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Gordon Long

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Mr. Long is a former senior group executive with IBM & Motorola, a principle in a high tech public start-up and founder of a private…

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Mr. Andros began his commodity career in the early 1980's and became a managed futures specialist beginning in 1985. Mr. Andros duties include marketing, sales,…

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China Slowdown Crippling Asia

With Special Guest BERT DOHMEN

Publisher of the China Boom-Bust Analyst
& Gordon T Long & Ty Andros

29 Minutes, 46 Slides

China Post-Crisis Credit Boom

With the aid of 46 supporting slides, Bert Dohmen, Ty Andros and Gordon T Long discuss what their individual research is telling them about the situation in Asia.

During the last six months China has injected nearly $1.6 trillion in new credit (21% of GDP) into the economy. If there can be a credit crunch even with that much credit being added to the system, then you know that the problems are big.

The crunch is in fact the result of one of the following:

    • A shortage of lendable funds,
    • Governmental lending restrictions,
    • Banks being unable to find creditworthy borrowers,
    • All three of the above.

The recent liquidity shock came from the realization that the government was no longer willing to provide infinite liquidity. In fact, they are trying to get control over the unregulated "shadow banking system," which is estimated to be around $10 trillion, although no one knows the real size.

The June credit crisis was the first big sign that the country's trillions of dollars in bad loans can no longer be hidden. Non-performing loans in China are monstrous and increasing by the day.

This has so far been hidden by the false GDP growth numbers released by the government. The official number contains governmental spending as well as "artificially enhanced numbers" from the party officials in their districts to make themselves look better.

China's private sector is already in recession.

China PMI

Small and medium size firms are facing a self-feeding avalanche of bankruptcies.

The reality of this cannot be hidden much longer. It is now surfacing.

China is the big elephant. A China recession could become like a tsunami around the world.

China is now experiencing a very serious credit crunch, similar to 2007 in the US that precipitated the global financial crisis. Anyone who expects improvement in China now is whistling in the wind.

Dohmen's prediction, without hedging, is that the contraction will accelerate! The only unknown: will the government launch another massive rescue mission as in 2009 and risk another, even bigger bubble?


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