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Gold Scandal | Major Banking Crisis for the PRC | Bad to Worse For China

by | Jul 3, 2020 | Mutual Funds

mike dunn financial authorMajor Banking Crisis for the PRC

Mike Dunn | Thought Leader | Mutualfunddirectory.org



 

Kingold (aka, Fake Gold) headquartered in Wuhan, China, has backed loans of $2.8 in what was to be believed gold bars turned out to contain a copper alloy. How much gold would be worth 2.8 Billion dollars? Eighty-three tonnes, if it was real, that is.

Fake Gold | So, what is the problem with Chinese “Fake-Gold?”

chinese economic newsSo now creditors are worried that the loans they thought were backed be gold bars as colloidal are not realizing their investments are backed pennies on the dollar. If creditors begin to fail, then this will affect manufacturing in China and other ramifications.

Resellers that rely on Alibaba for the manufacture of cheap goods from China may be the biggest losers in North America. If manufacturers cannot get credit to produce products to ship to the rest of the world will hurt the rest of the world and, possibly, stun the Chinese economy.

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Bad to Worse for China’s Economy

The PRC has had a terrible 2020 thus far.

Before the Fake Gold Scandal:

  • China was already reeling from companies rethinking their Chi-Com supply/Alibaba chain from the Wuhan/COVID Flu.
  • The PRC was either complicit or incompetent in causing 10.7 million of people to get sick, and causing ½ million families to lose a loved one. People across the world are mad. The PRC is doing everything in its power to help its Public Relations, but the ship has sailed for most countries and leaders.
  • Then Hong Kong’s rule essentially fell from Great Brittian to the PRC overnight. It was causing the US to change its economic tariff status.
  • Next, the backlash from debt-trap diplomacy began to fuel a PRC PR nightmare.
  • Next, the PR was so bad that the US recategorized several media outlets as diplomatic agencies.
  • Next, Australia threatens to reduce the sales of iron ore for China’s steel industry. Even worse, Australia now wants to produce local steel for internal use and export. Steel manufacturing was significant leverage that the PRC has over the world. A reduction of the PRC as a majority and dominant manufacturer reduces its influence on the world. The reduction supply of an ingredient to steel and a new competitor is a double negative for the Chinese economy.
  • Next, The Philippines changed the direction from teaming with the PRC to the US.
  • Next, the US began to eliminate Chinese related companies from the stock exchanges. It started with NASDEC then moved to the other markets.
  • Next, India and the PRA had a border skirmish where India had a decisive victory and an embarrassing loss for the PRC/PRA.
  • With the loss to Indian military forces, retired PRA military is not being paid and is a leadership threat. Hence, they are an identified risk to the PRC power.
  • And now…….. The Fake Gold Banking Scandal.

The bottom line is the Chinese economy has a significant cash flow problem.

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What is the Future of the existing PRC Leadership? Unknown Questions

  • If there is a change in the PRC leadership, who will take over?
  • How will it affect the west, EU, and the rest of the world?
  • Who will command the military/PRA?
  • Will the new leadership be focused on reviving the economy or going all-in on military expansion?

What is bad for China is good for Taiwan, Japan, and South Korea. With the body blow to the Chinese economy, this “should” take the military pressure off of Taiwan, Japan, Vietnam, and South Korea.

Microeconomic Changes Equal Macroeconomic Benefits

Moreover, these countries and The Philippines should gain manufacturing running away from mainland China to reduce risk.

2020 Mutual Fund Companies

How will the Kingold scandal affect US financial markets?

How individual companies are affected precisely depends on which companies made loans by the fraudulent gold bars. Companies that are NOT affected by the bad loans will be able to buy assets for pennies on the dollar.

 

Is this the straw that changes the PRC Global Aggressive Behavior?

You would think so, but there are many moving parts, many egos, and desperate influential people involved. If you are like me, keep watching the news for opportunities. Above all, the PRC wants to stay in power. So the safe bet to view the PRC decision making using that prism.

Investors

Change is opportunity. There no shortage of massive change underfoot. Be smart and be careful.

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