Derivatives in and of themselves are not evil. There's nothing evil about how they're traded, how they're accounted for, and how they're financed, like any other financial instrument, if done properly.
James ChanosWhat people don't realize is that China papered over its last two credit bubbles, those in 1999 and 2004. The banks were never bailed out - they just exchanged their bad loans for questionable bonds from quasi-state organizations.
James ChanosIn China, remember, the the banks are arms of state policy. They loan because the local party official or regional party official tells them we need a new stadium. They are instruments of state policy.
James ChanosWhat we define as a bubble is any kind of debt-fueled asset inflation where the cash flow generated by the asset itself - a rental property, office building, condo - does not cover the debt incurred to buy the asset. So you depend on a greater fool, if you will, to come in and buy at a higher price.
James Chanos