Will China Pop The Global Everything Bubble? Yes

The comments below are an edited and abridged synopsis of an article by Charles Hugh Smith

“The line of dominoes that is already toppling extends around the entire global economy and financial system. Plan accordingly.”

Will China Pop The Global Everythig Bubble? Yes - BullionBuzz - Nick's Top Six
China High Resolution Bubble Concept

That China faces structural problems is well-recognized. The list of articles in the August issue of Foreign Affairs dedicated to China reflects this: Xi Jinping’s Gamble: The race to consolidate power and stave off disaster; China’s Economic Reckoning: The price of failed reforms; The Robber Barons of Beijing: Can China survive its gilded age; Life of the Party: How secure is the CCP?

These are difficult issues: A demographic cliff resulting from the one-child policy, soaring wealth-income inequality, pervasive corruption, public health issues, environmental damage and a slowing economy.

What the conventional analysts do not fully grasp is the existential threat to the CCP and China’s economy posed by its unprecedented, metastasizing credit-asset bubble and its incipient energy crisis.

Smith discusses the above and concludes that there are only two policy options: 1) Grasp the nettle and refuse to bail out debt-funded speculative excesses, thereby popping the Everything Bubble, or 2) Play the game, expanding the bubble until it implodes on its own, an end-game made inevitable by the systemic instabilities intrinsic to bubbles. 

Xi Jinping has (correctly) chosen Policy #1, while the Fed has foolishly chosen Policy #2.

Leave a Reply

Your email address will not be published. Required fields are marked *