China is experiencing a credit crunch. It is leading to worries between its banks
that smell like the start of the US meltdown in 2008 where interbank lending came
to a standstill because the banks didn’t trust each other. So Bernanke had to add liquidity to the
system. China
recently had to start doing it as well.
There are 2 ways to address the issue. One is to add liquidity. But this leads to food
price inflation which is the bane of Chinese central planners. Those running China try to blame it on short
term weather events, etc. but the weather gets better while the prices stay
high. The real problem is money printing.
The other strategy for increasing availability of liquidity
(credit) is to reduce credit demand. If
you kill off one sector of the economy then it leaves more credit for
others. So China is now picking winners
and losers starting with the solar industry.
Without all the competition in the industry, expect price
rises to occur. The bottom is in with
respect to solar prices IMO. But that
does not mean solar is dead. In fact,
far from it. I think big profits await
the solar industry even as government subsidies collapse.
What will happen now, as I have predicted some time ago
would be the case, is that electricity prices will go up. This will drive
consumers who used to think solar was expensive to invest in solar production. All it will take is one good sized rate
increase with the promises for more to come in the future and people will go
flocking to solar panels en masse. The
beauty of owning your own utility is that it is more difficult for bureaucrats
to raise your rates willy-nilly.
If you don't want to become a slave to the system you have to get out of the system in any way possible. Solar is a great way to start.
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