiting to Happen”:
Readers may recall that it wasn’t all that long ago that China’s banks were sitting on big losses and the analysts debated how bad the mess was. In 2003, for instance, the damage was pegged at $500 billion, a stunning figure given the size of the economy, and meant the banking system was insolvent.
Even though the Western press has gotten excited about Chinese loan growth, seeing it as a sign of imminent recovery, appearances are deceiving. First, the government set targets, so loans had to be made, whether they made sense or not. Michael Pettis has reported some transactions were shams to meet the mandated goals. About 1/3 of the proceeds were estimated to go to the stock market, hardly a productive use. And the banking aurhorities themselves were recently reported to be trying to curtail loan growth, a confusing signal.
Ambrose Evans-Pritchard is even more dour, thanks to the reading a less than cheery reports from Fitch:
China’s banks are veering out of control. The half-reformed economy of the People’s Republic cannot absorb the $1,000bn (£600bn) blitz of new lending issued since December.
Money is leaking instead into Shanghai’s stock casino, or being used to keep bankrupt builders on life support. It is doing very little to help lift the world economy out of slump.
Fitch Ratings has been warning for some time that China’s lenders are wading into dangerous waters, but its latest report is even grimmer than bears had suspected….
“Future losses on stimulus could turn out to be larger than expected, and it is unclear what share the central and/or local governments ultimately will be willing or able to bear.”
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Fitch ratings could spend some time looking a little closer to home too. Yanno, if they get some spare time and want to look into what the US is doing to push loans and inflate the economy.
Comment by Maria — 6/29/2009 @ 9:41 am
China certainly isn’t doing a very good job of using us as a cautionary tale, eh?
Comment by Brad — 6/29/2009 @ 10:20 am
More like ‘follow the leader’. Or in this case, ‘follow the loser’.
“Monkey see, monkey do?”
Comment by BMB — 6/29/2009 @ 10:22 am
Maybe the Chinese authorities see how much we’re willing to shove over to the government when the banking system breaks, so they see it as a long term play to retain power.
Comment by Brad — 6/29/2009 @ 11:39 am
Some rather open discussion about how gov’t maneuvering is keeping the market propped up on CNBC this morning:
http://zerohedge.blogspot.com/2009/06/cnbc-this-market-continues-to-be.html
Comment by BMB — 6/29/2009 @ 11:44 am
IMHO, We have had a representative democratic oligarchy that has now descended closer into a pseudo-financial kleptocratic state with all of this blatent public bailout spending.
So aren’t Paulson, Geithner, and Paulson as spokesmen for their buddies treating the U.S. Treasury (actually the power of the dollar printing press) like their own personal treasury?
http://en.wikipedia.org/wiki/Kleptocracy
In political science, the theory of stages in an empire’s fall is from: 1) democracy to 2) oligarchy to 3) kleptocracy to 4) failed state.
Happened to the Greeks, Romans, Veneticians, Spanish, French, British, etc.
But, good to know this is the official WH policy on the threat:
http://georgewbush-whitehouse.archives.gov/news/releases/2006/08/20060810.html
http://georgewbush-whitehouse.archives.gov/news/releases/2006/08/20060810-1.html
Seems like the SEC should use this policy as their guide for enforcement.
Comment by Henry — 6/29/2009 @ 1:27 pm