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Soviet Collapse Echoes in China’s Belt and Road

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Re: Soviet Collapse Echoes in China’s Belt and Road

#161

Post by varjag »

gspetr wrote: post #146
varjag wrote: post #123

Earlier quoted context omitted.

Incorrect. Farmers were closer to slave labour and paid in "work-days", which could be accounted for handouts by administration. Farmers had no freedom of movement outside their farm territories. Life in Soviet villages was largely subsistence based. Slavery for farmers was abolished in 1974 when they were issued domestic passports (the primary ID in USSR) just like townspeople. As for countless prisoners, they were…

A strawman. Farmers alone could never account for the record Soviet rates of economic growth. And neither could they if combined with convicts/POWs. In late 20s this was the deal: - Poor peasantry cannot provide wheat due to very poor productivity. They use primitive and crude tools, because by definition they cannot afford anything better and can barely even feed themselves, let alone produce any meaningful surplus…

Most grand industrial projects in 1920s-1930s indeed were built by the West, or bought from the West wholesale. They were paid largely from proceeds of selling the confiscated grain, which led to famines taking lives of millions.

So tell me, are you keen to invest into a tractor plant if it takes the lives of your family? Improves productivity for those that survive alright?

Re: Soviet Collapse Echoes in China’s Belt and Road

#162

Post by jnurmine »

trocadero wrote: post #150
sonnyblarney wrote: post #93

Earlier quoted context omitted.

It's the same thing as borrowing. US gov sells TBills, those TBills are bought by China. The transaction you described also translates government debt into currency, which China also sits on, so it's a kind of an exchange debt. So the US 'owes' China a gazillion dollars in services and stuff. One way or another.

The US owes China gazillion dollars. Not a gazillion dollars in services and stuff. That's a huge difference because at any point the US can create a gazillion dollars for virtually no effort.

Won't "printing more money" crash the value of the currency?

Re: Soviet Collapse Echoes in China’s Belt and Road

#163

Post by nabla9 »

robocat wrote: post #114
nabla9 wrote: post #27

When you compare the cost of Belt and Road to wars that cost trillions of dollars, the money spent is peanuts. The belt and road is already working. China-Finland train link connects Nordic countries with China in 10-12 days. They carry heavy and expensive machinery and machine parts between China and EU. Too heavy for air-travel economically and needs to arrive relatively fast.

I don't think your example shows that, and the article disagrees with you: "The value of freight between Europe and Yiwu, a much-touted overland rail hub near Shanghai, came to 2.27 billion yuan ($330 million) in the first four months of this year [snip] China’s top four ports alone process about the same value of cargo every three hours." Also see this graph from the article: https://www.bloomberg.com/toaster/v2/cha…

Major logistical routes are build gradually. Currently it's only one train a week with 40 containers. Similar train goes from Chinese east coast to Spain.

When logistics starts to trust the route, the volumes and the cost or railway freight will increase. Railway freight is currently just 20-30% more expensive than ocean freight but takes only 10-15 days. Ocean freight takes two months.

Air freight for items above 500 kg is rarely cost effective. Rail freight opens up new possibilities for faster deliveries.

Re: Soviet Collapse Echoes in China’s Belt and Road

#164

Post by nabla9 »

JumpCrisscross wrote: post #141
igravious wrote: post #134

Earlier quoted context omitted.

So what? The trade route only just opened up. The numbers started at zero and started only recently, so of course they are small. By how much the trade is going to increase and at what rate is what everyone is arguing about. People underestimate how large Eurasia is along its east-west axis and how underdeveloped it is in parts. I predict the naysayers and doomsayers will be eating their hats. In nominal terms the US…

> The trade route only just opened up This is about the fundamental capacity constraints and costs of rail versus maritime transport. The former will always be more expensive than the other, and always be further capacity constrained. The only thing that could change that is a quantum leap in several technologies, in which case the current investments become useless. > “Rail services are considerably cheaper than air…

> The former will always be more expensive than the other, and always be further capacity constrained.

Yes. But it's also much faster. This creates new opportunities. Rail freight is not replacing sea or air freight, it's supplementing it.

Expensive but faster freight means that heavy but valuable items can be delivered faster. Heavy Air freight (>100 kg) typically costs 15-20 percent of the value of the goods. Rail wright can be expected to cost 5-10 percent easily, more for items weighing more than 1000 kg. That's value created by the rail.

Re: Soviet Collapse Echoes in China’s Belt and Road

#165

Post by Jagat »

kiliantics wrote: post #7

Were the West Indies productive before the ports and sugar plantations? Was India productive before its railways were built? Something smells of anti-China propaganda in this highly speculative piece.

Indian railway was built with Indian taxpayer's money to transport raw goods for exporting to British factories.

India had a highly developed set of kingdoms even before the British invasion, and in an alternate history where British had never invaded India, they'd have built the railway and industrialized anyway.

Re: Soviet Collapse Echoes in China’s Belt and Road

#166

Post by Jagat »

rfinney wrote: post #33
logicx24 wrote: post #20

Earlier quoted context omitted.

India had the world's largest GDP under the Mughals and had continued positive growth, but by the end of the British Raj, was facing stagnant population growth and actually reduced agricultural productivity. So contrary to everything you're saying, India was not only productive before the British, it was actually worsened by Britain's exploitation.

There are other views on the economics of India under British rule: https://en.wikipedia.org/wiki/Economy_of_India_under_the_Bri... example: * British increased the area of irrigated land by a factor of eight, contrasting with 5% under the Mughals.

Let's not conflate correlation with causation.

It's industrial revolution that caused the increase in irrigated land. It's possible that in the absence of British rule, Indian kingdoms would have found a way to trade its resources for agricultural equipments and engineers. Unlike China and Japan, Indian kingdoms weren't isolationist, and were well connected to Europe and Persia.

Re: Soviet Collapse Echoes in China’s Belt and Road

#167

Post by User23 »

sonnyblarney wrote: post #117
User23 wrote: post #104

Earlier quoted context omitted.

"the mechanism does not matter" only if you have no interest in understanding how the system actually works. China isn't the US's lender and they do not make any loans. They can't foreclose, because no loan exists. All they can do is take their coupons or sell the security to someone else who will do the same. China can't starve the Treasury of money because the Treasury exclusively borrows reserves from the Federal…

You're confusing mechanism with economics. "China isn't the US's lender and they do not make any loans." Yes, China is a lender to the US, in fact the largest lender [1]. Treasures are loans/bonds. Whoever owns them is a lender to the United States. It's economically the same thing as any other nation selling bonds. "They can't foreclose, because no loan exists. All they can do is take their coupons or sell the secur…

For the benefit of anyone else reading this, I'd like to point out the misconceptions and misinformation above.

> China can 'starve' any nation to the extent they are a lender to that nation. China's demand for Treasuries makes up part of the demand curve for Treasuries, along with all the the demand.

The Federal Reserve controls short term yields completely through its open market operations desk. It controls long term yields as well, because they are a function of expectations of short term yields. If China, or Russia, or anyone else stops buying treasuries, the Primary Dealers will pick up the slack, and they will always take that deal because no matter what the yields are they make money off it.

> If China was the only buyer of US Treasuries you can dam well be sure they can 'starve the Treasury' - because if nobody is buying Treasuries, then the government is printing money.

The Federal Reserve, not China, creates reserves every time the Treasury or a member bank asks it to, which is all the time. It's called an elastic money supply. Relatively few reserve notes are actually printed, because there isn't a lot of demand for Federal Reserve Notes compared to demand accounts.

>Every nation on Earth can do this. It's called 'printing money'. It's not a new idea, and it has dramatic consequences including hyperinflation.

Hyperinflation is a consequence of a collapse in productivity, not of money printing. Some governments turn to printing more money as their money becomes worthless, and there is a feedback loop, but that is a consequence not a cause. Hyperinflation can also occur when the money issuing sovereign effectively loses their sovereignty, fully or partially.

> China is the #1 lender to the US both in Treasuries (and by holding US dollars.)

The Federal Reserve is the USA's bank, not China. China is just another depositor at the Fed and whether they choose to store their capital account surplus with the USA in a interest free account (reserves) or an interest bearing account (treasuries) is irrelevant to the solvency of the US Treasury.

I hope this helped everyone else with an interest in understanding some of the widespread ideologically motivated ("money printing" is a shibboleth) misconceptions in this area.

Re: Soviet Collapse Echoes in China’s Belt and Road

#168

Post by doombolt »

oblio wrote: post #159
doombolt wrote: post #81

Earlier quoted context omitted.

Actually, all of those states had higher standards of living than core USSR and also access to this huge Soviet market. Didn't do much good since communism is so bad, but still. After the collapse of the Bloc most of those countries lost their industrial capacity, some have not yet recovered, some only recovered on outsource.

https://en.m.wikipedia.org/wiki/SovRom

"The last two remaining SovRoms, Sovrompetrol and Sovromcuarţ, were disbanded in 1956"

If we're talking about 1950s especially, I can see how this link is relevant. Unfortunately I can't validate any clauses that are there.

However, in a general context of Soviet-Romanian relationship, USSR imported a huge amount of Romanian furniture, footwear, clothes and other consumer goods. I assume these were paid for nicely. As far as I know Romania had uniquely severe economic problems during communist period even when compared with neighbouring countries, but I don't think you should blame USSR solely for that.

Re: Soviet Collapse Echoes in China’s Belt and Road

#169

Post by User23 »

jnurmine wrote: post #162
trocadero wrote: post #150

Earlier quoted context omitted.

The US owes China gazillion dollars. Not a gazillion dollars in services and stuff. That's a huge difference because at any point the US can create a gazillion dollars for virtually no effort.

Won't "printing more money" crash the value of the currency?

Inflation is caused by too much currency chasing too few goods and services. Creating money alone won't cause inflation, that money has to actually be spent in a market where demand is already greater than or equal to supply.

One great example of inflation is the housing market. Private sector banks create money from nothing, by balance sheet expansion, every time they originate a mortgage. Because the stock of housing is less than the demand, every time the banks create more money it drives prices up. Because money in the housing market mostly stays in the housing market, that is people usually take the proceeds from a sale and put them into a new house, there isn't too much spillover to non-housing markets. The same is true for student loans.

So as you can see, two of the largest examples of inflation in the US are caused by the private sector, not Treasury spending. Please note though that the Federal Government does set banking policy as well, along with various direct and indirect guaranty programs, so in that sense ultimately they are responsible.

Re: Soviet Collapse Echoes in China’s Belt and Road

#170

Post by fspeech »

seanmcdirmid wrote: post #44
sonnyblarney wrote: post #35

Earlier quoted context omitted.

The comparison to Soviet Union is problematic but definitely more relevant than US investment scenarios that you highlighted. The US scenario you highlighted would be more comparable to Chinese investment in the last 25 years, no? The clear difference between Soviet Union and China is that China has a growing and robust economy, with a firm grip on the situation whereas the Soviet Union was aching away on so many lie…

There are more booms to be found in China, for sure. But corrections/recessions/crashes are needed to wash out the bad elements so the better ones can thrive. The party has stated they can do this on their own, but given that their families' control of large parts of the economy has become a huge part of the problem they are unwilling to manage (which would have been hard anyways).

Crashes are happening all the time. For example right now P2P lending is crashing hard. The question is if it is worth it to have a systematic crash in order to clear the markets, as in Andrew Mellon's "liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate." China is not the only one in the modern world unwilling to crash systematically.
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