Jump to content
House Price Crash Forum
interestrateripoff

The Perils Of ‘bangers For Cash’ Chinese Style

Recommended Posts

http://business.timesonline.co.uk/tol/busi...icle6677467.ece

Say what you like about the Chinese, they certainly know how to do economic stimulus. The 3.9 per rise in British private car sales in June announced this week was hailed as a great success. It was clear evidence that the Government’s “bangers for cash†car scrappage scheme and other efforts to revive the economy were starting to work.

Big deal. In China, June car sales were up 48 per cent. Now that’s what I call a stimulus.

It just shows what you can do when you own the banks. Yes, I know we own our banks, too, but that’s different. Stephen Hester is not appointed by the Communist Party.

When China decided it needed a stimulus package, it chose to create one by ramping up government spending and opening the lending spigots.

Bank chiefs were told to flood the economy with credit and competed with each other to get the most money out the door. The result was a tidal wave of cash, with bank lending in June twice the level in May.

The authorities are now worried about inflation, a property bubble and future bad debts. But it has kept the economy growing at a decent lick despite the slump in exports. This is good news for many foreign companies, particularly carmakers. Jaguar Land Rover will this year sell many more than the 12,456 vehicles it shifted in China in 2008.

But China’s growth may actually be a net negative for Britain in the short term because of its impact on commodity prices. As Barclays Capital pointed out in a recent report, the effect of Chinese growth on the price of oil and metals seems disproportionate to its share of the world economy.

For the British economy, the near-doubling of the oil price in the past six months is a high price to pay for selling a few more Jags.

Although the oil price has fallen back by more than $10 a barrel in the past two weeks, economists warn that at above $60 it is one more reason to be nervous that flickers of life in the British economy could be snuffed out.

Recent signs have been discouraging, notably the 0.5 per cent fall in factory output in May published this week.

Against this background, yesterday’s decision by the Bank of England’s Monetary Policy Committee not to extend its quantitative easing programme was a surprise.

The purchases of bonds using newly created money have had limited impact so far.

Public comments by members of the committee highlighting the continued weakness of lending had led many observers to expect that the Bank would step up its purchases of bonds to the £150 billion maximum authorised by the Chancellor, and possibly seek permission for more.

The committee may merely be waiting until it completes its next set of quarterly forecasts next month before pressing ahead with better targeted purchases. Let’s hope so.

The Chinese are clearly storing up serious potential problems in the future. But the British economy is still in such a fragile state that there remains more risk in doing too little than too much.

The Chinese are genius the West is in trouble because of the amount of debt we are in and now China does the same, ramps up lending to prop up it's economy.

No future problems here at all.......

Unless of course a deal has already been struck behind the scenes for debt jubilee and the Chinese are going for their share of the debt write offs?

Edited by interestrateripoff

Share this post


Link to post
Share on other sites
http://business.timesonline.co.uk/tol/busi...icle6677467.ece

The Chinese are genius the West is in trouble because of the amount of debt we are in and now China does the same, ramps up lending to prop up it's economy.

No future problems here at all.......

Unless of course a deal has already been struck behind the scenes for debt jubilee and the Chinese are going for their share of the debt write offs?

But all their debt is backed by the big pile of cash they've earnt from US&co... All they're doing is spending it before it devalues too much, while prices are low. Yeah, sure, there'll be some internal strains in the system as a few debts go bad, but that's a small problem compared to sitting on a big pile of foreign IOU's wondering what to say to the unemployed masses!

Share this post


Link to post
Share on other sites

China is the last thread in the belief based system we have created, people are still clinging to the hope that China can carry all us over indebted Western nations out of them mire. In reality this is complete wishful thinking but that does not mean they can't paint that picture.

You have to ask yourself, do you trust the US official figures to give you clarity of the actual economic picture? Then ask yourself how much credence you should place on numbers coming out of China.

China know they are being seen as central to any recovery and a recovery is in their interest, they have already played their part in the green shoots being read into their commodity price manipulation through stock piling. Some see them running scared from the Dollar which could be a sensible move but it is still a currency speculation/gamble which could seriously backfire.

China know the are part of the greens shoots picture that the World has to believe in order to have a double dip recession let alone a recovery.

More on it when it was released earlier in the week.

http://www.zerohedge.com/article/yet-anoth...umer-car-demand

Share this post


Link to post
Share on other sites
China is the last thread in the belief based system we have created, people are still clinging to the hope that China can carry all us over indebted Western nations out of them mire. In reality this is complete wishful thinking but that does not mean they can't paint that picture.

You have to ask yourself, do you trust the US official figures to give you clarity of the actual economic picture? Then ask yourself how much credence you should place on numbers coming out of China.

Completely agree - China will not save the west, or indeed itself. It is still too dependent on exports.

Not sure it's in the link, but I understand Chinese authorities count "car sales" as shipments from the factory to dealers, rather than actual sales to customers. Big difference.

Share this post


Link to post
Share on other sites
As Barclays Capital pointed out in a recent report, the effect of Chinese growth on the price of oil and metals seems disproportionate to its share of the world economy.

The price of oil and metals was not affected by Chinese growth. It was affected by Chinese hoarding of commodities as a hedge against their US Treasury holdings.

Share this post


Link to post
Share on other sites
Completely agree - China will not save the west, or indeed itself. It is still too dependent on exports.

Not sure it's in the link, but I understand Chinese authorities count "car sales" as shipments from the factory to dealers, rather than actual sales to customers. Big difference.

Would not surprise me, the more games like this played around the world the more deflation is looking unstoppable.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   289 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.