WHEN IS A CRISES BLOWN UP TO A SUPER CRISES?
In China, bankruptcy avoidance at all cost is the death spiral of failed policy. Bad loans are rolled over as if they are in fact performing assets. As this occurs with 1,000 upon 1,000 of small banks and small industries all of which are not performing and truly bankrupt, the mountain of bad toxic debt, unrecognized by the system, becomes the pig in the python financially in China.
At some point, the backup constipation of bad debt must LET LOOSE. When it does, a domino default cascade begins. This creates liquidity breaks to the entire system and the largest institutions begin to run dry of cash.
As the predictable mess delayed far too long works itself through the system those who were denied bankruptcy must go bankrupt to rebalance the system itself. This pain to the population illuminates the failed policies of leadership and their shame in making the problems so much worse.
Bankruptcy is a condition best contained at FIRST INSTANCE. The longer delay occurs to disguise bankruptcy the worse the future reality will become to the economic system. This is all historic.
So China is forging a debt driven an economy, at its last gasp within a mountain of bankrupt banks, institutions and firms. Liquidity crises and a domino of defaults will occur without warning and fall far beyond central planners capacity to control with existing tools. PANIC is never controllable.
The Yuan is worthless – bankrupt.
The debts of China are not going to be paid.
Creditors are getting very nervous. Already.
The life cycle we feel is 18 to 24 months maximum before a serious contagion event strikes CHINA in crises.
There is still one way out – SUPER BOND THEORY but the fiscal reforms promised and never realized must be initiated to develop a fix to the problem at the core. Time is running out.
Keep this prophetic prediction in mind when betting on world finance.
Berny Dohrmann – Keeping a Light on for you