Last Wednesday we noted there is something rotten in the state of Denmark, meaning that the world’s great potemkin village of Bubble Finance is unraveling. The evidence piles up by the day. To wit, now comes still another story about the Red Paddy Wagons rolling out in China—–this time to round up the proprietors of a $7.6 billion peer-to-peer (P2P) lending Ponzi called Ezubi Ltd.
Ezubo investors lined up outside a government office in Beijing last month; having shut down the online peer-to-peer investing.
The particulars of this story are worth more than a week of bloviating by the Wall Street economists, strategists and other shills who visit bubblevision the whole day long. That’s because it exposes the rotten foundation on which the entire Red Ponzi and the related world central bank regime of Bubble Finance is based.
Needless to say, these dangerous, unstable and incendiary deformations are not even visible to the Keynesian commentariat and policy apparatchiks. They blithely assume that what makes modern economies go is the deft monetary, fiscal and regulatory interventions of the state. By their lights, not much else matters——and most certainly not the condition of household, business and public balance sheets or the level of speculation and leveraged gambling prevalent in financial markets and corporate C-suites.
As that pompous fool and #2 apparatchik at the Fed, Stanley Fischer, is wont to say—–those are second order foot faults. But they are not the fault of monetary policy and can be readily minimized through “macro-prudential” regulation.
After all, if the Keynesians had any inkling that debt was a problem they wouldn’t have attempted to radically subsidize it with 84 straight months of ZIRP. In that respect, they might especially have noted that US credit outstanding has soared from $54 trillion to $63 trillion or 17% since the eve of the financial crisis. That is, since the nation’s mountain of debt blew-up the first time around.
So here’s what happened with Ezubu. It’s parent (Yucheng Group) was an equipment leasing operation, having gotten started way back near the dawn of the Red Ponzi. That is, it apparently started about 2012 in the business of supplying rentable equipment and factoring services via the shadow banking system during China’s fixed asset boom.
Yucheng Group was definitely not China’s equivalent of General Electric; it was apparently organized by a gang of military buccaneers who have occupied a certain Chinese speaking province of northern Myanmar.
But by July 2014 the infrastructure boom and leasing demand were cooling so it opened up a new operation in P2P lending. Quicker than a flash it became China’s #2 player in that suddenly flourishing sector, or as the company described it:
Founded in 2012, Yucheng started as one of the pioneers of finance leasing and focused on fulfilling the financing needs at the county level. Yucheng quickly grew its business by expanding into different cities and continued to develop innovative solutions to address their clients’ evolving financing demands. In 2014, Yucheng successfully launched Ezubo.com, a disruptive A2P (asset-to-peer) online platform that bridges borrowers and lenders to facilitate a more efficient transactional process. As of June 2015, Ezubo.com is ranked second in terms of daily average investment amount. Yucheng now sets the industry benchmark by offering a comprehensive range of market leading finance lease and factoring solutions to large and medium-sized companies, international corporations, small and private enterprises to individuals.
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