China: Major Devaluation Coming

Jon Blogosphere, Economy, Fiscal Policies, Government, Market Commentary

The whole ‘market economy’ thing is turning out to be a little trickier than China’s dictators expected. To set up the story: After the 2008 crash the country borrowed about $15 trillion (an amount that dwarfs the US Fed’s quantitative easing programs) and spent the proceeds on history’s biggest infrastructure program.
This pushed up the prices of iron ore, oil, copper, etc., igniting a global commodities boom. Then China liberalized itsSTOCK TRADING rules, setting off a stampede into local equities that doubled prices in less than a year. The result is a classically unbalanced economy, with massive physical malinvestment, overpriced financial assets and way too much debt.
The inevitable crash began in June, and Beijing responded by tossing about 10% of GDP into equities to stop the bleeding. This worked, as such interventions tend to do, for a while. But last night it failed:

This post was published at DollarCollapse on July 27, 2015.