Chinese "ponzi" Economy Is Collapsing

[Realistbear]

http://www.telegraph.co.uk/finance/finance...nzi-scheme.html

Credit tightening threatens China's 'giant Ponzi scheme'

China's loan growth plunged in July while exports fell 23pc from a year ago after grinding lower for nine months as consumers in the West tighten their belts further.

Confucious say man who seek to get rich quick become poor instead.

[R K]

Karma's a b*tch. And it seems there's no shortage of it this morning. Poor Chinese, just when they thought they were taking over the world...........

[fluffy666]

Confucious say man who seek to get rich quick become poor instead.

In the 1930s, a newly industrialised nation with lots of territorial disputes with it's neighbors went through a depression.. how did that end again?

[Realistbear]

In the 1930s, a newly industrialised nation with lots of territorial disputes with it's neighbors went through a depression.. how did that end again?

A very long march followed by the largest slaughter of people in history (26m) all terminated at the hands of the national hero whose portrait still hangs on a wall in Tinymen Square.

[AvidFan]

No wonder the Chinese bankers were in Washington 2 weeks ago asking when the US economy was going to turn around.

The US have them by the neck. It's a sad fact that as one empire dies, its replacement is pulled around like a dog attacking a rag doll until its dependence is finally broken.

Oh well, the greatest of depressions anyone?

[ken_ichikawa]

No wonder the Chinese bankers were in Washington 2 weeks ago asking when the US economy was going to turn around.

The US have them by the neck. It's a sad fact that as one empire dies, its replacement is pulled around like a dog attacking a rag doll until its dependence is finally broken.

Oh well, the greatest of depressions anyone?

How so? , it appears to me that they both have each others by the neck.... ie if China stops buying US debt , the US is doomed , if the US stops buying Chinese made stuff China is doomed, hence its a ponzi scheme based on a ponzi scheme.... and China is from the local press spending like no tommorow its reserves , susprisingly in Mongolia I found Han work gangs doing projects for Mongolia , same in the stans etc , they are even considering upgrading Iranian oil refining capacity.

[AvidFan]

How so? , it appears to me that they both have each others by the neck.... ie if China stops buying US debt , the US is doomed , if the US stops buying Chinese made stuff China is doomed, hence its a ponzi scheme based on a ponzi scheme.... and China is from the local press spending like no tommorow its reserves , susprisingly in Mongolia I found Han work gangs doing projects for Mongolia , same in the stans etc , they are even considering upgrading Iranian oil refining capacity.

I agree its a co-dependence. But China's reserves will either run out or they'll try to sell treasuries to get back Yuan. Heaven help us.

If that happens (1) a collapse in the dollar (2) still no long-term plan for the Chinese economy.

Either they get the ponzi scheme restarted or its curtains for the US dollar.

I didn't mean to sound as though the US have the upper hand. It's just that the dislocation of East and West, if it comes now or later, is going to be messy and will benefit no-one in the short to medium term.

Edited August 12, 2009 by AvidFan

[Guest KingCharles1st]

SHIT- forget the 14 year cycle- think the 800 year cycle and Genghis Khan

[roman holiday]

http://www.telegraph.co.uk/finance/finance...nzi-scheme.html

Credit tightening threatens China's 'giant Ponzi scheme'

China's loan growth plunged in July while exports fell 23pc from a year ago after grinding lower for nine months as consumers in the West tighten their belts further.

Confucious say man who seek to get rich quick become poor instead.

I agree, the economies are tied at the hip [Ponzi Americana ], but if/when the collapse... or a slow whimpering deflation..occurs, the Chinese economy [and the asian region in general] will be the one best situated to emerge from the ashes.

Edited August 12, 2009 by roman holiday

[LuckyOne]

I agree its a co-dependence. But China's reserves will either run out or they'll try to sell treasuries to get back Yuan. Heaven help us.

If that happens (1) a collapse in the dollar (2) still no long-term plan for the Chinese economy.

Either they get the ponzi scheme restarted or its curtains for the US dollar.

I didn't mean to sound as though the US have the upper hand. It's just that the dislocation of East and West, if it comes now or later, is going to be messy and will benefit no-one in the short to medium term.

The ultimate prisoner's dilemma.

[AvidFan]

SHIT- forget the 14 year cycle- think the 800 year cycle and Genghis Khan

I thought it was a 515 year East/West cycle that started in 1600 ish?

[D.C.]

SHIT- forget the 14 year cycle- think the 800 year cycle and Genghis Khan

I thought the Mongols had horses not cycles?

[AteMoose]

Decoupling my @rse

Edited August 12, 2009 by moosetea

[Guest_FaFa!_*]

I agree, the economies are tied at the hip [Ponzi Americana ], but if/when the collapse... or a slow whimpering deflation..occurs, the Chinese economy [and the asian region in general] will be the one best situated to emerge from the ashes.

I agree that China is very well placed. With its ageing workforce, chronic pollution, poor education and health, non-existant social security, feeding 20% of the world's population on 7% of the arable land, unresponsive and corrupt bureaucracy, policy makers having to square the circle by constantly explaining why rampant capitalism is in fact socialist and a two tier economic policy based on cheap exports and government infrastructure spending (neither model being sustainable in the long term) I think China will do brilliantly in the years to come.

Ultimately if America collapses tomorrow, they will have no money but still be living in a developed country. If China collapses tomorrow they will have no money and be living in a polluted, overpopulated hole.

My two cents

Edit: here's an excellent article on China in the FT today:

http://blogs.ft.com/dragonbeat/2009/08/11/...an-complacency/

Money quotes:

"There is nothing remarkable...about an economy growing at 8 per cent when credit is allowed to expand by 34 per cent."

"The fact becomes even less remarkable when we recognise that nominal GDP (the appropriate comparator for nominal credit growth) grew just 3.8 per cent in the first half. In other words, 10 dollars of new loans were required to generate just one dollar of economic growth."

Edited August 12, 2009 by shylock

[Guest Parry aka GOD]

http://www.telegraph.co.uk/finance/finance...nzi-scheme.html

Credit tightening threatens China's 'giant Ponzi scheme'

China's loan growth plunged in July while exports fell 23pc from a year ago after grinding lower for nine months as consumers in the West tighten their belts further.

Confucious say man who seek to get rich quick become poor instead.

Read The Coming Collapse of China, by Gordon E. Chang.

They've been QE'ing the whole time. For decades. Ever wondered when they never floated the Yuan?

Well, they just had state owned enterprises 'SOE's' which were not guided by market forces, simply production . . . over-production in fact. As these 'businesses' inevitably failed, the Communist Party would simply instruct the state owned banks to bail these firms out.

. . . and so and so forth . . . round and round and round . . .

Chang argued this would eventually fail and would lead to revolution and the overthrow of the Communist Party.

[Guest_FaFa!_*]

Read The Coming Collapse of China, by Gordon E. Chang.

They've been QE'ing the whole time. For decades. Ever wondered when they never floated the Yuan?

Well, they just had state owned enterprises 'SOE's' which were not guided by market forces, simply production . . . over-production in fact. As these 'businesses' inevitably failed, the Communist Party would simply instruct the state owned banks to bail these firms out.

. . . and so and so forth . . . round and round and round . . .

Chang argued this would eventually fail and would lead to revolution and the overthrow of the Communist Party.

I read that, good book though he is a bit of a evangelical free marketer. Minxin Pei is also good - he wrote a book called "China's Trapped Transition" which covers much of the same but less polemically.

CCP will not collapse - worse case scenario for them is a takeover by the PLA, possible civil war as the apocalyptic scenario, IMHO. There is no effective opposition and the CCP is ruthless. China faces stagnation in the long term methinks

[roman holiday]

My two cents

Edit: here's an excellent article on China in the FT today:

http://blogs.ft.com/dragonbeat/2009/08/11/...an-complacency/

My favourite China bear is Andy Xie:

http://illusionofprosperity.blogspot.com/2...6/andy-xie.html

http://www.moneycontrol.com/india/news/fii...andy-xie/396529

I think that in the long term [a generation] though the balance of economic power will move east.

Edited August 12, 2009 by roman holiday

[roman holiday]

opps

Edited August 12, 2009 by roman holiday

[dinker]

Your quality of life is determined solely by the average IQ of your population:

[Har Fast]

China Construction Bank, the number two lender, is cutting loans by 70pc over the second half of the year. "We noticed that some loans didn't go into the real economy. Housing prices are rising too fast," said the bank's president, Zhang Jianguo.

What are the odds of a UK bank boss saying something like that?!

[Guest_FaFa!_*]

My favourite China bear is Andy Xie:

http://www.moneycontrol.com/india/news/fii...andy-xie/396529

I think that in the long term [a generation] though the balance of economic power will move east.

Thanks for the link!

I also agree that the balance of power should move East. However I think there are many many problems there and it is by no means a given, hence my deep scepticism. When we think about it, why did the balance of power ever move West? China and India were, on paper, in an incredibly storng position for much of their history. But it didn't work out that way in the end.

[AvidFan]

Read The Coming Collapse of China, by Gordon E. Chang.

They've been QE'ing the whole time. For decades. Ever wondered when they never floated the Yuan?

They were sterilising their dollar purchases for a while - but they've stopped again now.

The miracle of diluting your money supply by 30%+ YoY!

[AvidFan]

Your quality of life is determined solely by the average IQ of your population:

Why are dumb American's earning a good $10K a year more GDP per capita than Europe then?

[@contradevian]

God knows what horrors the Chinese are covering up.

My money is still on the USA. Especially if/when the looters are finally jailed and bankrupted.

[R K]

I agree, the economies are tied at the hip [Ponzi Americana ], but if/when the collapse... or a slow whimpering deflation..occurs, the Chinese economy [and the asian region in general] will be the one best situated to emerge from the ashes.

Why?? They're communists with 1.3 billion mouths to feed, polluted rivers, a largely poorly educated agrarian population, no recent 'commonwealth' of resource rich countries to fall back on etc etc.

If/when the dollar collapses and China can no longer rely on being the lowest cost producer then they're f*cked. The US and the West will rise triumphant from the ashes, and they'll go back to subsistence farming with the brightest and best fleeing to the West with their capital and their brains.

They're stuffed - it's only a matter of time.