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

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

#151

Post by willj »

yongjik wrote: post #133
vijucat wrote: post #68

The day after the Fukushima nuclear incident, the top-voted article on HN was an extremely confident-sounding article by an expert about how this was a minor incident, sure to be contained and forgotten. The comments in the article were dismissive about alarm. I remember feeling a sigh of relief that the experts had pronounced it a minor incident. As the days rolled by, the news about Fukushima turned from bad to wor…

The really infuriating thing about Fukushima disaster, in my opinion, is how many people died as a result of evacuation. From wikipedia: > A survey computed that of some 300,000 evacuees, approximately 1,600 deaths related to the evacuation conditions, such as living in temporary housing and hospital closures that had occurred as of August 2013, a number comparable to the 1,599 deaths directly caused by the earthquak…

Question: your second quote says:

> residents who evacuated were exposed to so little radiation

It does not say anything about residents who did not evacuate. How can we know how many cancer deaths would have happened if nobody had evacuated, and whether that would be less than the amount that died due to poor evacuation procedures?

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

#152

Post by adrianN »

xrange wrote: post #116
skookum wrote: post #89

Earlier quoted context omitted.

Not sure if you are trying to be sarcastic, but: https://en.wikipedia.org/wiki/International_Nuclear_Event_Sc...

If Fukushima is a major event, with no fatalities, what does one consider the Banqiao Dam event, with 170,000 fatalities? https://en.wikipedia.org/wiki/Banqiao_Dam

Also a major event, but in a category that is almost completely irrelevant to the current discussion.

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

#153

Post by Animats »

TheSpiceIsLife wrote: post #83
vijucat wrote: post #68

The day after the Fukushima nuclear incident, the top-voted article on HN was an extremely confident-sounding article by an expert about how this was a minor incident, sure to be contained and forgotten. The comments in the article were dismissive about alarm. I remember feeling a sigh of relief that the experts had pronounced it a minor incident. As the days rolled by, the news about Fukushima turned from bad to wor…

Probably this https://news.ycombinator.com/item?id=2326726 The linked article headline "Fukushima is a triumph for nuke power: Build more reactors now!"

That's from the former editor of The Register, Lewis Page. See some of his other articles.[1]

[1] http://www.theregister.co.uk/Author/93

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

#154

Post by Animats »

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…

Pettis assumes, without justification, that the assets owned by the Government of China would be more productive in private hands, and thus calls for the government "to begin to sell off government assets". That's an ideological position. The privatization experience of the USSR indicates otherwise.

China's government debt situation isn't bad.[1] Government debt / GDP is less than half that of the US. Japan is much worse off, with the world's highest Government debt to GDP ratio.

What's really likely to hit China is the same thing that's hitting the rest of the developed world - it just doesn't take all that many people to make all the stuff. This is a killer for an export economy. This hit in Japan 20 years ago, in the US 10 years ago, and is starting to hit in China.

The biggest suggestion of trouble is that so many wealthy Chinese are trying hard to get assets out of the country. This fuels the Vancouver and London real estate booms, and in a lesser way, Bitcoin.

[1] http://www.tradingeconomics.com/country-list/government-debt...

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

#155

Post by nickgrosvenor »

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…

Lots of Charlie Munger type language in this comment.

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

#156

Post by yongjik »

willj wrote: post #151
yongjik wrote: post #133

Earlier quoted context omitted.

The really infuriating thing about Fukushima disaster, in my opinion, is how many people died as a result of evacuation. From wikipedia: > A survey computed that of some 300,000 evacuees, approximately 1,600 deaths related to the evacuation conditions, such as living in temporary housing and hospital closures that had occurred as of August 2013, a number comparable to the 1,599 deaths directly caused by the earthquak…

Question: your second quote says: > residents who evacuated were exposed to so little radiation It does not say anything about residents who did not evacuate. How can we know how many cancer deaths would have happened if nobody had evacuated, and whether that would be less than the amount that died due to poor evacuation procedures?

Given the difference of ~130 vs ~1600 in actual deaths, I'm naively assuming that staying at home would not have increased radiation exposure tenfold.

(There are ways to limit radiation exposure even if you're in the middle of a lightly contaminated region. I think delivering clean food would have been easier than trying to accommodate 300k additional refugees after tsunami.)

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

#157

Post by seanmcdirmid »

Animats wrote: post #154
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…

Pettis assumes, without justification, that the assets owned by the Government of China would be more productive in private hands, and thus calls for the government "to begin to sell off government assets". That's an ideological position. The privatization experience of the USSR indicates otherwise. China's government debt situation isn't bad.[1] Government debt / GDP is less than half that of the US. Japan is much w…

As for government debt, it really depends on if you include SOE debt or not. So SOEs are technically companies owned by the state, but have implicit backing from the government that they won't go bankrupt, giving them access to easy credit from the biggest banks (also often state owned....).

Without the perception that moral hazard exists, this credit binge is really dangerous.

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

#158

Post by mistermann »

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…

"To move from the abstract to something specific, I will assume, as occurred in 2009-10 as a consequence of the global crisis, that for reasons external to China there is a sharp contraction in its current account surplus, mainly caused by a sharp fall in exports....." (he then goes on to describe the repercussions that match his model.)

Maybe I'm misunderstanding what he's saying, but isn't what he describes true of any export-driven economy? And, doesn't it ignore the fact that a large portion of the country is still pre-industrial and is easy pickings for GDP growth? It should be not terribly difficult to grow GDP via moving these people to an industrial standard of living based on domestic consumption, albeit not nearly as easily as in an export-driven economy where your customers are holding your hand along the path. And, does it not also ignore the possibility of moving up the value chain as their technological prowess increases? China is producing some pretty sophisticated technology on their own these days, and they have no shortage of engineers (although the quality may not be world class, I have no idea).

This isn't to say his theory is wrong, it just doesn't seem terribly useful. But I think I must be missing something?

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

#159

Post by seanmcdirmid »

lucasschm wrote: post #44

For this subject I would like to offer this counter view: Why China bears are wrong: An interview with Andy Rothman ( http://supchina.com/sinica/china-bears-wrong-interview-andy-... ) As it is likely for someone to mention the Ghost cities, I recommend this video https://www.youtube.com/watch?v=AyBBQ-wF87M&list=PLxh5xkC0W-...

Ghost cities are weird: first they talk about the ghost cities, then others say the ghost cities are filling up. If you actually visit, say, Ordos New Town, you'll really get that, no, those ghost cities really exist.

Some will fill up, like Pudong did, I get Tianjin's new financial district will also. But those in areas with little economic hope in the near term (Ordos and dying coal), they really aren't going to happen before the buildings become substantially rundown (given Chinese concrete overbuilding to make use of unskilled migrant labor, these buildings require a lot of maintenance and will look decrepit sooner rather than later).

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

#160

Post by vkou »

xrange wrote: post #116
skookum wrote: post #89

Earlier quoted context omitted.

Not sure if you are trying to be sarcastic, but: https://en.wikipedia.org/wiki/International_Nuclear_Event_Sc...

If Fukushima is a major event, with no fatalities, what does one consider the Banqiao Dam event, with 170,000 fatalities? https://en.wikipedia.org/wiki/Banqiao_Dam

A sign that we should shut down every single hydroelectric power-plant in the world.

Or, we could be reasonable about these things, and understand that power generation at an industrial scale will kill people.

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