Thursday, May 15, 2014

Why China Will Implode: Its A Monumental Building Aberration, Not An Economy

by David Stockman
David Stockman’s Contra Corner


The thing to understand about China is that it is not just another booming EM economy that is momentarily struggling to cool-down its excesses in fixed asset investment and make a transition to some kind of more “normal “consumer-based economy. That comforting notion represents an odd-confluence of propaganda from the comrades in Beijing and hopium from Wall Street stock peddlers.
In fact, China is a grotesque economic aberration that bears no relationship to prior economic history or any conventional economic models-–not even to the export-mercantilism model originally developed by Japan, and which has now proven itself wholly unsustainable. Instead, China is a nation that has gone mad building,speculating and borrowing on the back of a credit bubble so monumental (and dangerously unstable) that its implications are resolutely ignored by observers deluded by the notion that China embodies a unique economic model called “red capitalism”.
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