Cathie Wood: China Already COLLAPSED!! You Just Haven’t Seen It Yet… - YouTube

China's entire economy is about to collapse  and instigate the largest global recession.  

Recent economic data coming out of China  is exposing the country's serious weakness.  

The Chinese Communist Party is trying to save  the economy, but the truth has already come out.  

Cathie Wood manages almost 20 billion and has  quickly recognized the pain that the world is  

about to face. Economists now see the US GDP  growth outpacing China for the first time in  

almost five decades. So what's really going  on in China? This video will unravel China's  

fighting situation and the shocking data  pointing towards the country's collapse. 

After China began to open its economy in 1978,  the country experienced unprecedented levels  

of growth. China's GDP growth averaged a  rate of roughly 10% per year. This brought  

substantial prosperity to Chinese citizens. Over  800 million people escaped poverty. Healthcare  

advanced immensely, education became prioritized  and technological development accelerated.  

China's unrivaled growth has led the country to  become a manufacturing powerhouse respected by  

all economists. But as you all know, there's  no free lunch. The reason behind China's  

unparalleled prosperity centered around its  growing liabilities. When the economy thrived,  

those who took out loans experience a  quick appreciation in their net worth.  

This incentivized others to do the same,  causing the economy to grow even faster.  

This caused even more Chinese citizens to take out  loans. The cycle represented a positive feedback  

loop that caused China to experience exponential  growth. This model has worked for many decades,  

but China's debt has grown to  a point that isn't sustainable. 

China's government debt to GDP ratio has increased  to over 66%, which was built over the many decades  

of growth. The total public Chinese debt to GDP  has also followed this trend to over 300%. This  

is almost 60% higher than the global rate of debt  to GDP and it's almost double the US non-financial  

corporate debt to GDP. Such a large amount of  liabilities is obviously not sustainable and  

China's recent issues are revealing this. China  has been attempting to implement what's known as  

the zero-COVID policy. The zero-COVID policy gives  China's government a simple target of zero COVID  

cases. The only way to get remotely close to this  goal is to implement harsh regulations, which have  

severe economic implications. Banks and economists  worldwide have continuously cut their GDP forecast  

for China due to strict COVID regulations. More  importantly, China's crackdown on over-leveraged  

companies could instigate the opposite of the  positive feedback loop we talked about earlier:

a negative feedback loop. People defaulting on  their loans causes the economy to slow down. That  

leads more people to default, which slows down the  economy even more. President Xi has a simple goal  

of common prosperity and has been implementing  a vast array of regulations for this campaign.  

One of these sectors is real estate. Real estate  prices are the epitome of uncommon prosperity.  

Speculators have made a disproportionate amount of  capital appreciation from rising property prices.  

Xi is attempting to crack down on this by  implementing new property taxes. Another policy  

that Xi has been implementing to crack down on  within real estate is the three red lines policy.  

The three red lines put a ceiling on the amount  of debt that property developers can have.  

All of these policies are causing housing  prices to drop at extremely fast rates.  

The volume of new home sales is also experiencing  a similar downturn. New home sales in early May of  

2022 were down by 33% in 23 major Chinese cities.  Real estate accounts for 25% of China's GDP. 

So a 33% drop in home sales would result in  a 9% drop in China's GDP. China's government  

recognizes the company's impending disaster and  has been doing anything in its power to prevent a  

further collapse. While the US Federal Reserve has  been raising interest rates, China's government  

has been cutting interest rates to save its  economy. China's loan prime rate for households  

and corporate loans is currently at 3.7%. This  number is only expected to drop even more as time  

goes on. The country recently cut its five year  loan prime rate by the largest amount since 2019.  

Most investors look at this crash as an isolated  failure that won't affect other countries.  

Contrary to this, China's economic collapse  could cause the entire world to enter a severe  

recession. The US Federal Reserve is raising  interest rates and strengthening the purchasing  

power of the dollar. This directly weakens the  value of the Chinese yuan in comparison to the  

US dollar. China's weakening currency will lead  its purchasing power to drop substantially while  

the Chinese economies already crashing. The Fed is really focused on the US, but  

I think Europe is in a recession. China,  some of the numbers coming out of China are  

shocking as well, that has an impact on the rest  of Asia. So what they're facing is a recession  

and their currencies are dropping. Their  currencies are dropping relative to the dollar,  

which means their purchasing power's going down.  But it also means that some of them are tightening  

more because their currencies are falling against  the dollar. So it's a bit of a vicious cycle. And  

as Nancy says, I agree with you, Nancy. We  are not alone. Many people are thinking about  

the US in isolation. We've already  had one quarter of negative GDP,  

which most people brushed aside saying, "Oh,  that's, that's a fluke." And I don't think,  

I think that was a real number and we should not  dismiss it. So agree with you totally, Nancy. 

China accounted for over 18% of the global  GDP in 2021. So a sudden crash in China's  

economy would cause global weakness. Top this  off with the fact that Europe is experiencing  

decelerating economic growth and we are clearly  in a frightening situation. Cathie likened the  

Fed raising interest rates to playing with fire  because it could exacerbate international issues.  

The US bond curve recently inverted for the first  time since 2019, which signals that a recession  

could be coming. An inverted yield curve is when  the 10 year treasury bond yield is less than the two  

year treasury bond yield. When the interest  rate for a shorter period of time is greater  

than a longer period of time, this implies that  the near term risk is greater than a long term.  

In simpler terms, bond investors are expecting  considerable pain. An inverted yield curve  

typically precedes recessions most of the time.  Europe and China are in difficult straits. The  

Feds seems to be playing with fire. International  economies are incredibly fragile right now  

and a crash in the US economy will spiral  every other economy into unbearable turmoil. 

Europe's probably in recession. China is,  if we're looking at the micro numbers,  

China's very weak, very, very weak. And so  everything's riding on the US. So the supply  

shocks, I think, are hurting purchasing powers,  I said in the US, could cause a recession that  

will unwind the supply chain bottlenecks  pretty quickly. And I think a lot of what  

we're seeing right now is a function of supply  chain and supply shocks, very cyclical as well.  

And I think we'll see the other side of that. The last global recession was in 2008, when a  

vast array of countries experienced economic  weakness. But the 2008 recession wasn't on the  

same scale as our impending crisis. China's GDP  was still growing in double digits during the 2008  

global recession. The rest of Asia, Australia,  and Africa also didn't experience a substantial  

decline in the respective GDPs. Unlike 2008, our  current situation includes the majority of Asia,  

Europe, South Africa, Australia and America  suffering. I've shown many graphs about China's  

economy throughout this video, but those numbers  could actually be fake. China is known for having  

false economic data that covers economic  disasters and exaggerates growth. Several  

Chinese cities have openly admitted to faking  economic data. One northern industrial city in  

China named Baotou openly revised their economic  report due to quote unquote fake additions.  

Another city in 2016, that was called the  Chinese Manhattan overstated its revenue by 33%. 

This type of false reporting could mean that  China is already in a recession, but we just  

don't know it yet. Cathie believes that if we  saw the real numbers in China, there would be  

even more massive sales declines in the property  sector. She believes that could ultimately lead  

to lower oil prices in the short term. I'm beginning to think that substitution  

as well as a recession in Europe, a  significant slowdown in China. I think  

if we saw the real numbers there, we'd probably be  seeing more declines, given how much they've hit  

their property sector and are bearing down on the  economy generally from a regulatory point of view.  

So we think that demand is falling and would not  be surprised at the end of the day to learn that  

130 was the peak. Of course, anything's possible  now, given the kind of shocks we've been through. 

So given all this information, how can investors  prepare their portfolios to survive this downturn?  

One simple way to stay afloat is to hold cash, but  inflation will eat away at your capital. Investing  

internationally is also not an option, with both  Asia and Europe suffering. One way to protect your  

portfolio in the coming months is to invest in  the US market. That might sound counterintuitive,  

but the US financial markets are still in the  best position compared to the global markets. Even  

though the US dollar is experiencing significant  inflation, it is still remaining relatively  

strong. The dollar index tracks the strength of  the dollar relative to other currencies. This  

index has been in the uptrend over the past year  despite immense inflation. Investing in gold could  

be a fantastic hedge, although the way significant  slow down in inflation could lead gold prices to  

drop. My point is that every asset has downsides. In this environment, diversification in the best  

assets would be the greatest option for lowering  volatility while still keeping positive returns.  

One instance of diversification could be  25% of cash, 5% in gold, 5% in Bitcoin,  

40% in ETFs and 25% in individual stocks. Such a  portfolio might not obtain the highest returns,  

but you can still have the capital to  buy the dip while having long term gains. 

The dollar's moving up. And I do believe  there's a terms of trade reason for it.  

China's become more hostile to capital. Europe's  in recession and on the border of a war.  

And the US just seems like a  safer place to be right now. 

If you're looking to take on higher risk for  higher rewards, investing in public growth stocks  

could be very lucrative. I recently attended  an event in Miami called the All-In Summit,  

which featured many billionaire venture  capitalists and CEOs. I noticed at the event  

that many of the venture capitalists became  incredibly bullish on public growth stocks.  

This is a picture that I took at the All-In Summit  with venture capitalists, Brad Gerstner and Bill  

Gurley. Both of them managed billions of dollars  and gave a presentation detailing why softwares as  

service stocks were intriguing. We all know that  public growth stocks have crashed immensely with  

ARK Invest being the center of attention for that. This has opened up a vast array of opportunities  

to make 10 or even 20x returns over the next  few years. Public growth stocks are extremely  

volatile and you should only invest if you're  prepared to see your portfolio trend downwards  

in the short term. That being said, I have  witnessed several billionaires change their  

sentiment on growth stocks and start buying  in. Let me know what you think about China's  

impending recession down below. Do you think  that US will be hit alongside China? If you  

enjoyed this video, please hit the like button  and subscribe and I'll see you in the next one.