A weekend topic starting with Asia News. "Here we publish the ground breaking speech that Prof. Xiang Songzuo held on December 16th at the Renmin University School of Economics, during a seminar for entrepreneurs. This speech is now impossible to find in China because the censors erased it from the Internet. The reason is clear: Prof. Xiang, known for his frank character, gives China a far less marvelous picture than the one told by journalists and 'experts,' true court aids - so numerous and well-paid in the east and west."

"Prof. Xiang: China’s economy has been going downward this year, as everyone knows. The year 2018 is an extraordinary year for us, with so many things taking place. But the main thing is the economic slowdown."

"In the four decades following the economic reform, we have undergone five phases of consumption. The first was to solve the food problem, the second was the 'New Big Three' [新三大件, short for refrigerator, color TV, and washing machine], the third was the consumption of information, the fourth was automobiles, and fifth was real estate."

"But these five waves have essentially all come to an end. Car sales have dropped sharply and real estate spending is also substantially decreasing, so we are facing serious problems. China’s economic decline indicates that there is a major issue with the focus on expansion and growth:  It has deviated from the fundamental and moved to speculation. These are the words of former chief of China’s central bank, Zhou Xiaochuan (周小川)."

"What are our current financial risks? They are hidden, complex, acute, contagious, and malevolent. Structural imbalance are massive, and violations of law and regulations are rampant. There are black swans to prevent, and gray rhinos to stop. A reporter once asked Zhou, 'Where are the black swans? Which ones?' Zhou smiled and did not answer."

"The black swans are right next to you. The P2P lending, blockchain, Coin Circle, aren’t all these black swans? But you can’t see them. As for the gray rhinos, they can charge at any time. The biggest of them is real estate."

"I’m acquainted with many bosses of listed companies. Frankly speaking, a large part of their equity pledge funds did not go into their primary business, but used on speculation. They have many tricks. They buy financial products; they buy housing. The government said listed companies have spent 1-2 trillions on speculative real estate. Basically China’s economy is all built on speculation, and everything is over leveraged."

"Starting in 2009, China embarked on this path of no return. The leverage ratio has soared sharply. Our current leverage ratio is three times that of the United States and twice that of Japan. The debt ratio of non-financial companies is the highest in the world, not to mention real estate."

From Leap Rate. "Copenhagen based Retail FX broker Saxo Bank has today published its Q1 2019 Quarterly Outlook for global markets. Steen Jakobsen, Chief Economist and CIO, Saxo Bank, commented: 'As 2019 gets under way, Europe is sliding back into recession despite a negative ECB policy rate. Strains in the US credit market reached a crescendo in the first trading days of 2019, as Barclay’s high-yield spread climbed more than 500 basis points above US Treasuries.'"

"'This combined with a bear-market run in equities from the September highs saw US Federal Reserve chief Jerome Powell trotting out the latest version of the Fed in an interview where he shared the stage with his two bubble-blowing predecessors. There was plenty of egg on Powell’s face as his promise to 'listen to the market' came barely two weeks after he put on a hawkish show at the December 20 Federal Open Market Committee meeting. So the Fed is already slamming on the brakes as the flows from corporate repatriation run dry and high-risk issuers have not been able to auction debt.'"

"'The global economy is suffering, global markets are shaken after a terrible 2018, and China will do all it can for stability. The hunt for a solution is fully engaged, and the odds of one appearing are rising fast. Nonetheless, beware of incoming turbulence as the policy response everywhere is reactive rather than predictive and may come a bit too late.'"

"That being said, early 2019 could merely mark the start of the cycle or the early innings of the next cycle of intervention. 2020 is more likely to prove the real year of change. That would fit the political cycle, and it might take an even bigger scare for central banks and politicians to get their acts together – unfortunately.
Welcome to the Grand Finale of extend-and-pretend, the worst monetary experiment in history.'"