China credit bubble going bust

Marc Faber : Don’t forget the Chinese invented paper; they are very good at printing money as well. (Economist and commentator) Paul Krugman argues that the overall level of debt doesn’t matter because one man’s debt is another man’s asset. But the problem arises when one man’s debt cannot be repaid. That is going to happen in China because the underground lending market is larger than people perceive. That is a potential problem. In China, for sure you will see a setback: in fact, it’s already started. Small companies are finding it difficult to get credit, and in the underground market, the lending rates are over 60 percent. That tells you something. The price of copper too is telling you something is not right… The problem is that the local Chinese are selling and buying properties in Vancouver and in Singapore. They are shifting money outside. So, the insiders are selling and the stupid foreigners have been buying Chinese shares. It’s very difficult to measure GDP growth in China. We essentially add up goods and services and we calculate an inflation indicator – say, the CPI. The nominal growth less the CPI gives you the real growth. But it’s not only in America that leaders are lying about the true cost of living increases. In China, the rate of cost increases is of the order of 10 to 15 percent a year. Pork prices have doubled over the past 12 months; rice prices are up; energy prices are up. I believe that China’s GDP figures are overstated. - in www.firstpost.com