Perhaps, you remember three or four months ago when the European Union was supposedly going to be saved by the Chinese. In other words, the Chinese would become the lender of last resort because they didn’t want to lose the European market for their exports. It is true that Europe accounts for almost 20% of their exports, and therefore it stood to reason that China would be concerned about the euro crisis. Whereas, that may be true, the Chinese are not stupid with their money, but the Anglos sure seem to be. Okay so let’s talk about this for second shall we?
You see, I thought it was somewhat absurd to think that China would come to the aid and save the Europeans and their economy, and further prop up their socialist black hole digging endeavor. Nevertheless it made great public-relations headlines, and it occurred right before the G-8 summit, which was about to severely chastise China for currency manipulation. China went along with it, and let the rumor continue with no interest whatsoever in helping those making stupid policies from destroying themselves.
At this point, I think we can put all those rumors to bed, the Chinese aren’t going to bail out anyone, as they’re going to try to bail out themselves to the tune of a couple hundred million dollars worth of new stimulus for seven industries and 20 sub-sectors which they would like to own in the global market. In case you think there’s still a chance of the Chinese will come to the aid of the EU, ECB, euro, and euro zone, it’s time to think again.
The Wall Street Journal reported on May 30, 2012 “Chinese Banks Back Off Europe” by Ken Brown and Lignling Wei that although China is looking to buy energy assets in Spain, we shouldn’t expect them to come to the rescue of the Spanish banks, or help stop the run on these banks as public sentiment turns too pessimistic for the inevitable and on-going slow motion train wreck. After all, as the article duly mentioned, Chinese Banks had been severely burned with Lehman Brothers, and other investments during the 2008 crash in the US.
Incidentally, the Spanish banks shouldn’t expect any help from the ECB, which knows it doesn’t have the wherewithal to become the lender of last resort for everyone, and a domino effect could make such a bailout or large loan package futile, and costly taking away its credibility and strength. You can’t blame the ECB for their conclusion or decision on this.
Needless to say, it appears it’s time for the talks in the euro zone to get a little more serious without the political rhetoric, the populist uprisings, or nonsensical debates. If they don’t stand together now, the whole thing is going to collapse. Why would China want to be part of that? Indeed, this latest episode of the banking pain in Spain is just the tip of the globally warmed iceberg in the euro zone. Indeed I hope you will please consider all this and think on it.