Monday, January 1, 2018

Is China getting ready to throw in the towel on the global debt Ponzi? [YANG]

A friend sent me this link regarding the Chinese-fed Australia bubble.  I agree with the overarching premise that Australia is a house of cards and the main reason is that its Chinese benefactor is an even bigger house of cards.  One of the charts therein caught my attention because it is now showing the characteristic "five down from the top" that marks every chart reversal as being real.

In a debt Ponzi, once the credit collapses, everything else follows close behind.  Keep in mind that this is happening at a time when the carefully scripted message coming from China's central bank is that local regions who are in over their head in investment debt should be allowed to BK with the overall goal of benefiting the country.   While the overarching message of debt reduction by any means being a good one, the question is whether the resulting economic collapse will result in widespread rioting even to the point of regional coups and efforts to break away from the Chinese central control (similar to Catalan and Spain).  Anyone who thinks there will be no unintended consequences from allowing a massive debt Ponzi to collapse is a blithering idiot.  We are past the point of people wanting the constantly growing debt in order to have better lifestyles.  We are now at the point of the masses needing it in order to survive.  And I don't just mean in China.

I've been documenting the bottoming process in the reverse leveraged China ETF and I think early January will be very kind to YANG longs at the expense of those who are long Chinese stocks.

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