Worse Than 2008: $3.25 Trillion Gone as China’s Stock Market Plummets

July 8, 2015   |   Claire Bernish

Claire Bernish
July 8, 2015

(ANTIMEDIA) Forget Greece. No, really. As you might have heard by now, China’s stock market is hemorrhaging without a sufficient tourniquet to stem the massive loss—now $3.25 trillion and counting. To bring it into perspective, that figure is more than double the annual GDP of Canada—and there doesn’t seem to be a way to stop it.

In fact, since June 12, the Shanghai Composite Index has lost a whopping 32%. And the Shenzhen—China’s largely tech index, often compared to the U.S. Nasdaq—is down 41%. By every indication, things will only get worse.

Why this matters to any of us can be summarized in a contextual comparison. What’s taking place in China now bears an uncanny similarity to what occurred there before the global financial disaster in 2008-2009—but on an unnervingly larger scale.

If you’re looking for good news, you won’t find it here.

Most analysts agree that China is experiencing a bubble—specifically, one of the largest bubbles in the history of markets. In an attempt to to bolster its flailing economy in the wake of the 2008 crisis, China flooded its stock market with $20 trillion—thinking a steady bull market would result. Instead, the sudden influx of funds exploded, inadvertently creating the massive bubble. The Wall Street Journal explained the rather startling indicators:

“There are four basic signs of a bubble: prices disconnected from underlying economic fundamentals, high levels of debt for stock purchases, overtrading by retail investors, and exorbitant valuations. The Chinese stock market is at the extreme end on all four metrics, which is rare.”

High-risk margin investments—trades made with money borrowed specifically for that purpose—tripled in number in just over a year. At its zenith, margin debt accounted for almost 9% of the market total—more than any other time in history. Margin financing has since dropped 30% from its peak. A burgeoning contingent of new and inexperienced retail investors contributed roughly 80% of margin investment totals. Recent wild fluctuations in the Chinese market are largely indicative of reactionary over-trading by these inexperienced investors, who are most likely to panic when the market goes south.

Though China has the second largest global market, its value is less than half of the U.S. total. But recently, China’s market volume—total shares traded in a day—has literally exceeded the volume of the rest of the world’s markets, combined.

The Chinese stock market isn’t the only alarming indicator of a possible crisis. Both futures and commodities prices have fallen sharply as speculative demand decreases while supply threatens to glut the marketplace. Various metals, including silver and gold, have plunged in price. Copper, in particular, hit lows last seen in July 2009. Lower metals prices caused a ripple effect, forcing shares in mine companies into a tailspin. Though that might seem insignificant in passing, the resource-laden economy of Australia suffered the full impact and may face a recession. A more ominous prospect for commodities markets is the likelihood metals were used as collateral by many who sought to invest in China’s now tanking stock market.

Futures aren’t faring any better, either. Plummeting oil futures brought U.S. crude prices down 8% for the week with market indicators pointing to a downward trend. Pre-opening futures in the three major U.S. exchanges hovered near a 1% loss.

China’s government has implemented an extensive list of stops in an attempt to stabilize the market, but this has been a futile endeavor so far. Rate cuts from the Chinese central bank, a cut in initial public stock offerings, and pledges from China’s twenty top brokerage firms to buy stocks have been inconsequential at best.

Petrified Chinese companies yanked their shares from the market altogether—at least 1,430 of the 2,776 total companies traded in China have halted trading. This means around 43% of China’s stock market is effectively frozen.

Another factor necessitates consideration: China’s enormous debt burden. An epic, mounting debt has increased over $20 trillion since 2008 and is now equal to 300% of the country’s GDP.

Wednesday’s opening of the Shanghai Composite saw an alarming 8% drop—though a slight rebound by midday netted a 4% loss. Most stocks had reached the maximum permitted 10% loss by the middle of the day.

Though Greece’s impact on the U.S. totals $12 billion, RBS Economics noted that China’s impact amounts to a breathtaking $100 billion. Unfortunately, China’s options are evaporating as quickly as its finances. If the market starts to bottom out, “it will make the drama surrounding Greece look like a sideshow,” an article in the Wall Street Journal warned. “China has been the largest contributor to global growth this decade; Greece’s economy is about the size as that of Bangladesh or Vietnam.”

Wednesday morning on the New York Stock Exchange started with falling prices that took a sharp downturn before trading halted due to an apparent “technical glitch.” But with the Dow Jones Industrial average already off by 177 points when trading abruptly ended at 11:32am, “technical issues” might be the least of our concerns. Even after trading stopped, the Dow loss briefly exceeded 200 points but had corrected to a 163 point loss by 1:00 pm. Of the eleven other stock exchanges that did not experience technical issues, trading purportedly continued smoothly and without issue but maintained a downward trend. By the close of business for Asian markets on Wednesday, Hong Kong’s Hang Seng Index plummeted to a 5.6% loss after briefly reaching 8%, Japan’s Nikkei Index experienced a 3.1% loss, and China’s Shanghai Composite was pummeled with a 5.9% overall loss on the day. At the time of publication, the NYSE was slotted to reopen between 2:45-3:00pm.

It appears we may feel the repercussions of China’s crisis sooner than previously imagined.


This article (Worse Than 2008: $3.25 Trillion Gone as China’s Stock Market Plummets) is free and open source. You have permission to republish this article under a Creative Commons license with attribution to the author and theAntiMedia.org. Tune in! Anti-Media Radio airs Monday through Friday @ 11pm Eastern/8pm Pacific. Image credit: Rafael Matsunaga. Help us fix our typos:edits@theantimedia.org.

Author: Claire Bernish

Claire Bernish joined Anti-Media as an independent journalist in May of 2015. Her topics of interest include thwarting war propaganda through education, the refugee crisis & related issues, 1st Amendment concerns, ending police brutality, and general government & corporate accountability. Born in North Carolina, she now lives in Cincinnati, Ohio.

Share This Post On

28 Comments

  1. If the price of money drastically decreases, we will only go back to the earth and sea to feed our families. Natural living. Hunting, fishing farming.

    Post a Reply
  2. The US should create 17 trillion dollar coins and give them to the Chinese in payment of our debt to them. Maybe that would help.

    Post a Reply
  3. I think one day all Economies will likely fall. But with The technology we have today it won't be nearly as bad as people may think.

    Post a Reply
  4. well I guess the only solution for China is to do what the USA does in time of financial pitfalls ..go to war ..

    Post a Reply
  5. As mentioned by the author, China refused to let its wages go up in order to allow domestic consumption to improve economic growth. Rather they allowed the middle class to invest in the stock market on margin no less. When you invest on margin and the stock market goes up all is fine. But the moment the market peaks and starts falling investors must pay what they borrowed tp invest in the first place. Now it becomes a vicious downward spiral with investor selling their stocks to cover the money they borrowed. The more they sell, the more the market goes down, and the more it goes down, the more the margin calls come in and the debt has to be paid. This is the sick nature of finance dominated capitalism: Destructive and parasitic.

    Post a Reply
  6. HAHAHA! An incredibly opportune and convenient time for OUR stock market to experience some technical glitches, no? Anyone here believe that BS story we were handed yesterday as to WHY the NYSE shut down?
    They really, REALLY think the American public is that stupid…..
    In the meantime, watch your OWN @sses concerning your investments.

    Post a Reply
  7. With the strong Chinese penchant for gambling they might consider some restrictions on margin trades. I agree strongly with your comment regarding finance dominated capitalism.

    Post a Reply
  8. The US Treasury actually has the legal authority to produce trillion dollar coins. The US currency is no longer backed by anything – it is a fiat currency. It would be within US law for the US to produce 17 trillion dollar coins and give them to the Chinese in payment of our dept. It's not like the dollar is backed by gold or silver. The Federal Reserve can produce an unlimited amount of money.

    Post a Reply
  9. "Gone," eh? Ha! Right. Only two options here: either it's "gone" into someone's pocket, or this demonstrates the fraudulent nature of the fiat currency that exists "as money" (not really money, just something designed to make you THINK it's money). Only something that is imaginary can simply "disappear."

    Post a Reply
  10. John Pollard You are repyling to a point I did NOT make. My point is that the debt that the US owes to China is 1.5 trillion dollars and not 17 trillion dollars as you posted. 8.2% of 18 trillion (the current debt) gives around 1.47 trillion, 1.5 if you round up. I am fully aware of what the treasury and Feds can do.

    Post a Reply
  11. I would say thats what happens when you don,t beleive in standard of living wages increases,bye greedy assholes….

    Post a Reply
  12. China has border disputes with all of its neighbors -Japan, India, Vietnam. China have to think with whom it will be more convenient to start the war.

    Post a Reply
  13. John Pollard Please find a dictionary and look up the word fiat. This has become a ridiculous meme being said by nearly everyone, and almost no one knowing, they are not understanding the word at all. Like most people you have no idea in the world what real money is but keep repeating nonsense you have heard that sounded correct. Yes I know that you think your comments made sense, a whole lot of other people would agree with what you wrote. They too would all be incorrect. Let me show you real truth and what real money is. Open your mind up, because real money is so simple people can not grasp it.
    Your Congress has the right to coin money. What you call money has been phony for most of the US history. Confederation script, continental currency, and the green back were very close to being real money, though under other monetary manipulations like interest, fractional reserve banking practices, inflation, it wasn't quite real in effect. It is a massive mistake to back or base "money" on high value commodities like gold or silver. Those markets are manipulated and mostly controlled by some of the same criminals that have had total control over your country for over 100 years now. All other countries are also being controlled and manipulated by the money masters, not just by debt.
    Gold and silver are made by nature, are NOT money but commodities that are great for barter. You actually can create real money using gold as the medium of exchange, but there is no benefit and it has issues of being manipulated, and it is a waste of a very useful metal. The most important aspect of money is how you define it. If defined as debt based, the debtors control it. If defined as gold based, the owners of mines and stores of gold control it.
    Money is a creation of the mind and exists in law. Real organic sovereign money has only one purpose, to facilitate barter. A person produces something, B person produces something, but neither A or B has what the other needs so we use money, so that A can go to C and trade money then C can trade with A, and so on. Following?
    Real money is not the thing you hold or put in your wallet. That is simply the medium of exchange. Paper works very well so long as the style can not be counterfeit. When a record is put on the medium of exchange assigning a value, it becomes money. If the legal and accepted authorities declare that this is money, then a fiat has been declared. Yes John, real money does come from thin air, as it should. This is good.
    Now here is the kicker. Remember I said, that what is most important is how you define your real organic sovereign money. You base the value of real money on the value of yours and my work, our creativity, our ideas, our hours of labour. You base the value on the people for the people, and controlled by the people, to facilitate barter. This real money will always be worth the same, just as an honest days work, that it is based on, will always be the same. put real money in a safe and 100 years later it still has the same purchasing power. There is no interest, no inflation, no debt, no private cabals controlling it, no market manipulations from commodities markets. Fractional reserve lending practices must be banned and illegal.
    How do you put this real money into use? Good question John. You spend it into existence on infrastructure, education, and health care. We need these three for people to go to work building a future. We re-purpose all the small banks as service centres, collect up all the old funny money and bury the big bankers and money masters with it. Debt payed! I recommend also putting all the money masters in very small jails with public assess, so passers by can spit on them. I recommend confiscating the other half of the worlds wealth these evil a-holes have stolen from the world and distributing it. I also recommend using hemp paper as the medium of exchange. Makes great paper and saves trees.
    See? Real money as defined by Aristotle long ago is a very simple thing. ALL the complexity and fools of economic thought are scam.

    Post a Reply
  14. Its not capitalism when a country doesn't allow wages to go up or they don't allow you to invest in a market other than in futures. Its called communism.

    Post a Reply
  15. The "financial pitfalls" are orchestrated by the money masters, and they also are the only ones that profit from wars.

    Post a Reply
  16. True capitalism is dead. Until Central Banks are eliminated and the governments quit meddling in the markets and allow true price discovery, capitalism is doomed. Good comment though.

    Post a Reply
  17. Ronald West This is wishfull thinking and will never happen. Central banks are not going away anytime soon. When the founding fathers created the U.S. federal system of govt. the first thing they did is create a central bank. That was even before the Federal Reserve. So according to your logic the U.S. back in the late 1700s was not capitalist. Second, the govt has always meddled in markets. There is no major industry in the U.S. that was not created w/o govt. meddling. The internet that you and I are communicating on was a govt. project. The railroads that dominated American for much of the late 1800s were created by govt. land grants. The oil companies get govt. subsidies. In otherowrds, the capitalism that you want never existed in reality, or maube existed for a very brief priod of time.

    Post a Reply
  18. John Pollard The Chinese would piss on it. If the coin was made of gold, that would be fine but as it is, the Chinese are not buying any more US fakes that are just paper and ink, since they are still stuck holding $1.5 some odd trillion of this crap debt already. Further, I don't think the Chinese are as worried as before, since they now have most of the gold from Fort Knox, that the US has flagrantly squandered, in their attempts to crush the price of gold. And far as I know, the US has no legal authority to print any paper money that is not backed by gold or silver, as specified in the US Constitution.

    Post a Reply
  19. 3.25 Trillion is gone only if you calculate it on a ~1 month average. If you look at a bigger picture of say 1 year, the Shanghai composite rocketed more than 80 percent higher over the past 12 months.

    Post a Reply
  20. Japan actually owns more US debt, but since they are an ally country the media is quiet on it…………

    Post a Reply
  21. Mark – my statements are correct. The US currency is not backed by anything – there is no longer a gold or silver standard. And yes – the US currency is a fiat currency or not ! Here is an interesting article from Forbes about the subject – http://www.forbes.com/sites/pascalemmanuelgobry/2013/01/08/all-money-is-fiat-money/
    Money is generally money because the government that produces the money says it is money. I could have more properly stated the the US currency is a fiat currency that is no longer backed by a commodity.

    Post a Reply

Submit a Comment

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>