Archive for the ‘Financial melt-down’ Category

Thinking about a thousand-year depression

Tuesday, December 16th, 2008

– An excellent piece from The Automatic Earth; a Blog I’ve just started following.

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Cyclical terms like “recession” and “depression” are looking less appropriate by the day. It’s like calling the period between the fall of Rome and the Renaissance a “depression”.

I know the our situation is vastly different from the state of the world in Roman times, but the idea that we could be on the brink of a fundamental reset of civilization is intriguing, to say the least.

I’ve been convinced for several years that we are looking at the convergence of a set of wicked interlocking global problems — ecological problems (climate chaos, the death of the oceans, fresh water shortages etc.), energy shortages due to fossil fuel depletion, and overpopulation with the resulting pressure on the global food supply. This convergence is happening under the umbrella of the current global financial collapse that constrains our ability to respond to any of these problems individually, let alone any further problems that might emerge from interactions between them.

This unfortunate collision makes the future of our civilization very murky indeed. Writers like James Howard Kunstler, John Michael Greer, Carolyn Baker and Sharon Astyk (along with people like Stoneleigh and Ilargi at The Automatic Earth) have been warning about the possibility of a generalized, unrecoverable collapse of modern civilization for a while now. They have generally been derided by the mainstream as millennialist prophets of doom — driven more by their own subconscious fears and dark desires, their research full of confirmation bias.

The events unfolding around us now, however, cast their optimistic mainstream critics in a somewhat different light. None of them — even the Roubinis and Krugmans – have fully appreciated the severity of the world’s financial predicament. Their comforting bromides (and even their more pessimistic utterances) have been overwhelmed by events on a weekly basis. It has become clear that for all their careful analysis of trunks and tails, nobody truly understood the shape of the entire elephant.

This evident failure of comprehension brings their entire analysis into disrepute. And that should make us ask – if they failed to comprehend the underpinnings of a calamity in their own domain, what does that say about the possibility that they also failed to understand the dangers being trumpeted by the doomers they have derided?

After all, we are seeing the same outcome in the climate crisis as in the financial one – the trends are uniformly negative, and are unfolding much faster than the professionals in either field predicted. There are new signs from world bodies like the International Energy Agency that the same situation is developing with respect to the world’s oil supply – the more pessimistic members of the Peak Oil crowd appear to be heading for vindication.

So, following a “major, rapid contraction” (aka collapse), could our civilization end up staying on the mat, unable to rise from the ashes of our former glory? That’s unknowable of course, but hardly inconceivable. Several factors give that speculation some foundation.

The first confounding factor is the spectre of irreversible climate change. That could irreparably damage the world’s food production capacity through shifts in rainfall and the reduction of snow and glacial cover that supplies much of the world’s fresh water for agriculture.

The second factor is the permanent depletion of the compact, high-density, transportable energy supply represented by fossil fuels. We’re putting a lot of effort into developing electrical alternatives, of course. There are two major challenges in the way, though. The first is the relative infancy of the industry, and the fact that it will require both capital and fossil fuels to enable its continued growth. The second longer term problem is that the use of electricity requires a higher level of technology in the infrastructure needed to manufacture, distribute, store and convert it into work. This may not seem like much of a a problem today, but if our global industrial civilization goes into a decline, growing parts of the world may find the maintenance of such infrastructure increasingly difficult.

A third factor that may get in the way of recovery is the depletion of easily-recoverable resources such as metals. The decline in the average quality of various ores being mined today is well documented, and is likely to continue. While recycling can recover much of the metal currently discarded as waste, recycling facilities capable of producing enough output to feed our civilization’s needs do not yet exist. They would face the same hurdles as the build-out of electrical supplies I described above.

You might think that such a situation will take so long to develop that we will be able to address the situation before it gets quite that dire.

One consideration that works against that hope is that human beings are not, for all their cleverness, fully rational creatures. Research has shown that most of our “rational” decisions are made at a deeply unconscious level, to be dressed up with rational justifications only upon their emergence into the conscious mind some time later. The truth of this proposition can be seen all around us in the competition between environmental remediation and economic imperatives, in the obstruction of alternative energy development, in our repeated creation of financial bubbles — in all the myriad ways in which we as a society work tirelessly against our own best interests as individuals and as a species.

Even worse, events have recently shown a terrifying ability to outstrip our expectations, in both speed and severity. We may not have nearly as much time left as we think. A lack of time coupled with an inability to respond rationally (or even to accept the evidence of our eyes) does not bode well for the future of this civilization.

It’s conceivable that our current civilization will never regain its feet after this storm has burst upon us. We will endure as a species no matter what happens, of course, and it’s even probable that we will rise to new heights. It’s also quite possible that the rebirth of this Phoenix will take a long, long time and that those new heights will be unrecognizable to someone raised in today’s world of 401(k)’s, Credit Default Swaps, automobiles and gigantic concrete cities.

– To the original:

– Research thanks to Kael for this.

Top investors ‘hit by $50bn con’

Saturday, December 13th, 2008

Zowie!Some of the world’s wealthiest private and corporate investors are reported to be victims of an alleged $50bn fraud by Wall Street broker Bernard Madoff.

Mr Madoff is alleged to have confessed to a huge Ponzi scheme (pyramid fraud).

Reports say the main owner of the New York Mets baseball team, Fred Wilpon, and former American football team owner Norman Braman are among the victims.

Others facing losses reportedly include French bank BNP Paribas, Japan’s Nomura Holdings and Zurich’s Neue Privat Bank.

Prosecutors say Mr Madoff, ex-head of the Nasdaq stock market, has described the fraud as “one big lie”.

A federal judge has appointed a receiver to oversee Mr Madoff firm’s assets and customer accounts, while the 70-year-old banker has been released on $10m bail.

More…

– do you want more of this same stuff, Sweetpea? Look no farther. Just follow this next link for another fine story of financial integrity.

And more…

– This second article is from the NY Times and they insist that folks have an ID and a PW in order to read their stuff. You can get these for free just by signing up. However, a friend of mine suggests the website bugmenot.com :arrow: as an alternative to having to do these annoying sign ups. Check it out. Thx Bruce S. for the tip.

FHA-Backed Loans: The New Subprime

Thursday, December 4th, 2008

– So, are you hopeful that we’ll pull out of the economic crisis we’re in? Hopeful that we’ve seen where the problems lie? And that while it may still take us awhile to dig our way out from under them, we eventually will?

– Is that what you think, Sweetpea? Well, read on – you’ve got news incoming.

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The same people whose reckless practices triggered the global financial crisis are onto a similar scheme that could cost taxpayers tons more

As if they haven’t done enough damage. Thousands of subprime mortgage lenders and brokers—many of them the very sorts of firms that helped create the current financial crisis—are going strong. Their new strategy: taking advantage of a long-standing federal program designed to encourage homeownership by insuring mortgages for buyers of modest means.

You read that correctly. Some of the same people who propelled us toward the housing market calamity are now seeking to profit by exploiting billions in federally insured mortgages, securing their initial leads through short-term loans online. Washington, meanwhile, has vastly expanded the availability of such taxpayer-backed loans as part of the emergency campaign to rescue the country’s swooning economy.

For generations, these loans, backed by the Federal Housing Administration, have offered working-class families a legitimate means to purchase their own homes. But now there’s a severe danger that aggressive lenders and brokers schooled in the rash ways of the subprime industry will overwhelm the FHA with loans for people unlikely to make their payments. Exacerbating matters, FHA officials seem oblivious to what’s happening—or incapable of stopping it. They’re giving mortgage firms licenses to dole out 100%-insured loans despite lender records blotted by state sanctions, bankruptcy filings, civil lawsuits, and even criminal convictions.

More Bad Debt

As a result, the nation could soon suffer a fresh wave of defaults and foreclosures, with Washington obliged to respond with yet another gargantuan bailout. Inside Mortgage Finance, a research and newsletter firm in Bethesda, Md., estimates that over the next five years fresh loans backed by the FHA that go sour will cost taxpayers $100 billion or more. That’s on top of the $700 billion financial-system rescue Congress has already approved. Gary E. Lacefield, a former federal mortgage investigator who now runs Risk Mitigation Group, a consultancy in Arlington, Tex., predicts: “Within the next 12 to 18 months, there is going to be FHA-insurance Armageddon.”

The resilient entrepreneurs who populate this dubious field are often obscure, but not puny. Jerry Cugno started Premier Mortgage Funding in Clearwater, on the Gulf Coast of Florida, in 2002. Over the next four years, it became one of the country’s largest subprime lenders, with 750 branches and 5,000 brokers across the U.S. Cugno, now 59, took home millions of dollars and rewarded top salesmen with Caribbean cruises and shiny Hummers, according to court records and interviews with former employees. But along the way, Premier accumulated a dismal regulatory record. Five states—Florida, Georgia, North Carolina, Ohio, and Wisconsin—revoked its license for various abuses; four others disciplined the company for using unlicensed brokers or similar violations. The crash of the subprime market and a barrage of lawsuits prompted Premier to file for U.S. bankruptcy court protection in Tampa in July 2007. Then, in March, a Premier unit in Cleveland and its manager pleaded guilty to felony charges related to fraudulent mortgage schemes.

More…

– research thanks to Fitz

The Minimal Impact of a Big Hypertension Study

Sunday, November 30th, 2008

– I take a blood pressure medicine because my doctor told me that even though I only have borderline high blood pressure, I’ll probably live a bit longer if I take this stuff.   OK, makes sense to me.   I take Diovan and it is fairly expensive stuff.   Well, this article makes the point that Big Pharma has been stacking the deck for years to keep us buying their expensive solutions when there are much cheaper alternatives out there.  

– Corporations and their profit motives – enough already!

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The surprising news made headlines in December 2002. Generic pills for high blood pressure, which had been in use since the 1950s and cost only pennies a day, worked better than newer drugs that were up to 20 times as expensive.

The findings, from one of the biggest clinical trials ever organized by the federal government, promised to save the nation billions of dollars in treating the tens of millions of Americans with hypertension — even if the conclusions did seem to threaten pharmaceutical giants like Pfizer that were making big money on blockbuster hypertension drugs.

Six years later, though, the use of the inexpensive pills, called diuretics, is far smaller than some of the trial’s organizers had hoped.

“It should have more than doubled,” said Dr. Curt D. Furberg, a public health sciences professor at Wake Forest University who was the first chairman of the steering committee for the study, which was known by the acronym Allhat. “The impact was disappointing.”

The percentage of hypertension patients receiving a diuretic rose to around 40 percent in the year after the Allhat results were announced, up from 30 to 35 percent beforehand, according to some studies. But use of diuretics has since stayed at that plateau. And over all, use of newer hypertension drugs has grown faster than the use of diuretics since 2002, according to Medco Health Solutions, a pharmacy benefits manager.

The Allhat experience is worth remembering now, as some policy experts and government officials call for more such studies to directly compare drugs or other treatments, as a way to stem runaway medical costs and improve care.

The aftereffects of the study show how hard it is to change medical practice, even after a government-sanctioned trial costing $130 million produced what appeared to be solid evidence.

More…

– This article is from the NY Times and they insist that folks have an ID and a PW in order to read their stuff. You can get these for free just by signing up. However, a friend of mine suggests the website bugmenot.com :arrow: as an alternative to having to do these annoying sign ups. Check it out. Thx Bruce S. for the tip.

The Crisis & What to Do About It

Saturday, November 22nd, 2008

George Soros– About two years ago, I read The Age of Fallibility by George Soros & and I was very impressed.  He has long had an alternative and persuasive view of how markets work.   Either he’s been very lucky, or there’s a lot of truth to his analysis.   The man has become a billionaire by walking his own talk.

– I, like many of you, have read endless ‘explanations’ of what’s gone wrong with the U.S. and the world’s financial markets.   Some have been plausible, some silly and some impenetrable.  But none has impressed me more than what follows here.

– Here’s George Soro’s  explanation of what’s happened and what should be done about it.   I’ve got two specific quibbles about it, which I will leave to the end of this post.  But, overall, it is the best thing I’ve seen on the ongoing financial crisis.

– Enjoy.

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1.

The salient feature of the current financial crisis is that it was not caused by some external shock like OPEC raising the price of oil or a particular country or financial institution defaulting. The crisis was generated by the financial system itself. This fact—that the defect was inherent in the system —contradicts the prevailing theory, which holds that financial markets tend toward equilibrium and that deviations from the equilibrium either occur in a random manner or are caused by some sudden external event to which markets have difficulty adjusting. The severity and amplitude of the crisis provides convincing evidence that there is something fundamentally wrong with this prevailing theory and with the approach to market regulation that has gone with it. To understand what has happened, and what should be done to avoid such a catastrophic crisis in the future, will require a new way of thinking about how markets work.

Consider how the crisis has unfolded over the past eighteen months. The proximate cause is to be found in the housing bubble or more exactly in the excesses of the subprime mortgage market. The longer a double-digit rise in house prices lasted, the more lax the lending practices became. In the end, people could borrow 100 percent of inflated house prices with no money down. Insiders referred to subprime loans as ninja loans—no income, no job, no questions asked.

The excesses became evident after house prices peaked in 2006 and subprime mortgage lenders began declaring bankruptcy around March 2007. The problems reached crisis proportions in August 2007. The Federal Reserve and other financial authorities had believed that the subprime crisis was an isolated phenomenon that might cause losses of around $100 billion. Instead, the crisis spread with amazing rapidity to other markets. Some highly leveraged hedge funds collapsed and some lightly regulated financial institutions, notably the largest mortgage originator in the US, Countrywide Financial, had to be acquired by other institutions in order to survive.

Confidence in the creditworthiness of many financial institutions was shaken and interbank lending was disrupted. In quick succession, a variety of esoteric credit markets—ranging from collateralized debt obligations (CDOs) to auction-rated municipal bonds—broke down one after another. After periods of relative calm and partial recovery, crisis episodes recurred in January 2008, precipitated by a rogue trader at Société Générale; in March, associated with the demise of Bear Stearns; and then in July, when IndyMac Bank, the largest savings bank in the Los Angeles area, went into receivership, becoming the fourth-largest bank failure in US history. The deepest fall of all came in September, caused by the disorderly bankruptcy of Lehman Brothers in which holders of commercial paper—for example, short-term, unsecured promissory notes—issued by Lehman lost their money.

Then the inconceivable occurred: the financial system actually melted down. A large money market fund that had invested in commercial paper issued by Lehman Brothers “broke the buck,” i.e., its asset value fell below the dollar amount deposited, breaking an implicit promise that deposits in such funds are totally safe and liquid. This started a run on money market funds and the funds stopped buying commercial paper. Since they were the largest buyers, the commercial paper market ceased to function. The issuers of commercial paper were forced to draw down their credit lines, bringing interbank lending to a standstill. Credit spreads—i.e., the risk premium over and above the riskless rate of interest—widened to unprecedented levels and eventually the stock market was also overwhelmed by panic. All this happened in the space of a week.

– More…

 – Research credit – my apologies.   One of my friends sent me this and I’ve managed to forget who it was.

Quibble #1:  The old saw that for a carpenter, the answer  to every problem involves a hammer comes to mind when you read Soros.   Oh, his analysis is penetrating and relevant, no doubt.  He see everything through a financial lens which is particularly appropriate when he’s discussing the current crisis. But, I know from reading The Age of Fallibility, in which he discusses larger issues like history, politics and the environment, that he sees all of these, as well, through that same lens.   That it is a lens he wields well, is not in doubt.   That it is the best lens through which to analyze everything is.

Quibble #2:  In his piece, above, he discusses the need for a new type of regulation to prevent bubbles.  What he doesn’t address is that if part of the world’s financial markets implement such regulation and others do not, then there will be an incentive for those willing and wanting to take more risk in hopes of larger profits to migrate towards the less regulated markets.   This seems to me, inevitable.   And, as it progresses, the regulated markets will have to respond by lessening regulation if they want to stay competitive.   And the entire cycle will begin again with everyone racing down the same slippery slope.   A functional global agreement on regulation could prevent this and provide a fair and level playing field for all.   But the human urge to push to the front of the line and cheat in various ways will, forever, be a challenge even if such a global and functional agreement can be reached – and I’m not at all sure that it can.

A Quiet Windfall For U.S. Banks

Wednesday, November 19th, 2008

– The truth is, I don’t really know what this means in the big picture.   It sounds like some stuff was put through that would have never been allowed if this wasn’t a time of crisis.   Reminds me a bit of the time I was perusing the back pages of my news paper and found that a new ‘no knock’ law had quietly been passed in Washington D.C.    It makes you sit up and pay attention.

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With Attention on Bailout Debate, Treasury Made Change to Tax Policy

The financial world was fixated on Capitol Hill as Congress battled over the Bush administration’s request for a $700 billion bailout of the banking industry. In the midst of this late-September drama, the Treasury Department issued a five-sentence notice that attracted almost no public attention.

But corporate tax lawyers quickly realized the enormous implications of the document: Administration officials had just given American banks a windfall of as much as $140 billion.

The sweeping change to two decades of tax policy escaped the notice of lawmakers for several days, as they remained consumed with the controversial bailout bill. When they found out, some legislators were furious. Some congressional staff members have privately concluded that the notice was illegal. But they have worried that saying so publicly could unravel several recent bank mergers made possible by the change and send the economy into an even deeper tailspin.

“Did the Treasury Department have the authority to do this? I think almost every tax expert would agree that the answer is no,” said George K. Yin, the former chief of staff of the Joint Committee on Taxation, the nonpartisan congressional authority on taxes. “They basically repealed a 22-year-old law that Congress passed as a backdoor way of providing aid to banks.”

The story of the obscure provision underscores what critics in Congress, academia and the legal profession warn are the dangers of the broad authority being exercised by Treasury Secretary Henry M. Paulson Jr. in addressing the financial crisis. Lawmakers are now looking at whether the new notice was introduced to benefit specific banks, as well as whether it inappropriately accelerated bank takeovers.

The change to Section 382 of the tax code — a provision that limited a kind of tax shelter arising in corporate mergers — came after a two-decade effort by conservative economists and Republican administration officials to eliminate or overhaul the law, which is so little-known that even influential tax experts sometimes draw a blank at its mention. Until the financial meltdown, its opponents thought it would be nearly impossible to revamp the section because this would look like a corporate giveaway, according to lobbyists.

Andrew C. DeSouza, a Treasury spokesman, said the administration had the legal authority to issue the notice as part of its power to interpret the tax code and provide legal guidance to companies. He described the Sept. 30 notice, which allows some banks to keep more money by lowering their taxes, as a way to help financial institutions during a time of economic crisis. “This is part of our overall effort to provide relief,” he said.

The Treasury itself did not estimate how much the tax change would cost, DeSouza said.

More…

Alternative Energy Suddenly Faces Headwinds

Wednesday, November 12th, 2008

– I’m not surprised.

– When we had tons of cheap energy, we couldn’t be bothered to even think about preparing with alternative energy for when we didn’t.  That’s a shame because we could have prepared then for the future with out much fuss or muss.

– And when energy got to be a bigger deal and folks stated talking about Peak Oil and the end of cheap energy,  all the obfuscators stood up and grabbed the mike and said, “Hey, there’s no problem, the greens are just hallucinating – don’t let those worry warts spoil your party – just keep buying our oil and gas.”  It would have been harder then to have prepared to switch to alternative energy, but, with effort, we could have done it.

-  Now, that the shit’s hit the fan with the economy, we’re hearing that, “We’re too preoccupied with fixing the economy to worry about alternative energy, the environment and a host of other problems you folks have been raving about for years – we’ve got an economy to fix here.    After that, we can come back and do something, perhaps, reasonable about these other problems.”

– Yeah right.   Personally, despite all the talk and all the good reasons for doing so, I don’t think there was EVER a time when humanity was going to stand up and do the right thing and begin a fundamental switch to alternative and sustainable energy sources.

– We’re not going to begin to consider it seriously until our hair’s on fire and it is far too late to switch without a huge transition gap between the energies we’re using now and the one’s we’ve yet to build.   And that transition gap is gonna be a son of a bitch.

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HOUSTON — For all the support that the presidential candidates are expressing for renewable energy, alternative energies like wind and solar are facing big new challenges because of the credit freeze and the plunge in oil and natural gas prices.

Shares of alternative energy companies have fallen even more sharply than the rest of the stock market in recent months. The struggles of financial institutions are raising fears that investment capital for big renewable energy projects is likely to get tighter.

Advocates are concerned that if the prices for oil and gas keep falling, the incentive for utilities and consumers to buy expensive renewable energy will shrink. That is what happened in the 1980s when a decade of advances for alternative energy collapsed amid falling prices for conventional fuels.

“Everyone is in shock about what the new world is going to be,” said V. John White, executive director of the Center for Energy Efficiency and Renewable Technology, a California advocacy group. “Surely, renewable energy projects and new technologies are at risk because of their capital intensity.”

Senator Barack Obama and Senator John McCain both promise ambitious programs to develop various kinds of alternative energy to combat global warming and achieve energy independence.

Mr. Obama talks of creating five million new jobs in renewable energy and nearly tripling the percentage of the nation’s electricity supplied by renewables by 2025. Mr. McCain has run television advertisements showing wind turbines and has pledged to make the United States the “leader in a new international green economy.”

But after years of rapid growth, the sudden headwinds facing renewables point to slowing momentum and greater dependence on government subsidies, mandates and research financing, at a time when Washington is overloaded with economic problems.

More…

– This article is from the NY Times and they insist that folks have an ID and a PW in order to read their stuff. You can get these for free just by signing up. However, a friend of mine suggests the website bugmenot.com :arrow: as an alternative to having to do these annoying sign ups. Check it out. Thx Bruce S. for the tip.

The nature crunch will be worse

Wednesday, November 12th, 2008

When humanity touches its ecological limits, the current financial crisis will pale in comparison. It’s time to rethink our catastrophic environmental trajectory, writes George Monbiot.

This is nothing. Well, nothing by comparison to what’s coming. The financial crisis for which we must now pay so heavily prefigures the real collapse, when humanity bumps against its ecological limits. As we goggle at the fluttering financial figures, a different set of numbers passes us by.

On October 10, Pavan Sukhdev, the Deutsche Bank economist leading a European study on ecosystems, reported that we are losing natural capital worth between US$2 trillion and US$5 trillion every year as a result of deforestation alone. The losses incurred by the financial sector (by mid-October) amounted to between US$1 trillion and $1.5 trillion. Sukhdev arrived at his figure by estimating the value of the services — such as locking up carbon and providing fresh water — that forests perform, and calculating the cost of either replacing them or living without them. The credit crunch is petty when compared to the nature crunch.

The two crises have the same cause. In both cases, those who exploit the resource have demanded impossible rates of return and invoked debts that can never be repaid. In both cases, we denied the likely consequences. I used to believe that collective denial was peculiar to climate change. Now I know that it’s the first response to every impending dislocation.

Britain’s prime minister, Gordon Brown, for instance, was as much in denial about financial realities as any toxic-debt trader. In June 2007, he boasted that 40% of the world’s foreign equities were traded in London. The financial sector’s success had come about, he said, partly because the government had taken “a risk-based regulatory approach”. In the same hall three years before, as chancellor of the exchequer, he pledged that “in budget after budget, I want us to do even more to encourage the risk takers”. Can anyone, surveying this mess, now doubt the value of the precautionary principle?

Ecology and economy are both derived from the Greek word oikos — a house or dwelling. Our survival depends on the rational management of this home: the space in which life can be sustained. The rules are the same in both cases. If you extract resources at a rate beyond the level of replenishment, your stock will collapse. That’s another noun that reminds us of the connection. The Oxford English Dictionary gives 69 definitions of “stock”. When it means a fund or store, the word evokes the trunk — or stock — of a tree, “from which the gains are an outgrowth”. Collapse occurs when you prune the tree so heavily that it dies. Ecology is the stock from which all wealth grows.

More…

Taking the economic pulse

Saturday, November 8th, 2008

– Well, I’d have to stay that the economy is beginning to affect us here at the nursery.   Our sales are off 35% from last year and it was off from the year before.

– Today was the topper, though.   First Saturday we’ve EVER had where we made zero, zip, nada for the entire day.   Three looki-loos came through and that was that.

– We’re going to go out and apply the Margarita attitude adjustment fix.

That’s us….

Some owners deserting factories in China

Thursday, November 6th, 2008

Financially troubled plants are being abandoned by the boss, leaving behind unpaid workers and debts.

Reporting from Shaoxing, China — First, Tao Shoulong burned his company’s financial books. He then sold his private golf club memberships and disposed of his Mercedes S-600 sedan.

And then he was gone.

And just like that, China’s biggest textile dye operation — with four factories, a campus the size of 31 football fields, 4,000 workers and debts of at least $200 million — was history.

“We’re pretty much dead now,” said Mao Youming, one of 300 suppliers stiffed last month by Tao’s company, Jianglong Group. Lighting a cigarette in a coffee shop here, the 38-year-old spoke calmly about the bleak future of his industrial gas business. Tao owed him $850,000, Mao said, about 60% of his annual revenue. “We cannot pay our workers’ salaries. We are about to be bankrupt too.”

Government statistics show that 67,000 factories of various sizes were shuttered in China in the first half of the year, said Cao Jianhai, an industrial economics researcher at the Chinese Academy of Social Sciences. By year’s end, he said, more than 100,000 plants will have closed.

More…