Banks vs. The People
Backed by Tanks, the Banks in China are Prohibiting Withdrawals!
It started in April when a few banks in China’s Henan province prohibited cash withdrawals.
Now things have spread and escalated. Hundred of thousands of people have been unable to withdraw their money. In Zhengzhou, the provincial capital of Henan, the government has deployed tanks to the streets to intimidate depositors, with police violently dispersing others.
Now the government is using the country’s health code to control protestors, down-grading their government health rankings to derail their travel and other activities.
There are other troubles brewing in China that are mostly off-the-radar screens. One of the biggest is a growing mortgage boycott. Here is a story from Bloomberg News on July 14:
“It is spreading like wildfire. Homebuyers in China are refusing to pay the mortgage on properties they’ve bought but that their financially strapped developers can’t finish. Some say that they will only resume payments when construction restarts… The frustrated buyers accuse the developers of misusing sales proceeds and the banks of failing to safeguard their loans. China has never seen anything like this. As in the US — until the 2007 subprime crisis — the possibility of troubles in the mortgage market was vanishingly small.”
There are a reported 100 million apartment units in China that are unoccupied. Remember “jingle mail”? That was the term in America’s mortgage meltdown for borrowers who walked away from their loans when their home values slipped below their mortgage debt. They defaulted, left the house keys in the mailbox, and walked away, leaving the problem to the lender.
As market values tumble below what is owed, the same sort of thing can happen in a way unique to China.
China is buried in debt, which explains why its holdings of US debt has recently fallen below a trillion dollars. The US can hardly afford to lose a leading creditor like China, but events in the credit market there are happening very fast. Doug Noland who writes the Credit Bubble Bulletin says that credit conditions in China continue to deteriorate and that the “housing downturn is becoming only more deeply entrenched.”
What happens to the rest of the world if the second largest economy experiences a credit collapse? We can say only two things: 1). it will be like a nuclear bomb going off in the global economy, and 2). you will be very glad you protected yourself with gold and silver.