Friday, April 8, 2011

(and the US is becoming main debtor of the world)

China is buying up the world

Really sharp piece telling what the China is up to, explaining world trade imbalance dynamics and its consequences. If it goes that way, China will but the world for the US debt and the US will end up the world's main insolvent debtor (and an enemy of everyone). The US will be the enemy No 1, China will own the world and the western world will be bust.

Posted by ant @ 10:31 AM (2464 views)
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32 thoughts on “(and the US is becoming main debtor of the world)

  • yes they are buying it up, however what are they going to do with the 64 million empty properties in their own country?

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  • general congreve says:

    Actually a very good article, recommend everyone reads it (it’s mercifully concise like all of G Pytel’s offerings). Even for me, the last paragraph (which is a theme I have alluded to in the past myself but prefer not to think about) completely takes the gloss of the biggest money making opportunity in modern history:

    It does not look too good at all. The US is likely to react at some point (at the end it is a military hyperpower). It is anybody’s guess how it will look like.

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  • Any educated estimates on how long the current charade can continue? The US government is reaching there debt ceiling (Which they will increase) and there is no meaningful recovery going on in Europe / US and to top it off we have rising commodity prices.

    Perhaps the comment under the article that things will kick off by then end of 2012 (around 18 months) is about right.

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  • Not a bad article, Mr Pytel. It could do with a few links to your references; but otherwise it’s one of your best, and fairly original too.

    I’d question how long China will be able to rely on cheap labour though. In the past two decades, cheap labour was in the form of rural peasants moving to the big cities. That flow is now drying up: more Chinese now live in cities, especially the young, healthy, ambitious, and hard-working ones. Already companies in China are having to compete harder for the best talent. Growth will slow and eventually plateau, just as in the rest of the developed world. In the late 1980s there was lots of talk of how Japan would take over the world; that never happened either.

    Let’s not forget that China’s overseas investments – e.g. building new roads or ports in Africa – are also a benefit for the recipient countries. Infrastructure investment is a win-win when there is little infrastructure to begin with. Sturdy roads, able to withstand heavy trucks even in the rainy season, will bring far more prosperity to Africa than Oxfam schools or mosquito nets. The Chinese have the money and the clout to knock heads together and stop the political in-fighting that normally bedevils infrastructure projects. If only the west had been so prescient.

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  • ontheotherhand says:

    Same schstik 25 years ago when Japan was buying up the world. Who is the idiot here anyway. US gets instant ‘stuff’ and China gets IOUs in a currency that can be devalued.

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  • @3 (bellwether): you clearly do not understand Pytel’s writing as his analysis is multidimensional and showing many aspects of interactions. Basically you should give up a habit that if you read something and you do not understand it, you conclude that the author is dim or of subnormal intelligence. (You would have written “subnormal” together if you were of normal intelligence yourself:-)

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  • general congreve says:

    @3 – Did you read the article? G Pytel was saying that China is using it’s Labour force in the sacrificial way leaders of old used their able-bodied to fight wars of conquest. They know they are locked into an economic cycle that will cause painful adjustment for many in the Labour force when China (as they will lose jobs and income) finally pulls the plug on the goods for US debt cycle, but it will sink the US economically. As for who is holding all the paper? The whole point was that China is passing off the paper around the world in exchange for the debt of other countries who are less likely to default and also to secure resources. Sure they’ll not get rid of it all, but taking a necessary hit on the remaining value of US treasury’s, in order to get ahead of the US economically, is all priced into their plans.

    @6 – US gets instant ‘stuff’ and China gets IOUs in a currency that can be devalued. The point of the article is they know that and have a clever plan to stick it to the US. They have no intention of working for the US for next to nothing for forever.

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  • @8 general congreve

    Perhaps the US are more cleaver than China and never intended to pay those IOU’s.

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  • The engineered boom and bust is making more sense to those in the dark by the day.

    We still have some ‘dim’ ones left.

    According to my books the plan is rolling out perfectly. Who gains is LE CRUNCH question.??

    Kindergarten stuff.

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  • Why the future tense? Surely most of this is already extant?

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  • Ant as you can barely string a sentence together I’m afraid your opinion doesn’t count.

    GC I read the article and it’s probably flat out the worst thing I’ve read on the topic. Next to Pytel, Nadeem Walayat is a heavyweight.

    I don’t doubt that the rise of China creates issues, and possibly quite serious ones, similar to when the small kid at school has a growth spurt over the summer and returns with a bit of a grudge and a point to prove – except with more serious consequences.

    I do doubt that Pytel or anyone, but most of all Pytel, can predict what’s going to happen in the future as a result of what’s happening now. And it is and was always so, there are just too many variables to even contemplate outcomes that far out, and it’s no more than psycic masturbation to assume otherwise – as Greg does, then compounds the indulgence by creating a blog, and writing about it.

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  • 8. general congreve said…’@6 – US gets instant ‘stuff’ and China gets IOUs in a currency that can be devalued. The point of the article is they know that and have a clever plan to stick it to the US. They have no intention of working for the US for next to nothing for forever.’

    Peter Shiff puts it across well in his short island story a little way in on this utube clip. http://www.youtube.com/watch?v=FxEJpIjFk8I

    The dola stwong Amigo!

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  • @10 – bellwether:

    Bellwether as you can barely string a word (“sub normal”:-))))) are a genius (of a different kind).

    As to the rest of your comment you are a story teller peddling comments of no substance. Incidentally if you had intellectual capacity to review Pytel’s blog you would have realised that his predictions, and his pyramid model of the crisis, worked very well.

    Anyway, you find it much easier to dish out mindless insults than to think.

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  • Bellwether will be an ignorant optimist right up untill the point of the chip.

    He may even think ( much like a lot of arrogant yuppies) that his will signal KMA, but everyone gets sold out in the end mate.

    You must really dig the Chinese model.

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  • @10 – bellwether:

    Very often it is quite easy to predict the future based as a result of what;s happening. (It simply takes some brainpower.) For example anyone with at least a couple of braincells that communicated knew back in 2003 that the US war with Iraq would not be a cakewalk and a success as a project finance enterprise as the US planned it. And that generally it would end up in a mess.

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  • Bellwether it’s friday, shut shop and go for a beer, it will harmonise with your state of mind.

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  • general congreve says:

    @9 – They don’t. They know that and the Chinese know that. But thanks to the short-termism of the US administration, corrupt corporate interests and the greed of the US population, the Chinese have led the US on a merry dance to their economic doom.

    When the dust has settled the US will be a shadow of it’s former self and the Chinese will be standing tall. That’s if the US don’t throw their toys out of the pram and start WW3 as a solution (Hint: Afghanistan, Iraq and Libya are all about maintaining cheap oil and dollar dominance at the end of a gun, so the US can carry on ruling the world even though it is broke).

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  • Ant bear in mind it was you who initially went on the offensive, offended I think because I didn’t rate the article and said so. Surely unless you are Greg Pytel you really have no business taking my initial comments personally. Anyway let’s leave it at that for now, I’m sure if necessary we can reignite the spat at some later date. Have a good weekend.

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  • @14 (bellwether):

    indeed I did not take your initial comments personally (as I generally read into content and I am not driven by emotions). But I could. Since I posted Pytel’s article (and in fact I am a fun of his blog) if you offend him (for writing the article), you, by implication, also offend me as someone who disseminate it. (It takes some reasoning powers that you clearly lack to realise that.) It was you who was personally offensive towards Pytel and I simply reflected upon it. Please do not suggest that I was offensive to you in any way. I was not. You may be as critical as you wish discussing the stuff on the merits, or if you consider Pytel’s articles completely meritless, you should ignore them. However your offensive behaviour towards Pytel is a reflection upon who you are rather than quality of Pytel’s blog posts.

    PS. Pytel is simply running a blog like millions others. You like it: fine. You don’t: also fine.

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  • a few people have missed the point made in the article that China is using these IOUs to buy up hard tangible assets and commodities, passing on these useless IOUs to other countries. hence offloading China’s exposure to US debt default. simple.

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  • Every empire rises & falls… the West is no exception

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  • Bellwether, reminding us of your intelligence again? And again, and again…. No response to GC’s point @8, which you seemed to muddle @3?

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  • Ant, it is a bit rich criticising someone’s English ability when you write phrases such as “if you offend him (for writing the article), you, by implication, also offend me as someone who disseminate it.” Missing a verb, adjunct and simple past tense for starters! Those in glass houses etc.

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  • Rumble a response to 8 didn’t seem necessary as the point GC made begged more questions than answers. Here are some of the questions

    “The whole point was that China is passing off the paper around the world”

    To whom precisely? In what volume? What is the composition of the chinese debt holdings?

    ” in exchange for the debt of other countries who are less likely to default”

    What countries? How does China/Pytel know they are less likely to default. Note the markets view on default is constantly expressed and priced in via the exchange rate and CDS’s. Will this pricing in be completely accurate no, but it is likely to be more accurate than most other views, especially where the market is very bearish on the $ right now.

    “and also to secure resources.”

    what resources? for what ends? what difference does this make to the west?

    “Sure they’ll not get rid of it all, but taking a necessary hit on the remaining value of US treasury’s, in order to get ahead of the US economically, is all priced into their plans”

    China clearly plan to grow, they plan for growth, maybe they even plan to take over the world as Pytel would put it, but that in itself tells us nothing about what will in fact happen. It seems an almost commonplace view amongst vaguely alternative blogs etc (perhaps as a
    reaction to the mainstream) that the game is up for the west and already won/in the process of being won in the east. Where a view is so common place (and right now bearishness on the west is hugely common place) the contrarian in me rebels against what I perceive to be a herd or people thinking in herd like ways.

    Of course I don’t know what will happen (which means I already know more than Greg a simpleton who assumes too much) but I wonder who would do better the west or the east, the us or china if they were to withdraw into an Autarkic state. Another thing worth looking at in puzzling over this is the demographic of the population, the relative freedoms within a country and the populations tendancy to produce ideas and innovation.

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  • @18 (bellwether):

    you clearly do not understand what Greg Pytel’s blog is all about and his writings. It is about presenting risk scenarios and stimulating the debate (this is how I take it). In order to understand this you should understand a little bit of probability theory. But also bear in mind that if you present stuff in short articles on a blog you have to make some simplifications to present the point. And then it is up to readers’intelligence not to read too much into articles.

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  • general congreve says:

    @19 – Indeed. This is what makes Pytel’s articles such concise reads. Most educated readers already know most of the background info in order to fully understand his point.

    @18 – Withdraw into an Autarkic state? That’s the whole point!. China is buying up minerals and mines and has all the means of production and so may well be planning on such action, which would be largely successful for them. By default the US, which would be kicked in the nuts economically by such a move and therefore forced to adopt such a state too, will see their standard of living collapse, as the purchasing power of the dollar collapses and because they no longer have the means of production, having exported most of it abroad.

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  • A few weeks back, the Economist said some European countries “on the fringe” were bankrupt and need a restructuring. They were over indebted. It has also produced articles questioning how the US will pay their way out of the debts they have. For individuals, there is only so much money you can pay back on loans which is internally generated before you auction the family silver or go steal some. For the US government and the European central Bank there is another option – printing.

    If you rehash some of The Economist’s comments, you won’t be too far away from Pytel’s article.

    What do the people believe? – well, I’ve watched people snap up 1kg bars of Silver at £890 this week. People are clearly preparing for another big default – where – I don’t really know, I can only guess and hedge the bet. China has some bright people running the country – what would you do?

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  • GC and Ant, absolutely no shame in your having not the faintest idea as to the answers to questions at 18, but then have the balls to admit this rather than chosing to hide behind pointless Pytelesque generalties.

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  • @22 (bellwether):

    Bellwether, absolutely no shame in your admitting “subnormal intelligence” you showed in this comment exchange rather than choosing (double “o” BTW) to hide behind your pointless epistolary diarrhoea.

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  • Ant you’re taking this way too personally. I looked to calm things down at 18, and have resisted throughout (retaliatory pop at 10 apart) attacking your own posts, and believe me you are offer fertile ground – eg:

    “If it goes that way, China will but the world for the US debt and the US will end up the world’s main insolvent debtor (and an enemy of everyone). The US will be the enemy No 1, China will own the world and the western world will be bust.”

    “For example anyone with at least a couple of braincells that communicated knew back in 2003 that the US war with Iraq would not be a cakewalk and a success as a project finance enterprise as the US planned it.”

    Time to let it go.

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  • And before you pounce on the rogue “are” at the second line of my last post – it’s delete.

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  • @24 (and 25): bellwether:

    I have simply adopted your convention. I apologise if you feel offended but I hope it will make your language more balanced and considerate.

    You clearly do not understand what you read as the first of “retaliatory” examples you provided shows. It starts with a massive qualifying conditional “if it goes that way”. (So it is only a “retaliatory” example for those of “subnormal” intelligence.) Hence your “rouge” “are” was clearly comparatively an insignificant issue.

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