[Bank of America] told clients that a confluence of forces are coming together that threaten to chill the speculative mania on the Shanghai stock exchange and to expose the underlying fragility of China’s $26 trillion edifice of debt.
“A credit crunch is highly probable,” said the bank in a report entitled “Deflation, Devaluation, and Default”, written by David Cui and Tracy Tian.
They said the country’s highly-leveraged companies cannot safely withstand President Xi Jinping’s drive to stamp out moral hazard and wean the country off excess credit, warning that the mix of slower growth and excess debt “could prove lethal for the financial system”.
And what, pray tell, will expose the underlying fragility of the United States of America’s $220 trillion edifice of debt and unfunded liabilities?
It’s time to brush up on Gordon Chang.