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Source link: http://archive.mises.org/19759/chanos-on-china-2/

Chanos on China

December 7, 2011 by

Famous short seller Jim Chanos talks to Bloomberg about the fragile Chinese banking system. “The Chinese banking system is built on quicksand.”

The People’s Bank of China, is described by Jim Grant as the world’s most broke central bank, leveraged at 1,297 to 1 at September 30.

Carl E. Walter and Fraser J.T. Howie make the case in detail in their book Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.

{ 6 comments }

Bogart December 7, 2011 at 4:14 pm

Now how could the Chinese Banking System with a Central Bank with $2trillion in US Dollars be “broke”? The answer is simple, their portfolio of dollar bonds is going to be paid back with progressively less valued dollars.

All I can say as a participant in the Fed-Bank cartel command economy in the USA to the Chinese Government is: Thanks Dudes. You gave us so much money that our consumer-government debt mess has gone on for at least 20 years longer than it should have.

nate-m December 7, 2011 at 9:44 pm

Well one of the things we can be thankful about is that when the damn dam breaks and we are flooded by hyperinflation our mortgages and student loans are all of a sudden going to get very very cheap.

Westonh December 8, 2011 at 3:24 am

I agree with you that China was much more foolish to purchase our debt then we were to sell it to them.

You hit the nail on the head with the combination of China’s hunger for U.S bonds and the Fed’s printing kicking the can down the road. Ludwig Mises touched on this in “Money and Credit”, when he said that social programs require inflation for if there full cost is transparent to the public there would be much opposition. I think this relates to our current Government binge spending so long as borrow then pay back in much cheaper dollars.

VoCo December 8, 2011 at 2:23 am

How can a central bank be leveraged? They lend money, not borrow it.

Dom December 8, 2011 at 5:35 am

How can Jim Grant come up with such a precise figure : 1297 ? How does he calculate this ?

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