So what's the problem?
Well, the world's most prestigious financial agency -- the central banks' central bank, called the Bank of International Settlements or "BIS" -- has long criticized the Fed and other central banks for blowing bubbles. The World Bank and top economists agree. So do many others.
As such, it was easy for us to predict a crash in China when the bubble collapses.
We argued in 2009 that China's period of easy credit was analogous to America's monetary easing starting in 2001 ... and Rome's in 11 B.C.
We noted in 2009 and again in 2011 that China is suffering from a lot of the same malaises as the American economy, including corruption, crony capitalism, and failure to disclose bad debt.
In 2010, we asked "When Will China's Bubble Burst?"
China's $23 Trillion Dollar Credit Bubble Is BurstingInternational Business Times noted last year that China's debt-laden steel industry was on the verge of bankruptcy.
Quartz reported in December that a huge coal company called Liansheng Resources Group declared bankruptcy with 30 billion yuan ($5 billion) in debt.
Chinese Business Wisdom argues (via China Gaze) that waves of bankruptcies are striking in 10 Chinese industries: (1) shipbuilding; (2) iron and steel: (3) LED lighting; (4) furniture; (5) real estate development; (6) cargo shipping; (7) trust and financial institutions; (8) financial management; (9) private equity; and (10) group buying.
AP notes today:
"Chinese authorities have allowed the country's first corporate bond default, inflicting losses on small investors in a painful step toward making its financial system more market-oriented.
"A Shanghai manufacturer of solar panels paid only part of 90 million yuan ($15 million) in interest [it owed] ...
"Until now, Beijing has bailed out troubled companies to preserve confidence in its credit markets. But the ruling Communist Party has pledged to make the economy more productive by allowing market forces a bigger role."
Time asks whether China has reached its "Bear Stearns moment":
"A dangerous build-up of debt and an explosion of risky and poorly regulated shadow banking have raised serious concerns about the health of China's economy. That's why the Chaori default -- the first ever in China's domestic corporate bond market -- has sparked fears that the country could be headed for a full-blown economic crisis like the one that slammed Wall Street in 2008. 'We believe that the market will have reached the Bear Stearns stage,' warned strategist David Cui and his team at Bank of America-Merrill Lynch in a report to investors.
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