China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says • Hacker News Board

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

#221

Post by lowpro » Thu, May 25, 2017, 1:54 PM UTC

r00fus wrote: post #97

matheweis wrote: post #43

Ok, this is probably a silly question, but who holds all the debt now? The avg US citizen would say China holds much of the US debt, but now it sounds like China is borrowing their way into trouble too... it's not any of these third world countries... who is it?

The biggest group holding US debt are its citizens. The social security trust fund has been raided for decades by the general fund to spend on defense security state and has not been paid back. Politicians and their funders hope everyone is hoodwinked into forgiving the debt or just taxing everyone more to make up for the stolen^W borrowed money.

Although this has been done, the social security system is primarily going to fail because more people are using it then have paid for it, so the system is actually borrowing from the future citizens (our kids). You can blame defense spending (which is too much), but that's not the main reason the system itself is broken.

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

#222

Post by busyant » Thu, May 25, 2017, 1:55 PM UTC

VintageCool wrote: post #60

drcode wrote: post #31

Earlier quoted context omitted.

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...

To quote Keynes: The market can stay irrational longer than you can stay solvent.

Or...economists have successfully predicted 7 of the last 5 recessions.

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

#223

Post by D_Alex » Thu, May 25, 2017, 1:59 PM UTC

justinhj wrote: post #215

gunnyguy121 wrote: post #214

Earlier quoted context omitted.

I think China may be more on the brink than people realize. Right now there are about 30 million men in China who can't get married,not wont, can't. There simply aren't enough women in China for the men to find a bride. That's 30 million men who may be left jobless, and without a relationship. That is a recipe for disaster, maybe even a revolution

If your figure is correct that's only 2% of the population.

Unfortunately, these 30 million are "men of marriageable age" (the imbalance is due to the practice of aborting female foetuses during the "one child" policy). This would mean perhaps 15-20% of young men are doomed to bachelorhood... potentially a volatile situation!

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

#224

Post by ethbro » Thu, May 25, 2017, 2:03 PM UTC

chadcmulligan wrote: post #207

MrBuddyCasino wrote: post #201

Earlier quoted context omitted.

Germany cares, for historical reasons. We get yelled at a lot for that.

So how does Germany manage to avoid the same situation?

By being politically dedicated to maintaining low levels of debt:GDP. It's easier when, as parent said, your voters remember what happens when things go really badly.

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

#225

Post by mowenz » Thu, May 25, 2017, 2:10 PM UTC

busyant wrote: post #222

VintageCool wrote: post #60

Earlier quoted context omitted.

To quote Keynes: The market can stay irrational longer than you can stay solvent.

Or...economists have successfully predicted 7 of the last 5 recessions.

Keynes took previously unacceptable ideas and made them gospel, and he also was critical of economics when others thought they had everything figured out.

Before an econ degree I thought it could all be understood the way we understand, say, a chemical reaction, or some process with rules, laws and order.

But afteran econ degree the thing I realized is that money and economics, it's all about people. Money and debt has no intrinsic value (especially in 2017)--it's just promises and credits people made to each other.

But people are prone to irrationality, cheating, and frankly, their own bullshit. The global financial system in 2017 has not done everything it can to minimize this, either. If anything, they take advantage of it where it profits them.

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

#226

Post by stevesun21 » Thu, May 25, 2017, 2:15 PM UTC

This kind of article to me sounds like, an outside developer look at all the charts of a system and tell the developers who are working on the system: "well, this system's going to crash in a week based on the numbers on the charts". If I'm going to argue with this "expert", I would say, you saw what you can see, unfortunately, you are not the engineer see all the sh*t of how the machine works.

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

#227

Post by georgeecollins » Thu, May 25, 2017, 2:20 PM UTC

drcode wrote: post #31

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...

You don't need to decide which is expert is right. You need to know -- if it concerns you-- that there is a chance there will be a contraction in the Chinese economy. Economists predict this sometimes, and it gets news because when it is presented as a certainty it seems like news. The truth is it is always a risk, and probably more of a risk than it was ten years ago. As an average HNer it probably doesn't matter much either way, unless you are planning on investing in China or counting on no recessions in the US in the next ten years.

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

#228

Post by mattmanser » Thu, May 25, 2017, 2:29 PM UTC

ryandamm wrote: post #130

gitah wrote: post #46

Earlier quoted context omitted.

Can you elaborate? From the article, Pettis assumes the following is true: 1) China has overinvested in infrastructure and manufacturing capacity to such an extent that in the aggregate the cost of additional public sector investment exceeds the present value of future increases in productivity generated by the investment and 2) China's long-term sustainable growth rate is substantially below the economy's current GD…

He elaborates on technology improvement in other articles, but it boils down to: technological improvements have a range of returns, but even the most optimistic of historical returns to technological progress can't paper over the debt-fueled boom China is currently undergoing. Basically, qualitatively, you're right. Technological improvements can generate growth from scratch. But when you look at the historical data…

Containerization? That's really interesting. I knew it had a big effect on how shipping worked, but didn't realise it was as important driver of change to the world economy as electrification.

My Dad used to work as a merchant seaman, I believe he got up to first officer and had passed his captain's exam.

But then the big container ships came along, and they needed a tiny fraction of the captains, officers and seaman they needed previously per tonne and he ended up coming ashore to pursue a different career. His stories from those times are pretty amazing.

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

#229

Post by ryandamm » Thu, May 25, 2017, 3:03 PM UTC

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…

No, the reason he suggests the government move assets into private hands is because his main thesis for how China can get out of the jam is to improve household consumption vis-a-vis growth in household wealth.

Not covered in the article I linked in particular, but his main idea is that China has had investment-fueled growth that's no longer sustainable; the foundation for all advanced, post-industrial economies is a robust consumer sector. China's is stunted at best. That's the motivation for transfers, not a productivity argument.

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

#230

Post by graphitezepp » Thu, May 25, 2017, 3:20 PM UTC

spangry wrote: post #175

valarauca1 wrote: post #147

Earlier quoted context omitted.

Solow-Swan model is based on neoclassical economics that assumes a closed market with zero technological growth. In the event of technological growth it assumes a steady state is still reached. And I quote, "Due to Common Sense." [1] How TF do you consider this a valid scientific theory? This is a theory based on NeoClassical economics which modern Behavior Economics finds that the models of NeoClassical economics fa…

I don't have the time atm to get into much detail (but will come back in 8ish hours after work), but very quickly: - This is just a simplified description of probably the simplest macro-economic growth model you'll learn if you study economics. It's basically the model you learn in Macro 101. I didn't really want to write a super-long post going through all the extensions of the base model (not to mention the more co…

I wonder what the ratio of attempts to make a point fully and well ends in "Oh fuck it. I quit." compared to attempts that actually succeed.