Tuesday, September 18, 2012

Not A Problematic Economic Situation At ALL!

In addition to shadow bankers disappearing/committing suicide/going bankrupt/leaving the country, China's economy is in the middle of another body blow.

Say you're a Chinese businessman "needing" a loan. Go to the bank! No, not the shadow banks, a legit REAL bank. They have been ordered by the Communist national government to lend, regardless of your credit-worthiness. All they want is collateral. Tell them about your warehouse full of steel, and they'll give you a loan.

Well let's say your business plan wasn't as great as you thought. You end up in default on the loan. Here comes the bank looking for their collateral warehouse-full of steel. Except you lied, and there is no steel.

Or, probably, copper and other commodities. To say this is a huge problem is an understatement. Let's see if the Chinese government lets the banks take a hit, even on paper, or if bailouts become "necessary" to "save" the banks in China.

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