So hear me out.
I personally think underneath the hood China really is hurting worse than us in this trade war but with their centuries of experience saving face and authoritarian government they’re putting on a pretty good kabuki theater. I believe they have issued so much debt so fast they are now over extended that the export spigot has turned into a trickle. China is an export based economy, the U.S is not. And it looks like the Chinese economy is showing smoke, and where there’s smoke there’s fire.
- Chinese exports have basically ground to a halt (0 growth)
- Slowest GDP growth since 2008
- Manufacturing at 17 year low, in contraction
- Multiple banks having been nationalized (x3 now)
- Retail sales growth at 16 year low
- Rumors coming out of HSBC
- Ban on importation of gold to stop capital flight
- China is in a liquidity crisis
- China can not sell U.S treasuries because that’s how they fund the Yuan
- Monetary stimulus has been losing its’ effectiveness
- The devaluation in their currency is so they could finance their debts, not because of the trade war
It looks like China is in the midst of a spiraling debt crisis. Since 2008 China has lent trillions of dollars in loans for the silliest shit. Entire cities where no one lived, they were just growing in order to grow, even if it didn’t make sense, and people were making money hand over fist. They’re throwin money worse than rappers in a strip club. But now that Trump gang has thrown a couple tariff hand grenades over their wall it’s looking a little dicey over there.
For instance and i think most prudent is the Chinese nationalization of now a third bank. That means these banks were failing. And the first two were shrugged off as “rural”, but this third one isn’t and it’s even weirder because the .gov had their sovereign wealth fund take it over.
I honestly believe there is trillions of dollars in contagion (bad, risky loans) over there, and the dominoes have started to fall. You pair that with the HSBC rumors floating about and it gets weird.
HSBC posted positive earnings and on paper were killin it. Same day, smoke their CEO down. Next day, let 4,000 people go. 2 days ago, their “Head of Greater China” is let go. HSBC is extremely close to the Chinese government. They’re based in HK and do a lot of business as an outlet from the mainland to the rest of the worlds financial system. The official line is something about Huawei and the detention of their CFO in Canada a little ways back, but about a week ago Kyle Bass came out with a rumor stating HSBC had been loaning billions of dollars to the Chinese government to help them with liquidity in their currency. Just a rumor, but it’s a puzzle piece on the table.
Something is not right over there and with them being an authoritarian regime it’s hard to tell for sure. If i had to bet on it i’d say they’re overextended on debt and now that the US dollar machine is on level 2 as opposed to level 10 shit’s going to get real over there. But the real question is if they go tits up, what does that mean for the world economy? And the question is do the Chinese wield the power to stop it now that it’s started.
If you get a chance listen to this Macro Voices episode in order to gain some insight into how their currency works behind the scenes.www.youtube.com/watch?v=bRj6Rhqh0WQ