"Party rulers in China are trapped in a position that chess players deeply fear — zugzwang — where any move made puts you at disadvantage. In China, the potential cost of both action and inaction is economic collapse.
China is slowly starting to face the consequences of its actions — loans grew over 30% a year over the last few years — and inflation is rising fast. Inflation in developed countries is unpleasant, but it is tolerable. For a developing country — and China, despite its size, is still a developing country — it can be catastrophic. In developed countries, we spend two or three times less on food as a percentage of our income as do people in developing countries.
Therefore, though food inflation is unpleasant, we have a much greater tolerance (margin of safety) for it. While food inflation the U.S. can mean fewer trips to restaurants or no summer vacation, food inflation in China leads to hunger.
As China slams the brakes on the economy and as housing prices fall, the banks will lose plenty of money. But more importantly, it is the people who bought tremendously overpriced houses, and their relatives who lent them money, who will lose. The wealth and hard work of more than one generation will be lost, and this kind of pain leads to political unrest. That is the Chinese blacks swan!"...................READ MORE
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