Friday Pussy - economy edition

You may recall china just a few months ago going with a stimulus package of several hundred billion to pump up a slowing economy. It appears that didn't quite work. While the idea of government spending generally works in a slowing economy it didn't work in this case for a couple of reasons. First off the bulk of the money never made it to the workers who actually spend the money. It went to the main banks and shadow banks who neatly siphoned off the money to themselves and their investors. All well and good for a while until the bill came due and it's about to do just that. Bonds sold for China's major coal industry are about to come due and with sagging coal prices they may default come January 31. The other main issue in the picture is what China did with its' housing market. In the last five years or so it's built more housing than any other country on the planet. Entire empty cities have sprung up seemingly overnight but the problem is that there were no industries to support them. And just like the U.S. housing bubble these apartments are priced out of the reach of the average worker. Pristine new trains run empty because wages are so low.

The Chinese took our concept of free market capitalism to a level never seen before but it's looking more and more like the vulture capitalism that's destroyed the U.S. Looking at charts and graphs it's mirroring the same situation pre- 1929 depression era economics where the debt to GDP ratio is moving off the charts. China is now discussing austerity measures just like but not as extreme as countries like Greece, Spain, and Italy. The big question will be how can China continue to have growth while the rest of the world is pulling back? Who are they selling to when nobody's buying?

And how exactly did we get in this mess to begin with? The problem or should we say the solution was addressed some 2000 years ago. Simply put it said not to charge interest to your neighbor and every 50 years debt has to be forgiven. Today those concepts has been thrown out the window. With a fractional reserve economy it's mathematically impossible to pay off all the debt now standing at an estimated $600 trillion dollars. Buggering your neighbor is a game best left to children on the playground.

There will be a major default it's coming soon. And will the last person in line at the payout window please turn off the lights. Oh that's right the bill wasn't paid so the power company will do that for us.

Bank fails later....