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China's Subprime Crisis Is Here

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Re: China's Subprime Crisis Is Here

#81

Post by rosser »

dangerpowpow wrote: post #77
rosser wrote: post #48

Earlier quoted context omitted.

China can do things at a scale the West in general, and the US in particular can't even fathom. I was in Tibet with some friends in October. At one point, our tour bus was detoured, because the bridge on our scheduled route wasn't big enough for it, so we drove a couple hours out of our way, and just happened to pass a 10MW solar plant. In the middle of Nowhere, Tibet. A thing we wouldn't even have seen if we hadn't…

>India, used to being Nepal's big brother and pushing it around, subsequently closed their border with Nepal No we did not close any border. This is false information.

Dude, I was there. 30 seconds' googling yields citations from Time, the BBC, the NY Times, The Guardian, Wikipedia, and others.

How about the guy whose hands were cut off when he tried to smuggle fuel across the border that wasn't closed?

Or did that also not happen?

EDIT: To be fair, I do remember noting a rather curious difference in tone and content in the reporting about the Nepali constitution's passage and the subsequent border situation between Indian media and everyone else's.

Re: China's Subprime Crisis Is Here

#82

Post by oliwarner »

rosser wrote: post #48
jcoffland wrote: post #33

The American media seems to jump at any opportunity to dismiss China as an economic threat. It makes us feel more secure but leads to a public informed only about one side of China's story. Namely the part our ego can handle. China has regularly surpassed the US in number of cars sold since 2009. China also holds more US debt than any other country. Another way to put that is the US government owes China over 1 trill…

China can do things at a scale the West in general, and the US in particular can't even fathom. I was in Tibet with some friends in October. At one point, our tour bus was detoured, because the bridge on our scheduled route wasn't big enough for it, so we drove a couple hours out of our way, and just happened to pass a 10MW solar plant. In the middle of Nowhere, Tibet. A thing we wouldn't even have seen if we hadn't…

That's a neighbour so there's an obvious local power advantage. It's not unimpressive though and I completely agree about there being a scale and general surplus of engineering prowess that the rest of us just can't comprehend.

What is perhaps more alarming is their development of Africa. I passed through a few African countries last year and China was everywhere. They're in the up-and-coming metropolises like Addis Ababa, they're in despot states like Zimbabwe and they own vast numbers of resource mines in places like Zambia (copper) and Namibia (uranium).

Now almost every sub-Saharan African country has Chinese mining activity.

And the story is the same in all these places. China promises roads and power stations for mining rights, then they do all the work. They ship everything over, including workers. If there is any untrained scrot work for locals, they get paid a tiny fraction of what a Chinese worker would —let that sink in— but anything else is Chinese. There's no local training, no real number of local jobs.

They're investing hundreds of millions in exchange for the infrastructure they use to strip-mine a country.

While we're all fretting about how much cash China has, they have built a resource network that covers half the planet. They have millions of engineers and ton of resources and the political power (the debts of every other major power) to get away with nearly anything.

Re: China's Subprime Crisis Is Here

#83

Post by shostack »

slantedview wrote: post #29
yueq wrote: post #27

The root cause of 08 financial crisis is not simply 'subprime loans' that can't be repaid. It's because of trillions of derivatives that those banks hold, and lack of liquidity when banks are making wrong bet. China doesn't have many complex financial engineerings as US did in 07/08.

It was broader than subprime and derivatives even. It was a general real estate (housing) bubble. Home prices became massively inflated and the various investments tied to housing came crashing down. A similar result can be expected in China when the music eventually stops.

Any thoughts on what that will mean for the US real estate market given continued Chinese investment here? My current guess is we'll see more money pour in as people attempt to shelter their Chinese funds.

Re: China's Subprime Crisis Is Here

#84

Post by rosser »

oliwarner wrote: post #82
rosser wrote: post #48

Earlier quoted context omitted.

China can do things at a scale the West in general, and the US in particular can't even fathom. I was in Tibet with some friends in October. At one point, our tour bus was detoured, because the bridge on our scheduled route wasn't big enough for it, so we drove a couple hours out of our way, and just happened to pass a 10MW solar plant. In the middle of Nowhere, Tibet. A thing we wouldn't even have seen if we hadn't…

That's a neighbour so there's an obvious local power advantage. It's not unimpressive though and I completely agree about there being a scale and general surplus of engineering prowess that the rest of us just can't comprehend. What is perhaps more alarming is their development of Africa. I passed through a few African countries last year and China was everywhere . They're in the up-and-coming metropolises like Addis…

It's staggering, isn't it?

> They're investing hundreds of millions in exchange for the infrastructure they use to strip-mine a country.

They aren't even investing that much. The equipment is all being bought — from government-owned companies — with government grant money.

They're playing a very long game, and they're incredibly good at it.

Re: China's Subprime Crisis Is Here

#85

Post by neltnerb »

nebula wrote: post #71
rosser wrote: post #48

Earlier quoted context omitted.

China can do things at a scale the West in general, and the US in particular can't even fathom. I was in Tibet with some friends in October. At one point, our tour bus was detoured, because the bridge on our scheduled route wasn't big enough for it, so we drove a couple hours out of our way, and just happened to pass a 10MW solar plant. In the middle of Nowhere, Tibet. A thing we wouldn't even have seen if we hadn't…

new constitution, which favored closer ties with China over India. Really? They have it ingrained in the constitution? If Geo-political situation changes, and they need to re-balance their ties? They are going to need constitutional amendments?

When was this? I just searched for India and China in their 2015 constitution and it's certainly not there.

http://www.inseconline.org/linkedfile/Bill%20Of%20Constituti...

Meanwhile, Wikipedia claims, "The promulgation of the new constitution was immediately followed by virtual blockade of all checkpoints at Nepal-India border." but without any citation.

turtles all the way down...

Re: China's Subprime Crisis Is Here

#86

Post by ktRolster »

jcoffland wrote: post #35
ktRolster wrote: post #23

Earlier quoted context omitted.

Probably small. China's financial system isn't entwined with the US/European system as much (the Fed buys bonds from the ECB, and vice versa). Commodities will be hit the hardest, because China will stop importing them. Alan S Blinder estimated that a very severe recession in China would affect the US GDP by .2% So that kind of gives you an idea.

China holds more US treasury bonds than any other country. How are we not intertwined?

The US holds vastly more US treasury bonds than any other country. But look at the data: http://ticdata.treasury.gov/Publish/mfh.txt

China holds about the same amount as Japan, and if you count Europe as a region, then Europe holds more than either of them.

Furthermore it doesn't really matter: it's not like they can 'call the debt.' China has to wait for their bonds to mature just like everyone else. Really it's rather nice of China to loan us the money.

Re: China's Subprime Crisis Is Here

#87

Post by jcoffland »

roel_v wrote: post #65
jcoffland wrote: post #35

Earlier quoted context omitted.

China holds more US treasury bonds than any other country. How are we not intertwined?

You've been saying that across this thread, but let's say that Chinese banks start to go bankrupt because of nonperforming loans. The Chinese central bank holds large amounts of US treasury bonds. What would be the effect of the bankruptcies? A sell-off to bail out Chinese banks? How would that work; they'd get dollars for their tbonds; then what? Would it depress tbond yields? They can't go much further before you h…

I answered this question elsewhere in this thread.

Re: China's Subprime Crisis Is Here

#88

Post by Gibbon1 »

jcoffland wrote: post #57
mmanfrin wrote: post #41

Earlier quoted context omitted.

China also holds more US debt than any other country ... except the US and domestic sources, which hold 2/3rds of all our debt. In other words, domestic sources hold over 9x the debt that China does.

It's pretty typical for institutions to buy their own government's bonds.

I don't have any formal education in economics, but...

The reason that a bank holds government bonds is different than the reason a private investor would do so. Government bonds are the strongest type of reserve a bank can hold. Less safe reserves require a discount from face value. So for a bank there is a balance of risk between cheap and safe reserves like Treasuries and more expensive but better returning paper. A bank is always going to hold a mix of paper as a reserve[1].

China? China hold's US debt in order to be able to stabilize their currency against the dollar. And to backstop the value of their currency on the world market.

I don't see anything abnormal about any of this.

[1] For a bank, if the ratio of loans outstanding vs reserves in hand gets too low they can't loan out any more money. And since a bank makes money on fees inability to make loans is bad bad bad.

Re: China's Subprime Crisis Is Here

#89

Post by jcoffland »

ktRolster wrote: post #86
jcoffland wrote: post #35

Earlier quoted context omitted.

China holds more US treasury bonds than any other country. How are we not intertwined?

The US holds vastly more US treasury bonds than any other country. But look at the data: http://ticdata.treasury.gov/Publish/mfh.txt China holds about the same amount as Japan, and if you count Europe as a region, then Europe holds more than either of them. Furthermore it doesn't really matter: it's not like they can 'call the debt.' China has to wait for their bonds to mature just like everyone else. Really it's rat…

You're right it doesn't matter that China has loaned us tons of money. You can talk your way around it and Wall Street and the American media outlets have done this for years but it does not change the facts. China continues to grow as an economic threat to the US and we don't want to believe it.

Re: China's Subprime Crisis Is Here

#90

Post by jcoffland »

foxhedgehog wrote: post #68
foxhedgehog wrote: post #58

Earlier quoted context omitted.

The research that I did on this for my grad school project with the GAO suggested that there was generally enough liquidity in the secondary bond market to absorb even a mass sale from China over the time period required to do so.

Won't let me respond to the comment below this one, but China doesn't determine the volume of the secondary market for UST. It's mostly in New York and in London.

Right but that market's volume changes over time and China gets to choose, with in some limits, when to sell off their bonds. This gives them potentially much more leverage than a static view of the situation might imply.
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