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Two Powder Kegs Ready to Blow: China & India
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
China and India are both powder kegs awaiting a spark for the same reason: systemic corruption.
The conventional view of China and India sports not one but two pair of rose-colored glasses: Chindia (even the portmanteau word is chirpy) is the world's engine of growth, and this rapid economic growth is chipping away at structural political and social problems.
Nice, especially from a distance. But on the ground, China and India (not Chindia--there is no such entity) are both powder kegs awaiting a spark for the same reason: systemic corruption in every nook and cranny of both nations. The conventional rose-colored view is that corruption will inevitably decline with modernization and economic growth.
This is simply wrong on multiple levels: as the opportunities for crony/neofeudal skimming increase, so does corruption. As the scale of the economy increases, so does the scale of corruption.
China's "princelings" (offspring and family of the inner political circle and top apparatchiks of the Communist Party) are billionaires, not mere millionaires. A recent expose of offshore accounts held by various Chinese billionaires estimated the wealth skimmed and transferred our of China at between $1 trillion and $4 trillion: China's Epic Offshore Wealth Revealed: How Chinese Oligarchs Quietly Parked Up To $4 Trillion In The Caribbean.
Even the top number is a gross underestimate, as $4 trillion only accounts for the skim of the top layer; beneath that 1/10th of 1% is the rest of the top 1%, tens of thousands of lower-level political functionaries who skimmed billions of dollars forcing peasants off their land and selling development rights to crony developers--to name but one common skim of many.
A more realistic estimate might be $6 trillion--half of China's gross domestic product (GDP). Consider the ramifications of the many models of systemic corruption at the top: How a PLA General Built a Web of Corruption to Amass a Fortune.
I know from confidential on-the-ground sources that a significant percentage of the entire top political layer of 3rd, 4th and 5th tier cities have left China for well-padded nests in the West: Australia and Canada are popular choices, as the right to immigrate can be purchased--just bring in the requisite sum of cash looted from peasants. (The U.S. also grants special immigration status to those bringing in major capital and declaring their intent to hire Americans: easy enough with looted millions.)
(Sidebar on how even the lowly functionary skimmer can get huge sums out of China: take a "vacation" to Macau. Buy $1 million in casino chips with your looted yuan. Lose $50,000 at the tables and then go cash in your remaining chips in U.S. dollars. Deposit the dollars in a Hong Kong or other Asian bank and then transfer the cash to L.A. or Vancouver to buy a house for cash. Repeat as necessary.)
All this systemic corruption is accepted as long as the conveyor belt of wealth is moving: that the previous political Plutocracy skimmed their $4 trillion and absconded with their ill-gotten gains is OK to their replacements, as long as there is another $6 trillion to be skimmed.
The problem is there isn't another $6 trillion to be skimmed. It has taken an enormous credit bubble of $23 trillion (The $23 Trillion Credit Bubble In China Is Starting To Collapse – What Next?) plus the monumental credit expansion of the shadow banking system in China to enable the skimming of $6 trillion by the political/financial Plutocracy.
This $23 trillion credit bubble is roughly twice the size of China's entire GDP ($12 trillion). That this credit bubble is generating less return in the real economy is obvious--diminishing returns have set in with a vengeance.
The revolution never starts with the oppressed peasantry--it starts with the bourgeois who bought the fantasy of another $6 trillion to be skimmed and credit bubbles/ real estate valuations that never go down. The leadership in China has managed to create a propaganda bubble of epic proportions: Chinese leaders are supposed to have a long-term view that puts the West to shame.
Alas, the secret view of China's leadership is considerably shorter-term: U.S. dollars in Swiss bank accounts, real estate in Vancouver, San Francisco, New York City, London, Geneva, etc. and whatever other assets can be scooped up with looted billions.
Corruption isn't just abstract: Much of China's building boom will not last a generation, much less a long-term timeline. This toppled tower is an apt metaphor for China's financialized crony-capitalist credit bubble and its shoddy corruption-riddled construction:
China's Towers and U.S. McMansions: When Things Fall Apart (Literally) (April 14, 2010).
India's system is different, but equally corrupt. Combine feudalism and religious tradition with a helping of modern crony capitalism and neofeudal looting, add a dash of post-Imperial flavoring and voila, corruption on every level.
The sad irony of this pervasive, systemic corruption that enriches the Plutocracy is that the average Indian and Chinese citizen is basically honest. Non-Elites will tolerate the corruption at the top as long as they believe their own prosperity is advancing. Once it becomes clear that their prosperity has been hijacked by the Plutocracy, tolerance of oppression, corruption and the vast inequalities of wealth being skimmed by the well-connected few will wear thin.
The spark that ignites the powder keg cannot be predicted or suppressed. Don't look to the disenfranchised peasantry as the source, though they are ready enough to cast off the Powers That Be; look to those who believed the gilded promises issued by the looters and discovered that the fruits of their labor and their hopes is disillusionment on a scale as vast as the skim looted from their nation by their self-serving leadership.
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And people will corrupt for the most petty of reasons, especially if there might be a schadenfreuden andrenalin kick to bootstrap the sociopathology. I'm sure that's not in any of the models.
Excuse me, but isn't there a third powder keg called the US?
Yes.
Purges of opponents to the Regime, like the 2016 film maker, are being arrested. Political, military, and any organized opposition to the now Dictator are being rounded up. Ordinary people are next.
Open source software is a solution to corrupt governments.
I have to admit I'm partial to chinese.
they all work hard, and its a meritocracy, meaning that your tested, and if you work hard you can go anywhere be anything,
But the INDIAN systm is CASTE and the stupidest fucking assholes go to college and rot floats to the TOP.
India is pathetic.
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Back in the day when I hired chinese in the states they always delivered, but the Indians are like "What I have to work, where I come from lower caste people do my work"
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Comparing INDIA, or CHINA, or AMERICA for that matter is for idiots all three countrys are like
CONDOMS, RICE, and GUNS
All three are useful, but all for entirely different purposes.
Who is paying you for this broken English posting marathon you're on right now?
condoms india
rice china
usa guns
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When the smoke clear's who wins? CHINA, hand's down.
Where is Russia in this picture?
I probably should have had
VODKA RUSSIA,
Where ever there is booze you will find happy men.
Of course in ASIA we can make an infinite fermented products with rice.
(yawn)
You think the princelings got their position and wealth through merit and hard work? Good grief Charley Brown!
Just like Chelsea Clinton. Pure merit.
Seven train aviators-3 radio. We have gold spare underneath in secret compartment.
My buggy comes to a Liz when I nesz to drink dem Slurpee drinks.
7-Eleven May Capitalize on Obama's Slurpee Drink Remarks
<The conventional rose-colored view is that corruption will inevitably decline with modernization and economic growth.>
Wasn't this the reported motivation for the original raproachment with China in the 70's? The US/West believed that by helping China develop economically, they could at the same time steer them to democracy & reduce the communist threat (while filling the elite's pockets via shipping high paying jobs from North America to slave labour in China and increasing profits).
That idea has always been fraught with peril and frankly, China, in terms of social and democratic instituations has not become like the US, but rather the US has become more like China with the centralization of power, control among a small group of elites...with the rest of the population left to fend for itself amid increasingly crumbling social institutions.
On a related note on the hacked CNN headline about China dumping US bonds....I always figured they would do that as part of a false flag operation....like a sudden North Korean nuclear threat (or similar crisis) that drives the world into the safe haven of $US....giving China the cover to dump their US bond holdings at a more favorable price (and using the proceeds to buy hard assets).
The only thing gained from trading with China is a hollowed out economy unable to support social safety net which will ultimately lead to a totalitarian regime the US was trying to mitiage...
Well said. It is too easy to condemn China for the acts of our shortsighted (from one election cycle or earnings report to another) "leaders." They obviously counted on creating a very complacent and agreeable China. I guess that didn't work out like they thought.
It still freaks me out that India and Pakistan both have nuclear weapons.
And Israel?
That's the real deaththreat to the world.
I don't have any political opinions about China and India. One thing is certain, they have both had a period of rapid credit fueled economic expansion. India has been on the rocks for awhile now and they have resorted to capital controls and devaluation. China hasn't really hit a big bump in the road as of yet, but I believe it's coming. Think for a moment about what is happening around the world and how it must be affecting their export driven economy, and their sales. Think about the turmoil in Europe, Japan, Ukraine, Argentina and elsewhere. Small as these problems may seem, they all take little bites off the bottom line. These are places where you can no longer project sales growth. Eventually, it causes a slow down. Sure things take time to fully develop, but the seeds of collapse are sown, and once the cascade starts it can gather momentum quickly.
It shows that the spectrum ought to be from statism to anarcho-capitalism, not democracy to dictatorship or some other BS convention. The detriment of statism is obvious no matter how that statism manifests itself. The U.S. when it was damn near anarcho-capitalist was the envy of the world in freedom, innovation, industriousness, etc, and then the Fed came and inflated in the 20s to prop up the pound and the crash came and they blamed it on laissez faire when the reality was that it was the Fed that inflated in the roaring 20s and led to malinvestments (unwarranted capital intensive undertakings, as well as more consumption financed cheaply via low rates so real resources for investment later are being depleted).
The tariffs and interventions in the 30s prolonged and exacerbated the Depression, but they fooled the people into going for the New Deal and that was essentially it. Since it has been spending all that wealth and trying to acquire wealth not via industriousness and legit voluntary trade but rather extracting and siphoning it through force abroad and as the global policeman, and through the main conduit of central banking.
China has economically liberated and it's no shock they are growing, but they have tremendous malinvestment with the ghost cities. This is not private citizens' choice as the government is directing the capital, and central planning always fails. Furthermore, they take paper for real goods, although now in Africa they are getting in return for vendor financing claims on real resources like oil and mines. In many ways China is productive but production is a means to consumption, not just to go ahead and build more stuff that is too many steps ahead. But that is what they are doing.
Just in general, though, the Chinese have a major proclivity to save. And if they keep saving in PMs not worthless fiat, they will keep increasing their leverage and influence. Savings is crucial to economic growth because it is foregone consumption available for future investment (or consumption). Their problem is their government just inflates and their currency never appreciates, and they squander their savings on unwarranted projects and US debt.
The tariffs and interventions in the 30s prolonged and exacerbated the Depression, but they fooled the people into going for the New Deal and that was essentially it. Since it has been spending all that wealth and trying to acquire wealth not via industriousness and legit voluntary trade but rather extracting and siphoning it through force abroad and as the global policeman, and through the main conduit of central banking.
Hit the nail on the head. Bravo.
http://www.youtube.com/watch?v=v1p9jlQUW0k
But but New Age disciples tell me these places are enlightened and much wiser than the West.
Interesting data dump of this info recently... like... someone purposely wants to trigger something. Hmmm...
Anyways, I spoke briefly to a friend -- it's known, but the feeling for some is what can you do? They (chinese govt) are the ones in power.
There are two narratives popular now that seem, on the face of things, to be at odds with each other.
On the one hand, we have an ever-increasing amount of funds (it seems to go up a trillion a day now) supposedly flying out of China into Western banks and real estate, all of which are funds stolen by the rulers and the elite. On the other hand, we supposedly have what must be the exact same rulers loading up on all the physical gold in the world and depositing in in the bowels of the PBoC. Why bother doing that if they are all going to immigrate? Why not just steal that $80-100 billion (figuring an average cost over a few years), too?
Pardon me for being somewhat skeptical, but when the numbers get this big ($6 trillion, up to 1/2 of GDP), I can't help but think somebody is just pulling them out of his arse. A $6 trillion injection into the RE and capital markets of the US, Australia, Canada and the UK just might have resulted in a GDP boost in excess of what those countries have actually experienced. Such a large movement of cash, even over a few years, would leave a mark, and one that would be visible to more than an association called the ICIJ, which until two days ago, most of the world did not know existed.
While there is little doubt that the Chinese elite is moving capital out of the country and away from the soon-to-have-their-dreams-of-driving-a-Bentley-dashed masses, the numbers now quoted just feel like hyperbole. The US has in total something on the order of $11 trillion in bank deposits. China's economy is smaller. If, in fact, $6 trillion has flown the coop, then the total market value of deposits in the Chinese banking system would be close to zero.
All good questions.
First I would suggest all to go to Charles Smith, and web and actually read the real article he's usually good about citations.
This think stinks of a lazy day pickup by charles, and it also stinks of MAULDEN and his crony's, perpetual guys on the seminar circuit, albeit really working with the GUBMINT as to cleverly offer the solution as an outside expert when the shit hits the fan.
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I don't see the panic on the streets of ASIA and I live here, and I don't see the panic on the stock markets of ASIA and I watch them daily.
So what is the panic? First of all its just the continual "LOOK OVER THERE ITS WORSE", why is Smith lowering himself to this? Most likely cuz his peers are doing the same shit.
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Here's the DEAL folks its going down, and guys like SMITH and MAULDEN have positioned themselves to the politicians as 'experts', as they intend to be the replacement for the Yellens of the future.
No better way to KISS POLITICAL ass right now than to BASH the BRICS.
I will go research myself on Smiths site and see if any thing factual can be backed up, but me thinks this is just old rehash.
The SKY is not falling in ASIA, but the DIKE is running over in the USA, and every liar, fool, lawyer, judge and cop has his finger in the dike to protect his pension check.
Good thing the world isn't a globalized economy with, say, ~18% of PRC exports being dependent on one market that is about to crash. Even if one accepts every single premise you make, the fact is no one is safe if major economic centers of the world economy implode, be they the $16T U.S., $8.3T PRC, $5.9T Japan, or $3.4T Germany. Any one of those top four go Argentina, bye bye normalcy bias. Maybe in your remote mountain fastness you may personally not get eaten by urban zombies, but a great deal of humanity will.
BTW, what view of "streets of ASIA" can you have from a remote mountain village?
SMITH is a gubmint whore and he's bringing 1,000's of Foreign cops to USA streets.
This story wreaks of shit, ... I went over to Smith's site... I feel that Smith is working with the US GOVERNMENT on a reciprocity agreement that INDIA and CHIAN greatly want, and this STORY is a PLANT to get the US Government to green-light the program.
Heres the deal right now today in INDIA & CHINA the IRS/FBI have over 500 field agents who sole job is to find ex-pats from the USA that have taxable USA money hiding in ASIA aka INDIA and/or CHINA.
Now the CHINESE & INDIANS want the same thing they want to send 1,000's of their OWN FEDERAL agents to the USA, to find these TRILLIONS of dollars of funds in hidden USA accounts and/or CANADA/USA real estate.
This story is a feel good story. To create sympathy for the poor governments robbed by the rich fleeing with their money.
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The USA has the power and muscle to force its way into CHINA & INDIA and open FBI/IRS offices, but so far for legal reasons the USA hasn't allowed the CHINESE or INDIANS to come here to the USA and spy on INDIAN/CHINESE nationals in order to recover assets and CASH.
This all part of the long know fact of UN and IMF, where all governments become one.
Long ago right wingers predicted there would be RUSSIAN troops on USA streets, but WHO would have predicted CHINESE FBI & IRS agents on US streets you would have been called a loon.
SMITH is a gubmint whore and he's bringing 1,000's of Foreign cops to USA streets.
I see here nobody has the balls to contest my premise, so case closed, 10's of 1,000's of CHINESE/INDIAN IRS/FBI agents coming to USA to fuck CHINESE/INDIAN expats in the ass on US soil, my gawd what has become of the land of the 'hairlip'.
The majority of the gold is not going into the Central Bank. It is being bought by richer Chinese or being smuggled into India.
As a Vancouver resident this has been obviously happening for years. If you are lucky enough to have the right address in the west side or even Richmond you have benefitted from the Chinese invasion. Just like China we have ghost condo buildings which are built and sold with maybe a 20% - 40% occupancy rate. Its rediculous, if this keeps up there is no way that my kids or their friends will be able to afford a home in the lower mainland.
$200k - $300k condos, $400k to $1M townhouses and the sky is the limit for houses. Rediculous. It has to end at some point.
I live in S Florida. It can and will happen. It's going to happen a second time here I think.
"systemic corruption in every nook and cranny of both nations. "
And how is that different from the EU or the US? It is a world-wide phenomenon.
Gold smuggling into India is so massive that government duty is effectively worthless.
“A duty cut is not going to provide any major relief to jewellers as restrictions have not really reduced the gold appetite of Indians. Import has lowered only on government books. Gold is being smuggled. Hence, a duty cut is not going to serve any purpose. The government must relax the 80:20 rule,” said Daljeet Kohli, head, research, IndiaNivesh Securities. The duty is 10 per cent.
http://www.business-standard.com/article/markets/jewellery-stocks-up-on-talks-of-relaxation-in-gold-import-norms-114012300933_1.html
If there's a silver lining, it's that they two countries are 10,000 miles away.
And that's a long way for a dead pig to travel.
We are lightyears ahead of China in terms of corruption and misallocation of resources and capital. China has strong manufacturing {unlike the US}, and it's bamboo network continues to find profitable new investments throughout s.e. Asia.
China, unlike the US, isn't going to sign trade agreements that hurt their long-term productivity on the thin premise of ...containing China [Hey Tylers - more on the TPP would be be good to see].
And China can fuck up its foreign policy decisions on its own. China doesn't have an AIPAC trying to drag it into needless wars based on outright lies with nations that would make excellent trading partners. That is, it doesn't have so deal with the same opportunity costs for the perceived interests of a tiny foreign state like the American economy does... A situation which grows worse year by year.
Just my 2 cents. Chinese corruption is screwing the Chinese peasant, not necessarily China, and the Chinese government will bend and adjust to contain that anger and/or claw back ill gotten gains when they feel necessary. Or, I'm wrong, they don't - and they get a revolution and/or go into Mongloia or Eastern Siberia and say "what are you gonna do about it" and begin building new cities, roads and manufacturing plants.. Still less of a powder keg than the US. I can't speak to India, which would probably dissolve if they didn't have a Pakistan to be opposed to.
Of some potential interest:
The Inescapable Antagonism Between A Prosperous China and An Imperial U.S.Defeat the Israel Lobby
Support the Geneva negotiations with Iran
+1
Interesting comments. Thanks for the links.
superb analysis about a predatory US "messianic" strategy, written into the DNA of West, as opposed to the more "civilized" strategy of China, as History teaches us. China is no Mongol Empire.
But China has shown it wants to be regional hegemon like in Tibet.
Oppenheimer's toy makes the game and stakes very complicated, with the Russian Gazprom Bear and the sprawling Indian subcontinent, tinderbox overpopulated region, in the wings.
It means "the buck passing" and proxy wars will continue flourish.
The current US led paradigm is not one that encourages world communion in peace and sustainable growth.
I've never thought that India's economy (nor its society) can easily be compared to China.
Brazil is a much closer comparison. Both are run by old-hand socialist governments who have not a clue about how to develop and run a successful free market system. Far too much dogma left over from the days of colonialism.
China needs a economic and corruption cleanse for sure. India is just a reglious mess and a place with desperate rapists. But then, the WEST is run by the same corrupt (Rothschild) FED and ECB with its cronies the IMF, WB, UN as well as the ESF. The only thing that is different is the sophistication of the outright corruption. Can you see it or can't you. EYES WIDE OPEN SHUT comes to mind. Take your pick of the type of evil you prefer.
China owns its own central bank and does not use its domestic currency for trade. This means that both the banksters required for a specctacular crash are missing and that there are no currencies the domestic currency can crash against. This article is just western propaganda as it identifies a problem that would only be serious if China was controlled by banksters, which it is not. China can print the money it needs to stop financial collapses and can be expected to do so.
When the average Chinese realize how precarious the situation is due to job loss, inflation, and collapse of banks and loan repudiation it is not going to matter if they can print their own currency.
China is much further down the road to the crack up boom than we are. Maybe you can quit reading Krugman and read some Hayek, Mises, and Rorhbard. Even if you disagree at least you won't sound like an simple idiot any more lol
News from Davos as pronounced by arch HF Oligarch Singer :
“We can only assume that the reason the global financial system is still… over leveraged, opaque, reliant upon the implicit and explicit support of governments for its very existence… is that fixing the problem would be too painful for powerful special interest groups,” Singer wrote in prepared remarks obtained by ValueWalk.
He continues: “The major financial institutions (those bailed out or implicitly supported in the last crisis) have taken important steps to reduce their trading risks since the 2008 collapse. However, it is impossible to verify such progress from public financial statements or even to assess these institutions’ true financial risks.”
Now here's the thing: We saw a little bit of this pay out last week when Wall Street reported its Q4 2013 earnings. JP Morgan serves as the perfect example.
JPM's investment bank reported a $1.5 billion loss because it started using a different way to value its over the counter derivatives — in finance jargon, this is called a funding valuation adjustment (FVA).
Of all the major banks that reported, only JP Morgan took steps to change the way it reports the derivatives it's trading/holding on its balance sheet.
What the FVA is supposed to do is force banks to report what it's costing them to hold the derivatives on their balance sheet — the derivatives' funding cost.
What makes this possible, is that regulators have been working to force the value of obscure derivatives into light. If we got into that conversation, you'd fall asleep. But it's happening.
The point is that banks can now use this value data to better understand what is going on in derivatives markets. And apparently what's going on blows $1.5 billion holes in bank balance sheets.
Read more: http://www.businessinsider.com/paul-singer-on-dervitives-2014-1#ixzz2rJpMo2Xx
From the Horse's mouth. What more need be said on the current financial conundrum and its explosive implications !
DID YOU SAY TWO POWDER KEGS ?
the indians would gang rape the communist lackey bitchez!
Brazil is corrupt also, within the political system (from federal to state, down to local), and between the political system and business. This will hardly change since politicians only go into politics because they get back handers. And there is huge ignorance in Brazil from many parts of society, with little respect for the environment and noise pollution.
Brazil is also dangerous in many parts of all of the big cities from petty thieves and drug dealers.
You won't see any mention of Fortress Brazil during the World Cup (sun, beaches, dancing, football). Fortress Brazil, where every single building in Brazil down to little hovels of shacks is barricaded up at night with iron gates, locks and in a lot of cases sharp wire and spikes on gates and walls.
Fucking humans are a failed experiment. The crown of creation turned from gold (if it ever was) to shit. God sitting up there in heaven is running out of reasons not to flush it and if there is no god, I'm sure we'll do it ourselves.
God promised to collect his Chosen People.
Not all humans are lost. A select few will be saved.
Expect the spaceship any day now...
7 to 10% real growth is never possible to sustain. The misallocation and fake numbers out of china are only one Bernanke or Yellen fart away from completely falling apart. They built a glass house and never thought of the consequences.
India is in slightly better shape if only because of a more balanced economy and they have less far to fall.
A certain Top calling troll was steadfast that it would be the deflation monster that gets us all, and that all the china cheer leading on this site three years ago was wishful thinking.
May he rest in peace.
Finger raping India's sexy diplomats can't help the situation.
Sounds like he is really writing about Amerika. But doubt the sheeple will ever wake up.
On powderkegs and contagion...
http://www.youtube.com/watch?v=Glfk_8oU7ko
I'm glad that the Chinese have chosen Hongcouver, one of Canada's most beautiful cities. Fukushima will take care of them.