Guest Post by Joe Hoft
In the Year of the Monkey, China May Finally Have to Face its Toxic Loans
(Picture of Year of Monkey Display at Hong Kong International Airport by Joe Hoft)
In the next few days, China’s year of the Sheep (Ram or Goat) will come to an end and the year of the Monkey will arrive. This is the biggest holiday in China as millions of Chinese travel back to their home towns to observe the holiday. The entire country celebrates the coming year with a week-long celebration. Families and friends gather together. Fireworks are shot off in the mornings to bring in the New Year.
This year may be different for China and the world because as the New York Times reported, “Beneath the surface of the global financial system lurks a multitrillion-dollar problem that could sap the strength of large economies for years to come.”
The Times goes on to explain that in many countries, especially China, there lies a “stagnant pool of loans that companies and people around the world are struggling to pay back.” China may have as much as $5 trillion in non-performing loans. It’s not just China that is in danger as troubled loans are plentiful worldwide.
The Times goes on to mention other countries and loans that are in jeopardy. However, the most troubling debt worldwide is not mentioned, and that is the massive amount of debt that the US government has outstanding which is now over $19 trillion. Also, the cause of that debt, the social programs in the US, is not mentioned.
Yes, the Chinese monkey may not have any more bananas or tricks to pay off its bad debts but Uncle Sam has a monkey on its back of its own. While China’s bad debt is related to bad loans to companies, many of which built buildings and roads and other projects which led to tangible assets, the debt in the US was blown on social programs and there’s nothing to show for it.
The monkey may be an ominous symbol of global economic disarray that lies ahead.
