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China’s Growing Economic Miracle…Collapse?!
Or…EVERYONE Pays the Piper
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In emulating the American economic raison d’etre, China has attempted to develop its unique capitalist model while ignoring that it too will soon suffer the same fate for the same reason: Unsustainable debt. When examining the recent realities of Chinese banking and finance over the past year it seems the steam that president Xi Jinping touts as powering the engine of his purported economic miracle of a master-planned economy is only a mirage, now almost completely evaporated before his eyes.

Like the many other similarly foolish western nations, China seeks only one path out of this fiscal death spiral, one that will likely spell doom and/or revolution in many countries soon: More debt.

China is becoming increasingly unable to continue to pay into the base of the world’s largest pyramid scheme of an economy and the cracks in the bubble are showing. This past year, saw three of the 4,279 Chinese lenders almost fail, if not for the massive intervention by the People’s Bank of China (PBoC) of immediate liquidity via more debt. The Chinese economic miracle is built on unsustainable debt-based infrastructure projects over the past two decades that have provided China with a face of prosperity to show the world, but this is only a mask to hide the limited countrywide success of the Chinese miracle into the rural areas. The injection of $Trillions in capital has seen China distribute these sums across the base of its economy creating a GDP that hit a high of 14.2 % in 2007 then averaged nearly 9% for the next decade before dropping yearly to 6.1% in 2018. All this growth had produced a personal affluence to a sub-set of Chinese society that has stoked this appearance of a flourishing economy.

This Chinese economic Keynesian trick of interjection of liquidity into national infrastructure is somewhat similar to the TVA and national works projects funded under Roosevelt’s depression-era New Deal. In this approach employment and therefore a growing tax base accelerated year after year as workers and corporations received the short-lived benefits of this massive windfall of available liquidity.

China’s method of stimulus is of course distinguished from today’s American model that merely shovels the injection of its own manufactured $Trillions by using multiple fiscal tricks to by-pass the citizenry and instead shovel the cash straight into the wallets of the already super-wealthy. Meanwhile, the US peasant once again pines in the “Hope” of yet another election.

The Metrics of a Failing Economy

Many analysts have for nearly a decade opined that China’s belief in national fixed-asset investment, the biggest engine of China’s economy, has long been the fundamental contributor to Chinese GDP growth, which was directly proportional to an ongoing increase in public and private debt. China has relied on export and debt-financed fixed asset investment for growth for over two decades,” said Ho-Fung Hung, Professor in political economy at the Johns Hopkins University.

But as the world economy slows while the metrics show a recession looming China’s economy is already cooling rapidly. “And as the central government and banking system keeps producing new loans to absorb the debt, it leads to the continuous debt buildup,” Maximilian Kärnfelt, an analyst with the Berlin-based Mercator Institute for China Studies, told news service DW, adding that infrastructure investment still largely drives China’s economic growth since fixed investment contributed to 45 per cent of China’s GDP in 2016.

In a sign of the disaster to come, the first Bank to almost fail was Baoshang Bank Co. in May 2019. In this instance, for the first time in twenty years, the government took over control and seized the bank. This progression next took form when Chinese regulators took a different approach by ordering three state-owned financial institutions to buy significant stakes in Bank of Jinzhou Co. When, Shandong-based Heng Feng Bank, which had failed to disclose its financial statements for two straight years, required a bail-out, the bank sold new shares for about $14 billion to a group of investors including a unit of China’s public sovereign wealth fund and a local government-backed asset management firm.

Although these were some of the smaller rural banks, as shown this past month in Chinese reports, their economy is following the world in a quantified slowdown that has seen GDP slip yearly since 2012. Making the matter worse a similar world slow-down in purchasing is already affecting China’s manufacturing-based economy. The three bank failures were only the tip of a huge iceberg.

China’s $40 Trillion banking system dwarfs the American system at double the size, with over 4,000 small, medium and massive, state-owned banks. The world’s four largest banks, including behemoth ICBC ($4TN), are all Chinese.

The failure of just three banks was important enough that Chinese regulators submitted Chinese banks to a stress test and the results were shocking. China’s central bank admitted that China’s banking sector is “showing signs of strain.” The stress tests had revealed that over 13% of China’s 4,379 lenders were designated “high risk” by the central bank’s report. With this amounting to over 570 banks, and thus multiplied by the three existing examples of bank bail-out funding, with the Chinese economy following the world into recession, the financial numbers and likelihood of any future series of bail-outs are truly biblical. If not, fiscally impossible.

Separately, the PBOC also stress-tested 30 medium- and large-sized banks in the first half of 2019. In the base-case scenario, assuming GDP growth dropped to 5.3% – or well above where China’s real GDP is now – nine out of 30 major banks failed and saw their capital adequacy ratio drop to 13.47% from 14.43%. In the worst-case scenario, assuming GDP growth of 4.15%, or just 2% below the latest official Chinese GDP report, seventeen out of the thirty of these major banks failed the test. Separately, a liquidity stress test at 1,171 banks, representing nearly three-quarters of China’s banking sector by total assets, showed that ninety failed in the base-case and 159 in the worst-case scenario. The metrics of any collective bail-out indicates that China has upwards of an insurmountable $20 trillion problem rapidly approaching.

In reaction to these first three bank failures, the stress tests and poorer economic news China did what centrally planned economies do: Chinese policymakers focused on strengthening oversight and regulation by the PBoC and gave it authority to write new rules for much of the financial sector. The China Banking Regulatory Commission and the China Insurance Regulatory Commission will now be merged as part of an overhaul aimed at resolving existing problems such as unclear responsibilities and cross-regulation as well as closing regulatory loopholes and curbing risk in the $40-43 trillion (€34.78 trillion) banking and insurance industries.

With the metrics of China’s banking system already pause for considerable concern to the tune of $20 Trillion, this huge obligation is as much a mirage as the economy since it fails to add to the account the very large and un-tabulated Shadow Banking loans which would add $Trillions in debt to China’s already highly leveraged systemic banking risk. The International Monetary Fund (IMF), which provides- despite its predatory legacy- some excellent yearly analysis of worldwide economic developments has warned China’s problems could lead to “financial distress” in the world’s second-biggest economy. China is seen as one of the economies most vulnerable to a banking crisis, although Beijing has repeatedly assured that the risks are under control. In response to the PBoC reports, Chinese Finance Minister Xiao Jie echoed that the situation “was under control.”

China’s Economic Tricks of Sustainability.

As the world economic body politic runs out of any remaining gas to keep a pilot light under the rapidly cooling metrics that show their long forestalled recession is near and certain, China is also contracting.

The national debt of China, which is the total amount of money owed by the Chinese government and all organizations and branches stands at nearly CNY 38 Trillion ( $5.4 TN) and 54.44% of GDP.

Chinese debt has been accumulating ever more rapidly. The Institute for International Finance (IIF) reported that year-on-year, in Q1 of 2019 China’s corporate, household and government debt increased 6% more from 297% of GDP to an incredible 303%. However, this is also more than a 100% increase since 2008 and amounts to 15% of all global debt.

These figures do not include the off-the-books “Shadow Banking loans that some estimates predict would triple that debt percentage to much closer to $16 Trillion. The problems are most serious in China’s rural banking sector where an ever nervous public has reacted with two late-2019 bank runs at China’s Henan Yichuan Rural Commercial Bank and then at Yingkou Coastal Bank.

At the end of 2018, the budget deficit of the Chinese government was close to five per cent. However, if the off-balance-sheet (“shadow”) financing of local governments is taken into consideration, the budget deficit rises to over 11 per cent. However, at the end of 2014, the official government deficit stood at less than one per cent, but an accounting which includes local “shadow” funding was around five per cent.

China’s shadow banking system is so-called since this myriad of endemic lending trickery is believed to be massive in total and kept off the books. These risky, undisclosed loans entered China’s financial system in 2009 throwing open the doors to debt for a Chinese population hungry for investment in order to pay for all those Chinese and internationally made western goods.

The main kind of shadow deposit is generally offered as a wealth management product (WMPs). Chinese banks offer these via aggressive marketing of high-interest-rate accounts as their alternative to savings accounts which are regulated to a maximum return of 3 %. Since these sanctioned shadow loans advertise a return of as much as 8% or more, normal banking customers have been throwing their miraculously large paychecks into these funds by the billions.

One reason WMPs offer higher rates is that they are based on much riskier bank loans, much like the precursor to the late ’80s, early ’90’s American savings and loan meltdown. Incredibly, banks don’t hold these loans on their balance sheets or set aside capital against their potential defaults. Instead, they typically extend this debt via intermediaries called trust companies—firms that are not allowed to accept deposits or formally loan out money but are allowed to manage it. The trust companies create investment products like WMPs, which banks market for them in return for a commission.

With some smaller Chinese banks having already found themselves either getting bailed out or the subject of a bank run, one reason is that, like America, China’s interbank/repo rates have surged amid growing counterparty concerns of the many banks seeking depleting available liquidity. This has forced many banks to rely almost entirely on new deposits to fund themselves, forcing them to hike their deposit rates to keep their funding levels stable. Like any Ponzi trick in banking, new cash is required to sustain these thousands of lending pyramids. With the economy in decline, this need has lead to some desperate regional banks offering incentives for depositor’s cash that would make the long-ago American “free toaster” seem ordinary.

China has a massive pork famine that has seen disease wipe out 40% per cent of its pig population in 2019. With China being the world leader in pork consumption these bank’s desperations have created some interesting incentives to attract depositors. The SCMP reports that new clients who deposited 10,000 yuan (US$1,430) or more in a three-month time deposit at the Linhai Rural Commercial Bank in Duqiao in Zhejiang province were then eligible to enter a lottery to win a portion of pork ranging from 500 grams (18 ounces) to several kilograms. Other rural commercial banks in northern China’s Hebei province and western China’s Guizhou province have also launched similar pork rewards programs. Dushan Rural Commercial Bank, located in the remote mountainous county in Guizhou, offered a coupon for 10 yuan (US$1.4) worth of pork for every 10,000 yuan of new deposits.

This solution has been touted as uniquely beneficial to these banks since, instead of offering higher rates which only accelerate the bank’s insolvency due to requiring higher payouts on deposits, the bank is instead making a one-time payment, and the unusual incentive is enough to garner substantial new deposits.

PBoC cuts in its key lending rates in August ’19 designed to stimulate a slowing economy have only exacerbated net interest margin pressures on these banks. With less income from returns

on their loans and without the many funding options available to China’s much larger banks, these increasingly high-interest rates that China’s smaller banks have to offer in order to attract new cash deposits could further lead to their insolvency.

It’s been over four years since the last official Chinese benchmark rate cut. With America leading the way across the globe with rate cuts aplenty and China still having a base rate of far higher than the US rate of < 1.5%, it was only a matter of time for China to also drop rates.

With the new authority given to the PBoC, this key Loan Prime Rate (LPR) has become the new Benchmark Reference Rate to be used by banks for lending. This, like most recent decisions are designed to interject further liquidity in the form of debt once again into a still failing economy by lowering borrowing costs for small businesses. This rate will be now set monthly (20th of every month) and will be linked to the Medium-term Lending Facility rate. The current 1 year LPR stands at 4.15% after its latest cut on Nov 30 versus the Benchmark Rate of 4.35%. This number is sure to continue to shrink and can be considered a key indicator of Chinese frustration at retaining needed annual GDP growth since the result of this one move lowered the costs of the roughly 152 trillion yuan ($21.7 trillion) in yuan-denominated outstanding loans held by financial institutions (that are actually on the books) in a further hopeful attempt to again boost economic growth.

Just mere days after the 20 bps cut the PBoC further highlighted its desperate need for capital, announcing that it will be lowering the required reserve ratio (RRR) – or the amount of money banks are required to have on hand – by 50bps for commercial lenders. Currently, the required reserve ratio is 13% for large banks and 11% for small banks. The cut, which is the first since September, will bring the blended reserve ratio for Chinese banks to the lowest level since October 2007. In doing so PBoC effectively released about 800 billion yuan ($115 billion) in instant liquidity from out of the already cash-strapped financial system.

All these adjustments by China and the PBoC do little to control or pay-off increasing debt and are designed to maintain the Chinese miracle of TVA style infrastructural improvements that has been the employment engine of its economic growth. China’s new development of the Belt and Road Initiative (BRI), although a masterstroke in Eurasian commerce, also serves to continue the illusion.

As traditional monetary policy becomes ineffective to boost the economy, Chinese President Xi has installed twelve former executives at the state-run financial institutions across the country who will support the communist government’s ability to combat banking and debt difficulties, reported Taipei Times.

These appointments are in response to growth collapsing to a three-decade low in 2019. New manufacturing orders did increase but this was in large- and medium-sized enterprises. S mall enterprises continued deeper into contraction and new non-manufacturing orders slowed, pushing employment further into quantified contraction.

An easier to understand recessionary metric, passenger car vehicle sales, fell yet again in December, plunging 3.6% to 2.17 million units, according to the China Passenger Car Association. This marks the 18th drop in the past 19 months for the country. Sales fell 7.5% in 2019 and 6% in 2018. GM said that its sales were down 15% in China and said that pressure into 2020 would likely continue.

Meanwhile, local Chinese manufacturers’ numbers are also down. BYD Co. posted an 11% drop in 2019 sales and SAIC Motor reported a “similar decline”.

Worse, exports to the United States were down 23% from the prior year.

Running from the Piper’s Call

But, it seems that China has no choice but to carry on with the façade of financed infrastructure projects as the only path to survival. Said Victor Shih, an associate professor of political economy at the University of California in San Diego;

“Because it [infrastructure investment] already is a large contributor to growth, the slowing investment will substantially reduce growth rates. This is not what the leadership wants.”

Shih’s assertion seemed confirmed when last year, President Xi said Chinese banks would lend 380 billion yuan ($55.09 billion) to support Belt and Road cooperation, and Beijing would also inject 100 billion yuan into a Silk Road Fund. Some observers view the project as an instrument designed to help the Chinese economy, with state-owned companies in specific sectors expected to profit massively from its implementation.

But they still need funding and Chinese banks on their own volition may be reluctant to get involved when already having troubles of their own. Andrew Collier, managing director at Orient Capital Research, says

“The banks [may] remain leery of these projects because they doubt they will be profitable and they will be stuck with bad loan. In the end, we are going to see increasing defaults among smaller institutions, the collapse of private loans via wealth management products, and growing layoffs in areas of the country with less political power.”

Making matter worse, a study conducted by the Center for Global Development estimates that the initiative could increase debt sustainability-related banking problems in eight countries also involved in the BRI.

“I still think that if growth falls below a certain level, the top leadership will order a stimulus, which involves acceleration in debt growth,” said Victor Shih. “That is the only viable tool in China’s arsenal if the economy slows too much.”

As noted in a recent article by University of Helsinki economics professor Tuomas Malinen, China has stimulated its economy aggressively in Q1 and Q3 2019 but interestingly has not continued its past emphasis on infrastructure investments as in 2015/2016. Q3 of 2019 saw record-breaking stimulus programs, however, China concentrated instead on providing loose credit to enterprises through both conventional and “shadow” banks.

As Malinen forewarns:

“What is notable is that even with this record stimulus, China has kept its economy growing barely above the ‘official rate’. This tells us that the Chinese economy has reached or is very close to reaching the point of debt saturation, where households and corporations simply cannot absorb any more debt, and any new debt-issuance fails to stimulate the economy.”

Though a massive infrastructure-spending program could revive growth, the ability of China to issue fiscal stimulus is starting to be seriously limited. This effectively means that China is fiscally unable to underwrite massive infrastructure projects and so any new world-economy-saving stimulus from China, as in 2015/2016, will be practically impossible. New infrastructure initiatives- if recessionary metrics continue to deteriorate- could only be realized if those costs are directly monetized by the PBoC. This would be the weapon of last resort for China but , when considering a declining economy, may soon be inevitable.

As Goes China…?

China is just one more working example of the failure of the many globalist economies worldwide that are already similarly suffering in the grip of massive unsustainable- if not orchestrated- debt. Which country becomes the first to trigger the almost certainly pending domino effect of global economic collapse, is merely a rhetorical question at this point. As goes China…?

This week in an interview, former Reagan OMB director David Stockman highlighted the global economic link to China, saying,

“The world economy would be not nearly as good as it looks had the Chinese not been borrowing like there’s no tomorrow and building regardless of whether its efficient or profitable.”

Stockman added, in summation,

“The whole global economy is really dependent on China piling even more debt onto the $40 trillion pile they already have.”

China economically continues to play the financial role of Kenneth Lay to its American mentor’s Bernie Madoff. But in the last few months China has shown, like so many other so-called first world economies, that it too is now all-in at the casino and using only borrowed money in a desperate effort to stay at the table…or starve.

Worldwide, many countries already burn in political turmoil of their own debt-ridden making as their own primal forces of nature squeeze their populations with the resultant new mantra of ever increasing austerity while the IMF and World Bank waits in the wings, salivating to gobble-up the carcass.

Alas, when it comes to unsustainable national endemic debt one primal truth is now being heard clearly in China, as in other Central bank boardrooms across the globe, and the empty dinner plates of their public…

When the time comes to pay the piper, that debt will be paid, no matter…but the Piper will take, in lieu of payment, pork, flesh, blood, or… dreams!

(Special thanks to Tracy Turner for providing additional research for this article.)

About the Author: Brett Redmayne-Titley has published over 180 in-depth articles over the past ten years for news agencies worldwide. Many have been translated and republished. On-scene reporting from important current events has led to his many multi-part exposes on such topics as the Trans-Pacific Partnership negotiations, NATO summit, Keystone XL Pipeline, Porter Ranch Methane blow-out, Hizbullah in Lebanon, Erdogan’s Turkey and many more. He can be reached at: live-on-scene ((at)) gmx.com. Prior articles can be viewed at his archive: www.watchingromeburn.uk

 
• Category: Economics • Tags: Banking System, China 
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  1. Svevlad says:

    It’s gonna be a global shitshow. China wastes money on too much too soon projects like doing the entire B&R at once, which is still better than American “repurchase stocks” pumping – after the crash, the Chinese will at least have something remaining. Americans, not so much.

    Russia will profit the most. Isolation pays off when you’re big enough it seems

    • Replies: @Moi
  2. Twaddle. Of all the national debts in the world, China’s is the most sustainable. China’s debt to GDP is far below Japan’s, and no bigger than the USA’s, too, yet its economy is growing three times faster and its debt is entirely internal.

    It corporate assets offset most of its corporate debt (Beijing is the home to the largest number of Global 500 headquarters on earth, incidentally) and it has annual trading profit of $300 billion, ample savings and a GDP that’s 15-30% bigger than the official figure. (http://csis.org/files/publication/150824_Rosen_BrokenAbacus_WEB.pdf ]

    While local governments borrowed a lot over the past eight years, an audit focusing on their indebtedness concluded that this was not a pervasive problem. And as for the localities which do have issues, either the provincial governments or the central government will have to bail them out.

    The key question is whether the central government has the resources to handle the debt problems of some of these corporations and local governments. And the answer is yes. Beijing has almost four trillion USD of reserves and its overall government debt level as a share of GDP is low.

    China actually saves more than it invests; it is one of the few countries where the savings rate is higher than the investment rate. Moreover, the country is still generating substantial balance of payments surpluses. China therefore doesn’t fit into a stereotype of a country in a financial crisis.
    More: http://carnegieendowment.org/2014/09/26/china-s-debt-problems-aren-t-same-as-in-west/hqbz.

    Chinese investments rarely fail to return its capital. Many are widely profitable: the Dujiang Water Diversion Project took eight years to complete but now earns back its entire capital investment every 24 hours.

    The Three Gorges earns its capital back every 44 months. All the HSR lines are becoming profitable on schedule and paying off their bonds.

    Here’s a cost-benefit analysis of the first completed leg of the South North Water Diversion project:

    Abstract⁠ [1]. The Hebei water-recipient area of the middle route project of China’s South-to-North Water Diversion Project (SNWD Project) is located in the Haihe River Basin, which was arid and had higher utilization intensity than other regions in China. Surface water shortage and groundwater over-pumping caused the world’s largest underground water funnel group in the research area. Water supply from the middle route of the SNWD Project is of great significance to ease acute water shortage, alleviate groundwater over-pumping and improve groundwater quality in Hebei water-recipient area. The purpose of this article was to evaluate the eco-economic benefits of the delivered water from the middle route of SNWD Project to alleviate groundwater over-pumping in Hebei water-recipient area by means of reference model method, cost-benefit method and substitute cost method. The results of reference model method, cost-benefit method, and substitute cost method were 5.526, 10.770 and 9.831 billion Yuan per year while the cost of delivered water in Hebei water-recipient area was 6.592 billion Yuan per year. From this point of view, the middle route of SNWD Project is very profitable in alleviating groundwater over-pumping in Hebei Province.

    The Chinese Academy of Social Sciences claims that the Chinese government had net assets of 120 trillion yuan (approx. USD$17.41 trillion) as of the end of 2016 based on an analysis of the most recent national balance sheet. These assets include foreign reserves, stakes in state-owned enterprises and infrastructure projects.

    1 Water supply eco-economic benefit evaluation of middle route of south-to-north water diversion project in Hebei Water-recipient Area. Y X Wang1,2,3, L Cheng1,2, H L Tian1,2 and X H Liu1, Institute of Geographic Sciences, Hebei Academy of Sciences, Shijiazhuang, 050011, China
    2Hebei Engineering Research Center for Geographic Information Application, Shijiazhuang 050011, China. E-mail: [email protected]

    • Agree: Vidi
  3. d dan says:

    LOL. China’s incoming collapse because of: debts, debts and debts. Now, I have saved readers 15 minutes of your time to read this article.

    Does the author know that there are different types of debts, e.g. internal vs external debts? For example, I don’t care if I owe my wife $1 million, but I will care a lot if I owe my neighbor $10,000. China’s debts, just like Japan’s debts, are mostly domestic debts. The governments have the power to deal with the debts, just like I can talk to my wife about my “debt” to her.

    Does the author know that debts can be denominated in different currency? China’s debts are mostly denominated in Chinese currency, which means that the debts can be repaid with their own printed money.

    Does the author know that debts can be compensated by assets? China has almost non-existent external debts, but the largest foreign reserve in the world.

    Does the author know that debts can be used for productive investments? While most of Americans’ debts are used for consumption and military adventures, China’s debts are mostly used for investments, business expansions, infrastructure projects, etc. No doubt some of these will be bad investments, but there will be others that pay for them.

  4. “Worse, exports to the United States were down 23% from the prior year.”

    This is what I look for in every conversation about national economies exports to imports.

    https://tradingeconomics.com/china/balance-of-trade

    The overall outlook requires looking at the overall trade balances and across that spectrum china continues to export more than she imports when compared to other countries.

    https://wits.worldbank.org/CountryProfile/en/Country/CHN/Year/LTST/TradeFlow/EXPIMP/Partner/by-country#

    You note a drop to US exports from China of 23%, The question is whether those exports are picked up by some other trading partner that might off the decrease. Despite that decrease she remains ahead of the US. Currently there is little attention paid to trading balanes — which I think are crucial in guaging the nations health.

    • Agree: Digital Samizdat
  5. @Godfree Roberts

    There is no way your BIS chart is accurate. Chinese banks expanded their balance sheets to the tune of over $21 trillion over the last ten years.

    • Replies: @Godfree Roberts
  6. Damzog87 says:

    I’m just not accepting anything from someone named Ho-Fung Hung.

  7. Andy says:

    For 20 years Western writers have claimed the Chinese economy is about to collapse, so forgive me if I’m skeptical until I see it

  8. @Godfree Roberts

    Hello Godfree… When authoring this article I had your name in mind as one that I hoped would comment. I see that your article is also provided to the UR readers, which I find as a further tribute to Ron Unz and his willingness to encourage debate. Since we have both read each other analysis I presume a cordial discourse on this is acceptable…

    Of all the national debts in the world, China’s is the most sustainable. China’s debt to GDP is far below Japan’s, and no bigger than the USA’s, too, yet its economy is growing three times faster and its debt is entirely internal.

    Although the the title does fall prey to hyperbole,my article points out that the sustainability you suggest is suffering. Using Japan and US as justification is not IMHO a good example of success since Japan has been using many US/Fed-like tricks to maintain its economy as well.

    In providing, as you do, established metrics, the ones in my article strongly suggest that the Chinese economy is cooling down, as is the ability to service all forms of debt, except what the PBoC might resort to financing. In looking at your counter metrics they appear to be from the past several years and reflect the older picture of China. Unless I am mistaken, most of the references you provide are not current as is shown in most of your citations.

    Similar to the John Walsh piece of this week on UR, the majority of what you present is true and does show that the Chinese economy is doing better than most.OK, but this is no longer the valid comparison it was several years ago, since new PBoC data ( as provided) shows a dramatic slow down.

    Yours and Mr. Walsh’s articles, although very well presented, in no way references the Chinese banking failures, problems of liquidity, the PBoC reactions to it, or the inherent problem of the Shadow Banking issue. Are these current events not important to the correct economic view point?

    A question I would pose, in lieu of the continued lowering of China’s PBoC reported 2018 GDP dropping for seven straight years down to 6.15% ( yes, better than most)is: What lowered percentage of GDP growth in your view will no longer sustain the economy? The PboC and the CCC have for years said that 6% is necessary. The fact that PboC is making structural changes to go with changes in liquidity provisions on a national basis shows that PBoC must be concerned.

    Consumer purchasing is down and this is not the usual reflection of a growing economy, but is reflective of the world consumer economy that is certainly in contraction. Do you not agree that China’s must be able to maintain its export percentage of GDP? With the world market for Chinese goods slowing, what do you feel will replace this in order to maintain just current GDP levels?

    While I can appreciate your defense of China, and you are correct that China is doing better than most countries at the moment, as I suggest in my article recent events should cool this enthusiasm to a substantial degree. Will China collapse economically? Probably not. Will China resort to any and all central bank tricks( ala ECB, FED, B of E, Japan) if as my article points out, China cannot maintain its domestic debt obligations? It will have no choice.

    Hence, … everyone pays the piper!

    Kind regards and thanks for the feed back. Feel free to contact me directly, as I always enjoy further chatting with the other very fine UR authors. Cheers! B.R-T.

  9. @Andy

    I’m not sure where you were seeing those claims. I didn’t notice them 15 years ago. Starting about eight years ago I saw more and more people pointing out that the totally unprecedented scale of state directed stimulus after 2008 in China was not sustainable and would eventually end badly.

    Instead of having a couple years of recession in 2009 & 2010 and enduring some restructuring, they went totally nuts with boondoggles and subsidies.

    • Replies: @Godfree Roberts
  10. A123 says:
    @Brett Redmayne-Titley

    Chinese banking failures, problems of liquidity, the PBoC reactions to it, or the inherent problem of the Shadow Banking issue. Are these current events not important to the correct economic view point?

    You make an excellent point. There is ample evidence that a number of commercial lenders are under severe stress. (1)

    Finally, for those curious which banks are most likely to follow in Baoshang’s footsteps, and fail next, Barclays has compiled a list of regional banks that have delayed publishing 2018 reports, the biggest red flag suggesting an upcoming solvency “event.”

    Larger firms have no reason to delay financial reporting. Have you seen a more recent list of late data releases? The table below is interesting, but rather dated.
    ..
    PEACE 😇
    _______

    (1) https://www.zerohedge.com/news/2019-05-30/which-chinese-banks-will-fail-next

  11. onebornfree says: • Website

    Chinese “Miracle”Economy-Living on Borrowed Time!

    The return [under Xi] of the idiotic, anti-freedom, anti-free market, hard-core communist, 
    pre-Xiaoping [Maoist] economic policies means that China is currently living on borrowed time and must collapse at some point in time, and probably quite soon.

    Fact:The more that the power mad commies at the top react to this collapse via even more top-down, centralized control measures, [i.e. “doubling down”] the faster, and the worse that economic collapse will be.

    Since power-mad megalomaniacs like Xi and his ilk are incapable of learning either through education, history, or via direct experience, I expect the collapse of the “Chinese miracle” to continue unabated, and for it to  actually accelerate, as the power mad mainland Chinese communist economic illiterates running the show literally double down on their highly destructive policies of  even less 
    economic freedom and  even more control of the Chinese population:

    “China Growth Slows To 29 Year Low “: https://www.zerohedge.com/geopolitical/china

    “China Braces For December D-Day: The “Unprecedented” Default Of A Massive State-Owned Enterprise”:

    Three days after we described the self-destructive doom loop that is tearing apart China’s smaller banks,  where a second bank run took place in just two weeks – an unprecedented event for a country where until earlier this year not a single bank was allowed to fail publicly and has now had no less than five bank  high profile nationalizations/bailouts/runs so far this year – the Chinese bond market is bracing itself for an unprecedented shock: a major, Fortune 500 Chinese commodity trader is poised to become the biggest and highest profile state-owned enterprise to default in the dollar bond market in over two decades.”:

    https://www.zerohedge.com/economics/china-braces-unprecedented-massive-default-state-owned-enterprise

    “China’s Skyscraper Boom Comes Crashing Down Amid Developer Default”:
    https://www.zerohedge.com/markets/chinas-skyscraper-boom-halted-amid-developer-default

    “Economic Recovery Narrative Doomed: Fathom’s China Momentum Indicator Signals More Downside Ahead”:
    https://www.zerohedge.com/economics/without-china-global-economy-doomed-brace-downside

    “Why China’s Growth Rate Is Much, Much Lower Than You Think”:
    https://www.zerohedge.com/crypto/why-chinas-growth-rate-much-much-lower-you-think

    Regards, onebornfree

    • Replies: @Tom Verso
  12. TG says:

    “This Chinese economic Keynesian trick of interjection of liquidity into national infrastructure is somewhat similar to the TVA and national works projects funded under Roosevelt’s depression-era New Deal. In this approach employment and therefore a growing tax base accelerated year after year as workers and corporations received the short-lived benefits of this massive windfall of available liquidity.”

    Um? You mean, the “Keynesian trick” that produced, in the United States, the greatest industrial power that the world had ever seen?

    The Chinese should be so lucky…

    • Agree: Parfois1
  13. gotmituns says:

    the chinks ain’t so smart…

    • Replies: @Just passing through
  14. After this author’s laughable article cheerleading the color revolution in Hong Kong, I find it impossible to take anything he writes about China, or anything else, seriously.

    That was probably the second-stupidest article I’ve ever seen published here, after Lance Welton’s piece attempting to frame Muslim Uyghurs as White Nationalist heroes.

  15. Biff says:
    @Andy

    For 20 years Western writers have claimed the Chinese economy is about to collapse, so forgive me if I’m skeptical until I see it

    I remember the Basset hound face Bob Schieffer TV talking head – talking about China’s doom and gloom economy about to fall, or as he said “un-managable” back in the nineties, so chalk me up for 30 years.

  16. niceland says:

    I only read the first few paragraphs. This author doesn’t get it.
    If you have government as strong as in China and mostly state run banks – who is going to oppose bank restructuring, debt cancellation, or money printing from the central bank to keep the banking system running? I think they can manage their banking system like a game of monopoly. Unlike many western nations they are not bound by international agreements, wast pressure from interest groups and all kind of nonsense. Chinese debt is internal matter, game of numbers and fiction like everywhere else but the government has all the cards.

    Think about the big recession in 1929, what happened, why was it as bad as a massive natural disaster? Did Yellowstone super volcano go off? Was there a massive famine wiping out sizable portion of the working population? Did people stop working or stop needing or wanting goods and services? Did the tools and equipment or other means of production evaporate? Nope. Everything needed for future prosperity was in place, the only thing that happened was that man-made system of really stupid ideas about money and finance – crashed. The book keeping system of ‘who gets what’ strangled the economy. Unfortunately pressure from the usual suspects on the top of the economical food chain made sure nothing changed and we – in the west’ are still stuck with the same ideas about money, credit and debt.

    The big recession is equivalent to a family where the parents use IOU’s written on paper to reward their children for doing the dishes and moving the lawn. Instead the children get read bedtime stories and can sleep in on Sundays. Suddenly a crisis hits and the ‘system’ collapses. So the lawn doesn’t get moved and the dishes just pile up dirty in the kitchen sink, no bedtime stories or sleeping in on Sundays for the children. Make sense?

    If the Chinese government apparatus hasn’t figure this out yet and gets stuck in similar nonsense I will eat my truck. Foreign account is very different story, but there the Chinese seem to have their house in order by spades.

    And since China is growing for the sake of it’s own population, increased imports are bound to happen. Why would China base it’s future as underpaid labor for the rest of the world? It’s only temporary situation, sooner or later their energy will turn towards their own internal market and trade with the rest of the world will balance out. This is already happening and will probably be seen as a ‘win’ for Trump in his ‘trade war’ against China.

    However, and perhaps beside the point; Chinese economic growth will approach zero in the, not so, long run. Like everywhere else. Exponential GDP growth is only possible in a world without limitations. We don’t have that as evident in the west today. U.S. GDP growth seems to be steaming from faked inflation numbers these days.

    • Replies: @foolisholdman
  17. China’s economy is too dependent on US markets and grandiose building projects. It would have done better to invest in environmental clean-up.

    China will have to go through a period of slow-down and reassessment, but the big question is how compliant will the masses be? And is there will to do the right thing? Japan in the 90s lacked the will to face its problems, and it’s been treading water since.

  18. Mihilus says:

    What a funny analysis and debate after it. All you need to know is this simple fact: Our current economic and social system requires at least 2% annual growth, preferably 3% or more. With short interruptions we’ve had that for well over a century. And now the time has come where organic growth has stopped. The fact that it happened simultaneously with end of population growth is not a coincidence. Its over. So the only purpose of these analyses is to determine when and how its going to happen. It can happen tomorrow, it can last few more years or it can last few more decades. It may be a gratious bell curve decline or it can be a seneca cliff collapse.

    I dont know how it will go, but China copied western economic model and they seem desperate to catch up. Therefore they will more or less share our fate.

  19. slorter says:

    ‘So you can compare what’s happening in China today with what happened to the American economy after 2008. Henry Liu and others have written about why China cannot really go broke as a result of its debt. The reason is that if a corporation in China is unable to repay its debt to the government-owned bank, then the government-owned bank has a choice: It can either write down the debt and leave the corporation functioning, working with its employees and being productive. Or, it can do what a US bank would do: foreclose on the loan, drive the company under, and have it sold at the distressed price to a corporate raider or vulture fund. China doesn’t throw the companies over to the corporate raiders or vulture funds.’ Michael Hudson

    https://michael-hudson.com/2020/01/democratizing-money-a-discussion/

  20. Parfois1 says:
    @d dan

    Does the author know that there are different types of debts, e.g. internal vs external debts? For example, I don’t care if I owe my wife $1 million, but I will care a lot if I owe my neighbor $10,000.

    That was the first question in my mind when I got to half way down the article, and stopped there. I am not an expert on financial matters but understand that China is a self-contained financial market; a bank may go belly-up here and there, but so what? They are all state-owned banks therefore the losses in one are assets in another, therefore all they have to do is to shift funds (read digits) from one to another via the central bank, bailouts and shutdowns and no-one loses anything because the private deposits are guaranteed.

    I am aware that the financial authorities have liberalized, for the sake of decentralization and efficiency, its banking sector to provide easier credit to its entrepreneurs knowing that many will fail. But many more will succeed and keep the economic engine forging ahead.

    Any economist knows that no economy can sustain high rates of GDP increases for decades. After the initial surges from a low GDP, there is a gradual decline over time once structural investment gets closer to saturation – you can’t keep on building motorways leading nowhere. Once you build the foundations of a successful economy, the GDP becomes meaningless anyway.

    Japan is an example that comes to mind; it’s GDP has grown on average 0.50% for the last 40 years.

  21. Lot says:
    @Godfree Roberts

    Largely correct Godfree, but you’re wrong about China’s GDP being secretly 15% larger.

    China’s main problem is its evil rulers and low fertility: same as Western Europe. Debt is just paper and bits on computer drives.

    At some point there will probably be a WMP-panic and recession, but it won’t be that bad or long lasting.

  22. Rahan says:

    I have to say, that there’s a “debt economy” and then there’s a “debt economy”.

    *Country A*: After the good times are over, what remains is a whole new level of badass infrastructure built across the country. Enough to provide for a “normal life framework” for the citizens until the next good times. Also, the military was upgraded and modernized during the “fake money years”.

    *Country B*: After the good times are over, it turns out everything was squandered and moved out of country, and no one even touched the infrastructure for the last twenty years, and the only army upgrades were a few super expensive prototypes that don’t do shit. So now not only is the economy crap, but the infrastructure is way worse than a generation ago, and by the time the next good times arrive, it’s gonna all become Mad Max slum Favela tier.

    The way I see it, even with both Country A and Country B going through the same crashes, Country A is the ones that’s slowly pulling ahead, due to investing the “fake money” into “real stuff that matters”, while Country B is at the same time falling behind, because neither “fake” nor “real” money is being invested into any real stuff that matters.

    In this sense Country A is catching up 30% due to its efforts and not being morons, and 70% due to Country B taking three steps back for each step forward of Country A.

    • Replies: @Anonymous
  23. Lot says:
    @Brett Redmayne-Titley

    “ many US/Fed-like tricks”

    You keep using derogatory language to describe normal monetary policies with no evidence or even arguments they are true problems.

    • Replies: @nsa
    , @silviosilver
  24. Lot says:
    @d dan

    “ China has almost non-existent external debts, but the largest foreign reserve in the world.”

    They cannot sell those reserves without driving up their currency and crushing their export sector.

    • Replies: @Anonymous
  25. @bobbybobbob

    Note the scale: debt as % of [$27 Trillion] GDP. Got it?

  26. @Brett Redmayne-Titley

    Good points all. Here are some preliminary thoughts:

    In providing, as you do, established metrics, the ones in my article strongly suggest that the Chinese economy is cooling down, as is the ability to service all forms of debt. Cooling down? GDP growth was 9.4 percent a decade ago, but the base for last year’s estimated 6.1 percent was 188 percent larger than the base 10 yrs ago. So the incremental expansion in the size of China’s economy in 2019 was 151 percent bigger than it was at the faster growth rate 10 yrs ago. Since China’s population is unchanged in that decade, we can see that growth in 2018 was twice 2008’s, even though the acceleration rate back then was higher. The economy added $1.60 Tn in 2019 vs $1.00 Tn in 2009 but, in 2019, grew 6.2%, to $27 trillion vs. US $21 trillion PPP.

    Unless I am mistaken, most of the references you provide are not current as is shown in most of your citations. Can you be more specific?

    Yours and Mr. Walsh’s articles, although very well presented, in no way references the Chinese banking failures, problems of liquidity, the PBoC reactions to it, or the inherent problem of the Shadow Banking issue. Are these current events not important to the correct economic view point? These current events are not important when we check the credit side of the ledger. China’s banks are the biggest and, by far, the most profitable in the history of mankind. Their profits alone are many times the losses of the failures. To­tal as­sets of Chi­nese bank­ing sec­tor in­sti­tu­tions were 284.67 tril­lion yuan, for YoY growth of 7.7%, while to­tal as­sets of se­cu­ri­ties sec­tor in­sti­tu­tions were 7.83 tril­lion yuan, for YoY growth of 13.6%. To­tal as­sets of in­sur­ance sec­tor in­sti­tu­tions were 19.96 tril­lion yuan, for YoY growth of 11.7%. China has the high­est level of wealth ac­cu­mu­la­tion and the low­est wealth ex­pectancy gap–the dif­fer­ence be­tween what re­spon­dents be­lieved they needed to re­tire com­fort­ably and the amount they would likely have at the age of 60 based on eco­nomic fore­casts.

    What lowered percentage of GDP growth in your view will no longer sustain the economy? You are conflating ‘acceleration’ and ‘growth’. They are very different things. See my first answer, above.

    Consumer purchasing is down. Really? Retail sales grew by 8 per cent in 2019. “China’s Box Office Total Breaks All-Time Record in 2019” – Variety. Leading insurer Ping An net profit rose 68%. The economy created 13.52 mil­lion new ur­ban jobs and the na­tional reg­is­tered ur­ban un­em­ploy­ment rate stood at 3.62%. Rail cargo grew 6.8%. Excavator sales rose 12%. Heavy trucks sales rose 11% percent. The mar­itime econ­omy grew 6.3% Average real wages rose 6%, as they did in 2018. Shanghai’s minimum wage rose 10 percent. Mobile payments rose 60% YoY. China overtook the US as the world’s largest fashion market.

    Do you not agree that China’s must be able to maintain its export percentage of GDP? With the world market for Chinese goods slowing, what do you feel will replace this in order to maintain just current GDP levels? China’s economy is not, and has never been, export-driven. China is, and has always been, averse to foreign trade. Its trade with the world is in balance, it’s the #1 trading partner for 60% of the world’s nations, its currency is fairly valued so export percentage of GDP is irrelevant.

    • Replies: @Brett Redmayne-Titley
  27. @bobbybobbob

    The totally unprecedented scale of state directed stimulus after 2008 in China was not sustainable? It was not sustained.

    The totally unprecedented scale of state directed stimulus after 2008 in the USA was sustained. That’s why we’re in the pickle we’re in!

    Last week, Beth Hammack, a senior Goldman Sachs banker who chairs a US government advisory group known as the Treasury Bond Advisory Committee, dispatched a letter to Steven Mnuchin, Treasury secretary, with a bombshell at the bottom.

    According to TBAC calculations, America will need to sell an eye-popping $12tn of bonds in the coming decade, sharply more than it did in the past 10 years. This will “pose a unique challenge for the Treasury”, Ms Hammack warned, even “without factoring in the possibility of a recession”. In plain English, the Wall Street luminaries on the committee were asking who on earth — or in global finance — will buy this looming mountain of Treasuries?

    In recent decades China has been a reliable source of demand for American debt, as the country amassed vast defensive foreign exchange reserves and its export boom left it with dollars to invest.

    But now a shift is in the air: between May and November last year, China’s holdings of US Treasuries quietly shrank from $1.18tn to $1.12tn, well below the levels seen just three years ago, when China’s holdings topped $1.25tn. [Gillian Tett, FT]

  28. anon[776] • Disclaimer says:
    @Brett Redmayne-Titley

    GDP dropping for seven straight years down to 6.15%

    GDP isn’t dropping, growth in GDP is dropping. Of course you know and understand this but to the casual reader, this nuance may be missed.

    Moreover, as China’s GDP and GDP per capita reach levels that approach or exceed that of the most prosperous developed economies the magnitude of growth will also more closely resemble that of those same economies.

    The problem won’t be debt per se but rather the difficulty of finding high return projects. Meanwhile SOE need to be rationalized, which will be painful and expensive.

    It’s really the other side of the balance sheet that will be increasingly challenging. And I don’t anticipate a massive failure, but rather China will began to stagnate due to its incredible successes.

  29. Sean says:
    @Brett Redmayne-Titley

    Yes, but there are those attacking China, yet it has proved resistant to Soros and Bass. Shorting Japan is the very definition of a sucker bet, and I suspect China is in the process of supplanting Japan in that respect. Helped no doubt by lack of willingness to risk global economic catastrophe by allowing Chinese collapse. Warren Buffet got huge returns on his Chinese investment in electric transit, and it was found US cities were using government carbon reduction grants to buy from that firm.

    Keynesian economics a la digging holes and filling them in is not what is happening in China. It is not obvious that China can’t beat the US in the same way the US beat the USSR post Sputnik, by investment in basic research. Considering they have a billion people that Coca Cola, MacDonald’s and the tech firms want to sell to but won’t be allowed to without technology transfer and setting up in China where everything is stolen as a matter of routine, no advance that the US has could be kept from China. The Chinese being unable to fair and square beat the US to trillionaire–making AI is maybe true, but they are building on what they can appropriate. It is not at all obvious that from a basis of what they can gather by comercial forced technology transfer and then adding the kind money being thrown at AI by China it would be unable to get ahead of the US.

    The military actively encouraged, when it did not finance directly, the giant cyclotrons, betatrons, synchrotrons, and synchrocyclotrons, any one of which consumed more steel and electricity than a prewar experimentalist could have imagined. These were not so much crumbs from the weapons-development table as they were blank checks from officials persuaded that physics worked miracles. Who could say what was impossible?
    ― James Gleick, Genius: The Life and Science of Richard Feynman

    China has the people, and their government are enthusiastic about the project. This isn’t America beating Nazi Germany to the bomb in WW2 because the Jewish physicists had left, the only Nazi (Pascual Jordan) among the top brains joined the Luftwaffe in 1939 and was working as a weather analyst at Peenemünde, while war production was making resources scarce so that as Heisenberg said “We wouldn’t have had the moral courage to recommend to the Government in the spring of 1942 that they should employ 120,000 men just for building the thing up”, and the leadership did not understand the potential of a crash program. The Chinese are all Pascual Jordans politically, they have many, many as clever as him, and there is no diversion on the Russian Front.

    China’s ‘Sputnik Moment’ and the Sino-American Battle for AI Supremacy
    I believe that the skillful application of AI will be China’s greatest opportunity to catch up with — and possibly surpass — the United States. But more importantly, this shift will create an opportunity for all people to rediscover what it is that makes us human.

    With more than three times the population China would only have to be a third as productive to surpass the US by 2049. The Chinese are like economist termites: living on paper because a hypercapitalist Western elite like it that way.

    • Replies: @Anonymous
  30. Thomasina says:
    @TG

    What turned the United States into a great industrial power was World War II. Every other country was bankrupt and leveled, and the United States greatly benefited from this. They became the world’s supplier.

    The Roaring Twenties were good times too, great skyscrapers built, the sky was the limit as far as borrowing and debt, stock market soaring, and then….whoops a daisy….the bottom fell out.

    The world is awash in debt: $32,000.00 of it for every single person on this planet.

    China will not be immune.

    • Replies: @obwandiyag
  31. The gods of finance capitalism ignore that fact that increasing debt does not automatically translate into increasing productive assets. And so, year by year, more debt must be used simply to service the old debt. Productive assets thereby decrease, or in the best case decelerate. The whole thing turns into a vicious spiral. The only thing China has going for it, is that most of its debt is owed internally, therefore a debt jubilee across selected sectors of the economy might actually alleviate the situation.

  32. @TG

    Do you have personal fond memories of WPA and the New Deal? Or maybe you got your history from that deceiver Howard Zinn. Regardless, it’s obvious you’ve never heard of WWII as the economic engine that finally drove out the depression.

  33. sally says:
    @d dan

    Yes, d dan I was going to ask about the same thing.. China has lost its opportunity to be independent until it finds a way to defeat the global currency providers.

    The problem described below is why I think the human rights problem in this world, that is leading the mobsters ( banksters, corporate cronies, and privateers) to force the nation states to war on each other is the nation state system itself. Think of the persons in control of the nation state as armed jailers and the humans contained within the nation state as unarmed inmates who must follow the orders of the armed jailers. If there were no global nation state system (GNNS) there would be no global wars, or it the unarmed humanity contained within the Armed Nation State Jail had the authority and power to remove from office any jailer who were to violate a human right. AFAICT that is the only two ways wars can be stopped: eliminate the Nation State or empower humanity to regulate the behaviors of those who are in positions of power within a nation state member of the nation state system.

    What I have yet to understand: why nation states (especially ones like China) don’t use two different currencies, one for intra nation state (INS) trade and payments of wage, and the other for inter(national) ENS state. So we have two generic currencies: INS currency and ENS currency. Oil producing nation states can sell oil internationally to acquire buying power on the international market, and if the producer, refiner and distributor of the oil is an internal producer of oil all of the benefit of the oil would flow to the nation state central exchange bank. The trick is Nation States needed to produce for its own and to trade with its own and deal it is own currency. The I-got-u occurs when the nation state cannot produce what it needs with its own resources. Iran is getting more and more independent so it is an enemy nation state. Russia, China and Iran are moving toward acting as one nation state and trade within these nation states may be treated as 100% internal trade. That would upset the privately owned third party issued ENS currency. hence war is imminent.

    Internally the currency is (internal Nation State ) ins, and externally it is (ENS, currency issued by a central global third party authority (the global reserve currency, the ENS) and is subject to the whims of the issuer.
    There is a great need for nation states with INS not to allow outsider third parties to own land, natural resources or to control industry within the nation state.

    In the dual currency Nation State, a central bank (the I-got-u bank of internal\external exchange) is needed. The larger the internal demand for goods and services produced internally the stronger the ins is against the ENS currency, but internally the ins/ENS exchange rate has little value and virtually no meaning to persons who do not trade in externally produced goods or delivered services and who also live and work in an 100% independent nation state.

    I like to play a thought game.. Assume a nation is capable to produce all of the goods and services it needs, has a good educational system, plenty of minerals and natural resources, and is a strong competitor in the global high technology arena; that is it builds its own airplanes, automobiles, cranes, heavy equipment, ships, and tanks, etc. <=that 100 % independent nation state has little need for third party issued currency, in fact ENS might be close to worthless to the average citizen in the has-everything nation state, since its citizens buy/produce/sell only goods and services made\traded\consumed internally.

    Now little by little deprive that 100% independent nation state of something it cannot produce or mine internally. For that missing something, the nation state must acquire that missing item in the international market. Such a nation state needs externally produced goods and services and must have ENS currency to acquire them. The 100%-X% independent-x Nation State must sell something produced internally (like oil) to external buyers in order to get ENS currency, or it must borrow from the external banker to get the ENS currency so it can purchase goods and services in the international markets.

    The 100% internal producer and user nation state is completely independent. Reduce that independence by subtracting goods and services it cannot produce internally. For each purchase made in the International market place it needs ENS. The need for ENS brings on borrowing (debt in ENS dominated currency) and retiring borrowed external interest bearing ENS currency debt requires ENS currency. Where does the nation state trading internationally get ENS currency it needs to trade on the internal market. That is the problem private banksters solve in exchange for their right to control the world.

    I would love to hear a debate about how our global world might look if the 8 billion people in the world were not divided and sorted by race, religion, and place of birth into 206 nation state containers that are managed by armed nation state jailers.

    • Replies: @Eugene Norman
    , @Mefobills
  34. anon[837] • Disclaimer says:
    @Priss Factor

    Japan’s problems are the Plaza Accord of 1985 and U.S. control of Japan in general.

  35. @gotmituns

    That’s what those Western CEOs thought when they exported all the jobs to China, they thought the little yellow men would keep slaving away in sweatshops making their products and raising their profits – all while they could boast about the wonders of capitalism and how so many Chinese no longer earn less than $1 a day – what they didn’t expect is that the Chinese would copy and even innovate and become a powerhouse. This is now why they are abandoning free market principles which they pushed so much and lobby the US president, who then lobbies the American vassal states in Europe, to exclude Chinese companies like Huawei.

    • Replies: @Thomasina
  36. @Priss Factor

    Many Western companies are now entering the Chinese market and so there is an inter-dependence being created. Also a lot of China’s products are now being sold outside the West in countries like India (a huge market, only going to get bigger as more enter the middle class) and even Africa.

    They will manage environmental cleanup, Beijing was like something out of blade-runner when the Olympics were held there in 2008, China were shamed into getting their act together and shut down lots of polluting coal factories.

    The masses in China don’t care about economic slowdown, like in the West, only the bankers and economists do. Life will still be comfortable for them and they will have a lot of great infrastructure. Debt ultimately doesn’t matter for China as it has become very powerful in the military and industrial sense and so no one can really use debt as an excuse for bullying China into submission.

  37. Somewhere in the middle of this Gish gallop we get the real figures – Chinese public debt is 55% of GDP and private debt is the same. In the US the latter is 150% of GDP and the former is about 100% and growing. Of course GDP is growing faster in China – if the debt were kept the same and growth was 6% then (with inflation of 2%) the debt to gdp ratio would fall to 25% in a decade. Stress tests are designed to catch problems and fix them. The sky isn’t falling in. And China earns a huge trade surplus every year while the US has a trade deficit of $1T. The US is clearly the country spending above its means. More importantly China is in fact spending the money on infrastructure and research rather than enriching shareholders. This leads to the sustainable growth which can pay the money back.

    Maybe the US needs Keynes.

    • Agree: Godfree Roberts
  38. @Monotonous Languor

    “Regardless, it’s obvious you’ve never heard of WWII as the economic engine that finally drove out the depression”

    Looks like the country needed even more government spending than the new deal, if that is correct.

    • Replies: @Thomasina
  39. Realist says:

    This is just another bullshit anti-China screed. Gordon Chang style.

    China bad…US good. LOL

    • Replies: @Just passing through
  40. @sally

    “I would love to hear a debate about how our global world might look if the 8 billion people in the world were not divided and sorted by race, religion, and place of birth into 206 nation state containers that are managed by armed nation state jailers.”

    A lot worse as the ethnic hostilities between states would instead be replicated within them.

    States (you are using the term nation states incorrectly) are not, in general, jails. The exception is some dictatorships and other regimes who don’t allow their citizens to leave. Instead they are close to castles – if we must pick a building – designed to keep people out.

    • Replies: @Brás Cubas
  41. TG says:

    Interesting, but:

    “When the time comes to pay the piper, that debt will be paid, no matter…” Oh really? What if China just repudiates it? In the early phases of development, the United States stiffed its foreign creditors and got away with it. As long as the debt is in your own currency, and you are mostly self sufficient in resources, a sovereign nation can wipe out debt quite easily. It’s just bits in a computer, after all.

    Never forget the physical reality. China’s large population is demanding in terms of resources, but the low fertility rate is a major asset: even modest real growth can compound, and not be wiped out by ever more mouths to feed (as is happening in India). China is building up real assets, real industries, real developed resources. China’s wages are now much higher than Mexico’s! China is the premier industrial power in the world and continuing to advance.

    Indeed, finance can screw things up, and finance is indeed complicated. But if the real economy of real productive assets has strength, finance can always just be dealt with like Solomon dealt with the Gordian knot. But if the real economy is a zillion malnourished peasants with no physical surplus to reinvest – like India, or Pakistan, or Egypt etc.etc., well, there is nothing that finance can do, is there? China has problems, sure, and the future is not clear, but China has so much better prospects than its peer competitors that it’s not even close.

    • Agree: Old and grumpy
    • Replies: @Anonymous
  42. China owns its own debt, which makes all the difference in the world. The US Fed is owned by private banksters. This may be why America is drowning in debt and China is not.

  43. All great powers eventually meet their nemesis. In the 21st century mankind’s nemesis will be nuclear Armageddon.
    https://www.ghostsofhistory.wordpress.com/

  44. CanSpeccy says: • Website

    it seems the steam that president Xi Jinping touts as powering the engine of his purported economic miracle of a master-planned economy is only a mirage, now almost completely evaporated before his eyes

    Evaporated is what steam is. If you seek to avoid contraction, what’s to worry about is condensation.

  45. Does a country have to repay its debt? Maybe it does. I still think its former single child policy, that resulted in primarily sons, is China’s real time bomb. Diversity is no one’s strength.

    • Replies: @ken
  46. @Realist

    Some Whites seem to be terrified that they are losing the edge (mostly due to the incompetence and pursuit of worldly hedonism by the average White) and are coming up with coping strategies when faced with China’s rise. It is quite obvious that Chinese IQ studies are bogus and that the average Chinaman has a lower IQ than the average White, which makes it even more frightening what a group of unified by intelectually mediocre (if you consider IQ tests to be the final say on the matter of intellect) can do, and that Whites as a group are unlikely to be unified due to the innate individualism present within them. Despite reading lots of alt-right material and agreeing with much of it, I simply cannot empathise with the majority of Whites around me, they are just too diverse and differing in values, Chinese meanwhile are more conformist and uniform so they do not have this problem, they lack the same ego as Whites.

    Western analysts are currently panicking about China much like Westerners were panicking after Japan – a non-White nation – won the 1905 Russo-Japan war stunning Europeans. Despite this development, retarded Whites proceeded to carry out the mass slaughter in World War form, not once but twice over the next 3 decades. Sure you could say the Jews were prodding us on but the fact remains that Jews were a necessary but not sufficient condition for war to break out.

    • Replies: @Anonymous
  47. Anonymous[292] • Disclaimer says:
    @TG

    Actually, *white* Americans have lower fertility than the Chinese have.

    As a matter of fact more white Americans die each year than are born. This has been going on for quite a few years now, and will only accelerate – to which significant proportions – in the future. Very few European whites emigrate to the USA to make up the shortfall. Not only are white Europeans effectively racially discriminated against by US official immigration policy – apparently subcons are favored by the US government – but very few white western Europeans, at least, are, in fact, interested in emigrating to the USA, all-in-all living standards including, crucially health care etc, are better in Europe. And anyway, why emigrate to the USA just so the precious tax sweat of one’s brow money is used to subsidize the USA’s enormous number of blacks and browns?

    In 20 years time the USA will definitely be mostly black and brown in character. Whatever we you cut it, it’s game over for the USA.

    Deal with it.

    • Replies: @Lot
    , @Bookish1
  48. CanSpeccy says: • Website

    The Chinese economic miracle is built on unsustainable debt-based infrastructure projects over the past two decades that have provided China with a face of prosperity to show the world, but this is only a mask to hide the limited countrywide success of the Chinese miracle into the rural areas.

    Or put another way: China, in achieving the most rapid economic development the world has ever seen, has brought prosperity to hundreds of millions of its citizens, even though many remain poor.

    China’s external debt of $2T versus a GDP of $12T is not unsustainable. And domestic debt of $4T can be, and no doubt will be, largely inflated away.

    The thing about debt is who benefits. In the US mainly the 1%, while the mass of ordinary folk have been made poorer as inflationary finance has driven up the cost of housing.

    In China, the 1% have no doubt benefited from debt-based money creation, but also a mass of ordinary folk.

  49. nsa says:
    @Lot

    “You keep using derogatory language to describe normal monetary policies…….”
    Lot proves that even a blind jew finds a fresh bagel once in awhile. Both the USA and China utilize a system best described as Joonomics….financial alchemy where money and credit are created out of thin air and then doled out to various friends, relatives, insiders, elites, and assorted useful idiots. Eventually a portion of the largesse filters down to the masses of asses who can’t wait to consume before they earn. At least the first Chinese recipients of the ersatz money and credit are Chinese, and not mostly members of the KKK (Kock Kutter Kult) as in North America.

  50. @Andy

    You must feel good that no less than Ron Unz agrees with you but I am afraid even the “pope” of this website isn’t infallible … we know that which goes up surely must come down but the question is when and just because it hasn’t happened in the last twenty years, it doesn’t mean it can’t occur at any moment.

  51. @Godfree Roberts

    Thanks Godfree, for the expected nicely crafted counter points to my comment. Unlike too many of the commenters here, who strangely saw this article as a comparison, if not tribute, to the American economy, your additional comments stick to the point: China.

    Respectfully, I would ask where you are getting the metrics you are presenting? I am presenting quite a different sub-set of information than presented in your article or comments, and would like to add your excellent resources to my own for future consideration.

    Our articles fall into two camps in general: The Keynesian allegiance to always sustainable debt regardless of the many tricks used to carry this debt( see: Japan and USA) or belief that debt is only sustainable in the long term if it can be ultimately paid. Fair enough… and the reason for this ongoing (mostly) cordial debate within this forum.

    While parrying statistics is part of this discussion, within the economic camp I ascribe to, I believe history of failed currencies and economies of the past( before Bretton Woods)strongly shows that ultimately countries that cannot service their debts do not survive. Certainly, as shown with Japan, the modern tricks of today’s central banks have created the ability to forestall this history much longer than past economies, but without these tricks so goes history.

    Going backwards to the Roman Denarius then forward thru the history of hundreds of currencies that have failed along with their economies, China itself has a very recent historic example of fiat currency failure of the Yuan. AS a partial result of China’s then attachment to the Spanish dollar and the century long effort to support it until it to failed, China from 1945-47 was hit with massive hyperinflation as a result of government money printing. Although China has not yet restarted this money printing in the American model, at that time China, although relatively impoverished compared to today, had to resort to a gold backed currency in order to stop the bleeding.

    Today, as the metrics in my article suggest, China is going backwards to sustaining its national debt with central bank monetary control and unless the Chinese economy( yes, better than most) stays above 6% GDP growth( their own estimates) the current Yuan will again suffer.

    I believe that history bolsters this possibility. Like America that will do everything and anything to maintain its VERY failing economy, the PBoC will not let the Yuan die without using all available tools. Interestingly to the 1945-47 comparison, China has been buy massive amounts of Gold bullion over the past five years and has accelerated these purchases in 2019.

    As I have admitted in a previous comment, no China will not likely collapse in totality. However, despite the positive metrics you present, unless China can become autonomous as an economy its reliance on world trade will continue to cause the PBoC and the Chinese people serious concerns in the near future. I believe history is clear: an economy can indeed resort to many and all tricks of purported economic growth, but if that growth is not sustained printing money or writing off the loans- as you suggest- only forestalls the inevitable.

    However, Japan, the EU, Australia, Canada, UK are all similarly paddling furiously and so far these countries have fixed nothing. They have, as I argue, only delayed- as with China- the inevitable.

    Thanks for picking up the gauntlet and presenting an opposing position on all this. Much appreciated!! Kind Regards, B.R-T.

  52. Moi says:
    @Svevlad

    One thing for sure and that is we’ll fail before China.

  53. @Brett Redmayne-Titley

    More probing questions but, I think, there’s enough reliable data to set aside the worries you describe.

    I would ask where you are getting the metrics you are presenting? Which metrics’ sources are you most interested in?

    Japan, the modern tricks of today’s central banks have created the ability to forestall this history much longer than past economies, but without these tricks so goes history. Japan’s economy is not remotely similar in any respect.

    China is going backwards to sustaining its national debt with central bank monetary control No, China’s debt is self-sustaining, as all good debt is, and as I explained above. Our debt, by contrast, has little or no income-earning asset backing.

    unless the Chinese economy( yes, better than most) stays above 6% GDP growth( their own estimates) the current Yuan will again suffer. Why will it suffer–and what will it suffer from–if growth goes to 5%?

    unless China can become autonomous as an economy its reliance on world trade will continue to cause the PBoC and the Chinese people serious concerns in the near future. China’s reliance on trade is almost as low as America’s, so why should either cause serious concern?

    • Replies: @Sean
  54. Thomasina says:
    @Eugene Norman

    “Looks like the country needed even more government spending than the new deal, if that is correct.”

    No, it wasn’t adding more government spending that finally drove out the depression.

    It was the fact that the U.S. was practically the only man left standing after the WWII. Everybody else was bankrupt and their countries were levelled: factories destroyed, millions dead, cities obliterated, massive destruction. The U.S. became the engine of the world.

    “Government spending” and the “New Deal” is just another myth that’s unfortunately been hammered into everyone’s heads. Stand back and think about it. If you’re in the enviable position of being the sole producer for the world, as happened after World War II, how can you miss?

    Keynes was all about saving money in good times so that you have money that can be spent in bad times. Sound reasoning, but good luck with that. What government ever does that?

    • Replies: @Eugene Norman
  55. Mefobills says:

    Brett says this:

    This Chinese economic Keynesian trick of interjection of liquidity into national infrastructure is somewhat similar to the TVA and national works projects funded under Roosevelt’s depression-era New Deal. In this approach employment and therefore a growing tax base accelerated year after year as workers and corporations received the short-lived benefits of this massive windfall of available liquidity.

    In the roaring 20’s excess credit was borrowed from private banks and then said credit channeled toward the stock market. Banks were also allowed to put stock on their ledgers as assets. This is an exponential function pushing prices by way of a hypothecation mechanism.

    What cannot go on forever (because it is fraud) will not, and eventually collapses. What is left behind is over-hanging debt that cannot be paid. Why? The money as credit has already changed hands, and created plutocracy. During the stock market crash, the winners were rewarded with the re-allocation of money distribution, while the losers were on the other side of the ledger holding private debts.

    I will keep pounding this point home, as economists cannot seem to grasp the concept. Money channels and so do debt instruments. The type of money an economy has and the type of debt an economy has, are fundamental to the operation of said economy. Also, debt instruments also make claims in excess of the credit they spawned. Ergo, the two are twins only at birth and so diverge, and said divergence can become exponential over time. Western neo-liberal economists do not codify time well… most equations have equal signs, and hence you get swaps of unlike kinds, and they call it equal.

    In order to get out of the great depression… to pay debts, new Public “credit” was created. This actually worked, and the end result was infrastructure that redounded to the public’s benefit.

    The sad thing was that Roosevelt administration did not DO ENOUGH. It actually took war, and the gusher of public spending to un-do the depression.

    Richard Koo, a Japanese Economist, has coined the term “Balance Sheet Recession.” He had to study the great depression to understand what had happened to Japan in the 80’s.

    So, in order to fix the balance sheets, especially where private debts were making claims on the real economy, it took Public Debts (to hypothecate new credit into existence) to pay said private debts.

    In other words, Keynes was actually correct. Keynes was an observer of debt money systems and how they operate, and came up with solutions to the problems of debt money.

    Germany under national socialism, did direct injections of money into the production system by way of its bills (mefo and oeffa), along with other tricks invented Reinhardt and Schacht.

    D Dan nailed it earlier:
    https://www.unz.com/article/chinas-growing-economic-miraclecollapse/#comment-3666148

    If your left pocket owes your right pocket a debt payment, do you bend over and yell at your pants?

    China’s debts are internal, and they are balanced by resources.

    In the case of WW2, America created new money as debt, and also created new money as line items on the budget. Yes, that’s right, new money issued forth directly from Treasury during the stress of war-time, and it was not accounted for on a balance sheet.

    At the end of the war, the U.S. had blown up much of what it had produced, and what was left behind was paid for infrastructure, and low PRIVATE DEBTs. People had paid down their private debts during the war.

    At the end of the war, the economy turned toward internal consumption, and a new debt cycle began.

    Debt cycles usually last around 7×7 = 49 years. To my estimation, this has to do with land polarization, as the land is hypothecated toward creditors. This is a cycle of history for those nations gripped in false economy, and which operate state sponsored usury systems (((the west))). In post war U.S. case, when women entered the work-force in mid 60’s and early 70’s it was to create a new debt class. New debts paid old debts.

    I hope people are beginning to understand that money and prices are the basis of everything. What is the knock on effect of women entering the workforce? Humans are like fish in water, where money and prices are analogous.

    Economists that keep pointing to China, and who use western neo-liberal economic spectacles, will continue to get it wrong. It is learned incompetence, as taught in colleges, with economic deception funded by usury flows.

  56. Mefobills says:

    Here is an example of deception:

    Brett says this:

    Going backwards to the Roman Denarius then forward thru the history of hundreds of currencies that have failed along with their economies, China itself has a very recent historic example of fiat currency failure of the Yuan.

    The entire 2000 year history of gold coins was fiat. Fiat means faith. The King had stamped the ‘coins’ with his stamp, and hence the coins became faith in the king.

    Once a coin gets a “stamp” it becomes law. The true nature of money is law.

    The real argument is whether or not money is lawful. Whenever you hear the term “fiat” being bandied about as an epithet, that is your opportunity to run away from the pundit.

    Since money’s true nature is law, then true nature of money is faith in said law, and ability of the economic production system to create goods and services.

    I submit that China’s money is far more lawful than “reserve currency” of Federal Reserve Notes (private bank corporate credit, supported by a bought and paid-for political class.)

    • Replies: @Brett Redmayne-Titley
  57. Lot says:
    @Anonymous

    “ Actually, *white* Americans have lower fertility than the Chinese have.”

    Nope.

    And China’s tfr is de facto overstated because of sex selection. Bare branches can contribute to the economy but they are demographic dead-ends.

    Further, China’s Han, sex-adjusted fertility is lower still.

    • Replies: @ken
  58. Tom Verso says:

    Thank you Ron Unz!

    Where else can one find a discussion like this, on a cogent topic like this, in an English language publication?

    • Agree: Bookish1
    • Replies: @Brett Redmayne-Titley
  59. Tom Verso says:
    @onebornfree

    Thank you for this note.

    I am a daily reader of Zerohedge and yet I totally missed the pattern of anti-China reporting you have brought forth. I will have to become a more careful reader.

    Although in part, the reason for my missing the Zerohedge pattern is because I tend to ignore most China so-called ‘reporting’ articles; in as much as they tend to rely on non-China sources who use American (Western if you will) concepts and analogies to develop their arguments.

  60. @Thomasina

    WWII was Keynesian, too. God, are you people ignorant.

    • Replies: @Thomasina
  61. Anonymous[392] • Disclaimer says:
    @Just passing through

    India = IQ of 82

    Cope

    • Replies: @Just passing through
  62. Sean says:
    @Godfree Roberts

    https://www.project-syndicate.org/commentary/china-political-legitimacy-modern-confucianism-by-robert-skidelsky-2019-12

    CHINA’S political stability and relative absence of violence were thus achieved at the expense of economic dynamism, not in harmony with it. The West’s economic ascendancy, on the other hand, was based precisely on a rejection of the organic unity of morals, politics, and economics….

    By the 1800s, these various currents had merged into a social Darwinist view of progress that arranged races in a hierarchical ladder of achievement – an outlook significantly influenced by the West’s military superiority in its encounters with “inferior” races. This universalist approach underpinned the West’s condescending, patronizing, and contemptuous view of China. Western economists and philosophers regarded the Chinese system of rule not as a contribution to the global stock of human wisdom, but as a cause of the country’s “backwardness.” Their verdict that the West was superior to China in every way, except in the manufacture of porcelain, left no room for cultural accommodation.

    No one has poured as much money into big data use and AI or has as many people working on it as China. https://www.cityam.com/bt-and-vodafone-support-huawei-involvement-in-uk-5g-network/
    As a Trump advisor got sacked for saying, for the first time the US faces a rival that is a non Caucasian country. The lesser sense of self that Chinese have and their vulnerability to being kept in line by shame makes them ideally suited to the coming era of big data. Westerners think as individuals.

    I think an effort to deliberately destabilize the Chinese economy is going to be increasingly discussed in Western capitals, though not by the same old elites. Playing by the rules of Smith and more especially Ricardo just won’t work, at least for the vast majority of people in the West who are not so easily controlled as Xi’s.

    • Replies: @Godfree Roberts
  63. Cratylus says:

    First, as another commenter shows in graphical form, China’s debt/GDP is not that much different from the that of the EU and US – and actually a bit less than Japan’s which is the highest.
    BUT let us pass over that devastating blow to this thesis.

    The real problem is that this article has a stifling familiarity to it. For many decades now predictions galore of China’s imminent collapse have graced the pages of the Establishment press. They have come to naught. I would stuff this prediction with all the others in the Gordon Chang file.

    Better to stick with the facts. Start with this in Unz the other day:
    https://www.unz.com/article/china-number-one-economic-power-for-half-decade-dashes-on/

  64. Cratylus says:
    @Godfree Roberts

    I agree with your comments!!
    But what have you got against twaddle?

  65. @Thomasina

    There’s a difference between being top dog after the war and growing as fast as the US did. The growth was driven by government spending. In fact the Keynesian deal after the war kept the US as top dog with historically unprecedented and broadly based growth across all income levels, something that stopped immediately the monetarist and neo liberal regime took over. Growth still happened at a lower level but it wasn’t broad based.

    Keynes by the way supported capital controls which were a vital part of regulating the post war system, capital could be taxed if it couldn’t flee. It wasn’t the lack of success that annoyed capitalists about the post war economy, the post war settlement enriched both capitalist and worker, it was the necessary power of government and the ability to place taxes on wealth.

    As for China it’s often touted as a success of capitalism even if it has a communist government, in reality it’s a success of tightly managed government dominated capitalism.

    This has had no effect on economics as it is taught, but economics is an ideology masquerading as a science. The problem the Chinese economy poses for standard macro economic theory is that it works in practice but not in theory.

  66. Mefobills says:
    @sally

    Think of the persons in control of the nation state as armed jailers and the humans contained within the nation state as unarmed inmates who must follow the orders of the armed jailers. If there were no global nation state system (GNNS) there would be no global wars,

    A nation is an extended tribe that has the same language and culture. To use U.S. as an example: Nation<States<Counties<Neighborhoods<Households

    A proper nation consists of concentric rings kinship, starting with family and race then expanding outward to history, and culture.

    (Unrestricted immigration of unlike tribes is folly in the extreme, and is one more factor in engineered collapse of U.S. and West. Finance capital plutocracy wants a decracinated people, disconnected from their past, and hence easy to dupe and maneuver with globo-homo liberalism.)

    Since money is law, and laws are national, then national sovereign money should never extend past your law. This is an iron rule of economics that humans routinely ignore. Never let you money extend past your borders and hence your national law.

    The globalists are all about "international money and international law" forcing something unnatural on the various tribes of man.

    Think of it like two circulatory systems that should not interact, for example the Cerebal and Spinal fluid system is segregated from the blood circulation system of the body. A nations money would be internal, and external would be something like a Bancor.

    Keynes proposed that humans use a Bancor system post WW2 at Bretton Woods. A Bancor is not money, but instead is an accounting unit that marks international trade. The Bancor then signals to a nation with exchange rate information. Of course Keynes was thwarted by the (((usual suspects))).

    If a trading nation is Mercantile (like China and Germany) and is exporting more goods than it is importing, then a Bancor system forces exchange rates up or down to get trade flows into balance.

    In this way, internal money of a nation stays internal and does not "leak" over into other economies while at the same time, international trade is allowed to go forth.

    The reserve currency of federal reserve notes (private bank credit) is fundamentally flawed to balance trade flows, as others have noticed e.g. Triffins dilemma. The U.S. is caught in a trap, as its "international bank money" has become extractive on the American people, especially labor.

    Hjalmar Schacht of Germany, came up with a trading bank system that allowed goods flow, and which also allowed NSDAP Germany to escape "international banksters" and their credit.

    Trading banks isolate money flows and debt instruments, such that Reichsmarks did not leave Germany, yet were able to purchase foreign raw materials and goods. The other side of the trade was also true, as counterpart trading nation was able to purchase German goods, but not have their money leave their local economy.

    Schacht's trading bank scheme, along with industrial capitalism, is the main reason that international finance capital attacked the nation state of Germany in 1933.

    Nation States and Sovereign Money are the natural state of affairs of man. Nations are extended kinship arrangements. Nations are 'containers' to protect the people within. A polity that does not protect its people is illegitimate.

    Trouble begins when man makes false identities about money, and grasps for what others have. The internationalist is constantly lying about the nature of money so he can take usury on international trades. He wants to be a middle man, and siphon off a tithe for his creation and cancellation of credits. Entire corpus of neo-liberal economics is spun up to confuse and hypnotize nations to think that international finance and capital is beneficial and good.

    A good parasite confuses the host to think that it is a baby to be protected and nourished. The parasite lies and spreads hypnosis to take rents and self aggrandize.

    • Agree: Parfois1
  67. RJJCDA says:

    China’s secret, and before them Japan’s and ROK’s was “replication.”Observe what has been done in the successful West, replicate it by forced capital allocation to designated areas as developed in the West, and a country can grow very quickly and skip many intermediate steps until they approach the level of the copied. But then they stagnate as they can copy, even advance existing technologies, but cannot originate and create new technological paradigms.

    Japan was slated to “take over the economic world” in late eighties. Didn’t work out that way. East Asian respective Bell Curves of IQ exhibit about 5% higher average IQ than West, but even in nominal terms, they are deficient in the upper reaches where genius creates. That is why the species needs the West, free and prosperous.

    • Replies: @Herald
  68. Anonymous[317] • Disclaimer says:
    @Sean

    Bass is not a big player on the level of Soros. He made some money, and lots of publicity, back during the housing crash, but he was never a big player in high finance and the hedge fund world, and he’s only been losing money since the housing crash and making himself look foolish with wrong prognostications and bets over the past decade. This is why he’s transitioned into doing more media work and commentating.

    Bass is an anti-Semite, but he’s not like some principled right wing anti-Semite like you might find on this website. He promotes all the standard globo-homo, neoliberal views. He’s an anti-Semite primarily out of envy and jealousy.

    • Replies: @Thomasina
    , @Sean
  69. JQ says:
    @Andy

    And for 40 years, I have been reading about the incoming collapse of the US economy!

    In the 80’s, I was a kid and remember reading about the incoming collapse of the US economy
    to Japan taking over the world. Even my teachers would sometimes bring that up, how japan was about to devour US because america had so much unsustainable debt. Japan was innovating on so many
    fronts that america was not able to compete no more.

    There is even a movie with Bruce Willies that reminded me of that. I cant remember the name of it.

    • Agree: AWM, Redneck farmer
    • Replies: @Andy
  70. Anonymous[295] • Disclaimer says:

    If this article and comment section provide us with anything, we can rest assured nobody knows anything about China. I say this with sarcasm, of course. We know that China is growing and growing and growing….. but what does this even mean?

    What I see is a China obsessed with growth, one that will use any and all tricks to accelerate it’s development. I watched with laughter as a Chinese residential building upon completion collapsed to the ground. Another time earthquake damage revealed the innards of a large building. Where American construction companies would use reinforcement bar and concrete, the Chinese left a hollow space filled with empty cans of cooking oil and other trash. One can only wonder how prevalent examples like this exist throughout the country.

    Nothing positive ever comes from rushed and forced industrialization. Beneath all the apparent success, we can be sure a very fragile foundation is cracking as we speak, and upon collapse will reveal rubbish at it’s core, same as the building I describe above.

    The Chinese are imposters.

    • Replies: @last straw
  71. @Anonymous

    Are you sure you have replied to the right person? I didn’t actually mention India in my comment.

  72. ricpic says:

    I’d take David Stockman’s predictions of doom with a grain of salt. When has he not been predicting total implosion?

  73. Pft says:

    This guy doesn’t get it. Debt owed to yourself in your own currency doesn’t matter so long as your are able to prevent devaluation of your currency by keeping international investors from making a run on it which China does very well, and the US is supporting a stronger RMB so that threat is negligible.

    The US could do the same but limits its debt creation (money creation) to benefit the Financial sector (Fire) and MIC while its infrastructure collapses and citizens go bankrupt to go to college or if they get sick (despite having insurance at the time they get ill).

    Thats why the US wants to gain more control of Chinas financial system via its financial vultures, which was the only real point of the trade war. They are making us look bad by showing us what we could have but are denied. Of course its not paradise there as Chinas technocracy has created an authoritarian state with total surveillance using social credit to control the people (an idea covertly being implemented in the US), but at least they have new infrastructure.

  74. Anon[266] • Disclaimer says:

    https://www.project-syndicate.org/commentary/china-corrupt-meritocracy-by-yuen-yuen-ang-2019-10?barrier=accesspaylog

    Xi has gassed or imprisoned or seized the assets of millions of ‘Tigers and Flies’ since he took power.

    China is a land of paradoxes.

    But give that level of corruption, and it’s probably tip of the iceberg given all the deals and hedging that would have been taking place, how real is China’s economic base.

    I liked the analogy of borrowing money from the wife.

    Imagine if the wife was Chinese and might gut you while you sleep if you don’t bring home the cashflow. That’s the state of affairs for the regime, and one of the bases of social credit. ”

    As always, the answer is going to be somewhere in the middle. What happens when you have a corrupt meritocracy. China has one answer, will the answer be the same in the West.

    • Replies: @Kim
  75. anon[191] • Disclaimer says:

    I would love to know what China’s relationship with the Bank of International Settlements is? Does this bank lend money at interest to China like most countries in the world and does China have control over the issue of its own money or is it like most countries having some kind of foreign bank or entity control its money, like the Fed?

  76. @Mefobills

    Hello Mefobills,
    Like Godfree Robert’s contributions to this discussion, after reading your many contributions to other economic discussions I was hoping that you too would join in. Cheers!!

    I greatly enjoyed your addition regarding the US use of Keynesian economic policy in years past. However, that period of time allowed for sustaining the debt with a robust economy that used debt in the prudent manner of business and personal expansion, but with the intention to pay off that debt as a business expense towards future success. Pre-1972 America was a very different economic reality.

    Like China, if one uses the metrics of more than six years ago, the US of that time was in an expansionary upward spiral that included all business and societal cross sections of the economy -and a growing tax base- and that growth did allow the debts to be serviced in the time honored manner.

    Today, in America there has been no fiscal responsibility regarding an obligation to pay debt. Although this topic would fill a substantial article, America now merely “borrows from Peter to pay Paul” using the tricks of US / Fed economics that seem to have no intention of ever paying the initial debt which is generally hypothecated in many forms of other financial debt based instruments and resold…as debt.

    Regarding:

    The entire 2000 year history of gold coins was fiat. Fiat means faith. The King had stamped the ‘coins’ with his stamp, and hence the coins became faith in the king.

    I believe you have made an error in wording since fiat currency is indeed faith based but that faith was either in the government or in the gold that backed that currency. Regardless gold has never by definition been a fiat currency ( other than today’s paper gold certificates and derivatives) since bullion gold was backed by the faith that it was under ones own control. Coins too were indeed fiat, but many economies over history began to play with the percentages of gold and silver in their coins when their economies deteriorated. Yes, these coins were fiat.

    Once a coin gets a “stamp” it becomes law. The true nature of money is law.

    The real argument is whether or not money is lawful.

    Lawful money does not provide value to that money except from the government providing the assurance to the faith in that currency. If the government can’t back up its fiat then that fiat will be revalued accordingly. The US is a good very short term example of the value of “legal” money since the US dollar remains strong primarily because US debt holders have “faith” that the US gov’t will never abandon the dollar. In the short term, while this faith holds out the dollar remains strong, but I doubt that anyone but a dyed in the wool Keynesian would support the last 60 day of massive US fabricated liquidity ( $600 billion and counting) as a sign of economic success).Ultimately, in the long term as seen throughout history, when the tricks run out and the base debt cannot be paid, the currency suffers.

    I pose an academic question: Do you know of any country that has successfully at any time in history managed to sustain its currency value via debt based economic solutions? I do not believe that an example exists. However, examples of fiat currencies meeting their fates once the economic tricks of their time were exhausted is a very long list throughout history that has no exception that I know of.

    Thanks for you valuable additions to this article. Cheers!! B.R-T.

    • Replies: @Mefobills
    , @Mefobills
  77. chris says:
    @Brett Redmayne-Titley

    Your comment sets your entire article in a great framework vis-a-vis the rest of the world economies.

    The expansion of this comment into its own article might make for a balanced diagnosis of the precarious state of the current world economy.

  78. Thomasina says:
    @Anonymous

    Anti-semite or anti-parasite?

    Maybe Bass is just averse to parasites.

  79. @Eugene Norman

    Very much liked your comment, since I had just suggested the similar counter argument to Mefobills. I believe pre-1972 America was a far different emerging economic animal than after that time.

    Thanks for your addition to this discussion Cheers! B.R-T.

  80. @Tom Verso

    I think that this discussion both pro and con, and the amount of professional yet challenging discourse in this forum and the many other UR article forums, is EXACTLY why Unz Review continues to grow significantly in readership while almost all others are in decline for EXACTLY the opposite reason.

    To have the responses of so many individuals who have shared valuable facts on UR to this article, even as an alternative view, is a return to the kind of educated, academic discourse that transcends individual opinion back to the time of learned discussion.

    This is why IMHO that UR continues to grow. UR is setting a higher standard!!

    Thanks for noticing the difference. Kind Regards. Cheers!! B.R-T.

  81. Kim says:

    It’s spelt “corrapse”.

    • LOL: Redneck farmer
  82. Bookish1 says:
    @Anonymous

    Alot can happen to burst your scenario. Example—a great depression.

  83. Kim says:
    @TG

    Um? You mean, the “Keynesian trick” that produced, in the United States, the greatest industrial power that the world had ever seen?

    The indispensable element that made the US “the greatest industrial power the world had ever seen” was cheap surplus energy. Specifically cheap oil.

    The good press that Keynesianism has enjoyed is the result of it being applied at a time when there was the greatest growth in history in the availability of a very cheap, energy-dense, liquid energy source.

    Your viewpoint is bunk.

    https://ibb.co/NtsZC3H

    • Replies: @Thomasina
  84. Kim says:
    @Anon

    Imagine if the wife was Chinese and might gut you while you sleep if you don’t bring home the cashflow. That’s the state of affairs for the regime, and one of the bases of social credit. ”

    The Chinese have a saying, “One bed, two dreams”, but this takes it to the extreme. And I like the dragon lady trope as well. Well played.

  85. @Sean

    the vast majority of people in the West who are not so easily controlled as Xi’s?

    I suggest that you try controlling just ONE Chinese then get back to us with your insights on controlling 1,400,000,000 of the buggers.

    • Replies: @Sean
  86. I was listening to Andrew Yang discuss his book and suddenly it hit me–he shares a hidden false assumption with _everyone_ around the world who talks about the subject of economics.

    They _assume_ a newborn child will add a net economic value to the world during their lifetime.

    We know that while that has been true in periods of agricultural and industrial growth powered by human labor, that is _not_ true for most children born today (in any nation).

    What we also know is that robots/AI _will_ add economic value for each unit created.

    _That_ is why none of the economies will work.

    _That_ is why no economic system will work.

    The bad news affects everyone together–and I have yet to hear any serious proposal to deal with it.

  87. Mefobills says:

    Japan was slated to “take over the economic world” in late eighties. Didn’t work out that way. East Asian respective Bell Curves of IQ exhibit about 5% higher average IQ than West, but even in nominal terms, they are deficient in the upper reaches where genius creates. That is why the species needs the West, free and prosperous.

    Japan was secretly running an “industrial capitalist” economy up until plaza accord in 1985.

    Watch this movie by Werner to get some sort of understanding of what went on during that period:

    Credit Guidance Windows were a secret method used to inject new credit into industry and the commons. Japan was monetarily astute during their run-up to WW2, and figured out how “western” finance capital economy was bogus. So much for supposed inferior Japanese intellect.

    The line of causality to credit guidance windows goes like this: 1) American System of Economy 2) Peshine Smith and Frederick List 3) List advises the Kaiser 4) Japan tests the system in Manchuria 5) Manchurian rail road engineers guide MITI in Japan post WW2. 6) MITI tells the central bank where and how much credit to create. 7) Manchurian engineers die off and then Plaza accord 8)Japan’s economy is re-ordered as part of an externally imposed plan.

    And Yes, our (((friends))) were involved in the destruction of Japan… especially Stanley Fischer.

    The Japanese economic miracle was a function of Industrial Capitalism and a form of Sovereign Money.

    It always works, and that is why China is unbeatable. Get over it people. The American System of Economy was lost to Americans after the election of 1912, which in turn was funded by the (((usual suspects))).

    After Japan was read the riot act at Plaza accord, BOJ ran a housing bubble against their population. Anybody with a pulse was given a loan, and this pushed housing and real estate into the stratosphere.

    Law and force are related, and the “force” of America came to bear upon their “client state” Japan.

    Being an economic fast follower is good strategy, and Japan employed it to good effect. But, let me remind you that both Japanese and Chinese do have people at the extreme right of the IQ bell curve.

    Their percentage of genius at the far reaches of bell curve is less than that of White Men, but that doesn’t matter if economics of a country prevent genius from expressing itself. Not only that, from a large population base, the total genius is on par..

    People need to stop whistling past the graveyard. The U.S. has a parasite in its brain and is carrying one on its back.

    Until America reverts back to the “American System of Economy” and ejects its finance plutocracy, then it is running a race with a seriously heavy ball and chain attached.

    Immigrating low IQ people from the third world increases the size of the ball and chain.

    • Agree: Ghan-buri-Ghan
  88. Sean says:
    @Anonymous

    Soros has been running his business as a ‘family office’ for a decade so it is not so easy to know what his net results have been. Finding the kind of undervalued European companies that Soros made his money in is not so easy in the age of shareholder value. Bass is only 50.

    Soros was a supporter of Hillary Clinton. He wants to destroy all nation states, starting with America, using China as the battering ram. #billionairesSellingtochina and yes a lot of those billionaires and those articulating the views such as Kissinger are Jewish. Israel had banned travel to China for organ transplant because they are obviously being taken from ethnic minorities and political dissidents who are killed to order for the purpose.

    He’s an anti-Semite primarily out of envy and jealousy.

    Soros openly says that China is the greatest beneficiary of globalisation. Soros also subscribe to the same ideas about Bush and the neocons that so many on this site do

    SOROS declared in his 2004 The Bubble of American Supremacy, Bush and his coterie embraced “a crude form of social Darwinism” that assumed that “life is a struggle for survival, and we must rely mainly on the use of force to survive”. Whereas before September 11, “the excesses of [this] false ideology were kept within bounds by the normal functioning of our democracy”, after it Bush “deliberately fostered the fear that has gripped the country” to silence opposition and win support for a counterproductive policy of militaristic unilateralism. To Soros, assertions such as “either you are with us, or you are with the terrorists” eerily echoed the rhetoric of the Nazis and Soviets, which he hoped to have left behind in Europe. Soros worried, wisely, that Bush would lead the nation into “a permanent state of war” characterised by foreign intervention and domestic oppression.

    I think Bass understands as Soros does not that nation states operate to defend the interests of the common people, and have the emergent quality of maintaining their existence. Or maybe Soros does not care, because his foundation is clearly just another super rich tax evasion scam as with Gates and the rest of them’s ‘ philanthropy’. There is going to be a determined effort made by America to stop China overtaking the US, rely on it. And if it can’t it done economically there will have to be another way. Better that Bass succeeds.

    • Replies: @Anonymous
  89. ken says:
    @Old and grumpy

    1/3 of population over age sixty by 2050. They’ll be too busy changing their parents diapers to have time to have kids of their own. They’re building roads no one will drive on and apartments no one will live in. Central planning at its finest.

    • Agree: Hong Kong Hibernian
  90. ken says:
    @Lot

    Something along the lines of 30,000,000 Chinese men without a female counterpart. This could be harnessed into one hell of a motivated army, but I’m guessing they are mostly a beta lifestyle similar to Japanese men.

    • Replies: @Lot
  91. Mefobills says:
    @Brett Redmayne-Titley

    I believe you have made an error in wording since fiat currency is indeed faith based but that faith was either in the government or in the gold that backed that currency.

    All human relations are two way or three way. The third way, or third person interlocutor is force and law.

    Fiat is the faith that law and then force will intervene in between two way relations. I made no mistake. When there is a disagreement, then law and force become involved. Money settles in between two way trade and relations, and hence is part of the “third” party.

    When a money note or token says it is good for payment of debts public or private, that means there will be some sort of threat by law. All humans create this sort of organization as the basis for their civilizations. Even small tribes that have no money, will ordain a King or Chieftain, or some sort of interlocutor.

    Ergo, money requires a legal basis. The first money actually came out of the Temples, as Hudson’s Harvard team has shown us. It was based on grain, and then finally gold as a weight … hence gold is measured in “grains.” Money did not spontaneously arise out of trade, as money takes a certain level of law/civilization development before it can come into existence. In this case, the Temples were the law and order of the ancients.

    King Numa 716-672B, introduced bronze discs as money instead of gold or silver. This was pure Fiat money where metallic base was much less cost than the stamped value. This disenfranchised the gold/silver hoards, and hence their metal could only be used for jewlery or sold as commodity. Eastern (((Temples))) which used gold at that time, could could not disrupt Rome. Romes civilization was off to the races using fiat money and law. Of course, later in history they make monetary mistakes.

    The line of causality to King Numa could have been from Aristotle to Lycurgus to Numa. Who knows for sure. Lycurgus introduced Pelanors, which were iron disk money dipped into vinegar, to then render the base metal useless.

    Lycurgus wrote a new constitution that included Spartan land reform, as land had been polarized toward creditors, and then used armed volunteers in the marketplace, to then accept the new money. Sparta’s pure fiat money worked for 3 1/2 centuries.

    Lolbertarians want to pretend that there is a god in gold and precious metals. That we can give away ourselves to some sort of intrinsic value inherent in gold because it is shiny and does not rust.

    This is some sort of wishful little girl thinking that has no basis in real monetary history. Unfortunately, today’s economists are not taught economic history, so they can then be more easily duped by usury based neo-liberal orthodoxy.

    • Replies: @Biff
  92. Thomasina says:
    @Just passing through

    “That’s what those Western CEOs thought when they exported all the jobs to China, they thought the little yellow men would keep slaving away in sweatshops making their products and raising their profits – all while they could boast about the wonders of capitalism and how so many Chinese no longer earn less than $1 a day – what they didn’t expect is that the Chinese would copy and even innovate and become a powerhouse.”

    The Western CEOs thought nothing of the sort. They specifically went to China (Kissinger and Nixon) and won over the Chinese elite. The jobs would be offshored to China not only to save money on labor costs and those pesky environmental controls, BUT to build a whole new market consisting of over one billion new consumers!

    In order to do business in China, U.S. technology had to be turned over to the Chinese (or this is the reason they give) and the western corporations had to take on a Chinese partner (of course, one of the Chinese elite).

    These Chinese elite were then allowed to travel to the West and buy up properties with their newfound money, forcing prices up for the locals, and providing them a safety valve just in case things didn’t go well (you know, the Chinese population getting uppity over not being able to breathe or being priced out by the Chinese elite). The Chinese elite know very well that if things don’t go well and there is a downturn, whereby the Chinese population starts losing money, they will be strung up from the nearest lamp post.

    It wasn’t that long ago I read that 60% of everything exported out of China were goods owned and produced by the U.S. multinationals operating in China.

    When the downturn occurred in 2008, China did its part and printed, just like every other central bank. Mustn’t allow price discovery! Mustn’t allow bankruptcies! They continue to print every time there’s a hiccup.

    China is swimming in a massive amount of debt. No worse than anybody else, but they are not some miracle that just happened out of the blue. They were American-made.

  93. Mefobills says:
    @Brett Redmayne-Titley

    I pose an academic question: Do you know of any country that has successfully at any time in history managed to sustain its currency value via debt based economic solutions? I do not believe that an example exists.

    Easy: Canada 1938 to 1974.

    I’m using Canada as it was fairly recent, and was a major economy.

    Canada’s BOC (bank of canada) was a crown bank, which meant all of its stock was owned by MOF. Ministry of Finance would tell BOC to issue debt free into the commons and industry.

    MOF and BOC would supervise the private banks further down in the system. Private banks were prevented from hypothecating credit toward housing.

    Housing and land purchases were done through trusts, and this was pure gyro banking. Think of it like the Savings and Loans in the U.S. were people pooled their savings.

    So, housing loans monetary circuit would be a loop with old people’s savings, going to young people as a loan. The young people would produce goods and services that old people bought with income from the Trust loan. It was a virtuous cycle.

    Also, short term factoring loans (to bridge time to make payroll usually) were denied banks, and this guaranteed low risk activity was given over to the Trusts.

    Canada had little public debt by 1974, and educated population, free medical, a first world infrastructure, a viable small business sector. (People would pool their money to start business, hence local economy was viable.)

    So, yes — a debt money system can be made to work, but it takes really smart people at the top of the hierarchy, who are not deluded about how things work. (Gold doesn’t work.)

    The U.S. does not have smart people in the hierarchy. The U.S. is a finance plutocracy, that works for plutocracy and not the public.

    The usual suspects, external agents of mammon, overturned Canada’s system in 1974, and now Canada is another debt-ridden Western country slouching toward Gomorrah.

  94. Andy says:
    @JQ

    I don’t think the US economy will collapse. What I suspect is that China for the foreseeable future will have considerably higher annual growth than the US (right now is 6% against 2%). I don’t see a change in the fundamentals of both countries to prevent this. The comparison with Japan in the 1980s does not really hold water in my opinion. Japan was already a very developed economy three decades ago, so they didn’t have a lot of “room to expand”. China is still a developing economy, so they still have a lot of potential growth ahead.

    • Replies: @showmethereal
  95. Sean says:
    @Godfree Roberts

    For controlling their behavior, I suppose a school of psychology called Behaviorism might have been useful. But the social Credit Score System of China is completely voluntary so no chance of operant conditioning and holding a mirror of their activities up to each person to shame them into conformity. Unlike Facebook which does not have a the box saying ‘I agree with the terms and conditions’ that you can choose or not choose. Zhima Credit is completely private, so nothing to do with the government.

    Also, individualism in the Chinese tradition does not ’emphasize one’s power from within the context of one’s connection and unity (or harmony) with external authorities of power’. It is Western Liberalism that is down on the person developing through being open to radical ideas and new experiences. I have obviously mistaken an episode of Black Mirror for a documentary about China

    • Replies: @Godfree Roberts
  96. Anonymous[154] • Disclaimer says:
    @Sean

    Soros and Bass aren’t in the same league, and Soros has been waging war against China since long before Bass came on the scene. Soros was able to break the Bank of England and many other financial markets and economies, but the one he couldn’t was Hong Kong, because of China:

    “How Beijing and Hong Kong sent billionaire George Soros packing the last time he attacked Asian markets”

    https://www.scmp.com/news/china/economy/article/1906325/how-beijing-and-hong-kong-sent-billionaire-george-soros-packing

    Since then he’s been on the warpath against China for a quarter century now, and now as he nears the end of his life has become more outspoken:

    “George Soros: China Is a ‘Mortal Enemy’ of the West”

    https://www.breitbart.com/national-security/2019/10/25/george-soros-china-is-a-mortal-enemy-of-the-west/

    “George Soros praises Trump’s China policy but urges hard line on Huawei”

    https://www.washingtonexaminer.com/policy/economy/george-soros-praises-trumps-china-policy-but-urges-hard-line-on-huawei

  97. Thomasina says:
    @Kim

    An excellent point. Thank you.

  98. Biff says:
    @Mefobills

    hence gold is measured in “grains.”

    And so is gunpowder.

  99. @Monotonous Languor

    > WWII as the economic engine that finally drove out the depression.

    What a crock of crap. Life got increasingly miserable for every American through the war. “GDP” went up but life got harder. Guess What, you can drive the unemployement rate to zero when you enslave all the men. It was only when both the New Deal and the War Economy were called off that life started to get better for Americans.

    • Replies: @Mefobills
  100. Lot says:
    @ken

    1. These guys are in the bottom 10% of Chinese men. Hi tech armies don’t hordes of low IQ losers.

    2. You don’t really know for sure you’re a bare branch until maybe 35 or 40. Even then you might have a little hope. So too old to be in a mass army. And the guys at 20 who actually know they’ll be BBs are the losers of the losers.

    3. Lots of only children in China, they can’t get killed or nobody will take care of their parents and grandparents.

    • Replies: @Hong Xiu Quan
  101. @Sean

    We don’t know much about Social Credit yet but we do know that the Chinese trust their government. They have always (for 2200 years, anyway) seen it as the head of their national family and exemplar of their culture.

    Beijing sees itself as a neutral custodian of Social Credit data that makes life cheaper and easier for ordinary folk and harder and more expensive for assholes.

    95% of Chinese support the idea and they have been experimenting with it for many years so, by the time it gets legislated, support will be close to unanimous.

  102. Thomasina says:
    @obwandiyag

    “God, are you people ignorant.”

    Yikes, I see the Year of the Rat has started off early.

    Abundant, cheap oil (as one astute commenter said below) and being the only productive engine after WWII was what made the U.S. a powerhouse. This lasted until the 70’s when, according to Ralph Nader, the corporate elite started getting upset at what they thought were excessive demands by labor, and jobs began being offshored to China, this practice sanctioned by government.

    Since then, any time there’s the slightest wobble in the economy, in swoops the central banks with liquidity and lowering of interest rates, while big brother government provides a stimulus, and anyone who made bad bets is bailed out.

    During bad times the government incurs debt; in good times they never pay it back, which is what Keynes advocated they should do. I think if Keynes were alive today, he would weep.

  103. Household debt is relatively low in China. Most of that debt are mortgages. For instance – you bring up the drop in car sales. Well in China the overwhelming majority pay cash for cars. Only a minority take out loans or lease.

    As to the banks. You should also note that Chinese banks are required to have one of the highest reserve rates in the world. It has been lowered over the past decade – but it is nowhere near as low as the US or the EU.

    Lastly – be weary of certain sources… For instance “Taipei Times” is one of the last resources you want ask about anything to do with Mainland China. That is like asking MSNBC to report impartially about the GOP.

  104. @Anonymous

    Well it’s not just Soros… China’s greatest “sin” is not the human rights garbage they bring up (anyone who is a friend of Saudi Arabia can’t be serious) – but because China doesn’t bow down easy.

  105. @Andy

    Agree about Japan… Japan is highly urbanized. China still has a few hundred million people to move to cities before it reaches even US level of urbanization (it’s too big to reach Japan and South Korea’s level). Modern economies are built on urbanization. Still a long way to go for China.

    • Replies: @Lin
  106. @Lot

    He knows his audience, we can give him that much.

  107. Erebus says:
    @Eugene Norman

    The problem the Chinese economy poses for standard macro economic theory is that it works in practice but not in theory.

    A classic case of the old adage:
    In theory, theory and practice are the same, but in practice they’re not.

    If all hell breaks loose, the comparison gets very simple. If the financial plane that overlays both the Chinese and American economies disintegrates, the Chinese fall back on the world’s most developed civil and industrial infrastructures to rebuild their finances, while the US falls back on a mid-20th C civil infrastructure and almost no industrial infrastructure to speak of. IOW, the sqrt of fuck all.

    At bottom, there’s the difference. Which nation will fair better on the other side of the financial Armageddon we all see looming on the horizon?

  108. Aldou says:

    China’s debt is the least of your problems. Your women are not having enough children to save you from extinction. While moral and sexual degeneracy is destroying your youth.
    The U.N reports the most popular male name in the U.S in 2019 is ‘Mohammed’
    By the end of the century your lands will belong to us and there is nothing you can do about it now. All we have to do is wait.

  109. Lin says:
    @showmethereal

    China still has a few hundred million people to move to cities before it reaches even US level of urbanization

    You’re correct. The urbanisation level in china is about 60%(and increase at the rate of about 1%/year) while only 18% of murikans live in rural area.(Of course it is subjected to definition of urban and rural township)
    However I would like stress some important aspects:
    –In term of resources, china has no resource problems to build cities. As Bill Gates pointed out china produced more cement in 3 years than US 20th century total.
    –The number of farm workers in china is often misread. A significant % of people registered as farm workers actually have migrated to town, likely finding works in factory or construction sites.
    Its a matter of employment and china has no problem producing farm machines;china is the biggest motor vehicle making industry in the world

  110. @Lot

    Nay marriage these days is a bad deal for men. Especially in China where the groom is supposed to buy house for the bride. Smart men avoid marriage, and pump and dump if they can. Mgtow is the future.

  111. Always amusing to see unz.com’s resident cadre of leftists carry water for the Chinese capitalists in communist guise. Team America and Team Russia, meet Team China.

  112. @Andy

    I can remember while I was still at school, that the Communists would be unable to manage even Shanghai power station without the American engineers who had built it, when they captured it. Since then there has been a pretty constant flow of articles predicting the collapse of the Chinese economy. (For the record, there was, in fact, not even a power-cut when the power station changed hands!)

    • Agree: Andy
  113. @niceland

    Think about the big recession in 1929, what happened, why was it as bad as a massive natural disaster? Did Yellowstone super volcano go off? Was there a massive famine wiping out sizable portion of the working population? Did people stop working or stop needing or wanting goods and services? Did the tools and equipment or other means of production evaporate? Nope. Everything needed for future prosperity was in place, the only thing that happened was that man-made system of really stupid ideas about money and finance – crashed. The book keeping system of ‘who gets what’ strangled the economy. Unfortunately pressure from the usual suspects on the top of the economical food chain made sure nothing changed and we – in the west’ are still stuck with the same ideas about money, credit and debt.

    This really is the point. As to the crash in 1929, I remember reading that the day before the crash J.P.Morgan and Churchill were walking together in Wall St and Morgan told Churchill that he was going to crash the market tomorrow. Churchill asked how he could do that and he replied “Very simply, I just tell the bankers to stop lending.” Is it true? I don’t know but it sounds true to me, though I cannot remember where I read it. It is easy to see that such an action would have that effect.

  114. melpol says:

    Central leadership of China can in one swoop erase all debt. Chinese people will also have their savings erased. Rent payments will also be erased. Workers will be given food stamps for wages. Until normalcy returns homes will not get electricity. From bankruptcy China will rise again.

    • Replies: @Astuteobservor II
  115. @Anonymous

    Do you think Soros last squeal right before his well deserved death will be “China”!!!!!!

    🤣

  116. Baron says:

    Run it by us again, BRT, please. Three financial institutions out of a total of 4,279 fail and you call it catastrophe? Arghhhh

  117. @melpol

    I can never understand people who make arguments like this.

    Omfg, you are not eating lunch, omfgbbq, you might as well not eat from now on and die of starvation!!!

    Omfg, China erased a few billions of internal debt? Why not erase all debt and collapse the economy of China. Omfgbbq, such genius.

    😂🤣😂

  118. …a face of prosperity to show the world, but this is only a mask to hide the limited countrywide success of the Chinese miracle into the rural areas.

    … personal affluence to a sub-set of Chinese society that has stoked this appearance of a flourishing economy.

    The Mask of China.

    The fraud, the lying, the Copying and Pasting, the outright theft, the great con, the theatre.

    It cannot continue.

    Lots of good posts in the comments section!

    • Troll: Blinky Bill
  119. Lin says:

    You’re wearing a made-in-US propagandist mask, haha. Let me throw some shit on your mask

    a face of prosperity to show the world, but this is only a mask to hide the limited countrywide success of the Chinese miracle into the rural areas

    The Mask of China. The fraud, the lying, the Copying and Pasting, the outright theft, the great con, the theatre. It cannot continue.

    –I went to Urumqi, probably the most remote bigger china city 18 years ago. It was not ‘1st world’ for sure but still it had very good roads and facilities. The ground water is salty, so bottled water was cheap and abundant. What a ‘mask’. I visited a number of astro observatories and facilities there. (I once was an administrator of a community astro observatory with a dome& a Ritchey- chretien scope)
    (Interesting enough, the halal restaurants there run by muslims there served beer..)
    –As I mentioned before electricity generation/capita in china has reached developed world level, actually has exceeded that of UK. The electricity growth will slow down(just like other countries at this stage) but it’ll sure continue

  120. You’re wearing a made-in-US propagandist mask, haha. Let me throw some shit on your mask

    haha Lin! Maybe can next time go. Lucky lucky golden buddha dragon can maybe anyway can water very very cheap water.

    now only 5 polluted city maybe can go Lin maybe polluted okay now.

  121. Lin says:

    Lucky lucky golden buddha dragon

    I don’t believe in such stuff. I’m a Christian(of alt. conviction)
    (I don’t feed pearls/magic mushrooms to propagandist pigs)
    Pollution? All the industrialised nations went thro that stage.
    ‘Smog’ is not originally a Chinese slang.
    https://asia.nikkei.com/Business/Business-trends/China-s-solar-panel-makers-top-global-field-but-challenges-loom

  122. @Brett Redmayne-Titley

    @Brett Redmayne-Titley
    Since you referenced my article, I wish to point out that I was very candid about its stance. It is decidedly minimalist – just the facts. Virtually no predictions, no models. There are tow reasons for this. First I am extremely skeptical of economics as a discipline and a flat out denier of economics as any kind of genuine science.
    Second, I have been reading doomsday scenarios for China’s economy for decades now, and they have all proved false. But they keep on coming. Gordon Chang may be the champion at this but his stuff keeps finding its way into print. And there are a million little Changs out there all singing the same tune for which there are lots of buyers in the West.
    Let’s all be a bit more minimalist about China’s economy. And let us hope it does not collapse because such an event will leave none of us on the planet untouched.

  123. Vidi says:

    Brett, you made an enormous error almost right away. I doubt the rest of your article is worth reading, because your initial error is so serious that it probably invalidates everything that follows. As the saying goes, “Garbage in means garbage out”.

    In emulating the American economic raison d’etre, China has attempted to develop its unique capitalist model while ignoring that it too will soon suffer the same fate for the same reason: Unsustainable debt.

    This is one of the latest narratives on China; you are to be congratulated for staying up to date on U.S. propaganda. But unfortunately for you, the propaganda is mere propaganda and is very wrong.

    While China has been growing rapidly, it has not been doing so with debt, the kind of debt that the term suggests to most people. This is fundamental to the deceptive propaganda of the Western media, which you’ve been echoing.

    What I specifically mean is that China as a whole is not encumbered with usurious debt that requires the country to redeem not only principal but also interest. As such a debt will compound, growing exponentially as time goes on, a country burdened this way must work harder every year. Most such countries never overcome the burden: they are in a debt trap. This is probably what the media narrative means by China’s “unsustainable debt”.

    China is NOT in a debt trap. The major reason is that China’s government creates its money debt-free, and not many countries can do this; most must borrow from independent entities that demand compound interest. (The U.S. borrows from the Federal Reserve, a private organization so powerful that it has been able to fight off any attempt by the government to audit its books.) Countries unable to create currency — and therefore must borrow — are risking debt traps, which are often lethal. China has avoided this uncomfortable situation.

    China prints its money, debt-free, and the country grows quickly. Of course, few countries can do the same with reasonable safety. Even countries with the freedom to create their money debt-free often can’t do it without some major risk: the new money stimulates demand for natural resources, for manufactured goods, and so on; if the country is not self-sufficient in these things, it must import from elsewhere; if it can’t raise its imports for some reason, all that new money merely causes inflation.

    China is unusual in that it’s endowed with natural resources in abundance, and of course is the world’s largest manufacturer. So any new demand caused by freshly-printed money can be met internally, for the most part. The relatively small quantities of extra imports can be paid for with a fraction of the county’s vast exports. Therefore, China’s printed money doesn’t cause inflation.

    This is how the Middle Kingdom grows: by printing money and by drawing on its people’s vast ability to make things. No debt trap, no unsustainable debt.

  124. Herald says:
    @RJJCDA

    That is why the species needs the West, free and prosperous.

    The problem is that the West doesn’t see the rest of the world in remotely the same way and is currently only maintaining its own standard of stagnation by virtue of the printing press, sanctions and military might. “Genius” you have to be joking.

  125. @Vidi

    Your assertion that my article presents an enormous error is pure conjecture on your part as it was with many of the other comments to this post. The collective counter point you offer is pure Chinese economic theory and not in any way bolstered by history or facts as I and others have used in the proposition that the article brings to bear.

    While mathematically alluring, wholesale cancellation of debt- which all commentators have acknowledged is massive and growing-has no precedent in reality as actually working. The theory sounds good, but history far more bolsters the contention of the article, the title of which- I hope you noticed- contained a question mark.

    The history of Keynesian trickery has always met with disaster in the long term, so until you and others can show an example of your theory working within the realities of a modern interconnected and international economy and market place, your critique is merely conjecture without practical foundation.

    History speaks otherwise.

    Thanks for your comment. Kind Regards, B.R-T.

    • Replies: @Vidi
  126. Ron Unz says:

    Well, this morning I was hardly surprised to see that Godfree Roberts had written another one of his ridiculous pro-China pieces. But what did astonish me was that a silly quasi-Maoist like him was given space to publish it in on the New York Times op-ed page!

    https://www.nytimes.com/2020/01/20/opinion/china-technology-economy.html

    Oops, my mistake! The author was actually the chief global strategist of Morgan Stanley, one of our most influential investment banks and wealth management firms.

    I guess reality is something that gets noticed both by quasi-Maoists and by die-hard capitalists…

    • Replies: @Mefobills
    , @Vidi
  127. Mefobills says:
    @bobbybobbob

    It was only when both the New Deal and the War Economy were called off that life started to get better for Americans.

    https://www.unz.com/article/chinas-growing-economic-miraclecollapse/#comment-3667777

    I addressed this in an earlier comment in THIS THREAD. Please read before commenting.

    The reason for the Great Depression then WW2, and post war economy all have the same factors at play.

    • Replies: @Brett Redmayne-Titley
  128. Mefobills says:
    @Vidi

    Vidi,

    You are right in concept but not in mechanics.

    China is NOT in a debt trap. The major reason is that China’s government creates its money debt-free, and not many countries can do this; most must borrow from independent entities that demand compound interest. (The U.S. borrows from the Federal Reserve, a private organization so powerful that it has been able to fight off any attempt by the government to audit its books.) Countries unable to create currency — and therefore must borrow — are risking debt traps, which are often lethal. China has avoided this uncomfortable situation.

    China prints its money, debt-free, and the country grows quickly.

    China creates its money with a debt instrument. When the State Bank’s of China release the debt instrument, both sides of the ledger are not cleared.

    In other words, the state bank ledger does not expand and contract in the same was as does the FED’s ledger. The FED’s ledger has assets and liabilities offsetting and thus expanding/contracting ledger simultaneously.

    The FED acquires a TBill or some sort of finance paper e.g. MBS, that then becomes their asset, and they print an offsetting liability – federal reserve notes. The notes are swapped for the finance paper, thus expanding the ledger. This is how QE works and all central bank monetization of finance paper, including debt instruments.

    The State banks of China by CONTRAST, have a giant .gov eraser that erases only the “asset.” They release debt claims on the asset side of their double entry ledger, and said release is into the trash can.

    This actually happened during the conversion of communist era debt, so that China could earn preferred trading status. Many of you may remember that China magically became a good trading partner almost overnight as China performed their legerdemain.

    When China releases debt instruments into the trash can, what happens is the other side of the ledger “the Yuans as state bank liabilities ” are now free to float in the money supply.

    Said Yuans were spent into money supply previously, and no longer are required to return to the ledger. This is how China creates debt free.

    Western economists are clueless. No worries though, if the average supposedly educated economist gets it wrong, then average observers will also be confused.

    Ok, Now lets think carefully on former debt instrument and the Yuans it spawned. 1) The .gov debt was created and aimed at industry and the commons. 2) The Yuans that spun off of the new debt channeled into industry and the commons. 3) New Yuans front loaded the money supply and created demand. There is always a time factor for money, and money has to exist prior to demand. If there is no money, people cannot demand goods and services. China’s ghost cities were part of this mechanism, and virtually all western economist got that wrong too. 5) If private debts are mounting, and there is a need for private savings, then the State bank uses its .gov giant eraser, and releases their asset to the trash can, thus creating debt free.

    Debt free money, if done right, becomes savings and also jumps from transaction to transaction with low friction, and not claiming interest for its right to exist.

    China ends up with improved commons and infrastructure, which allows them to out-compete the west, and further has a money type that is low friction and not “taking.”

    This is why China is permanently efficient, and wall street can take wage arbitrage forever, and why middle america will be screwed over forever.

    America has to return to the “american system of economy” and shake off the (((Parasite))) that infected its body politic in 1912.

    China is basically running the American System of Economy, only they issue from their State Banks instead of Treasury.

    In America, 97% or more of new money as bank credit is hypothecated in the lower tier banks, not at the FED level. Mostly the FED is expanding and contracting its ledger, and the money it creates on its keyboard tends to stay in the Finance Economy. (It buys as sells finance paper and calls it an asset.)

    The Production side of the U.S. economy is then flogged by Finance to produce, which is why we (I’m an American) have to run on a treadmill and serve finance plutocracy.

    • Replies: @Vidi
  129. @Eugene Norman

    States (you are using the term nation states incorrectly) are not, in general, jails. The exception is some dictatorships and other regimes who don’t allow their citizens to leave. Instead they are close to castles – if we must pick a building – designed to keep people out.

    If all states behaved like castles, it would make no difference whether they allowed their citizens to leave, as they would have nowhere to go.

  130. Mefobills says:

    The history of Keynesian trickery has always met with disaster in the long term, so until you and others can show an example of your theory working within the realities of a modern interconnected and international economy and market place, your critique is merely conjecture without practical foundation.

    History speaks otherwise.

    Brett,

    I gave y0u an example of the Canadian economy 1938 to 1974, and if you read some of my other comments I talk about U.S. in WW2 issuing new money as line item budgets – which effectively was debt free.

    I also include above how China erased debts in the mid 90’s and does so by stealth today.

    China routinely has competing companies within their production economy beating up on each other. Then the state prunes the laggards, and allows the champion to go forth and compete globally. In the course of pruning the laggard, China also erases the former debt they created.

    In other words, China uses Industrial Policy and China channels its new credit at industry and the commons. The evidence abounds that this process works and is the correct way to run an economy.

    The U.S. and West no longer have industrial policy, the finance class is playing the pipes, and the rest of the west is forced to walk in lockstep.

    The U.S. and the west are on the wrong side of history, and have already lost…

    Any ruling elite that hates their people, and uses Usury and monetary tricks to extract, showing elites as parasites on the host, is doomed for the ash bin of history.

    • Replies: @Erebus
  131. Mefobills says:
    @Ron Unz

    Ron,

    From your link, and to drive home the concept of industrial capitalism and industrial policy. Quotes from link are in italics:

    China initiated its economic miracle by opening to the outside world, but now it is nurturing domestic tech giants by barring outside competition.

    Opening to the outside world was to gain foreign know how and foreign capital.
    Nurturing domestic tech giants is a function of industrial policy.

    nurturing domestic tech giants by barring outside competition.

    Barring outside competition using tariffs and other techniques is necessary to allow your industry to develop, and not be smothered in the crib by already developed foreign competitors.

    China is effectively creating a new consumer culture behind protectionist walls as a tool of political control and an engine of economic growth.

    Turning on a consumer culture and internal consumption is done AFTER home grown champions are built out. In this way, the economy becomes diverse, and labor can buy and sell their output from each other, rather than being beholden to a foreign economy.

    The increment of production must go to labor, otherwise a middle class cannot form.

  132. Erebus says:
    @Mefobills

    In other words, China uses Industrial Policy and China channels its new credit at industry and the commons. The evidence abounds that this process works and is the correct way to run an economy.

    Put another way, China treats of currency as a medium of exchange and unit of account, trimming its store of value function to the short term and using the physical result (civil & industrial infrastructure) as both the longer term store of value for the entire society, and as a springboard for further development.

    A month spent in China says this works, proving that there’s nothing as practical as a good monetary theory. Whodathunkit that “Communists” knew more about how money works than all the Austrians, Keynesians, Chicago-schoolers, IMF-ers, etc put together, but there it is.

    Attempting to use debt obligations to extend the currency’s store of value function works only until debt accumulation begins to outstrip the growth needed to pay the interest. As growth slows, unpayable debt accumulates and the currency’s store of value function deteriorates. At some tipping point, having functionally tied a currency’s 3 functions together, the currency loses all 3 simultaneously.

    .

  133. Mefobills says:

    Attempting to use debt obligations to extend the currency’s store of value function works only until debt accumulation begins to outstrip the growth needed to pay the interest. As growth slows, unpayable debt accumulates and the currency’s store of value function deteriorates. At some tipping point, having functionally tied a currency’s 3 functions together, the currency loses all 3 simultaneously.

    Unpayable debt will occur naturally as the earth follows a natural growth curve, while debt instruments compound and require exponential returns.

    A natural curve is something like birth, where you grow fast, and then mature and grow slow. Debt instruments over time make demands that double and then double again and so on, so the curve is totally different. This mismatch is at the core of the malfunction of debt based money systems.

    Other trickery includes refinancing old debts and including interest from the old into the new, which makes debt claims go exponential in a shorter time frame. Greek debts anyone?

    I’m not a fan of the debt money system. I am saying that if you run a debt money system, then you better sure as hell have .gov at the top of the pyramid, so it can release debts, especially when the claims outstrip nature.

    Brett and I are probably not that far apart on our analysis, but Lolbertarians refuse to understand that money and law and force are all intrinsically related. For this they are dupes that refuse to accept monetary reality.

    When China releases public debts, then the former “Yuan Credit” is now available to float in the money supply, and also is available to pay down private debts. Please consider this element that releases private debts, as private debts are the most onerous type.

    There has to be debt free money in a debt created money supply and/or some way of legal debt cancellation. China can do this because their public debts are housed in their State Banks.

    Also .gov has to go after plutocracy and sophisticated thievery, otherwise the public will become outraged and revolt. (Which is happening as populist revolts today around the Western world.)

    With regards to debt instruments being housed in state banks and then jubileed, the analog is burning of Jewish homes in England prior to the expulsion. Exponential debt claims had been mounting and usury Jews were putting house to house, and making claims on the entirety of England. So, the debt instruments were burned, a form of Jubilee.

    • Replies: @Erebus
  134. Anonymous[419] • Disclaimer says:
    @Rahan

    You’re absolutely correct in general, but how good is China’s infrastructure? Will it last until the next boom? I’ve seen a lot of China and a lot of Chinese products and I’d say most of them are simply incapable of producing high quality that lasts.

    If we’re aiming for a boring taiwan-like future where everyone is comfortable and enjoys a good standard of living, the infrastructure built today must continue to be usable with minimum upkeep required. Otherwise, we’d also need a massive underclass of low paid construction workers to keep rebuilding it.

    • Replies: @Lin
    , @d dan
  135. Anonymous[419] • Disclaimer says:
    @Lot

    They cannot sell those reserves without driving up their currency and crushing their export sector.

    Surely that depends what they bought with it? If they used their USD to directly buy commodities, then their own CNY is not involved and wouldn’t be affected.

  136. Lin says:
    @Anonymous

    I guess you’re indian.
    Your experience might be correct. Some years ago, I once read a certain indian senior military official said the same thing about the china made disk player he bought. What happened was that many indian importers bought non-branded QC rejects from Chinese factories at junkyard prices. Well, its price, demand and supply in Bharat.
    Chinese actually make very good violins, good enough for concert violinists.


    Same with caviar
    http://www.aljazeera.com/video/news/2017/03/china-establishes-largest-caviar-producers-170331113335014.html
    http://www.thatsmags.com/beijing/post/17511/the-world-is-eating-chinese-caviar-and-doesn-t-know-it

  137. Vidi says:
    @Brett Redmayne-Titley

    Your assertion that my article presents an enormous error is pure conjecture on your part as it was with many of the other comments to this post. The collective counter point you offer is pure Chinese economic theory and not in any way bolstered by history or facts as I and others have used in the proposition that the article brings to bear.

    The very first sentence in your article was wrong, so why should I care what else you said?

    That first sentence, asserting that China is in deep trouble due to “unsustainable debt”, is easily disproven. If China — the country as a whole, not some company or other — is so deep in debt, who does China have to pay back? Can you answer?

  138. Vidi says:
    @Ron Unz

    Well, this morning I was hardly surprised to see that Godfree Roberts had written another one of his ridiculous pro-China pieces.

    To me, an article by Dr. Roberts is a welcome relief from the anti-China propaganda that blares deafeningly, relentlessly in the West.

    But what did astonish me was that a silly quasi-Maoist like him was given space to publish it in on the New York Times op-ed page!

    https://www.nytimes.com/2020/01/20/opinion/china-technology-economy.html

    Perhaps what astonishes you is that any article that’s even slightly fair to China actually was printed somewhere in the Western mainstream media — let alone in the leading Newspaper Of Truth.

  139. @Vidi

    Actually what’s astonishing is how so many leftists have deluded themselves into thinking that Chinese capitalism is “progressive”.

  140. d dan says:
    @Anonymous

    “…how good is China’s infrastructure? … I’d say most of them are simply incapable of producing high quality that lasts.”

    Right, like the Great Wall, the world largest, longest and one of the oldest man made structure? Or like the Grand Canal, the longest and oldest canal that is 7 times longer than Panama and Suez combined, and is still being using for transportation in China today? Or like the Dujiangyan built in BC200 that still prevents flood, irrigates over 2000 sq mi of land, and makes Sichuan the “rice” basket today?

    China’s record of building the largest, most difficult and longest lasting infrastructure is unmatched by any ancient or modern civilizations. Even US Trans-continental railway could only be built with the importation and helps from the lowest class workers from China.

    • Replies: @Anonymous
    , @Mefobills
  141. d dan says:
    @Vidi

    Vidi:

    Ron is being sarcastic. He understands Chinese points very well.

    • Replies: @Vidi
  142. Vidi says:
    @Mefobills

    You are right in concept but not in mechanics.

    Well, I was speaking in rough generalities.

    China creates its money with a debt instrument.

    Yes. Basically, what happens is that China conjures money out of thin air. If it creates enough (but not too much), directs the new funds properly, and its internal resources can mostly meet the consequent new demand, it grows. As I have shown, few countries can do this successfully (without too much inflation).

  143. MTMT123 says:

    gordon chang and david shambaugh would love this china-collapsing piece …

  144. Anonymous[419] • Disclaimer says:
    @d dan

    Yes.. And ancient Greece and Rome did some impressive stuff too. How are they doing today?

    • Replies: @d dan
  145. @Mefobills

    I believe your example in using Canada, and some of your other comparisons actually bolster my contention on wholesale debt relief…

    Since Canada switched from the fiscal responsibility during the period you referenced the Value of the Canadian dollar has plummeted to historic lows against the US dollar partly as a result of accumulated debt and delusion of its currency over that more recent period. This example is anything but a working example of the success of debt cancellation. If so successful, why is the Canadian economy suffering so much over the past decade?

    You admit that the US current economy is doing poorly. What would be the net result if the US cancelled debt? Utter disaster. Yes, the US is a different business model, but…

    You claim that the China economic model is different and at face value this seems to be the case. But, as I suggest, until the Chinese cancellation of debt works as well as you predict your proposition remains unproven economic conjecture. Your assertion says nothing about how this possible cancellation would NOT negatively effect China’s international trade, FOREX values and service of foreign contractual obligations that are mostly currently denominated in US dollars.It is impossible to imagine a scenario where these important macro-economic factory would not be negatively affected.

    As I have said repeatedly in these posts ( after referring the dissenting opinions to my deliberately placed question mark) : despite the hyperbole of the title, I, too, doubt that China will “collapse.”

    However do I think that the PBoC will be doing some very heavy paddling as a result of the subset of data presented and a slow down in their GDP presented in the article… yes I do.

  146. @Vidi

    I find it disingenuous that you would call the facts presented in the article:

    anti-China propaganda that blares deafeningly,

    The article quotes- with references- statistics and economic news that have one primary source: the Chinese PBoC.

    The facts presented, which spawned this excellent discussion within this forum, are facts and must be considered within both sides of the argument

    Are you suggesting that the PBoC is producing pure propaganda?

    Sorry, my mistake… you said you didn’t bother to read the article, so how would you know?

    • Replies: @Vidi
  147. d dan says:
    @Anonymous

    “And ancient Greece and Rome did some impressive stuff too”

    There is no comparison here in terms of scale and difficulty, effectiveness and utilitarian values with ancient Chinese projects.

    Further, you are switching the goalposts here. You original assertion is that Chinese infrastructure does not LAST. What we see is that those gigantic Chinese infrastructure still mostly STANDS and a lots are still being used. Not much for Greek and Roman ones.

    • Replies: @Anonymous
  148. Anonymous[419] • Disclaimer says:
    @d dan

    What I’m saying is that countries change over time and that the China of today is not necessarily producing the same quality of work as ancient China.

    From my own personal experience, I’d say that, until today, they still churn out a huge amount of shoddy and short lasting work and then very work hard to disown any problems that arise as a result. If my observations in one specific industry carry across to the construction industry, then I’d say they’re in real trouble. On the other hand, if their civil engineers are leagues above the industries that I deal with, then my points are irrelevant.

    • Replies: @d dan
  149. Vidi says:
    @d dan

    Ron is being sarcastic. He understands Chinese points very well.

    I think you are right. He does have a history of denouncing the American Pravda (“Pravda” is Russian for “truth”).

  150. Vidi says:
    @Brett Redmayne-Titley

    I find it disingenuous that you would call the facts presented in the article:

    anti-China propaganda that blares deafeningly

    The article quotes- with references- statistics and economic news that have one primary source: the Chinese PBoC.

    If your “facts” rely on your fallacious first sentence, they are invalid. I don’t care how many references you cite.

    I repeat: That first sentence, asserting that China is in deep trouble due to “unsustainable debt”, is easily disproven. If China — the country as a whole, not some company or other — is so deep in debt, who does China have to pay back? Can you answer?

    You have not answered. Likely, you’ve no honest answer. Therefore, I conclude that even you are realizing that the first sentence of your article was nonsense; therefore, everything else that follows is probably nonsense. “Garbage in means garbage out.”

  151. d dan says:
    @Anonymous

    “What I’m saying is that countries change over time and that the China of today is not necessarily producing the same quality of work as ancient China.”

    So, a civilization that consistently producing the largest, most difficult and most useful infrastructure for thousands of years suddenly is producing shoddy projects recently? Do you have any concrete reason or data other than your hunch?

    If anything, China’s infrastructure has reached a scale and quality that surpasses ancient Chinese. Go visit China today. 8 out of 10 world longest bridges are in China. Plus the biggest dams, some of the tallest buildings, longest tunnels, most extensive high speed rails, the biggest water diversion projects in human history, some of the longest oil and gas pipelines and most sophisticated electric grids. Out of the 6 millions 4G cell base stations world wide, about 4 millions are in China today. Even those outside China, many were built by Chinese companies. Expect the same situation for 5G, even with US bearing down with full force trying to stop that. Do you think other countries will let China build their infrastructure and cell base stations if they are all shoddy?

    “From my own personal experience…”

    The original topics is about the quality of the infrastructure. Obviously, I can’t argue with you about your personal experience, nor do I know about your industry. I concede that for a country as big as China, there will be bad apples. Even for supposedly high quality Japanese or German products, there are scandals (e.g. Kobe Steel). The latest one from US of course is the Boeing 737 Max. So, anecdotal evidence is a weak argument.

    • Replies: @Anonymous
  152. Erebus says:

    On the other hand, if their civil engineers are leagues above the industries that I deal with, then my points are irrelevant.

    I don’t think they’re wholly irrelevant, just out of date.

    The reality is that while just about everything was lo-grade 10-15 yrs ago, several fields have taken great leaps forward since then. Civil engineering, from transport to building construction is definitely one of them. This shouldn’t surprise as that’s where eye-watering sums have been invested, but plenty of other fields such as automotive have upped their game markedly over the last decade as well.

    That there are laggards shouldn’t surprise either. Not everything can be developed at once. One of the main issues keeping some fields back is that fundamental disciplines such as metallurgy and materials science lags. They’ll doubtless have their great leaps forward at some point, but until they do fields such as machine tools and aeronautical engineering will remain 2nd class and/or depend on foreign supply both material and expertise.

  153. Erebus says:
    @Mefobills

    A natural curve is something like birth, where you grow fast, and then mature and grow slow.

    And if a body wants to try to keep growing at an unnatural rate, they pump themselves full of steroids and HGH, the equivalent of pumping ZIRP loans into a mature economy in late middle age. The resulting unnatural growth in human bodies leads to mental instability, followed by a heart explosion. Something analogous to that happens to the body politic and its sustaining economy. We see it everywhere we look now.

    So, the debt instruments were burned, a form of Jubilee.

    Figuratively speaking, all that paper will burn this time too, and maybe not just figuratively. The flames that popped up in 2008 were smothered by a piles of paper, and even more paper has been piled on top since. The “economists” never stopped piling it on, but the old coals kept smouldering and there’ll be no stopping the conflagration the next time they come alive.

    • Replies: @Vidi
  154. Anonymous[776] • Disclaimer says:
    @d dan

    If anything, China’s infrastructure has reached a scale and quality that surpasses ancient Chinese. Go visit China today. 8 out of 10 world longest bridges are in China. Plus the biggest dams

    This is all about quantity, not quality. I too am overwhelmed by the scale of the infrastructure development that has taken place across China. Even far western china is leagues ahead of the neighbouring stans.

    My point was (and still is) that I have concerns about the longevity of the modern infrastructure that has been produced so far. Again, my suspicions are that present day China’s culture will inevitability result in problems in the future, because the common people only care about today. It seems i can’t hope to convince yourself (fair enough) but possibly my concerns might resonate with some of the other readers.

    • Replies: @Vidi
    , @Biff
    , @d dan
  155. Vidi says:
    @Erebus

    And if a body wants to try to keep growing at an unnatural rate, they pump themselves full of steroids and HGH, the equivalent of pumping ZIRP loans into a mature economy in late middle age. The resulting unnatural growth in human bodies leads to mental instability, followed by a heart explosion. Something analogous to that happens to the body politic and its sustaining economy. We see it everywhere we look now.

    If you mean China, there is hope that the country’s fast growth won’t cause a heart explosion. Problems will undoubtedly occur, but huge corrective forces will probably be operating as well: the government looks far ahead; the leaders are proactive; and the giant labor pool of 1.4 billion people can do much. However, China has been doing the unprecedented; we will see what happens.

    There will be a limit, certainly, as nothing grows forever. With some likely technical developments, however, that limit will be farther off than I can see. For example, the fast breeder reactor means that energy won’t be a limitation for a long time (millions of years); even the comparatively primitive biotech of the next few decades will mean that food will be abundant; nanotechnology will ensure extremely efficient use of natural resources. These particular developments aren’t guaranteed to happen, but if China can pursue enough alternatives in parallel, success seems probable. And China will be able to pursue more alternatives than any other country; that is one advantage of a large, well-educated population. I’m not saying that China will last millions of years, but right now I can’t see her limits.

    • Replies: @Erebus
  156. Vidi says:
    @Anonymous

    My point was (and still is) that I have concerns about the longevity of the modern infrastructure that has been produced so far.

    That is reasonable. I’m sure some bridges and dams will break — but they will be fixed. The amount of infrastructure in China is huge, of course, but the quantity of labor is even huger.

    Again, my suspicions are that present day China’s culture will inevitability result in problems in the future, because the common people only care about today.

    The common people may be short-sighted, but the government is usually not. China’s current strength is largely due to a wise government.

  157. Miro23 says:
    @Brett Redmayne-Titley

    However, Japan, the EU, Australia, Canada, UK are all similarly paddling furiously and so far these countries have fixed nothing. They have, as I argue, only delayed- as with China- the inevitable.

    So with the US and China included, the credit bubble is pretty much a worldwide phenomenon (with the interesting exception Russia).

    It’s a basic mistake with debt. There’s good debt and bad debt. Good debt goes into projects (often new technologies) that open up whole new possibilities for growth (e.g. early US railroads or digitalization, e.g. Microsoft or Google) which easily pay back capital and interest.

    Bad debt often goes into the same things, but at the late stage when these winners already have more than enough capital than they can usefully use.

    The credit doesn’t connect with anything real. It just drives up prices (speculative railway stock bubbles, internet stock bubbles etc.) with the inevitable crash (return to reality). And lending to consume is even worse, since it doesn’t even pretend to generate activity that will pay back capital and interest.

    So, like other Ponzi schemes, they work as long as they’re fed with new money (credit) and it’s not a new phenomenon. 300 years ago (1720) the price of South Sea Company stock went from Sterling 100 to Sterling 1.000 (single year), in a speculative frenzy that had the directors of the company relending the new money back to “investors” to further drive up the price.

    Especially in the US, the FED is pumping up something that is dead in the water.

  158. Biff says:
    @Anonymous

    because the common people only care about today.

    I’ve heard about this-

  159. d dan says:
    @Anonymous

    If anything, China’s infrastructure has reached a scale and quality that surpasses ancient Chinese. Go visit China today. 8 out of 10 world longest bridges are in China. Plus the biggest dams

    This is all about quantity, not quality.

    1. No, it is not just quantity. It is also about quality, about construction innovation, about engineering ingenuity and ease of maintenance. Take the Dujiangyan I mentioned previously. Constructed in BC200, before the invention of gunpowder and with little use of iron tools, how did they open a passage through one of the toughest granite mountain to divert the river? Think before you read further to see if you can find a better solution than ancient Chinese.

    LiBing, the chief engineer, instructed the workers to set the mountain with scorching fire. Immediately, cold water was poured onto it resulting in cracks. The granite could then be pried open. Repeated application of this process eventually opened up a mouth of 20 x 40 x 80 meters through the mountain to divert the river. There were several other additional clever designs that enable the system to be used even until today. It has been designated UNESCO heritage site.

    I can go on to write a book about all the clever techniques ancient Chinese employed. Ultimately, think for yourself, did Stanford decided to hire Chinese workers for the Trans-continental railway just because of cheaper wage, or because they offered something that other workers couldn’t?

    2. OK, you want to talk about present day China. Volumes can also be written about the unique techniques and innovations. Take a random project, says the Qinghai Tibet railway. Completed in 2006, it goes through one of the world toughest terrain, the world highest railway point, the highest rail station, the longest tunnel, the most inhospitable environment, extreme weather, huge temperature differences, several earthquake faults, rivers, valley, permafrost layers. The engineers had to resolve issues related to cooling of the roadbed due to long term climate change anticipate for the next 50 – 100 years [1]. They also took care of long term effect of permafrost to the railway embankment deformations [2]. The construction is done in extremely low oxygen level and a very fragile bio ecosystem. In 2018, China issued a white paper on ecological progress on Qinghai-Tibet Plateau that includes monitoring and long term maintenance of the railway. Does it look like the profile of cutting corner and skimming on quality control?

    3. Regarding the quantity vs quality. In practical situations, these are actually not orthogonal concepts. They tend to correlate. Good quality products tends to sell more, and selling more tends to help improve quality through better research and experience. I ask you in my previous post why would so many countries want China to help building their infrastructure if it is shoddy? Are all countries gullible/corrupt, or lacking their own QC engineers/government regulators/western consultants or lawyers? Even within China, it is not monolithic. There are many construction companies competing for projects. Do you think Chinese home buyers will tolerate leaking roof and chipped paint more than anyone, or allow bad companies to flourish?

    4. A good illustration of this quantity-quality virtue cycle is Chinese high speed rail (HSR). Just 10 years ago, China only has 2,000 km of HSR. Today, they have almost 30,000 km, more than the rest of the world combined [4]. How did China do that? Did they sacrifice quality? The answer is through relentless automation and standardization. For example [5], they use 580-ton bridge erecting machine (架桥机) to lay pre-fabricated bridges to support the rail and the 8-engines 1152-wheeled self-propelled modular transporter to transport the pre-fabs. For tunnels, they manufactured over 400 tunnel boring machines (盾构机) and modified special wheeled track laying car (铺轨车) to work within tunnels. Finally, they used seamless rail (无缝钢轨) as much as possible. This saved up manual welding and helped to ensure uniformity and quality of tracks. The result is not just fast construction but big improvement in quality. A few years ago, an UK (or US?) journalist posted an youtube of him traveling in Chinese HSR and left a coin standing in the speeding train for a long time. It demonstrated the incredible steadiness of the ride.

    5. Last year, the biggest project is the opening of Beijing Daxing Airport, the world largest and greenest airport completed only in 4 years. Also opened last year is the world second tallest bridge Pingtang Bridge in Guizhou. During construction, they resorted to use rockets, drone and satellite to help laying cable across the enormous valley. The list goes on.

    …present day China’s culture will inevitability result in problems in the future, because the common people only care about today.

    LOL. For once, I thought this is a typo or your are being sarcastic. It is common knowledge that China plans very long terms. In contrast, the saying is that American CEOs don’t plan beyond next quarterly report (because their compensations are based on stock price) and American politicians don’t plan beyond next election. If a bridge collapsed in China, people know that the CEO or government officer in charge are likely to be hauled back even from their retirement/bedside and put in jail (or even executed). Chinese communist party plans to stay in power permanently, and retirement is not an immunity from punishment of wrong doings. In contrast, we know that after more than 300+ death, no Boeing nor any government employee has been punished, and Boeing CEO has been “fired” with > $60 million package. Please tell which country has better incentive for quality (or disincentive for shoddiness)?

    It seems i can’t hope to convince yourself (fair enough)…

    And that is because you offer ONLY cultural stereotyping based on personal experience and nothing else.

    … but possibly my concerns might resonate with some of the other readers.

    In other words, you are appealing to emotion and prejudice.

    Ref:
    [1] https://www.sciencedirect.com/science/article/abs/pii/S0165232X05000042
    [2] https://www.sciencedirect.com/science/article/abs/pii/S0165232X11000449
    [3] http://www.highestbridges.com/wiki/index.php?title=Pingtang_Bridge
    [4] https://www.worldatlas.com/articles/countries-with-the-most-high-speed-rail.html
    [5] https://www.youtube.com/watch?v=kSI0xtlErR8&list=PLyVkLhhS0qON1PZ12yGNDQmaCCI1yFGFe&index=31

  160. Erebus says:
    @Vidi

    If you mean China…

    No, I meant the West.

    Monetizing suspect paper smothered 2008’s GFC with the unnatural “growth” of financial assets simply increased . Despite eye-watering increases in Central Bank balance sheets and markets, real economic growth has remained stagnant.

    China’s monetary system de facto borrows from the scrip systems that have been used historically across many societies. From medieval fairs, to America’s Colonial Scrip, to factory towns, and even within Nazi concentration camps, scrip has been issued as self extinguishing credit to facilitate transactions where official currencies were scarce or otherwise undesirable.

    Self-extinguishing credit is simply a transaction clearing mechanism It cannot be inflationary or place a debt burden on the economy.

    I’m not saying that China will last millions of years, but right now I can’t see her limits.

    Agreed, in the sense that the limits will be defined by the planet’s carrying capacity, physical law, and China’s socio-political system’s ability to remain cohesive and focussed on sustainable development.

    A program to maintain the all-important latter indefinitely is the principle contribution Xi JinPing Thought brings to the table, and the extension of his term of office was made in recognition of that.

    As ever, everything’s good until it’s no good, but the time when that will apply to China’s social & economic development isn’t visible today.

    • Replies: @Vidi
  161. Vidi says:
    @Erebus

    If you mean China…

    No, I meant the West.

    Monetizing suspect paper smothered 2008’s GFC with the unnatural “growth” of financial assets simply increased . Despite eye-watering increases in Central Bank balance sheets and markets, real economic growth has remained stagnant.

    I see.

    China’s monetary system de facto borrows from the scrip systems that have been used historically across many societies. From medieval fairs, to America’s Colonial Scrip, to factory towns, and even within Nazi concentration camps, scrip has been issued as self extinguishing credit to facilitate transactions where official currencies were scarce or otherwise undesirable.

    A country’s currency differs from scrip in being accepted everywhere inside the country; it’s enforced by law. As the U.S. dollar bill says, “This note is legal tender for all debts, public or private”. An organization’s scrip is not worth much beyond the organization (though exceptions sometimes happen).

    Self-extinguishing credit is simply a transaction clearing mechanism It cannot be inflationary or place a debt burden on the economy.

    Such credit cannot place a debt burden on the issuing country, true enough. However, excessive money printing can indeed cause huge inflation, as Perón of Argentina learned.

    Under special circumstances, it is possible to grow by printing money. This seems magical but it is not. The planet has resources, natural and human; printing money uses them more rapidly — but only under special circumstances. If a country lacks resources and is unsuccessful at acquiring more from elsewhere, an attempt at printing money causes inflation. Fortunately, China has enormous resources, natural and human, and she can trade for even more resources. Thus China is a country that can grow by printing money.

    Agreed, in the sense that the limits will be defined by the planet’s carrying capacity, physical law, and China’s socio-political system’s ability to remain cohesive and focussed on sustainable development.

    Technology can increase the planet’s carrying capacity — and China is in prime position to drive technology. “China opens a university a week” (link).

    Agreed about the cohesion and focus.

    • Replies: @Erebus
  162. Mr. (or Ms.) Brett Redmayne-Titley reminds me of Gordon Chang who has been loudly predicting China’s immediate (within 12 hours or less) demise, annually for nearly 20 years now. For some kinds of people there is no greater pleasure than the delicious prospect of contemplating the failure and humiliation of someone we dislike.

    Perhaps consider your reaction if you were to learn that citizens of another country were praying for the US economy to collapse, for all of you to be infected by the plague during a bitter recession and all killing each other for food. What would that tell you about those people? And what credibility would you attach to their prognostications of your immediate demise?

    And for all those of you who seem to have such a hate on for China, why don’t you give it a rest? Go wipe your kid’s snotty nose or cut the grass, or make a sandwich or something. Why not try hating gophers or armadillos instead? At least that doesn’t start world wars, and you won’t have any more holes in your front lawn.

  163. Chinaman says:

    The fallacy of all this doomsday talk of monetary collapse is in not considering a crucial aspect of economics.

    Inflation

    If the author is right, the economies of America and Europe would have long collapsed after the Civil War and if not so, after the WW2 given the massive amount of Fiat money that was printed to finance the wars. Goddamn, China would still be stuck at the Malthusian limit if the author is correct.

    It would take another 2000 words to espoused on it but Inflation will get China get out of this debt malaise. High Inflation expectation amongst the populace is a key advantage that other countries don’t have. Wage inflation is close to 10% a year.

    I read so much of this gloom and doom talk early in my investment career that it hurts to think about the opportunities I missed because of the fear of financial Armageddon.

    I would caution against reading too much into these articles which are, prima facie, convincingly argued and well supported by stats and facts. It makes for an intriguing read. Good journalism but bad economics.

    “ Trying to solve tomorrow’s problems with existing solutions.” Is the engine behind all doomsday theories. The problem is not the arguments itself but that it doesn’t consider that people are already working on solutions to resolve it. I suggest everyone, including the author interpret these depressing predictions as a prelude to the best buying opportunity in a century.

  164. Erebus says:
    @Vidi

    A country’s currency differs from scrip in being accepted everywhere inside the country…

    That simply says that a currency/scrip is accepted within its zone. Which, btw, is why it’s called “currency”.

    … it’s enforced by law. As the U.S. dollar bill says, “This note is legal tender for all debts, public or private”.

    What the italicized words mean is no-one can refuse USD in payment of a legal obligation within the USD currency zone, including the government. AFAIK, there is no legal obligation to use USD for private transactions within the USA. People can (and do) transact in whatever currency they’ve agreed to. If I want to sell my car and all you’ve got are CNY, I can choose to accept them or refuse the transaction.

    However, excessive money printing can indeed cause huge inflation, as Perón of Argentina learned.

    Money printing and “huge inflation” aren’t a simple cause-effect relationship. Historically, heroic money printing lags hyperinflation. Not sure what you mean by “huge inflation”, but in hyper-inflationary situations it is more accurate to talk of money printing as an effort to accommodate the inflation of a repudiated currency. IOW, seeing repudiation as the root cause of hyperinflation, and money printing as the vain attempt to keep up with it comes closer to the reality of the matter.

    Currencies and scrips depend on much more than prudent financial/monetary mgmt. Socio-political considerations provide an all important “network” support that’s at least as important. The longest lived fiat currency went on for >800yrs despite the govt’s attempts to kill it.

    Technology can increase the planet’s carrying capacity — and China is in prime position to drive technology.

    In particular, we need new recycling technologies that would allow the economical re-use of previously extracted and used resources.

    As you note above, Rosatom’s fast breeder technology is now emerging as the future energy source of choice. Their next gen will come within a hair’s breadth of closing the fuel cycle, instantly obsoleting every other means of generating electricity. It’ll be a long time before we get electric airplanes, but every sort of surface transport and most thermal processes used in industry can utilize electricity almost as easily as H-C fuels.

    • Replies: @Vidi
  165. Vidi says:
    @Erebus

    That simply says that a currency/scrip is accepted within
    its zone. Which, btw, is why it’s called “currency”.

    That
    is fine, as long as you understand the difference between a scrip and
    a country’s legal tender.

    Money printing and “huge inflation” aren’t a simple cause-effect relationship.

    Of course the relationship isn’t simple. But there is a relationship.

    Historically, heroic money printing lags hyperinflation.

    In the later stages, yes, as a country frantically prints more money to catch up with its devaluing currency. However, it’s the money printing that triggers the initial inflation.

    Not sure what you mean by “huge inflation”

    In Perón’s case, the inflation rate passed 50% in 1951. If that had been sustained for ten years, your money would have declined to less than a thousandth of its original value. That is pretty huge inflation if you ask me.

    but in hyper-inflationary situations it is more accurate to talk of money printing as an effort to accommodate the inflation of a repudiated currency. IOW, seeing repudiation as the root cause of hyperinflation, and money printing as the vain attempt to keep up with it comes closer to the reality of the matter.

    No, the money printing triggers the initial inflation.

    A country can grow by printing money, but most countries that try it end up with inflation. China was a special case.

    In particular, we need new recycling technologies that would allow the economical re-use of previously extracted and used resources.

    In the longer run, yes. Nanotech would be a good solution. But for China, nanotech is not as urgent as the food and energy supplies.

    Food: China is already within 10% of being self-sufficient in food. The country has developed Giant Rice, which produces 20% more food per hectare. I suspect researchers are working to breed more genetic variation into this species, to avoid the monoculture trap. Giant rice will probably be less productive than even the early products of elementary biotech. So I am rather optimistic that food will be abundant.

    Energy: see below.

    As you note above, Rosatom’s fast breeder technology is now emerging as the future energy source of choice. Their next gen will come within a hair’s breadth of closing the fuel cycle, instantly obsoleting every other means of generating electricity.

    More importantly, fast breeders like Russia’s BN-800 can burn Uranium 238, which is far more abundant than U-235. The Japanese have recently demonstrated that U238 can be extracted economically from seawater. This is important, as there’s enough U238 dissolved in the oceans to last the world millions of years.

    The BN-800 has been operating successfully for years, and China is building a similar pilot plant, the CFR-600, so the fast breeders are almost ready. This is why I was rather optimistic that energy would not be a problem for China.

    • Replies: @Erebus
  166. Erebus says:
    @Vidi

    In Perón’s case, the inflation rate passed 50% in 1951… That is pretty huge inflation if you ask me.

    Having had quite a bit of experience with late ’80s/early ’90s Brazil, when really huge inflation of 1-2% per day (several 1,000% annually) made cash a hot potato, 50% /annum seems pretty mild.

    A Brazilian joke at the time went…
    Q: What’s cheaper, taking a bus, or a taxi?
    A: Taxi, because you pay at the end of the trip.

    If you’re interested, you may want to learn how Brazil’s hyperinflation was solved in one night (with about 6mos psycho-social preconditioning). Damn clever, and quite enlightening, but it put me out of business.

    • LOL: Vidi
  167. Mefobills says:
    @d dan

    Even US Trans-continental railway could only be built with the importation and helps from the lowest class workers from China.

    Not really. Chinese workers were imported as wage slaves.

    Credit was issued from “banks” and this form of “capital” always wants to be above labor, to extract the most from labor.

    A business case was made that would import wage-slave labor from China, and that buisness case included the costs of transport i.e. the outfitting, and building of ships.

    The exact same mechanism was used to import African slaves from Africa’s west coast across the Atlantic. (Thanks Jews).

    By contrast, Canada built their transcontinental railroad using state credit (not private bank credit) and from a much smaller population base (about 30 million people), and did it without corruption, and the labor force was white canadians.

    No Chinese needed. The white man has all the genius and capability he needs, but the problem is the white man is carrying a parasite. This parasite is the worship of “capital” and the expense of labor, and this mentality is promoted by our (((Friends))).

    China has always had a bureaucratic elite who administered the population. It did take Mao to break up the landed fuedal elites.

  168. Erebus says:

    By contrast, Canada built their transcontinental railroad using state credit (not private bank credit) and from a much smaller population base (about 30 million people), and did it without corruption, and the labor force was white canadians.

    At the time (1870-ish) Canada’s population was less than 4M people. It’s ~35M today.

  169. Old Guy says:

    If the debt crisis comes to a head the CCP can deal with it by printing money, as others have state above, since internal debts in the “shadow economy” are likely denominated in RMB, not dollars.

    The crazy thing will be if they have to deal with multiple crises simultaneously.

    Currently China imports food and oil, and can easily embargoed or cut off – which is why they are pursuing the OBOR and “Chain of Pearls” strategy. If there is any significant war between Iran and Saudi Arabia that shuts down the flow of oil any time soon, the Chinese are cooked.

    Add that to an ongoing epidemic in the country…. and the pileup of chaos isn’t pretty.

    This is likely why they elected to install Xi as dictator. Many countries install dictators in times of war or crisis to limit the time for deliberation. The Chinese see a crisis coming down the pike and want to be ready.

  170. jadan says:

    When westerners look at China they see it through the lens of western central banking systems which means they fail to understand the differences, and these are profound. Because Idiot Trump has opted to create a trade war with China, China is making efforts to develop its domestic consumer sector and rely less on exports. This means even more debt to stimulate internal demand for goods and services. So, the author foresees a future drowning in debt, which he foresees for the west as well. China is following the western pattern, the so-called Keynesian stimulus model and this will fail catastrophically. The author’s ideological bent can have it no other way.

    But this is not what is going on in China. Private banks are permitted along with a shadow system because the CCP is developing capitalism with Chinese characteristics, and this private activity is merely ancillary. The big picture is the sovereign system controlled by the CCP. As Michael Hudson has demonstrated in his latest work “…And forgive them their debts”, debt management has always been a key to economic survival. The ancient means to manage excess debt was the “clean slate”, or “debt jubilee”. Debt was simply disappeared to restore economic health and balance in society.

    The CCP adopts this ancient means to control debt. It just goes away when it becomes too much of a problem. The key to China’s financial stability is MMT theory. This author doesn’t understand “modern monetary theory” because he has learned what he knows under a private central banking system in which debt is sacrosanct. The US & the EU are owned by private capital. Debt financing means the people become debt slaves to the minority of wealthy capitalists. This is a genuine pyramid scheme. China’s system is not a pyramid scheme, because the debt is owed to the state not to a class of billionaires & millionaires. The state can dismiss the debt.

    But do you think for one moment Paul Singer ( famous vulture capitalist) or Warren Buffet, or Robert Mercer, or Michael Bloomberg, or any of these unimaginably wealthy individuals would take a hair cut? Not for one minute! They won’t voluntarily carry all their bonds out to a bonfire in the name of the general welfare. They will starve the mass of people in debt peonage before they will give up what they believe is rightfully theirs. Ask David Koch if he wants to pay higher taxes. This elite group is the most destructive element in society because it demands more than its fair share and makes policy in its own interest above all. This capitalism with Chinese characteristics on the other hand is ruled by an ideologically defined elite that makes policy in the interest of the masses, whereas our western capitalism is ruled by a self-centered class of ultra-wealthy aristocrats with no ideological commitment to the general welfare. Our system is collapsing as we speak.

    The Chinese system is not collapsing. It has absorbed the Covid 19 shock and is rebooting, whereas the western system cannot reboot because it cannot deal with its debt. It is not ideologically equipped to cope with crisis. It is ideologically constrained. The system cannot support a population less than one third the size of China’s because it has no flexibility and is ruled by a rigid oligarchy that by and large embraces a libertarian world view. The US system has failed to meet the minimum requirements of a sustainable society: it has failed to effectively deal with a pandemic and it has failed to provide the means for all its citizens to achieve a minimum quality of life that makes life worth living.

    So, If I were you, Mr. Redmayne-Titley, I’d pay more attention to my own country and cease this sinophobic demagoguery you are engaged in.

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