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New Bank Lending Soars By 1000%

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http://business.timesonline.co.uk/tol/busi...icle5524501.ece

Gripped between the jaws of financial and economic calamity — and knowing that the banks hold the answer to everything — there are two choices a government can take with the sector: caulk and coddle or maim and martyr.

It is still early days, but with new bank lending soaring 1,000 per cent year-on-year in December, it looks very much as though China is taking the Joan of Arc (maim and matyr) option.

China’s banks may appear to be more like market-traded, market-led institutions than they did ten years ago, but that view is wishful at best. As Beijing flusters over slowing growth, decade-low exports and the threat of social instability, the reality of its banks has emerged: part crude pipes of financial salvation and part sacrificial lambs.

The biggest exposé of the banks’ true nature comes in the form of a recently produced graph of new bank lending in China, dating back four years. Between April 2004 and October 2008, the line bounces around in much the way you would expect it to in a booming economy with lots of simultaneous investment cycles and bubbles. Between November 2008 and now, it suddenly goes up. Vertically.

The 1,000 per cent surge — a slew of 772 billion yuan in new loans to companies and projects — dates almost exactly from the moment lending quotas were scrapped and regional banks were told that their loan to deposit ratio could legally drop below 75 per cent. M2 — the sum of all cash and deposits — soared 18 per cent in the same month.

For the China bulls, and the breed is not yet extinct, this chart is the belated Christmas present they dreamed of receiving. That roaring loan growth line “proves” the bull’s central theory that the banks are beautifully liquid and that Beijing is in full and perfect control of its economy. Or, as CLSA’s China strategist Andy Rothman puts it: “in China, there is only a credit crunch when the political leadership wants one.”

Rampant new lending growth, runs the logic, came on the direct orders of Beijing and with the implicit argument that the grand old growth rates can only be recovered if the banks suppress their natural caution in a downturn and open the money taps wide. For those who truly believe that restarting the lending cycle again is a guarantee of sustainable Chinese growth above 8 per cent, the unfettering of the country’s banks could even be more significant than the government’s $580 billion spending package.

Yep you can always trust the state to run an economy in a sensible direction. Recessions are banned.

I bet Ponzi Brown is getting all excited reading this, the Chinese are doing what he's wants to do. Rampant lending, relaxing of capital ratios and again more proof that debt is wealth.

This clearly is what's needed.

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http://business.timesonline.co.uk/tol/busi...icle5524501.ece

Yep you can always trust the state to run an economy in a sensible direction. Recessions are banned.

I bet Ponzi Brown is getting all excited reading this, the Chinese are doing what he's wants to do. Rampant lending, relaxing of capital ratios and again more proof that debt is wealth.

This clearly is what's needed.

I thought the chinese were supposed to be great savers. Why do they need to borrow money ?

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I thought the chinese were supposed to be great savers. Why do they need to borrow money ?

Because Chinese growth has been funded by debt, the West cannot take on anymore debt so now the Chinese have cleverly decided to indebt their own nation to increase wealth.

Debt is wealth remember. Of if you want a mathematical formula.

D=W

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Because Chinese growth has been funded by debt, the West cannot take on anymore debt so now the Chinese have cleverly decided to indebt their own nation to increase wealth.

Debt is wealth remember. Of if you want a mathematical formula.

D=W

I understand better now. I am not disagreeing I just posed the question to get a better understanding. Thanks.

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Suspect the Chinese will lend on proper projects and not just property Ponzi schemes like the UK ones. I wonder what the penalty for defaulting on a Chinese state bank is? :unsure:

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This is a very interesting development which we should all keep a close eye on. I should imagine that alot of these loans are for business and internal projects rather than loans to private indviduals as the Chinese people have a saving mentality.

The Chinese government know that they can no longer rely on the indebted West to purchase their exports with Chinese money and the slack has to be taken up.

This massive increase in lending/spending could cause the indebted west to see a increase in inflation if the Chinese are successful in inflating their economy with their large reserves. This will also cause problems with the West seeking funds as the Chinese turn their investment inward.

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Because Chinese growth has been funded by debt, the West cannot take on anymore debt so now the Chinese have cleverly decided to indebt their own nation to increase wealth.

Debt is wealth remember. Of if you want a mathematical formula.

D=W

This would be the best avenue to persue as a government. To run down by western standards massive reserves. 75% capital ratios!Have I understood thjat correctly?

What do we run here? Think its something like 6-9%. It looks to me that the Chinese are willing to run these ratios down to stimulate the economy. No more cheap Chinese money for us.

Inflation here we come!

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http://business.timesonline.co.uk/tol/busi...icle5524501.ece

Yep you can always trust the state to run an economy in a sensible direction. Recessions are banned.

I bet Ponzi Brown is getting all excited reading this, the Chinese are doing what he's wants to do. Rampant lending, relaxing of capital ratios and again more proof that debt is wealth.

This clearly is what's needed.

Actually, they are doing exactly what is needed. Don't confuse debt spending of a highly indebted nation such as the uk, with one that has massive foreign currency and internal currency reserves. All they will be doing is running down some of those reserves rather than going into extreme debt.

Remember - debt/savings are a zero sum game. For every unit of debt there is an equal unit of savings somewhere. So that if the UK is to increase its savings and decrease debt, surplus countries will need to decrease their savings and increase their relative amount of debt.

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Remember - debt/savings are a zero sum game. For every unit of debt there is an equal unit of savings somewhere. So that if the UK is to increase its savings and decrease debt, surplus countries will need to decrease their savings and increase their relative amount of debt.

Absent debt default, for a debt-based currency total bank debt will always and increasingly exceed total money supply.

It is true that (almost all) money and debt come into and go out of existence together in equal and opposite amounts.

However, in general debt numbers grow at a faster rate than (deposited) money numbers.

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As we know, as a unit of debt is created it ends up as a deposit somewhere - and in the event results in the reduction in the value of all money in circulation by the process of inflation.

Now, if you were to net off all the debt against savings (as in the process of deleveraging) , I wonder how much true savings there would be left and how much cheaper everything would be. LET THE SAVERS INHERIT THE EARTH!

Theoretically the total money supply could be used to pay down debt - banks then holding all the physical cash and all bank deposits reduced to zero.

There would then remain massive debt still owed to the banking system. Strange but true.

Note that with no money remaining to pay down this remaining debt then logically, in the absence of further borrowing to create further money, it must default.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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