Excellent post by David Stockman on the fate of China...

So many people think China is going to take over.  It is the old mistake of extrapolating of relatively recent performance into the foreseeable future.  They said the same thing about Japan and look how that turned out.  China is a debt Ponzi that is even bigger than the US debt Ponzi in relative terms.  The US did not build theme parks to nowhere, mega shopping malls that nobody can afford to shop in and million people "investment cities" such as Ordos that nobody in China can afford to live in.

None of these foolish projects were done with savings.  All of them were done using debt.  The use of OPM (Other People's Money) incites the scammers to do all kinds of ridiculous, uneconomical endeavors.  This is why a credit based economy always ends up being a pump and dump mess.  Easy money leads to bad decisions.  Easy money leads to finance frenzy in search of short term profits instead of economically sound long term thinking.

And so with this background I invite you to read a recent post by David Stockman.  China's debt Ponzi makes Japan's debt Ponzi of the 70s and 80s look like a conservative walk in the park.  This activity pumped up their GDP and growth numbers at an exponential rate.  Anything exponential is temporary in the world of economics.  Exponential charts are the sure sign of massive leverage in use and leverage will always have to be unwound at some point.

The future is going to see massive global deflation IMO.  Only after all of this bad debt is written down from the global economy will we see the expected massive inflation finally arrive.  It could take years to happen but in the mean time, I expect that things which are normally purchased using cash to cost more while things that are normally purchased with credit to decline in value (cars, homes and yes, financial assets such as stocks - margin debt is now at an all time high).  We have reached peak credit at the global level.