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I was interviewed by BusinessInsider about China, click here to watch. If you did not see it, this presentation covers a lot of points I discussed in this interview.
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OMG that interviewer should shut the F**k up... he interrupted you at every turn.
Maybe if we thought of all the countries of this world as one country, we could make more sense of things. Lets say China is say, Alabama. Let's say Alabama took most of the manufacturing business from rust belt because AL had lower wages. Let's say some of this money savings made cars/other goods cheaper, some of it went to slightly increased wages of AL workers and most of it went to higher corporate profits. And corporate profits went to those invested in stock market, bond holders and management class. Now lets say this lead to a boom of building in AL, houses, factories etc..But really, there were already developed lots with utilities, houses, factories in the rust belt, and now these are actually costing the rust belt money because they have to be decommissioned due to slack demand and the fact their workers wages have plummeted from nice middle class wages to practically nothing.
Meanwhile, workers in AL are paying for lost value of infrastructure and trained workforce in some hidden sort of tax ways...they lend money to state of MI and pay federal taxes so MI can pay food stamps and UI and avoid complete rebellions in the street, but MI pays almost no juice on this money and is asking for more loans, not paying down principle.
Meanwhile, AL has more houses than low wage workers can afford and whole families are tapped out just trying to guy a house. Also factories capacities exceed what they can sell to rest of America, and the biggest decline in goods sales comes from rust belt. Workers are demanding more money to keep up with increase cost of housing just as demand is slackening.
So both MI and AL are in for a world of hurt. MI won't get any more loans, AL will have reduced demand for their products, will have to cut back. Only ones that seem in good position are those that made lots of cash in good times...certain rich ones in AL that can now go buy assets in say MI for much much cheaper than they were 10 years ago. In fact things are so cheap in MI, and the workers in AL are demanding so much....they start moving their capital back to MI.
The real question is, not whether AL will suffer, indeed it will because its customer is suffering and is in debt...it's customers will either default or just have very little to spend on AL goods.
But the real questions is how will AL fare compared to MI, long-term. Who knows, but regular working folk of the world lose regardless.
All I see is some really poor workers in AL gain a little in wages while well paid workers in MI lose out big time, while those in AL have most of the increased wages eaten up in increased housing costs, incur lots of debt, and have rug pulled out from them when capital goes to next cheaper, state. Houses are worth less than debt, wages go down...rinse wash repeat.
A lot of confusion here...China was essentially out of the global market for many, many years. Technology has only just begun to spread inland. People in China are used to living on next to nothing.
China's comparative advantage in wages is likely to persist for some time to come.
People in China may have been used to living on next to nothing but the problem for the Chinese central government is rising expectations among common Chinese (therefore the need for 8% growth in GDP).
Much has happened since 1978 (Deng's Open Door Policy) and great wealth has been created. Trouble is, that wealth is not evenly distributed--neither geographically (concentrated along coastal areas) nor across all society (China has oligarchs too). The income disparity has caused those "used to living on next to nothing" to demand more (such as the recently approved higher wages in Jiangsu Province). Why are people's demands going to be met? Because social disorder--strikes and riots--are increasing; there were more than 78,000 official cases last year).
The one item not receiving much analyst attention and which will impact China's "speed" is corruption. In China, "some are more equal than others" and it is the corrupt officialdom --currently focused on growth at the expense of the majority--that will inadvertently detonate the bomb of social upheaval.
Karl Marx' Capital is the top-selling book in China.
Good summary on China in presentation, couldn't listen to the interview as well - an interviewer was a bit annoying.
I think you're right on mark with your predictions regarding commodities, they might get hammered when China finally has its own bubble burst, my only concern is that it doesn't happen now, but rather a couple of years from now, when property bubble is in full flower, when banks have much more bad loans and bigger exposure to the real estate. Either way, it's going to be very dramatic.
upd
This Jim's Chanos quote regarding 5*5 ft cubicle for every person in China is quite misleading, I hope he stops putting it in his analysis. Reason: this would be a big deal if this was an office space (the only sort of space that is supposed to be measured in 'cubicles'), but it's not.
Few people realize Hyper-Inflation is alive and well in the global economy. I say global economy in the sense the USD is the world's reserve currency. Inflation, as correctly defined by free market Austrian economists, is the increase in the money supply. The fed near tripled its balance sheet, this means they monetized the bad assets- printed money. Pay no attention to M3 or other data tools they manipulae, they are meaningless. Anytime the Fed "purchases" anything it= increase supply of USD.
We do have massive deflation right as a symptom of credit contraction, however because of the Fed's QE we also have Hyper-Inflation at the same time.
The result of this HyperInflation is inevitably interest rate spike, PMs to the moon, every day consumer prices through the roof, currency collapse, etc
It will be felt soon and the collapsing American middle-class will be wiped out completely. Very dire times we live in.
(on M3) .. by "manipulate", I'm assuming you might mean "no longer publish"?
Can you explain more about how you think deflation & hyperinflation can take place at the same time?
Also - what are your thoughts on the current velocity of money and the impact of debt destruction on money measures?
I couldn't watch the interview. The interviewer wouldn't let you complete a single sentence without interrupting. The written presentation was much better.
Good read makes sense to me.
To all the China bears, I have one simple point to make: When was the last time you actually bought something made in America (excluding (i) a Cheese Burger or (ii) a derivative instrument.
Last thing bought that was made in America?? A GUN CASE! Looking to put something into it, and it will not be for decoration. China will go through a depression just like America did in the 1930's. America will turn socialist like Britain did from the 1930's through 1960's. And the FED will lead all governments towards a one-world monetary system - oh happy day....NOT. (Because that will then lead to a one-world government just ripe for a dictator to manipulate - How special!)
China is F*cked:
http://www.guba.com/watch/3000053112/Arithmetic-Population-Energy
As is anyone else whose system is predicated on growth.
Thanks for playing!
China is joined at the hip with the US and European consumerism. Borrow money, buy stuff from China, how's that working out so far?
just went through your writings about China here:
http://contrarianedge.com/category/macro/china/
Looks like you are a professional China bear.
The earliest of those articles was written in 2007.
Any one earlier than that? Any of your forecast
materialized? You should revisit those articles
every 5 years from time of writing. or maybe make that 10 years?
My view? I am laughing out loud. hahahahahahaha.
You're laughing? Why don't you take a moment and pull up a one year chart of the Shanghai Stock Exchange from August 2007. That should change your mood from a laugh to a cry, because you missed out on one of the sharpest and most profitable bear market moves in modern history, which was a one year, 63% rout.
Yeah, turkeys employ the same sort of reasoning to derive they are well-loved for a good long time. Every day, the farmer comes out, feeds the turkey, waters him, checks to see he's well, day after day after day through the spring, through the summer and deep into fall. The turkey knows he's got it made. How could he not be a special well-loved member of the family?
Til the turkey gets his head cut off, how could he know it was all just a set-up?
Gobble gobble, rube.
Sunshine after many days of rain. Oh its a nice weekend. Yabba dabba doooo
What Me Worry?
Your comparison of China to the out-of-control bus in Speed is perfect: without maintaining 50mph (or 8% GDP), the bus will blow up. So far the leadership has been able to stay on course but we all know that the elevated transition from the 110 freeway to the 105 is fast approaching.
Before the bus turns, however, I think more immediate problems in Europe will provide China with a breather. It's not just the PIGS but it's STUPID nonetheless:
Shock as British deficit equals that of Greecehttp://www.independent.co.uk/news/business/news/shock-as-british-deficit...