It is never hard to spot potential clouds on the economic horizon but the present moment seems, perhaps, especially gloomy. There are those seemingly endless clashes between the US and just about everyone on the subject of trade, with the previous, globalist settlement stalled if not in full reverse.

Then there are the effects of rising US interest rates on the emerging markets, with Turkey the first to crumble aided, admittedly by its own economic mismanagement. It is unlikely to be the last. Throw in the possibility that the world economic cycle has peaked, uncertainties over Brexit and worries about what will happen when the European Central Bank stops backstopping Eurozone debt markets and the economic world starts to look, perhaps, nearly as scary as it did when financial crisis hit.

And we haven’t even got to what, in many quarters, is seen as the darkest cloud of them all: China’s ballooning debts.

The Reserve Bank of Australia, the Japanese government, and the International Monetary Fund have all been warning at increasing volume about the perils of this huge pile of IOUs. Indeed back in May, the RBA called the rapid increase in debt within China’s financial system ‘among the largest risks the Australian economy is facing.’ Considering all the other risks the Australian economy is facing that’s quite a statement. The IMF has flagged Chinese debt as a risk to world financial stability.

Beijing’s efforts to stoke growth have seen an unwillingness to let struggling firms go under. That is part of the reason why Chinese corporate debt now approaches 170% of Gross Domestic Product, with overall debt above 250%. Corporate debt surged thanks to neo-Keynesian infrastructure projects funded by Beijing’s half-trillion-dollar post-crisis stimulus program. By some estimates, state-run enterprises now account for 80% of all the cash owed by Chinese firms.

DEBT BUILDUP HAS BEEN EXTREMELY RAPID

These are not unprecedented levels in absolute terms. But, the speed with which this debt built up has been completely new- matching what took the developed economies decades or centuries to amass in a few short years. Moreover, the IMF has identified 43 historic credit booms in which the debt/GDP ratio rose by more than 30 percentage points in five years. All but five ended with a significant slowdown, a financial crisis or both for the country involved, it said. So China’s odds of getting out unscathed are not good