Good on you, Ambrose Evans-Pritchard. There is really no other story that matters, is there? If China goes down, the economic system of the past 60 years may be finished. Collapsed. Kaput. That's because every other major economy in the world is troubled to a degree. China has been pulling the whole boatload. But what if China's magnificent industrial engine begins to sputter and lose traction?If America is in a recovery, as the Obama administration claims, it's a funny one. We tend to think the American economy more or less resembles a depression. Europe's, too. In fact, Italian political and financial leaders just asked China to buy the country's bondsChinese leaders already own trillions in American securitiesthat they are about to sellbecause China has been acting as the buyer of last resort for the entire world.This is a really big story. Everybody should ben it! It is more important than the concerted surge of central banking liquidity now announced for Europe,the loss of US$2 billion by a trader, or even the determination of the Obama administration to reduce or eliminate french fries on fast-food menusWhat's a hard landingIn our terminology it just means that a country's central bank has over-printed money to a degree that the economy cannot absorb any more price-distortion and that the business and financial investments that were seen as sound yesterday are suddenly revealed as insolvent. This causes a panic. Stock markets crash. Investor equity is wiped outJobs are lost. Banks turn insolvent of course, analyzes the unfolding downturn from a more measured perspectiveHeis perhaps the best mainstream financialat the moment, or at least the most fearless, buthe values his jobwho can blame himThus he presents his conclusions through the veil of socialism and Keynesianism that are taught at such fashionable Fabian schools as the London School for Economics.This is why he can write that China has no What he means is that China and other Asian countriesChina is not alone have already taken steps to raise interest rates and slowthe amount of fiat money printing by their central banks. We would simply observe that the money manipulations of China's central bankers have failed and they are running out of time.China has actively sought to cool overheatingto-income ratios for property in the rich coastal cities nearing wild extremes of 20. But it does notwant the economy to jerk violently from boom to bustIt" being the old men who run the Chinese command-and-control financial systemlet's take a breather. There's plenty of otherWe're still shook up over the death of Amy Winehouse, for instance. Scarlett Johansson recently the phone hacking that broadcast naked pictures of her around the web, I really felt badBrad Pitthas told the world that he is happier with Angela Jolie than with Jennifer AnistonBut the point is that even these storiesas monumentally important as they arepale into insignificance when one considers the import of a hard-landing in China.The China hard-landing story being featuredChina's economy may be slowing down from its doublebut corporate investors aren't letting that get them down. And why should theyChina's the No. 2 economy in the world after theand growth at 7% on the bearish estimate to 9% currently is adding to higher wages. There areproblems in China, but its centrally managed government seems to have the trust of many big firms from around the worldChina's future looks brightMultinationals increased foreign direct investmentmonth 11% to $8.4 billion, the Commerce DepartmentChina's attractiveness as a destination for foreign investment is still strong," Wang Zhile, director of the research center fortransnational corporations at theCommerce DepartmentThis is an upbeat story. But stillare we getting the whole picture?points out that China's electricity use closely watched as the economy's true pulsewas almost flat over the summer.Export orders fell 3.3pc in August, Inventories have jumped.money supply has dropped from its normal growth rate of 18pc to 20pc to nearer12pc over the past three monthsHere's some moreThe historic pattern of global crises is that the region emerging strongest is often prey to its owncrisis three years later or so, usually because it was able to respond with a blast of credit thatstored up problems for the future. 1987 crash, only to succumb in 1990dodged the Asian crisis in 1998, only to face the dotcom collapse in 2001Charlene Chu composed the Fitch and thequotes her as well. "China's banking systemis the largest, fastest-growing, but most thinly capitalised among emerging markets," she is quoted asThat China's economy is slowing while financing is still so abundant illustrates how dependent growth remains on loose fundingChina's credit boom does not match Iceland – which saw credit rise from 130pc to440pc over five years – but is significantly worse than the jumpthe sub-primecrisis, or even in Japan before the Nikkei bubble burst"Such leverage is a signthat the incremental return on credit has declined, meaning that borrowers' ability to repay is notkeeping paceThe agency fears that non-performing loans could riseAccording to a Chinese business publicationwish to reduce some US$150billion in available credit. Yet, we learn from the Telegraph that any significant reduction in credit will have a serious impact on the liquidity of regional governments in China that have stored up some US$1.7 trillion of liabilities during China's latest building binge. The localities depend on land sales for 40pc of their income!If we have a hard landing, the government is not going to be able to pay salariesWang Jianlin, Dalian's biggest property developer. And what does Evans-Pritchard concludeWhat isclear is that if Europe and America fall back into recession, China will not be able to buttress the global economy a second time."
We have no quarrel with this, except for the assumption that Europe and America ever emerged fromtheir "recessions" in the first place. The 2000s are looking more like the 1930s than the 1970s – a long slog from slump to slump, in other words, that was only alleviated by resetting the world's economic system after World War II.We will end with the observation that it is harder and harder to conclude all of this is serendipityWe remember the George W. Bush years,government began spending hundreds of billions on insane domestico Child Left Behindwhile funding trillions in expenditures for the wars in Iraq and Afghanistan.The Bush and Obama administrations purposefully droveinto a kind of economic depressionhile counterparts in Europe did the same thing. None of this is an "accident." It is all the result of deliberate policiesNow China apparently teeters on the brink.One can argue of course that Bush, Obama and the Eurocrats did that their policies wouldresult in the current messone can also argue that the brightest men in the world – after some 100 years – did not realize that central banking inevitably collapses economiesBut how could they not know? How could they be so sure that central bank money printingguaranteed endless prosperity? It does not. History shows it does not. And now the old men of China are about to find this out as well.
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