By Steve Sjuggerud in DailyWealth:

Is it possible? Could China be on the brink of a Great Depression?

Most experts would say, "No way." They would point to China's trillions of U.S. dollars in reserves as their Exhibit A and say, "Case closed."

Countries use reserves to back their liabilities... like their currencies. Think of it like having a huge balance in your savings account. If you've got all that cash, you're not likely going under, right?

But one expert recently made an interesting case for a potential Great Depression in China, even with its trillions of dollars of reserves...

"Twice before in history, a country has, under similar circumstances, run up foreign reserves of the same magnitude," says Michael Pettis, a former Wall Streeter and Columbia professor who now teaches finance in China. "Both cases turned out badly for long investors..."

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