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Marc Faber Discusses Chinese Economic Cooling Off, Sees Day Of Reckoning Delayed
Nothing notably new here from the man who has called for a Chinese crash in as little as 12 months. Now that the Chinese PMI came at the lowest level in 17 months (in line with the drop in the US ISM but completely the opposite of Europe's PMI as everyone makes up their own data on the fly now with no rhyme or reason), Faber seems to have mellowed out a little on the Chinese end-play. He now sees the China government stepping in and prevent a collapse of the economy when needed, as the economy has dropped from a near 12% GDP growth to a collapse in the PMI in the span of a few months, even as Chinese banks lent another quarter trillion renminbi billion in July, and issued who knows how many hundreds of billions in CDOs to keep the ponzi afloat.
From Bloomberg TV:
On the cooling of China’s economy:
"I mean I've been arguing this year that the economy would inevitably slow down, because the impact of the stimulus would diminish. But having said that, the economy hasn't crashed yet. It could still crash. But on the other hand, if you look at the performance of equities worldwide, it seems that the worse the economic news is, that the more the markets go up, because the market participants expect further easing measures, and maybe further stimulus. So altogether I would say it's not going to be a disaster for stock investors yet. It's interesting. The Chinese stock market began to discount the slowdown in economic growth actually precisely a year ago, in August, 2009. The market peaked out. And then drifted lower, but now that the bad news is essentially out, the market has started to rebound.”
On whether the property market is the biggest weakness in China:
"I'd like to make the following observation. We have a global economy, and an economy has different sectors. And you can have recession in some sectors of the economy. You can have a crash, say, in the property market, and you can have other sectors expanding. [Bolton: That's the biggest weakness, right Marc, as far as you're concerned, in the Chinese economy right now, it is the overheating in the property market?....] Well, I'm not sure. Because if they ease again, the speculation will go on. But we have credit problems in the property market undoubtedly. We have Ponzi schemes like loan sharking operations all over China. That's a very dangerous. But what I would like to point out is that the agricultural sector, the rural sector in China and everywhere in the world is doing relatively well, because agricultural prices have started to rebound. And that was also seen in Thailand. In Thailand, new car sales are up very strongly.”
On whether the Chinese government will delay increasing interest rates this year:
“I think even if they increase it marginally it's meaningless. Because interest rates are far below nominal GDP growth, and in my opinion far below inflation.”
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China’s Shark Loan Ponzi Finance- As Ponzi Schemes Collapse the Chinese Government Fears Civil Unrest
The collapse of this ponzi scheme at the town level, is a sign that even the bottom part of the hierarchy of the Chinese society was exposed to these schemes. This exposes the pervasivness and seriousness of the shark loan problem. more and more local participated in this get rich quick frenzy since normal business profits wages simply are not enough to make ends meat .
The collapse was triggered by the actions of one of the female ring leaders that turned herself in after she found out she can’t afford to pay the high interest rate anymore.
China’s Shark Loan Ponzi Finance- As Ponzi Schemes Collapse the Chinese Government Fears Civil Unrest
I wonder how many Chinese bought/stored silver (or gold) as was recommended to the citizenry by the Chinese government.
I wonder how many Americans did not buy/store silver(or gold)as was recommended to the citizenry by the Federal Goverment.
I can tell you that silver is a little hard to come by at the moment. They used to sell silver pandas at the post office. They've been sold out for a while.
Well, if silver or gold fell considerably, that might force the Chinese gov't to save their face and divert some small amount of their FX reserves into those markets. I'm not saying this will happen, but I don't think they want to lose their faces either. Buying whatever gold the IMF has to offer would be peanuts for the Chinese.
LOL why does Faber expect some kind of cataclysm when governments can always just step in to prevent them whenever they want?
No nation ever established has Not become a Failed state... no exceptions.
It's all about money and power through the barrel of a gun. Ideas, expectations, are what starts the fuse.
'Governments can ALWAYS step in and prevent cataclysm'?
Well any student of real history knows they can do that BRIEFLY, and always ends in total devastation.
Average lifespan of fiat currencies is 70 years or so before default.
That 70 years is way over estimated I believe it is more like 40.
Where do you get 70 years ? Average.......?
So you are a student of real history. Go on. I'm interested.
Well, we're technically around 40 years on the fiat dollar. 30 more years?
Popo! Oh, somebody just front-ran your comment to catch the much coveted #500000.
Wonder who it was?
...
Any ZH-ers there in China are welcome to join the worldwide ATM party on August 12. Please visit your ATM early (might be lines) and pull out the max in renmimbi.
Are you joking ?
Governments can only do that until they destroy the currency. Why do we even work if the governemnt could just mail everyone a paycheck at the end of the month ?
but...but...China is the FUTURE!!!!!!1
I guess the US circa 1928 had no future either...
There were plenty of natural resources, esp oil, and a looming destruction of manufacturing outside of the US (WWII). Not too long after 1928 US oil discoveries peaked.
China is at the top of its game and has nowhere to go but down.
Fundamentals! Energy = Work = (potential, depending on availability of surplus/cheap energy) = Growth. Declining energy means decreasing growth rate, contraction.
If you can point out where there is surplus/cheap energy resrouces then a projection of growth (but only until such surpluses expire) is possible. And, also consider that other resources are required as well, and that ALL non-renewable ones are by default in decline: and for a heighteneded example consider that the future wave is predicated on rare earth metals, whose very name should give a tip as to how That is going to pan out!
The laws of thermodynamics govern the physical world but analogies to the physical sciences can give you good hints on where the economy is going.
Take Entropy for example. It is said that a system with high order and structure has no where to go but down, depleting (transferring) it's energy as it degenerates into a natural state of disorder. Like a building demolished to the ground, it's stored energy as potential is converted into kinetic and heat energy as it progresses towards a pile of rubble. Any action to avoid this requires ever increasing amounts of energy to the point of unsustainability.
China's orderly structure (low Entropy) is showing clear signs of cracking. Stimulus pumping (Energy in) is no match to the laws of physics.
All ponzi schemes collapse. D'oh!! Faber is losing his touch as he grows older/ senile. China will crash as they have huge social, environmental and ponzi problems!
He aint losing his touch. He just doesn't want to say that it will collapse eventually because he knows the TV audience has allot shorter time horizon then he does.
China isn't the powerhouse economy that the US was in the 50s and 60s because it is not tied to gold.
"...because it is not tied to gold." -- Yet!
True but that might be a rough transition.
why did I get junked for that ?
Interesting that as what he predicted (to a certain extent) would happen, starts to happen - that he pulls back his call a bit. I'm perplexed...
True, but better to change his mind and admit it, than stay glued to an idea he thinks could be wrong.
On a long enough timeline, the survival rate for everyone drops to zero.
And the DXY breaking 81.5 like that [snap of fingers] is a bad sign for doelarr bulls. I still think that the Yen and Pound should fall further, but then again, which is the prittiest pony at the glue factory? Get yer popcorn ready!
David Tice on Bloomberg continuing the bearish theme. Tice points out that the GDP is a completely propped up farce:
http://www.bloomberg.com/video/61891496/
Mr lennon, good call. It did drop more quickly once it hit 81.05. now at 80.86
Tyler, please, the PMIs are due entirely to FX.
Check out EURJPY and EURUSD.
I know you know what a move like those can do to manufacturers, but the analysts at the banks are not capable of anything involving curvature, they can only draw straight lines. Hence european PMIs beat the linear 'expectations', everyone else misses. Yawn.
There still isnt enough global demand to keep this ship afloat. Faber knows this, he said alost nothing in this interview - which means he's happy, doesnt really have to talk his book.
These 'China Hands" big and small, sitting in their Manhatten, London and even Xianggang offices parsing the "China data" crack me up. I used to compile this data and on the operating level within the biggest SOE. I could never get two people to even count transactions and volume the same on a monthly basis. All that garbage translated onto a management with ZERO corporate governance experience, set in a politically correct fascist regime, where mere "critism" will end your career. The semi retired guys at the top, the ones that were catching sparrows and squirrels to stay alive during the Geat Leap and the CR, remember two things; inflation bad and too much unemployment scary.
The hard working foloks in China can't send their money out of China. The countryside is their international market that can and will drive the coastal cities. Cuturally, they can't cope with the reality of their systemic bad loans. We are now no different.
Wait until the RMB is pegged to Gold and Oil and you will start buying your happy meal with Yuan instead of the greenback.
If you want to invest in China, learn the language, go native and in a million years you earn some respect. In the meantime, we are just giving away our technology.
The hard working foloks in China can't send their money out of China.
This hasn't been true for several years.
The rest of your post is pretty right on though.
China may be only the latest in a long string of alleged free lunch perpetual motion economic miracles dating back to Japan, the Federal Reserve, the IRS, Mississippi Scheme, South Sea Bubble, the Walls of Jericho and the Tower of Babel.
Tough to cheat and lie your way to success for any length of time...
Check out the latest Chinese business, gutter oil for food:
http://news.scotsman.com/world/China-finally-flags-up-risks.6430120.jp
The Chinese economic miracle was created by high velocity money looking for a quick profit and may disappear as soon as the money leaves China, the SSEC down -70% so far since 2008.
Ask AOL how well it went twice, spending hundreds of millions with PR hoopla to enter China, and not opening a single Internet account...
http://www.pcworld.com/article/161110/aol_closes_china_randd_base_as_eco...
Makes sense to me. China will intervene. They are communists for crap's sake.
There are many investors and industry types out there who tout the Chinese middle class as some sort of saviour. I have sat through meetings with morons in 4,000 dollar suits and 200 dollar ties tell me that China will save the day and rebalance the global economy..
Oh really..
Because unless youre Chinese , you arent part of their plans - unless working at Walmart and McDonalds or mowing their lawn which once belonged to you , is a plan you can believe in.
Either America's leadership meet the Chinese threat head on , or Americans learn how to bow and kneel. The resource race is the name of the game - the Chinese do it through purchasing , the US through force. At some point in the future the wealth migration from the West to the East will cause an almighty uprising.
If it doesnt , then learn to bend low.
So true. China is proof that protectionism works. Meanwhile the idiots running businesses here in the US kid themselves that someday China will let US products freely into their markets. China banned the movie Avatar because it was too successful for crap's sake. China is not going to let us sell anything over there, ever.
Well of course they banned Avatar. That film is DEEPLY subversive to the Chinese. The script is explicitly against a military-industrial complex and an imperialistic scramble for resources. The heroes of that film are people who might, in China, be viewed as political dissidents. The movie is implicitly against nationalism and ethnocentrism. Meant to be a left-wing fantasy-critique of the U.S., it is even sharper as social criticism when applied to the Chinese.
China is running like a giant corporate now in many aspects. (You can complain for lack of freedom for Chinese people, but how much freedom do you have when you are in office working as an employee?) Major banks, real estate companies, railway companies, etc. are owned by the Chinese government. They are just different divisions within that giant corporate. When the time is tough for some divisions, the headquarters (the Chinese central government) ask another division (banks) to support or pop-up the weak divisions, and to "artificially" create jobs to build infrastructure (railways, buildings, parks, etc.). Such projects (20%?) will not generate enough cash flows to cover the specific loans. Some projects are public goods anyway, and some have long cycles (railways). But since all transactions happen within the corporate, and all assets created by these pop-up efforts will remain on the book of the corporate and will benefit future growth, the corporate headquarters are not too worried about the cash-flow problems. The nominal transactions are from the left pocket (a division) to the right pocket (another division). The left pocket will not force the right pocket to go bankruptcy and get money back. So what is the crisis here? In the US, we accept the norm that it is a good society to have some people to get rich by forcing other to become poor. The current financial crisis may not be so sever if our government rein in such speculative activities.
"Never get involved in a land war in Asia."
- Vizzini
"Charlie don't surf."
- Col. Kilgore
China is the latest iteration of the rising superpower, and its flavor is unique. Other superpowers arrived on the scene via technological expertise, military strength, inventiveness, an innovative world class company or two, or an abundance of natural resources.
China has based its growth on cheap/slave labor in endless supply, and technology theft. Also default, as in other nations have been in the process of commiting suicide so they have left the field open.
China has no world class companies. They have no world class (home grown) technology. They have no particular engineering expertise, and they have almost no pride of craftsmanship. They had added next to nothing to the body of human knowledge for longer than most can remember. Even their military---if it has strength---relies on the same thing as its economy: endless bodies to throw at adversaries. Its culture, at least that which it did not destroy during the "revolution", does not translate well outside China (except for what Japan borrowed and improved upon) and has little or no appeal to outsiders.
Somewhat like the US, China has built an economy dependent on ever-rising asset prices, though there are some differences. In the US, asset inflation was the driving force behind the ability to consume. In China, asset inflation---and property speculation in particular---substitute for corporate profits, which are almost nil from ongoing operations.
What China does have is individual ambition that collectively has created a juggernaut as every Tao, Dao and Han(i) tries to escape the "oneness" and banality of collectivism and endeavor to be something more than the billionth person in line. Mix that with a total lack of conscience---leading to environmental degradation of the grandest scale or the export of known fatal products---and some degree of success can be expected. How much staying power this new iteration has remains to be seen.
Incidentally, remember all the melamine-containing baby formula and the totally artificial eggs? They did not go to waste when the developed nations of the world caught on to the dangers. China has redirected transportation lines to the developing world, where governments lack the funds to do proper testing. Apparently Chinese exporters are doing their part to keep the world's population down by killing the poor and uninformed in Third World countries hungry for baby formula, milk, toys and all the glorious effluent from China's self-claimed economic miracle.
But it's not all one-way trade. Using the chloroform extraction method, China is importing potential brides from some of the very same countries now absorbing its toxic manufactured goods. This is China's unique solution to solving its excess male problem, that a result of the One Child policy and effective ultrasound or amniocentesis.
Gotta love this Brave New World of capitalism.