In what may be the biggest news of the day, and certainly with far greater implications than whatever Mario Draghi will announce in a few hours when we will again witness the ECB doing not “whatever it takes” but “whatever it can do”, moments ago Reuters reported that China is preparing for an unprecedented overhaul in how it treats it trillions in non-performing loans.
As a result, conventional thinking such as that proposed by Bass, Ray Dalio, KKR and many others, speculated that China will have to devalue its currency in order to inflate away what is fundamentally an excess debt problem as the alternative is unleashing a massive debt default tsunami and “admitting” to the world just how insolvent China’s state-owned banks truly are, not to mention leading to the layoffs of tens of millions of workers by these zombie companies.
However, China now appears to be taking a surprisingly different track, and according to a Reuters report China’s central bank is preparing regulations that would allow commercial banks to swap non-performing loans of companies for stakes in those firms. Reuters sources said the release of a new document explaining the regulatory change was imminent.
According to Reuters, the move would represent, “on paper, a way for indebted corporates to reduce their leverage, reducing the cost of servicing debt and making them more worthy of fresh credit.”
Source – Zerohedge
The implications of such a “plan” are unprecedented – it makes the Western “Bail-In” plans pale by comparison, and will absolutely destroy the Chinese currency, taking their banking sector and most of their general economy with it. Under such circumstances, the only means of preventing a mass revolt at home, will be to engage in a massive “patriotic war” somewhere else in the world… (Now, where have I heard that before?)
WE HAVE BEEN WARNED