Something suddenly changed in December last year in the world’s second largest economy (some say it’s the first). For the last few years private investors in China have been running away at a faster and faster pace. Apparently, no one wants to invest in the Chinese economy except the government, and six months ago, the State launched a rocket.
The massive growth of China is partly thanks to rampant money-printing. Say hello to Malinvestment. The Chinese economy is sick. It’s distraction time. Anyone want to stoke a war?
…
I saw the graph on the ABC news last night thanks to Phillip Lasker. The original graph came from Bloomberg under this unlikely headline:
China Proves Doubters Wrong For Now as Credit Boom Stokes Growth
“Stoking Growth” is not always desirable — to go biological — cancer “stokes growth” and so does Ebola.
“The amount of cash Beijing is shoveling into the economy is stunning,” said Andrew Collier, an independent analyst in Hong Kong and former president of Bank of China International USA. “Given high fixed-asset investment among state-owned enterprises, it’s likely most of it is being consumed by the inefficient state sector. This is more bad news for structural reform. “
It’s not just bad news for “structural reform”. It’s also bad news for holders of Chinese money. Supertanker loads of money have been manufactured in China in the last few years. In essence money is a promise, but too many promises have been made. Worthless bits of paper only have worth as long as they carry an IOU promise that the owner will one day be able to swap them for something they want. But create too many new promises and sooner or later it destroys the value of those created earlier. There is only so much of people’s labor that you can buy with new “free” money. As the promise-bubble pops, inflation arrives and people start to realize that they’ve done years of work for almost nothing. Not surprisingly, smart Chinese money is pretty keen to escape China while it can still buy nice things like real estate in Sydney.
In the end, broken promises rather suck motivation, so China’s economy is struggling uphill under the weight of the debt. Even a command economy run by a communist party cannot make people perform at their best, as the Soviets found. The alternative of a capitalist economy bloomed in China, but the Chinese economy is becoming more soviet by the day.
Its called quantitative easing and it has its merits (ask the Americans) but there is obviously a limit.
We should avoid falling into the trap of jumping to the conclusion that because something happened last century, which ended with depression and war, is somehow relevant today.
China is the Third Way and very keen to build lots of infrastructure in Australia, Keynes would have been impressed. Capitalism can only survive if it finds new markets and this hybrid model is very refreshing.
524
I’ll make the call on that as bull$hit peddled by bankers and economists to justify their policies (and renumeration).
See my comment #13 for more details.
210
OK, it looks like not many people are reading my comment #13 due to the monster post by ROM and then followup pat news feed. So I’ll repost it (with some amendments) up here. Jo, please kill comment #13 if you feel there is too much repetition.
———–
I’ve recommended this book before as it illustrates the danger inherent in government interventionist policies for maintaining growth in the face of market reality.
Alchemists of Loss: How Modern Finance and Government Intervention Crashed the Financial System by Kevin Dowd & Martin Hutchinson
Dodgy, risky investments abound along with highly leveraged positions since the easy money makes borrowing cheap.
We are still in the bubble that resulted in the 2008 GFC because the governments and central banks doubled down with policies like “quantitative easing” and now that China’s is firmly in the bubble, there is no wealth reserve to rescue the global economy (and we have no longer have a surplus to cushion our economy).
Quantitive Easing just “kicks the can down the road” – it defers the bubble bursting at the cost of further inflating the bubble, making the inevitable burst and following deflation far greater. Sovereign debt has exploded with the issue of money under the guise of quantitative easing as governments buy the worthless, rubbish investment products that originated in the subprime housing bubble in order not to devalue the holdings of the “too big to fail” institutions (which issued this çrap and thus took the initial profits) and those left holding the bag when the reality of the GFC hit home. This money has then fed the development of further investment rubbish which is of no proper value.
The complex, artificially concoted “investment” products like tranched 2nd order (or higher) derivatives and credit default swaps mean risk cannot be measured. Add this to the fact that almost all institutions continue to hold these on their books as major portions of their portfolios means no one can properly value their asset base.
Mike loves to post up “scare” stories from zerohedge on the energy market borrowings which are one of the consequences of the loose monetary policies but these are the tip of the debt overhang iceberg that they have promoted. I firmly believe that the “growth” in renewables is another byproduct of this as everyone seeks returns from the subsidies (which is another conduit for throwing money into the economies) that are on offer as another economic “growth” spur (re The Third Way).
The global economy will crash when proper revaluation becomes unescapable, along with writeoffs huge holdings (multiples of global GDP) of inherently valueless assets like CDO’s and CDS’s. And it will hurt – the growing bubble caused by policies to forestall it just makes it worse. I am sorely tempted to sell all my investments and take a position in gold.
Or maybe we could form a mutual fund to take a position in a hedge fund to short the whole mess (like the proposed the “Cool Futures” fund).
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It is vastly less difficult to understand if all that is kept in mind is simply that ‘those private individuals with the power to print money/fiat, eventually or already do, own the entire world’.
If it were not for the current rate of money printing, gold would be on the streets (Not blood) and would be worth very little and were it not for the fact that central banks buying vast amounts of gold, the demand would be paltry and the price of gold would crash. Central bank buying of gold helps to create an artificial demand for gold during times of worldwide debt.
This is scary:
Putin: “We know year by year what’s going to happen, and they know that we know. It’s only you that they tell tall tales to, and you buy it, and spread it to the citizens of your countries. You people in turn do not feel a sense of the impending danger – this is what worries me. How do you not understand that the world is being pulled in an irreversible direction? While they pretend that nothing is going on. I don’t know how to get through to you anymore.”
60
These new “alchemists” have figured out how to turn gold into Lead.
40
Mystery about Germany´s Gold in the US Solved
http://nsnbc.me/2013/07/31/mystery-about-germany%C2%B4s-gold-in-the-us-solved/
30
Sorry, I also meant to post the question asking please provide something to justify this statement
As a child, I used to wonder why people valued this metal so much since it has limited practical use. It was only later as I delved into economic theory that I understood the requirement for a commodity of exchange to be fungible and gold serves this purpose well as it cannot be created out of thin air, unlike fiat money. Money availability SHOULD reflect the real wealth available so the supply should only increase as wealth is generated and should decrease with destruction of wealth. The limited availability of gold works well as a representation of wealth due to the production limits which reflect the costs of getting the stuff out of the ground.
All the world’s mining and discovery of antiquities has not vastly increased the world’s monetary gold supply, particular with the increase in use for circuitry contacts etc. Its fundamental value could only be deflated if a vast new endless supply was to be found, debasing it in the same manner as silver was debased when the Spaniards conquered the Inca empire and sent shiploads of silver back across the Atlantic.
Also have a read of this https://libertyinsight.com/money/
50
You theory will go up in smoke when the first gold asteroid is discovered.
10
Central banks purchases amount to hundreds of tons of gold at the time.
It is common sense. Without that demand by central banks, gold would plummet.
Most countries, corporations, individuals etc are in debt, and are/have become net sellers of gold, not buyers. Central banks who own everything keep up appearances to make gold look scarce in order to satisfy mythological perceptions about gold. They need to keep buying gold or their own gold would loose value.
Mankind was never everyman woman and child in debt/owned to/by banks.
20
M. Simon said:
Which part? This bit?
00
No. Not so.
1. Central banks accounted for only 14% of total gold bullion demand in 2015.
2. Central banks were net sellers of gold in the years 1999-2009, during which the price of gold relentlessly rose from $250 – $1000.
3. The price of gold is determined more by the paper market than the physical market. Paper-gold trading is a vastly larger than real bars and ingots.
40
Thanks Jo…
What we have now is QE (Quantitative Easing) gold. QE Gold happens when ever the price of gold/paper gold falls dues to lack of demand or, in particular, too many net sellers in both the paper and physical markets.
For example many are paying ‘interest only’ on mortgages, therefore the bank technically owns the house or the gold in the paper or physical gold market.
Point number one. The paper gold and the physical gold market price is determined by central bank money/fiat availability/liquidity. Both are funded with the same fiat coin, both directly by central bank purchases (Intervention), and indirectly by crediting debtors to purchase paper or physical gold.
I am not offering any links as it is plain common sense.
10
Spooky stuff.
10
Since the main article is sort of about money being put by the government into the economy, I think I will just say that HOW a government puts money into the economy is important. As an example, when a nation takes its unemployed and employs them on infrastructure projects that benefits the nation, that is putting money into the economy. It isn’t necessarily just making cheap credit. I don’t know precisely how China is putting money into the economy, but the US put a lot of money into the economy during the great depression years building infrastructure. It worked then because government spends the money to buy materials that are made within the nation, thus that boosts the economy, as well as taking people that are unemployed and getting useful construction done that is needed or will be needed, and that boosts the economy.
The trouble that China has is that not enough of what it produces is consumed at home, thus it becomes dependent on economies that are being run by idiots, like the current groups in the EU and the US. You can’t “credit” money into the economy and have it work if everything you are buying is imported. The program run by the US in the 1930s could not work in the US now simply because the money would work once, and then go overseas. China can make it work and revitalize their economy if that is the type of program they are spending their money on.
And yes, the have a “real” economy, not the paper economy in the US, and it IS the largest economy in the world. A true economy has to be based on productivity and production, not on services rendered and inflation, like the US economy of smoke and mirrors.
10
What a load of tosh. QE has no merits. QE results in the lending of money at interest rates that are mis-priced relative to the risk of the investment, and is therefore wealth-destroying. It’s worse than that though, because it disincentivises savings, which are our surpluses that become invested in future production. It also leads to asset price bubbles which are another unintended consequence, and are once again, wealth destroying. Triple whammy.
No one should be borrowing money for a house with a 3% interest rate.
Furthermore, Keynsian stimulus (in the form of government spending on consumption), rather than rational, justified, economically viable investment is similarly wealth destroying when you look over the medium to long term. The research into Rudd’s stimulus found that there was a short-term sugar hit for the economy, but over the long-term the stimulus has actually harmed the economy, compared to the “do-nothing” alternative. The money is wasted (flat screen TVs, holidays etc) rather than invested in future production, but the debt (and interest repayments) remain.
230
‘What a load of tosh. QE has no merits.’
Its the way modern day capitalism works.
http://4.bp.blogspot.com/-8mqfifzkECc/VEgS9mV1CmI/AAAAAAAAhAc/vkTUqq_lfHY/s1600/QESP500.PNG
27
No, quantative easing is one of the ways they have broken capitalism
It’s like trying to kill a fire by smothering it with wood. Works for a bit but eventually….
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This is not capitalism. What we have is the boys club, corrupt, not based on a free enterprise. Pigs at the trough. We have lost true capitalism when Roosevelt come to power and since then slow dismantling accelerated. QE is an abomination that will eventually bankrupt the world and blood will flow.
What China cares about is the preservation of its face and in order to preserve it it will lie to anybody. The Chinese hybrid miracle was never real. Their economic stats were and are still reported by the centralised communist government with no independent checks. 50% of their economy was always a black market that was never controlled or the magnitude never appreciated. Tell me what they have produced apart from building concrete ghost towns? The creation of value never comes from above, the government or a decree. China is no hybrid, China is like the Soviet Union built on clay foundations. For all their double digits economic numbers the vast majority is still horribly poor, just like after decades of incessant economic expansion of the soviets no real increase in wealth was created.
121
‘China is no hybrid, China is like the Soviet Union built on clay foundations.’
China is not how you imagine. Think about the world ten years from now with Africa and South American becoming part of the greater middle class through the efforts of Ji and the Party.
Eliminating poverty, introducing education where its lacking and coupling it with birth control is the way forward. Are you aware that the old axis powers now have the lowest birth rates in the world?
European wealth originally came from exploiting the third world, capitalism with an ugly face, but that won’t happen this time. As Foreign Minister Wang Li said last year.
“In China’s exchanges and cooperation with Africa, we want to see mutual benefit and win-win results. I want to make clear one point, that is, China will never follow the track of western colonists and all cooperation with Africa will never come at the expense of the ecology, environment or long-term interests of Africa.”
21
Your trust in the wisdom and benevolence of the Chinese government is astoundingly naive.
China has and continues to treat large portions of its more remote areas, and the local inhabitants, in a exploitative, uncaring manner. Why would you expect them to treat other countries any differently unless forced to?
African nations are having their resources bound up via development contracts that mainly benefit the Chinese companies and the local ruling government (often dictatorships). That there is value for the infrastructure developed to the local population is an incidental byproduct of the need for these to transport in mining equipment and workers and to ship out the mined ores.
A press release does not automatically lead to the truth. Especially not from a communist government functionary.
And falling birthrates is a sign of increasing wealth – the baby boom was a anomaly caused by WW2. Any other mechanism for reducing birthrates requires force.
40
‘Your trust in the wisdom and benevolence of the Chinese government is astoundingly naive.’
They can be repressive, there is no question of that, but then you can look at the incarceration rate of Australia’s indigenous population, or the treatment of African Americans in the US police state as comparisons.
‘Any other mechanism for reducing birthrates requires force.’
The two child policy is back in vogue, replacement value, giving women the option of birth control (free of religious involvement) the population of the world should stabilize.
23
Thanks for the great comments Analitik and Dariuz.
I look back on several generations in our family.
Being poor, as in not having much money, was the common experience. Thanks to a great system here in Australia up until about 40 years ago, each new generation benefited from education provided plus apparently sensible government, whatever that may mean.
Many in my age group have had decades of savings stolen from superannuation accounts via manipulative practices of elites in the financial world.
There is no getting away from this.
The system is BROKE.
I think that both of you are saying that money,to really be money, needs a strong link to a specific quantity of work or its physical equivalent, gold.
It’s not only the EEU that needs fixing, it’s the elected misfits who have never, fed the chooks or tended the vegetable garden.
KK
60
KK
Similar background here.
Stolen – in our case throw in a monumental uncompensated loss via the vegetation management act.
Both my wife and I are tertiary educated. Our boys have successfully so far gone the hands on stream.
30
“Krony Kapitalizm” … new world order hopefuls?
30
Only if you consider “modern day” to be post-2008.
20
“Only if you consider “modern day” to be post-2008.”
Post 2008 is going to be with us for a very long time. A different view of post 2008:
http://classicalvalues.com/2016/07/a-different-view-of-economics/
20
It started a lot earlier than that. And, in my time, it started in British universities. The thinking behind it was founded in the social horrors of 19th century Europe, and supported by the depression of the 1930s. The whole truth was ever too long a story, but here goes.
The Hawke/Keating government (1983/1996) deregulated the banks, then vigorously promoted abuse of that deregulation by Alan Bond and his ilk, abuse in which three of Australia’s “big four” banks joined merrily. The fourth bank refused to join this road to ruin, for which the CEO was subjected to public vilification by no less than the Prime Minister. After the crash of 1987 that bank went from being one of the smaller banks to becoming Australia’s biggest.
That abuse was Australia’s biggest, though only one of many, contributions to the crash of 1987. It was clear to me that the crash of 1987 was a deliberate artefact of the Australian government of the time, and others around the world acting in sync. Just as a developer buys a building and demolishes it to build another, the Marxists in our modern governments are working to demolish the capitalist system in order to install a system of their choosing.
In 1987 a return to 1930 was widely expected. However the Marxists were outsmarted for once, as the people on top of the pile could still remember the 1930s. There is but little fun on top of the pile when the pile is flat. So, instead of extracting every pound of flesh, they took losses sufficient to ensure that the pile did not collapse, leaving them still on top and the Marxists still on the outer.
After failing to gain control in 1987, the Marxists in Australia set about running up public debt. Public debt must be funded by private capital. Their motive in running up this debt is to take private capital out of private management, no matter the cost.
Top this off by remembering that the first major announcement on economic policy by the first Rudd government was: :”The Howard government has let the inflation genie out of the bottle”. This was a monstrous lie, so the message had to be that the Rudd government intended to engage in inflationary policy and blame the inflation on Howard. Tumultuous events since have thrown all plans out of kilter, but the actions described on this blog tell us that we are in great danger of an early day of reckoning.
20
Thanks Ted; a coherent explanation of your thoughts, which contrasts greatly with el gordo’s thoughts.
el gordo;
Your chart is nothing but a timeline, there is no reason to believe QE made that line go up or down.
Your thoughts on China are completely misplaced and ignore their history. In case you didn’t know; history repeats.
And your other comments in this thread are completely bonkers; I mean completely wrong in every way possible.
10
el gordo,
Your statement —
“Capitalism can only survive if it finds new markets and this hybrid model is very refreshing.”
I find it lack at least one essential facet for capitalism, namely its ability to reinvent and change it’s products.
True capitalist market are not static (the wanted preference for Chinese government) but are dynamic, where the winners change. Yes it has to find new markets but that is because it invents and reinvents products — sometime for the better sometimes not.
E.g. 100 years ago you could buy a wristwatch from a market of a few thousand similar types. Today you can buy a wristwatch from a few million types — has the value of this item changed for people over a hundred years? Has all the changes to wristwatches been an effect of capitalist’s market economics? How many different wristwatches would there be if communism (or the Chinese third way) was in charge of the market?
Capitalism is not perfect but it is very efficiently at cutting out the redundant from the market place. The Chinese third way seeks to temper this efficiency (much as many western governments have tried before) and it always fails but it does fail in interesting ways.
80
Tom the Chinese dictatorship wants to take over the world commercially, using supply and demand as their basis. They are on a steep learning curve yet there is no reason why they can’t be a successful capitalist nation.
There is a strong anti communist feeling reflected here, but undoubtedly the US is the most bankrupt nation on earth and their democracy leaves a lot to be desired.
25
tomO. There’s simple rule, not, I think, well recognised.
Affluence depends on overproduction,
10
And overproduction leads to deflation. The money supply and the goods supply are out of sync. But that is true of inflation as well.
10
This is what is happening in this century.
http://classicalvalues.com/2016/07/a-different-view-of-economics/
That link is just a review. You will need to read the full 14 part article to get a deeper understanding. BTW the author of the original article has read my review and liked it.
20
Looks like China’s returned to proper crony communism where —
Government pretends to pay the workers and the workers pretend work.
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The value of something is determined by how much of your lifetime you are willing to spend attaining it….. Having a population work their entire adult lifetimes away for the benefit and pleasure of an entitled political elite, is a surefire way of attaining civil strife.
A population rich in poverty and oppression will certainly spend it on a revolution.
150
What went “wrong” was that they’ve run out of wealthy foreign customers and the economic inertia of a fast-growing, domestic economy. Remember 2008?
Real worth and prosperity is what is created when desirable things are made for a market willing to buy. Intangibles such as services have no persistent value. Only the intangibles that are those enabling the realisation of marketable physical artefacts have real value; but only in reality to the point of sale.
Fiat currency isn’t worth the paper on which it’s not even printed. Printing money is a good way to devalue “paper”.
130
Don’t they just call in the trillions of dollars of loans that they have made to the US Government?
50
That’s true.
The China economic model was flawed because they didn’t have the will to ease out the State run conglomerates, which may have avoided (through due diligence) building useless ghost towns.
http://www.news.com.au/travel/travel-ideas/chinas-ghost-city-kangbashi-ordos-full-of-brand-new-empty-buildings/news-story/6a2a91176e2fb27c9ee273671e85cbe8
Their bullet trains are export ready.
40
They also has a lot of loans (The Chinese). Chinese people do not trust anything made in China and buy as much they can from outside. Now the government has put a personal limit for foreign expense on people and it is a lousy 150 usd or 1000 chinese Yuan. This means export to China will go down as they at the same time has boosted the customs with x-ray mashines and people. Trump is right, they are raping everyone not only the US with their way to handle trade.
90
You are too young to remember the European rape of China in the 19th century and the US joining the fray in 1899, negotiating the ‘open door policy’ with the other foreign powers already in China. They didn’t even have the decency to talk with the Qing government.
I feel nothing but contempt for all those imperial powers.
25
el gordo , I must admit you’ve got me now , ive really no idea were your coming from , your one of the commentators I respect the most , yet here you are seemingly supporting Chinese communism and the cast system in India , are you taking the piss or just having a laugh , please explain buddy 😉
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Thanx Dave, I’m supporting the hybrid model over the classic capitalist model.
The dictatorship holds the mandate of heaven and they must seek out new markets or face revolution.
There is nothing we can do about the cast system in India or communism in China, but in Australia we are accommodating a flood of immigrants from those counties and within a generation their children will be standing in parliament.
20
The Chinese do not trust the Chinese.
I visited China recently going from Hong Kong to Shanghai to Hainan Island. At almost every restaurant we went to (except in Hong Kong) the locals always use the tea (or specially provided hot water) to wash the cutlery before they use it. Even when it came in sealed bags stating that it had been washed and sterilised, they still used the hot water (or tea) to wash the cutlery before they used it. Always. Complete lack of trust right there.
Hong Kong not so much. I guess they trusted the English more than they trusted themselves …
40
The Chinese devalued their currency in order to flood foreign countries with cheap imports like steel in order to artificialy prop up their own industry , which is exactly why Trump has been warning that so called free trade is not fair trade , beware of TTP Australians . The problem with the Chinese leadership seems to be that they fear their own population more than they do the reaction from foreign governments and trading partners , when you have so many thousands of well educated students leaving university every year that don’t have jobs to go to because growth has stagnated , its easy to understand why .
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… many thousands of well educated students leaving university every year …
Millions per year actually. There are over 1 million pa graduating in the “Competency in English” course alone. The scale of Chinese and Indian populations are not truly appreciated in Aus.
180
True.
I heard it said recently that there are more people living in India than there are in the whole of “The West” – and China has even more people than that.
50
There are more people living in Sydney than all of New Zealand.
10
Uh oh… maybe losing the mandate of Heaven?
China’s guvuhmint, more things change, more
same thing … Modern centralized authority
like Ming centralized authority, distrusting innovation as a threat to their own power.
There was a time with the fighting of the
Five Dynasties and Ten Kingdoms when China experienced its most spectacular burst of
invention and prosperity. Chinese were the
masters of silk, tea, porcelain production,
paper and printing, and made coke from coal
to smelt high grade iron. The Ming Dynasty nationalized industry and created state
monopolies for salt, tea, foreign trade
and education, the path to bureaucratic
office. What would Schumpeter say?
60
Sorry about the line dance. (
40
Flooding world markets with cheap product does not just boost local production. It also depresses production capability around the world, which in turn can have serious consequences in the event of hostilities arising.
What, for example, might be the effect on the Australian economy should China decide to punish Australia for commenting on events in the South China Sea by imposing trade restrictions?
50
China is not going to punish Australia or America, simply because the middle kingdom is our biggest trading partner. They will just give us the finger.
10
That is so much money impacting so many people that it is hard for me to see where this situation is heading. There is more than just the graphs and amounts of money troubling me.
Is the Chinese move into the south China Sea, which brought China a defeat in the international court, designed to release the pressure by more government spending, is it a distraction to rally China against its “enemies”, or is it a real territorial grab by force signaling future Chinese expansion into other countries?
I certainly don’t have answers to these questions!
50
The South China Sea ‘water grab’ is of no concern, its a territorial dispute which hopefully won’t reach the stage of brinkmanship.
10
where will the money come from?
15 Jul: Bloomberg: Jessica Shankleman: BoE’s Carney Sees Up to $7 Trillion Invested in Renewable Energy
As much as $7 trillion of investment will flow into clean technologies that can help curb pollution and climate change over the next two decades, Governor of the Bank of England Mark Carney said.
Companies and investors can take advantage of the shift to low-carbon energy, spurred by government policies, as they prepare for the risks climate change may bring, such as rising sea levels, Carney said at an event in Toronto on Friday…
As much as $694 billion of bonds currently outstanding globally will support projects that help drive down emissions, according to a report this month commissioned by HSBC Bank Plc. Only about $118 billion of that market is officially labeled “green.”
***Carney said China is issuing about $500 billion a year in climate-friendly securities…
http://www.bloomberg.com/news/articles/2016-07-15/boe-s-carney-sees-up-to-7-trillion-invested-in-renewable-energy
16 Jul: news.com.au: G20 focus on green finance, BoE’s Carney
by Matt Scuffham and Fergal Smith, AAP
Climate change and the funding of “green” initiatives will form a major part of this year’s G20 summit in China in September, Bank of England Governor Mark Carney says, emphasising China’s commitment to environmental issues.
“If anyone is in any doubt, these issues are of paramount interest to China and will form a substantial proportion of the Chinese G20 summit,” Carney told Canada’s Environment and Climate Change Minister Catherine McKenna at an event in Toronto on Friday.
China, one of the world’s biggest emitters of greenhouse gases, is keen to be seen taking a leadership role in global action to combat climate change and has said it will push for efforts to encourage green investment through its period of G20 leadership.
Those initiatives could lead to a “green” bond market to finance environmentally friendly projects, China has said…
Carney also backed efforts by world leaders and international banks to launch programs that put a price on carbon dioxide emissions.
“Carbon pricing is the cleanest way to regulate to stabilise emissions,” he said…
http://www.news.com.au/world/breaking-news/g20-focus-on-green-finance-boes-carney/news-story/731ccee8ebacb0ebec5328fff9499b43
20
Well, if they want to throw money down the drain there is no better way than pushing ‘renewables’. I suspect the Chinese leadership aren’t that gullible, and they have certainly shown no great enthusiasm for “Climate Change” to date, so why would they start now as the wheels fall off the scam?.
90
Because they are ones making the solar panels and parts for the turbines – follow the money!
110
Wow, turns out I’m a genius, despite what my teachers told me.
I have been forecasting for some time now that China is the Next Big Problem. The way I said it would work is (1) the Chinese economy tanks, probably flattened by debt and fake money (2) the Chinese population starts to mutter darkly about those barstards in government, then (3) the Chinese government attempts to distract aforementioned, would-be rebels by stoking up nationalistic feeling with a nice little war, starting with sone neighbour attempting to deny China’s ‘historic’ rights to the South China Sea, or similar.
At this point, Australia will be so happy it invested in some state-of-the-art submarines and fighter aircraft……….
100
I got passed over at a job interview in HK in 2007 for saying the same thing. My interviewer took a much more optimistic view of centrally planned economies with enormous demographic problems than me. He got it right, for a few years Beijing continued to be able to keep the lead balloon afloat with more helium!
50
Steve,
When just about every country admits to a huge debt problem, it is unreal unless other entities confess to a huge plus of $$$ coming their way as creditors.
Who are the global creditors of today?
Geoff
60
Where has all this debt money ended up?
Large amounts have ended up in private holdings via the various routings of crony capitalism.
Most of this has occurred under the guise of quantitative easing as governments buy the worthless, rubbish investment products that originated in the subprime housing bubble in order not to devalue the holdings of the “too big to fail” institutions (which issued this çrap and thus took the initial profits) and those left holding the bag when the reality of the GFC hit home. Additionally, subsidies to “emergent green technologies”/renewables has filled the coffers of profiteers of the CAGW scam.
20
‘Who are the global creditors of today?’
This article explains the whole story.
http://www.telegraph.co.uk/business/2016/02/12/creditors-must-brace-for-a-tsunami-of-losses-in-a-world-awash-wi/
10
Interesting read.
00
Some people have already notice —
https://chiefio.wordpress.com/2016/07/17/italy-non-performing-loans-headed-for-20-yikes/
10
Chinese leaders will only support something that they will make money on. If they will support a trading scheme that market will probably be in China, run by Chinese.
60
Infrastructure building by Chinese consortium outside of the motherland is their ambition. In Australia we need to build a continental bullet train network, satellite cities and dams. Its going to be a trade off, the Australian taxpayer won’t pay a penny while the Chinese get to purchase the surrounding land.
For the past five weeks I have had a team of mainland construction workers staying at my place, they seem nice.
MKS the dragon has landed.
00
China should stimulate growth by building lots of sand islands, each with its solar powered Multi Function Polis. Magnificent shopping malls could be connected to hi-tech industrial precincts and vibrant, liveable Turnbullian mini-cities by Very Fast Egon Musk Whatsies. The islands could be administered by former South Australian premiers, and there’s no need to ask if they’ll be agile.
Of course, you’ll have your knockers.
180
Cartoonist David Rowe: Islands in the stream
50
This is why many of the stock markets of the world and real-estate are on the rise despite real issues we are facing – Chinese money is leaving and finding other places to be parked. Of course it will end one day but only a fool would try and predict when.
50
I’ve recommended this book before as it illustrates the danger inherent in government interventionist policies for maintaining growth in the face of market reality.
Alchemists of Loss: How Modern Finance and Government Intervention Crashed the Financial System by Kevin Dowd & Martin Hutchinson
Dodgy, risky investments abound along with highly leveraged positions since the easy money makes borrowing cheap.
We are still in the bubble that resulted in the 2008 GFC because the governments and central banks doubled down with policies like “quantitative easing” and now that China’s is firmly in the bubble, there is no wealth reserve to rescue the global economy (and we have no longer have a surplus to cushion our economy).
Mike loves to post up “scare” stories from zerohedge on the energy market borrowings which are one of the consequences of the loose monetary policies but these are the tip of the debt overhang iceberg that they have promoted. I firmly believe that the “growth” in renewables is another byproduct of this as everyone seeks returns from the subsidies (which is another conduit for throwing money into the economies) that are on offer as another economic “growth” spur (re The Third Way).
The complex, artificially concoted “investment” products like tranched 2nd order (or higher) derivatives and credit default swaps mean risk cannot be measured. Add this to the fact that almost all institutions continue to hold these on their books as major portions of their portfolios means no one can properly value their asset base.
The global economy will crash and it will hurt – the growing bubble caused by policies to forestall it just makes it worse. I am sorely tempted to sell all my investments and take a position in gold.
Or maybe we could form a mutual fund to take a position in the “Cool Runnings” hedge fund to short the whole mess.
71
Analitik,
Of the the two schemes you suggest, I think gold is the safer, perhaps not the most profitable. Even so, if the whole lot goes pear shaped, you may have to wait out the turbulence even for gold to regain it’s value. Gold is a good currency but you can’t eat it.
60
I fully agree RobK – shorting takes timing and nerve since the saying “The market can remain irrational longer than you can remain solvent” is all too true
70
Reminds me of the time when a friend of mine was shorting the Nikkei back when it was in a major bull run. He lost a lot and eventually gave up. It topped out and headed south in a big way a month later. The moral of the story is if you want to make a quick profit by shorting something expecting it to fall big time or crash; don’t unless you have big pockets. Bull markets invariably go much further than most people expect.
30
Not “most people”. Most people think it’s never going to end.
“It’s different this time” they always say.
30
Italians used to put gold leaf on icecream and eat it in some restaurants.
10
Cool Futures Hedge Fund is not getting off the ground unfortunatley.
[email protected]
It is stalled at the crowd funding startup level. So far only $44,000 has been raised (including my donation) out of a target of $375,000. Disappointing! Usually a simple request for funds to send some poor boy to college or to buy medical treatment for somebody who might not exist raises far greater amounts in a few days.
I think that Chris Dawson’s pitch does not give enough hope to the crowd sourcing seed financiers. They need to think that they will participate in the bonanza that this fund could produce. Instead they are promised a certificate and lead to expect that later larger investors will get all the rewards.
40
Yes, that is why I was not enthusiastic at all about the way it was pitched.
40
The promised “share certificates” reminded me a bit of Michael Mann’s Nobel Prize.
30
‘I am sorely tempted to sell all my investments and take a position in gold.’
A safe haven in times of uncertainty.
http://www.goldpriceoz.com/goldpricegraph/aud-gold-price-per-ounce-2-years-history.png
20
Very well said, and I agree. The global economic crash I think is now a foregone conclusion. Too much currency has been created and they keep having to create more and more to keep the system from crashing. It’s unsustainable.
As one astute person points out:
Investing in gold is a smart move to protect yourself from the inevitable collapse of fiat currency, but investing in silver would be smarter. Silver is many times more undervalued than gold and possibly the most undervalued asset ever.
30
Many commentators, including the IMF, were warning Brexit was the biggest risk to the world economic outlook. The reality is that it is the massive malinvestments in China. The question then is why should most of the leading experts in economics get this so wrong? The answer is quite simple. These experts believe that that their pontifications and proclamations guide economic reality based on sound motives. Reject the experts and everything collapses. Follow the advice of the experts and disasters will be averted. But if they had developed an understanding of the principles of economics, rather than rote learning of mathematical formulae, they would know that the subject is about the unintended consequences of human actions. The biggest adverse consequences through history have been through following the false beliefs in the collective ability to control economies.
110
No argument from me in any way, Kevin. That’s why I recommend that everyone who doesn’t have the background to know why you made your statements should read the book I linked in comment #13
Alchemists of Loss: How Modern Finance and Government Intervention Crashed the Financial System by Kevin Dowd & Martin Hutchinson is the best and clearest description I have read for the problems caused by government intervention and policies designed the “manage” growth. It is both illuminating and highly disturbing
40
Quantatative Easings (another BS bank invention)….Or Big Bank Ponzi Schemes, are world wide not just China!
It only suits the major players (criminals) to be able to borrow money at cheap or zero interest to gamble on stock exchanges (casinos) world wide with no risk to themselves as we the little people are and will be forced to bail them out through even more excessive taxation, as is what happened with the GFC.
Capitalism would have allowed the criminal banks to collapse, but fascism has allowed the unjustified bailouts by the state with our tax money and investment collapses.
And now it is negative interest rates, where bank depositors get paid less than their original deposits, which is how stupid it has become!
The world economy is under going a slow down and nearing the point of collapse because of the lunatics in charge.
It is not just China….China is being blamed/scapegoated by the International Ponzi-Bankers….the world’s biggest criminals, that are never held to account except for a few relatively petty fines here and there just for appearance sake, but never any jail time.
Jail is only for the little people… the Justice that is ‘Just for Us’.
And when it all fails we (the little people) will be taken to war and expended as cannon fodder, whilst the criminal top 1% steal even more from us!
The so called leaders, everywhere, do not act in their peoples interests.
They act only in their own interests, or the bank’s that own them, just like our very own newly elected Australian big bank lackey!
70
As a sideline a very good source of opinions and information on China and the whole Asia Pacific, the part of the world where our destiny as the Australian nation is inextricably tied to, is the online site The Diplomat.
Unfortunately it is a pay to view site but only $5 / month but you are allowed, I think, is four free articles per month.
If I could justify it at all even on my limited pension I would sign up for this excellent window onto the whole Asia Pacific region site ahead of many, many other sites on the net.
.
As far as China’s position on the global GDP tables, if PPP, ie; “Purchasing Power Parity” is used to calculate GDP rather than the Currency exchange rates, the most common method of the past, according to the World Bank, the IMF and the CIA world Fact Book have all listed both China and the EU [ before Brexit. The British come in at about fifth on the GDP global rankings ] ahead of the USA in the GDP, PPP based economic rankings.
[ Wiki;
ie; A Chinese plumber does a job that is costed in China as a $100 job. [ international dollars / US dollars ]
An American plumber does the same identical plumbing job in the USA but it costs of $200.
In global PPP economic calculations the Chinese plumber’s job is therefore rated as the same as the American plumbers job cost ; ie $200 and the GDP using PPP as the base is then calculated for the comparisons in economic ratings.
Which is how using Purchasing Power Parity to calculate GDP, the Chinese and EU [ pre Brexit ] GDP are both larger than the American GDP putting the USA into third place on the global GDP rankings.
To give some comparisons; The Chinese in GDP average around US$7000 per capita
The Saudis average about US $20,000 per capita.
There are over a 100 million Chinese still living in abject poverty in the vast underdeveloped hinter lands in China’s western provinces.
Ref; China Dialogue; UN climate talks: is China still a poor country?
.
There is another measure [ below ] by which it can be seen that there is a huge and arguably inevitable slow down coming for the Chinese economy with uncalculable political consequences for the Chinese leadership, the Chinese nation and the possibility that the Chinese Dragon will lash out in frustration and to divert attention as economic events begin to spin out of the Communists Party Central Committee’s control.
Elements the Peoples Liberation Army might even take some events or deliberately create events and go it alone in launching an attack somewhere on somebody without the permission , support or imprimatur of the Central Committee.
The identical to sequence of events that the Japanese Manchurian Army took prior to and leading to the beginning of the Sino -Japanese war in mid 1937 and to the Nomahan Incident with the Soviets on the Manchurian / Mongolian border in 1939 where the Japanese got completely hammered with very heavy losses and so then went south in 1941 -42 instead of west and north as was the IJA’s original intentions.
The measure and indicator of the looming Chinese slow down can be found in Cement production. Cement of course being Concrete after stone, sand and water leading to a chemical reaction in the cement and the formation of concrete used in infrastructure building on an immense scale world wide.
From the Washington Post March 2015
How China used more cement in 3 years than the U.S. did in the entire 20th Century
[ quoted variously ]
There is only so much infrastructure that can be constructed and used effectively in any nation. Cement production and consumption are a very good indicator of economic growth in a developing nation.
But a developed nation needs far less cement and construction steel annually to maintain its already established infra structure and to continue to add and to and modify or rebuild existing infrastructure.
As the demand for infrastructure building and therefore for cement steel and all the huge range of manufactured materials and goods and machinery used in infrastructure of every type starts to fall off, so to does the need for a huge workforce that was used when the infrastructure build was at its zenith.
What does the Party do with this now unemployed work force?
Worse still as China is trying to reduce the huge state owned and highly inefficient heavy industry sector and the consequent loss of employment by millions if it tries to rationalize its state owned industries.
China as above still has 100 million or more ofm its citizens living in poverty but the inevitable slow down is coming as it did with Japan as it reached a point where infrastructure building reached a saturation point in the late 1980’s .
Japan since then has suffered from a close to three decade long economic “Stagnation”
Strangely another factor comes into play around 2020 for the Chinese.
And has been created by the now recently abandoned “one child” policy.
The Chinese will begin to run out of young workers as factory fodder due to the past one child policy and the average age of the Chinese work force, just like the western work force is now doing, will begin to age quite rapidly past 2020.
China of course in modern times has had its fair share of conflict with it neighbours, including India and Vietnam .
The Chinese and Vietnamese fought a brief border war in 1979 and the Chinese got the hell beaten out of them when they invaded a small part of north Vietnam.
The Vietnamese were allied with the Soviet Union which was then competing with China for influence in SE Asia [ the Chinese allowed the passage of Soviet armaments across China to Vietnam during the Vietnam War but did very little else to help the North Vietnamese.]
When the Chinese invaded across the border, the Vietnamese figured out very quickly what the invasion route was going to be, pulled everybody, civilians and etc, the lot out of the invasion route and the main cities and then sat up in the hills each side of the Chinese columns and chopped them to pieces.
After a month of fighting, big losses in men and material and a very bloody nose, the Chinese pulled back across the border.
China under Xi seems to be embarking on the old Chinese Imperial Celestial Empire psychology where all must bow before the Emperor, Xi in this case.
In reality I think China may need all the friends it can get and grabbing other nation’s pieces of the South China Sea would seem to be very much a case of creating a lot of enemies that China could well do without in the years and decades ahead as the inevitable economic slow down occurs in China.
Unless the Chinese can shift rapidly to an service economy which given the current Chinese psychology re infrastructure build and burden of the huge and very expensively subsidised state owned eneterprises might be very hard for the Chinese to implement.
Better and easier perhaps to divert a lot of attention by starting a small war somewhere unimportant .
However as they say about starting any war, just be bloody sure you know how it will end before you start it!.
The Chinese might think they know what the achieved end will be!
Others on the receiving end of the current and possibly much stronger future Chinese push and shove don’t agree.
40
keep hearing how the Brexiteers exaggerated their claims. however:
12 Jul: UK Express: Rebecca Perring: Siemens brushes off project fear and promises MORE investment in Brexit Britain
GERMAN engineering giant Siemens has dismissed Brexit fears, vowing it will remain in Britain because the nation is a “good place for business”.
The company’s chief executive vowed the energy firm is in the UK for “the long-term” despite scaremongering claims top businesses would pack up and go elsewhere in Europe in the event of a British exodus from the crumbling bloc…
http://www.express.co.uk/news/uk/688711/Siemens-Brexit-project-fear-EU-referendum-investment
11 Jul: CNN: Ivana Kottasova: Boeing to create 2,000 new jobs in the U.K.
Boeing is not afraid of Brexit…
The new jobs will mean Boeing will double the number of its U.K. staff again, to 4,000 in total…
11 Jul: CNBC: Raytheon, Boeing committed to UK despite Brexit
by Phil LeBeau & Kalyeena Makortoff
Speaking to CNBC at the U.K.’s Farnborough Airshow, John Harris, CEO of Raytheon International, said the outcome of the U.K.’s referendum on European Union (EU) membership wasn’t prompting a scare.
“We’ve been here in the U.K. for the better part of 100 years. We’ve got a strong company here, thousands of employees, fantastic capability and we intend to remain here,” Harris said…
http://www.cnbc.com/2016/07/11/raytheon-boeing-committed-to-uk-despite-brexit.html
never mind, there are new anti-Brexit scares now:
16 Jul: UK Express: Vincent Wood: Turkey military coup ’caused by Brexit’. claims Labour MP
forget all the big news breaking today, BBC TV is still running the following as a constant news ticker today:
15 Jul: BBC: Lowcost Holidays demise blamed on Brexit vote
40
I find it funny that many manufacturers (those that actually make or mine) stuff want to be in and stay in the UK, while the paper-shufflers are all threatening to leave.
Umm, difficult question for the UK — Who do you want?
Vehicle manufacturers still have to come to terms with this being an opportunity —
http://www.todayonline.com/business/asian-car-makers-fret-over-uncertainty-ahead-after-brexit-vote
10
something serious happening in SA!
16 Jul: Australian: Michael Owen: Warning of energy crisis to hit the nation
An energy crisis in South Australia created by an over-reliance on untrustworthy and expensive wind and solar will force the state Labor government to seek greater access to cheaper coal-fired electricity from the eastern states.
This comes amid rising concern that federal renewable energy targets will force other states down the path taken by South Australia, which has the highest and most variable energy prices in the national electricity grid.
South Australian Treasurer Tom Koutsantonis, who is also the Energy Minister, yesterday put the eastern states on notice, vowing to “smash the national electricity market into a thousand pieces and start again”…
“This is coming to Victoria, this is coming to NSW … every jurisdiction is facing what we’re facing now,” the Treasurer said.
South Australian Labor’s admission that it needed urgent reform of the national energy market rules, so that in addition to upgrading connection with Victoria it also could tap into NSW baseload power, reveals the vulnerability of its reliance on renewables…
Koutsantonis: “Wind is paid by the commonwealth to produce power … if you are going to pay wind farms to produce electricity regardless of demand, you better make sure that is distributed equally across the country because you can’t have a national policy implicating just one state,” he said…
http://www.theaustralian.com.au/national-affairs/state-politics/warning-of-energy-crisis-to-hit-the-nation/news-story/9083700ceb88fe18480c1e289c1654f3
14 Jul: Deutsche Welle: Dave Keating: Sea change to Germany’s energy transition as it throws renewables to the open market
Opinion polls put support of the Energiewende at around 90 percent among the German public. Yet despite this, last month the German parliament approved a root-and-branch reform of the program, which fundamentally changes how it works…
The German Green Party is furious about the changes, with party leader Simone Peter calling it a “knock-out punch” to Germany’s energy transition. The German media reaction has been equally scathing, and Berlin has been rocked by protests against the reform. Germany’s renewable energy association BEE said the changes could result in a 10 percent cut in future renewable energy capacity.
So if the Energiewende was so popular, why did the German government decide to change it? The answer has its roots in a decree from the European Union…
Although Germans accepted and in time came to appreciate the subsidy system, it was significantly less popular with neighbors – particularly Poland, the Czech Republic and the Netherlands.
The European Union has a connected energy market, and they said German-subsidized renewable power was flooding their electricity grids and wreaking havoc…
Matthias Buck, energy think tank Agora Energiewende: “So they went to Brussels to complain about it. They said, ‘Germany didn’t consult us before they did this.'”…
Gielen says that while fixed feed-in tariffs have been very successful in increasing deployment of renewables, they have not been successful in controlling costs. Germany’s Fraunhofer Institute has projected the total cost of the Energiewende to be around 1.1 trillion euros…
http://www.dw.com/en/sea-change-to-germanys-energy-transition-as-it-throws-renewables-to-the-open-market/a-19400641
15 Jul: CarbonPulse: “This isn’t a market”: Hubei limits daily price drop to 1% after third day of max. losses
The Hubei carbon exchange on Friday announced the daily price drop in the provincial emissions trading scheme will be limited to 1% from July 18 after the market suffered its third straight day of the maximum 10% loss…
30
pat:
And the response of the S.A. Government was for $700 millions for a new interconnector to N.S.W. to bring more coal fired electricity to S.A. Needless to say that the money won’t come from near bankrupt S.A.
But when even “silly Koot” realises there is a problem the situation is obviously dire.
30
When the majority of the people lose their morality then they will be more prone to become impressed by amoral (corrupt) politicians. Amoral people and politicians do not care about others, especially more so about future generations. Thus when corrupt, inept and amoral politicians lose the plot ending up with unserviceable national debts and stagnant economies then they go for short term solutions such as irresponsible mass immigration to boost, artificially, the GDP; quantitative easing, a euphemism for irresponsible printing of money that always results in massive inflation, but letting them to save their skin for a few years, till pension age. The yet-to-be-born generations will then have to take the brunt of these politician’s (criminal?) decisions and their consequences. There’s a load limit to the camel’s back. One day its gonna break.
50
Hayek was, and remains correct.
We continue to travel on the road to serfdom.
Our velocity remains in direct proportion to the amount of top down
autocracy our economies ‘benefit’ from.
The little man pulling the levers behind the curtain is now and has always been a fraud.
Government is now and has always been a parasite —
a tiny amount is symbiotic, but as it grows it mestasizes.
Milton was also right. There is no free lunch.
60
On a slightly separate point; until I read your Nice Not Tribute post, and researched the implications of the section 18C wording, I had not realised that Australia had in fact entered the world of Orwell’s 1984, and of course Leveson.
If your readers care to link , they might read what I have written, and ponder on the state of their own nation!
40
What is called Keynesian Economics is a crib notes version of what Keynes actually said. Among other bits, he said that such stimulus would only work a short time (couple of years) and then lead to inflation. He also said that during times of plenty, government needed to run a surplus to retain a net balanced account over time. Both warnings ignored by the current crop of politicians who just heard, in their 1 day economics seminar, “Spend money stimulate”…
Keynes also understood that as interest rates approach zero, folks stop spending and buying bonds (investing) and stack up piles of currency. This is called a “Liquidity Trap” and is fairly well understood.
What has happened now is simply that as most of the global economies became thrall to low Chinese Cost Of Production, their ability to buy dropped. Governments tried to compensate with monetary policy (print money / QE / etc.) which just put them into a Liquidity Trap of their own. This spreads, country by country, until it gets to the final player. Now China is just running out of growth prospects and joining the Global Liquidity Trap.
https://chiefio.wordpress.com/2016/02/29/the-present-global-liquidity-trap/
There is only about a 2% to 3% increase in production ability each year from technological advance. That’s it. The only way to grow faster for any length of time is IF you are starting from a backward state and “catching up” with the best state of the art. China could do that for a long time, being very large, but once they became the dominant economic production center and after “technology transfer” they, too, became stuck at that R&D Wall of 3% or so. (They have presently slowed from about 12% /year GDP growth to about 6%, but some of that stat will be bogus as government spending is counted in GDP even if unproductive…)
So China will join the Crib Notes Economy with QE and “Stimulus” but no amount of that drug will improve the product of R&E or improve actual productivity growth. It will just go into advancing their march into the Liquidity Trap and / or inflation. Japan or Venezuela.
Add in the flood of time and money wasting productivity killing “regulation” taking over the world, season with “Central Planning” boondogles, and top with the frosting of “Crony Capitalism” (that is really “Crony 3rd Way Progressive Socialism for the Rich”, and you get this present mess. Fiscal Policy (Government Spending and Regulating) killing the real economy.
Bad Fiscal Policy can never be fixed by Monetary Policy.
Monetary Policy can at best mask it for a couple of years, then advance into inflation for a dozen more, eventually ending in a Japanese Stagnation (Liquidity Trap) even with ZIRP (Zero Interest Rate Policy). At worst it ends in Venezuela, Greece, Puerto Rico, Cyprus, Spain, etc.etc.etc.
80
It is not just the Chinese cost of production. The cost of production is declining everywhere. The answer to that deflation has been helicopter money to the banks. The real answer is helicopter money to the people.
A review of that idea is posted here:
http://classicalvalues.com/2016/07/a-different-view-of-economics/
00
Helicopter money to the people is better than to the banks though we should support investments instead of consumption. Central bank sending 1000 € to every European every now and when would at least popular for the voters.
Lack of demand is our problem. Aging population does not need new stuff and the stimulus money is left in the bank accounts. Babies with millionaire mothers could be one solution because babies are natural mass consumers. We have also a few billion people in developing countries that have needs but no opportunities to satisfy these needs because of the exploitation of their elites. World is trying with mass immigration but that is not an easy path either. WWW III would also create new demand to rebuild everything that has been destroyed.
10
My suggestion is that the Chinese are feeling their way economically at now half the size of the US economy. The situation is unprecedented and the change extremely rapid.
For example Steel alone is a $1Trillion world product at wholesale. Amazingly half is produced in China without only 1/5th of the world population. Of course they have been dumping for years, but now seem to be closing mills and realising that while dumping destroys competition (like Arrium and Bluescope) it means massive losses at home as wages have increased x4 in perhaps 15 years.
So they are cutting back. Suddenly US Steel prices have increased 66% in this half year alone and that in turn has picked up Bluescope with an extra $70million profit. Even jobs in Whyalla might be saved without more of our money being spent (government intervention it is called).
At the same time no one comments on Saudi Arabia halving the price of oil without warning or explanation, halving the incomes of oil dependent exporters and crushing the logic behind fracking, shale and more. When OPEC jacked up oil prices in the 1970s, the world was outraged. When Saudi halved it, nothing was said even though countries like Nigeria were devastated.
So in the great world of economics, we are to believe visionary economists know everything from China to Climate. So how many economists predicted the GFC based on trilions of dollars of fake mortgages, mortgage derivatives? No one went to jail for creating and onselling mortgages which the recipients could not possibly afford. Malcolm Turnbull’s Goldmann Sachs were the standout profiteers.
Who warned us before stock exchanges plummeted? No one.
Remember in 2007 we were lectured by economic experts like Ross Garnaut and Richard Dennis that a Carbon tax is a wonderful thing, as they debated ‘the science’ of man made Global Warming with anyone. Richard Dennis debated Lord Monckton in Canberra on live television. Why? In Australia Bernie Fraser, without doubt the most boring deadpan person on television, managed to land the job running the Australia’s Climate Change Authority. How?
In 2015 “Former Climate Change Authority chairman, Bernie Fraser, has described the federal government’s argument that there is a “moral” case to develop huge new thermal coal mines in Australia as “obscene” and nonsensical.”
Now how would he know that? An economist can lecture our country on morality too. Is there no end to their genius?
So economists know everything and would have us believe they understand economics and all science and can see the future clearly.
However they would have to be classified with Tim Flannery for having the wrong qualifications and a track record of being utterly wrong. Economists not only practice the ‘dismal science’, they are dismal scientists. Though if Flannery can apply his dead kangaroo expertise to climate, why not an economist?
50
>China is the Third Way and very keen to build lots of infrastructure in Australia.
WHY?!!!
30
The solution to failed socialism: add more socialism.
40
Not so sure. Communism in China is being seriously corrupted by their success, a sort of capitalist communism based on consumerism. Russia and China never bloomed under Communism and Shanghai was a wreck. Now it is an amazing place full of tourists, Australians, new and often fantastic buildings, new underground, tunnels and is incomparable to the Shanghai of twenty years ago. All based on capitalism. Karl Marx never dreamed of iPhones and jetsetting and the internet and holidays cruising on the Dalmatian coast. The world is changing rapidly. You have to wonder how even democracy would work in a country of 1,300,000,000 people? Even the US is now 300,000,000 people and climbing by millions a year.
30
China is the fastest ageing of all countries. Median age presently 37 years. That means very high propensity to save. If the savings of individuals are not provided by the government they have to come from offshore. China already runs a huge current account surplus so offshore funding of their private savings is limited and there is international pressure to reduce the CA surplus.
The tipping point for asset price inflation in Japan was when median age was 38 years. China is very close to that so it is reasonable to expect the private sector to be net savers or very close to it. The government has to spend in excess of taxes to fund the savings otherwise the economy collapses.
China’s upside down population pyramid will place a lot of pressure on younger people supporting their aged. That is why Africa presents such a great opportunity for China as Africa has a normal population pyramid and a lot of people. Fundamentally the aged in China will be supported by the young in Africa if China does it right.
China has also invested in Australia so young Australians will be burdened supporting their own ageing population as well as the aged in China. In fact Australia is the most indebted nation on earth on a per capita basis; worse than Greece, Spain and Portugal:
https://en.wikipedia.org/wiki/List_of_debtor_nations_by_net_international_investment_position_per_capita
Private savings represent the arms length means of ensuring the aged have call for support from the younger people in the population. Without savings the aged have to rely solely on government support.
With the exception of nations in Africa, population growth is slowing, or even negative in some countries, so there will need to be build up in government deficits to fund the savings of ageing populations to keep the economies ticking over. It will be another 30 years or more before the median age of populations reach some level of stability. During this period the world will be awash with savings looking for a safe place.
At present time in Australia an individual retiring at 65 needs savings in addition to a house or apartment of about $700k to support themselves above the poverty line through the rest of their life without government support. With workers building savings and retirees consuming their savings the private savings represent a huge soak for funds while the median age continues to rise. Australia’s rate of ageing is slowed by immigration though and it will be a few years before the country is a net saver.
40
Africa is looking good now but within a generation, enjoying the comfort of an educated middle class existence, women will lose their appetite for large families.
https://en.wikipedia.org/wiki/List_of_countries_by_population_growth_rate#/media/File:Population_growth_rate_world_2005-2010_UN.PNG
Its been rumored that China will need to import labor within 20 years.
10
It is reasonable to expect that. Japan has allowed immigration with respect to bringing in Filipino domestic workers and there are a significant number now working there now.
10
In the past Australia has used backpackers to work in agribusiness, but that’s all changing, so we may see more seasonal guest workers in the years ahead.
I’m thinking Timorese for starters.
10
So the Libs were actually selling ‘Jobs and cancer?” No wonder it was close.
30
No big surprises here. China is about to demonstrate (again) the fundamental problem with the Command Economy. Last time around, they build several dozen empty cities, and when they finally figured out that wasn’t working, they managed to crater the worldwide price of iron. Which, in turn, severely cramped the income of a company I was working for at the time, because the idiots running the company (or, for that matter, the idiots running our biggest customer) weren’t much ahead of the Chinese.
20
In order for capitalism to work, there has to be a consumer class. Capitalism means no consumer class. It is antitical. But they are codependent. One needs the other. Everyone gripping about the liberal society? Not me, you must remember, liberal, means in its first form, educated, no education, no future. You refuse to teach the future generations, you proceed to the dark ages again. The Brutish win. Are you born of the ruling class, or not, then you cannot rule.
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Over the next months, there are going to be numerous revaluations and devaluations of nations currencies. Last week Belarus changed the value of its currency majorly. The petrodollar is in its final throes of being irrelevant. The new CIPS money transfer system (Chinese) is now worldwide and leaving the SWIFT system for dead. Don’t be surprised if China is one of the countries which is revaluing.
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