Unemployment at lowest rate since March 2009, thanks to small businesses

Everything I post here is just speculation. I don't think China per se is experiencing any sort of bubble. It started from such a low economic base that with even just a bit of loosening to allow some markets to flourish, its economy can afford to grow at 9 or 10 percent a year for a long time and still not even come close to reaching the potential the U.S. economy has realized. There are more people in China living on $2 a day still than there are people approaching the American standard of living.

I think the collapse of China is going to happen because of the topple effect of what is going on in Europe and the U.S. because of the debt contagion. Plus, China does have some hidden problems along the same lines. Officially, China has no Federal debt, but its tens of thousands of municipalities have issued massive amounts of bad debt, a lot of it after 2008, and the full weight of it might come crashing down the way it is with sovereign debt problems everywhere else. They are already showing cracks.

I think the big problem for China will be if Europe crashes. Its the same thing that is threatening the U.S. economy. The moves a few days ago were too well coordinated and for China to be on board demonstrates that they are freaked by the prospect of European bank liquidity problems. At the same time the Federal Reserve was lowering funding costs for European lenders, China announced that it was lowering the RMB deposit reserve ratio.

Those are fairly drastic steps, and it puts our central bank in a role of monetizing OTHER people's debt, which infuriates me personally. Regardless, stuff like that doesn't happen unless there is a perceived crisis and autocrats start panicking. That is why I think there is a real liquidity crunch that reached near meltdown levels, and there is a coordinated effort going on to try to put off the debt flu from spreading.

The liquidity injections are just more of the same, though. It's not a cure. It just masks the symptoms a bit longer and when the outbreak does occur, it will be that much worse. I think China is just as freaked as our Federal Reserve is, and that is because if the European banking system crumbles, it will send the world's economies spiraling. It will be worse than 2008 and piled on top of already soft economies.