As trade tensions continue to skyrocket and markets around the globe are affected, a Chinese government-backed think tank had a memo leaked warning of potential financial panic. China, the world's second-largest economy, sees the rising tensions as a cause for concern.
Political elitists don't care about the effects of their policies on the masses, as long as those masses continue to comply with the demands of the rulers. And now that's evident by a Chinese think tank leaked memo warning of the potential for financial panic of the peasants they rule over. The warning is that leveraged purchases of shares have reached levels last seen in 2015 when a market crash erased $5 trillion of value. "We failed to clean up the leveraged funds after the 2015 market rout; they have staged a comeback in a new guise," NIFD said.
Bond defaults, liquidity shortages and the recent plunge in financial markets pose particular dangers at a time of rising United States interest rates and a trade spat with Washington, according to a study by the National Institution for Finance & Development (NIFD) that was seen by Bloomberg News and confirmed by a NIFD official.
Obviously, trade wars and tariffs are taxes on those who consume the product not those who produce it (as they just raise their prices passing on the tax to those in the country whose elitist ruling class insists on participating in such ludicrous ideas.) "We think China is currently very likely to see a financial panic," NIFD said in the study, which appeared briefly on the Internet on Monday, before being removed. "Preventing its occurrence and spread should be the top priority for our financial and macroeconomic regulators over the next few years."
The study shows that the Chinese government is well aware of the possible effects of a prolonged trade war with the United States. In recent weeks, prominent academics have also begun to question if the country's slowing and trade-dependent economy can withstand a sustained dispute that includes massive amounts of tariffs (taxes). The trade tensions have already started to weigh on the stock prices and the yuan and could definitely continue in a downward trajectory toward a full-blown financial crisis, which would include the public panicking.
Chinese stocks entered a bear market this week, with the benchmark Shanghai Composite Index falling more than 20 percent from its January high, while the yuan has slumped more than 3 percent in the past two weeks. Investors have been spooked by the escalating trade tensions and fears that the government's deleveraging campaign will curb economic growth and trigger defaults. –Bloomberg