China's Debt: How Serious?

Is the Chinese Debt closer to 16% of GDP or 150% of GDP????????? That is a huge difference but seriously, most economist do not know.

It is hard to get a handle on what current Chinese debt is? A lot of the available data is old.

In 1999 China is thought to have had a savings & investment rate of around 40%. They supposedly no longer just print currency because in the past when they have done that they have created shortages and internal inflation. In truth they both borrow money and print money. All the building that has been taking place in China had to be financed / paid for somehow.

Cable finance stations like to talk about how much USA Debt is held by the Chinese which is valid. But they don't like to talk about how much Chinese debt is held by the Japanese.

While the Bush and now Obama administration like to say that China is artificially holding the value of their currency the Yuan down against the dollar, known economic data does not all together support that. Chinese economist (which yes have a bias and perhaps government agenda) say that if the Yuan were allowed to truly float without a peg to the dollar it would in fact go down against the dollar and make current economic difficulties between the United States and China worse, not better.

If Chinese debt and currency levels are higher than what the United States believes that may in fact be true. Does the United States really want to risk proving that to be true?

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In this age where every government and so many of their citizens seems to be in debt, one may need to start asking the question to exactly who is hording all the currency around the world and why? Has the computer age and transfer of money created trades based on phantom currency that vanishes as quickly as it comes into existance and is that what is throwing the world economy into turmoil.

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Bad mortgages can only explain up to a point one singular cause of the economic crisis. Wasn't there real money going to pay for those houses from the mortgage / banking sector. In the aggregate economy shouldn't that money have still existed somewhere? Individual house holds may have been broken and not able to pay for their given houses but that only explains so much of the economic disaster and break down of the world barter system. What caused a total lock up of the lending system and the liquidity crisis? Those bad mortgages did not just suddenly appear on the eve of Obama's election. They had been part of our economy for quite some time.

Run away commodity prices being financed by a phantom money might explain part of it in that at some point people had to show real money to pay for those commodity trades and the money simply wasn't there, but again, that doesn't fully explain it.

Fear of an Obama Presidency may have caused a great transfer of money from the American banking system to some other banking system, but still the money should have existed somewhere. It was like it evaporated. How much of the money fleeing the United States proved to be phantom money where there was not real money there to transfer.

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To what degree was this economic crisis caused by the world becoming more of a cashless society (with balances being moved between computers and no money changing hands) and the phantom money that cashless society may have created. How much money is created with the velocity of wealth transfers, and yet without a single dollar ever being printed to back the new wealth created by that velocity. Are we asking for more economic crisis after crisis if the Federal Reserve Banks refuse to make sure that there is real money to back the phantom money created by cashless exchanges.

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Interesting Article on Chinese Debt: http://www.nus.edu.sg/SUP/cij/p73_98.pdf
It is a pdf article that requires the adobe reader.