Spiritual Forum

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  Cortex June 3, 2012 at 7:03pm

  Automatic translation:

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  Bank run in China?
  Rainer Sommer 06/03/2012
  While all eyes are on the euro zone crisis, China could be just the worst fears come true
  
  Remember: Before all eyes were on the euro zone crisis, did you look here and there still interested in other relevant developments in the global economy. Would not it be a potentially enormously weighty element in the current global economic financial disaster, the euro area could indeed be quite happy to be displaced at times a little out of focus in the financial markets. A good candidate for this seems to be positioned at the other end of the world to build, where to show it already for many years of warnings in China is now quite clear evidence for the occurrence of the worst fears.
  
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  There seems to be in the now second-largest economy in the world to have played, which is probably still have much more dramatic consequences than the drama that has just been in Europe since early May, a bank run. So will the Chinese business newspaper 21st Century Business Herald unnamed banking sources have learned that the big four Chinese banks (ICBC, Bank of China, China Construction Bank, Agricultural Bank of China), in March, about a trillion yuan (130 been sufficient billion €), had awarded in May in the first 20 days only 34 billion yuan (4.33 billion euros) in new loans. At the same time should have been but 270 billion yuan (34.4 billion euros) lifted - while it must be noted, that are regarded in China for official information at all times with skepticism and even more so those from unknown sources.
  
  If the information but also apply only to some extent, it is clear that the government, the newspaper writes, while accelerating the approval of infrastructure projects, but last Monday to 100 projects had been waved through. However, in view of these figures, an open question whether the government can manage to move consistently under government control as the major banks to finance all these projects. Of particular concern is the quality of the newspaper is preparing the projects, which have also been affected by the "manic-infrastructure activities," the "mega-stimulus was triggered in 2008" by the.
  
  Three years ago, China (leave and finance through the banks) to four trillion yuan (510 billion euros) taken in hand and the growth of so held despite the global economic crisis, more than eight percent, which was probably the main reason why, after the Mega-financial crash of 2008, in particular Germany on exporting rather quickly came to decent growth rates.
  
  It does not matter if these projects fail in the long term or not, in any event before they had the effect of debt-financed demand, thus generating income and growth. After all, Marx, Keynes and came back today in honor of economist Hyman Minsky have made it clear that without credit expansion in the long run no growth. Finally, it takes for a seller to every buyer, the expenditures must always equal the income (and the sum of all purchases of a particular region and time period then result in economic output, the GDP). To achieve growth, future expenses have to exceed the current revenue growth over time is therefore only possible if the gap is financed through loans. This is true also for the world economy, for which positive growth thus is basically a credit expansion is required.
  
  Balance Sheet Recession
  
  Apparently, the leading industrial states have already a debt maximum (When will the "peak debt"?), So that the previously overly expansive homes, businesses and governments on their own initiative or forced to try to clean up their balance sheets. The consequence of this global "deleveraging" (reduction of debt financing) is called a balance sheet recession, which makes the recent economic downturn is much more dangerous than the "normal" cyclical downturns, often triggered simply by the fact that the central bank because of the cyclical boom rising inflation raising interest rates.
  
  Now the world tangible interest rate increases were observed at most in some overheated commodity exporting countries, which benefited from demand from the huge construction boom in China, there had also led to further sharp increases in domestic consumption.
  
  In contrast, the world had the private sector after the 2008 crash the belt-tightening, while initially in terms of credit expansion (ie, revenues exceeding expenditures) could at least count on the budget deficits of nation states. While the massively swollen budget deficits in the West only anemic growth rates, but produced the euro zone crisis, China remained the engine of the world economy. Only China has long since led to obvious bad investments and high excess capacity, while large parts of the euro zone by the private credit markets have now been cut off as well or have left voluntarily on austerity.
  
  At the limits of their possibilities
  
  Thus, in the west for the expansion of credit, only the states remained with their own central bank like the U.S. and Great Britain with budget deficits expected to be for years to more than eight percent, and Japan with more than seven percent, so far I would say the probably most important support for the global economy pose. Even higher deficits are found also in Ireland, Greece and Spain, is only clear that the resulting credit expansion can hardly make a positive contribution to the world economy, because while the private sector greatly shrink and pre-finance the overseas its exports to these countries almost entirely be .
  
  Much more effective so as were the vast and pure debt-financed infrastructure projects in China, which shows currently still officially a comparatively modest budget deficit of 1.5 percent. However, the debt is not made in China by the government but by local authorities and development companies, which were in turn financed by the large state banks.
  
  Since most of the projects but it seems hardly bring the expected returns, they may eventually end up as a burden but even in the state budget, which is why the government fears seem to have encountered here soon reach the limits of their possibilities.
  
  And know though, the Wall Street Journal wants since the beginning of twice as many projects were launched as a year earlier and analysts expect the Credit Suiss Group (CS), that China will invest this year two trillion yuan (260 billion euros) to to stimulate the economy, had the Central Government on 28 May, the state news agency Xinhua announced that they have no plans to conduct in light of the recent economic weakness again, a similar program under way as in 2009.
  
  Long queues at the counters of all major banks
  
  If the Chinese people but actually be there already in mass should be to sell assets to repay loans, as the focus on China financial blog, "So said analyst" claims that it itself would be expected from the CS stimulus package probably only a drop in the bucket.
  
  Given the extremely shaky Chinese stock markets can be considerable nervousness in the close of the population, it could be that the brakes in the credit system entirely an expression of general insecurity. Also speak for the excitement that should have occurred just in the industrial city of Wuyishan. So reports the blog, "So said analyst" in the name of his bloggers "Zarathustra" by a veritable bank run, would be formed this week at the long queues at the counters of all major banks.
  
  The trigger was the collapse of an Internet company that had apparently operated a fraudulent Ponzi scheme and had fled along with his boss and top management about one billion yuan (130 million euros) last week. He had operated an online shopping site, in, took the middle of their clients large sums of money to them in small daily payments to repay with high interest rates. As usual with this kind of fraud transactions were to ensure the required supply customers, large sums actually paid out for a while, but what was obviously classically from the newly accrued funds.
  
  Once the fraud was uncovered, customers had ravaged the company's office in Fuzhou, after which on 30 May, the rumor had surfaced that the government investigate the case and it will come in the wake of its accounts checks for the customers (or "members"). Then "the city is crazy," was how the reporters were told by witnesses and the victims stormed their banks. Meanwhile, the boss of the company was indeed caught and charged, the confidence in the financial system, the incident is unlikely to have contributed.
  
  If the Chinese private sector, but the brakes increases and waived the government for lack of even remotely presentable projects actually on massive investment programs, then in recent years enormous increase import demand of China will certainly not have much to contribute to world economic growth. At the same time but also in Great Britain, Japan and the U.S. government austerity measures of the speech, with the politicians want anscheinen in terms of credit expansion and economic world rely exclusively on central banks.

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