The Great Depressing (A Banking Story)

Inflation in China builds up steam
China has 38 trillion renminbi ($5850 billion) deposited in ordinary bank accounts. The returns on those investments have recently turned negative because inflation has risen faster than the central bank has lifted interest rates. That money has been locked up like a "caged tiger" and is now leaping into the stockmarket.

See Money, Money, Money for our version of the caged tiger.

Yu likens the stockmarket to a "pyramid financing" scheme in which "immoral acts are tolerated and condoned".

Like NINJA ("no income, no job, no assets") loans?

He has no idea when the bubble will burst. But when it does, the economic, social and political implications will be large and unpredictable.

I'm sure they will "contain" the problems just as well as we are.

The "wealth effect" on consumption will reverse. People will lose all their savings. Bad loans from the banking sector will be exposed. And the Government will be judged on whether or not it could have acted to prick the bubble at an early stage or relieved the liquidity pressure by raising the exchange rate.

Hey Ben Bernanke, sweating yet?