Chinese Sterilization, Death and Taxes
David Stockman posted on China's Monumental Debt Trap.:"So when the China Ponzi finally crashes, the deflationary gales will propagate violently through the global economy and financial system. China's $28 trillion tower of debt will come tumbling down in the process; and a world floating on $200 trillion of the stuff will not be far behind."
We Nattered: As for RMB loan defaults, China will sweep this under the rug. As for dollar based loans... As we Nattered here, through FX reserves... China is the only country with the luxury of being able to sterilize the effects of massive defaults by non financial corps (acting as financial intermediaries) on dollar based loans by cutting their bank reserve deposit requirement from 20%.
With $9.2 trillion in GDP x 180%; this yields $16.5 trillion in NFC (non financial corp) debt of which $1 trillion is dollar denominated. This figure may be conservative or underestimated.
According to the World Bank, at the end of 2014, China had $3.9T in FX reserves. According to the state owned Bank of China, their balance sheet was $5.4T; total deposits = $17.5T; total banking system reserves were at $3.5T.
The recent drop from 20% to 18.5% in bank reserve requirement....lowered reserves to $3.23T. The Chinese have an additional $262B of sterilization cushion for that $1T in dollar denominated debt. Which may or may not cover any dollar based NFC debt that blows up.
Later in the string, Mike Holt commented: "don't forget that there are only two things in life that are certain: death and taxes."
We Nattered: Two things are certain in this life: time stops for no one leading to eventual death and time is the only resource or asset which can never be recuperated. As in, burn down my house, steal my money, wreck my car, kill my dog, take my wife (please), these I can replace, but, don't ever waste my time. On the other hand, taxes can be mitigated, avoided (legally) and evaded (illegally).
We Nattered: As for RMB loan defaults, China will sweep this under the rug. As for dollar based loans... As we Nattered here, through FX reserves... China is the only country with the luxury of being able to sterilize the effects of massive defaults by non financial corps (acting as financial intermediaries) on dollar based loans by cutting their bank reserve deposit requirement from 20%.
With $9.2 trillion in GDP x 180%; this yields $16.5 trillion in NFC (non financial corp) debt of which $1 trillion is dollar denominated. This figure may be conservative or underestimated.
According to the World Bank, at the end of 2014, China had $3.9T in FX reserves. According to the state owned Bank of China, their balance sheet was $5.4T; total deposits = $17.5T; total banking system reserves were at $3.5T.
The recent drop from 20% to 18.5% in bank reserve requirement....lowered reserves to $3.23T. The Chinese have an additional $262B of sterilization cushion for that $1T in dollar denominated debt. Which may or may not cover any dollar based NFC debt that blows up.
Later in the string, Mike Holt commented: "don't forget that there are only two things in life that are certain: death and taxes."
We Nattered: Two things are certain in this life: time stops for no one leading to eventual death and time is the only resource or asset which can never be recuperated. As in, burn down my house, steal my money, wreck my car, kill my dog, take my wife (please), these I can replace, but, don't ever waste my time. On the other hand, taxes can be mitigated, avoided (legally) and evaded (illegally).
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