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Credit booms and busts have been the hallmark of economics and central bank policy in the new millennium globally and most pronounced in the G-20 nations. Despite a well-documented body of evidence that dramatic credit growth leads to boom and bust cycles this process continues and nowhere is the credit bubble bigger than in China, the world’s 2nd largest economy where outstanding loans have reached 28 trillion US dollars a figure some 2.6 times its economy. Other high water marks for the Chinese economy; the credit to GDP or Gross Domestic Product gap has passed 30%, policy makers and economists generally start to become nervous when this gap exceeds 10%. As one would expect when this much credit is applied real estate has positively boomed and now accounts for nearly a 1/3 of all economic activity directly and indirectly as Chinese property bubbles have reached mythic proportions not just in China but Australia, South East Asia and North America amongst other locations. Huge booms have occurred with respect to commodities production, handling and storage as well leading to some truly eye opening data points like Chinese cement use 2011 through 2013 exceeding that used by the USA in the entire 20th century. The idea was to maintain economic growth of 7% or so, something that has been achieved to date. But credit bubbles can’t be maintained indefinitely and they have a nasty habit of being fairly symmetrical when they collapse with respect to both size and duration.

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