From Nils Jenson at Crescat Capital:
History has proven that credit bubbles always burst. China by far is the biggest credit bubble in the world today…….
The Bank for International Settlements (BIS) has identified an important warning signal to identify credit bubbles that are poised to trigger a banking crisis across different countries: Unsustainable credit growth relative to gross domestic product (GDP) in the household and (non-financial) corporate sector. Three large (G-20) countries are flashing warning signals today for impending banking crises based on such imbalances: China, Canada, and Australia….
The trouble with credit bubbles is they always burst. The problem is we don’t know when. “Imminent” could mean next week or it could mean in 3 years time. Keep a close watch on the PBOC for signs that it has run out of options. They will kick the can down the road for as long as possible, but the time will come when that is no longer viable.
Great Analysis, worth reading the entire report: Crescat Capital Quarterly Investor Letter Q2 2017 | Crescat Capital