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Guest Post: Is The Iron Fist Control Of China’s Central Government Coming Unhinged?

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Guest Post from History Squared

Is the Iron Fist Control of China’s Central Government Coming Unhinged?

First, what is China’s Central government trying to do? Second, is it working?

The PBOC is worried about asset priced inflation so they’ve attempted
to reign in the credit tsunami they initiated in response to the 2008
economic crises. The outside perception is that if the Chinese
government orders banks to lend, they lend. So if that’s the case, if
the PBOC orders banks to reign in lending out of fear of overheating and
future non performing loans, the banks should stop lending. For the
past few years, the PBOC has established official loan quotas on banks,
but the banks have exceeded the official thresholds each year.
Unofficially, the problem is much worse, as banks have hidden another
30% or so of their loans in off balance sheet transactions, according to
Fitch. Recently, the PBOC officially dropped the loan quota and decided
to focus on the reserve ratio. The loan quotas failed and were not
being obeyed, so issuing guidelines that are inevitably violated would
merely highlight PBOC weakness.

Last week, immediately before President Hsu’s visit to the US, photos
of a Chinese Stealth fighter were released. The timing was viewed as a
way for China to flex its muscles and set the tone for the Obama
meeting. That may have been the case, but on whose orders? Secretary of
Defense Gates spoke with Hsu, who said he knew nothing of the photos.
This sparked alarm from the administration that the leaders of the
Chinese central government do not have control over the military. This
is not the first allegation of lack of oversight. It also shows the
hostility of China’s military leadership towards the US.

Food costs account for 40% of disposable income in China. To control
prices, the central government has placed limits on the number of
purchases on such things as cooking oil. There are rumors the central
government is releasing stockpiles, yet prices continue to rise. China
has 20% of the world’s population, but just 6% of the farmable land. If
the central government begins to implement price controls, shortages are
inevitable. A recent reported from World Economic Forum warned that
shortages could “cause social and political instability, geopolitical
conflict, and irreparable environmental damage.” The central government
seems to have few options to control food inflation without causing a
major disruption in the rest of the economy.

Chinese soldiers and their families are mostly from rural China, the
majority of whom have not benefited from China’s rising economy, with
600 million still earning less than $6 a day. Indeed, in many aspects,
quality of life has deteriorated for those without connections, a
prerequisite for wealth in the eyes of most Chinese according to polls.
Many do not view competition for material goods as healthy, pollution
and waste have worsened exponentially, housing prices have skyrocketed,
and now food prices surging. Businessweek
reported that ordinary Chinese are increasingly yearning for a return
to Mao style communism – “a more equal” society, with Conqing Party Boss
Bo Xilia gaining support and pushing for membership to the inner
circle.

To summarize, banks have ignored PBOC orders, the military is doing
their own thing, and food prices are surging with few solutions
available to the central government. They have a fixed asset bubble, a
likely onslaught of bad loans in the offing, and millions of jobs tied
to construction. Many Chinese are worse off and the military is more
sympathetic to ordinary Chinese than the noveau riche. Inflation is
nearing levels associated with social unrest. The situation is a
powderkeg.

 


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Mon, 01/17/2011 - 16:18 | Link to Comment Dr. Porkchop
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Devil's Advocate: Are America's civilian leaders in full control of their military?

Mon, 01/17/2011 - 16:24 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Hey, don't junk porkchop.  A very good question.  Even better, since we only have a volunteer army of around 150,000 (next to a Chinese army of 1,000,000), will it really matter when certain states act in their own best interest and recall their troops.  After they recall those troops they could start printing their own money backed by REAL resources in those states.  - Just saying. 

Mon, 01/17/2011 - 16:35 | Link to Comment greengoogol
greengoogol's picture

Given the steady increase of Oath Keeper influence amongst the rank and file troops, I seriously doubt it--unless the civilian leaders suddenly remember THEIR duty to the Constitution . . .

Mon, 01/17/2011 - 23:03 | Link to Comment bankonzhongguo
bankonzhongguo's picture

I could almost make an argument that the entire reason for this global financial whateveritis is about inducing runaway inflation into the Chinese Mainland - to break China.

Only within a few circles have I ever heard of "a plan" to destabilize Zhongguo.  Inflation is the only mechanism to otherwise break China into pieces or regional spheres of influence to remake the 3 kingdoms.  Its the grand game of the 21st century - for the last gasp of whithered colonialists to otherwise break China (again).

Instead of opium its Keynesianism

China will always be feudal.  Their veneer of centralism is the backlash to the prior millennia of systemic political culture failings.  Even Kongzi could not clean house.    All those billionaires in Shanghai/Pudong/Shenzhen/Xianggang are tired of standing at attention because some second cousin of some revolutionary farmer from the Black Dragon River walks into a room south of the Chang Jiang once a decade.  Yes the PLA is the glue that keeps the country together, but considering I saw some PLA-N boys strapping Hyundais to the sterns of their submarines for midnight runs across the Yellow Sea to make $1,000 a hop - I say anything goes.  You only have one hometown.

Its no accedente that BOC/US got approval to open RMB accounts in the US prior to Hu coming to Amerika.  More chaos (opportunity) to be shipped to China.

What is that Chinese saying?  'Beware what you wish for.'

Tue, 01/18/2011 - 00:29 | Link to Comment Green Leader
Green Leader's picture

I totally agree with you.

Thanks for your detailed post.

G/L

Tue, 01/18/2011 - 02:11 | Link to Comment 1984
1984's picture

Then brace for destabilization everywhere.

Tue, 01/18/2011 - 02:12 | Link to Comment Moonrajah
Moonrajah's picture

Even Kongzi could not clean house.

Kongzi couldn't, but Ponzi just might.

Mon, 01/17/2011 - 16:18 | Link to Comment mikla
mikla's picture

Businessweek reported that ordinary Chinese are increasingly yearning for a return to Mao style communism – “a more equal” society, with Conqing Party Boss Bo Xilia gaining support and pushing for membership to the inner circle.

Oh, dear.

That ain't good.

Mon, 01/17/2011 - 16:54 | Link to Comment billwilson
billwilson's picture

A bit of an over reaction re Bo XiLai. In reality he is more a "Mr. Clean" rooting out corruption than an idealogue. That is actually a good thing.

Mon, 01/17/2011 - 17:06 | Link to Comment mikla
mikla's picture

Ok.  That's better, then.

Large social upheaval can be very bad (Mao killed ~70 - 140 million of his countrymen), or very good (I'm amazed the people in so many countries in Africa suffer their corrupt murdering leadership without uprising).

The uprising in China is inevitable.  The current system in China is heavy-handed stability, but which is now inevitably becoming unstable.  My hope is for a positive changing-of-the-guard, but I'm unsure how to transition gracefully (e.g., how to make an omelet without breaking any eggs).

Mon, 01/17/2011 - 17:25 | Link to Comment bingaling
bingaling's picture

this is from an article from Guardian UK

After winning several key posts, Xi Jinping, 57, is almost certain to take over as China’s president from Hu Jintao in 2012.

A “supreme pragmatist”, Mr Xi devoted himself to Marxist ideology in order to “become redder than the red” and prosper in the Communist system.

The revelations came from the US Embassy in Beijing after an interview with an unnamed professor who was a childhood friend of Mr Xi. The Embassy briefing has now been released by Wikileaks.

Until now, he has remained a deeply mysterious figure. Chinese censors have been careful to delete almost all of his biographical detail from the record, even hushing up his former classmates and professors. No one can even be sure of his political allies within the Communist party.

However, a detailed portrait of Mr Xi has now emerged which shows him to be “exceptionally ambitious” and to have had “his eye on the prize” of becoming China’s leader from “early adulthood”.

One revelation supressed from the official record book until now is that Mr Xi has been married twice.

His first wife was Ke Xiaoming, the daughter of a former Chinese ambassador to the UK, while his second is Peng Liyuan, a famous singer, with whom he has a daughter.

Hopes for greater reform of China’s political system in the next five years are quashed by descriptions of Mr Xi as a true “elitist” who believes that “dedicated and committed Communist Party leadership is the key to enduring social stability and national strength [in China]“.

Mr Xi is what is known in China as a “princeling”, the son of one of the country’s revolutionary heros.

Many of the princelings enjoy enormous privilege in modern China, and are in control of several key industries.

“Having shared a common upbringing with him, the professor said, he is convinced that Xi has a genuine sense of ‘entitlement’, believing that members of his generation are the ‘legitimate heirs’ to the revolutionary achievements of their parents and therefore ‘deserve to rule China’,” the cable revealed.

In a demonstration of sign of his unwavering ambition, however, it appears that Mr Xi joined the Communist party even when his own father was languishing in a Party prison during the Cultural Revolution for alleged political crimes.

The professor said Mr Xi is incorruptible by money, does not drink or do drugs, and that women felt he was “boring”.

Mr Xi was also described as a “good guy” and “not cold-hearted” and is “repulsed” by the prostitution and corruption that are on open display in many Chinese cities. Instead, the professor remarked that Mr Xi was drawn to Buddhism during his early career and had a “seeming belief in supernatural forces”.

Mr Xi is also likely, the US Embassy decided, to be pro-Washington and a relative internationalist. His older sister, Xi An’an, is thought to live in Canada while his younger brother Xi Yuanping, spent time in Hong Kong while it was under British rule.

 

I dont know if that is the same Xi??

Mon, 01/17/2011 - 16:19 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Damn, damn, damn that finite planet!  An opportunity for the U.S. to be great again if the world wants to eat.

Mon, 01/17/2011 - 16:21 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

 

 

Soros Speaks Of A "Managed" Decline In The Dollar & How China Will Be A Part Of The New World 

 

http://www.youtube.com/watch?v=GRauoDrTxdo

Mon, 01/17/2011 - 16:26 | Link to Comment LawsofPhysics
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The word "china", when translated quite literally means "the center of the universe".

Mon, 01/17/2011 - 22:26 | Link to Comment bankonzhongguo
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Hey.  That's my line.

Tue, 01/18/2011 - 12:30 | Link to Comment SilverRhino
SilverRhino's picture

That would be Zhongguo / Chung-Kuo.  "Middle Kingdom" (Central Country)

The word China is a derivative of Cin/Qin (chin) which is Persian.   That was named after the Qin dynasty.  

Han Empire is a little more accurate in terms of what they really are.

 

 

 

Mon, 01/17/2011 - 16:35 | Link to Comment wintermute
wintermute's picture

Apologies Tyler but this widespread error on the web has got my goat.

"rein in" not "reign in" (the latter refers to kingship).

Mon, 01/17/2011 - 16:46 | Link to Comment gwar5
gwar5's picture

It's "rain in" not "rein in" (the latter refers to Santa)

Mon, 01/17/2011 - 17:28 | Link to Comment bingaling
bingaling's picture

They say this in the South with a drawl "its rain'n not rein'n"

Mon, 01/17/2011 - 16:37 | Link to Comment FatFingered
FatFingered's picture

Oh, that awful China!  Good thing we pay our corn farmers to waste our cooking oil in the production of ethanol, as reported by ZH yesterday.  God forbid those poor Chinese might want it. I wonder if that wicked Chinese government would choose to starve the world's poor so that their banking buddies could buy more Maseratis?  Whose military is outa contol?!?!?

http://www.zerohedge.com/article/guest-post-how-many-senators-does-it-ta...

Mon, 01/17/2011 - 16:57 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Spot on, but still a predominantly a volunteer army.  If states exercise their true power they can recall their own at any time.  Moreover they can draft any of their citizens into that army.  Could get interesting should a creative law professor with the "hitler" mindset arise in politics.

Mon, 01/17/2011 - 16:40 | Link to Comment Spalding_Smailes
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China. Rock. Inflation. Hard place.


Michael Pettis has a blunt way of describing the China predicament, after Friday saw the People’s Bank raise required reserve ratios for the seventh time over the past year, in an effort to rein in inflation and curb lending by the country’s banks.

In a sentence, it’s “damned if you do and damned if you don’t.” The issue, says theShenyin Wanguo Securities analyst and all ’round China expert, is that high or just persistent inflation creates “an almost unsolvable problem for the PBoC.

Here’s why:

On the one hand the PBoC can raise nominal interest rates in tandem with inflation (which they have certainly not done so far) so as to keep real rates unchanged. The problem of course is that raising nominal interest rates – even if real rates are unchanged – is effectively the same as accelerating principal payments, and with many borrowers struggling to generate the cash flows needed to meet interest payments, a significant rise in nominal interest rates could cause a sharp rise in financial distress.

On the other hand the PBoC can repress interest rates further, allowing them to rise much more slowly than inflation, but this would make deposit rates even more negative in real terms than they already, putting more downward pressure on household income as a share of GDP, and with it household consumption. (Given the high level of household savings relative to household income, income on those savings should be a significant part of overall household income). Lower, or negative, real lending rates would also make it even more rational to borrow money and spend it foolishly on increasing capacity, fueling bubbles, or building even more non-economic real estate and infrastructure projects. In that case lower real interest rates means worsening the imbalances in the economy.

So with rising inflation, it is dammed if you do and damned if you don’t, and the fervent discussion within policymaking and analyst circles has not arrived at any resolution. This discussion has, however, generated two claims, one of which is debatable and the other is just plain foolish. The debatable claim is that raising interest rates and reducing lending is one of the ways the PBoC can combat inflation.

We’re going to focus on the ‘foolish claim.’

That’s the notion, Pettis says, that China was able to ‘grow out of’ its last banking crisis (which happened a decade ago) and can therefore do so again.

This is just WRONG! says Pettis, but with less caps and exclamatory marks.

Some 10 years ago, China did suffer a banking crisis, but it did not escape from it unscathed. In fact, China’s crisis was resolved just like all banking crises tend to be resolved — by transferring wealth from households/taxpayers to the banks. For instance, by lowering lending rates to spur investment and help out borrowers.

The problem, though, is that this subtle debt-forgiveness doesn’t come free:

The combination of implicit debt forgiveness and the wide spread between the lending and deposit rate (which adds at least another 100 basis points annual loss to household depositors, and probably more) has been a very large transfer of wealth from household depositors to banks and borrowers. This transfer is, effectively, a hidden tax on household income.

It is not at all surprising, then, that growth in China’s gross domestic product, powered by very cheap lending rates, has substantially exceeded the growth in household income, which was held back by this large hidden tax – and my back-of-the-envelope calculation suggests that the tax has amounted to at least 5-7% of GDP annually (all the more painful when you consider that in China, household income is only around 50% of GDP). It is also not at all surprising that household consumption has declined over the decade as a share of gross national product from a very low 45% at the beginning of the decade to an astonishingly low 36% last year.

So in the end this is really how China’s banking crisis was resolved. It was not that China managed to grow rapidly and resolve the NPL problem with growth. It is that both China’s rapid growth and its rapidly developing imbalances were at least in part the consequence of polices aimed at resolving the NPLs. The banking crisis did not result in a collapse in the banking system, but it nonetheless came with a heavy cost. The banking crisis in China resulted in a collapse (and there is no other word for it) in household consumption as a share of the economy.

You can see where this is going, then. The worry is that a surge in non-performing loans amongst China’s banks won’t be so easily resolved this time around. Households would have to pick up the tab (once again) leading to even moreimbalances.

PBoC rock — meet hard place.

 

http://ftalphaville.ft.com/blog/2011/01/17/460876/china-rock-inflation-h...

Mon, 01/17/2011 - 16:47 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

Victor Shin ~ ( get ready to pick up more debt ).

1. The Chinese government claims that there is only 6 trillion RMB in local investment vehicle debt.
My response: A. This widely cited figure was produced by a 6/2009 CBRC survey of the situation. The exact methodology is unclear, but informants state that the CBRC extrapolated this amount on the basis of a partial study of a few provinces.
B. Other government agencies have provided conflicting and higher amounts. For example, a MOF research team uncovered "well over 4 trillion" in late 2008 (excellent Credit Swiss research even states that the 4 trillion was a YE 2007 figure).
C. The CBRC finding concerns only bank loans, but total debt should also include bond issuance and accounts payable, which constitute triangular debt.
D. if we sum the gross debt of just the top 50 or so LICs, we quickly arrive at gross debt of over 2 trillion (try adding the gross debt of Guangdong Highway, Guangdong Transportation Group, Chongqing Highway, Beijing Basic Construction, Shanghai Urban Construction and Development Company, Shanghai Pudong Development Co., Tianjin Urban Basic Infrastructure, Binhai Development...etc.), so the remaining 8000 or so entities only owe 4 trillion (on average 500 mln RMB each)?

2. The 11.4 trillion is too high when compared with total bank loans in various categories.
My response: A. First of all, total loans outstanding at the end of 2009 was well over 40 trillion RMB, and I think it is completely reasonable to believe that nearly 1/4 of it was loans to LICs. In fact, I wouldn't be surprised that a higher share of bank loans ended up in LICs. 
B. Some analysts have trouble believing that such a high share of medium and long-term loans ended up in LICs. When we consider how many LICs there are and the vital role they play in the local economic strategy, it is not surprising that likely as much as 3/4 of new medium and long term loans in 2009 ended up in LICs. 
C. Beyond medium and long term loans, many LICs are holding companies with subsidiaries engaged in a wide range of businesses. For example, the LICs run thousands of hotels across China, and loans to these hotels would be classified as loans to the service industry. Thus, in addition to medium and long term loans and loans to infrastructure, it is perfectly reasonable for a sizable share of working capital loans, trust loans, and loans in the "other" category to end up in LICs. Again, gross debt of these entities would also include bond issuance and debt owed to each other.

3. LIC debt can be calculated by subtracting government spending on basic infrastructure from the total infrastructure spending figure. In that light, LIC debt only increased by 2.8 trillion RMB in 2009.
My response:
A. First, as pointed out, LIC are diversified holding companies which do not only engage in infrastructure construction. For example, thousands of subsidiaries of local investment companies engage in real estate development and absorb some share of the real estate loans. The figure generated using the method above, however, may be meaningful one-day when the government decides how much of the existing LIC debt it will seek to take over as part of a bail out. 
B. The calculation above assumes that much of the extrabudgetary revenue from local governments derived from land sales went to infrastructure construction. According to excellent research done by Standard Chartered and UBS on land sales, much of the land sales revenue is spent on compensating original residents, leaving only a minority share for actual investment. Thus, a realistic application of this methodology would lead to something like 3.5 trillion RMB in new loans to LICs, not just 2.8 trillion. 

4. My estimate of 12.7 trillion in future LIC debt is baseless and is way too high for YE 2011.
My response:
A. To be sure, I now think most of this debt will not realize by YE 2011 also. However, it would not be far-fetched to think that most of this debt will be realize by YE 2012. This estimate is not "baseless" as it comes from the hundreds of lines of credit that banks have granted to local governments. As long as banks more or less adhere to these lines of credit, they will lend this amount to local governments at some point in the future.
B. Although the State Council has called for more caution in lending to local investment vehicles, we still see local governments aggressively trying to raise money from the banks. Hubei, for example, has an investment plan worth 12 trillion RMB, and plans on investing 6 trillion RMB between now and 2012 (please see http://nf.nfdaily.cn/epaper/21cn/content/20100324/ArticelJ07002FM.htm). Of the 6 trillion, at least 3 trillion will come from bank loans and other forms of debt. If Hubei is able to realize its ambition, we are already 1/4 of the way toward my 12.7 trillion estimate. Thus, unless the central government harshly restricts overall credit, I think local governments at the provincial and municipal levels will have no trouble borrowing an additional 12.7 trillion by YE 2011 or 2012. 

 

http://chinesepolitics.blogspot.com/

Mon, 01/17/2011 - 16:41 | Link to Comment tonyw
tonyw's picture

"quality of life has deteriorated for those without connections, a prerequisite for wealth in the eyes of most Chinese according to polls"  just like it was/is in Tunisia. In fact how many people still think it is possible to become wealthy today without connections when wealth has become very concentrated.

Mon, 01/17/2011 - 16:42 | Link to Comment Hephasteus
Hephasteus's picture

Sociopaths and psychopaths do not fear death. Therefore their lives are meaningless. They can't think 2 weeks ahead plan what happens after they win THIS fight. Stick em in freezing water and they'll live longer than normal people. They don't fear death but they fight it with everything they have.  They are enigmas. paradoxes of their own insanity. That always wins but still loses. Leads but leads nowhere. Addicted to crisis where what is truley out of control seems to be manageable and in control in their minds. They can get power but they can't keep it. They can get women but they can't keep them. They can get men but they kill them for what they have.

They are just quite literally the purest form of nonsense we have on this planet and you can see it in all their creations. The stock market, tv shows, movies. Militaries that devour oil and resources in an effort to control oil and resources that they've just devoured, generating larger militaries that devour more of the diminishing resources to control it all along a diminishing return equation.

Mon, 01/17/2011 - 18:13 | Link to Comment traderjoe
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+1

Mon, 01/17/2011 - 18:25 | Link to Comment cosmictrainwreck
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hey! who you callin' a psychopath? I resemble that remark. Anyway, you're right - absolutely. Am still waiting for someone to compute the $/bbl cost to USA of the 2487 barrels we're likely to pull out of Iraq. That's warfare costs (inclusive of pallets of $100 bills) plus VA & med costs (lifetime for all troops) plus lost civilian earnings of said troops plus.....plus... what else? OH, I KNOW: gross profits into the pockets of all DickHead Cheney's buddies. Well, what's a few trillion among friends anyway? Dollars per barrel, bitchez. Plus I want to add a $20/bbl/pint of blood premium to that.

Tue, 01/18/2011 - 08:23 | Link to Comment YHC-FTSE
YHC-FTSE's picture

+1

Holy Moly! That was well written.

Mon, 01/17/2011 - 16:50 | Link to Comment Sudden Debt
Sudden Debt's picture

Poor countries go by the best in a communist system.

I really believe that.

Rich countries go best by a semi socialist/capitalist system.

and EVERY TIME, the balance in THE SYSTEM is out of equilibrium, SHIT is HITTING THE FAN!!

 

Now the communist systems lean to capitalism while they are still poor. That will end up bad.

The Rich countries want to go to a pure form of capitalisme without any socialist touches. That will end up bad.

The word "socialist" is to often associated as a really bad thing because of the media propaganda. Everybody should give in so the individual who thinks so can have more.

If you think that's normal, you're kookook and should really start to rethink your values.

Do to others what you want others to do to you.

 

Mon, 01/17/2011 - 18:24 | Link to Comment bank guy in Brussels
bank guy in Brussels's picture

My fellow Belgian speaks much truth here.

Though it is hard now to speak with Americans in these terms, as Americans confuse 'socialism' with their corporate fascism, having too little experience of the kind of positive socialism (mixed with market economics above the social protections) that has made Western Europe the closest thing to paradise that ever occurred in human history.

Americans can't even learn from Canada's superior society, with Canadians viewing socialist Tommy Douglas as the 'greatest Canadian', because he helped enact Canada's universal health care (the real thing, not the US-Obama farce and fraud now being aborted).

In Eastern Europe now, most older people who remember Communism, would vote to have it back, instead of the 'shock therapy' capitalism they have endured.

In China, what was most tragic about their late 70s alliance with the evil Americans, when they started a rough capitalism, is that they abandoned universal health care, the famous Chinese 'barefoot doctor' programme that was the admiration of much of the world, a model for poor countries generally. If they had kept the health care in place, China would not be in the current mess ... the very reason Chinese consumers won't spend more, is because they are saving for health care emergencies ... this is hindering their internal economic development, and is a major part of their risk of internal revolution as stated in the above article.

Any society without universal health care is subject to (and needing) a revolution, and this will be the fate of the US as well.

Mon, 01/17/2011 - 19:15 | Link to Comment BurningFuld
BurningFuld's picture

The Canadian says: Very insightful! And my American wife agrees.

Mon, 01/17/2011 - 20:18 | Link to Comment surfsup
surfsup's picture

Divisive Labels do one job really really well.  Divide.  Behind that head eating the tail is exponential interest based on debt.   When interest is dealt with constructively for the whole then the head will no longer eat the tail.   This is why ZH deserves its high marks -- it causes people to think.   What you call your enemy is always you looking back.  Its time we turn off the "make them label each other and fear others" algo.  Its in full swing as we sway to and fro on simple abstractions and look not at the interest game -- to improve it -- to bring it up to speed -- to actually evolve.  

The change required to lift the race past the oncoming cliff is so steep mostly because we have been trained to adhere to ASSOCIATION in the mind regarding illusions painted as true -- the biggest of them being national rivalries.   

Sure is looking like Japan 1989 -- woe to those who deal with divisive labels and not simple math.

Interest eventually sucks capital flow out of general circulation.  

When you read the following piece count how many times your brain reverts to its animal training to "make labels and groups."  

http://www.perfecteconomy.com/pg-parable-of-perfect-economy.html

Forget the labels -- it could be a bunch of rich Sub Saharan Africans and an offshoot tribe that wants to find its way in Balance.   All nations have this type of individual and many of the masses following in a shadow effect in abject imitation -- gullible to suggestion... 

Free your mind -- grab an excel sheet -- do the math.  

http://www.perfecteconomy.com/pg-about-interest.html

 

Interest has a critical fault. So long as it exists, there's no neutralizing or stabilizing of its consequences; its inherent processes are perpetual, and irreversible.

As Mr. Kondratiev observed, "interest" inherently meets its end.

-Mike Montagne

 

 

Mon, 01/17/2011 - 21:41 | Link to Comment lumen ex lumine
lumen ex lumine's picture

bank guy in brussells:

"Americans can't even learn from Canada's superior society"

 

You're an idiot.

 

There's nothing superior about Canada's society. I'm a Canadian living in the US and I know the score.

 

Canada is just a couple of years behind America. Canada has the same unsustainable social network that California has. And we know where California's headed.

 

Canada decided to blow the real estate credit bubble to keep the party going.

 

But the end result will be the same.

 

POOF !

 

Tue, 01/18/2011 - 05:09 | Link to Comment Lord Koos
Lord Koos's picture

Canada doesn't have anywhere near the level of problems that California has. Canada still has many resoureces that America does not.  I think Canada's future will be much brighter than the US.

Tue, 01/18/2011 - 08:40 | Link to Comment YHC-FTSE
YHC-FTSE's picture

It's amazing. Slowly but surely on ZH, Americans and others in general are starting to understand the infantile nature of polarized politics.

Mon, 01/17/2011 - 22:27 | Link to Comment robertocarlos
robertocarlos's picture

You hate the Canadian?

Mon, 01/17/2011 - 16:55 | Link to Comment Piranhanoia
Piranhanoia's picture

We might even consider addressing gambling with the things required to live?

Mon, 01/17/2011 - 17:10 | Link to Comment the not so migh...
the not so mighty maximiza's picture

The Chinese fist will be stuck up Obama's ass.   They will work the Presidents mouth and China will benefit from the US Presidents words. 

Mon, 01/17/2011 - 17:18 | Link to Comment Cheesy Bastard
Cheesy Bastard's picture

He will not need the teleprompter that day.

Mon, 01/17/2011 - 17:12 | Link to Comment buzzsaw99
buzzsaw99's picture

Food costs account for 40% of disposable income in China. To control prices, the central government has placed limits on the number of purchases on such things as cooking oil. There are rumors the central government is releasing stockpiles, yet prices continue to rise. China has 20% of the world’s population, but just 6% of the farmable land. If the central government begins to implement price controls, shortages are inevitable. A recent reported from World Economic Forum warned that shortages could “cause social and political instability, geopolitical conflict, and irreparable environmental damage.” The central government seems to have few options to control food inflation without causing a major disruption in the rest of the economy...

My ass they don't. Those tightwad sons of bitchez could bid on the open market for grain and other foodstuffs then subsidise but they won't because they love clownbux too much and have this f@cked up thing about feeding themselves homegrown style. If the Chinese starve this is not the usa or bernanke's fault, it is their own greed. China always fails to feed its people periodically because they are stupid. I hope they are overthrown by the peasants again. [/rant]

Mon, 01/17/2011 - 20:10 | Link to Comment bpj
bpj's picture

China did go to the open market, back in the 60s and 70s, with confiscated rice. Sold it so they could get em an atom bomb. No big deal, only about 40 million starved to death.

Mon, 01/17/2011 - 20:50 | Link to Comment grunk
grunk's picture

The State Department and The Bernank are using inflation as a foreign policy tool/weapon.

Food is a much higher pecentage of income in China than the U.S. Unrest comes faster and larger in China with food inflation. 

When you think about it, other than having the potential of starting a war with China, it's a pretty smart strategy.

Mon, 01/17/2011 - 17:13 | Link to Comment bugs_
bugs_'s picture

Iron Fist meet Invisible Fist

Mon, 01/17/2011 - 17:21 | Link to Comment BlackSea
BlackSea's picture

Plastic collision.

Mon, 01/17/2011 - 17:15 | Link to Comment BlackSea
BlackSea's picture

Uhhh, let them eat rice cake?

Mon, 01/17/2011 - 17:40 | Link to Comment proLiberty
proLiberty's picture

And nobody should forget that the Communist Party has caused the deaths of tens of millions of Chinese rather than reduce their power.   Nobody knows how many died during the Tiananmen Square protests of 1989, but the government went to great lengths to erase any trace of the bloodshed there.   The number of deaths may have been in the low thousands.  

Mon, 01/17/2011 - 18:17 | Link to Comment wintermute
wintermute's picture

Correct. Both major communist powers, USSR and China, each killed 30+ million of their own citizens in the name of progress.

This is post-World War II, within the lifetime of today's policy-makers. Those who do not learn from history are doomed to repeat it...

Mon, 01/17/2011 - 18:23 | Link to Comment wintermute
wintermute's picture

<dup>

Mon, 01/17/2011 - 18:23 | Link to Comment wintermute
wintermute's picture

<dup>

Mon, 01/17/2011 - 17:40 | Link to Comment americanspirit
americanspirit's picture

Just like the US, China is burning down the house to roast the pig. Tasty while it lasts - then what?

Mon, 01/17/2011 - 17:41 | Link to Comment MarkS
MarkS's picture

Control of the military rests firmly in the hands of the civilian hierarchy.  Although there has become an increasing distance between those who serve and where many of our political elites come from, there is not now or likely will be a gap so wide as to question civilian authority and control.

Here is the real shame - It used to be that many of our wealthiest and politically elite families often had sons (and now we would expect daughters) join the officer  corps upon graduation from 'university'.  Today we rarely see Harvard or Yale or any of the Ivy league schools reperesented.  There was an influx after Sept 11th but it was unfortunately shortlived.

 

Tue, 01/18/2011 - 05:24 | Link to Comment Lord Koos
Lord Koos's picture

Yes, it's remarkable how that has changed.  In WWII for example I think that the most elite families in the Western world had someone serving active duty in the military. They may have served as officers but they still were in the line of fire. The entire sense of social contract, responsibility, and true patriotism pretty has much vanished from the American scene as far as the wealthy are concerned. 

Mon, 01/17/2011 - 17:45 | Link to Comment Beatscape
Beatscape's picture

The Chinese are roughly a 75% command economy.  The command economy experiment didn't go too well for their northern neighbor.  But the Chinese are smart enough to be an 75% command economy and not a 100% command economy. You have to let entrepreneurs have some latitude to make a profit and make their own decisions or they will not make the economic investments and take the financial risks in order to spur economic growth. As a result, the dictators have a tough balancing act to maintain. Now, they are trying to reign in a raging economic bull.  Government coffers and banks are flush and inflation fuels the profits by driving real estate prices higher.  The financial elite are happy--inflation is a good thing.

Uh oh, inflation gets out of control and the peasants (800+ million of them) are pissed because the cost of basics (food & energy) are killing them. They see the well connected and the rising wealth of the burgeoning middle class, so they are jealous and pissed. They are also feeling empowered because the government has loosened the reins a bit. This does create a powder-keg situation.

The writer makes a good point, "If the central government begins to implement price controls, shortages are inevitable." 

If food inflation really gets out of control, the government will indeed put in prices controls.  They already do it with fuel and many commodities.  If basic foods are in short supply, then you have hoarding and eventually rioting. 

 

 

Mon, 01/17/2011 - 17:58 | Link to Comment bingaling
bingaling's picture

I think many already hoard and it is a common occurence . I would even bet a lot of savings are held in food there .

Mon, 01/17/2011 - 22:35 | Link to Comment robertocarlos
robertocarlos's picture

So why doesn't the Chinese govt just print money or tax the rich and give it directly to the poor for food?

Tue, 01/18/2011 - 02:53 | Link to Comment 1984
1984's picture

What is the punch line?

Tue, 01/18/2011 - 05:27 | Link to Comment Lord Koos
Lord Koos's picture

I think it doesn't matter what kind of economic system it has, China is so full of corruption that nothing really works like it is supposed to.  Everybody is on the take.

Mon, 01/17/2011 - 17:46 | Link to Comment Tartarus
Tartarus's picture

I do tire of Zero Hedge engaging in this neocon fear-mongering about the great yellow threat or echoing neocon wet dreams about some imminent revolution. Neither is legitimate and better indicate the general lack of information the Western public is allowed to have about what the reality is in China. It helps when fear-mongerers throw out the dreaded M-word, again without allowing people to understand the reality of the situation. People here in the West think of Mao as a dictator because that is how elites in the West have described him and as such associate every problem in China when Mao was alive with Mao and his ideology to the exclusion of everything else. This is not to say Mao did not things wrong, he did plenty wrong, but he is given far more credit than he should and his ideas are mistakenly associated with his actions.

Mon, 01/17/2011 - 18:03 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture


 The central thesis of this biography is that Mao was as evil as Hitler and Stalin. Some will dismiss this is a hatchet job, meaning that Mao cannot have been that bad. He was. Chang and Halliday have taken a wrecker's ball to Mao, but they use the scalpel too. They have investigated every aspect of his personal life and his career, peeling back the layers of lies, myths, and what we used to think of as facts. Many of these facts were really lies, usually originating in the titanic autobiographical lie that Mao fed the American journalist Edgar Snow in 1936 for his scoop, Red Star Over China. For decades, that series of lies underpinned all that Chinese and foreigners knew about Mao.
 
In short, he was a monster, and Chang is right to claim that Mao "was as evil as Hitler or Stalin, and did as much damage to mankind as they did". She also says - hence "the Unknown Story" subtitle - that "the world knows astonishingly little about him."
 
This is untrue. Millions of Chinese know enough about Mao to be glad he is dead. More than 20 years ago the Party itself held Mao chiefly responsible for the Cultural Revolution, "the greatest disaster" since 1949, although it also insisted that his good points greatly outweighed the bad. One of his former secretaries, Li Rui, has written that Mao "did not care how many he killed" and others have long-since pulled the veil away from Chou En-lai. In the West, the opium story has been published, as has much of Mao's reckless self-serving behaviour on the Long March, Chou En-lai's grovelling, and how Nixon and Kissinger crawled. There are excellent biographies of Mao. In a very short one, Mao, based on already published materials, Jonathan Spence of Yale wrote that Mao's rule "was hopelessly enmeshed with violence and fear". Harvard's Stuart Schram, an early biographer, has published his multi-volume Mao's Road to Power, a collection of every existing scrap of paper Mao wrote up to 1949, which shows his ruthlessness. In the late 1970s, Lucian Pye of the Massachusetts Institute of Technologylaid out Mao's psychopathology, at a time when this was regarded as over the top. Harvard's Roderick MacFarquhar's three volumes, The Origins of the Cultural Revolution, compares Mao to Stalin and describes his eating well even while his policies were creating "the worst man-made famine in history". The Private Life of Chairman Mao, by Mao's doctor, Li Zhisui, displays the patient as monster.
http://www.rense.com/general65/mao.htm

Tue, 01/18/2011 - 05:39 | Link to Comment ivars
ivars's picture

Chang and Halliday Mao's biography is masterpiece. Having lived in Soviet union during its last 27 years, having heard about Stalin and experienced the later regime, I think the book is ABSOLUTEY spot on in equating MAO to STALIN , since, as a percentage of own people killed, they are about equal. Hitler is different since he was more concentrating on killing other people, not Germans. In the end he ended up with slightly less Germans dead as % of population, but close to Stalins and Maos Numbers. And Hitler was a relative shorttermer compared to the other too. Impatient. Did not die of old age, either.

The real problem is that there is MAO's legacy in today' s CCP party cadres, mostly the children of the people that EXECUTED MAO's orders. Involved by fear and sharing the joy of torturing and killing inocents. These are the future Chinese leaders who may glorify Mao's past and methods since its part of the path that has led to todays relative success.

 

Mon, 01/17/2011 - 18:04 | Link to Comment jm
jm's picture

I sympathize with your point about China.  People are people no matter where they live, and the Chinese nation has had some good leaders by any standard in the past 30 years or so. 

But lay off the Mao stuff.  The "flower blossom campaign" alone shows Mao to be diabolical.  The cultural revolution shows him to be bloodthirsty.  One can make the case he started with a Chin shi Huangdi fixation that turned into a God complex. 

The world would be better off if he took a fatal bullet very early in llfe.

 

Mon, 01/17/2011 - 18:07 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

 

 

The Emperor Has No Clothes: Mao's Doctor Reveals the Naked Truth

 

Mao Zedong's personal physician has written a fascinating exposé about his long and close relationship with the Great Leader. From the bedroom to the politburo, the personal details of Mao's imperial life are laid bare.

John E. Wills, Jr., a Professor of History at the University of Southern California, has written widely on the history of Chinese foreign relations. His most recent book is Mountain of Fame: Portraits in Chinese History.

 

 

THE LAST EMPEROR

It is not surprising that Dr. Li thought Mao's conduct imperial: he lived in isolation, shared his bed with many young women, and traveled around the nation to luxury villas in a great cocoon of guards and private trains. Dr. Li is in general not judgmental about the endless parade of young women in Mao's bed, citing the Daoist practice of using sex for longevity. But he was shocked by Mao's lack of concern about transmitting a vaginal infection from one woman to another. Far more insight into the pathologies of the inner circle is provided by his many accounts of the flattery and servility that surrounded the chairman; his description of these traits in the widely respected Zhou Enlai will upset many in China, if they ever have a chance to read it. Especially horrifying is his picture of the vast Potemkin village of perfectly planted fields full of peasant women dressed in red and green, with village blast furnaces smoking everywhere, as the chairman's train traveled south in the first autumn of the Great Leap Forward. Dr. Li describes a leader who has lost touch with reality and confesses that he himself was caught up in the enthusiasm. As millions died in the famines brought on by the Great Leap policies, Mao acknowledged it by occasionally abstaining from eating meat.

The Chinese political tradition is full of warnings that Mao did not want to hear: against ruthless centralization of power, against pushing ahead with a policy when the best advisers oppose it. Since these ideals ran counter to his aim of transforming China by revolution, he ignored them. Although Mao's fascination with China's past predated his revolutionary zeal, it was subordinate to or at least distorted by it. Dr. Li offers fascinating new evidence on this point, recounting Mao's praise for Emperor Yang of the Sui Dynasty, Empress Wu of the Tang Dynasty (the only woman ever to sit on the Dragon Throne in her own name), the notorious first emperor of Qin, and Zhou, the last king of the Shang Dynasty. Despite the traditional negative judgments of all four, modern students would have some sympathy with Mao's views of at least three of them as important and partly effective builders and wielders of central power, but it is hard to see more in the praise of Zhou than willful reversal of a traditional verdict. The first emperor of Qin, in particular, is credited by many modern nationalists with a key contribution to what they regard as China's natural or essential condition of political unity.

http://www.foreignaffairs.com/articles/50563/john-e-wills-jr/the-emperor...

 

Mon, 01/17/2011 - 18:09 | Link to Comment mikla
mikla's picture

I do tire of Zero Hedge engaging in this neocon fear-mongering about the great yellow threat or echoing neocon wet dreams about some imminent revolution. Neither is legitimate and better indicate the general lack of information the Western public is allowed to have about what the reality is in China.

The history of the world suggests an upheaval.  The last sixty years (since WWII) are atypically peaceful.  They do not correlate with the history of the world prior.

Generations since the 1940's are unnaturally biased towards "world calm".  Yes, it is possible that this is the "new norm" (e.g., we have the internet, economic globalism, and cheaper travel).  However, IMHO, this "new norm" is more likely spotted with more massive upheaval (less frequent, but more severe).  The Euro is gone, we just won't recognize that yet, because it is too painful as a thought.

Yes, of course, the future is uncertain, and nobody knows.  However, I know math, and I know ponzi, and I know the Euro is gone.  (So is the USA Federal Government as it is currently comprised.)

Painful thoughts.  However, serious adults will have great difficulty defending perpetual continuation of the present.

People here in the West think of Mao as a dictator because that is how elites in the West have described him and as such associate every problem in China when Mao was alive with Mao and his ideology to the exclusion of everything else.

True, many of the millions of deaths were related to "Ooops!" in the calculations (not specifically to malice).  However, IMHO, that is irrelevant to the calculation:  Mao instituted social upheaval, it was expensive, and ~70-140 million dead seems pretty bad.  (I don't care if he was a man with a "good heart" or not.)

Mon, 01/17/2011 - 18:13 | Link to Comment Hulk
Hulk's picture

Some have suggested that those 60 years of relative peace are due to the advent of the nuclear weapon...

Mon, 01/17/2011 - 18:18 | Link to Comment mikla
mikla's picture

In part, that's probably true (e.g., "the stick").  On "the carrot" side, we should probably consider the advancement of the world ponzi (e.g., establishment of world central banks and globalized trade).  The "early" part of any ponzi is always loads-of-fun-for-everyone.

It's only later, when the ponzi is exhausted, must we come to account.  We can't fight over scarce resources until they become scarce.  That means now.

Tue, 01/18/2011 - 15:16 | Link to Comment Tartarus
Tartarus's picture

Are you serious? Do you really think 70-140 million people died under Mao? This is exactly the problem. So much propaganda is spewed out that people lose all touch with reality and objectivity then beginning saying the most insane things one can imagine. In fact, the famine was the consequence of several bad policies and several natural disasters none of which can be solely blamed on Mao, with some obviously being no fault of his. The key thing here is that being supportive of Maoism does not mean something absolutely horrible is going to happen if you are in power. The Cultural Revolution was practically a civil war initiated because Mao was being stripped of his power and policies instituted that he absolutely despised. However, even that gives a bit more credit than he deserves. Essentially that is the core issue. People act as though Mao was a dictator with absolute power, thus making him 100% accountable for everything that happened before he died, when the truth is completely different.

Tue, 01/18/2011 - 16:22 | Link to Comment mikla
mikla's picture

Are you serious? Do you really think 70-140 million people died under Mao?

Numbers vary from 40-70 million, with some claims over 100 million.  For example:

http://www.scaruffi.com/politics/dictat.html

 

http://users.rcn.com/mwhite28/warstat1.htm

However, IMHO, the absolute number doesn't matter.  We can pretend it's "half-the-minimum estimate", which means Mao still beats #2 in the 20th Century, Stalin, ranking in at a wimpy 23 million.

Yes, we agree war is expensive.  Perhaps we disagree that heavy-handed external controls (e.g., "central planning") can also be expensive.  My assertion is that under Mao, that central planning was *very* expensive (in terms of human tragedy).

Mon, 01/17/2011 - 19:20 | Link to Comment DaBernank
DaBernank's picture

@Tartarus. - You missed the point of the article. There is no yellow threat because central planning of a complex economy always fails. China is no different, the wheels are coming off of the cart in a different way than they are coming off in Europe and the US. The nationalism in the military thesis, I guess you could interpret that as fear mongering but it's pretty essential to every military.

Tue, 01/18/2011 - 15:06 | Link to Comment Tartarus
Tartarus's picture

China does not have central planning, however. A big difference between China and the West is that China actually recognizes the need to take drastic measures to deflate bubbles. While disputing the effectiveness of such efforts is certainly reasonable, it represents a key difference in thinking. Also, the article was very clearly making suggestions of some sort of revolution and briefly suggested there would be war. So yes, it was indeed about fear-mongering.

Tue, 01/18/2011 - 03:04 | Link to Comment 1984
1984's picture

Mao was an emporer, just as ruthless, cruel and paranoid as Qin Shi Huangdi, the first of his ilk.

Mon, 01/17/2011 - 18:24 | Link to Comment the grateful un...
the grateful unemployed's picture

hard to imagine that in a world where the Soviet Union fell apart, that China can somehow hold their various regional and ethnic groups together. the point of China and any system really, is that central control doesn't work. The supreme irony is the US economy has fallen into the trap, of running a politburo economy. Just before 9/11 there were several state secessionist movements, including one in CA. 9/11 changed all that, just as WWII pulled the various groups, labor, socialist, communist, into the two party system, which is really the one party system. The difference for the US is we voted for Communism, except of course we were never given the candidate we voted for, so there you go.

Mon, 01/17/2011 - 18:30 | Link to Comment Apostate
Apostate's picture

Generalissimo Ben Bernanke closes in on conquering yet another foreign power...

Mon, 01/17/2011 - 18:34 | Link to Comment Kreditanstalt
Kreditanstalt's picture

AGAIN!

EARTH TO ZERO HEDGE WRITERS: It's "REIN IN LENDING", not "REIGN IN LENDING"....!!   (They're a government, not kings)

I'm mad as hell and I'm not going to take this anymore...

Tue, 01/18/2011 - 03:09 | Link to Comment 1984
1984's picture

Are you sure?  The bankers are sure acting like kings.  Oh wait.  You're talking about their gov't...

Mon, 01/17/2011 - 18:35 | Link to Comment Kreditanstalt
Kreditanstalt's picture

AGAIN!

EARTH TO ZERO HEDGE WRITERS: It's "REIN IN LENDING", not "REIGN IN LENDING"....!!   (They're a government, not kings)

I'm mad as hell and I'm not going to take this anymore...

Mon, 01/17/2011 - 18:41 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

AGAIN!

EARTH TO ZERO HEDGE POSTERS: HIT THE SAVE BUTTON ONE TIME.


Mon, 01/17/2011 - 19:12 | Link to Comment bingaling
bingaling's picture

+10 you reign!! That's the way to reign in people who scream in here. This is zero hedge we spell the way we want to spell . The extra G's are for Gold bitchez

Mon, 01/17/2011 - 19:23 | Link to Comment DaBernank
DaBernank's picture

+GG

Oh, there's a comma before bitches, bitches.

Mon, 01/17/2011 - 20:13 | Link to Comment bpj
bpj's picture

all this confusion with reign etc, had to start with the Who song "Reign over me" where it's starts with the sound of rain. Boomers just said fuck it after that.

Mon, 01/17/2011 - 22:45 | Link to Comment robertocarlos
robertocarlos's picture

I'm catching the 5:15 out of here.

Mon, 01/17/2011 - 19:54 | Link to Comment jeffca
jeffca's picture

I hear the drums of war beating.....

Mon, 01/17/2011 - 21:43 | Link to Comment treemagnet
treemagnet's picture

short, brief, powerful.  very nice - but when it comes to "chiner", unless somebody like TD says thats the way it is, I always wonder about the agenda.  That said, I wonder to myself (and apparently to you...) why the fuck TD's seal of approval is necessary.  For me, I guess it just is.  Maybe for the same reason I hold this site in such high regard.

Mon, 01/17/2011 - 22:19 | Link to Comment squexx
squexx's picture

The main reason Hitler is so demonized is that he tried to control the money supply.The joo Rothschild's couldn't have that. Stalin may have killed as many as 25 million and Mao's 50 million make Hitler's numbers look small. The number of 6 million is a Satanic Tribe lie, of course. Why do you think jooz get histrionic when anyone dares question the holy of holies number? Jooz are liars and the holohoax is one of the biggest lies of the century!

Mon, 01/17/2011 - 22:46 | Link to Comment robertocarlos
robertocarlos's picture

+1 and I'm in Canada so I might get arrested now.

Mon, 01/17/2011 - 23:22 | Link to Comment Oh regional Indian
Oh regional Indian's picture

The implied brother of a command anything is control. Having been in the armed forces for many a year, I can tell you that there is a big difference between being in a position to command and expecting to control. In fact, the armed forces would be a good analogy for china.

In reality, just beneath the thin veneer of C&C in the armed forces is a seething anger of men against the officers. It is this same tension that is released in battle (amongst others). But it is the reason control is so tightly clamped.

Reality for china, mid term is that a bunch of the politburo will be sacrificed in the "control" breakdown and it will split, USSR style into controlled fiefdoms with a loose, predatory, economic relationship to a central control mechanism.

Likewise for India by the way, which is a bunch of States masquerading as a nation. We do not even have a common language binding us.

Like all chaotic systems, sand pile style, the descent will be fast and "furious".

ORI

http://aadivaahan.wordpress.com/2010/10/18/an-opportunity-and-a-golden-w...

Tue, 01/18/2011 - 03:52 | Link to Comment ivars
ivars's picture

one thing I am sure of- China communists will reduce its exposure to internal capitalist boom very soon. There is an analogy in history- New economic Policies by Soviet Union which started in 1921 as the country economy was destroyed and ended straight after 1929 crisis as Stalin understood that the time for fast militarization has come as potential adversaries against the communist cause ( in that time, to install Soviet model communism in many countries) were dramatically weakened -same as today. And he was immensely succesful- after WWII, Soviet empire and communist controlled teritories had grown HUGELY. NEP run full scale in Soviet Union for about 7 years,before Party split over continuation, and Stalin(hardliners)  won. Chinese has run theirs for 7*5 =35 years, so its time to end this temporary measure (1980-2015) of improving economic conditions and move back to improving ideological things and power of communists, and project it internationally.

http://en.wikipedia.org/wiki/New_Economic_Policy

 

China will NOT cooperate long with the rescue of the West because of its economic interests. That is not important for a communist when international policy gains are within reach. And, by cooperating, China is itself running in trouble ( inflation, income gap) that threatens the power of the Communist party itself. Never trust a communist, period, based on Western values (greed) . Does not work.

 

China will scale back its capitalist and people focus part in favour of military development, so I am not so sure civil infrastructure projects without military benefits will get funding for long. That of course depends on the outcome of the coming power struggle in China CP in 2012-2013. I think China will reduce spending on people needs as it has done many times before, and eliminate most of the middle class/nationalize assets to use the opportunity of using the weakness of the West before the growing middle class and increasing costs of food, oil vs. increasing income inequality strip CP of its power. Its military spending will skyrocket. So China will intentionally reduce its economic efficiency in favour of projecting new ideology and power of CCP.

Tue, 01/18/2011 - 05:26 | Link to Comment DavidC
DavidC's picture

It is NOT REIGN IN, it's REIN IN! How many times?!

DavidC

Tue, 01/18/2011 - 10:43 | Link to Comment Jim B
Jim B's picture

Secretary of Defense Gates spoke with Hsu, who said he knew nothing of the photos.....

   I don't believe this one.... LOL

Tue, 01/18/2011 - 16:55 | Link to Comment MSimon
MSimon's picture

China should legalize opium.

 

Opium is the opiate of the masses.

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