Gridlock News

Many people in the talking the last week or two about the stock market correction.

The US stock market correction was in part triggered by a what appeared to be a correction in the Chinese stock market.  The Chinese stock market is relatively new and extremely inexperienced.  The problem with the Chinese stock market is that it is not built on a solid foundation.  Unlike American London and Japanese markets the Chinese market is just a few years old.

The Chinese market does not have any of the controls in place that you would find in more mature markets.  The controls that it does have in place are not maintained and often times they are openly subverted by companies banks and government officials.

That subversion typically comes in the form of cooking the books.  Chinese businessmen are pumping out fake numbers in their books to pump up their fake stock prices.  Chinese banks are supporting these numbers and the market so they can also repay financial reward to pay for the extreme risk that their taking them in financing the same companies.  The audit firms involved in reviewing the companies and the banks are turning a blind eye to all of the irregularities that would normally cause an instant scandal anywhere else in the world.

I've seen this first in myself when I worked for a Chinese company.  I work for a spin off of a division that came out of the role and was purchased by a Chinese manufacturer.  They cooked the books left right sideways and forwards, and after several people in the United States uncovered these financial irregularities we turn them in to the authorities.  The problem is that the US authorities have no regulatory control over Chinese companies.  Chinese revenue Chinese banks and Chinese auditors have no vested interest in improving the quality of the financial books kept on their side of the ocean.  There's too much money to be stolen by continuing to pump up the myth that their economy is strong.

And so what's going to happen is that the Chinese stock market is going to crash.  Corrections occur when economies heat up and investors attention gets slightly ahead of where the actual economy resides.  Markets crash when there is no true economy, when the economy is a myth or pumped up with lies and deceit.  So China is going to go through an old fashion route very soon.  This will have a major impact on markets around the world as they are tied very closely to the Chinese economy.  To give me some idea of just how much money is being stolen, the Chinese stock market is inflated and value from $400 billion at the end of 2005 to $1.5 trillion just a few days ago in March that the little over $1 trillion in stolen money essentially if the market corrects that is crashes to a moralistic valuation number.

Wal-Mart may be delivering cheaper prices on goods from China, but the Chinese economy is about to get a rollback of its own.