Friday, October 21, 2011

The China Bubble?

China's central banks has slowed its money printing (from 30% plus to 19%), which suggests a good bout of stagflation. A slowing economy, with price inflation. Slowing money growth can't possibly support a capital structure built on greater money printing.

Hans Palmstierna emails:

If I'm not mistaken, the Chinese stock market is showing a classic "bubble" pattern with the move from the 2008 bottom being the "bounce" after the initial crash, which eventually fails and the whole thing goes back to the breakout level. That would indicate Chinese stocks possibly being cut in half from here before its over. Interestingly enough, that only puts us back at the 2005 level ....

Now, I'm actually a believer in China (due to their massive savings rate, and the fact that they must have a pretty significant capital base, all of which probably won't be destroyed by a massive reset), but I'm not buying until the collapse is done and we know if they're going back to central planning (new chairman of the "communist" party might give a clue). Nice call on your part in the EPJ Daily Alert - it's hard to get it right and also be fairly well-timed.


  1. The Chinese gov't has cracked down on the RE trusts that fund the big developers (who are failing, like Greentown).

    I think the state is more or less preparing for a hard landing and are targeting who will get wiped out (not unlike here). But CHY liquidity pools and new exchanges are being built in HK to facilitate international investment in the mainland. Now is probably not the best time to invest as there is much downside potential, but a signal might be when a key interest rate reference (similar to LIBOR) is developed for the CHY.

  2. Could you please provide a reference for your statement, China's central banks has slowed its money printing (from 30% plus to 19%).

  3. Based on M2, the reduction is actually much lower, from about 30% to about 13%.

  4. Wenzel has been calling this for quite some time, unlike Schiff...