“The truth is,” wrote Michael Snyder, on The Economic Collapse blog on January 20, “that what has been going on in the global financial system is completely and totally unsustainable, and it is inevitable that it is all going to come horribly crashing down at some point during the next few years. It is just a matter of time.”
Is the “mother of all bubbles” about to implode? Many analysts have been predicting that China could have its “Lehman Brothers moment” today, on January 31, 2014. Its colossal $23 trillion ($24 trillion by some accounts) in private domestic debt is, say some economists, but a pin-prick away from a devastating banking collapse that would send shock waves across Asian (and then global) financial markets.
Why was/is January 31, which marks the start of the Chinese New Year (the “Year of the Horse”), considered D-Day for the Chinese economy? As Gordon G. Chang explained in a January 19 op-ed for Forbes (“Mega Default in China Scheduled for January 31”) that is the maturity date of a massively oversold, risky investment product called “Credit Equals Gold #1.” Packaged by China Credit Trust, it promised investors a 10-percent annual rate of return — almost three times the market rate. Credit Equals Gold turned out not to be as good as gold, and China Credit Trust turned out to be (surprise!) not trustworthy. China Credit Trust reportedly had dumped most of the funds from its Credit Equals Gold sales into a coal mining operation, Shanxi Zhenfu Energy Group, which has since gone bankrupt. On January 17, Chinese state media reported that China Credit Trust (CCT) may not repay investors when the January 31 maturity date arrives. Making matters worse, the Industrial and Commercial Bank of China (ICBC), by assets the world’s largest bank, had also marketed the Credit Equals Gold bonds and was also refusing to compensate investors.
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