28/8/2013: Some charts on China's debt addiction (via FT)

China has been the 'Big Asian Hope' when it comes to global growth and more recently, the 'Big Asian Worry'. The problem, however, is that China is not unique. Like the rest of the world, China is incapable of delivering growth at the rates below the rate of expansion of debt. Leveraging seems to be the worldwide story when it comes to growth generation, as if the entire global economy is populated by compulsive gambler-states...

FT has a fascinating set of slides on China's debt-growth links: http://www.ft.com/intl/cms/s/0/e76db82e-0a4d-11e3-aeab-00144feabdc0.html#slide0

And here are my two favourites:

Chart above clearly shows that China is in a league of its own when it comes to debt vs GDP per capita. If anything, the healthy due of countries by these metrics are Russia and Mexico (note South Korea, in my opinion, does not belong with Emerging Markets - it is an advanced economy). India is a sick economy, compared to the rest. But China... well, China is on its own.

Worse, however, as the chart below shows, China's mountain of debt is now shifting out of the banking sector and into the least transparent and trust loans markets:

Now, trust loans are debt that has been dressed up as 'investment product' and sold onto retail investors. This debt is funded usually by banks and/or investors. Back in 2010 these were problematic already, but arguably manageable. Since then they have shot up in importance. Trust loans are short-term finance, with maturities of few months and up to a year, implying high risk of exposure to liquidity shocks and interest rates shocks. They are also expensive. Roll over risk is rising in the Chinese economy.

FT had additional coverage on these back in 2010 here: http://ftalphaville.ft.com/2010/07/15/286766/chinas-trust-factor/

All of the above speaks of severe debt addiction in the Chinese economy. 

10/11/2012: Dublin's Shame

This week saw perhaps the most important FT article on Ireland's crisis (link) titled Dublin's Shame, the article highlights the issue of grotesquely over-exaggerated pensions of Irish failed bankers. The point it touches upon - by itself - is not a minor one. But what is most important is the fact that FT takes a clearly only feasible ethical position on the issue and, put frankly, throws it in the face of not only the Irish banking establishment (on which the article focuses), but the Irish Government that is sheepishly incapable of any response to the issue that would have been congruent with the normal tenets of morality in any normal society.

"Public shaming may be the only recourse available to the government. Some argue that the pension funds should stop paying these executives, daring them to sue. Alternatively, Dublin could raise a levy on the richest pensions. But, however justified the resentment, either step would be wrong. Governments should not tear up contracts or tweak laws just to target a few. If the directors are to be penalised for their acts, this should happen in the civil courts."

Alas, public shaming is something our Government refuses to engage in, judging by the statement made this week on the issue by the AIB owner - Minister Noonan. And, sadly, in Ireland, there is not a chance the civil courts will see the face of the vast majority of the reckless, incompetent and entitlement-driven elites.