atans1

TOXIC LOANS WEIGH ON GLOBAL GROWTH

In China, Uncategorized on 01/03/2016 at 1:40 pm

Recently, I posted this on how S’poreans’ debt and leverage compared to their counterparts in region. All the countries look bad but Some look worse than others: S’pore falls into the latter sadly with the serious possibility of loans turning toxic i.e. bad.

Globally NYT’s Dealbook explains why toxic loans are bad news

Beneath the surface of the global financial system lurks a multitrillion-dollar problem that could sap the strength of economies for years to come, Peter Eavis reports in DealBook.

Bad debts have been a drag on economic activity since 2008, but the threat they pose has worsened in recent months. China is the biggest concern, with analysts estimating that its troubled credit could exceed $5 trillion – equivalent to half the country’s annual economic output.

If Chinese banks continue to pull back on lending, the economy may slow even more, further harming countries that have relied on China for growth.

Toxic debt also hangs over countries where governments and central banks have unleashed aggressive stimulus policies in recent years. In the United States, energy companies are struggling to pay off the cheap money that they borrowed to pile into the shale boom.

In Europe, analysts say bad loans total more than $1 trillion and banks are still burdened with defaulted loans. Bad loans are also on the rise at Brazil’s biggest banks.

The looming question for the global economy is how China might deal with its pool of bad debts. After a previous credit boom in the 1990s, the Chinese government provided financial support to help clean up the country’s banks, but the cost of a similar operation today would be dauntingly high.

“My sense is that the Chinese policy makers seem like deer in the headlights,” said Christopher Balding, an associate professor at the HSBC School of Business at Peking University. “They really don’t know what to do.”

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  1. No worries man. At end of day, golden times still ahead. If crash can buy at the lows. If no crash just go along for the ride.

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