China is the Ultimate Crony Capitalist State. Its banks, its energy companies, its construction companies, all the big stuff is dominated by an entrenched post-Mao aristocracy. Prices are obfuscated and graft is widespread – particularly the legal kind. Such a situation is fundamentally unstable.
Remember when Japan was going to rule the world? And no I’m not talking about WWII, I’m talking about the late 80s. The Japanese were buying up everything. The world was turning Japanese. Ahem.
That was a long time ago now. Indeed many of our readers don’t remember the 80s Japanese surge because they weren’t even born. Since those heady days Japan has stagnated. It may be looking at significantly worse than stagnation soon. The Land of the Rising Sun,
Consider that according to Bass (one of the few investors to win big during the last recession) the exposure of Chinese banks (and others) to their domestic property bubble is 5 times that of US banks during our recent bubble. China’s economy is still 2nd to the American in terms of size. Consider the impact of a property bubble 5 times the size of ours in an economy which is smaller than ours. Consider also that China is run by a Communist Party which is very keen on staying in power and has a history of using extraordinary force in times of crisis.
A very well done video on the Japanese debt crisis. Anyone who cares about the world economy should have some understanding of what is going on currently in the world’s 3rd largest economy.
Kyle Bass is a smart guy and he’s been watching Japan closely and for a long time. The Hail Mary pass the Bank of Japan just tossed up has bounced in the end zone. Bass says it’s close to game over.
Well folks, Kyle Bass is a pretty smart guy and widely regarded as credible too. If he says that an Obama Administration official said that the government intended to kill the dollar, I believe him.
Bass makes a whole series of insightful observations regarding the global economy in the attached video, observations of the type one is unlikely to hear expressed on CNBC . But he makes one particularly chilling point. We have never seen peace time debt levels like this. In the past when debt levels spiked, during and just before war, the losers of the war got saddled with the debt. What happens now with much higher levels of debt to GDP ratios than we’ve ever seen,