Miners Buried In Billions Of Debt After "Colossal Misjudgment Of Demand"
- Borrowing Costs
- Capital Markets
- China
- Citigroup
- Copper
- Credit Suisse
- Money Supply
- Morgan Stanley
- ratings
- recovery
- Wall Street Journal
If one had to craft a narrative around the state of the global economic “recovery”, it might go something like this. Wildly optimistic assumptions about the sustainability of China’s torrid economic growth (and the voracious demand for raw materials which accompanied it), led to overbuilding and oversupply in the lead up to the crisis. In the aftermath of 2008, not only have multiple rounds of central bank money printing failed to provide a meaningful boost to aggregate demand, but global trade has also been hampered by China’s transition from an investment-led, smokestack economy to a model driven by consumption and services.
As Goldman put it in May, "there are no other markets large and/or dynamic enough to offset a slowdown in China in the foreseeable future, and we forecast trade volumes to stabilize in the period to 2018." This has been bad news for commodities as the following chart makes abundantly clear:
It’s also bad news for the global mining industry which, as WSJ reports, borrowed “heavily” in anticipation of neverending Chinese demand. Here’s more..
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