Bubbles - Public Domain

Despite the recent carnage, Shanghai shares are trading at 57 times earnings. That’s down from the June price-to-earnings ratio of over 100, but it’s still three times higher than the price-earnings ratio of the S&P 500.

The totalitarian regime is making daily policy modifications in a desperate attempt to stem the fall. But interest rate reductions by the People’s Bank of China (PBOC), cuts in reserve ratio requirements, and relaxations in margin trading rules have done little to calm investors.

Brokerage firms and fund managers have now vowed to buy massive amounts of stocks, aided by a direct line of liquidity from the PBOC, which is directly monetizing securitized loans from China Securities Finance Corp., China’s state-backed margin finance company.

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