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    “You cannot hope to bribe or twist – thank God! – the British journalist. But, seeing what the man will do unbribed, there’s no occasion to.” So wrote the witty early twentieth century British man of letters Humbert Wolfe. His assessment of American journalists isn’t recorded but, where pivotal issues are concerned, they have probably...
  • @Olorin
    Just two words:

    Agricultural espionage.

    Right, shaken not stir – say what a prick! ROFL

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  • […] Par Eamonn Fingleton – Le 11 janvier 2016 – Source UNZ […]

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  • @Billy Liu
    "China had a civilization for thousands of years yet never developed true science and their civilization was thus relatively static."

    Developed a scientific revolution is a singular one-off that was only ever achieved by the successors cultures to Latin Christendom. And only someone truly ignorant of human history could call Chinese civilisation static - it evolved and changed immensely over the two thousands years that followed the founding of the Qin Dynasty.

    "their cultural aversion to rocking the boat handicaps their own innovation."

    I've lived in China for a while - Chinese entrepreneurs and research scientists I've are amongst the biggest and most capsize-prone boat rockers I've encountered.

    "This is why I laugh when science fiction posits a future dominated by the Chinese."

    Probably best not to glean your information on other cultures from Marvel comics and sci-fi movies.

    Just two words:

    Agricultural espionage.

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    • Replies: @PandaAtWar
    Right, shaken not stir - say what a prick! ROFL
    ReplyAgree/Disagree/Etc.
  • […] Par Eamonn Fingleton – Le 11 janvier 2016 – Source UNZ […]

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  • @dc.sunsets
    HBD also must include acknowledgement that East Asian culture does not amplify high average IQ the way Western Civ did.

    Anecdotes are anecdotes, but from teachers to engineers (of US/Northern European heritage) what I've heard is that Chinese people often excel at wrote math but lack common sense application. Chinese engineers are great at reverse-engineering others' innovations but their cultural aversion to rocking the boat handicaps their own innovation.

    This is why I laugh when science fiction posits a future dominated by the Chinese. Perhaps I'm wrong, but as I see it, China had a civilization for thousands of years yet never developed true science and their civilization was thus relatively static.

    Without Western Civilization (and the people genetically predisposed to produce it) humanity will stagnate even under a high IQ mean China's leadership.

    “China had a civilization for thousands of years yet never developed true science and their civilization was thus relatively static.”

    Developed a scientific revolution is a singular one-off that was only ever achieved by the successors cultures to Latin Christendom. And only someone truly ignorant of human history could call Chinese civilisation static – it evolved and changed immensely over the two thousands years that followed the founding of the Qin Dynasty.

    “their cultural aversion to rocking the boat handicaps their own innovation.”

    I’ve lived in China for a while – Chinese entrepreneurs and research scientists I’ve are amongst the biggest and most capsize-prone boat rockers I’ve encountered.

    “This is why I laugh when science fiction posits a future dominated by the Chinese.”

    Probably best not to glean your information on other cultures from Marvel comics and sci-fi movies.

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    • Replies: @Olorin
    Just two words:

    Agricultural espionage.
    ReplyAgree/Disagree/Etc.
  • The Middle Kingdom is doing fine. They have a bit of a longer and different view than us hurried Westerners…

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  • […] is Pakistan. Trapped by the Saudis. The chaos to come. America’s opportunity. China troubles (1, 2, 3), and related. Commercialization of hard security. The demographic dimension. Skyscraper […]

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  • Actually, the least educated person is poor at factory work. In the US many high school drop outs have dyslexia or ADHD. These people tend to have poor-hand and eye coordination or manual dexterity even before the factory worked was shipped aboard a lot of high school drop outs couldn’t do factory work but service jobs. So, getting back factory jobs doesn’t always help the least educated if they suffer from poor-hand and eve coordination or poor manual dexterity which is hard to do factory work if you have to assemble several widgets in a particular time period. A lot of guys that would have become machinists are now becoming computer programmers, plumbers and so forth. They didn’t suffer but the low skilled white which tends to have learning disabilities doesn’t really benefit from factory work as much as many here thing. They are better doing a service job like cooking which is easier if you have poorer manual dexterity.

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  • @Jim Christian
    Eamonn, question from a layman. If robotics are becoming more and more viable for nearly any item now being manufactured by hand, will China suffer from manufacturing moving back to home countries of companies now manufacturing in China? Some manufacturing already is moving to Vietnam, but that "cheaper labor" train ought to nearly be in the station by now, no? Is not even the cheapest labor far more expensive than robotics?

    Does a resource-rich United States need still to export parts and raw materials to China for assembly anymore, only to have to ship finished product back to the United States for distribution and sale? Might, or shouldn't we see robotic lines in the States manufacture everything here? All you need are a few engineers to program, assemble and maintain the robotic lines, a few sweepers, some security guards to maintain secrets and dispense with the huge numbers of hands on-product. You eliminate the transport of material and finished product, the entire process becomes automated. Of course, what to do with idle hands?

    They talk of returning manufacturing to the U.S., but that move, while efficient, hardly employs more Americans. We don't manufacture with labor anymore which seems a major reason to move it all back here for robotic manufacturing. Does this wound China? Seems to me a mortal wound.

    Are the bears looking at the prospect of U.S.-based robotics killing Chinese manufacturing?

    Good point, I have said this several times to Donald Trump supporters. Robots and 2-d printing will lower the need for workers in factories.

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  • Anonymous • Disclaimer says:

    Mr. Fingleton is correct in his analysis of how we got to this point in our relationship with China, but he underestimates the resolve of the Anglo-sphere not to fall under Asian domination. You can be certain that regardless of who the next president may be (Trump, I hope) the relationship between China and the U.S. is going to drastically change.

    This will not occur solely as a result of China’a trade policies, but also as a result of its ecological destruction of the oceans. Right now China has 250,000 fishing boats, and fish stocks are collapsing. The number of Chinese fishing boats will need to be reduced to 50,000; and I can assure you that they will not make this change willingly. And then there are the issues of China’s industrial waste; and population growth.

    So in sum, I think that in a few years, China will face a completely new American foreign policy; one that demands deep concessions if trade is to continue at all.

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  • Anonymous • Disclaimer says:
    @Jim Christian
    Eamonn, question from a layman. If robotics are becoming more and more viable for nearly any item now being manufactured by hand, will China suffer from manufacturing moving back to home countries of companies now manufacturing in China? Some manufacturing already is moving to Vietnam, but that "cheaper labor" train ought to nearly be in the station by now, no? Is not even the cheapest labor far more expensive than robotics?

    Does a resource-rich United States need still to export parts and raw materials to China for assembly anymore, only to have to ship finished product back to the United States for distribution and sale? Might, or shouldn't we see robotic lines in the States manufacture everything here? All you need are a few engineers to program, assemble and maintain the robotic lines, a few sweepers, some security guards to maintain secrets and dispense with the huge numbers of hands on-product. You eliminate the transport of material and finished product, the entire process becomes automated. Of course, what to do with idle hands?

    They talk of returning manufacturing to the U.S., but that move, while efficient, hardly employs more Americans. We don't manufacture with labor anymore which seems a major reason to move it all back here for robotic manufacturing. Does this wound China? Seems to me a mortal wound.

    Are the bears looking at the prospect of U.S.-based robotics killing Chinese manufacturing?

    decades ago, corporations have considered using fully automated and robotic assemblies to reduce manufacturing costs. for example, in addition to savings on labor, there is no need for heating or cooling in the factories and no need for cafeterias and restrooms. the factories can operate 24/7 with no holidays. then when China opened, they discovered it was far cheaper to use Chinese labor when compared to totally automated, robotic manufacturing at home. As a result, corporations and those who have spare money to invest have done fabulously well and wealthy, leaving those with inadequate education and special skills far behind. the solution is place higher taxes on corporate profits and from stock gains and use the extra income to create huge number of jobs with infrastructure building and repairs, benefiting specifically those who need them.

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  • @dc.sunsets

    On your Enron analogy: if Enron had enough large work force, it would have never collapsed or at least not in that way, despite some large misallocations.
     
    Such misallocations become self-reinforcing. If you think a family, a firm or a nation-state can continuously misallocate capital on an ever-increasing level indefinitely, I'll join you in your juvenile ROFL.

    For more on what such misallocations eventually look like, please see any history of the USSR.

    How do you define “misallocate capital”? There are people who argue that, for example, not firing American workers and outsourcing to lower costs is “misallocating capital”. How do you define it?

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  • @Anonymous
    Your post doesn't really prove anything other than there are overhyped bears out there.

    But guess what - I can point to lots of ultraoptimists as well who predicted double digit growth for China for many decades to come.

    You don't really engage in any substantial quantitive analysis other than to look in the mirror and point out the missed estimates of other people, the easiest thing in the world. China's current GDP is massaged, everyone agrees on that. The only question is by how much.

    I think Nick Lardy of the PIIE think tank, who is seen as a modest optimist, is probably correct in saying that China's old industries are in recession but their services are doing pretty well. Even if the old industries are not as important as they used to be, they still account for a very large percent of the domestic economy.

    To this you add China's massive debt bubble, fuelled by shadow banking, and their humongus excess capacity, especially housing, which sends a deflationary shock pulse throughout the world, especially in the PPI inflation measurements(industry etc).

    To me, looking at an imminent Chinese crash is a red herring. Because of their totalitarian grip on the state, a much more likely outcome would be Japan, where zombie banks/financial institutions and inefficient SoEs are kept on life lease far longer than they should, because in normal democracies you get a recession and then the ruling party is purged. In China you can't have that, so they avoid recession at every price, and the end result of that is Japanisation.

    Do more original analysis next time than just ribbing off from other people, cherry-picking those with the most outlandish claims. Mediocre.

    http://thediplomat.com/2015/06/interview-joseph-nye/
    Joseph Nye is a University Distinguished Service Professor at Harvard University. He is also the former Dean of the John F Kennedy School of Government at Harvard, the Assistant Secretary of Defense under the Clinton administration from 1994-1995, and a current member of the Foreign Affairs Policy Board

    Xi Jinping has escalated nationalist rhetoric in China that is sometimes regarded as a precursor for Chinese belligerence. Do you think the economic slowdown in China is fuelling this new nationalism?

    Xi Jinping needs a legitimizing force for his power and for the power of the Chinese Communist Party (CCP). Economic growth has historically been the primary legitimizer of its authority, especially since communist ideology has declined greatly in importance. As China has an economic slowdown, nationalism will increase further, and I think we are undergoing a period of heightened attention to nationalism. I think nationalism has made it more difficult for China to resolve conflicts with its neighbors in the South China Sea. So far there is no clear indication that increased Chinese nationalism will result in military aggression. The high level meeting between Xi Jinping and Abe at the APEC summit was a positive step, as China had been resistant to these meetings in the past. But the potential for nationalism to boil over, it is something we need to watch closely.

    In 2011, Foreign Policy magazine named him to its list of top global thinkers.[5] [The] Magazine’s valued reporter Daniel Drezner wrote: “All roads to understanding American foreign policy run through Joe Nye.”

    So acceptance of economic slowdown and a shaky government in China is the view informing US policy.

    http://thediplomat.com/2015/07/mearsheimer-vs-nye-on-the-rise-of-china/

    Who predicted decades before the event that if Ukraine gave up nuclear weapons it would be invaded by Russia and all the international guarantees given would be worthless? Not Nye.

    China was the biggest economy in the world until a few centuries ago, it will be again. Potential military force relative to rivals is a zero sum game. By fostering the belief that it is not going to overtake the US in potential power, China is wisely avoiding scaring the US.

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  • @interesting
    China printed more money than the BOJ, the FED and the ECB combined since 2008, and since 2000 their debt has increased by 26 times.

    LOL, in the speed of light.....too funny!!

    LOL, too funny.

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  • @Astuteobservor II
    it is like the entire conversation just flew by your head in the speed of light.

    China printed more money than the BOJ, the FED and the ECB combined since 2008, and since 2000 their debt has increased by 26 times.

    LOL, in the speed of light…..too funny!!

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    • Replies: @Astuteobservor II
    LOL, too funny.
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  • @Stephen R. Diamond
    The highest-IQ capitalist countries have periodic recessions. China hasn't had one for decades, you don't soon predict one. IQ explains the possibility of rapid advance, but something else (economic organization?) must explain its uninterrupted character.

    must explain its uninterrupted character

    It has a huge market to dump it’s excess production in – the US and Europe. This was the same for Japan. The US and European periods of development were almost entirely indigenous. When the US factories produced too much for the market they had to throttle back production and lay people off. When the excess was worked off people were called back and more money was in circulation. This is what drove the business cycle. If Chevrolet in 1929 produced too many cars where were they going to dump that excess production?

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  • @KA
    IQ obsession will force Americns and Europeans a kind of fatalism . Competition will not be in the psychology anymore Changes in the behavior will be put off . Worship of IQ shows poor IQ and nothing else
    This damages the chances of recovery from the impotence laziness,and poor thinking . It eliminates the numerous myriad directions that a ountry could try to escape recover,and prosper. IQ worship creates learned helplessness .

    American or Indian problem is not rooted in IQ . The disadvantages are not to be found in IQ.
    There are many rigid barriers in thinking and in practices . These explain the rot.
    Sure the trade barrier , devaluation of yuan , theft of trade secrets are not new innovation of some new kind of IQ . The hubris to neglect them and arrogance to ignore them are manifestation of a systematic fault lines that are undergirded and maintained by American Exceptionalism ,dismissive attitude to other culture and to the faith in white aryan European Protestant superiority. Add the lack of knowledge to this mix ( among those who matter in shaping policy public opinion,and utterring cautions to the audiences on the media) .

    American habit of searchings for quick answers for any of their personal problems translate into searching for same quick fix in other areas of collective doldrums and insanities . It also leads to quick ,emotional , faulty and ego -pleasing conclusion . This is why Saddam's or Iran or N Korea's bravado turn into an ominous portend but Chinese deceptivity give a false sense of hope with trust in Anerican invincibility .
    Above all Chinese play the game as monolithic coordinated top to bottom advancing column . America is constrained by too many voices that are motivated by personal gains, anger at third party ( support China because it will hurt Russia despite not benefitting America) , motovated by individual corporate gain that hurts overall economy , falling prey to the shallowness of arguments about capitalism ( af if they were some divine revealitions nd laws) ,and uncoordinated misdirected ill conceived foreign adventures promoted by the liberal interventionist and the neocons.

    Above all Chinese play the game as monolithic coordinated top to bottom advancing column . America is constrained by too many voices that are motivated by personal gains, anger at third party ( support China because it will hurt Russia despite not benefitting America) , motovated by individual corporate gain that hurts overall economy , falling prey to the shallowness of arguments about capitalism ( af if they were some divine revealitions nd laws) ,and uncoordinated misdirected ill conceived foreign adventures promoted by the liberal interventionist and the neocons.

    That’s the key right there. Under western liberal capitalism the interest of the corporation trumps the interest of the economy as a whole. China is working under a postliberal capitalist model that they are acting forcefully to defend from the corruption of the western liberal model. The first example of postliberal national interest capitalism in practice was in Meiji Japan. China’s pragmatic, postliberal model illustrates why east Asia is ascendant while the west goes into decline. It’s a cultural issue.

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  • @Eamonn Fingleton
    A reply to Engineer:

    Any time I read an analyst who trots out the concrete statistic, I start to wonder, “What else did you miss?” There’s a lot about China that makes no sense, until you look at what’s actually going on.
     
    Well said! You have contributed the most informed and incisive comment of this entire discussion. You could indeed have generalized it to include the entire East Asian region. As someone who lived 27 years there, I can testify that there is a lot about countries like Japan and Korea also that makes no sense until you look at what's going on.....

    thing sthat makes no sense, until you look at what’s actually going on.

    dunning kruger effect: a cognitive bias in which relatively unskilled individuals suffer from illusory superiority, mistakenly assessing their ability to be much higher than it really is.

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  • @Historian

    China, by this standard, must be engaging in waste on a level we can’t imagine. Given its steel-making capacity and concrete production binge (didn’t they pour more concrete in the last few years than the USA did during the 20th century?), we have signs that this is exactly the case.
     
    The Chinese use concrete for everything, where we would use all sorts of substitute materials.

    Most of our railway network uses wooden ties. Most of the Chinese railway network uses concrete ties. They can't make them out of wood because they don't have any wood in China. They cut down their trees about two thousand years ago.

    Most of our suburban houses are made of wood. Most rural houses in China are either brick or concrete. Urban China is mostly concrete, or steel frame with a concrete skin.

    Most of our bridges are steel bridges. Most of the Chinese bridges are concrete bridges. Steel-reinforced concrete, but a lot more concrete than steel. Their civil engineers just really like to use concrete.

    Most of our roads are asphalt. Most Chinese roads are asphalt on concrete. The Germans build their roads this way, and they last a lot longer than American roads. It may be costing the Chinese a pretty penny now, but it's going to save them money in fifty years.

    This is the sort of thing that makes me wary of economic prognosticators. Any time I read an analyst who trots out the concrete statistic, I start to wonder, "What else did you miss?" There's a lot about China that makes no sense, until you look at what's actually going on.

    A reply to Engineer:

    Any time I read an analyst who trots out the concrete statistic, I start to wonder, “What else did you miss?” There’s a lot about China that makes no sense, until you look at what’s actually going on.

    Well said! You have contributed the most informed and incisive comment of this entire discussion. You could indeed have generalized it to include the entire East Asian region. As someone who lived 27 years there, I can testify that there is a lot about countries like Japan and Korea also that makes no sense until you look at what’s going on…..

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    • Replies: @AG

    thing sthat makes no sense, until you look at what’s actually going on.
     
    dunning kruger effect: a cognitive bias in which relatively unskilled individuals suffer from illusory superiority, mistakenly assessing their ability to be much higher than it really is.
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  • @interesting
    The US consumers are using a piece of tree leaf with some sign on it made in the basement of the Fed without any backing.

    They use it to exchange tangible and useful consumer goods made of angible materials such as metals,rubber, etc. using precious energies such as crude oil, etc.

    LOL,

    .......if the dollar is so worthless why is China pegging their currency to a piece of tree leaf with signs on it??

    it is like the entire conversation just flew by your head in the speed of light.

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    • Replies: @interesting
    China printed more money than the BOJ, the FED and the ECB combined since 2008, and since 2000 their debt has increased by 26 times.

    LOL, in the speed of light.....too funny!!
    ReplyAgree/Disagree/Etc.
  • @dc.sunsets
    If I interpret your position to be approving of a command economy, I only suggest you reconsider the consequences of eliminating (or worse, falsifying) factor prices.

    Mises irrefutably proved that without factor prices (set in a market) it is impossible to allocate resources properly (i.e., avoid waste on a scale commensurate with the lack of prices.)

    China, by this standard, must be engaging in waste on a level we can't imagine. Given its steel-making capacity and concrete production binge (didn't they pour more concrete in the last few years than the USA did during the 20th century?), we have signs that this is exactly the case.

    When you turn a raw material into something, you rarely get the chance to recoup the investment in case it turns out to be a mistake. Like someone who buys a shipload of snow-mobiles right before a decade-long period of unusually warm winters, there's going to be a phenomenally large write-off sometime.

    China is courting an astronomical write-off. (So is the West, but that's another story.)

    China's problem isn't who owns the debt and who owes it. China's problem with the debt is that most of it is bad, and the domino effect of recognizing that fact will have rather large implications. Debt during the last 30 years allowed a lot of capital consumption disguised as "investment."

    China, by this standard, must be engaging in waste on a level we can’t imagine. Given its steel-making capacity and concrete production binge (didn’t they pour more concrete in the last few years than the USA did during the 20th century?), we have signs that this is exactly the case.

    The Chinese use concrete for everything, where we would use all sorts of substitute materials.

    Most of our railway network uses wooden ties. Most of the Chinese railway network uses concrete ties. They can’t make them out of wood because they don’t have any wood in China. They cut down their trees about two thousand years ago.

    Most of our suburban houses are made of wood. Most rural houses in China are either brick or concrete. Urban China is mostly concrete, or steel frame with a concrete skin.

    Most of our bridges are steel bridges. Most of the Chinese bridges are concrete bridges. Steel-reinforced concrete, but a lot more concrete than steel. Their civil engineers just really like to use concrete.

    Most of our roads are asphalt. Most Chinese roads are asphalt on concrete. The Germans build their roads this way, and they last a lot longer than American roads. It may be costing the Chinese a pretty penny now, but it’s going to save them money in fifty years.

    This is the sort of thing that makes me wary of economic prognosticators. Any time I read an analyst who trots out the concrete statistic, I start to wonder, “What else did you miss?” There’s a lot about China that makes no sense, until you look at what’s actually going on.

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    • Replies: @Eamonn Fingleton
    A reply to Engineer:

    Any time I read an analyst who trots out the concrete statistic, I start to wonder, “What else did you miss?” There’s a lot about China that makes no sense, until you look at what’s actually going on.
     
    Well said! You have contributed the most informed and incisive comment of this entire discussion. You could indeed have generalized it to include the entire East Asian region. As someone who lived 27 years there, I can testify that there is a lot about countries like Japan and Korea also that makes no sense until you look at what's going on.....
    ReplyAgree/Disagree/Etc.
  • The US consumers are using a piece of tree leaf with some sign on it made in the basement of the Fed without any backing.

    They use it to exchange tangible and useful consumer goods made of angible materials such as metals,rubber, etc. using precious energies such as crude oil, etc.

    LOL,

    …….if the dollar is so worthless why is China pegging their currency to a piece of tree leaf with signs on it??

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    • Replies: @Astuteobservor II
    it is like the entire conversation just flew by your head in the speed of light.
    ReplyAgree/Disagree/Etc.
  • @PandaAtWar
    As HBD investor has already illustrated, there are always 2 sides of the equation: theoritically it really doesn't matter how much misallocations accur on 1 side, as long as the other side can balance it for real.

    China balances that by her massive industrial production power of real goods that people want (for both export to the world and domestic consumption), her much deeper pocket of foreign reserve, her high domestic saving rate, her arguablely more efficient decision-making style and channels when it really matters, etc. many angles...

    ...whereas the US balances her actual complete bankrupcy primarily by Fed's "QE" (aka outright cheating): printing money from the thin air letting the rest of the world footing your already bankrupted lifestyle bills, and ultimately backed by the the US millitary. Whenever the masses can tell this Emperor's new clothes, the music will stop with the $ sinking like a stone as it should, coupled with hyperinflation and domestic unrest... so will be empty the finance pot for the US military...

    Talking about misallocations of funds, the former USSR is like a walk in a park compared to the current state of the US -Fed mafia on any criteria you could dream of...ROFL

    If you finally understand the basics above, why not join Panda ROFL once more? ROFL!

    “printing money from the thin air”

    isn’t that exactly what China is doing as well?

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  • @PandaAtWar
    On your angle of "leech":

    The US consumers are using a piece of tree leaf with some sign on it made in the basement of the Fed without any backing.

    They use it to exchange tangible and useful consumer goods made of angible materials such as metals,rubber, etc. using precious energies such as crude oil, etc.

    Leech? Are the (US) banking mafia and the US consumers together leeching Chinese manufactorers' residual real values with that hyped up cheap tree leaf instead? ROFL!

    I’ll leave it to sink in.

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  • @anon
    [email protected]'s quote

    As for ‘leach wealth” from others, isn’t the one who has artifically popped up higher currency the one that leeches?
     
    Think some more about the interests of a banking mafia owned factory operating in China and exporting to the US: high dollar and low yuan.

    Both you and Panda seem to see this as solely China vs USA whereas it's partly banking mafia leeching USA using China as a base.

    On your angle of “leech”:

    The US consumers are using a piece of tree leaf with some sign on it made in the basement of the Fed without any backing.

    They use it to exchange tangible and useful consumer goods made of angible materials such as metals,rubber, etc. using precious energies such as crude oil, etc.

    Leech? Are the (US) banking mafia and the US consumers together leeching Chinese manufactorers’ residual real values with that hyped up cheap tree leaf instead? ROFL!

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    • Replies: @anon
    I'll leave it to sink in.
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  • @Astuteobservor II
    what you wrote doesn't make what panda wrote any less true.

    no matter – i’ll assume you got the point i was making

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  • @anon
    [email protected]'s quote

    As for ‘leach wealth” from others, isn’t the one who has artifically popped up higher currency the one that leeches?
     
    Think some more about the interests of a banking mafia owned factory operating in China and exporting to the US: high dollar and low yuan.

    Both you and Panda seem to see this as solely China vs USA whereas it's partly banking mafia leeching USA using China as a base.

    what you wrote doesn’t make what panda wrote any less true.

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    • Replies: @anon
    no matter - i'll assume you got the point i was making
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  • @Anonymous
    Whether it's a problem or not depends on one's perspective and values. But it's not a problem because US dollars are just worthless pieces of paper. Because US dollars aren't worthless pieces of paper. I'd be happy to take any US dollars off your hands if you think they're worthless.

    No, it’s a problem of imbalanced supply and demand currently held together by military power.

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  • anon • Disclaimer says:
    @Astuteobservor II
    this was a great ELI 5.

    [email protected]’s quote

    As for ‘leach wealth” from others, isn’t the one who has artifically popped up higher currency the one that leeches?

    Think some more about the interests of a banking mafia owned factory operating in China and exporting to the US: high dollar and low yuan.

    Both you and Panda seem to see this as solely China vs USA whereas it’s partly banking mafia leeching USA using China as a base.

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    • Replies: @Astuteobservor II
    what you wrote doesn't make what panda wrote any less true.
    , @PandaAtWar
    On your angle of "leech":

    The US consumers are using a piece of tree leaf with some sign on it made in the basement of the Fed without any backing.

    They use it to exchange tangible and useful consumer goods made of angible materials such as metals,rubber, etc. using precious energies such as crude oil, etc.

    Leech? Are the (US) banking mafia and the US consumers together leeching Chinese manufactorers' residual real values with that hyped up cheap tree leaf instead? ROFL!

    ReplyAgree/Disagree/Etc.
  • @PandaAtWar
    As for 'leach wealth" from others, isn't the one who has artifically popped up higher currency the one that leeches?

    Say, you print 1 anon-dollar, and Panda prints 1-Panda dollar, if Panda tells you that the latter worths more than the formal, then Panda leeches your arse off when Panda buys real goods from you, not the other way around, doesn't it?

    Talking about financial illiterates... ROFL!

    this was a great ELI 5.

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    • Replies: @anon
    [email protected]'s quote

    As for ‘leach wealth” from others, isn’t the one who has artifically popped up higher currency the one that leeches?
     
    Think some more about the interests of a banking mafia owned factory operating in China and exporting to the US: high dollar and low yuan.

    Both you and Panda seem to see this as solely China vs USA whereas it's partly banking mafia leeching USA using China as a base.

    ReplyAgree/Disagree/Etc.
  • Anonymous • Disclaimer says:
    @anon
    No problem then - the US can keep trading China pieces of paper for manufactured goods forever.

    Whether it’s a problem or not depends on one’s perspective and values. But it’s not a problem because US dollars are just worthless pieces of paper. Because US dollars aren’t worthless pieces of paper. I’d be happy to take any US dollars off your hands if you think they’re worthless.

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    • Replies: @anon
    No, it's a problem of imbalanced supply and demand currently held together by military power.
    ReplyAgree/Disagree/Etc.
  • @Anonymous
    US dollars aren't worthless. Would you refuse 1 million US dollars if somebody offered them to you because they're worthless?

    No problem then – the US can keep trading China pieces of paper for manufactured goods forever.

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    • Replies: @Anonymous
    Whether it's a problem or not depends on one's perspective and values. But it's not a problem because US dollars are just worthless pieces of paper. Because US dollars aren't worthless pieces of paper. I'd be happy to take any US dollars off your hands if you think they're worthless.
    ReplyAgree/Disagree/Etc.
  • @PandaAtWar
    So according to your previous argument , it concludes that the banking mafia domesticated in, being the citizens of, pay tax to, contribute the GDP of, China? Pls enlighten Panda? LoL

    Think some more about the interests of a US factory operating in China and exporting to the US.

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  • @anon

    Supply and demand are always in balance
     
    You supply me with food and I'll give you worthless pieces of paper in exchange.

    US dollars aren’t worthless. Would you refuse 1 million US dollars if somebody offered them to you because they’re worthless?

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    • Replies: @anon
    No problem then - the US can keep trading China pieces of paper for manufactured goods forever.
    ReplyAgree/Disagree/Etc.
  • @dc.sunsets

    On your Enron analogy: if Enron had enough large work force, it would have never collapsed or at least not in that way, despite some large misallocations.
     
    Such misallocations become self-reinforcing. If you think a family, a firm or a nation-state can continuously misallocate capital on an ever-increasing level indefinitely, I'll join you in your juvenile ROFL.

    For more on what such misallocations eventually look like, please see any history of the USSR.

    As HBD investor has already illustrated, there are always 2 sides of the equation: theoritically it really doesn’t matter how much misallocations accur on 1 side, as long as the other side can balance it for real.

    China balances that by her massive industrial production power of real goods that people want (for both export to the world and domestic consumption), her much deeper pocket of foreign reserve, her high domestic saving rate, her arguablely more efficient decision-making style and channels when it really matters, etc. many angles…

    …whereas the US balances her actual complete bankrupcy primarily by Fed’s “QE” (aka outright cheating): printing money from the thin air letting the rest of the world footing your already bankrupted lifestyle bills, and ultimately backed by the the US millitary. Whenever the masses can tell this Emperor’s new clothes, the music will stop with the $ sinking like a stone as it should, coupled with hyperinflation and domestic unrest… so will be empty the finance pot for the US military…

    Talking about misallocations of funds, the former USSR is like a walk in a park compared to the current state of the US -Fed mafia on any criteria you could dream of…ROFL

    If you finally understand the basics above, why not join Panda ROFL once more? ROFL!

    Read More
    • Replies: @interesting
    "printing money from the thin air"

    isn't that exactly what China is doing as well?
    ReplyAgree/Disagree/Etc.
  • @5371
    You really think if Bernanke had just wanted to, he could have " printed as much money" as them and the US economy would have grown as much as China's? Who knew Gentle Ben was such a spoilsport?
    The "demographic cliff" is another fraud. China's birthrate hasn't been high since the late seventies, hence numerous cohorts haven't been entering the job market since the nineties.

    did you miss read my post? based on your comments it sure seems like it,

    “China’s birthrate hasn’t been high since the late seventies”

    that is exactly my point, their population is aging so where are the workers going to come from?

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    ReplyAgree/Disagree/Etc.
  • @anon
    There are three parties: China, US and banking mafia.

    After off-shoring it becomes in the banking mafia's interest to keep the dollar high and yuan low and by doing so the banking mafia are leeching wealth from the US into their pocket.

    So according to your previous argument , it concludes that the banking mafia domesticated in, being the citizens of, pay tax to, contribute the GDP of, China? Pls enlighten Panda? LoL

    Read More
    • Replies: @anon
    Think some more about the interests of a US factory operating in China and exporting to the US.
    ReplyAgree/Disagree/Etc.
  • @dc.sunsets

    On your Enron analogy: if Enron had enough large work force, it would have never collapsed or at least not in that way, despite some large misallocations.
     
    Such misallocations become self-reinforcing. If you think a family, a firm or a nation-state can continuously misallocate capital on an ever-increasing level indefinitely, I'll join you in your juvenile ROFL.

    For more on what such misallocations eventually look like, please see any history of the USSR.

    Wrong a state can misallocate capital forever and never run out of cash.

    For example in NYC and San Francisco the city government spends billions every year on the homeless.

    Yet somehow this isn’t counted as debt! Because the government doesn’t expect the homeless to pay back the city.

    But what if you took that one billion and instead gave it to a company every year to prevent said unprofitable business from going out of business instead?

    So how exactly is the government pumping up businesses in China going to lead to a financial apocalypse because they have debt!

    But giving cash handouts to take care of criminals and homeless won’t because it’s not debt.

    Get it through your head debt != bad

    And trust me the Chinese government spends a Lot LESS on their criminal justice and homeless systems and lifetime on welfare leeches.

    Read More
    ReplyAgree/Disagree/Etc.
  • @5371
    You really think if Bernanke had just wanted to, he could have " printed as much money" as them and the US economy would have grown as much as China's? Who knew Gentle Ben was such a spoilsport?
    The "demographic cliff" is another fraud. China's birthrate hasn't been high since the late seventies, hence numerous cohorts haven't been entering the job market since the nineties.

    China’s birthrate hasn’t been high since the late seventies, hence numerous cohorts haven’t been entering the job market since the nineties.

    I’m still waiting to watch the denouement of the One Child policy; if it really dented the 51/49 split between girls and boys, leaving a whole lot more permanently unmarried males, I doubt that will contribute to placid conditions.

    Read More
    ReplyAgree/Disagree/Etc.
  • @PandaAtWar
    The true market has existed since the time immoemorial. It doesn't necessaily equate to, or even need, the Western financial system, particularly the current Western financial system which is so inherently hijacked, structurally toxic, and fundamentally bankrupt that it's a sheer luck that China doesn't have much of it.

    Misallocatuions of funds occur to everyone and anyone. The real question is which is the champ:

    China's state investment to the state-of-art infrastructure projects on the grand scale (e.g. national high speed train rails , roads, shipyards, etc. with much corruption here and there though), using mainly hard-savings of her own people who are producing & selling real goods in the global market ?

    Or printing FAR more cheap paper calling it USD from the thin air in Fed's own private "QE" appartment backed by errrr...nothing! Then pop them all into its buddy banking cartels which leverage them up to hundreds of trillions of "financial" instruments such as credit derivatives that remain largely not more than a billionaires /multimillionaires bankers-generating machine for the top 0.01%, besides countless "no one will loss" etc self-masturbating social engineering campaigns?

    Misallocatuions of funds? ROFL. No prize for guessing which one is phenomenal misallocations of funds at orders of magnitude higher than the other because that's just too low IQ, don't you think?

    On your Enron analogy: if Enron had enough large work force, it would have never collapsed or at least not in that way, despite some large misallocations. Essentially the key reason why Enron collapsed had not much to do with misallocation of funds (every company misallocates funds to a certain degree), but due to its completely faked accounting (not real goods/services in sight), and insane leverage (risk management) - all traits "accidentally" and genetically resembling to the Fed? OMG, was Enron just the posterboy brainchild of Greenspan-Yelen cartel?? ROFL.

    As for the legendary "My son works for a major multinational with operations in China...", yeah right, didn't Panda mention that "my 2 sons work for..."? Therefore, 2 against 1, you loss. Thank you and come again. ROFL

    On your Enron analogy: if Enron had enough large work force, it would have never collapsed or at least not in that way, despite some large misallocations.

    Such misallocations become self-reinforcing. If you think a family, a firm or a nation-state can continuously misallocate capital on an ever-increasing level indefinitely, I’ll join you in your juvenile ROFL.

    For more on what such misallocations eventually look like, please see any history of the USSR.

    Read More
    • Replies: @Hbd investor
    Wrong a state can misallocate capital forever and never run out of cash.

    For example in NYC and San Francisco the city government spends billions every year on the homeless.

    Yet somehow this isn't counted as debt! Because the government doesn't expect the homeless to pay back the city.

    But what if you took that one billion and instead gave it to a company every year to prevent said unprofitable business from going out of business instead?

    So how exactly is the government pumping up businesses in China going to lead to a financial apocalypse because they have debt!

    But giving cash handouts to take care of criminals and homeless won't because it's not debt.

    Get it through your head debt != bad

    And trust me the Chinese government spends a Lot LESS on their criminal justice and homeless systems and lifetime on welfare leeches.
    , @PandaAtWar
    As HBD investor has already illustrated, there are always 2 sides of the equation: theoritically it really doesn't matter how much misallocations accur on 1 side, as long as the other side can balance it for real.

    China balances that by her massive industrial production power of real goods that people want (for both export to the world and domestic consumption), her much deeper pocket of foreign reserve, her high domestic saving rate, her arguablely more efficient decision-making style and channels when it really matters, etc. many angles...

    ...whereas the US balances her actual complete bankrupcy primarily by Fed's "QE" (aka outright cheating): printing money from the thin air letting the rest of the world footing your already bankrupted lifestyle bills, and ultimately backed by the the US millitary. Whenever the masses can tell this Emperor's new clothes, the music will stop with the $ sinking like a stone as it should, coupled with hyperinflation and domestic unrest... so will be empty the finance pot for the US military...

    Talking about misallocations of funds, the former USSR is like a walk in a park compared to the current state of the US -Fed mafia on any criteria you could dream of...ROFL

    If you finally understand the basics above, why not join Panda ROFL once more? ROFL!

    , @Anonymous
    How do you define "misallocate capital"? There are people who argue that, for example, not firing American workers and outsourcing to lower costs is "misallocating capital". How do you define it?
    ReplyAgree/Disagree/Etc.
  • @Wizard of Oz
    Living and mostly investing in a country which first became rich in the first major era of globalisation roughly from the 1850s to 1914 and which went a long way, greatly to the benefit of most Australians, to throwing off the protectionist straight jacket (and inflator of costs) that prevailed from about 1905 to the 1980s, I don't respond instantly to the idea of "globalisation" as a negative. I wonder whether you would care to clarify what you mean by it, why it is bad, who suffers and who benefits.

    I associate globalisation with the benefits of free trade where the necessary conditions are met. Were Ricardo et al. all wrong about comparative advantage? Do the qualifications outweigh the basic advantages?

    Assuming you object to the consequences of free trade and attempts at achieving optimum comparative advantage I still wonder why you blame bankers for manufacturing businesses seeking to lower their costs when reduced or nil tariffs and abolition of quota restrictions make it sensible to move some manufacturing to cheap labour countries. Not only do I see it as having no special connection with banking but I also would like to know what you mean by "banking mafia". I won't be so pedantic as to require such a metaphor to connote illegality but it still seems to mean, of necessity, that you consider a large and relevant part of the banking industry engages in immoral coercion of the US government and does not engage in customer centred competition. That makes me even less persuaded that bankers have been major causes of the changes which have led to manufacturing leaving America.

    The problem is not free trade per se, and Ricardo et al are correct within the scope of their examination.

    The problem is that free trade – as defined in the term being thrown around (“globalization”) includes external factors to the trade itself. Americans – or Australians or any country in the developed world for that matter – cannot compete with the price point offered by developing nations manufacturing costs. We are precluded from doing so by things like environmental and labor laws and fees, minimum wage laws, etc. Even were our standard of living reduced to the level of the third world, or theirs brought up to match ours, our regime of government regulations, taxes, and laws would not allow for truly “free” competition.

    Note that this is not necessarily a bad thing, it just is.

    If I own a manufacturing company, and I build in Mexico (China, Vietnam, Thailand, etc) to sell in the US, I am leveraging an unfair advantage created in large part by the US government by virtue of our increased wage and regulatory burden. Should the US government choose to address this, they have two choices – tax such a transaction through tariff etc, or, remove the advantage. Neither is inherently desirable, therefore, you have the situation you see today.

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    ReplyAgree/Disagree/Etc.
  • anon • Disclaimer says:
    @Wizard of Oz
    Living and mostly investing in a country which first became rich in the first major era of globalisation roughly from the 1850s to 1914 and which went a long way, greatly to the benefit of most Australians, to throwing off the protectionist straight jacket (and inflator of costs) that prevailed from about 1905 to the 1980s, I don't respond instantly to the idea of "globalisation" as a negative. I wonder whether you would care to clarify what you mean by it, why it is bad, who suffers and who benefits.

    I associate globalisation with the benefits of free trade where the necessary conditions are met. Were Ricardo et al. all wrong about comparative advantage? Do the qualifications outweigh the basic advantages?

    Assuming you object to the consequences of free trade and attempts at achieving optimum comparative advantage I still wonder why you blame bankers for manufacturing businesses seeking to lower their costs when reduced or nil tariffs and abolition of quota restrictions make it sensible to move some manufacturing to cheap labour countries. Not only do I see it as having no special connection with banking but I also would like to know what you mean by "banking mafia". I won't be so pedantic as to require such a metaphor to connote illegality but it still seems to mean, of necessity, that you consider a large and relevant part of the banking industry engages in immoral coercion of the US government and does not engage in customer centred competition. That makes me even less persuaded that bankers have been major causes of the changes which have led to manufacturing leaving America.

    I still wonder why you blame bankers for manufacturing businesses seeking to lower their costs when reduced or nil tariffs and abolition of quota restrictions make it sensible to move some manufacturing to cheap labour countries.

    shareholder value
    junk bonds
    relaxation of rules on hostile takeovers
    abolition of tariffs and quota

    all changes that the banking mafia (aka Wall St.) made which forced manufacturers to offshore or be taken over and which led to the current global imbalance.

    Not in America’s interest, not in China’s interest but in the banking mafia’s interest.

    .

    As previously mentioned the current situation in a nutshell is the banking mafia offshored supply to the east while keeping demand in the west funded by ever increasing debt which was always going to break down eventually when artificial western demand dried up.

    How does China get out of this situation of working for worthless paper? They can do it by switching from exports to domestic consumption – in effect USA and China switch places: China becomes 1950s America and America becomes 1950s China. However that requires a stronger yuan and increased wages in China.

    Problem: when they try to do this that part of Chinese manufacturing which is owned by the banking mafia starts to move their plants to cheaper countries.

    So they’re stuck. If they try to switch to a domestic market the banking mafia take half their economy away and if they don’t they end up effectively slaves to worthless bits of paper.

    Solution: nationalize the banking mafia owned factories so they can’t leave and then increase wages.

    Problem: as the banking mafia currently control the US government that would mean war.

    Solution: they need to take out the banking mafia.

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    ReplyAgree/Disagree/Etc.
  • @AG
    At end of the day, economy is trade with goods and service using money as media. Goods, service, money need to constantly changing hands.

    Passive saving (Chinese did too much in general) is not good for economical activities. Active spending is good. Active spending on credit is even better for economical activities.

    Chinese government should create social security like pension plan for her citizens to stimulate people spend their money instead of passive saving for retirement. Inflation is another way to prevent people doing too much passive saving. All these can be done by government to create internal demand for economical activity. Oversupply needs to meet overdemand to keep economical activities at higher rate which means higher GPD per capita.

    Benefit of debt spending: higher productivity, higher economical activity, wealthier the people and nations.

    On paper there are more super-poor in rich countries than China due to negative wealth as result of debt earlier in life when net worth is calculated. Maybe Donald Trump is one of those “super poor” due to debt.

    http://www.forbes.com/sites/timworstall/2015/10/14/credit-suisse-wealth-report-there-are-more-poor-people-in-america-than-china/#2715e4857a0b614717b8148a

    But.

    With debt and interest, people are more motivated to work harder (higher productivity) to pay it back. Actually it is one of incentive in developed nations, which ends up with more wealth for the individual later in life and nation in general. Any business person would know that you can do very little with your own earning in life (small business only). With borrowed money, you can do far more if you can pay it back with investment plan. Students who take on debt to get elite education are investors who invests in their own future. When people take on debt, creditors and borrower both evaluate the odd of success (ability to pay back). Debt will give people with more potential a chance to enrich themselves and country as whole.

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    ReplyAgree/Disagree/Etc.
  • @PandaAtWar
    As for 'leach wealth" from others, isn't the one who has artifically popped up higher currency the one that leeches?

    Say, you print 1 anon-dollar, and Panda prints 1-Panda dollar, if Panda tells you that the latter worths more than the formal, then Panda leeches your arse off when Panda buys real goods from you, not the other way around, doesn't it?

    Talking about financial illiterates... ROFL!

    There are three parties: China, US and banking mafia.

    After off-shoring it becomes in the banking mafia’s interest to keep the dollar high and yuan low and by doing so the banking mafia are leeching wealth from the US into their pocket.

    Read More
    • Replies: @PandaAtWar
    So according to your previous argument , it concludes that the banking mafia domesticated in, being the citizens of, pay tax to, contribute the GDP of, China? Pls enlighten Panda? LoL
    ReplyAgree/Disagree/Etc.
  • @Anonymous
    What do you mean by supply and demand being in balance? Supply and demand are always in balance, as long as prices can adjust.

    Supply and demand are always in balance

    You supply me with food and I’ll give you worthless pieces of paper in exchange.

    Read More
    • Replies: @Anonymous
    US dollars aren't worthless. Would you refuse 1 million US dollars if somebody offered them to you because they're worthless?
    ReplyAgree/Disagree/Etc.
  • @anon
    Because the truth is it's only partly Chinese factories and partly US factories off-shored to China by Wall St.

    Thus an undervalued yuan was in Wall St's interest as they slowly leached wealth from the US.

    As for ‘leach wealth” from others, isn’t the one who has artifically popped up higher currency the one that leeches?

    Say, you print 1 anon-dollar, and Panda prints 1-Panda dollar, if Panda tells you that the latter worths more than the formal, then Panda leeches your arse off when Panda buys real goods from you, not the other way around, doesn’t it?

    Talking about financial illiterates… ROFL!

    Read More
    • Replies: @anon
    There are three parties: China, US and banking mafia.

    After off-shoring it becomes in the banking mafia's interest to keep the dollar high and yuan low and by doing so the banking mafia are leeching wealth from the US into their pocket.
    , @Astuteobservor II
    this was a great ELI 5.
    ReplyAgree/Disagree/Etc.
  • @interesting
    did the author bring up the fact that China printed more money since 2008 than all the other major CB's combined?

    that's how they achieved any growth since then and i stopped reading when he talked about the last 15 years as if the next 15 will be the same, they won't be, they never are.

    China is the biggest debt bomb in the history of the world AND i'll bet the author din't bother with their demographic cliff either.

    what i find interesting is the people that imply china leadership as "the masters of the universe" and can do no wrong ONLY look at one side of the balance sheet..

    Have you heard “QE” and “off-book credit derivs”?

    You are illterate on finance, aren’t you?

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    ReplyAgree/Disagree/Etc.
  • @dc.sunsets
    Super-high savings is great...as long as it is not misallocated into phenomenally redundant overcapacity.

    This is the fact to which macroeconomists are blind: in the absence of a true market, there is no way to know what product actually qualifies as an economic "good." China's financial system, as I understand it, lacks even the tissue of transparency we now condone in the West.

    We have such structured markets now that there is no way to discern how much product is good and how much simply represents digging a ditch and then filling it in, i.e., investment that produces nothing but entropy.

    If Enron's employees saved 20% of their net (forced by the management) and plowed it into the company's ESOP, and dozens of stock analysts offered endless Buy recommendations, does that mean Enron is a viable and profitable firm? Or does its accounting gamesmanship result in raw material + work + innovation divided by misallocation = nothing?

    My son works for a major multinational with operations in China. Even at the foot soldier level it is apparent to him that the firm is realizing just how little its "investment" is yielding, and how interaction with Chinese counterparts (presumably the cream of the crop) underwhelms.

    The true market has existed since the time immoemorial. It doesn’t necessaily equate to, or even need, the Western financial system, particularly the current Western financial system which is so inherently hijacked, structurally toxic, and fundamentally bankrupt that it’s a sheer luck that China doesn’t have much of it.

    Misallocatuions of funds occur to everyone and anyone. The real question is which is the champ:

    China’s state investment to the state-of-art infrastructure projects on the grand scale (e.g. national high speed train rails , roads, shipyards, etc. with much corruption here and there though), using mainly hard-savings of her own people who are producing & selling real goods in the global market ?

    Or printing FAR more cheap paper calling it USD from the thin air in Fed’s own private “QE” appartment backed by errrr…nothing! Then pop them all into its buddy banking cartels which leverage them up to hundreds of trillions of “financial” instruments such as credit derivatives that remain largely not more than a billionaires /multimillionaires bankers-generating machine for the top 0.01%, besides countless “no one will loss” etc self-masturbating social engineering campaigns?

    Misallocatuions of funds? ROFL. No prize for guessing which one is phenomenal misallocations of funds at orders of magnitude higher than the other because that’s just too low IQ, don’t you think?

    On your Enron analogy: if Enron had enough large work force, it would have never collapsed or at least not in that way, despite some large misallocations. Essentially the key reason why Enron collapsed had not much to do with misallocation of funds (every company misallocates funds to a certain degree), but due to its completely faked accounting (not real goods/services in sight), and insane leverage (risk management) – all traits “accidentally” and genetically resembling to the Fed? OMG, was Enron just the posterboy brainchild of Greenspan-Yelen cartel?? ROFL.

    As for the legendary “My son works for a major multinational with operations in China…”, yeah right, didn’t Panda mention that “my 2 sons work for…”? Therefore, 2 against 1, you loss. Thank you and come again. ROFL

    Read More
    • Replies: @dc.sunsets

    On your Enron analogy: if Enron had enough large work force, it would have never collapsed or at least not in that way, despite some large misallocations.
     
    Such misallocations become self-reinforcing. If you think a family, a firm or a nation-state can continuously misallocate capital on an ever-increasing level indefinitely, I'll join you in your juvenile ROFL.

    For more on what such misallocations eventually look like, please see any history of the USSR.
    ReplyAgree/Disagree/Etc.
  • @KA
    IQ obsession will force Americns and Europeans a kind of fatalism . Competition will not be in the psychology anymore Changes in the behavior will be put off . Worship of IQ shows poor IQ and nothing else
    This damages the chances of recovery from the impotence laziness,and poor thinking . It eliminates the numerous myriad directions that a ountry could try to escape recover,and prosper. IQ worship creates learned helplessness .

    American or Indian problem is not rooted in IQ . The disadvantages are not to be found in IQ.
    There are many rigid barriers in thinking and in practices . These explain the rot.
    Sure the trade barrier , devaluation of yuan , theft of trade secrets are not new innovation of some new kind of IQ . The hubris to neglect them and arrogance to ignore them are manifestation of a systematic fault lines that are undergirded and maintained by American Exceptionalism ,dismissive attitude to other culture and to the faith in white aryan European Protestant superiority. Add the lack of knowledge to this mix ( among those who matter in shaping policy public opinion,and utterring cautions to the audiences on the media) .

    American habit of searchings for quick answers for any of their personal problems translate into searching for same quick fix in other areas of collective doldrums and insanities . It also leads to quick ,emotional , faulty and ego -pleasing conclusion . This is why Saddam's or Iran or N Korea's bravado turn into an ominous portend but Chinese deceptivity give a false sense of hope with trust in Anerican invincibility .
    Above all Chinese play the game as monolithic coordinated top to bottom advancing column . America is constrained by too many voices that are motivated by personal gains, anger at third party ( support China because it will hurt Russia despite not benefitting America) , motovated by individual corporate gain that hurts overall economy , falling prey to the shallowness of arguments about capitalism ( af if they were some divine revealitions nd laws) ,and uncoordinated misdirected ill conceived foreign adventures promoted by the liberal interventionist and the neocons.

    IQ obsession amongst Americans and Europeans? I don’t see it. Apart from the bad company you keep on blogs where do you find it? Not amongst people running businesses and employing people for sure. If anything there is surely to little concern with IQ in the sense of concern about the dysgenic breeding of Americans and Europeans.

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    ReplyAgree/Disagree/Etc.
  • @anon
    Globalization has been a 30 year banking mafia scam that was always going to end in collapse.

    Originally supply and demand was mostly in the west and in balance.

    The banking mafia gradually off-shored supply to the east while keeping demand in the west so they could pay eastern wages while still selling at western prices.

    This made the banking mafia very rich.

    However the imbalance between supply and demand meant it could only last as long as western debt lasted.

    The banking mafia are organised crime.

    Living and mostly investing in a country which first became rich in the first major era of globalisation roughly from the 1850s to 1914 and which went a long way, greatly to the benefit of most Australians, to throwing off the protectionist straight jacket (and inflator of costs) that prevailed from about 1905 to the 1980s, I don’t respond instantly to the idea of “globalisation” as a negative. I wonder whether you would care to clarify what you mean by it, why it is bad, who suffers and who benefits.

    I associate globalisation with the benefits of free trade where the necessary conditions are met. Were Ricardo et al. all wrong about comparative advantage? Do the qualifications outweigh the basic advantages?

    Assuming you object to the consequences of free trade and attempts at achieving optimum comparative advantage I still wonder why you blame bankers for manufacturing businesses seeking to lower their costs when reduced or nil tariffs and abolition of quota restrictions make it sensible to move some manufacturing to cheap labour countries. Not only do I see it as having no special connection with banking but I also would like to know what you mean by “banking mafia”. I won’t be so pedantic as to require such a metaphor to connote illegality but it still seems to mean, of necessity, that you consider a large and relevant part of the banking industry engages in immoral coercion of the US government and does not engage in customer centred competition. That makes me even less persuaded that bankers have been major causes of the changes which have led to manufacturing leaving America.

    Read More
    • Replies: @anon

    I still wonder why you blame bankers for manufacturing businesses seeking to lower their costs when reduced or nil tariffs and abolition of quota restrictions make it sensible to move some manufacturing to cheap labour countries.
     
    shareholder value
    junk bonds
    relaxation of rules on hostile takeovers
    abolition of tariffs and quota

    all changes that the banking mafia (aka Wall St.) made which forced manufacturers to offshore or be taken over and which led to the current global imbalance.

    Not in America's interest, not in China's interest but in the banking mafia's interest.

    .


    As previously mentioned the current situation in a nutshell is the banking mafia offshored supply to the east while keeping demand in the west funded by ever increasing debt which was always going to break down eventually when artificial western demand dried up.

    How does China get out of this situation of working for worthless paper? They can do it by switching from exports to domestic consumption - in effect USA and China switch places: China becomes 1950s America and America becomes 1950s China. However that requires a stronger yuan and increased wages in China.

    Problem: when they try to do this that part of Chinese manufacturing which is owned by the banking mafia starts to move their plants to cheaper countries.

    So they're stuck. If they try to switch to a domestic market the banking mafia take half their economy away and if they don't they end up effectively slaves to worthless bits of paper.

    Solution: nationalize the banking mafia owned factories so they can't leave and then increase wages.

    Problem: as the banking mafia currently control the US government that would mean war.

    Solution: they need to take out the banking mafia.
    , @Lucius
    The problem is not free trade per se, and Ricardo et al are correct within the scope of their examination.

    The problem is that free trade - as defined in the term being thrown around ("globalization") includes external factors to the trade itself. Americans - or Australians or any country in the developed world for that matter - cannot compete with the price point offered by developing nations manufacturing costs. We are precluded from doing so by things like environmental and labor laws and fees, minimum wage laws, etc. Even were our standard of living reduced to the level of the third world, or theirs brought up to match ours, our regime of government regulations, taxes, and laws would not allow for truly "free" competition.

    Note that this is not necessarily a bad thing, it just is.

    If I own a manufacturing company, and I build in Mexico (China, Vietnam, Thailand, etc) to sell in the US, I am leveraging an unfair advantage created in large part by the US government by virtue of our increased wage and regulatory burden. Should the US government choose to address this, they have two choices - tax such a transaction through tariff etc, or, remove the advantage. Neither is inherently desirable, therefore, you have the situation you see today.
    ReplyAgree/Disagree/Etc.
  • @interesting
    did the author bring up the fact that China printed more money since 2008 than all the other major CB's combined?

    that's how they achieved any growth since then and i stopped reading when he talked about the last 15 years as if the next 15 will be the same, they won't be, they never are.

    China is the biggest debt bomb in the history of the world AND i'll bet the author din't bother with their demographic cliff either.

    what i find interesting is the people that imply china leadership as "the masters of the universe" and can do no wrong ONLY look at one side of the balance sheet..

    You really think if Bernanke had just wanted to, he could have ” printed as much money” as them and the US economy would have grown as much as China’s? Who knew Gentle Ben was such a spoilsport?
    The “demographic cliff” is another fraud. China’s birthrate hasn’t been high since the late seventies, hence numerous cohorts haven’t been entering the job market since the nineties.

    Read More
    • Replies: @dc.sunsets

    China’s birthrate hasn’t been high since the late seventies, hence numerous cohorts haven’t been entering the job market since the nineties.
     
    I'm still waiting to watch the denouement of the One Child policy; if it really dented the 51/49 split between girls and boys, leaving a whole lot more permanently unmarried males, I doubt that will contribute to placid conditions.
    , @interesting
    did you miss read my post? based on your comments it sure seems like it,

    "China’s birthrate hasn’t been high since the late seventies"

    that is exactly my point, their population is aging so where are the workers going to come from?
    ReplyAgree/Disagree/Etc.
  • @anon
    It's not China's fault. Since the 1980s Wall St screwed up global supply and demand.

    Yes indeed.

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    ReplyAgree/Disagree/Etc.
  • @Anonymous
    "phenomenal overcapacity" is nonsense. Savings have been used for public works of phenomenal, useful scale. Take the high speed rail network, now 20,000km in length (more than the rest of the world combined). That's infrastructure that is being used at capacity currently and will be used for the next 100-200 years. https://en.wikipedia.org/wiki/High-speed_rail_in_China

    “and will be used for the next 100-200 years”

    i literally laughed out load when i read that…….this is China we’re talking about.

    if it doesn’t collapse at some point they will blow it up and rebuild it just to put people to work.

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  • @utu
    Almost each declarative statement in this article and comments I can contest with a valid counter example. Nothing here has been clarified. The economic discourse is an art of obfuscation. Obfuscation not of the true knowledge but the ignorance because the true knowledge either does not exist or is very well hidden.

    did the author bring up the fact that China printed more money since 2008 than all the other major CB’s combined?

    that’s how they achieved any growth since then and i stopped reading when he talked about the last 15 years as if the next 15 will be the same, they won’t be, they never are.

    China is the biggest debt bomb in the history of the world AND i’ll bet the author din’t bother with their demographic cliff either.

    what i find interesting is the people that imply china leadership as “the masters of the universe” and can do no wrong ONLY look at one side of the balance sheet..

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    • Replies: @5371
    You really think if Bernanke had just wanted to, he could have " printed as much money" as them and the US economy would have grown as much as China's? Who knew Gentle Ben was such a spoilsport?
    The "demographic cliff" is another fraud. China's birthrate hasn't been high since the late seventies, hence numerous cohorts haven't been entering the job market since the nineties.
    , @PandaAtWar
    Have you heard "QE" and "off-book credit derivs"?

    You are illterate on finance, aren't you?
    ReplyAgree/Disagree/Etc.
  • “a rate of growth in dollar-denominated export revenues that has averaged more than 17 percent a year in the last fifteen years”

    facepalm…..taking the past and extending it forever into the future isn’t wise.

    China has as much if not MORE debt than the USA.

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  • @Reg Cæsar

    ... to keep the yuan at less than half its true value.
     
    Speaking of supply and demand... This is why international finance has always appeared to be voodoo to me. Why wouldn't the marketplace correct for such a false value, and reattain equilibrium, in this market as it does in any other? Why is it any more robust than any other fiat pricing?

    It's kind of a paper, or pixel, form of bimetallism.

    The Chinese government says “bring me a dollar, and I will give you six yuan. Bring me six yuan, and I will give you a dollar.” As long as it does not run out of dollars, the exchange rate is now fixed at six. A currency crisis is when it starts to run out of dollars. Because of persistent trade surpluses, it has many dollars. Simplifying a bit, obviously.

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  • Anonymous • Disclaimer says:
    @dc.sunsets
    Super-high savings is great...as long as it is not misallocated into phenomenally redundant overcapacity.

    This is the fact to which macroeconomists are blind: in the absence of a true market, there is no way to know what product actually qualifies as an economic "good." China's financial system, as I understand it, lacks even the tissue of transparency we now condone in the West.

    We have such structured markets now that there is no way to discern how much product is good and how much simply represents digging a ditch and then filling it in, i.e., investment that produces nothing but entropy.

    If Enron's employees saved 20% of their net (forced by the management) and plowed it into the company's ESOP, and dozens of stock analysts offered endless Buy recommendations, does that mean Enron is a viable and profitable firm? Or does its accounting gamesmanship result in raw material + work + innovation divided by misallocation = nothing?

    My son works for a major multinational with operations in China. Even at the foot soldier level it is apparent to him that the firm is realizing just how little its "investment" is yielding, and how interaction with Chinese counterparts (presumably the cream of the crop) underwhelms.

    “phenomenal overcapacity” is nonsense. Savings have been used for public works of phenomenal, useful scale. Take the high speed rail network, now 20,000km in length (more than the rest of the world combined). That’s infrastructure that is being used at capacity currently and will be used for the next 100-200 years. https://en.wikipedia.org/wiki/High-speed_rail_in_China

    Read More
    • Replies: @interesting
    "and will be used for the next 100-200 years"


    i literally laughed out load when i read that.......this is China we're talking about.

    if it doesn't collapse at some point they will blow it up and rebuild it just to put people to work.
    ReplyAgree/Disagree/Etc.
  • @anon
    Globalization has been a 30 year banking mafia scam that was always going to end in collapse.

    Originally supply and demand was mostly in the west and in balance.

    The banking mafia gradually off-shored supply to the east while keeping demand in the west so they could pay eastern wages while still selling at western prices.

    This made the banking mafia very rich.

    However the imbalance between supply and demand meant it could only last as long as western debt lasted.

    The banking mafia are organised crime.

    What do you mean by supply and demand being in balance? Supply and demand are always in balance, as long as prices can adjust.

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    • Replies: @anon

    Supply and demand are always in balance
     
    You supply me with food and I'll give you worthless pieces of paper in exchange.
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  • @Reg Cæsar

    ... to keep the yuan at less than half its true value.
     
    Speaking of supply and demand... This is why international finance has always appeared to be voodoo to me. Why wouldn't the marketplace correct for such a false value, and reattain equilibrium, in this market as it does in any other? Why is it any more robust than any other fiat pricing?

    It's kind of a paper, or pixel, form of bimetallism.

    Because the truth is it’s only partly Chinese factories and partly US factories off-shored to China by Wall St.

    Thus an undervalued yuan was in Wall St’s interest as they slowly leached wealth from the US.

    Read More
    • Replies: @PandaAtWar
    As for 'leach wealth" from others, isn't the one who has artifically popped up higher currency the one that leeches?

    Say, you print 1 anon-dollar, and Panda prints 1-Panda dollar, if Panda tells you that the latter worths more than the formal, then Panda leeches your arse off when Panda buys real goods from you, not the other way around, doesn't it?

    Talking about financial illiterates... ROFL!
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  • @Realist
    You could have listed Zero Hedge as a super China market bear blog.

    All the MSM blames the Chinese market for the US economic problems.

    It’s not China’s fault. Since the 1980s Wall St screwed up global supply and demand.

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    • Replies: @Realist
    Yes indeed.
    ReplyAgree/Disagree/Etc.
  • anon • Disclaimer says:

    Globalization has been a 30 year banking mafia scam that was always going to end in collapse.

    Originally supply and demand was mostly in the west and in balance.

    The banking mafia gradually off-shored supply to the east while keeping demand in the west so they could pay eastern wages while still selling at western prices.

    This made the banking mafia very rich.

    However the imbalance between supply and demand meant it could only last as long as western debt lasted.

    The banking mafia are organised crime.

    Read More
    • Replies: @Anonymous
    What do you mean by supply and demand being in balance? Supply and demand are always in balance, as long as prices can adjust.
    , @Wizard of Oz
    Living and mostly investing in a country which first became rich in the first major era of globalisation roughly from the 1850s to 1914 and which went a long way, greatly to the benefit of most Australians, to throwing off the protectionist straight jacket (and inflator of costs) that prevailed from about 1905 to the 1980s, I don't respond instantly to the idea of "globalisation" as a negative. I wonder whether you would care to clarify what you mean by it, why it is bad, who suffers and who benefits.

    I associate globalisation with the benefits of free trade where the necessary conditions are met. Were Ricardo et al. all wrong about comparative advantage? Do the qualifications outweigh the basic advantages?

    Assuming you object to the consequences of free trade and attempts at achieving optimum comparative advantage I still wonder why you blame bankers for manufacturing businesses seeking to lower their costs when reduced or nil tariffs and abolition of quota restrictions make it sensible to move some manufacturing to cheap labour countries. Not only do I see it as having no special connection with banking but I also would like to know what you mean by "banking mafia". I won't be so pedantic as to require such a metaphor to connote illegality but it still seems to mean, of necessity, that you consider a large and relevant part of the banking industry engages in immoral coercion of the US government and does not engage in customer centred competition. That makes me even less persuaded that bankers have been major causes of the changes which have led to manufacturing leaving America.
    ReplyAgree/Disagree/Etc.
  • @Reg Cæsar
    Nigeria was still a British colony in the 1950s. In other words, it was administrated by competent professionals, whatever the capacity of the locals. So a prediction of growth, if too rosy, wasn't entirely off the mark.

    Koreans at the time misruled themselves, and did so for decades afterward. Independence allowed the "Nigerians" (actually Igbo, Hausa, Yoruba, etc) to do the same.

    Korea was ruled very well after the Korean War ended in 1953 by President Park Chung Hee and his successors in the 80s.

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  • Gordon Chang–a courteous fellow, btw–has been predicting the blow-up of China’s economy for a couple of decades.

    If we wait long enough, he might be right. The question is, will the Cubbies win the series before or after the debacle?

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  • Most likely imo the fact that China has been rebounding dramatically from a similarly dramatically depressed position, below its “natural” level in relation to the rest of the world, for decades.

    I think this is it. If you look at a graph of Chinese GDP growth, it has its peaks and troughs, its just that its peaks are really really high while its troughs are still quite a lot above zero.

    You see an exactly analogorus picture with South Korea, incidentally. Apart from a tiny dip around 1980, its first truly noticeable recession appears to have been around the 1998 crisis – that’s almost 50 years since it started its developmental takeoff.

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  • @MQ
    Why is debt bad for economic growth? It is bad for economic growth because it leads to a failure of confidence on the part of creditors and a failure of consumption on the part of borrowers, leading in turn to the cessation of productive economic exchange between them. This is a problem in a *decentralized market* economy. If you have a command economy, debts can be wiped out by fiat and economic exchange can be forced, meaning that debt is NOT necessarily a problem in a command economy at all. Command economies have other problems, like rampant inefficiency in normal distribution.

    Debt, the sinister-sounding 'shadow banking', and the like might (or might not) be an issue for the market exchange elements of China's economy, but the fact that China has a strong command / public ownership element to its economy leads me to believe that debt will have very different effects there. If much of the market demand and discipline in China's economy is coming from foreign importers, they will not be particularly affected by China's internal debt issues. Capital will continue to be allocated to industries that are successful export industries, introducing an element of market discipline. In terms of Chinese owing money to each other, that might be an issue or the government might iron it out with internal redistributions, but much of China's growth is not coming from their internal markets.

    If I interpret your position to be approving of a command economy, I only suggest you reconsider the consequences of eliminating (or worse, falsifying) factor prices.

    Mises irrefutably proved that without factor prices (set in a market) it is impossible to allocate resources properly (i.e., avoid waste on a scale commensurate with the lack of prices.)

    China, by this standard, must be engaging in waste on a level we can’t imagine. Given its steel-making capacity and concrete production binge (didn’t they pour more concrete in the last few years than the USA did during the 20th century?), we have signs that this is exactly the case.

    When you turn a raw material into something, you rarely get the chance to recoup the investment in case it turns out to be a mistake. Like someone who buys a shipload of snow-mobiles right before a decade-long period of unusually warm winters, there’s going to be a phenomenally large write-off sometime.

    China is courting an astronomical write-off. (So is the West, but that’s another story.)

    China’s problem isn’t who owns the debt and who owes it. China’s problem with the debt is that most of it is bad, and the domino effect of recognizing that fact will have rather large implications. Debt during the last 30 years allowed a lot of capital consumption disguised as “investment.”

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    • Replies: @Historian

    China, by this standard, must be engaging in waste on a level we can’t imagine. Given its steel-making capacity and concrete production binge (didn’t they pour more concrete in the last few years than the USA did during the 20th century?), we have signs that this is exactly the case.
     
    The Chinese use concrete for everything, where we would use all sorts of substitute materials.

    Most of our railway network uses wooden ties. Most of the Chinese railway network uses concrete ties. They can't make them out of wood because they don't have any wood in China. They cut down their trees about two thousand years ago.

    Most of our suburban houses are made of wood. Most rural houses in China are either brick or concrete. Urban China is mostly concrete, or steel frame with a concrete skin.

    Most of our bridges are steel bridges. Most of the Chinese bridges are concrete bridges. Steel-reinforced concrete, but a lot more concrete than steel. Their civil engineers just really like to use concrete.

    Most of our roads are asphalt. Most Chinese roads are asphalt on concrete. The Germans build their roads this way, and they last a lot longer than American roads. It may be costing the Chinese a pretty penny now, but it's going to save them money in fifty years.

    This is the sort of thing that makes me wary of economic prognosticators. Any time I read an analyst who trots out the concrete statistic, I start to wonder, "What else did you miss?" There's a lot about China that makes no sense, until you look at what's actually going on.
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  • @Stephen R. Diamond
    The highest-IQ capitalist countries have periodic recessions. China hasn't had one for decades, you don't soon predict one. IQ explains the possibility of rapid advance, but something else (economic organization?) must explain its uninterrupted character.

    something else (economic organization?) must explain its uninterrupted character

    Most likely imo the fact that China has been rebounding dramatically from a similarly dramatically depressed position, below its “natural” level in relation to the rest of the world, for decades. Ever since the end of WW2 in some senses, but most obviously since the 1980s, clearly.

    Similarly Japan experienced only occasional brief pauses in its relentless growth from the 1960s to the beginning of the 1990s.

    Historically, China has been the number one world economy for much of human history. It’s not unreasonable to suppose it might well achieve that position again, once the advantages to Europe and its offshoots (such as the US) of the industrial revolution have finally played themselves out.

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  • Almost each declarative statement in this article and comments I can contest with a valid counter example. Nothing here has been clarified. The economic discourse is an art of obfuscation. Obfuscation not of the true knowledge but the ignorance because the true knowledge either does not exist or is very well hidden.

    Read More
    • Replies: @interesting
    did the author bring up the fact that China printed more money since 2008 than all the other major CB's combined?

    that's how they achieved any growth since then and i stopped reading when he talked about the last 15 years as if the next 15 will be the same, they won't be, they never are.

    China is the biggest debt bomb in the history of the world AND i'll bet the author din't bother with their demographic cliff either.

    what i find interesting is the people that imply china leadership as "the masters of the universe" and can do no wrong ONLY look at one side of the balance sheet..
    ReplyAgree/Disagree/Etc.
  • China is simple to forecast, simply look at the rise of the other East Asian nations and extrapolate.

    Sure the data is questionable, and for outsiders the business practices are unfathomable, but that applies to most of them. Western firms piled into China, they took the tech and the Western companies will be left with nothing. Well done GE for steering clear and opting for Russia to expand into. Like most East Asian markets they will be closed to almost everything except high end western consumer goods.

    Anyway the Chinese economy seems to be picking up now after the slowdown of 2015.

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  • @dc.sunsets
    The entire world is still seized by a mania in credit creation and the inevitable massive misallocation of resources that must depend from it. It's gone on long enough that virtually everyone thinks this is the New Normal. Hint: the last 30-40 years will eventually become Vol. 2 for Charles Mackay's Extraordinary Popular Delusions and the Madness of Crowds.

    China is, if anything, Ground Zero for the worst of the credit bubble (in large part because its financial system is even more of a command "economy" than any in the West.) This makes China the world's biggest casino, in a world covered by them.

    I have no doubt that the deeply embedded deference of East Asian culture will keep China's restive populace far more docile than anywhere else such economic cataclysms may rage, but the notion that there won't be hell to pay for China's recent "miracle" is silly.

    No, they're not likely to return to Maoist mass murder. Yes, they're in for some serious upheaval. China has spent decades accepting dollar-IOU's in return for shipping mountains of stuff to the USA. A credit collapse should have very interesting effects when it arrives in earnest.

    Why is debt bad for economic growth? It is bad for economic growth because it leads to a failure of confidence on the part of creditors and a failure of consumption on the part of borrowers, leading in turn to the cessation of productive economic exchange between them. This is a problem in a *decentralized market* economy. If you have a command economy, debts can be wiped out by fiat and economic exchange can be forced, meaning that debt is NOT necessarily a problem in a command economy at all. Command economies have other problems, like rampant inefficiency in normal distribution.

    Debt, the sinister-sounding ‘shadow banking’, and the like might (or might not) be an issue for the market exchange elements of China’s economy, but the fact that China has a strong command / public ownership element to its economy leads me to believe that debt will have very different effects there. If much of the market demand and discipline in China’s economy is coming from foreign importers, they will not be particularly affected by China’s internal debt issues. Capital will continue to be allocated to industries that are successful export industries, introducing an element of market discipline. In terms of Chinese owing money to each other, that might be an issue or the government might iron it out with internal redistributions, but much of China’s growth is not coming from their internal markets.

    Read More
    • Replies: @dc.sunsets
    If I interpret your position to be approving of a command economy, I only suggest you reconsider the consequences of eliminating (or worse, falsifying) factor prices.

    Mises irrefutably proved that without factor prices (set in a market) it is impossible to allocate resources properly (i.e., avoid waste on a scale commensurate with the lack of prices.)

    China, by this standard, must be engaging in waste on a level we can't imagine. Given its steel-making capacity and concrete production binge (didn't they pour more concrete in the last few years than the USA did during the 20th century?), we have signs that this is exactly the case.

    When you turn a raw material into something, you rarely get the chance to recoup the investment in case it turns out to be a mistake. Like someone who buys a shipload of snow-mobiles right before a decade-long period of unusually warm winters, there's going to be a phenomenally large write-off sometime.

    China is courting an astronomical write-off. (So is the West, but that's another story.)

    China's problem isn't who owns the debt and who owes it. China's problem with the debt is that most of it is bad, and the domino effect of recognizing that fact will have rather large implications. Debt during the last 30 years allowed a lot of capital consumption disguised as "investment."
    ReplyAgree/Disagree/Etc.
  • @Eamonn Fingleton
    A reply to Sherman (Comment 27):


    You say that the Chinese economic model "has been based largely on cheap labor." Chinese labor would not seem particularly cheap if the Chinese authorities had not intervened constantly to keep the yuan at less than half its true value. As for the future, you seem not to have understood: China's super-high savings rate has been providing Chinese industry with torrential flows of capital to invest in the most advanced, capital-intensive production systems.

    … to keep the yuan at less than half its true value.

    Speaking of supply and demand… This is why international finance has always appeared to be voodoo to me. Why wouldn’t the marketplace correct for such a false value, and reattain equilibrium, in this market as it does in any other? Why is it any more robust than any other fiat pricing?

    It’s kind of a paper, or pixel, form of bimetallism.

    Read More
    • Replies: @anon
    Because the truth is it's only partly Chinese factories and partly US factories off-shored to China by Wall St.

    Thus an undervalued yuan was in Wall St's interest as they slowly leached wealth from the US.

    , @Bill
    The Chinese government says "bring me a dollar, and I will give you six yuan. Bring me six yuan, and I will give you a dollar." As long as it does not run out of dollars, the exchange rate is now fixed at six. A currency crisis is when it starts to run out of dollars. Because of persistent trade surpluses, it has many dollars. Simplifying a bit, obviously.
    ReplyAgree/Disagree/Etc.
  • @Eamonn Fingleton
    A reply to Sherman (Comment 27):


    You say that the Chinese economic model "has been based largely on cheap labor." Chinese labor would not seem particularly cheap if the Chinese authorities had not intervened constantly to keep the yuan at less than half its true value. As for the future, you seem not to have understood: China's super-high savings rate has been providing Chinese industry with torrential flows of capital to invest in the most advanced, capital-intensive production systems.

    Super-high savings is great…as long as it is not misallocated into phenomenally redundant overcapacity.

    This is the fact to which macroeconomists are blind: in the absence of a true market, there is no way to know what product actually qualifies as an economic “good.” China’s financial system, as I understand it, lacks even the tissue of transparency we now condone in the West.

    We have such structured markets now that there is no way to discern how much product is good and how much simply represents digging a ditch and then filling it in, i.e., investment that produces nothing but entropy.

    If Enron’s employees saved 20% of their net (forced by the management) and plowed it into the company’s ESOP, and dozens of stock analysts offered endless Buy recommendations, does that mean Enron is a viable and profitable firm? Or does its accounting gamesmanship result in raw material + work + innovation divided by misallocation = nothing?

    My son works for a major multinational with operations in China. Even at the foot soldier level it is apparent to him that the firm is realizing just how little its “investment” is yielding, and how interaction with Chinese counterparts (presumably the cream of the crop) underwhelms.

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    • Replies: @Anonymous
    "phenomenal overcapacity" is nonsense. Savings have been used for public works of phenomenal, useful scale. Take the high speed rail network, now 20,000km in length (more than the rest of the world combined). That's infrastructure that is being used at capacity currently and will be used for the next 100-200 years. https://en.wikipedia.org/wiki/High-speed_rail_in_China
    , @PandaAtWar
    The true market has existed since the time immoemorial. It doesn't necessaily equate to, or even need, the Western financial system, particularly the current Western financial system which is so inherently hijacked, structurally toxic, and fundamentally bankrupt that it's a sheer luck that China doesn't have much of it.

    Misallocatuions of funds occur to everyone and anyone. The real question is which is the champ:

    China's state investment to the state-of-art infrastructure projects on the grand scale (e.g. national high speed train rails , roads, shipyards, etc. with much corruption here and there though), using mainly hard-savings of her own people who are producing & selling real goods in the global market ?

    Or printing FAR more cheap paper calling it USD from the thin air in Fed's own private "QE" appartment backed by errrr...nothing! Then pop them all into its buddy banking cartels which leverage them up to hundreds of trillions of "financial" instruments such as credit derivatives that remain largely not more than a billionaires /multimillionaires bankers-generating machine for the top 0.01%, besides countless "no one will loss" etc self-masturbating social engineering campaigns?

    Misallocatuions of funds? ROFL. No prize for guessing which one is phenomenal misallocations of funds at orders of magnitude higher than the other because that's just too low IQ, don't you think?

    On your Enron analogy: if Enron had enough large work force, it would have never collapsed or at least not in that way, despite some large misallocations. Essentially the key reason why Enron collapsed had not much to do with misallocation of funds (every company misallocates funds to a certain degree), but due to its completely faked accounting (not real goods/services in sight), and insane leverage (risk management) - all traits "accidentally" and genetically resembling to the Fed? OMG, was Enron just the posterboy brainchild of Greenspan-Yelen cartel?? ROFL.

    As for the legendary "My son works for a major multinational with operations in China...", yeah right, didn't Panda mention that "my 2 sons work for..."? Therefore, 2 against 1, you loss. Thank you and come again. ROFL

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  • @Hbd investor
    I'm not sure if the author believes in hbd or not.

    But hbd is the obvious answer to the disconnect between mainstream economists and actual reality is because of liberal media.

    It was pretty obvious that Korea and China would become fairly wealthy based on iq tests performed.

    At the end of the Korean war in the 1950s pretty much every economist insisted that Nigeria was going to beat Korea and korea in economic development.

    Why did they make this prediction? Because they assumed that every human being was interchangeable and have the same iq, China and Korea's economic development was going to be stalled by the Korean war while Nigeria was going to get a massive head start.

    And true to a fault 65 years later it looks like the hbders we're right.

    The economists will make all sorts of crazy explanations for Chinas and Korea's economic growth, but none of the mainstream economists will ever mention the words iq or genetics.

    Nigeria was still a British colony in the 1950s. In other words, it was administrated by competent professionals, whatever the capacity of the locals. So a prediction of growth, if too rosy, wasn’t entirely off the mark.

    Koreans at the time misruled themselves, and did so for decades afterward. Independence allowed the “Nigerians” (actually Igbo, Hausa, Yoruba, etc) to do the same.

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    • Replies: @Anonymous
    Korea was ruled very well after the Korean War ended in 1953 by President Park Chung Hee and his successors in the 80s.
    ReplyAgree/Disagree/Etc.
  • @Sherman
    Chinese economic growth has no doubt been impressive.

    However, the Chinese economic model has been based largely on cheap labor.

    These days there is no longer an unlimited supply of poor Chinese people willing to do the kind of grunt work needed to sustain this model.

    There is also a tremendous amount of corruption in China. My company recently ran into trouble working with a subcontractor in China. We eventually abandoned the

    I believe China's rise as an economic superpower has been exaggerated.

    A reply to Sherman (Comment 27):

    You say that the Chinese economic model “has been based largely on cheap labor.” Chinese labor would not seem particularly cheap if the Chinese authorities had not intervened constantly to keep the yuan at less than half its true value. As for the future, you seem not to have understood: China’s super-high savings rate has been providing Chinese industry with torrential flows of capital to invest in the most advanced, capital-intensive production systems.

    Read More
    • Replies: @dc.sunsets
    Super-high savings is great...as long as it is not misallocated into phenomenally redundant overcapacity.

    This is the fact to which macroeconomists are blind: in the absence of a true market, there is no way to know what product actually qualifies as an economic "good." China's financial system, as I understand it, lacks even the tissue of transparency we now condone in the West.

    We have such structured markets now that there is no way to discern how much product is good and how much simply represents digging a ditch and then filling it in, i.e., investment that produces nothing but entropy.

    If Enron's employees saved 20% of their net (forced by the management) and plowed it into the company's ESOP, and dozens of stock analysts offered endless Buy recommendations, does that mean Enron is a viable and profitable firm? Or does its accounting gamesmanship result in raw material + work + innovation divided by misallocation = nothing?

    My son works for a major multinational with operations in China. Even at the foot soldier level it is apparent to him that the firm is realizing just how little its "investment" is yielding, and how interaction with Chinese counterparts (presumably the cream of the crop) underwhelms.
    , @Reg Cæsar

    ... to keep the yuan at less than half its true value.
     
    Speaking of supply and demand... This is why international finance has always appeared to be voodoo to me. Why wouldn't the marketplace correct for such a false value, and reattain equilibrium, in this market as it does in any other? Why is it any more robust than any other fiat pricing?

    It's kind of a paper, or pixel, form of bimetallism.
    ReplyAgree/Disagree/Etc.
  • Chinese economic growth has no doubt been impressive.

    However, the Chinese economic model has been based largely on cheap labor.

    These days there is no longer an unlimited supply of poor Chinese people willing to do the kind of grunt work needed to sustain this model.

    There is also a tremendous amount of corruption in China. My company recently ran into trouble working with a subcontractor in China. We eventually abandoned the

    I believe China’s rise as an economic superpower has been exaggerated.

    Read More
    • Replies: @Eamonn Fingleton
    A reply to Sherman (Comment 27):


    You say that the Chinese economic model "has been based largely on cheap labor." Chinese labor would not seem particularly cheap if the Chinese authorities had not intervened constantly to keep the yuan at less than half its true value. As for the future, you seem not to have understood: China's super-high savings rate has been providing Chinese industry with torrential flows of capital to invest in the most advanced, capital-intensive production systems.
    ReplyAgree/Disagree/Etc.
  • @Eamonn Fingleton
    A reply to Sinocinema:



    The point of my article is that the super-bears – some of them clearly at the lunatic-fringe end of Sinology – get all the publicity. You seem to agree, so what is your point?

    As for your suggestion that there are “lots of ultraoptimists as well who predicted double digit growth for China for many decades to come,” I am not aware of a single serious China watcher who have made such an extreme prediction. Perhaps you could quote a few, preferably from the editorial pages of the Wall Street Journal, Washington Post, and New York Times (where the most extreme of the super-bears are not infrequently taken seriously).

    In talking of China’s “zombie banks” and “shadow banking,” you echo what the super-bears have been saying all along. Though there are always problems in any banking system, China’s financial problems have not so far – a generation after they were first talked about – shut down its export growth. To the extent that China’s export growth is likely to slow in future this is merely because the ability of slow-growing Western nations like the United States to continue to increase their imports is limited.

    The entire world is still seized by a mania in credit creation and the inevitable massive misallocation of resources that must depend from it. It’s gone on long enough that virtually everyone thinks this is the New Normal. Hint: the last 30-40 years will eventually become Vol. 2 for Charles Mackay’s Extraordinary Popular Delusions and the Madness of Crowds.

    China is, if anything, Ground Zero for the worst of the credit bubble (in large part because its financial system is even more of a command “economy” than any in the West.) This makes China the world’s biggest casino, in a world covered by them.

    I have no doubt that the deeply embedded deference of East Asian culture will keep China’s restive populace far more docile than anywhere else such economic cataclysms may rage, but the notion that there won’t be hell to pay for China’s recent “miracle” is silly.

    No, they’re not likely to return to Maoist mass murder. Yes, they’re in for some serious upheaval. China has spent decades accepting dollar-IOU’s in return for shipping mountains of stuff to the USA. A credit collapse should have very interesting effects when it arrives in earnest.

    Read More
    • Replies: @MQ
    Why is debt bad for economic growth? It is bad for economic growth because it leads to a failure of confidence on the part of creditors and a failure of consumption on the part of borrowers, leading in turn to the cessation of productive economic exchange between them. This is a problem in a *decentralized market* economy. If you have a command economy, debts can be wiped out by fiat and economic exchange can be forced, meaning that debt is NOT necessarily a problem in a command economy at all. Command economies have other problems, like rampant inefficiency in normal distribution.

    Debt, the sinister-sounding 'shadow banking', and the like might (or might not) be an issue for the market exchange elements of China's economy, but the fact that China has a strong command / public ownership element to its economy leads me to believe that debt will have very different effects there. If much of the market demand and discipline in China's economy is coming from foreign importers, they will not be particularly affected by China's internal debt issues. Capital will continue to be allocated to industries that are successful export industries, introducing an element of market discipline. In terms of Chinese owing money to each other, that might be an issue or the government might iron it out with internal redistributions, but much of China's growth is not coming from their internal markets.
    ReplyAgree/Disagree/Etc.
  • @Hbd investor
    I'm not sure if the author believes in hbd or not.

    But hbd is the obvious answer to the disconnect between mainstream economists and actual reality is because of liberal media.

    It was pretty obvious that Korea and China would become fairly wealthy based on iq tests performed.

    At the end of the Korean war in the 1950s pretty much every economist insisted that Nigeria was going to beat Korea and korea in economic development.

    Why did they make this prediction? Because they assumed that every human being was interchangeable and have the same iq, China and Korea's economic development was going to be stalled by the Korean war while Nigeria was going to get a massive head start.

    And true to a fault 65 years later it looks like the hbders we're right.

    The economists will make all sorts of crazy explanations for Chinas and Korea's economic growth, but none of the mainstream economists will ever mention the words iq or genetics.

    HBD also must include acknowledgement that East Asian culture does not amplify high average IQ the way Western Civ did.

    Anecdotes are anecdotes, but from teachers to engineers (of US/Northern European heritage) what I’ve heard is that Chinese people often excel at wrote math but lack common sense application. Chinese engineers are great at reverse-engineering others’ innovations but their cultural aversion to rocking the boat handicaps their own innovation.

    This is why I laugh when science fiction posits a future dominated by the Chinese. Perhaps I’m wrong, but as I see it, China had a civilization for thousands of years yet never developed true science and their civilization was thus relatively static.

    Without Western Civilization (and the people genetically predisposed to produce it) humanity will stagnate even under a high IQ mean China’s leadership.

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    • Replies: @Billy Liu
    "China had a civilization for thousands of years yet never developed true science and their civilization was thus relatively static."

    Developed a scientific revolution is a singular one-off that was only ever achieved by the successors cultures to Latin Christendom. And only someone truly ignorant of human history could call Chinese civilisation static - it evolved and changed immensely over the two thousands years that followed the founding of the Qin Dynasty.

    "their cultural aversion to rocking the boat handicaps their own innovation."

    I've lived in China for a while - Chinese entrepreneurs and research scientists I've are amongst the biggest and most capsize-prone boat rockers I've encountered.

    "This is why I laugh when science fiction posits a future dominated by the Chinese."

    Probably best not to glean your information on other cultures from Marvel comics and sci-fi movies.
    ReplyAgree/Disagree/Etc.
  • At end of the day, economy is trade with goods and service using money as media. Goods, service, money need to constantly changing hands.

    Passive saving (Chinese did too much in general) is not good for economical activities. Active spending is good. Active spending on credit is even better for economical activities.

    Chinese government should create social security like pension plan for her citizens to stimulate people spend their money instead of passive saving for retirement. Inflation is another way to prevent people doing too much passive saving. All these can be done by government to create internal demand for economical activity. Oversupply needs to meet overdemand to keep economical activities at higher rate which means higher GPD per capita.

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    • Replies: @AG
    Benefit of debt spending: higher productivity, higher economical activity, wealthier the people and nations.


    http://blogs-images.forbes.com/timworstall/files/2015/10/creditsuisseweatlhreport.png

    On paper there are more super-poor in rich countries than China due to negative wealth as result of debt earlier in life when net worth is calculated. Maybe Donald Trump is one of those "super poor" due to debt.

    http://www.forbes.com/sites/timworstall/2015/10/14/credit-suisse-wealth-report-there-are-more-poor-people-in-america-than-china/#2715e4857a0b614717b8148a

    But.

    With debt and interest, people are more motivated to work harder (higher productivity) to pay it back. Actually it is one of incentive in developed nations, which ends up with more wealth for the individual later in life and nation in general. Any business person would know that you can do very little with your own earning in life (small business only). With borrowed money, you can do far more if you can pay it back with investment plan. Students who take on debt to get elite education are investors who invests in their own future. When people take on debt, creditors and borrower both evaluate the odd of success (ability to pay back). Debt will give people with more potential a chance to enrich themselves and country as whole.
    ReplyAgree/Disagree/Etc.
  • @5371
    [Some manufacturing already is moving to Vietnam]

    If true, this suggests the "robotics revolution" is a fraud.

    No, it just means some folks that manufacture low-value “stuff” (rubber dogshit and rubber puke) want even cheaper labor than in China to bring rubber dog shit and rubber puke to a novelty store near you. Said low-value goods don’t need robotics, the margins are too slim.

    Cars and phones and household goods can be done with robots here in the States and we can eliminate the middleman of transport for raw materials at one end and finished product at the other. I’m assuming, anyway. Robots take no breaks, raw materials in at one end, cars and such out the other end. Henry Ford would be proud.

    This would be the one reason those bearish on China would be justified their bearishness.

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    ReplyAgree/Disagree/Etc.
  • @Jim Christian
    Eamonn, question from a layman. If robotics are becoming more and more viable for nearly any item now being manufactured by hand, will China suffer from manufacturing moving back to home countries of companies now manufacturing in China? Some manufacturing already is moving to Vietnam, but that "cheaper labor" train ought to nearly be in the station by now, no? Is not even the cheapest labor far more expensive than robotics?

    Does a resource-rich United States need still to export parts and raw materials to China for assembly anymore, only to have to ship finished product back to the United States for distribution and sale? Might, or shouldn't we see robotic lines in the States manufacture everything here? All you need are a few engineers to program, assemble and maintain the robotic lines, a few sweepers, some security guards to maintain secrets and dispense with the huge numbers of hands on-product. You eliminate the transport of material and finished product, the entire process becomes automated. Of course, what to do with idle hands?

    They talk of returning manufacturing to the U.S., but that move, while efficient, hardly employs more Americans. We don't manufacture with labor anymore which seems a major reason to move it all back here for robotic manufacturing. Does this wound China? Seems to me a mortal wound.

    Are the bears looking at the prospect of U.S.-based robotics killing Chinese manufacturing?

    [Some manufacturing already is moving to Vietnam]

    If true, this suggests the “robotics revolution” is a fraud.

    Read More
    • Replies: @Jim Christian
    No, it just means some folks that manufacture low-value "stuff" (rubber dogshit and rubber puke) want even cheaper labor than in China to bring rubber dog shit and rubber puke to a novelty store near you. Said low-value goods don't need robotics, the margins are too slim.

    Cars and phones and household goods can be done with robots here in the States and we can eliminate the middleman of transport for raw materials at one end and finished product at the other. I'm assuming, anyway. Robots take no breaks, raw materials in at one end, cars and such out the other end. Henry Ford would be proud.

    This would be the one reason those bearish on China would be justified their bearishness.
    ReplyAgree/Disagree/Etc.
  • @Anatoly Karlin
    This article provides a much needed rebuttal to the perenially annoying predicted-12-of-the-past-0-Chinese-recessions crowd. Regrettably, these one might think rather obvious things do have to be repeated every so often.

    That said, the continuing secular rise of China is all but assured not by its industrial policy and technological espionage that Fingleton hyperbolically refers to as the "economic equivalent of murder" - which, for that matter, the vast majority of today's developed countries happily engaged in during their own periods of catch up - but by its high level of average national IQ, which makes it much easier to push through productivity improvements than in S.S.-Africa or even India.

    IQ obsession will force Americns and Europeans a kind of fatalism . Competition will not be in the psychology anymore Changes in the behavior will be put off . Worship of IQ shows poor IQ and nothing else
    This damages the chances of recovery from the impotence laziness,and poor thinking . It eliminates the numerous myriad directions that a ountry could try to escape recover,and prosper. IQ worship creates learned helplessness .

    American or Indian problem is not rooted in IQ . The disadvantages are not to be found in IQ.
    There are many rigid barriers in thinking and in practices . These explain the rot.
    Sure the trade barrier , devaluation of yuan , theft of trade secrets are not new innovation of some new kind of IQ . The hubris to neglect them and arrogance to ignore them are manifestation of a systematic fault lines that are undergirded and maintained by American Exceptionalism ,dismissive attitude to other culture and to the faith in white aryan European Protestant superiority. Add the lack of knowledge to this mix ( among those who matter in shaping policy public opinion,and utterring cautions to the audiences on the media) .

    American habit of searchings for quick answers for any of their personal problems translate into searching for same quick fix in other areas of collective doldrums and insanities . It also leads to quick ,emotional , faulty and ego -pleasing conclusion . This is why Saddam’s or Iran or N Korea’s bravado turn into an ominous portend but Chinese deceptivity give a false sense of hope with trust in Anerican invincibility .
    Above all Chinese play the game as monolithic coordinated top to bottom advancing column . America is constrained by too many voices that are motivated by personal gains, anger at third party ( support China because it will hurt Russia despite not benefitting America) , motovated by individual corporate gain that hurts overall economy , falling prey to the shallowness of arguments about capitalism ( af if they were some divine revealitions nd laws) ,and uncoordinated misdirected ill conceived foreign adventures promoted by the liberal interventionist and the neocons.

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    • Replies: @Wizard of Oz
    IQ obsession amongst Americans and Europeans? I don't see it. Apart from the bad company you keep on blogs where do you find it? Not amongst people running businesses and employing people for sure. If anything there is surely to little concern with IQ in the sense of concern about the dysgenic breeding of Americans and Europeans.
    , @Thirdeye

    Above all Chinese play the game as monolithic coordinated top to bottom advancing column . America is constrained by too many voices that are motivated by personal gains, anger at third party ( support China because it will hurt Russia despite not benefitting America) , motovated by individual corporate gain that hurts overall economy , falling prey to the shallowness of arguments about capitalism ( af if they were some divine revealitions nd laws) ,and uncoordinated misdirected ill conceived foreign adventures promoted by the liberal interventionist and the neocons.
     
    That's the key right there. Under western liberal capitalism the interest of the corporation trumps the interest of the economy as a whole. China is working under a postliberal capitalist model that they are acting forcefully to defend from the corruption of the western liberal model. The first example of postliberal national interest capitalism in practice was in Meiji Japan. China's pragmatic, postliberal model illustrates why east Asia is ascendant while the west goes into decline. It's a cultural issue.
    ReplyAgree/Disagree/Etc.
  • The strongest reason for viewing China-doom scenarios with scepticism is certainly the one alluded to at the end of the article – the fact that such scenarios have been repeatedly predicted by the supposed experts and those who find their predictions useful, and have repeatedly failed to come to pass.

    While we can rarely say for sure whether any particular China watcher is in Beijing’s pocket, most undoubtedly are.

    Some might be, but many more are clearly simply ideologically disposed to hope for the worst for China (Chang, for instance). And it is that same hope for the worst for China, based upon ideological opposition or nationalist rivalry, that ensures any predictions of Chinese doom get such a boosted reception in the US sphere media.

    Wishful thinking is a much better explanation than supposed pro-China sympathies for the prevalence of false China doom scenarios in US sphere discourse over the past couple of decades, imo.

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    • Agree: Seamus Padraig
    ReplyAgree/Disagree/Etc.
  • @Anonymous
    The author here is hypocritical.

    So what if China devalued its currency. America has been inflating its currency for over 50 years now. It's called dollar hedgemony, and it's the reason why America can afford to drop a trillion in Iraq and still keep its economy going. Show me a country that has a currency that is priced at market value. There is none.

    Also, the west has not engaged in corporate espionage? Give me a break. The west topples entire countries it doesn't like, directly supports terrorists, and has supported separatist movements in China for years. And you want to take China to task for stealing plans on some industrial process?

    Concur. And for all our trillions owed, what’s to stop the United States from filling freighters with $100-dollar bills on pallets and sailing them to China to satisfy our debt? A C-Note would be worth a dollar overnight, but still. Perhaps we extend the middle finger to China on our debt? Would the bankers care? Would China even care? After all, over all these decades, they kept their people fed and busy stocking American shelves after all.

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  • @Eamonn Fingleton
    A reply to Sinocinema:



    The point of my article is that the super-bears – some of them clearly at the lunatic-fringe end of Sinology – get all the publicity. You seem to agree, so what is your point?

    As for your suggestion that there are “lots of ultraoptimists as well who predicted double digit growth for China for many decades to come,” I am not aware of a single serious China watcher who have made such an extreme prediction. Perhaps you could quote a few, preferably from the editorial pages of the Wall Street Journal, Washington Post, and New York Times (where the most extreme of the super-bears are not infrequently taken seriously).

    In talking of China’s “zombie banks” and “shadow banking,” you echo what the super-bears have been saying all along. Though there are always problems in any banking system, China’s financial problems have not so far – a generation after they were first talked about – shut down its export growth. To the extent that China’s export growth is likely to slow in future this is merely because the ability of slow-growing Western nations like the United States to continue to increase their imports is limited.

    Eamonn, question from a layman. If robotics are becoming more and more viable for nearly any item now being manufactured by hand, will China suffer from manufacturing moving back to home countries of companies now manufacturing in China? Some manufacturing already is moving to Vietnam, but that “cheaper labor” train ought to nearly be in the station by now, no? Is not even the cheapest labor far more expensive than robotics?

    Does a resource-rich United States need still to export parts and raw materials to China for assembly anymore, only to have to ship finished product back to the United States for distribution and sale? Might, or shouldn’t we see robotic lines in the States manufacture everything here? All you need are a few engineers to program, assemble and maintain the robotic lines, a few sweepers, some security guards to maintain secrets and dispense with the huge numbers of hands on-product. You eliminate the transport of material and finished product, the entire process becomes automated. Of course, what to do with idle hands?

    They talk of returning manufacturing to the U.S., but that move, while efficient, hardly employs more Americans. We don’t manufacture with labor anymore which seems a major reason to move it all back here for robotic manufacturing. Does this wound China? Seems to me a mortal wound.

    Are the bears looking at the prospect of U.S.-based robotics killing Chinese manufacturing?

    Read More
    • Replies: @5371
    [Some manufacturing already is moving to Vietnam]

    If true, this suggests the "robotics revolution" is a fraud.

    , @Anonymous
    decades ago, corporations have considered using fully automated and robotic assemblies to reduce manufacturing costs. for example, in addition to savings on labor, there is no need for heating or cooling in the factories and no need for cafeterias and restrooms. the factories can operate 24/7 with no holidays. then when China opened, they discovered it was far cheaper to use Chinese labor when compared to totally automated, robotic manufacturing at home. As a result, corporations and those who have spare money to invest have done fabulously well and wealthy, leaving those with inadequate education and special skills far behind. the solution is place higher taxes on corporate profits and from stock gains and use the extra income to create huge number of jobs with infrastructure building and repairs, benefiting specifically those who need them.
    , @cynthia curran
    Good point, I have said this several times to Donald Trump supporters. Robots and 2-d printing will lower the need for workers in factories.
    ReplyAgree/Disagree/Etc.
  • What we KNOW is that Chinese forex reserves have fallen by 1/2 trillion dollars in 2015. This indicates a sizable capital outflow and, as John Mauldin quotes a Shanghai based Merrill Lynch employee, if the wealthiest 3% of the Chinese people were to move 7% of their wealth abroad it would equal another $1.5 trillion. Allowing the yuan to fall will accelerate this, keep the dollar peg and Chinese exports get hit.

    China has not found a magic solution to economic trouble. The credit intensity of their economy has soared with diminishing returns on the additional debt. Same everywhere in this debt choked world. Its not a country specific issue it is the nature of the beast. At low debt to GDP levels each dollar or yuan of additional debt expands GDP by more than a dollar or yuan. As debt levels rise the ratio falls as debt service rises. This os basically what Carmen Reinhart and Kenneth Rogoff document in their book “This Time Is Different: Eight Centuries of Financial Folly”.

    The problem for China is perhaps more political than economic. Every nation has economic slumps or recessions and, in democracies, the party in power typically gets the blame and is voted out. China, being a one party authoritarian state doesn’t have that safety valve and should it experience serious unemployment from an economic slump the legitimacy of the government itself could be called into question with all that entails. China hasn’t faced this problem since Deng Xiaoping but the low hanging fruit and days of rapid economic growth appear to be coming to an end.

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  • @Hbd investor
    I'm not sure if the author believes in hbd or not.

    But hbd is the obvious answer to the disconnect between mainstream economists and actual reality is because of liberal media.

    It was pretty obvious that Korea and China would become fairly wealthy based on iq tests performed.

    At the end of the Korean war in the 1950s pretty much every economist insisted that Nigeria was going to beat Korea and korea in economic development.

    Why did they make this prediction? Because they assumed that every human being was interchangeable and have the same iq, China and Korea's economic development was going to be stalled by the Korean war while Nigeria was going to get a massive head start.

    And true to a fault 65 years later it looks like the hbders we're right.

    The economists will make all sorts of crazy explanations for Chinas and Korea's economic growth, but none of the mainstream economists will ever mention the words iq or genetics.

    is there a source of any economist comparing the economic prospects of Nigeria and Korea in 1950? I doubt so…

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    ReplyAgree/Disagree/Etc.
  • @Anonymous
    The author here is hypocritical.

    So what if China devalued its currency. America has been inflating its currency for over 50 years now. It's called dollar hedgemony, and it's the reason why America can afford to drop a trillion in Iraq and still keep its economy going. Show me a country that has a currency that is priced at market value. There is none.

    Also, the west has not engaged in corporate espionage? Give me a break. The west topples entire countries it doesn't like, directly supports terrorists, and has supported separatist movements in China for years. And you want to take China to task for stealing plans on some industrial process?

    haha. bro. what are you doing here with your logic? this is about us vs them. it doesn’t matter how we do things, we must point out everything that is wrong with the chinese. we are already doing everything we can get away with under the sun trying to stall or bury the chinese economy.

    the sadist in me kinda want to see what happens when usa and china is openly at war with each other in trade and economy.

    PS: the TPP alone is like a bucket of ice water in author’s face.

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  • Anonymous • Disclaimer says:

    On the subject of anyone making hyper-optimistic China predictions in the mainstream Western media.

    The most hyper-optimistic prediction every published in a major Western publication was written by Robert Fogel, a UChicago professor and Nobel Prize laureate in January 2010. He predicted the Chinese economy would rise to 123 billion dollars in 2040.

    http://foreignpolicy.com/2010/01/04/123000000000000/

    It’s not too overly optimistic in my opinion. If China reaches 80 billion dollars by 2040, it will still just be twice the size of the US economy.

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  • You could have listed Zero Hedge as a super China market bear blog.

    All the MSM blames the Chinese market for the US economic problems.

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    • Replies: @anon
    It's not China's fault. Since the 1980s Wall St screwed up global supply and demand.
    ReplyAgree/Disagree/Etc.
  • @Anatoly Karlin
    This article provides a much needed rebuttal to the perenially annoying predicted-12-of-the-past-0-Chinese-recessions crowd. Regrettably, these one might think rather obvious things do have to be repeated every so often.

    That said, the continuing secular rise of China is all but assured not by its industrial policy and technological espionage that Fingleton hyperbolically refers to as the "economic equivalent of murder" - which, for that matter, the vast majority of today's developed countries happily engaged in during their own periods of catch up - but by its high level of average national IQ, which makes it much easier to push through productivity improvements than in S.S.-Africa or even India.

    The highest-IQ capitalist countries have periodic recessions. China hasn’t had one for decades, you don’t soon predict one. IQ explains the possibility of rapid advance, but something else (economic organization?) must explain its uninterrupted character.

    Read More
    • Replies: @Randal

    something else (economic organization?) must explain its uninterrupted character
     
    Most likely imo the fact that China has been rebounding dramatically from a similarly dramatically depressed position, below its "natural" level in relation to the rest of the world, for decades. Ever since the end of WW2 in some senses, but most obviously since the 1980s, clearly.

    Similarly Japan experienced only occasional brief pauses in its relentless growth from the 1960s to the beginning of the 1990s.

    Historically, China has been the number one world economy for much of human history. It's not unreasonable to suppose it might well achieve that position again, once the advantages to Europe and its offshoots (such as the US) of the industrial revolution have finally played themselves out.
    , @MarkinLA
    must explain its uninterrupted character

    It has a huge market to dump it's excess production in - the US and Europe. This was the same for Japan. The US and European periods of development were almost entirely indigenous. When the US factories produced too much for the market they had to throttle back production and lay people off. When the excess was worked off people were called back and more money was in circulation. This is what drove the business cycle. If Chevrolet in 1929 produced too many cars where were they going to dump that excess production?
    ReplyAgree/Disagree/Etc.
  • So the price of virtually every physical commodity is in free fall because…?

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  • Anonymous • Disclaimer says:

    The author here is hypocritical.

    So what if China devalued its currency. America has been inflating its currency for over 50 years now. It’s called dollar hedgemony, and it’s the reason why America can afford to drop a trillion in Iraq and still keep its economy going. Show me a country that has a currency that is priced at market value. There is none.

    Also, the west has not engaged in corporate espionage? Give me a break. The west topples entire countries it doesn’t like, directly supports terrorists, and has supported separatist movements in China for years. And you want to take China to task for stealing plans on some industrial process?

    Read More
    • Agree: Seamus Padraig
    • Replies: @Astuteobservor II
    haha. bro. what are you doing here with your logic? this is about us vs them. it doesn't matter how we do things, we must point out everything that is wrong with the chinese. we are already doing everything we can get away with under the sun trying to stall or bury the chinese economy.

    the sadist in me kinda want to see what happens when usa and china is openly at war with each other in trade and economy.

    PS: the TPP alone is like a bucket of ice water in author's face.
    , @Jim Christian
    Concur. And for all our trillions owed, what's to stop the United States from filling freighters with $100-dollar bills on pallets and sailing them to China to satisfy our debt? A C-Note would be worth a dollar overnight, but still. Perhaps we extend the middle finger to China on our debt? Would the bankers care? Would China even care? After all, over all these decades, they kept their people fed and busy stocking American shelves after all.
    ReplyAgree/Disagree/Etc.
  • This article provides a much needed rebuttal to the perenially annoying predicted-12-of-the-past-0-Chinese-recessions crowd. Regrettably, these one might think rather obvious things do have to be repeated every so often.

    That said, the continuing secular rise of China is all but assured not by its industrial policy and technological espionage that Fingleton hyperbolically refers to as the “economic equivalent of murder” – which, for that matter, the vast majority of today’s developed countries happily engaged in during their own periods of catch up – but by its high level of average national IQ, which makes it much easier to push through productivity improvements than in S.S.-Africa or even India.

    Read More
    • Replies: @Stephen R. Diamond
    The highest-IQ capitalist countries have periodic recessions. China hasn't had one for decades, you don't soon predict one. IQ explains the possibility of rapid advance, but something else (economic organization?) must explain its uninterrupted character.
    , @KA
    IQ obsession will force Americns and Europeans a kind of fatalism . Competition will not be in the psychology anymore Changes in the behavior will be put off . Worship of IQ shows poor IQ and nothing else
    This damages the chances of recovery from the impotence laziness,and poor thinking . It eliminates the numerous myriad directions that a ountry could try to escape recover,and prosper. IQ worship creates learned helplessness .

    American or Indian problem is not rooted in IQ . The disadvantages are not to be found in IQ.
    There are many rigid barriers in thinking and in practices . These explain the rot.
    Sure the trade barrier , devaluation of yuan , theft of trade secrets are not new innovation of some new kind of IQ . The hubris to neglect them and arrogance to ignore them are manifestation of a systematic fault lines that are undergirded and maintained by American Exceptionalism ,dismissive attitude to other culture and to the faith in white aryan European Protestant superiority. Add the lack of knowledge to this mix ( among those who matter in shaping policy public opinion,and utterring cautions to the audiences on the media) .

    American habit of searchings for quick answers for any of their personal problems translate into searching for same quick fix in other areas of collective doldrums and insanities . It also leads to quick ,emotional , faulty and ego -pleasing conclusion . This is why Saddam's or Iran or N Korea's bravado turn into an ominous portend but Chinese deceptivity give a false sense of hope with trust in Anerican invincibility .
    Above all Chinese play the game as monolithic coordinated top to bottom advancing column . America is constrained by too many voices that are motivated by personal gains, anger at third party ( support China because it will hurt Russia despite not benefitting America) , motovated by individual corporate gain that hurts overall economy , falling prey to the shallowness of arguments about capitalism ( af if they were some divine revealitions nd laws) ,and uncoordinated misdirected ill conceived foreign adventures promoted by the liberal interventionist and the neocons.
    ReplyAgree/Disagree/Etc.
  • […] By Eamonn Fingleton • Unz Review • January 11, 2016 […]

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  • “In truth about the only thing India and China have in common is an Asian address.”

    Well, not even that. China sits on the Eurasia Plate, whereas India sits on the Sub-continental Plate which floated over from Africa, knocking into the Eurasia Plate forming the world’s highest moutain range – the Himalayas, which happens to be the world’s most difficult terrain to trespass, only the invention of the modern airplanes having made it possible.

    If China and India shared the same Asian address, then Spain( or France, Portugal, Italy etc.) and Morroco would share even closer European or African address, too.

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  • If Chinese economy is in trouble, how comes China is not demanding America to return $1 trillion the later owes to China?

    Furthermore, Chinese elites cannot go bankrupt because according to the Newsweek (December 29, 2010), they learn business from Holy Talmud.

    http://rehmat1.com/2010/12/31/newsweek-talmud-is-a-business-guide-in-china/

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  • @Anonymous
    Your post doesn't really prove anything other than there are overhyped bears out there.

    But guess what - I can point to lots of ultraoptimists as well who predicted double digit growth for China for many decades to come.

    You don't really engage in any substantial quantitive analysis other than to look in the mirror and point out the missed estimates of other people, the easiest thing in the world. China's current GDP is massaged, everyone agrees on that. The only question is by how much.

    I think Nick Lardy of the PIIE think tank, who is seen as a modest optimist, is probably correct in saying that China's old industries are in recession but their services are doing pretty well. Even if the old industries are not as important as they used to be, they still account for a very large percent of the domestic economy.

    To this you add China's massive debt bubble, fuelled by shadow banking, and their humongus excess capacity, especially housing, which sends a deflationary shock pulse throughout the world, especially in the PPI inflation measurements(industry etc).

    To me, looking at an imminent Chinese crash is a red herring. Because of their totalitarian grip on the state, a much more likely outcome would be Japan, where zombie banks/financial institutions and inefficient SoEs are kept on life lease far longer than they should, because in normal democracies you get a recession and then the ruling party is purged. In China you can't have that, so they avoid recession at every price, and the end result of that is Japanisation.

    Do more original analysis next time than just ribbing off from other people, cherry-picking those with the most outlandish claims. Mediocre.

    A reply to Sinocinema:

    The point of my article is that the super-bears – some of them clearly at the lunatic-fringe end of Sinology – get all the publicity. You seem to agree, so what is your point?

    As for your suggestion that there are “lots of ultraoptimists as well who predicted double digit growth for China for many decades to come,” I am not aware of a single serious China watcher who have made such an extreme prediction. Perhaps you could quote a few, preferably from the editorial pages of the Wall Street Journal, Washington Post, and New York Times (where the most extreme of the super-bears are not infrequently taken seriously).

    In talking of China’s “zombie banks” and “shadow banking,” you echo what the super-bears have been saying all along. Though there are always problems in any banking system, China’s financial problems have not so far – a generation after they were first talked about – shut down its export growth. To the extent that China’s export growth is likely to slow in future this is merely because the ability of slow-growing Western nations like the United States to continue to increase their imports is limited.

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    • Replies: @Jim Christian
    Eamonn, question from a layman. If robotics are becoming more and more viable for nearly any item now being manufactured by hand, will China suffer from manufacturing moving back to home countries of companies now manufacturing in China? Some manufacturing already is moving to Vietnam, but that "cheaper labor" train ought to nearly be in the station by now, no? Is not even the cheapest labor far more expensive than robotics?

    Does a resource-rich United States need still to export parts and raw materials to China for assembly anymore, only to have to ship finished product back to the United States for distribution and sale? Might, or shouldn't we see robotic lines in the States manufacture everything here? All you need are a few engineers to program, assemble and maintain the robotic lines, a few sweepers, some security guards to maintain secrets and dispense with the huge numbers of hands on-product. You eliminate the transport of material and finished product, the entire process becomes automated. Of course, what to do with idle hands?

    They talk of returning manufacturing to the U.S., but that move, while efficient, hardly employs more Americans. We don't manufacture with labor anymore which seems a major reason to move it all back here for robotic manufacturing. Does this wound China? Seems to me a mortal wound.

    Are the bears looking at the prospect of U.S.-based robotics killing Chinese manufacturing?

    , @dc.sunsets
    The entire world is still seized by a mania in credit creation and the inevitable massive misallocation of resources that must depend from it. It's gone on long enough that virtually everyone thinks this is the New Normal. Hint: the last 30-40 years will eventually become Vol. 2 for Charles Mackay's Extraordinary Popular Delusions and the Madness of Crowds.

    China is, if anything, Ground Zero for the worst of the credit bubble (in large part because its financial system is even more of a command "economy" than any in the West.) This makes China the world's biggest casino, in a world covered by them.

    I have no doubt that the deeply embedded deference of East Asian culture will keep China's restive populace far more docile than anywhere else such economic cataclysms may rage, but the notion that there won't be hell to pay for China's recent "miracle" is silly.

    No, they're not likely to return to Maoist mass murder. Yes, they're in for some serious upheaval. China has spent decades accepting dollar-IOU's in return for shipping mountains of stuff to the USA. A credit collapse should have very interesting effects when it arrives in earnest.
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  • I’m not sure if the author believes in hbd or not.

    But hbd is the obvious answer to the disconnect between mainstream economists and actual reality is because of liberal media.

    It was pretty obvious that Korea and China would become fairly wealthy based on iq tests performed.

    At the end of the Korean war in the 1950s pretty much every economist insisted that Nigeria was going to beat Korea and korea in economic development.

    Why did they make this prediction? Because they assumed that every human being was interchangeable and have the same iq, China and Korea’s economic development was going to be stalled by the Korean war while Nigeria was going to get a massive head start.

    And true to a fault 65 years later it looks like the hbders we’re right.

    The economists will make all sorts of crazy explanations for Chinas and Korea’s economic growth, but none of the mainstream economists will ever mention the words iq or genetics.

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    • Replies: @Erik Sieven
    is there a source of any economist comparing the economic prospects of Nigeria and Korea in 1950? I doubt so...
    , @dc.sunsets
    HBD also must include acknowledgement that East Asian culture does not amplify high average IQ the way Western Civ did.

    Anecdotes are anecdotes, but from teachers to engineers (of US/Northern European heritage) what I've heard is that Chinese people often excel at wrote math but lack common sense application. Chinese engineers are great at reverse-engineering others' innovations but their cultural aversion to rocking the boat handicaps their own innovation.

    This is why I laugh when science fiction posits a future dominated by the Chinese. Perhaps I'm wrong, but as I see it, China had a civilization for thousands of years yet never developed true science and their civilization was thus relatively static.

    Without Western Civilization (and the people genetically predisposed to produce it) humanity will stagnate even under a high IQ mean China's leadership.
    , @Reg Cæsar
    Nigeria was still a British colony in the 1950s. In other words, it was administrated by competent professionals, whatever the capacity of the locals. So a prediction of growth, if too rosy, wasn't entirely off the mark.

    Koreans at the time misruled themselves, and did so for decades afterward. Independence allowed the "Nigerians" (actually Igbo, Hausa, Yoruba, etc) to do the same.
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  • It seems to me that there are perpetual bears and Bulls, who get it right, by chance, 1/2 of the time. I discuss this in my blog.

    http://www.prophecypodcast.com/journal/2015/11/11/a-lesson-from-the-twilight-zone.html

    It seems obvious to me that the world is headed for a downturn, and China is no exception to this. But so what? The world goes in such cycles and the world is due for a crisis of some sort. But collapse, disaster and Armageddon? Nope. Not happening.

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  • […] Is the Chinese Economy Really in Trouble? by Eamonn Fingleton for The Unz Review.  The case for not selling China short. […]

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