* Credit in China has ballooned from $9 trillion to $23 trillion since 2008 * SHIBOR – Shanghai Interbank Offered Rate The SHIBOR is the average rate at which big banks in China say they will lend. On June 19 th China’s interbank market had to stay open late as banks scrambled to borrow money from each other. On the 20 th as Ben Bernanke was helping fuel a market and commodity market meltdown, the SHIBOR (unknown to most) was going through the roof and doubling from 6% to 12%. As resource stock investors (including micro cap and penny stocks), this is not something we should ignore as a passing event . If China allows a cash crunch to worsen, the impact on the Chinese economy is dramatic. This will have economic repercussions around the world and in particular, has the potential to hit commodity prices very hard. Even part of the selloff in gold on Thursday may have been as a result of Chinese investors selling gold to free up cash and relieve debt pressure associated with other investments. Thursday night the Chinese government put a band-aid on the problem by injecting capital into the system. Some rumours say up to 400 Billion Yuan ($70 Billion) but that is unconfirmed. In the short term, access to credit in China will become VERY tight.
Had we seen this happen in a G8 country or even the Eurozone, it would have made headlines around the world . Instead it lurked in the financial shadows as Bernanke took center stage.
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