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China's Subprime Crisis Is Here

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Re: China's Subprime Crisis Is Here

#191

Post by danharaj »

dvt wrote: post #182
DominikR wrote: post #173

Earlier quoted context omitted.

> It's natural to cheer for your team and boo the other team. I wouldn't take too much offense. It is a primitive behaviour because it fosters racism and hatred for others instead of cooperation. The one thing we do not need more of right now is hatred, there's enough of it in the world. Edit: It is also one thing if a private person holds his opinion (however detestable it might be - I don't care) and if we get this…

Even from an artificial game theoretic perspective, cooperation is often not the optimal choice. I'd say that in real life, even more so.

Especially from an artificial game theoretic perspective. Real life observations of human beings consistently show higher levels of cooperation than rational choice theory predicts alone. You are taking for granted the vast amount of cooperation and trust that goes into your society. It's so seamless that nobody notices it. People notice competition because it's more obvious when people are in conflict than when they are in harmony.

Re: China's Subprime Crisis Is Here

#192

Post by melted »

jqm wrote: post #164
melted wrote: post #15

FWIW, George Friedman (of STRATFOR) predicted this, except he believed the implosion of China would be on a truly catastrophic scale. So they could still be at the edge of a much deeper hole. See: The Next 100 Years: A Forecast for the 21st Century https://www.amazon.com/dp/0767923057

He also predicted Mexico and Poland would become world powers soon. Although there are some interesting insights, I take his predictions with a whole shaker of salt.

Not really "soon" — more like towards the middle of the century for Poland, and end of the century for Mexico. I'm curious about his predictions on Russia and Turkey in particular.

Re: China's Subprime Crisis Is Here

#193

Post by maolt »

Having lived in Beijing for 3 years, I try to pay more attention to the country's "hidden" or at least somewhat non obvious debts.

The Chinese soil is dying or dead.

The population as a whole and the younger generations in particular are facing future health issues of cataclysmic proportions.

The pace at which the country moves is sure to leave dozen of millions of people in the dust. Those already left in the dust endure, because their living conditions are better than those of their parents. Yet their kids' might not be, and they will choose to endure or not (and vent in a way they think appropriate). That, added to the dearth of females, and the Confucianist view of a man's place in society are already proving explosive.

China has a lot of potential, but it also faces challenges of epic proportions. To me, the economic problems are more a symptom of the problem rather than the problem to worry about.

Re: China's Subprime Crisis Is Here

#194

Post by logfromblammo »

oliwarner wrote: post #137
saiya-jin wrote: post #117

Earlier quoted context omitted.

well, and now let's look what their "competitor" (west) have done during those hundreds of years of presence there... Yes Chinese are not saints but pure capitalists, I see no evil in their actions. On the other hand, white man's actions there were evil on quite a few occasions

You might as well argue that two wrongs make a right. They don't though. We should all be helping underdeveloped African nations reach a basic level of education, economy and healthcare so they can decide their own future in the world. As it is, they're being economically suppressed.

Help them how?

The best way I can think of to help a developing nation is to buy the exports of its domestic companies.

Foreign investment into resource extraction sends money in when the goods come out, but then it goes all the way round in the revolving door and comes right back out to pay the foreign investors. (Foreign investment in infrastructure at least leaves the roads/wires/pipes behind when the money goes.)

You want to help Africa? Buy African goods and services from African-owned companies, whenever they are competitive in the world market. Treat them like economic grown-ups, and eventually they will shake off the memory of living in their colonial power's basement apartment and getting a weekly allowance.

Stop sending free money. It just ends up fueling corruption and making local business less competitive.

Africa, like everywhere else, is perfectly capable of addressing and solving its own problems when outsiders aren't constantly intervening in its affairs.

Re: China's Subprime Crisis Is Here

#195

Post by snowwrestler »

jcoffland wrote: post #66
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.

That may be true in the current environment, or in that which you measured in your study, but might be totally different in a struggling economy. Say they decide to have a massive sell of at a strategic moment. Combined with other factors it could have a larger effect. The value of one play matters in checkers but in chess it's the combined value of your moves that win the game.

A struggling economy is when demand for U.S. Treasuries is the highest, because people flee to safety in troubled times, and financial instruments don't get much safer than U.S. Treasuries. There would be no shortage of buyers if China decided to sell off in a struggling economy.

China chose to put their own wealth into U.S. Treasuries, and therefore China will do everything it can to ensure that it can extract at least that much wealth out of U.S. Treasuries. They don't have a $1 trillion of free money that they can burn up just to hurt the U.S. by selling low. They need that money back!

The amount of U.S. debt held by China is often viewed as a negative thing, but it actually does a lot to stabilize our relationship with them. They want us to succeed financially, so that they can get their money paid back, and so that they have a place to sell the products they make.

Strong economic ties are the major reason we do not have a Cold War with China the way we did with Russia. Neither country wants to change that.

Edit to add: This is why there is so much U.S. reporting on China's economy. Not because Americans want it to fail, but because Americans want it to succeed, and have concerns.

Re: China's Subprime Crisis Is Here

#196

Post by khuey »

jcoffland wrote: post #189
khuey wrote: post #172

Earlier quoted context omitted.

No, they don't. There's only 1.4 trillion dollars in circulation. http://www.federalreserve.gov/faqs/currency_12773.htm

Not all of their cash reserves are denominated in US dollars.

There's around 5 trillion US dollars worth of hard currency in the world. http://gizmodo.com/5995301/how-much-money-is-there-on-earth 80% of it is not sitting in a vault in China.

Re: China's Subprime Crisis Is Here

#197

Post by snowwrestler »

foxhedgehog wrote: post #58
fasteddie wrote: post #39

Earlier quoted context omitted.

US treasuries are at historically low rates -- if China dumped 'em all it probably wouldn't move the needle that much. And the reason they hold so many is not as some control play against the US -- its because it was the best way to devalue their currency enough to support exports.

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.

Last time I looked, the daily trading volume of U.S. Treasuries was about $1 trillion.

Re: China's Subprime Crisis Is Here

#198

Post by dvt »

danharaj wrote: post #191
dvt wrote: post #182

Earlier quoted context omitted.

Even from an artificial game theoretic perspective, cooperation is often not the optimal choice. I'd say that in real life, even more so.

Especially from an artificial game theoretic perspective. Real life observations of human beings consistently show higher levels of cooperation than rational choice theory predicts alone. You are taking for granted the vast amount of cooperation and trust that goes into your society. It's so seamless that nobody notices it. People notice competition because it's more obvious when people are in conflict than when they…

I used the modifier even, because I can trivially fabricate a game where cooperation yields a negative outcome for both (or all) players -- so I was discounting those kinds of games. Real life and games based on real life tend to be less artificial, but your point is well-taken.

Re: China's Subprime Crisis Is Here

#199

Post by ww520 »

slv77 wrote: post #143
ww520 wrote: post #105

Earlier quoted context omitted.

Inflation doesn't happen here. Bad debts actually take money out of the system. Recapitalizing the banks just add back the destroyed money. Modern monetary policies don't "print" money anymore. Debt creation and destruction are used as the primary mean to create and destroy money. Below is a very simplified version of money creation, skipping many other aspects. The banks lend their deposit out to the public and mone…

Couple of points... - There has been no economy that has been able to grow debt as fast as China has without accumulating a large amount of bad debt. This is just as true for the US in the 1920's, Japan in the 1980's, Greece, Spain, Iceland, Portugal, Brazil, Mexico, etc. - China has grown debt to GDP at a breathtaking pace. - Savings and debt are opposite sides of the same coin. Once a loan goes bad the debtor's pro…

Fair points. There will certainly be turmoil and pain in a downturn.

The main thrust of my comment was to dispel the notion that recapitalizing banks or QE to write off non-performing loans would cause uncontrolled inflation. This misconception is a misunderstanding of how fiat money creation and destruction work in the modern economies. The oppose is true. Not doing those would cause credit crunch. The Great Depression at 1929 was the result of credit freeze when banks saddled with bad debts could not function at normal money creation.

I'll address one of your points. Central banks writing off the debt it bought would not go insolvent and don't need recapitalization by others. Central banks can create all the money they need at will. Insolvent is when you can't pay back the debt. The central banks don't owe debt. They own the debt; they can do however they like with them, including forgiving the debtors.

The mandate for central banks, at least in the U.S., is to keep inflation at a modest low rate window and keep unemployment low. Everything else is secondary.

Re: China's Subprime Crisis Is Here

#200

Post by dh997 »

seanmcdirmid wrote: post #110
jcoffland wrote: post #40

Earlier quoted context omitted.

China is miles ahead of South East Asia and much of India. Chinese tourists go to places like Vietnam and are seen as wealthy and sophisticated by the locals. From the Western perspective it may seem like China, SEA and India are on a level playing field but that is far from the truth.

Bangkok is a much more cosmopolitan city than Beijing or even Shanghai. I get the feeling that Thailand is a bit richer than China per capita. That's about it though.

Beijing takes the cake for both craziest bus drivers and bicyclists, beating Hanoi and Davis, CA.
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