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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: MulhollandDrive who wrote (3286)	12/12/2003 10:53:11 AM
From: MulhollandDrive	Respond to of 110194

morganstanley.com China Economics: Easy Credit Destroys Jobs Andy Xie Sustaining hyper credit growth destroys jobs in the long term. Sustaining hyper credit growth destroys jobs over time, as capital waste due to excess capacity formation decreases China's growth potential. Cheap credit causes more capital-intensive growth, which is fundamentally bad for job creation in the long term. Leverage in this cycle could be 1,000%. Debt could have risen by ten times more than equity capital in the past seven quarters, in my view. Even though China has cut off easy credit, the amount of credit that has already been created in this cycle could haunt China's financial system for years to come. Banking reform is likely to be superficial. The Chinese government controls the economy through banks that implement countercyclical measures and regional development. It also ensures the supremacy of politics over economics. Without fundamental ideological changes in how China works, banking reform is likely to remain superficial. morganstanley.com Asia/Pacific Economics: Hard-Rock Dotcom Andy Xie The global commodity market is a bubble about to deflate, in my view. China is the delta in commodity demand. Its credit drives its investment, which in turn drives China's demand for commodities. As China decreases its credit creation, the marginal balance for commodities is about to turn negative, in my view. China is still a long-term bull story for natural resources. China's industrialization/urbanization is bullish for natural resources. But its cycles are quite big. Extrapolating the trend at the cycle's peak, as many investors appear to be doing, could be quite dangerous.