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China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

nytimes.com

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Re: China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

#31

Post by drcode »

ryandamm wrote: post #15

I think the best model to understand this is Michael Pettis's balance sheet analysis. He covers it extensively, but here's his latest digest of the model: http://carnegieendowment.org/chinafinancialmarkets/66221 It really makes clear how stark the choices are for China. The debt binge of the last ~10 years has masked the flattening out of productive investment, and there will need to be a reckoning. Hopefully it's a…

It seems like smart people have been predicting that China's growth is unsustainable on a regular basis for at least 15 years... it's tough for an average HNer like myself to take the time to tell which "expert" is just blowing smoke and which expert truly has a handle on the salient facts- Guess all I can really do is simply wait and see who ends up being right...

Re: China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

#32

Post by coffeevradar »

Analemma_ wrote: post #25
jseliger wrote: post #21

Earlier quoted context omitted.

and there will need to be a reckoning And yet when I read things like this I also think of the cliché, "Markets can remain irrational longer than you can remain solvent." People have been waiting decades for Japan's post-boom day of reckoning and we've not seen it.

> People have been waiting decades for Japan's post-boom day of reckoning and we've not seen it. Japan's "day of reckoning" already came: what they've been in for the last 25+ years is the "post-reckoning" of ZIRP, low growth and low inflation. If the Chinese debt bubble explodes, it's not like the country is going to collapse, the most common prediction is that they'll become "Japan 2.0" where the country is functio…

Yeah, it's more like people have been waiting for decades for a day of reckoning for Japan in the sense that the country is still very productive in many senses but has yet to escape its extremely long-term recession. Japan has been punished enough.

It's quite tragic.

Re: China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

#33

Post by maerF0x0 »

All the fears around growth is from people not understanding the difference between absolute growth and relative growth. Which is better growth of 1000 or 3% ? the developed world cannot grow at high percentage points because they're so large.

This video more or less shows the insanity of trying to grow at a fixed rate (say being an "emerging market" at 6% per year) for an indefinite timespan.

https://www.youtube.com/watch?v=sI1C9DyIi_8

Re: China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

#34

Post by gitah »

ryandamm wrote: post #15

I think the best model to understand this is Michael Pettis's balance sheet analysis. He covers it extensively, but here's his latest digest of the model: http://carnegieendowment.org/chinafinancialmarkets/66221 It really makes clear how stark the choices are for China. The debt binge of the last ~10 years has masked the flattening out of productive investment, and there will need to be a reckoning. Hopefully it's a…

When you have a hammer everything looks like a nail. My problem with these kind of analysis is that it pretty much only looks at things from a financial perspective thinking it's the be-all-end all.

However, on first level principles, money is simply an abstraction; it's a medium for trading your services for other people's services. And if you become more efficient, you can buy more services with the same amount of effort and vice versa. The root cause of this increase in efficiency is technology.

As a developing country, China has lots of easy productivity growth just by adopting current technologies on the technological frontier. Therefore, I think an analysis on how fast China is advancing in various technological areas and their industrial policy would be much more useful than one just at a financial level. Are Chinese companies as a whole becoming more productive and creating new technology?

Re: China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

#35

Post by WillPostForFood »

theprop wrote: post #23
ryandamm wrote: post #12

Earlier quoted context omitted.

Sustainability is a function of total annual deficit relative to growth in ability to service the debt. Deficits that lead to productivity-enhancing investments will pay for themselves: education, infrastructure, etc. Deficits that result from cutting taxes will not: the idea that we're on the virtuous part of the Laffer curve has been thoroughly debunked in economic, if not political, circles. Furthermore, debt in t…

Are you seriously suggesting that US government deficits are run to invest in education and infrastructure? Deficits are mostly attributable to military spending. I'm doubtful that killing people in other countries who present absolutely no threat to you is productivity-enhancing.

I know there is some fake news floating around with a chart that purports to show 57% of spending goes to the military, but it's been debunked. 28% goes to healthcare (Medicare), 25% to Social Security, 16% to Defense.

http://www.politifact.com/truth-o-meter/statements/2015/aug/...

Re: China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

#37

Post by leoc »

gitah wrote: post #34
ryandamm wrote: post #15

I think the best model to understand this is Michael Pettis's balance sheet analysis. He covers it extensively, but here's his latest digest of the model: http://carnegieendowment.org/chinafinancialmarkets/66221 It really makes clear how stark the choices are for China. The debt binge of the last ~10 years has masked the flattening out of productive investment, and there will need to be a reckoning. Hopefully it's a…

When you have a hammer everything looks like a nail. My problem with these kind of analysis is that it pretty much only looks at things from a financial perspective thinking it's the be-all-end all. However, on first level principles, money is simply an abstraction; it's a medium for trading your services for other people's services. And if you become more efficient, you can buy more services with the same amount of…

> However, on first level principles, money is simply an abstraction; it's a medium for trading your services for other people's services. And if you become more efficient, you can buy more services with the same amount of effort and vice versa. The root cause of this increase in efficiency is technology.

Pettis does discuss this at length.

Re: China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

#38

Post by hkmurakami »

jseliger wrote: post #21
ryandamm wrote: post #15

I think the best model to understand this is Michael Pettis's balance sheet analysis. He covers it extensively, but here's his latest digest of the model: http://carnegieendowment.org/chinafinancialmarkets/66221 It really makes clear how stark the choices are for China. The debt binge of the last ~10 years has masked the flattening out of productive investment, and there will need to be a reckoning. Hopefully it's a…

and there will need to be a reckoning And yet when I read things like this I also think of the cliché, "Markets can remain irrational longer than you can remain solvent." People have been waiting decades for Japan's post-boom day of reckoning and we've not seen it.

>People have been waiting decades for Japan's post-boom day of reckoning and we've not seen it.

We saw the bust in the early 90's.

Re: China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

#39

Post by WillPostForFood »

Analemma_ wrote: post #13
alexbeloi wrote: post #8

Earlier quoted context omitted.

US debt to GDP ratio is half that of China, not claiming the trend is sustainable but that (at least according to Moody's) China is more at risk of a runaway debt-spend crisis than the US is.

Not only is our debt-to-GDP ratio lower than China's, it's lower than most (not all) countries in Western Europe. There is so much uninformed hysteria about the US national debt, it's incredibly frustrating and blocking the implementation of better policy.

By what measure is the US ratio lower than China's? US is worse in the IMF measure of gross debt to GDP by far. Looking at total debt (government, corporate, and household), the US is worse: 331% to 250%. What numbers are you looking at?

https://www.theguardian.com/business/2016/jun/16/chinas-debt...

Re: China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

#40

Post by [deleted] »

leoc wrote: post #37
gitah wrote: post #34

Earlier quoted context omitted.

When you have a hammer everything looks like a nail. My problem with these kind of analysis is that it pretty much only looks at things from a financial perspective thinking it's the be-all-end all. However, on first level principles, money is simply an abstraction; it's a medium for trading your services for other people's services. And if you become more efficient, you can buy more services with the same amount of…

> However, on first level principles, money is simply an abstraction; it's a medium for trading your services for other people's services. And if you become more efficient, you can buy more services with the same amount of effort and vice versa. The root cause of this increase in efficiency is technology. Pettis does discuss this at length.

[deleted]
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