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China’s Coming Collapse

Now that China’s coming collapse is getting quite a lot of press (though not enough), I must point out one of my regrets in writing this blog, and that is the fact that I never really fleshed out my opinion, first stated more than a year ago, that China is due for a horrific day of reckoning:

Hugh Hendry gives an interview with King World News.  He opts to unhitch his wagon from China’s star before it starts to fall to earth again.  Key quote: “I am just intrigued as to the optionality, as to the profits that could be made, should that revert. And because it’s deemed to be impossible, the trade is actually asymmetric. By golly if I am right, I can make a lot of money.”  Indeed you can, Hugh.  And if you’ve missed his prior interview entitled “I Would Recommend You Panic,” you should check it out.  Stay tuned to this blog for further insight into why China of the 2010s is Japan of the 1980s.

The parallels to historical bubbles are overwhelming, and there is particular similarity to the Japanese bubble of the 1980s.  The fact is, China’s economy is written on paper.  The data available are fabricated, and even where they are real, they are circular and without a basis in reality.

The reckoning is inevitable, as I’ve mentioned before as well:

Rather than reflecting the true time preferences of the citizenry, inflationary actions push consumers to buy more now – right up until the point when the bubble bursts and they can’t buy anything at all.  Mark my words, China will get there.

Consider this post too little, too late, but at the very least my humble contribution.  China is going down, and at least now I can say “I toldja so.”

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