The Coming Chinese Collapse
If you're dependent on them for anything, now is the time to bail
You may or may not have heard that there is a giant bank run by Chinese citizens occurring in China. This is likely a result of China’s harsh lockdown policies forcing people to withdraw large amounts of cash in order to survive.
Real Estate Warning Signs
To be fair, the warning signs for China’s economy tipping over were first exposed when China’s biggest trillion dollar real estate provider Evergrande missed debt repayments, and collapsed.
Arguably akin to a combination of the US’ 2008 subprime mortgage loan collapse coupled with the tethering brink edge of the 1930s stock market collapse, China’s real estate market imploded.
Without going too deep as to why, the Chinese government set economic targets, regional governments were required to hit these targets, and the “easiest” way they found, was to keep building real estate - even if no-one in China was buying, producing the infamous ghost cities.
This led to a glut of properties no-one was buying, there was no incoming revenue, and so the regional governments started running out of cash. That meant no more money for the likes of Evergrande to keep building with, meaning Evergande, back in December 9th, 2021, defaulted on their debt.
House of Cards
Forbes commented that, in doing so, the Chinese government’s debt had reached $8.2 trillion, although small potatoes compared to the US debt ($50 trillion in 2020), the $8.2 tril represents over 52% of China’s GDP (Gross Domestic Product; a rough way of estimating their total financial output), which means it exceeds China’s ability to pay, given interest.
Ignoring the investors who obviously lost out, the loss implies a major contraction on the Chinese economy, on top of all the shipping backlogs and tariffs. This of course means people out of work, living off of savings. This means there’s a pressure on the fractional reserve banking system.
Fractional Reserve Banking?
So, it’d be physically difficult for a bank to physically hold all physical notes in the billions or trillions. So instead of requiring banks hold all physical notes representing their wealth - a reserve - ‘fractional reserve’ banking says they only need to keep a fraction of the physical notes available on-demand for day-to-day transactions.
So usually this is enough for old grandma to get a lump of her pensions out, a business to exchange for cash for use in shopping tills (often delivered direct by cash vans), and a daily number of customers who do withdrawals, plus ATMs.
What it cannot handle is if a large horde of people came down all at once to suddenly demand their entire savings, as eventually it will exhaust the available money and trigger what’s known as a “bank run”.
Bank Run?
Where people panic, hear there is little to no money, so they rush down to their nearest bank branch and try to withdraw it all before all the money is gone, causing a self-perpetuating crisis.
Normally a government might step in here with notes or similar, but remember, we’re talking a government that is 52% of their GDP in-debt, and thus has nothing to spare.
Mortgage Default?
The Chinese are now refusing to pay for their mortgages in protest of the current situation in China. ZeroHedge claims it is occurring in over 50 cities, adding:
Analysts believe that a drop in home values may be another driver for the refusal to meet mortgage payments.
It looks to be a 2008 subprime mortgage crash all over again.
It Is Inevitable
This means, with word-of-mouth inducing panic to mass withdraw banking deposits, a huge run on savings has just started in cash strapped China where there are no jobs and a contracting economy where people earn less, with brutally harsh lockdowns trapping people and crippling the domestic output.
In short: China is about to crash, and take everything ties to it, down with it.
Pull your assets now, before it is too late.
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