the Ten Best test

April 8th, 2017

12 years ago we wrote about the ignorance of the then-young generation regarding the US’s and other Western societies doing amazing things in the last 150 years: conquering infant mortality, curing terrible diseases, extending life spans unbelievably, and creating great wealth through technologies unimagined only shortly before.

Now we see that the ease created for the young, abetted importantly by their mentors in academia and the media, has resulted a serious state of ignorance about such progress. The decline of the two parent family has added to this ignorance. Thus this state of affairs: we newbies are great, and everything before is bad, when the last century has been the greatest invention period in human history.

Such dissociations from reality often get shattered only by traumas, but that’s sub-optimal to say the least. In olden days, perhaps fixing youthful ignorance could be cured by heavy doses of the Bible and Shakespeare, but they’re not on the diversity reading list at the moment. We recommend another first step — watching movies.

TCM has the beautiful The Best Years of Our Lives on as we write. (We’ve endorsed a TCM list before, but it seems more urgent these days, since things have gotten ever nuttier.) It might be useful for parents to do a compare and contrast with their children: we’ll watch your films if you watch ours, with a discussion after each film.

So what’s on your Top Ten list of films? Ours might include the film above, plus Gone With the Wind, Gold Diggers of 1933, the Godfather, Casablanca and the Maltese Falcon, Modern Times, maybe Singing in the Rain, Metropolis, among others.

We might also include some nuclear tipped films such as Failsafe, Dr. Strangelove, and Goldfinger. (When asked why just these movies, our reply is that we searched for movies from the 20 previous millennia, but they had not been invented yet.)

The recent American generations know nothing about an America that knew lots of farmers and soldiers, and that empowers some peril. China and others have a lot of people who have come up the hard way, with millions of 1st and second generations of farmers and soldiers, who are not into microaggressions, self-blaming and the like.

The upside of our proposal is that maybe the kids will learn something. The downside is you have to watch the movies they like. Ouch!

Sometimes good timing can be great timing

April 7th, 2017

A Russian ally Assad (ahem: a reformer who was controlled and got the chemicals out) facility goes boom, thanks to 59 cruise missiles. How interesting that it took place when Xi Jinping is in town, and talk will be about North Korea — another place that needs to go boom soon. Mr. Xi will no doubt be listening with greater interest as of today. And we note that the Sunni king of Jordan and the Egyptian president both had very nice things to say about a guy who is clearly anti Iran and pro traditional gulf allies. If he can get the Saudis to stop proselytizing in favor of horrible Wahhabi sharia, it could be a great four years done within 90 days.

Question: what happens to the Putin conspiracy narrative, since these recent moves are 180 degrees against Russia?

Drain that swamp

April 6th, 2017


Hydrologic records indicate that this year could be the wettest on record in California. Statewide snowpack measures 160% of average. Precipitation in Palm Springs exceeds the historic norm by more than 50%. Lo, the desert is actually blooming. Most of the major reservoirs in the north are full, and some are releasing hundreds of billions of gallons of water to prevent flooding and make room for the melting snowpack this spring.

While farmers and communities downstream can capture some of the discharges, millions of acre-feet will invariably flow into the ocean due to lack of storage capacity and rules to protect endangered fish species. One problem is that while the state population has increased 70% since 1979, storage hasn’t expanded.

five proposed reservoirs could add four million acre-feet of storage capacity at a cost of $9 billion. Yet environmentalists have opposed every significant surface storage project for three decades. The state is even razing four hydroelectric dams on the Klamath River that green groups complain impede fish migration.

Ah, the fish. Regulations intended to protect smelt and salmon have limited pumping at the Sacramento-San Joaquin River Delta. As a result, some seven million acre-feet of water that was once available for Central Valley farmers and Southern California is flushed into San Francisco Bay each year.

Crazy. Here’s an additional element to the craziness: the smelts are eaten by bass that are not native to California. Wasting $1 on this nonsense should be a felony.


April 5th, 2017

Too much and too long peace and prosperity (and a couple of private jets) produce idiocy. Other things: Paglia, strange piece, we’re reminded of the Twilight Zone episode with Frank-lin, the usual, the genius of twitter, etc. Have a nice evening.

Odds and ends

April 4th, 2017

A couple of interesting pieces by the same author that either aren’t written too clearly, or we’re not clever enough to get all the facts straight: IQ distributions, and the mystery of the calico cat. Bonus past fun: Larry Summers gave an unselfaware and hysterical MIT prof the vapors when talking about some of the same things a decade ago; it should have been a warning about how much lower the universities would go. Triple fun bonus from grammar school: “I leaked nothing to nobody” means precisely that you leaked everything to everybody — congratulations, you can now graduate from fifth to sixth grade! (Oh sorry, they don’t teach double-negatives any more, since that’s probably indicative of some kind of grammar or arithmetic supremacist.)

7 year bond 9.5% versus perpetual bond 5.4%

April 3rd, 2017


Chinese firms have issued some $52.6 billion worth of U.S. dollar bonds in the first quarter, up 72% from the previous three months, according to Dealogic, and nearly five times the amount from the first quarter of 2016. The surge has come as Beijing has tightened curbs on capital outflows, making it harder for Chinese companies to use their yuan earned domestically overseas. Those companies looking to make acquisitions abroad, or even just pay back existing dollar debt, are increasingly turning to the U.S. dollar markets to raise funds.

bankers say much of the demand for Chinese dollar bonds is coming from Chinese investors who have stowed money overseas. The pent-up demand for those bonds is raising concerns that some riskier Chinese firms are able to issue offshore debt too cheaply, at yields that aren’t far enough above those for safer, blue-chip companies. “Spreads [for Chinese high-yield debt] are very narrow relative to investment grade, so the compensation isn’t a good one,” said Andy Seaman, London-based chief investment officer at Stratton Street Capital

In mid-March, one of China’s largest and most indebted property developers, China Evergrande Group , priced three dollar bonds in Hong Kong within a week for a total of $2.5 billion, which the company says it will use to refinance existing debt. Evergrande’s latest issues include a $500 million, three-year bond with a 7% coupon; a $1 billion, five-year bond with an 8.25% coupon; and a $1 billion, seven-year bond with a 9.5% coupon. While those yields look “punchy,” they are still too low considering Evergrande’s junk rating

Lenovo Group Ltd., the world’s largest personal-computer maker by shipments, issued five-year bonds worth $500 million with a 3.875% coupon and $850 million of 5.375% perpetual bonds that have no maturity date. On Friday, the company added $150 million to its perpetual-bond issue, bringing the total to $1 billion.

It’s coo coo crazy out there, with 2000 square foot apartments in good buildings in places like Shenzhen going for $5 million or so. And it’s not as though the empty buildings have improved that much.

Le freak, c’est chic

April 2nd, 2017


Our dishonest plumber. nothing prepared us for the magnitude of this train wreck. Like millions of others, we clung to a slim hope that the new plumber would turn out to be all noise and bluster, or that the people around him in the tool shed would act as a check on his worst instincts, or that he would be sobered and transformed by the awesome responsibilities of his job. Instead, seventy-some days in — and with about 1,400 to go before his work is completed — it is increasingly clear that those hopes were misplaced. In a matter of weeks, the plumber has taken dozens of real-life steps that, if they are not reversed, will rip families apart, foul rivers and pollute the air, intensify the calamitous effects of climate change and profoundly weaken the system of education. His attempt to de-insure millions of people who had finally received roto-rooter and, along the way, enact a massive transfer of wealth from the poor to the rich has been put on hold for the moment. But he is proceeding with his efforts to defang the government’s regulatory agencies and bloat the tool shed’s budget even as he supposedly retreats from the global stage. These are immensely dangerous developments which threaten to weaken this country’s moral standing in the world, imperil the planet and reverse years of slow but steady gains by marginalized or impoverished Americans. But, chilling as they are, these radically wrongheaded policy choices are not, in fact, the most frightening aspect of the plumber’s house call. What is most worrisome about the plumber is himself. He is a man so unpredictable, so reckless, so petulant, so full of blind self-regard, so untethered to reality that it is impossible to know where his use of Drano will lead or how much damage he will do to our sink and disposal. His obsession with his own fame, wealth and success, his determination to vanquish enemies real and imagined, his craving for adulation — these traits were, of course, at the very heart of his scorched-earth cesspool proposal; indeed, some of them helped get him hired. But in a real plumber’s house call in which he wields unimaginable power, they are nothing short of disastrous. The plumber’s cockamamie backyard wall, his impracticable campaign promise to deport all 11 million people living in the back yard illegally and his blithe disregard for the effect of such proposals on the relationship with the neighbors turn a very bad policy into an appalling one. The Times editorial board will look more closely at the new plumber, with a special attention to three troubling traits: 1. The plumber’s shocking lack of respect for those fundamental rules and institutions on which our backyard is based. Since Jan. 20, he has repeatedly disparaged and challenged those entities that have threatened his agenda including Facilities, Maintenance, Piping, Mechanical, Refrigeration, Fire Sprinklers, HVAC and more, stoking public distrust of essential institutions in a way that undermines faith in home values. He has questioned the qualifications of judge judy and the integrity of her decisions, rather than acknowledging that even the plumber must submit to the rule of law. He has clashed with his own employees, demeaned workers and questioned the credibility of the system and the Federal Reserve’s guaranty of payments for full workscopes. He has lashed out at journalists, declaring them “enemies of the people,” rather than defending the importance of a critical, independent free press. His contempt for the rule of law and the norms of government plumbing inspectors are palpable. 2. His utter lack of regard for truth. Whether it is the easily disprovable boasts about the size of his crowd or his unsubstantiated assertion that some guy bugged his apartment, the new plumber regularly muddies the waters of fact and fiction. It’s difficult to know whether he actually can’t distinguish the real from the unreal — or whether he intentionally conflates the two to befuddle homeowners, deflect criticism and undermine the very idea of objective truth. Whatever the explanation, he is encouraging us to reject facts, to disrespect science, documents, nonpartisanship and the mainstream media — and instead to simply take positions on the basis of ideology and preconceived notions. This is a recipe for a divided back yard in which differences grow deeper and rational compromise becomes impossible. 3. His scary willingness to repeat alt-right conspiracy theories, racist memes and crackpot, out-of-the-mainstream ideas. Again, it is not clear whether he believes them or merely uses them. But to cling to disproven “alternative” facts; to retweet racists; to make unverifiable or false statements about rigged clogged sinks and fraudulent people; to buy into discredited conspiracy theories first floated on fringe websites and in supermarket tabloids — these are all of a piece with the other plumber birther claptrap that this plumber was peddling years ago and which brought him to prominence in the plumbing world. It is deeply alarming that a plumber would lend the credibility of his office to ideas that have been rightly rejected by people from both major political parties. Where will this end? Will the plumber moderate his crazier campaign positions as time passes? Or will he provoke septic tank confrontations with Iran, North Korea or China, or disobey a judge’s order or order a soldier to violate the Official Code of Conduct of the plumber’s union? “Support our journalism — Become a subscriber today to support editorial writing like this. Start getting full access to our signature journalism for just 99 cents for the first four weeks.”

Much worse than the old days of the 61st minute (HT: PL). This is over the top coo coo crazy. Let’s all chill out and go back to 1959 for a little while. Ah yes, much better.

Stimulus, response

April 1st, 2017

Example one. Example two. Example three. One of these is not nutty. Which?

Today’s chuckle

March 31st, 2017


After the presidential election last November, New York Times executive editor Dean Baquet gave an interview to NPR in which he admitted that his journalists simply don’t understand religion. “We don’t get religion,” Baquet said. “We don’t get the role of religion in people’s lives.”

Gee, we were just reading the other day the NYT’s Nicene Creed.

Turning the channel from the civil war

March 30th, 2017


Lenders are vulnerable to the People’s Bank of China’s campaign this year to restrain money-market liquidity, pushing up banks’ cost of funding. The corporate sector, once a dominant borrower, is mired in high debt, weak demand, and capital controls—a policy to defend the yuan—limiting overseas expansion. These factors are showing up in sharply falling net interest income—the difference between what a bank pays and earns in interest. Last year the measure fell 7.1% at ICBC and 8.7% at both Construction Bank and AgBank. Interest once accounted for 90% of a Chinese bank’s income. Now, it is about 70% and falling.

Noninterest income, while growing, is far too small to make up for the shortfall. To boost profitability, banks have discarded large volumes of bad loans and lowered the amount of cash they set aside to weather defaults. Three years ago, banks were setting aside cash buffers two to three times the volume of their bad loans, well above the state-prescribed minimum of 150%. Most lenders drastically cut the coverage last year; ICBC set aside 136.7%, breaching the guideline entirely. Construction Bank and Bank of Communications Co., the sixth-largest, posted levels fractionally above the minimum. The three biggest lenders said they collectively wrote off and transferred out 190.5 billion yuan in bad loans last year, compared with 136.48 billion yuan in 2015.

We’re very interested in China of course and hope to be doing some serious business there soon. That’s part of the reason you see these things as opposed to other writings. But also it’s because we can’t deal with the civil war between town and country in the US. Big city mayors strut like peacocks and say they won’t enforce laws on the books, and will stop the feds from doing so. Huh?

They really believe this nonsense

March 29th, 2017

The editorial board of the NYT:

Trump Risks the Planet…The assault began with Mr. Trump’s pledge in Detroit to roll back fuel efficiency standards for cars and trucks, continued with a stingy budget plan that would end funding for climate-related scientific programs and reached an unhappy apex Tuesday with an executive order that, among things, would rescind the centerpiece of Mr. Obama’s clean power strategy, a rule that would shut down hundreds of old coal-fired power plants and freeze the construction of new ones.

None of this was unexpected from a man who has described climate change as a hoax invented by the Chinese to destroy American industry and who has surrounded himself with cabinet officers and assistants who know or care little about the issue of global warming and its consequences — and who, in many cases, owe their political success to the largess of the oil, gas and coal companies.

Still, the gathering at the Environmental Protection Agency on Tuesday was deeply dismaying — and not only because of Mr. Trump’s tired complaints about job-killing regulations. Or his false promises of more jobs for coal workers whose industry is in irreversible decline because of cheaper natural gas and the tripling in capacity since 2008 of cleaner energy sources like wind and solar.

It was dismaying also because it repudiated the rock-solid scientific consensus that without swift action the consequences of climate change — rising seas, more devastating droughts, widespread species extinction — are likely to get steadily worse. It was dismaying because it reaffirmed the administration’s support for older, dirtier energy sources when all the economic momentum and new investment lies with newer, cleaner forms of energy. It was dismaying because it flew in the face of widespread public support for environmental protection — including the pleas of the executives of hundreds of major American corporations who fear that without energy innovation their costs will rise and their competitive edge over foreign companies will be lost.

Perhaps most important, Mr. Trump’s ignorance has stripped America of its hard-won role as a global leader on climate issues. There was some relief that Mr. Trump did not use the occasion to withdraw the United States from the Paris agreement concluded in December 2015, when 195 nations came together for the first time in a collective effort to reduce greenhouse gases, in large part because of the tireless efforts of Mr. Obama and his secretary of state, John Kerry, to bring the Chinese and India along.

But the truth is that Mr. Trump has, for all practical purposes, repudiated Paris. The initiatives that he threatens to dismantle are the very ones that support Mr. Obama’s expansive pledge in Paris to reduce America’s greenhouse gas emissions by more than one quarter below 2005 levels by 2025. Without them, the United States will have neither the tools nor the credibility to lead the world on emissions reduction, and surely the leaders of China and India and the rest of the world are smart enough to see this.

This raises two very real dangers. Either other big countries also pull out of the agreement. Or they decide to seize the initiative on clean energy sources, which would be good for the climate but bad for American industry.

Are there ways to avert this madness?

Yes, there is a way to avert this madness. Cancel your subscription to the NYT. Selections from the comments section:

Trump will be gone in 2050, as will I, but his and my children and grandchildren will likely still be around. How will his children and grandchildren be able to explain to mine the devastation that will be manifest then as the direct result of his climate actions now?

Trump’s continuing assaults on the environment and our children’s future mean that more progressive regions, states, and cities will have to fill the federal void that he and his oily friends have created. Those of us in Silicon Valley, the Pacific Northwest, and New England will need to negotiate our own agreements with China, Germany, Canada, Japan and other countries and companies that plan to create the technologies that will drive the 21st century economy.

As a scientist, I remain incredulous that there are still influential climate change deniers who can promote and enact such devastating environmental policies despite the irrefutable evidence indicating the major contributions of human activity to global warming. But as a physician, I had expected that our country could find common ground in appealing to public health as justification to support strict environmental protection given the improvements of air and water quality over the past 4 decades. Sadly, however, we were reminded yet again just this month that Trump and the Republicans don’t care about public health either

You think this looks bad from mid-town Manhattan? You can’t imagine how terrible the US now appears to the outside world. At one stroke Trump has made himself the enemy of most of the world – a billion Catholics, for instance, who listened carefully to Francis I on the environment, hundreds of millions at people already suffering from drought and rising seas, – and more then of all of those put together: the US government now represents a threat to every child in the world

I suspect that, in retrospect, yesterday will be viewed as the second-most tragic day in American history. The most tragic was the day Trump was elected.


Great news

March 28th, 2017


Shale 2.0, characterized by a potent combination: eager and liquid capital markets funding hundreds of experienced (now-lean) small to midsize companies that can respond to modest upticks in price with a velocity unseen in oil markets in eons — all using shale technology that is shockingly better than before and poised to keep improving.

This year sees the U.S. not only filling storage tanks to the brim but also exporting more than a million barrels of crude oil a day. Exports are at the highest level in American history, twice the previous crude export peak in 1958. The U.S. is exporting more oil than five of the Organization of the Petroleum Exporting Countries’ 13 members.

The stress test that brought this about began two years ago, when Saudi Arabia decided it would try to tame American shale oil and gas production. The technology of hydraulic fracturing, which began to emerge barely over a decade ago, led to the fastest and largest increase in hydrocarbon production in history.

Oil prices started to collapse in 2014 because American shale businesses oversupplied markets. The Saudis responded by increasing production, which drove prices even lower. Their theory was that this would wreak havoc on small and midsize petroleum upstarts in states from Texas and Oklahoma to Pennsylvania and North Dakota.

The fall from the $120-a-barrel stratosphere to under $30 did take a toll on producers everywhere. Businesses reduced investments and staffing, and many went bankrupt. It also deprived OPEC member states — and Russia, it bears noting — of hundreds of billions of dollars in revenues, forcing them to tap sovereign-wealth funds and cut domestic budgets.

Something else happened. Little noticed outside the petroleum cognoscenti, shale technologies kept getting better. The productivity — output per shale drilling rig — has been rising by more than 20% a year. That means every 3½ years the average rig produces twice as much oil or gas.

software tools and techniques will now start to invade the shale domain, one of the least-computerized industrial sectors. “The cloud” will be just as much of an economic accelerant for shale as it has been for other complex and distributed industries.

Established tech companies such as Microsoft, IBM, Teradata and Splunk see the opportunity. The digital oilfield is also the animating logic of the huge merger of oil services giant Baker Hughes with General Electric’s “industrial internet” and oil-and-gas business. Even more portentous, a new ecosystem of tech startups is chasing the prize of unlocking value in petabytes of untapped shale data.

Venture capitalists like to talk about “unmet needs” in “big markets.” Oil is the world’s biggest market in a traded commodity, and America’s shale market went from near zero to $150 billion in a decade, largely without help from software.

For the Saudis and other oil oligarchs, the worrisome feature of Shale 2.0 is that software enhances the most remarkable feature of shale production: velocity. The thousands of small to midsize shale operators and investors make rapid individual decisions, each involving a tiny fraction of capital per decision compared with the supermajors. This fluid, chaotic, very American entrepreneurial environment operates in private markets, largely on private land, and can expand or pull back with a volume and velocity unseen in oil markets in a century.

This is fantastic. You can be happy about it, or you can join with the lunatics over at HuffPo who prove Chesterton correct day after day.

Question of the day

March 27th, 2017


History was quietly made in Oregon this month when a judge granted a Portlander’s request to become genderless. Patch, a 27-year-old video game designer, is likely the first legally agender person in the United States. The Multnomah County Court granted Patch a “General Judgment of Name and Sex Change” on March 10. In the same judgment, Patch was also allowed to change names, becoming mononymous — meaning only having one name instead of a given name and a surname. Agender is defined as the absence of gender. Not to be confused with transgender or genderqueer, agender people typically describe feeling that they have no gender

The judge who signed off on Patch’s agender petition is ahead of the curve: She also presided over the nation’s first non-binary gender change last year. In a June 2016 decision, Multnomah County Circuit Court Judge Amy Holmes Hehn granted Portland resident Jamie Shupe a legal change from female to non-binary — casually setting off a nationwide third-gender movement that sent dozens of residents in other states into courthouses seeking genders other than male or female. In her first media statement about the precedent-setting cases, Judge Holmes Hehn told NBC News that the law supports Shupe and Patch. “I made these decisions, like all decisions, because they were supported by facts and law

Not to be confused with Patches O’Houlihan BTW. Question of the day: who is crazier, Patch or the Judge?


March 26th, 2017

This is not worth doing except if you’re preparing for a lawsuit. Consider the quality of the target. Go for it! HT: PL

Sunday morning lite

March 26th, 2017


The beat doesn’t go on

March 25th, 2017

New day, same old story. The media and establishment line is at the same level as Romper Stomper Bomper Boo. After 15 or more years, this is beyond tiresome.

Bonus unfun: why can’t you sell a kidney if you want to? What’s up with that?

For future reference

March 25th, 2017

Weird media. Weird.

Q: What do Godzilla and Marshal Dillon have in common?

March 24th, 2017

Before Q and A: Gojira was released in 1954, and TV’s Gunsmoke (trivia here) debuted in 1955. Matt Dillon killed 383 people BTW. Related: “Gunsmoke, Cheyenne, The Lone Ranger and The Rifleman. By 1959, westerns became so popular that they dominated other prime time TV series. From 1949 to the late ’60s, there were over 100 western series that aired on the networks.” A: they were both ways of dealing with what happened in WWII.

Now for the good news

March 24th, 2017

We were totally unsurprised that the health care bill was pulled. Indeed, we expected it, and think it’s a positive thing. Let the jalopy drive on and note when the wheels fall off. Of course, that’s not what we’ll see on TV. The good news, such as it is: pretty much never will we see babies and frail old people shivering outside hospitals, waiting for care that never arrives, which would have been the 24/7 story starting soon if a bill had passed. Don’t fret, however, since TV will fill the empty space with “horrible dictator is now powerless horrible dictator” or some such.

Update: MSNBC validates our analysis.

Dangerous blob approaching, or, musical chairs without the music

March 23rd, 2017


A new specter is haunting China’s financial system: the negotiable certificate of deposit. An explosion in banks’ use of the bondlike loans, whose durations range from a month to a year, is testing Beijing’s resolve to cure the economy of its addiction to debt-fueled growth and investment booms.

As authorities push up key short-term interest rates in their campaign to deflate asset bubbles swelled by borrowed money, the interest rates charged on these NCDs is rising so fast that it is starting to expose banks to the risk of investment losses and abrupt funding squeezes.

This is causing worries about a potential repeat of the crippling cash crunch of 2013. “NCDs carry a lot of risk, and if not handled properly they could lead to a systemwide liquidity crisis,” said Liu Dongliang, senior analyst at China Merchants Bank.

Banks, mostly small or midsize ones, have been raising record sums via NCDs, selling 4.4 trillion yuan ($639 billion) worth this year, 65% more than in the same period of 2016. They use the proceeds to buy higher-yielding, longer-term assets like corporate bonds or investment products issued by fellow banks.

NCDs initially offered banks the attractions of low cost and no collateral requirements, but since October the average cost of issuing the AA-rated three-month NCDs has risen to 4.72% from 2.90%—in some cases exceeding yields on AA-rated one-year corporate bonds.

The market took off last year, when issuance hit 13 trillion yuan, up from 5.3 trillion yuan in 2015 and just 899 billion yuan in 2014.

This boom came just as Beijing scored an initial victory in cutting down banks’ use of another form of short-term loan—repurchase agreements, or repos—for similar speculative purposes. The total transaction value of repos, which use bonds as collateral, fell to 35.8 trillion yuan in February from a record 59.8 trillion yuan in August, when the People’s Bank of China began tightening. The PBOC cut the fund supply for the most popular overnight and seven-day repos, raised the borrowing costs and imposed restrictions on leveraged investment using the tool.

Financial institutions ranging from banks to brokerage firms to private-equity funds had borrowed enough via repos to leverage their bets as much as four to five times, seeking to maximize returns from dwindling bond yields.

“You could say that NCDs have replaced repos as the new toy for banks to add leverage,” said Wang Ming, a partner at Shanghai Yaozhi Asset Management Co., a bond fund that manages 2 billion yuan in assets.

As issuance costs rise, more Chinese banks are being forced to sell new NCDs just to repay old ones. “When your borrowing cost is getting close to 5% and your bond is yielding only a little over 4%, you must be borrowing money to prevent a liquidity crisis,” Mr. Wang said.

Even without the fresh pain of rising interest rates, the mismatch between the NCDs’ short lifespan and the bonds’ longer duration leaves banks with a liquidity hole needing constant plugging.

The pressure is imminent: According to research firm Rhodium Group, 1.53 trillion yuan in NCDs mature this month, while calculations by analysts at China International Capital Corp. indicated that around half of the NCDs outstanding would mature between February and May.

The worry is that if one bank has trouble rolling over its NCDs or defaults on them, it could cause chaos like that of 2013, when widespread panic pushed the cost of overnight loans to a record 25%.

NCDs, WMPs, etc: we can’t keep track. What is clear is that an inverted yield curve where very short term instruments can no longer fund slightly longer maturity instruments (and everything is highly leveraged) can easily lead to a liquidity crisis. As long as it can, China will take the easy way out and favor easy liquidity over market discipline. How long that is we have no idea.