Meet China's new leader : Pon Zi | Finance
Truly amazing….ponzi networks of ‘guaranteed’ loans…..Zero collateral….phantom financing…….a checkmated position…..
nearly 20% of Beijing residents own two apartments or more in the city. Thus any precipitous slide in the property market would have a tremendous negative wealth-effect in an economy whose consumption spending needs to be nurtured, not impaired.
The reciprocal nature of the guarantee network stripped real bank loan guarantees of any value, argued another banker. The system has made all its participants mutually vulnerable to an economic downturn, he said. Now that property development can no longer guarantee profits, the banker said, borrowers and guarantors are in trouble together.
"Most banks care only about how to get themselves out of the mire," he said. And without a broad solution for companies and banks "no one will escape."
Right, that's a circular Ponzi--meets-creative-accounting scheme, in which companies simply guarantee each other's loans, use the loans to speculate, and in the end there's zero collateral for a zillion yuan in credit .
The current political leadership of China represents the greatest looting of a country by the political class ever seen in history. In the Hurun Report released in March 2012—the richest 70 members of the government have a net worth of $89.8 billion, an average of over $1 billion each. This compares to $7.5 billion for the 660 for the US government, an average of $11 million each.
So on the one hand, we have companies guaranteeing each other's debt (loans), and on the other hand, we have companies buying excessive numbers of equipment, which they pay for with loans provided by the suppliers on condition excessive numbers are bought.
That equipment is then used as collateral to secure more loans. Large parts of these loans are then used to speculate in real estate markets. In both instances, and don't let's forget the overlapping ones where both schemes are combined, we are talking about absolutely virtual money. Are these incidents perhaps? I find that hard to believe in view of how Chinese society is organized: major profits will attract major attention, a pyramid of perfect dimensions.
Charles Ponzi, eat your heart out. You may have been a fine crook, but you never even dreamed of operating on this scale. When these guys are done, they’ll leave nothing but a shell of a country behind. The Chinese elite has amassed far more in wealth than all the country's vaunted foreign reserves put together. That is something people all over the world need to very seriously think about.
For now, though, the only true Chinese leader is Pon Zi. Whose inevitable successor will be Domi No.