Sunday, October 30, 2016

China Is Providing 
"Vendor-Take_Back" Financing
Danielle Park observes how China has several forms of vendor-take-back financing for the western credit/consumption bubble 2005-2015. First by recycling its export profits back into U.S. & European treasury bonds (which kept rates low & allowing more borrowing in the west), then by funding the world’s largest stimulus program a few years ago to boost global demand in the short run, & lastly in recent years, with capital fleeing China to buy up property & businesses in the west .. "All of these actions have helped boost official demand numbers and asset prices, but with it, also more superfluous inventories, inefficient allocations of capital, and of course debt on debt on debt. Officially China now has a debt to GDP ratio of 275%+ as charted here. Fitch estimates that loans are going bad in China today at 10x the officially reported rate. As with all extend and pretend strategies that throw good money after bad, they delay, but also magnify, the underlying fundamental problems which require structural reform, debt write-offs and lower prices to clear the excesses of the prior boom."
LINK HERE to the source & video

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