China Warns Officials: Allow Social Unrest, Lose Your Job

Sunday, March 27, 2016
By Paul Martin

by Tyler Durden
ZeroHedge.com
03/27/2016

To be sure, there are always going to be financial and geopolitical landmines and every once in awhile we – and by “we” we’re referring to the market, or the country, or humanity, or whatever collective you want to choose – are going to step on one on the way to ushering in a black swan event.

But when we look out across markets and across the political landscape it’s difficult to escape the feeling that there are more black swans waiting in the wings – so to speak – than usual. There’s the threat of a dirty bomb being detonated in a crowded Western European urban center for instance. Or the chance that Turkey ends up “accidentally” killing a Russian or Iranian soldier while shelling the Azaz corridor. And how about the possibility that China tries to save its economy by chancing a 30% devaluation of the yuan and inadvertently plunges the world into a crisis far worse than 2008?

The interesting thing to note about the third crisis event listed above is that an economic implosion in China may spawn a black swan far larger than that which would emanate from a crisis in the country’s banking sector and/or a deeper devaluation of the RMB.

As we’ve discussed on multiple occasions of late, China desperately needs to purge its economy of excess capacity. The industrial sector is weighed down by too much debt and too little demand, but an acute overcapacity problem prevents the market from getting anywhere close to clearing. Either Beijing moves quickly to ameliorate this, or else a wave of defaults will ripple through the industrial complex on the way to crippling the country’s banking sector, where NPLs are probably at least five times greater than the official numbers suggest.

The big question is this: how will China manage to restructure or otherwise wind down insolvent SOEs without triggering a wave of layoffs that will leave millions of Chinese jobless, destitute, and, most importantly, furious? In other words, the biggest black swan of them all – with the possible exception of terrorists detonating an actual nuclear weapon – may be a coup in China stemming from the sweeping layoffs the country must implement to restore the industrial sector to some semblance of solvency.

The Rest…HERE

Leave a Reply

Join the revolution in 2018. Revolution Radio is 100% volunteer ran. Any contributions are greatly appreciated. God bless!

Follow us on Twitter