Unusual complacency in global RISK OFF event. Powell likely to finish off China this week. Chinese Bubble bursting may trigger global bubbles.

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China poses a huge risk to global stability – financial, economic, and geopolitical. The bursting of the Chinese Bubble is likely to be a catalyst for bursting global bubbles.

China’s Bubble deflation has entered the acceleration phase. Going forward, Crisis Dynamics will be increasingly unpredictable and difficult to control.

August 17 – Bloomberg: “Only a week ago, Zhongzhi Enterprise Group Co. attracted little notice within China and was almost unheard of everywhere else. Now, the secretive shadow banking giant has become the latest symbol of financial fragility in an $18 trillion economy where confidence among investors, businesses and consumers is rapidly dwindling. The privately owned manager of more than 1 trillion yuan ($137bn) and its trust-company affiliates are under intense scrutiny after halting payments to thousands of customers.”

Zhongzhi is a top-10 player in China’s shadowy $3.0 TN “trust” industry. Operating as “shadow banks,” trust companies typically offer investment products with rates significantly higher than bank deposits. Many are essentially subprime lenders. The industry is said to have about $300 billion, or 10%, direct exposure to real estate development, though most analysts believe overall real estate exposure is much higher.

While the failure of so-called “wealth management products” is not that unusual, today’s situation is much more dire. The unfolding collapse of Country Garden has unnerved already fragile confidence, with the entire developer industry likely to face a further collapse in sales, along with an acute liquidity crisis. The trust industry faces the grim prospect of rapidly mounting bad loans and panicked investors desperate to get their money back.

Investors Fear a Financial Contagion in China

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