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tastywheat

China's Stock Market Crash

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I was going to post this to WOYM, but decided that it's probably significant enough to warrant its own thread. For those out of the loop, the Chinese stock market is teetering on the edge of an official crash, having lost just under 20% at the time of writing since last Friday. This comes after heavy handed intervention by the Communist Party, which has included devaluing the Yuan to entice exports, dropping interest rates on lending, and softening regulations around margin lending.

 

While the situation is unique because of the domestic situation in China and the influence the Communist Party has on the finance sector, there are many parallels with the financial crisis of 2007. Because Australia's economy relies heavily on iron and coal exports to China, if the financial sector does collapse, it's going to have a significant effect on us. The fact that the Communist Party is manipulating the situation, means there's increasing fears that it could be much worse than what the current data indicates.

 

Adding fuel to this speculation are reports that the police have conducted raids this morning on various media and financial institutions, including the Chinese equivalent of the SEC (CSRC), for 'spreading false rumours' and 'falsifying official documents':

 

新华网北京8月25日电 据记者从有关部门获悉:中信证券股份有限公司徐某等8人涉嫌违法从事证券交易活动,《财经》杂志社王某伙同他人涉嫌编造并制造传播证券、期货交易虚假信息,中国证监会工作人员刘某及离职人员欧阳某涉嫌内幕交易、伪造公文印章,上述人员已被公安机关要求协助调查。

Xinhua Beijing August 25 Xinhua reporter learned from relevant departments : CITIC Securities Co., Ltd. Xu 8 people suspected of illegal trading activities in securities , "Finance " magazine Wang , together with others suspected of fabricating and manufacturing spread securities and futures false information , China Securities Regulatory Commission staff separations Ouyang Liu and a suspected insider trading , falsification of official documents stamp , said staff have been asked to assist in the investigation public security organs.

 

Source (expect it to be censored soon)

 

This does not bode well.

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So it comes down to a similar situation to the chemical explosions - go headhunting for a few scapegoats, preferably in organisations directly affiliated with the situation.

 

There's only so long you can artificially manipulate the economy. And it comes to a point where it all starts to backfire. Sort of like KRudd's spending orgy. You can't sustain it, and the long term drawbacks more than counter the short term gains.

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Maybe. It's the way things go. When the Asian financial crisis occurred ~ 1997, plenty of US companies took advantage and increased shareholdings. Then when the US financial crisis happened about 10 years later the situation got reversed. There was large scale divestment from US companies that needed the cashflow.

 

The other thing is that with the market panic, plenty of investors just dump the medium/high risk ones and go to cash or gold, or just invest in markets that are more stable.

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https://www.corbettreport.com/never-forget-the-central-banks-have-engineered-this-collapse/

 

The China-as-economic-villain narrative ranges from the subdued (“China’s ‘Black Monday’ sends markets reeling across the globe“) to the blatant (“Chinese Economy Causes Markets to Fall“) to the silly (“Don Yuan Causes Heartbreak“), but they all convey the same message: China has brought this on the world all by itself. It’s not that China is reacting to a global monetary environment created by the Fed and fostered by other central banks, or a global economic slowdown that is biting into a heavily export-driven economy, or the conflicting pressures on the country as it tries to navigate its way toward global reserve currency status. Nope, it’s just a bull in a china shop (or is that a China in a bull market?) knocking things over and causing mayhem (Trump was right!).

 

The only-central-banks-can-save-us narrative is even more infantile, but also more dangerous. We are told that the crash came because China’s central bank failed to act. We are told that it’s now up to Turkey’s central bank to bolster the flagging lira. We are told that the Lehman collapse occurred because of too little central bank intervention. We are told that only the European Central Bank is capable of “riding to the rescue” and preventing a market rout.

In other words the very same institutions that engineered this crisis are the only ones that can save us.

It is the height of insanity that anyone would believe this nonsense, but then again the world fell for it after Lehman, and they’re likely to fall for it again. Unless we spread the word.

The banksters did it. And unless we derail their agenda, they’re going to do it again.

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I also saw an article about people now injecting huge pension funds to try save it, that sounds fun...

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