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Strategies & Market Trends : The Financial Collapse of 2001 Unwinding
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To: Snowshoe who wrote (1421)11/25/2018 12:31:39 AM
From: elmatador1 Recommendation

Recommended By
Elroy Jetson

   of 13800
 
credit agencies and financial markets have yet to factor the unofficial debt estimates into the price of Chinese financial assets. That’s why China’s debt rating by S&P and Moody’s are very close to those of America and Japan.


The article explains what will happen when government is debtor and creditor at the same time.


It will do a Greece:
Worse, the government’s role as both lender and borrower concentrates rather than disperses credit risks. And that creates the potential of a systemic collapse. Like the Greek crisis so explicitly demonstrated.

Meanwhile, the dual role of government conflicts and contradicts with a third role. That of a regulator, the setting of the rules for lenders and borrowers.

And it complicates creditor bailouts in the case of financial crisis.

Once again, Greece is a case in point. The reason why the “haircut” of Greek debt had such an immense impact on the Greek economy is that government-controlled banks and pension funds were the creditors of the general government and government-owned enterprises.

This means that the haircut shifted losses from one government branch to another. And created the need for new loans to cover the losses.

The situation could be more severe in China. The government simultaneously owns banks, pension funds, and common corporations.

Government-owned banks lend money directly to government owned corporations. They usually function as welfare agencies.

Nov 24, 2018, 12:58pm
Debt, Not Trade War, Is China's Biggest Problem

https://www.forbes.com/sites/panosmourdoukoutas/2018/11/24/debt-not-trade-war-is-chinas-biggest-problem/#12bdddba4c4d



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