This is only a Preview!

You must Publish this diary to make this visible to the public,
or click 'Edit Diary' to make further changes first.

Posting a Diary Entry

Daily Kos welcomes blog articles from readers, known as diaries. The Intro section to a diary should be about three paragraphs long, and is required. The body section is optional, as is the poll, which can have 1 to 15 choices. Descriptive tags are also required to help others find your diary by subject; please don't use "cute" tags.

When you're ready, scroll down below the tags and click Save & Preview. You can edit your diary after it's published by clicking Edit Diary. Polls cannot be edited once they are published.

If this is your first time creating a Diary since the Ajax upgrade, before you enter any text below, please press Ctrl-F5 and then hold down the Shift Key and press your browser's Reload button to refresh its cache with the new script files.


  1. One diary daily maximum.
  2. Substantive diaries only. If you don't have at least three solid, original paragraphs, you should probably post a comment in an Open Thread.
  3. No repetitive diaries. Take a moment to ensure your topic hasn't been blogged (you can search for Stories and Diaries that already cover this topic), though fresh original analysis is always welcome.
  4. Use the "Body" textbox if your diary entry is longer than three paragraphs.
  5. Any images in your posts must be hosted by an approved image hosting service (one of: imageshack.us, photobucket.com, flickr.com, smugmug.com, allyoucanupload.com, picturetrail.com, mac.com, webshots.com, editgrid.com).
  6. Copying and pasting entire copyrighted works is prohibited. If you do quote something, keep it brief, always provide a link to the original source, and use the <blockquote> tags to clearly identify the quoted material. Violating this rule is grounds for immediate banning.
  7. Be civil. Do not "call out" other users by name in diary titles. Do not use profanity in diary titles. Don't write diaries whose main purpose is to deliberately inflame.
For the complete list of DailyKos diary guidelines, please click here.

Please begin with an informative title:

  In 2007-2008, the United States had a Minsky Moment. It was the moment that asset prices, driven to unsustainable levels by cheap credit, collapse when the financial ponzi scheme runs out of road.
   The term is named after the almost forgotten economist, Hyman Minsky.

  Lately that term is being tossed around when referring to the globe's 2nd biggest economy.


You must enter an Intro for your Diary Entry between 300 and 1150 characters long (that's approximately 50-175 words without any html or formatting markup).

 Our analysis indicates that China’s economy has arrived at that unstable state where speculative and Ponzi finance appear to dominate. From a macroeconomic perspective, very few economies have ever created as much debt as China has in the past five years. China’s private sector debt has increased from 115% of GDP in 2007 to 193% at the end of 2013.3 (Display 2) That 80% increase over five years compares to the U.S.’s 26% in 2000-2005. In recent years, only Spain and Ireland have achieved debt growth greater than China’s.Every year, China is now adding $2.5 trillion of private sector debt to a $9.7 trillion GDP.
 The sheer volume of debt alone is unsustainable. You can't create 1/4 of a nation's GDP every year in debt without consequences.
   The source of this Minsky Moment was in the days immediately following the 2008 crash. The central bank of China created immense amounts of easy credit (much more than in the United States) in their effort to prevent any slowdown of any amount in their economy. It worked, but it didn't produce sustained development. Most of it got sucked into real estate.
 Those consequences are malinvestments.
 There is evidence that this debt growth has become excessive and non-productive. It now takes 4 renminbi (RMB) of debt to create 1 renminbi of GDP growth from a nearly 1:1 ratio in the early and mid-2000s.
 Most of those malinvestments have been funneled into speculative real estate, exceeding Japan in the late 80's and the United States in the mid 00's.
 The stories of "ghost cities" in China are legendary by now, although it might be nothing compared to what is coming.
 Nomura said the number of ghost towns has spread beyond the well-known disaster stories of Ordos and Wenzhou to at least eight other sites. Three developers have abandoned half-built projects in the 2.5m-strong city of Yingkou, on the Liaodong peninsular. They have fled the area, a pattern replicated in Jizhou and Tongchuan.
 This enormous Chinese real estate bubble has been pushed all over the world, as land-rich Chinese have used their speculative earnings to purchase houses in Canada, Hong Kong, and America, among other places.
 The bursting of this debt bubble is reflected in the currency and stock market falling, but that is normally just the leading indicators of a credit bubble bust.
 The real indicators are more personal.
 Cash-strapped Chinese are scrambling to sell their luxury homes in Hong Kong, and some are knocking up to a fifth off the price for a quick sale, as a liquidity crunch looms on the mainland...
  "Some of the mainland sellers have liquidity issues - say, their companies in China have some difficulties - so they sold the houses to get cash,"..
 The central bank of China has only barely started to cut back on loose credit, but the liquidity crunch is already hitting. That's a sign of far too much debt in the system.
 Defaults or near-defaults have begun to occur with regularity over the past three months and are likely to pick up in quantity significantly over the next year. As it is becoming more clear that investors may not get all of their money back, interest rates on trust products, wealth management products (WMPs), corporate bonds, and bank loans have risen by roughly 200 basis points in the last year.
 If you think this doesn't affect you, consider that the financial markets have largely ignored what is going on in the Ukraine, but have watched the events in China very closely.

4:30 PM PT: Here's some videos of China's empty cities:

here and especially here

Extended (Optional)

Your Email has been sent.