World debt
Posted: Wed Jan 16, 2019 3:35 pm
$244,000,000,000,000.00 is over thrice world wealth:
https://www.bloomberg.com/news/articles ... ter-growth
https://www.bloomberg.com/news/articles ... ter-growth
https://www.livewiremarkets.com/wires/t ... ebt-levels
For investors, the primary takeaway is a reminder that Chinese debt growth is unprecedented. Whilst Chinese debt is mostly internal and denominated in the home currency (emerging market debt busts often involve substantial foreign currency debts), this simply shifts the likely outworking of a debt bust. Rather than looking to Argentina or Venezuela as recent precedents, China looks much more like Japan in the late 1980s. It’s not just the debt growth and “miracle” economic growth that seems similar, the cultural and demographic likenesses are uncanny. A potential Chinese bust is therefore more likely to be a multi-decade malaise rather than a rapid plunge.
However, this scenario assumes that the heavy hand of the Communist Party remains. If an economic downturn leads to widespread revolt and a change of government, then a rapid plunge is the most likely outcome. This is one key difference with Japan, Chinese citizens have an unwritten bargain with their government that their continued submission relies upon their wealth increasing. If the wealth accumulation of recent decades turns out to be a Ponzi scheme, the citizens will turn on their government and there will be a fight for control. The current demonstrations in Hong Kong might be just a prelude to the main event.