China must wean itself off debt addiction if it is to avoid financial calamity, warns IMF chief


Good luck with that. Debt is a drug that addicts individuals and nations. It creates a (usually) never ending loop of,  “Hit, pay dealer. Hit, pay dealer.” There is a reason why many of the world’s great religions warn not to abuse it.

China, like most of the world has abused debt. And it’s kept things going. It is a high functioning debt junkie. (Not unlike us in many regards.) In the wake of the 2008 Crash the Ultimate Crony Capitalist State poured massive”stimulus” into its system. Chinese “pyramids” were built across the land. But then the high started to wear off. So what did China do? It went back to the dope man, I mean the central bank for another infusion. Now China’s coming down again and it might have to come to terms with its predicament. However, going back to the dealer will likely prove too tempting.

These sorts of situations typically end badly.

(From The Telegraph)

China is edging towards “financial calamity” and must wean itself off its debt addiction and reform if it is to avoid a crisis, the International Monetary Fund has warned.

Markus Rodlauer, deputy director of the IMF’s Asia-Pacific department, said the world’s second largest economy was approaching a tipping point where its rapidly growing financial sector and surge in shadow credit could undermine the state’s ability to contain the fallout from a crash.

“The level of financial and corporate debt and the complexity of the financial system and rapid growth in shadow banking is on an unsustainable path,” he said.

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