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Guest Post: “This Time It’s Different”– The Four Most Expensive Words In The English Language
Submitted by Simon Black from Soveriegn Man
“This time it’s different”– the four most expensive words in the English language
For at least a decade now, the world has marveled at China’s amazing economic transformation.
Hundreds of millions of people have been lifted out of medieval
peasantry and brought into the modern world. Living standards have
improved dramatically. China has become the manufacturing hub of the
world.
And, today, China boasts world-class infrastructure on a truly
impressive scale. Beijing, Shenzhen, and especially Shanghai, have all
become modern metropolises with facilities on par with any in the world.
Every taxi driver from Melbourne to Manitoba, and every money manager
from London to L.A., recite the same mantra: insatiable demand from
China (and India) will guarantee decades of prosperity for countries
such as Australia and Canada which are blessed with the raw materials
that billions of Chinese and Indian consumers require to emulate western
lifestyles.
So the story goes…
Thing is, once anything has become mainstream knowledge in financial
markets, it’s usually a sign we’re nearing the END of the boom. Or, at
the very least, that all the positive news is already baked in the
price. That’s where we are today with China.
The Australian press is constantly running economic puff pieces,
declaring endless rosy times for the country due to its commodity
exports to China. This sort of thing borders on propaganda.
They claim that “this time it’s different,” suggesting that the
resource boom in Australia which got underway in the 1990s is not going
to bust this time around (as has happened so often in the past).
It’s been said that, “this time it’s different” are the four most
expensive words in the English language. They have an uncanny knack of
showing up at the top of EVERY boom, just before the bubble bursts.
I’ve been around in the financial markets long enough, and lived
through enough spectacular booms and busts, to know the telltale signs
of a bursting bubble when I see them.
China today fits the bill… and that’s most likely going to be very
bad news for industrial commodity prices and the economies of the
countries that supply them. China accounts for less than 10% of global
economic activity. Yet, the country is consuming nearly half of all the
steel, cement, and copper used in the world.
You’ve seen the videos–
vast, empty ghost cities in China with thick forests of empty apartment
towers, 8-lane highways with no cars on them, and brand new government
buildings and public infrastructure all sitting idle.
I’ve read estimates from well-respected, independent (i.e. not
invested in seeing a continuance of the Chinese gravy train) analysts
who suggest that there are up to 64 million empty apartment buildings in
China. This is a misallocation of capital on an unimaginable scale.
To be sure, any time you have a government-directed boom that lasts
for 3-decades and is fueled by cheap credit, you are going to get
massive economic distortions. Construction and fixed capital formation
in China has accounted for more than 60% of GDP for more than 10 years
in a row now. This is simply not sustainable.
These empty cities, bridges to nowhere, airports with only three or
four flights per week, brand new bullet trains with hardly any
passengers (because they can’t afford the fares), and millions of empty
apartments are NOT indicators of a healthy economy at all.
True, China’s economy is quite a bit of cloak and dagger… they don’t
let you see what’s going on behind the curtain. But there is enough
objective and empirical at hand to suggest major problems in the
country, and we should take measures to protect ourselves from the
consequences.
I’m in Hong Kong right now and will be heading over to the mainland
in a few days to put some boots on the ground myself (concurrent to
Simon’s PIIGS tour in Europe). Naturally, you’ll be the first to hear
about our findings, right here, in Notes from the Field. Stay tuned.
»
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just the tip
Nothing like a little Chinese-Style Keynesianism to save the day.
Any problem you got, throw money at it. That doesnt solve it? Throw more money at it. All hail Keynes.
'The Australian press is constantly running economic puff pieces, declaring endless rosy times for the country due to its commodity exports to China. This sort of thing borders on propaganda.'
Borders on propaganda. What is it then, Hopium?
Keep it dumb, that's the name of the game...
Idiot Abroad went to China and I didn't see anything there that resembled modern
In the long term no country get rich by exporting commodities and importing manufactured goods!
you be true son of confucious.
Confucious say tight pants like cheap hotel - no ballroom.
+1
It's been true for Africa for almost a century.
That's not exactly fair - the people with guns run many places in Africa.
And altruistic China's in Africa now, too.
And the people behind the really big guns run the USA, fortunately they are outnumbered by those with small arms, and their big guns haven't proven particularly effective against large numbers with small arms.
But the GDP looks so good!
tell that to the Arab oil exporters.
Arabs trade gold gold for black gold according to some...just sayin'.
America, Australia, Canada, New Zealand, all grew very large and prosperous selling commodities and importing manufactured goods.
But America at least has no net exports these days, not even foods. Our food exports pay for the diesel, insecticides, fungicides, nitrate fertilisers, etc, necessary to grow those foods.
OK China whatever....whats going on with the big Greek vote sotry did they cancel it? No news about it anywhere.
Comes out tomorrow, friend. Trust me when I tell you: it's irrelevant.
Well everythings irrelevant. Fuck it.
Chill sheepy :) It takes a minimum of 3 govts to be thrown out before the politics can change enough to allow them to deal with the debt fraud. I think Iceland had to throw out 3 govts? Argentena was... several I think. Equador was 3? They are going to have to pitch out all the parties that made money from this. Right now that means the main party and the large opposition party. If your worrying about shorts I am with you, Even with this pig passed I don't see the market flying :)
The Omen in China will be in the Gold
Australia has sold its self to China, and the problem is now though that non-mining related businesses in australia are struggling under the weight of a currnecy that is the wrong price. Australia does not operate well under a high rate of exchange. Now if Australia had an unbalanced economy before this boom then I would say fine, let the ccy adjustment realign things. However, such is the impact of the mining boom that it is distorting investment away from almost every other area. This will end the same way, as all mining booms do. You are right about the aus newspaper pimping the good times forever. Sadly, life doesn't work that way. And even before the crash you will see a material decline (perhaps thats happening now) as the impact of the infamous second derivative kicks in. China are unlikely, even for a small period of time, increase their demand at a higher and higher rates (of change). Eventually things come down, and then they go pop.
Sad to see Australia get destroyed by this. At a minimum the govt could stop spunking all the boom proceeds and start running a surplus. The ccy is trading 1.05 today, but after this bursts it'll be 70c again. Just make sure you're not doing a chuck prince, cause that music is about to stop!
You forgot to mention Australia's huge housing bubble that is now about to collapse. Either in orderly fashion or something like... Vegas. Doesn't matter, it pops, banks need rescue, sadness to commence...
So true, see the US v Oz comparison in the following article.
http://macrobusiness.com.au/2011/06/aussie-investors-flock-to-us-housing...
Thats hilarious. I can tell you (if you don't already know) that both Brunswick and Newtown are shite places to live. I have lived in both melbourne and sydney and they (brunswick and newtown) are both awful places. That people pay $700k for a 2 bedroom piece of 50s shit in brunswick is just stupid. Its a fucking dump, and yes, it's reminiscent of the US a few years back.
i totally agree. Not sure why i am getting junked for my comment. What i wrote is all true....
50/50 Simon sings a different tune after his tour of the mainland.
I like aussies as a rule, especially when they lose at cricket, but they are also one of nature's simpletons when it comes to believing in bullshit, unicorns, and rainbows. I wouldn't take stock in anything they say about the future, but simpletons have a way of expressing views that are plainly obvious and they are obviously correct at this moment in time.
http://www.thedailybell.com/2572/Migrant-Workers-Riot-Across-Southern-China
Aren't those like 5 words?
Isn't that Spock's line?
I'd call it three words and one contraction
This reminds me of the silver play two months ago. Our former CFO finally started asking me about buying silver. At that point I literally said, "oh, shit, the run is over". It was down 20 percent before I could even blink an eye.
We have friends that bought a condo in Florida for $370,000 in 2006. They timed the top to the near second. At the time they were comfortable with it because it was bringing in $1,100 per month rent.
Does anybody else notice how everybody around you is totally confounded if you say words like, "the 120 rule"? But at the same time they are lining up to pour into investments.
So the singlehanded and unilateral decision by CME group to hike margins has nothing to do with it ?
Interesting how quickly you forget.
I don't.
You've never met our former CFO. Have you? The CME can't pop a bubble nearly as well as he can. He just thinks of something and it crashes.
I'd buy his newsletter! Is he consistent?
Comparing the silver market to FL condo's?
1 person in a 100 or maybe even 1 in a 1000 owns any physical silver.
The mania stage hasn't even started yet. Going to take three digits to get that going.
Any comparison of silver to Florida condos is unintentional.
I don't believe silver is in a bubble. Government, on the other hand......
So you have latent hostility towards Silver and are taking satisfaction in other peoples real estate losses, just end your frustrating life.
Oddjob, was that towards me? I still like AG a lot. I don't think that was a bubble popping. It was a correction brought about by the CME, god, whatever, at the exact moment that my former CFO thought about buying.
I'm not taking pleasure in their losses. I am completely frustrated. They are one of the many that we know that got hurt that would not listen.
My life's not really that frustrating. Thank you very much.
Just the past tense reference to the 'Silver play' seemed somewhat disingenuous. My apologies.
Your virtual hug is accepted.
Please get a room guys.
jim rogers laughs at your ignorance soveriegn man
Wow, what a powerful argument!
And the second most expense 4 words in language???? There is a bubble. There's no doubt prices will eventually crash but "predicting" it too early is extremely costly in it's own right.
I disagree. My experience shows that it is better to entirely miss a bubble than it is to be any part of the bust. Sitting out the tech bubble, Beany Baby bubble, real estate bubble didn't hurt anybody. The believers get crushed. Typically the non-believers just keep moving along like the tortoises they are.
early isn't wrong, unless you're margined to your eyeballs, its just early - you never get the top or bottom anyway.
Yes, as someone once said, "the market can remain irrational longer than you can remain solvent".
Tuco Benedicto Pacifico Juan Maria Ramirez
The people of China and India CAN NOT reach the western-world's level of consumption, there simply is NOT enough resources for that to happen. They (and we) need to seriously reconsider what we call "quality of life". It needs to be redefined and the fucking economists can all go to hell.
Not sure why you were junked
The PRC is a fascist dictatorship, run by a single unopposed party in full control of all the media.
The Party will do whatever is necessary to stay in power, no limits and no hesitation.
They will keep the game going. There is no other option. More ghost cities, more empty highways and stadiums.
Remember what you are dealing with here. The PRC is an intrinsically atheist nation. For those in power there is no soul, no afterlife, no decency to at least give a nod to, as here in the west. There is only power, and money.
It's ghastly but no way the bubble pops.
Soul or Sex?
Power, Money, Sex. That's what matters.
Until you die of pollution.
The afterlife is simply a con. How do you persuade people to die for you for nothing. It's your typical psychopathic thought process. You create the concept of life after death.
Can also be put as "Die for me and I'll pay you back later."
Humanism.
Using the term afterlife does necessarily infer any of the ideas that you have just shared. "Die for me and I'll pay you back later" is not an idea that is associated with many of the beliefs in an afterlife. Who is "me" anyways? You sound bitter and without hope.
Actually, that would be correctly called Religion.
"The USA is a fascist dictatorship, run by two homogenous unopposed parties in full control of all the media.
The parties will do whatever is necessary to stay in power, no limits and no hesitation.
They will keep the game going. There is no other option. More ghost cities, more empty highways and stadiums (not to mention invasions and regime changes in dozens of nations each decade and endless wars against invisible enemies like drugs and 'terrorists').
Remember what you are dealing with here. The USA is an intrinsically atheist nation. For those in power there is no soul, no afterlife, no decency to at least give a nod to, as here in the east. There is only power, and money.
It's ghastly but no way the bubble pops."
For the sake of accuracy I made a few changes, remind me, how many nations has China invaded in the last 100 years?
In case you don't know the answer is 0.
The media does not control the parties. 95% of the politicians "and" the establishment media are controlled by the international banksters and corptocracy. The dinosaur media control nothing. They are puppets just like the politicians. Other than that I agree with you.
Tuco Benedicto Pacifico Juan Maria Ramirez
Technically they have not. Korea would be the closest. You could argue the North Koreans invited them in, but they have definitely been involved in many conflicts. There are also other types of wars you can wage besides a war involving a military. Economic being the most popular. It could be argued that America's soul is darker than China's, based upon foreigners murdered. China has, however, killed many of its own people in the last 100 years.
Forgot to take history I see.....where do you people get an education? Or do?
About 5 or more they've engaged, took over, etc ...Tibet, Taiwan, Hong Kong, Japan(WWII), etc, off the top of my head, look it up.
Tibet is the only one my friend. Taiwan is free and was not attacked. Hong Kong was peacefully handed over by the British due to a treaty. Japan attacked and invaded China during world war II.
Bullshit
China attacked Taiwan in the 50's. And what about Vietnam, not to mention India.
I am not saying the US is better, but you've got a serious problem in you argument.
Tibet,
Part of China in the Qing and Yuan dynasty's, thus not invading another country.
Taiwan, Hong Kong, also are part of China. China does not consider these places to be other countries. In fact, if someone in China asks you what other countries you have visited, do not say HK or Taiwan, because those places are part of China, to the Chinese.
Taiwan island was indeed never attacked, but some of the outlying islands under the administration of the Republic of China (ROC) were occupied, although Kinmen Island was shelled and a PRC landing force was repelled in the mid-1950s I believe.
Taiwan is free now, but after WW2 the then Japanese island was handed to the ROC by the invading Americans. The brutal subdigation of the people by the Chinese Nationalists is now celebrated on February 28th since year 2000 when the Democratic Peoples Party came to power. On this date in 1949, tens of thousands of locals were slaughtered.
The leader of opposition movement were exiled or jailed until the 1990s.
They finally came to power for 8 years from 2000 - 2008, but interestingly the ruling KMT are back, and their leader is now back in jail.
But yes, compared with most places in the world, Taiwan rates as a free country.
Sino-Indian War?
Just how ignorant ARE people these days? You probably didn't even know this conflict ever took place.
"how many nations has China invaded in the last 100 years?"
For starters:
China invaded Tibet, 1949-1959
China invaded Korea, 1950
China invaded India, October 20, 1962
China invaded Vietnam, February 1979
China invaded Viet Nam in 1979, Tibet in 1950, and India in 1962.
They currently have some sort of skirmish in the Philippine Sea over the
Spratley Islands.
I suppose I could go back another 40 years...
Said like a true religious zealot. One does not need to look forward to or fear an afterlife to treat your fellow man with decency. Not much different than some onZH that hate Jews and Blacks. It is just that they are perceived as different by insecure people who always have to have a boogie man to blame bad shit on. As long as you don't try to rule me based on your superstitions I wont fight you. You leave me alone and I'll leave you alone. Do that and we can be friends.
Where do you get the definition of decency if not from an external entity? Why do humans believe certain things to be good and others bad? What do we refernce when determining goodness? Why do we even have the idea of "good".
It's observable to many, if not most, people - this decency that you cannot recognize without an invisible man in the sky to tell you that it exists.
The concept of decency is not dependent upon belief in an 'external entity'.
and it differs in that it doesnt pretend to be humane and follow a bunch of bullshit to get onto the power they all crave. i dont see the leaders in the wast as all that humane, they just gotta put on a bigger bullshit show to stay in power.
same goals same people, just differnt party.
I didn't realise that saxxon fed his muscles on spiritual steroids from heaven! Now I can see the sparkle of divine wisdom.
.
BEIJING—China said local governments owe debt equal to more than a fourth of the country's economic output, the first time Beijing has put a number on such debt, fueling fears banks could again face mountains of bad loans and underlining the limits Beijing faces as it battles inflation.
Some analysts say the National Audit Office's figure failed to count certain kinds of local government debt, meaning the actual total could be even higher.The National Audit Office said Monday that local-government debts total some 10.7 trillion yuan ($1.65 trillion), or 27% of China's gross domestic product last year. The report Monday was billed as a comprehensive tally of such debt, much of which was incurred during a two-year stimulus-spending binge ordered by Beijing to fight the effects of the global recession.
http://online.wsj.com/article/SB1000142405270230444780457641101357522110...
So that would be a 27% public debt to GDP ratio, vs. 122% in the US (Federal & Municipal).
Then there is always F/X Reserves to GDP (hint: the US is basically 0)
Some analysts say the National Audit Office's figure failed to count certain kinds of local government debt, meaning the actual total could be even higher.
How much debt do these analysts think the National Audit Office missed?
Simon... I like the way you think!
Why the hell is it so difficult for people and governments, to understand the benefits of selfsustainability? Is it, that it is easier to do a lame-ass job and cheat?
Everywhere, i see the same pattern..... don't fix it, just compensate it with something else.
You know what? You don't need politicians for compensation. You don't need economists for compensation. You don't need technicans, scientists, or any other profession for compensation. Every fucking idiot can compensate defects! Fire the entire fucking arsenal of "experts" because they don't know nor understand shit, and don't deserve their social status.
You don't need experts to compensate. You need knowledge, understanding, experience and skill to fix stuff, not to compensate defects.
Depeg. Then we'll talk. No different than the1990's with the Thai Bhat.
If you build it they will come. Keep your citizens busy and there wont be too much trouble. China has the spare change to build which keeps people busy and earning more than rural subsistance farming. The problem is they can't keep it up forever. Boom/Bust
"The problem" may well turn out to be that they can't keep it up for another 20-24 months; let alone "forever". Twenty years from now, the financially educated will look back on this mass delusion that China, and India (!), were going to thunder on as giant engines of global economic support as a very funny example of an obviously screwed up prognosis that temporarily fascinated the hive mind.
Wow, big, shiny new things. You folks ever watch HOW the Chinese build and with WHAT they build it with? How long do you think that new, shiny, high speed rail line will last without major repairs? Why do their buildings look old after 5-10 years? Get a grip on yourselves.
The entire country was built on corruption, fraud, deceit, theft etc. Just how long do you think that is going to last?
albanese ceo of rio spoke at a conference in perth yesterday and expounded these same views for over 2 hours realting to resources, how this play had 30+ years to run and that his ever increasing output of dirt and black gold was insufficient to satisfy his shareholders, clients, and finance chiefs. i think he said he could double output and not satisfy demand which he claims is just a horizontal line on the charts
I guess he is assuming that theres NEVER going to be a chinese blow up. Hard to expect him so say anything different. Just as chuck price was still dancing cause everyone else was, well i guess its similar for rio. Luck he doesn't have a lot of debt on board......oh.....
Some of my concerns were expressed by the Idiot from the West Village. I continue to believe in the PM play, but I'm starting to have some doubts about silver... (even though I took delivery on many .9999 100oz Canadian bars this past week). A not so small part of the silver run-up has been about continueing industrial use... China has industry... Lots of industry both real and imagined. The joke about Chinese solar stocks cuts both ways. I've been an active silver buyer... enough to start having storage problems. But, my antenna is starting to twitch.
I know the fundementals about silver, I know about declining government inventories, I know about the Comex inventories, I pay attention to the COT. I know about industrial use and lagging mine supply... Sprott, Morgan,...blah blah blah. I've bought the story and put my money behind that belief. But, I might be wrong. Any trader or investor might be wrong. Blind faith is just that.... blind.... faith. I've worked at not being blind or devolving into ideological monetary allocation. But, again, I could be wrong...
If the Western monetary structure collapses, so might the price of silver by the way of industrial use. Gold probably won't as it doesn't have that much industrial use... it's just pretty and totally believed in. I feel fairly certain gold will hold it's value against real things (food, energy, land, etc..) But will silver? I'm starting to have questions about that...
Then there are the other PM's... This afternoon, I just picked up some Brass & Lead in the 9mm denominations...
don't forget the "Green" aspirations of the elite and their need of Ag, to "go green", rising extraction costs, and USGS's "extinct silver down to 5000ft" which happens to be about where the easy(read "most")silver deposits lie. JMOs.
"Industrial use" is completely meaningless in the silver market price. You don't understand the situation or the market. The Sprott, Morgan story" was just internet bullshit; but you accidentally did the right thing. Silver will increase in purchasing power over the next 24 months; for instance; which is a reasonable time line. Try not to read too much internet wisdom. It all boils down to human psychology and the fact, and it is a fact, that the chinese public are buying silver. The price will respond, more or less, to short term news events, but buying will continue.
I read WhatCouldGoWrong's comments and have to say I am starting to wonder about the numbers predicted by all those Sivertards.
I have read and double checked info and bought into what seems like a very sound investment - yes, almost a sure thing. I can't fault the fundamentals but I watch silver and I do wonder.
In the event that big changes take place in the world, for sure Gold will skyrocket - it's small, portable and easy to liquify.
I just wonder if lugging around a suitcase of silver will capture the masses in the same way.
I am not getting cold feet, just they are not quite as hot as they were. I'm gonna buy some gold slippers :-)
They don't need to sell the apartments as long as we keep buying the iPads...
Someone is always buying.
The problem today is what they are using to buy.
China's debt including munis is 82% of GDP; it's official government statistic and it makes it in same league as France. Welcome to the debtor nations club RPC in spite your mega currency reserves!
I'd love to hear feedback from the tour in Hong Kong
This article is nothing but bullshit. This dumbass and world explorer Simon, are completely full of shit. So now there are 64,000,000 empty apt. bldgs!? Not apts? Bullshit. Sure there may be a lot of empty apts, and even a few, nearly empty new cities, but thats nothing. I live in Chongqing, and the growth is phenomenal. Hundreds of new apt. bldgs going up, and tons of beautiful villas too. It seems there is some childlike envy of China, and I am constantly sick of hearing doomsday bullshit on the end of this country. Sure there is definately corruption and misallocation of resources, but insn't that the case everywhere during booms...and wars? You folks need to face a new future that not going to go away: the West is finished, and the next few huundred years or more will be the golden age of East Asia. I take no pleasure in this, cuz I am a westerner, and asians for the most part, suck. But, unless there is a major war instigated by the West on China, then you should accept your new masters. To be honest, the West deserves this. Not just the big institutions and banks...EVERYONE! I was back in the States in 2005, and was amazed by the egos of the average Joe's because their houses weere going up in value. They all thought they were financial Gurus. They lived far beyond their means as well. That house of cards was bound to crash, and crash hard. All I can do is laugh. Now there are tons of armchair revolutionaries, posting all sorts of horse shit on the internet; stuff they will never do, battles they will never see, and nuts they will never grow. America is full of fucking pussies who will slowly rot away, and not go out with a bang. I imagine, we will see a slow disintegration, in which the US will resemble Brasil. You will have americans hanging out in their dirty BVDs, dancing to latino music all day, and drinking cheap grain alcohol. Fuck em all I say! HAHA!
This article is nothing but bullshit. This dumbass and world explorer Simon, are completely full of shit. So now there are 64,000,000 empty apt. bldgs!? Not apts? Bullshit. Sure there may be a lot of empty apts, and even a few, nearly empty new cities, but thats nothing. I live in Chongqing, and the growth is phenomenal. Hundreds of new apt. bldgs going up, and tons of beautiful villas too. It seems there is some childlike envy of China, and I am constantly sick of hearing doomsday bullshit on the end of this country. Sure there is definately corruption and misallocation of resources, but insn't that the case everywhere during booms...and wars? You folks need to face a new future that not going to go away: the West is finished, and the next few huundred years or more will be the golden age of East Asia. I take no pleasure in this, cuz I am a westerner, and asians for the most part, suck. But, unless there is a major war instigated by the West on China, then you should accept your new masters. To be honest, the West deserves this. Not just the big institutions and banks...EVERYONE! I was back in the States in 2005, and was amazed by the egos of the average Joe's because their houses weere going up in value. They all thought they were financial Gurus. They lived far beyond their means as well. That house of cards was bound to crash, and crash hard. All I can do is laugh. Now there are tons of armchair revolutionaries, posting all sorts of horse shit on the internet; stuff they will never do, battles they will never see, and nuts they will never grow. America is full of fucking pussies who will slowly rot away, and not go out with a bang. I imagine, we will see a slow disintegration, in which the US will resemble Brasil. You will have americans hanging out in their dirty BVDs, dancing to latino music all day, and drinking cheap grain alcohol. Fuck em all I say! HAHA!