Will China bring down the western economies?

Generali

theEnd wrote: »

I still feel the western world didn't really sort out any of the issues of the last downturn. Patched it up and kicked the can down the road.

Anything major could have the ability to trigger the crash that didn't really happen last time.

That's not really true though is it. The banks are massively capitalised, business has paid down debt and US consumers (where the problems started) are carrying much less debt.

Effectively private debt has been swapped for public debt but, thanks to QE, a huge amount of that is sitting on the books of Central Banks and so in net terms, the extension of national debts in the UK and US hasn't been huge.

DiggerUK

Generali wrote: »

........banks are massively capitalised, business has paid down debt and US consumers (where the problems started) are carrying much less debt.

Effectively private debt has been swapped for public debt but, thanks to QE, a huge amount of that is sitting on the books of Central Banks.............

"Banks are massively capitalised" with funny money, and containing their toxic debt books with ZIRP........these debts overshadow everything central banks in the world do. China is shifting the direction of the can they are kicking down a new road. Chances are they will be successful, to somebody else's cost.

Consumer debt was not the start of the problem, that was just the weakest link in an already corroded chain. Doesn't matter were debts sit, they don't disappear that easily, even harder in a low inflation environment .
..._

CLAPTON

theEnd wrote: »

I still feel the western world didn't really sort out any of the issues of the last downturn. Patched it up and kicked the can down the road.

Anything major could have the ability to trigger the crash that didn't really happen last time.

what problems do you think haven't been sorted out?

what do you think should have happened?

Thrugelmir

theEnd wrote: »

I still feel the western world didn't really sort out any of the issues of the last downturn. Patched it up and kicked the can down the road.

Issues take time to resolve. Be silly to !!!!! a balloon with a pin. Far better to release the air slowly under a degree of control. Plenty has happened and is happening. So more a question of you won't know we've got there until you look back. Some years away yet.

BobQ

imin83 wrote: »

So in what way do you suggest China will bring down the western world? From my POV, China is only good at producing low-priced stuffs.. not sure though those will be able to bring down any civilization

OK it was a headline. The Sun gets away with it, why not me:)

[Deleted User]

official figures suggest growth in china is around 7% experts/reallist suggest its more like 4% and falling

Mummyisbeauty

Can China not call in the money that they have lent to other countries?

DiggerUK

Mummyisbeauty wrote: »

Can China not call in the money that they have lent to other countries?

Trying to get money off sub-prime borrowers was a problem in 2007.

A lot of loans in China are through the shadow banking sector, and poorly controlled by central government. Shadow banking is best understood as a supersized form of peer to peer lending.

Most of China's lent out money is in the form of U.S. Bonds. Which is an unknown outcome of its own for now, if they continue to cash them in.

Loans are all fine 'n dandy so long as the repayments are made on time......or the other side of that coin is that they are all fine 'n dandy so long as nobody asks for a lot of their money back.
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Generali

Mummyisbeauty wrote: »

Can China not call in the money that they have lent to other countries?

No because they have bought bonds which have a fixed duration. The Chinese could sell the bonds as could any other holder: US Government bonds are pretty easily traded which is one of the reasons people like to buy them.

Generali

DiggerUK wrote: »

"Banks are massively capitalised" with funny money, and containing their toxic debt books with ZIRP........these debts overshadow everything central banks in the world do. China is shifting the direction of the can they are kicking down a new road. Chances are they will be successful, to somebody else's cost.

Consumer debt was not the start of the problem, that was just the weakest link in an already corroded chain. Doesn't matter were debts sit, they don't disappear that easily, even harder in a low inflation environment .
..._

How do you define 'funny money' as opposed to the regular sort? I have a few dollars in my wallet which I can exchange for food, beer and petrol regardless of the interest rate.

Banks are hugely capitalised with cash held at central banks. Gone are the days when a bank like NRK could work on a T1 capital base of 2%.