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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

#241

Post by Animats »

ryandamm wrote: post #229
Animats wrote: post #154

Earlier quoted context omitted.

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…

improve household consumption vis-a-vis growth in household wealth.

He's complaining that China's individual savings rate is too high?

"Use it up. Wear it out. Make it last. Or do without." - U.S. Government, WWII.

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

#242

Post by arkis22 »

dragonwriter wrote: post #180
arkis22 wrote: post #74

Earlier quoted context omitted.

Source? The first couple of graphs here: https://en.wikipedia.org/wiki/Income_tax_in_the_United_State... , suggest otherwise. We've rarely had income taxes as a higher percentage of GDP than we do now.

If you just look at federal income tax (not payroll tax which is stacked on top of it, and not state and local taxes on top of that), the long term trend is downward since the end of WWII.

It makes complete sense to not ignore them though.

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

#243

Post by dragonwriter »

arkis22 wrote: post #242
dragonwriter wrote: post #180

Earlier quoted context omitted.

If you just look at federal income tax (not payroll tax which is stacked on top of it, and not state and local taxes on top of that), the long term trend is downward since the end of WWII.

It makes complete sense to not ignore them though.

State and local taxes have nothing to do with the federal deficit, so excluding them is obviously correct when talking about the federal deficit.

Social Security is the bulk of payroll taxes, and most of the increase in payroll taxes, and remains self-funded (though that would cease to be the case if the trust fund was to be exhausted and full benefits maintained.) So it makes sense to exclude that.

But payroll tax also includes Medicare taxes (the payroll tax portion, not the additional income tax portion on certain income not subject to payroll a tax imposed under the ACA) as amuch smaller component, and while Medicare Part A is self-funded, Parts B and D have significant general revenue contributions as well. But Medicare payroll tax hasn't changed significantly (and the share of GDP subject to it has dropped as returns move out of labor and into capital), so if you kept it in but split out Social Security for the reason above, it wouldn't change the declining trend shown by income taxes (except to enhance it).

So, again, the federal deficit is driven by declining federal income tax share.

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

#244

Post by legolas2412 »

HillaryBriss wrote: post #121
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?

This is from the NYTimes article itself: ... the biggest category of debt in China is corporate debt, which equals almost 170 percent of annual economic output. This debt consists overwhelmingly of loans by state-owned banks to state-owned enterprises. So ... does that answer the question? I'm not sure. I'm used to thinking about how much money the US government owes to outsiders . But, this "state owned enterprise"…

Except it isn't really a government giving money to itself, it's the banks.

When and if the enterprises default, the banks will go under. This means that Chinese people will lose money (or the government will try to be fiscally prudent to recover money lost in bad investments, which will mean that Chinese people will lose money).

Money owed by a government owned bank to a government owned enterprise is a real debt, which if defaulted upon will have a lot of real effects.

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

#245

Post by mistermann »

ryandamm wrote: post #233
yxhuvud wrote: post #199

Earlier quoted context omitted.

So what you are talking about would amount to a rebalancing of the economy from the SOEs to the private sector. This is something he has written extensively about and that he thinks is necessary for long-term sustainable growth. But something has to be done about the SEOs, and right now they are kept afloat by a transfer in the OTHER direction. That is, the resources spent on their debt is cannibalizing growth in oth…

To piggyback on your point, Pettis lays out explicitly how China should shift to consumer-driven GDP growth... then also points out how politically difficult it will be (because it likely entails assigning losses to the wealthy and politically connected, via breakup of SOEs, transfer of wealth to households from the government, etc). So yes, grandparent's point is correct, that there's room for consumer-led GDP growt…

I'm probably a bit naive, but I don't really understand why it would be that difficult. You have an extremely hard working populace with powerful aspirations (viewing their countrymen who've risen up from poverty), they have the technology and manufacturing prowess, natural resources, political will and experience, money....if any country in the history of the world was in a position to do it, China seems like the very well best prepared by far. The biggest hurdles I can think of is the cultural propensity for corruption and excessive savings, far from insurmountable imho.

Sure, it may not be "easy", but is it hard?

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

#246

Post by dgregd »

pankajdoharey wrote: post #204

Here's the thing about China, if it doesn't pay up, the world at large can't do anything to China. The world is dependent on Chinese export. If China sinks it will sink the world economy with it. Too Big to fail actually applies to China. If China falls short of paying up its mortgages or loans on time it can't be recovered by anyone. The only thing one could do is wait. So all the talk is useless, China gas got ever…

China doesn't import that much goods from the west. So crisis there shoudn't have big impact on US and Europe. Except real estate market. It seems that US, European land/houses are the only thing Chinese are interested in.

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

#247

Post by pasbesoin »

What it's going to come down to, is whether the Chinese government has enough control to tell the general public to eat the loses and to make them take it (relatively peacefully).

If they do, this sets the basis of the play and outcome.

Yes, elites are escaping what they can of their personal assets -- and eventually, if necessary, themselves or their next generation.

As I stop to think about it, that could actually prove to be something of a safety valve, from China's perspective.

Anyway, with the Great Firewall and a thousand other things: It's not exactly as if they haven't been (at all) preparing for this.

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

#248

Post by vectorpush »

axaxs wrote: post #132
vectorpush wrote: post #109

Earlier quoted context omitted.

> you don't get to define fake news. Fake news is as simple as it sounds: articles that are factually incorrect. I'm happy to debate the nuance of the term fake news, but I think it's ironic that you presume to glibly assert your own definition of fake news right after exclaiming that one cannot do so (unless you're suggesting that CNN and myself, in particular, are forbidden from doing so). Anyway, fake news is not…

and tell me again, based on your own definition, how all news isn't fake news? Fake news was pushed heavily as a term by the 'liberal media' until it was pushed back against them and they threw a fit and tried to redefine it. In reality, all modern news is fake news. Every outlet has a left or right agenda, and shapes the news in that way based on clever editing, lies, and omissions. Let's call a spade a spade, and a…

> and tell me again, based on your own definition, how all news isn't fake news?

That's a pretty disingenuous response. Obviously, "all news" is not deliberate fabrication presented as truth, and to suggest as much is worthless cynical hyperbole or willful ignorance or both.

For example, if I load up CNN.com right now, the tag-line for the front-page story reads "Another blow to Trump's travel ban". Clicking through to the article yields the headline "Appeals court upholds block on Trump's travel ban". You can read the article here:

http://www.cnn.com/2017/05/25/politics/4th-circuit-travel-ba....

This is not fake news. The 4th Circuit court really did uphold the block on Trump's travel ban. Here is an excerpt FTA:

> Judge Paul Niemeyer, one of the three dissenters, said the majority "looks past the face" of the executive order. The approach "adopts a new rule of law that uses campaign statements to recast the plain, unambiguous, and religiously neutral text," Niemeyer, a George W. Bush appointee, wrote. "Opening the door to the use of campaign statements to inform the text of later executive orders has no rational limits."

I will reiterate: this is not fake news, Judge Paul Niemeyer really is a 4th circuit judge and those really are his words. Do you understand what I'm saying here? This is a thing that happened in the real world, it is not a fabrication created by CNN to defame Trump, this is reporting of a noteworthy current event that merits news coverage. A critic of CNN might claim "CNN always reports negative stories about Trump". Fine. Selective reporting meets the definition of bias, but bias, once again, is not fake news.

We can perform the same exercise with Fox News. The front-page tag-line reads "TWISTED TREACHERY - ISIS tricked US into bombing building where 100 innocents held captive". Clicking through to the article yields the headline "ISIS rigged explosives to home where 100 civilians died in US-led airstrike, military says". You can read the article here:

http://www.foxnews.com/world/2017/05/25/isis-rigged-explosiv....

This is not fake news. The military really did report that ISIS tricked them into bombing civilians. Here is an excerpt FTA:

> An investigation into the March bombing found that the terror groups rigged a house with over 1,000 pounds of explosives, put civilians in the basement, and employed two ISIS snipers on the roof to bait the U.S.-led coalition to attack. U.S. Air Force Brig. Gen. Matthew Isler, the investigating officer for US Central Command, told Pentagon reporters that the bomb used by the American jet, a GBU-38 (500-lb bomb), would not have caused the type of damage associated with the destruction of the building.

I will reiterate: this is not fake news, Air Force Brig. Gen Matthew Isler really is a U.S. Air Force Brigadier General, and those really are his words. Am I making myself crystal clear? This is a thing that happened in the real world, even if civilians are not in a position to corroborate the findings of a military investigation, this is the official report from the military and not a fabrication created by Fox to excuse or justify the U.S. bombing of civilians. A critic of Fox might claim "Fox News always defends the military, even when they kill innocent civilians". Fine. Publishing stories with a tone favorable to one's predefined narrative meets the definition of bias, but bias, once again, is not fake news.

You see what I'm getting at here?

> Let's call a spade a spade, and admit that all factually incorrect articles, infographics, and stories are what they are...fake news.

Simply posting something on the internet does not make it news and you are actually contributing to the "debasing of the term news" that you complain about by refusing to acknowledge the distinction between memes posted to facebook, factual errors in reporting, institutional bias, and deliberate fabrications with no basis in reality. I mean, you're argument is literally "all news is fake". If more people would abandon your cynical defeatist attitude that encourages labeling literally everything as fake news and actually judged individual stories based on their own merit, political discourse in the USA would be a lot more productive.

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

#249

Post by yxhuvud »

mistermann wrote: post #245
ryandamm wrote: post #233

Earlier quoted context omitted.

To piggyback on your point, Pettis lays out explicitly how China should shift to consumer-driven GDP growth... then also points out how politically difficult it will be (because it likely entails assigning losses to the wealthy and politically connected, via breakup of SOEs, transfer of wealth to households from the government, etc). So yes, grandparent's point is correct, that there's room for consumer-led GDP growt…

I'm probably a bit naive, but I don't really understand why it would be that difficult. You have an extremely hard working populace with powerful aspirations (viewing their countrymen who've risen up from poverty), they have the technology and manufacturing prowess, natural resources, political will and experience , money....if any country in the history of the world was in a position to do it, China seems like the v…

> political will

No, they really don't have any political will to do anything about the SEOs. That is why their debt is still ballooning in an unsustainable manner. Just as Japan didn't, and the Japanese economy is still held back by keeping failing business afloat. The entrenched elite is just too strong, in both Japan and China.

China may overcome the issues in a way Japan didn't, but the things you list apart from the political will (that they emphatically doesn't have) is plain irrelevant.

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

#250

Post by viraptor »

dredmorbius wrote: post #202
viraptor wrote: post #176

Earlier quoted context omitted.

Reminds me of the wage growth forecasts picture: https://twitter.com/rpy/status/861877936952967168

"Sorry, you're not authorised to view those tweets."

Can't edit original now. Image is at https://imgur.com/N6dOFMS

Source pdf (page 1): https://www.rba.gov.au/publications/bulletin/2017/mar/pdf/bu...

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