“Twitching like a finger On the trigger of a gun.”
-Paul Simon
Uh oh! China is making things feel twitchy!
We are always on the alert for the most likely trigger of the coming economic calamity. The thing that ends the made-up, manipulated money system and remonetizes honest money. There are many candidates today. War. US banks. Bidenomics. A debt crisis. A Fed screwup.
But if we had to guess, it looks like China.
We are very concerned that this could be the one. The block in the Jenga tower that makes the whole thing tumble. The straw…
There is generally a trigger, a single event that sets the whole house of cards collapsing. It was the failure of Creditanstalt 1931, Austria’s largest bank, that was the first major bank collapse of the Great Depression.
Kyle Bass notes that Chinese real estate developers Evergrande and Country Garden together have $500 billion in debt.
Think about that. Two real estate companies, both in default, a half trillion dollars in debt! “Every single property developer in China, listed property developer, is in default today,” says Bass. “This is just like the US financial crisis on steroids. They have three and a half times more banking leverage than we did going into the [2008] crisis.”
“China has 20 plates spinning and all the plates are crashing right now!”
This looks like the trigger event. It looks far too big to contain. It has the prospect of bringing the global economy to its knees!
The seriousness of the situation has China scrambling for gold. The people in China seem to know it and are trying to prepare themselves. Here’s one Japanese newspaper’s headline and lead:
China gold purchases soar 30% on economic anxiety
Chinese gold purchases rose 30% in 2023, as the country’s central bank bought the commodity to replace its dollar holdings amid tensions with the U.S. and individual investors sought a haven for their assets as the economy stumbled….
As China acquired more gold, the country cut its holdings of U.S. Treasurys to around $782 billion as of November, about 10% less than the previous year, the U.S. Treasury Department reports. The figure is roughly $230 billion less than China’s holdings immediately after Russia’s invasion of Ukraine.
China is a hot mess. There’s not much they can do about the popping of their real estate bubble. But they want to land on their feet. They want to have some real enduring assets on the other side of the mess. That’s a good idea for individual American investors right now, too. Especially since this looks very much like the trigger!
