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China's Government Self-Immolation Progresses As We Expected

Tyler Durden's picture




 

Just a month ago we warned that all was not well in the political elites of China. Critically, expectations of some coordinated and massive stimulus to save the world were far overblown since "the last thing Hu & Co. would want in their final months in office would be to unleash another oligarch-enriching orgy of speculation". Sure enough, as Reuters just reported, 'China's ruling Communist Party is seriously considering a delay in its upcoming five-yearly congress by a few months amid internal debate over the size and makeup of its top decision-making body as the party struggles to finalize a once-in-a-decade leadership change.' The delay will likely further unnerve global financial markets whose perception of Chinese politics as a well-oiled machine has already been shaken this year by the extraordinary downfall of an ambitious senior leader, Bo Xilai, in a murder scandal.

Reuters Exclusive: China considers delay of key party congress: sources

China's ruling Communist Party is seriously considering a delay in its upcoming five-yearly congress by a few months amid internal debate over the size and makeup of its top decision-making body, sources said, as the party struggles to finalize a once-in-a-decade leadership change.

 

The two most senior posts, of president and premier, are not considered in much doubt. But any delay in the congress, no matter the official reason, would likely fuel speculation of infighting over the remaining seats in the nine-member politburo standing committee which calls the shots in China.

 

...

 

One long-time and well-connected U.S.-based investor in China said there were two ways to interpret a congress delay.

 

"One is to say that the leadership is in turmoil and that China is fighting a serious challenge to reform. That will be quite upsetting to the markets, as it may be seen as a challenge from the like-minded allies of Bo Xilai," he said.

 

"The second interpretation is that China is trying to cope with the challenges posed by the shift in the global economic order and does not want to move rashly. That is not positive for markets, either," said the investor, who declined to be named.

 

As Sean Corrigan recently noted (and now seems extremely prescient):

Even if we dismiss the wilder rumours swirling about the offshore websites and the fringes of the blogosphere, it is painfully clear that something very unusual and potentially disruptive is afoot. Given our overdependence on the myth, as much as on the reality, of a China rising inexorably and uninterruptedly to a resource-hungry world primacy over the next decade or two, the interplay of factional political infighting with potential economic meltdown could be the defining influence on the world’s affairs in general, much less on the enthusiasms of those active in its financial market playground, in the coming months.

 

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Tue, 05/08/2012 - 13:32 | 2407277 LawsofPhysics
LawsofPhysics's picture

Apparently, Americans haven't cornered the market on greed and corruption, yet.  Imagine that.

Tue, 05/08/2012 - 13:35 | 2407300 francis_sawyer
francis_sawyer's picture

The Chinese "invented" paper currencies... We just turned them into a contact sport (with ring card girls in scantily clad outfits to inform us of what round we were in)...

Tue, 05/08/2012 - 14:00 | 2407423 AnAnonymouses
AnAnonymouses's picture

Chinese citizenism at work!  China citizenses all really want to be US citizenses!  Struggle for power all about yuan and gold to buy good land elsewhere!

Tue, 05/08/2012 - 14:06 | 2407435 Manthong
Manthong's picture

Oh, our little Chinese friends will be just fine.

They only need to create 2,000,000 new jobs PER MONTH for at least the next THREE YEARS to keep everything together.

That should be a cake walk with the help of a strong US and EU.

http://www.globaltimes.cn/business/china-economy/2010-12/598403.html

Tue, 05/08/2012 - 14:11 | 2407466 Upswaller
Upswaller's picture

OT, sorry, but has anyone seen CD lately?

Tue, 05/08/2012 - 15:38 | 2407852 cougar_w
cougar_w's picture

"Seen" as in down at the pub? No. On the ZH boards? Yes indeed.

Wed, 05/09/2012 - 22:25 | 2412009 sullymandias
sullymandias's picture

2 million jobs per month for 3 years? Easy. Occupy Kazakstan. Then Pakistan. Then Iran. Then Afganistan. Etc.

Tue, 05/08/2012 - 14:14 | 2407473 Joe The Plumber
Joe The Plumber's picture

I will give you a green for a somewhat original thought. Yep the chinese are just like us or want to be

Tue, 05/08/2012 - 14:23 | 2407498 Dr. Acula
Dr. Acula's picture

"The capsules were made in northeastern China from babies whose bodies were chopped into small pieces and dried on stoves before being turned into powder... some people believe them to be a panacea for disease, the customs service said in a statement.

The capsules of human flesh, however, contained bacteria and other harmful ingredients."

 

http://www.telegraph.co.uk/news/worldnews/asia/southkorea/9250438/Pills-...

 

"The San Francisco Times reported that tests carried out on the pills confirmed they were made up of 99.7 per cent human remains.

The tests were successfully able to establish the genders of the babies used."

http://www.dailytelegraph.com.au/news/thousands-of-pills-filled-with-pow...

Tue, 05/08/2012 - 14:45 | 2407606 AnAnonymous
AnAnonymous's picture

Buy land? Under US citizen special deals as offered to the Indians then.

The pic shows the good progress of US citizenism in China though. Doing what a US citizen does.

Tue, 05/08/2012 - 14:57 | 2407678 Sandmann
Sandmann's picture

Under US citizen special deals as offered to the Indians then.

 

Sure...they get Casinos

Tue, 05/08/2012 - 15:02 | 2407703 AnAnonymous
AnAnonymous's picture

Part of the Ponzi, part of the ponzi...

Tue, 05/08/2012 - 16:22 | 2408050 akak
akak's picture

But without Ponzi, there are no "Happy Days"!

Wed, 05/09/2012 - 01:22 | 2409144 Oh regional Indian
Oh regional Indian's picture

The new Trinity of Joy-full-ness....

Happy Days

Happy Hours

Happy Endings.....

ori

Tue, 05/08/2012 - 14:50 | 2407635 LFMayor
LFMayor's picture

comedy gold, with a spritz of delicious irony for flavour.   Well done sir!

and to the real AnAnoms....  a most heartfelt FLUCK YOU, ASHWHOWLS.

Tue, 05/08/2012 - 13:40 | 2407327 Dear Infinity
Dear Infinity's picture

Blythe Masters: Cancer Raising Money For Cancer

To sum it up, the internet is DESTROYING WAGE ABRITRAGE.

Tue, 05/08/2012 - 13:55 | 2407395 Joe The Plumber
Joe The Plumber's picture

U have it backwards. The internet promotes wage arbitrage by making it easy to take work from highly paid employees and give it to low paid employees

Tue, 05/08/2012 - 14:06 | 2407448 Dear Infinity
Dear Infinity's picture

thanks for catching that

Tue, 05/08/2012 - 13:32 | 2407278 apberusdisvet
apberusdisvet's picture

Hu's on first?

Tue, 05/08/2012 - 13:47 | 2407361 mayhem_korner
mayhem_korner's picture

 

 

Tea, any mon?

(it's weak, I know)

Tue, 05/08/2012 - 13:52 | 2407378 Mary Wilbur
Mary Wilbur's picture

Truly clever and very funny.

Tue, 05/08/2012 - 16:41 | 2408065 akak
akak's picture

 

Hu's on first?

I don't know exactly where Hu is, but if the game is being played in China, you can be sure that Pu is all over the field.

Tue, 05/08/2012 - 18:49 | 2408459 TheFourthStooge-ing
TheFourthStooge-ing's picture

Being to in referencing of Mr. Jintao Hu, Hu in roadside stand gloriously inventoring of Pu Pu Platter patriotic Chinese citizenism recipe.

 

Tue, 05/08/2012 - 19:12 | 2408471 akak
akak's picture

Having now face if the decisioning for among them sublimely enticing dried fetus health-making capsules, fried puppies and kitten tenders (oh! the goodness tastings they!), or beforesaid Pu Pu platter (served on roadside, in authentic fashion), difficultness on the choosing are do not but that exceeds length of Great Wall of Chinese Citizenism denialism, many much so.

Tue, 05/08/2012 - 13:33 | 2407283 carbonmutant
carbonmutant's picture

Will America follow suit?

Tue, 05/08/2012 - 13:59 | 2407411 mayhem_korner
mayhem_korner's picture

 

 

When will America follow suit?

Fixed it.

Tue, 05/08/2012 - 14:03 | 2407439 carbonmutant
carbonmutant's picture

Late October?

Tue, 05/08/2012 - 15:43 | 2407878 cougar_w
cougar_w's picture

Of which year?

Seriously. I think the PTB are going to go all-out to make the upcoming election into a grand party and mutual admiration society. The debates (there will be) will be rigged, scripted and pre-chewed. The rallies (such as they are) will look like scenes from Norman Rockwell. The voting day turnout will be policed to within an inch of despotism.

They do not care who wins. However they care a great deal about keeping the ship of state from capsizing under a rogue wave of populist outrage. And this, they will combat tooth and nail.

Tue, 05/08/2012 - 16:37 | 2408090 jumbo maverick
jumbo maverick's picture

I sure hope Aretha Franklin shows up again at the inauguration wearing another spectacular hat. Circus and bread.

Tue, 05/08/2012 - 13:33 | 2407284 francis_sawyer
francis_sawyer's picture

Calling WB7...

That "kick the can" foto from the other thread is valid here too (just replace the Obama logo with a Chi-Com one)...

Tue, 05/08/2012 - 13:41 | 2407333 williambanzai7
williambanzai7's picture

Chinese Proverb: A fool is the guest who insults his hosts.

Tue, 05/08/2012 - 13:52 | 2407376 Chump
Chump's picture

ROR!  Sounds like typical US citizenism if you ask me!  Made me laugh!

Tue, 05/08/2012 - 14:14 | 2407476 Dr. Engali
Dr. Engali's picture

Chinese proverb: Foolish man give wife grand piano, wise man give wife upright organ

Tue, 05/08/2012 - 15:27 | 2407799 williambanzai7
williambanzai7's picture

The version I use: how are women and pianos alike!

Either they are upright or they are grand.

Tue, 05/08/2012 - 16:16 | 2408023 Catch-22
Catch-22's picture

Tulips on organ preferable to roses on piano

Wed, 05/09/2012 - 01:26 | 2409149 Oh regional Indian
Oh regional Indian's picture

Except that in India, in Hindi, Rose on the Piano would translate to Every Day on the Piano.

Then?

ori

Wed, 05/09/2012 - 06:36 | 2409372 Catch-22
Catch-22's picture

Works for me...

Tue, 05/08/2012 - 13:39 | 2407312 Sandmann
Sandmann's picture

China is probably have a quiet chat with Bank Auditors to ask who financed all those See-Thrus in Shanghai and how they intend to make the books look beautiful. Long before the Chinese went bust making iPhones and LCD displays they went down the drain making Ming vases - of which they had a monopoly. China will crash and burn but the Corporation of The City of London will have invested the funds of The Elite in Canadian forests and US gas fields long before the IMF sauys "We didn't realise"

Tue, 05/08/2012 - 13:44 | 2407340 Aziz
Aziz's picture

China: $3 trillion of FX reserves (and growing) away from being bust.

Tue, 05/08/2012 - 13:52 | 2407368 GeneMarchbanks
GeneMarchbanks's picture

No, it is as the man states. Those 'reserves' cannot be deployed in any meaningful way.

http://www.atimes.com/atimes/China_Business/ND20Cb03.html

To aim is simply to suffocate over the long term.

http://www.atimes.com/atimes/China/NE09Ad01.html

Tue, 05/08/2012 - 13:58 | 2407404 Aziz
Aziz's picture

Nope. You don't go broke as a nation by running huge current account surpluses, not to mention massive domestic savings rates. That's like saying an obese guy is going to starve because he's eating too many hamburgers.

Tue, 05/08/2012 - 14:01 | 2407434 GeneMarchbanks
GeneMarchbanks's picture

Interested in epistemology are you? Hamburgers and 'surpluses' aren't the same 'thing'.

Tue, 05/08/2012 - 14:09 | 2407450 Aziz
Aziz's picture

You don't go broke by accumulating huge piles of cash.

I can talk about China's problems all day (central planning failure, misallocation of capital, although as a centrally-planned economy I think they are marginally better at it than the dumbshit central planners over here), but "going broke" isn't one of them. 

If we're gonna look for countries going broke, let's look at the consumer nations and the debtor nations, and the welfarist nations, starting with Britain and America.

Tue, 05/08/2012 - 14:16 | 2407482 GeneMarchbanks
GeneMarchbanks's picture

You don't go broke by accumulating huge piles of cash.

That doesn't mean that you can't. There are no 'huge piles of cash' only promissory notes. Sure you can recycle that into gold, military spending, Aussie minerals and even Vancouver housing but that guarantees nothing.

Tue, 05/08/2012 - 14:27 | 2407535 Aziz
Aziz's picture

I'd love to see the U.S. try and default on those promissory notes, I really would. What percentage of U.S consumption goes through China now? >95% of U.S. consumption involves Chinese labour or resources, or components or sub-components, even the "Made in America" stuff a lot of the time is Chinese components.

That's the state of global trade, and that's what you get for relocating your manufacturing base into the backyard of a hostile foreign power who fucking hate the West for the opium wars....

I know what usually comes next...

"We have thermonuclear weapons, we can default on whatever we want"

Typical American hubris. 

http://www.zerohedge.com/news/guest-post-treasury-bubble-one-graph 

Tue, 05/08/2012 - 14:36 | 2407571 GeneMarchbanks
GeneMarchbanks's picture

Didn't read my links did ya? 'Default' has already happened.

Tue, 05/08/2012 - 14:48 | 2407627 Aziz
Aziz's picture

Not really. The dollars are still dollars. They're still using them to buy African resources and farmland.

Must be why the U.S. imperialists are selling that Kony 2012 bullshit to get America deeper into Africa to compete for resources. Lucky for the Chinese they don't have to play along with the socially aware bullshit, they do imperialism as imperialism without the humanitarian pretensions.

Tue, 05/08/2012 - 14:56 | 2407668 GeneMarchbanks
GeneMarchbanks's picture

'Not really'

Dollars are indeed dollars, the tautology still doesn't help your case. You are aware that there is no pile of FX 'cash' stashed away with large armed Chinamen watching over it?

Imperialism? That's another topic for another day.

Tue, 05/08/2012 - 14:56 | 2407671 Sandmann
Sandmann's picture

They're still using them to buy African resources and farmland.

 

Yes but they are Neo-Colonialists who send Chinese to act as Masters over Africans....and we know how that will end

Tue, 05/08/2012 - 15:03 | 2407712 AnAnonymous
AnAnonymous's picture

Neo Colonialists? You mean US citizen?

Tue, 05/08/2012 - 15:35 | 2407830 TheFourthStooge-ing
TheFourthStooge-ing's picture

No. Don't play dumb. He means Chinese citizens.

 

Tue, 05/08/2012 - 16:07 | 2407979 BigJim
BigJim's picture

He's not just 'playing' dumb.

Tue, 05/08/2012 - 14:56 | 2407655 Dr. Acula
Dr. Acula's picture

>"We have thermonuclear weapons, we can default on whatever we want"

"If the Asiatics and Africans really enter into the orbit of Western civilization, they will have to adopt the market economy without reservations. Then their masses will rise above their present proletarian wretchedness and practice birth control as it is practiced in every capitalistic country. No excessive growth of population will longer hinder the improvement in the standards of living. But if the oriental peoples in the future confine themselves to mechanical reception of the tangible achievements of the West without embracing its basic philosophy and social ideologies, they will forever remain in their present state of inferiority and destitution. Their populations may increase considerably, but they will not raise themselves above distress. These miserable masses of paupers will certainly not be a serious menace to the independence of the Western nations. As long as there is a need for weapons, the entrepreneurs of the market society will never stop producing more efficient weapons and thus securing to their countrymen a superiority of equipment over the merely imitative noncapitalistic Orientals. The military events of both World Wars have proved anew that the capitalistic countries are paramount also in armaments production."

- Ludwig von Mises, http://mises.org/Books/humanaction.pdf

 

Tue, 05/08/2012 - 14:54 | 2407661 Sandmann
Sandmann's picture

I'd love to see the U.S. try and default on those promissory notes,

 

Would be truly frightening - especially for China. Over 1.5 billion people with a GDP per capita of $4000 and Denmark on $56,000 means China ranks with Jordan.

The US could destroy the global financial system - you confidence that it can control events is wonderful Aziz. I simply don't think the US can control the outcomes.  Are you really too young to remember Japan in the 1980s borrowing for 0% and building huge industrial capacity that noone needed and finding out you go bust if you cannot keep volumes up. Experience Curve Pricing doesn't work if you get pushed up the Cuve by not selling volume.  That is China's problem - Demand is drying up

Tue, 05/08/2012 - 14:58 | 2407683 GeneMarchbanks
GeneMarchbanks's picture

'Are you really too young to remember Japan in the 1980s borrowing for 0% and building huge industrial capacity that noone needed and finding out you go bust if you cannot keep volumes up.'

He is.

Tue, 05/08/2012 - 16:11 | 2407813 Aziz
Aziz's picture

The US could destroy the global financial system - you confidence that it can control events is wonderful Aziz.

The US could destroy the global financial system, thereby destroying its own ability to acquire the goods and resources it — and its military — needs to function. Great idea.

A
re you really too young to remember Japan in the 1980s borrowing for 0% and building huge industrial capacity that noone needed and finding out you go bust if you cannot keep volumes up. Experience Curve Pricing doesn't work if you get pushed up the Cuve by not selling volume.

Is that really all you've got? Demand is drying up? Demand dried up in the 30s in the US too, and as I say by 1945 the U.S. was the pre-eminent power. I'm not saying there won't be some kind of economic turbulence and hard-landing afflicting China. Their economy is messy, very messy, Hu Jintao even admits it. But when you are the world's productive base you are the world's productive base. Demand can come back. Harder for America to rebuild its productive base than for demand to return...

A war would do it...

Tue, 05/08/2012 - 17:38 | 2408256 Sandmann
Sandmann's picture

and as I say by 1945 the U.S. was the pre-eminent power.

Really ? Yet it could not risk war with the USSR. In 1945 the world had just seen a war on a scale China could not handle and where the US was the only intact major power. The US was hugely in debt in 1945 and financial repression lasted throughout the 1950s to pay for the Debt Mountain. Yet it was still BRitain that produced the world's first civilian jet aircraft, the first civilian nuclear reactor, and built its own hydrogen bomb - even as a major indebted nation. It was not cHina or japan or France or Germany or the USSR or USA.

 

You simply have to get used to the idea Aziz - we are superior

Tue, 05/08/2012 - 17:41 | 2408269 Sandmann
Sandmann's picture

thereby destroying its own ability to acquire the goods and resources it — and its military — needs to function. Great idea.

Not really - economic growth depends on US trade deficits. China is simply parasitic and it is unsustainable. The destruction of the Cinese Communist Party is the greatest prospect of current turmoil and when Tariffs return and Import Controls China will have a People's Revolution against the New Emperors

Tue, 05/08/2012 - 17:55 | 2408318 Aziz
Aziz's picture

China is simply parasitic and it is unsustainable.

That is absolutely Orwellian backwards logic. The country that produces is the parasite, and the country that consumes is the host?

Think about that for a second. The producer is the parasite? How do you even produce that kind of logic?

By the way, GDP growth is just circulation of money (i.e. a derivative) it doesn't really refer to any real economic activity. 

Tue, 05/08/2012 - 17:48 | 2408289 Sandmann
Sandmann's picture

of a hostile foreign power who fucking hate the West for the opium wars....

 

Opium Wars were simply Jardines looking for a product to sell the Chinese and export a surplus from India. China had a Protectionist Policy and would not buy Western goos but demanded Silver for its exports so a product had to be found to appeal to Consumer tastes. The Chinese must learn to avoid Mercantilism and building up unsustainable trade surpluses. 

Tue, 05/08/2012 - 14:33 | 2407532 MarsInScorpio
MarsInScorpio's picture

Aziz, I don't think you are quite getting it.

 

The issue is not what they've got in foreign reserves, the issue is what can they do with them.

 

Or to put it another way, what can they buy that raises their standard of living for the enslaved masses? (And we know they are, in fact, often literally enslaved. The Reds are good at organization, but quality of life, not so much.)

 

So before you get carried away about their foreign reserves, let me respectfully suggest you think about how they can use them to improve the life of their population. Digital dollars in the BoC don't put food on anyone's plate.

-30-

Tue, 05/08/2012 - 14:35 | 2407565 Aziz
Aziz's picture

It's relatively easy to improve your standard of living when you have the world's manufacturing base in your back yard.

That was the basis of America's development, in fact — manufacturing and credit. Now it's not Detroit, it's Guangzhou. 

People still accept dollars in payment for goods. China is sucking up gold. It's sucking up foreign farmland. It's sucking up foreign resources. As I say we can talk about China's problems all day, just as we could talk about America's problems all day in the 30s. Didn't stop America becoming the global superpower based on its manufacturing base, and it being creditor to the world.

Tue, 05/08/2012 - 14:44 | 2407601 GeneMarchbanks
GeneMarchbanks's picture

Well, great. I agree, however my time-frame isn't a century I'm only concerned about what might likely happen next and that is a purge of bad investment and internal strife for countless reasons. Yet, therein lies the trick: should they play the next decade poorly it jeopardizes the long term.

30s US is a poor analogy because there was a war involved.

Tue, 05/08/2012 - 14:48 | 2407632 Aziz
Aziz's picture

Are you dismissing the possibility of a war this decade? I'm not.

Tue, 05/08/2012 - 14:59 | 2407695 Sandmann
Sandmann's picture

No but my bet is on Pakistan watching stray Indian rockets re-model its cities

Tue, 05/08/2012 - 15:08 | 2407719 GeneMarchbanks
GeneMarchbanks's picture

Please read at least one of the links as it pertains to your questions: http://www.atimes.com/atimes/China/NE09Ad01.html

War between ? I see the provocateurs in many places but I rule out nothing.

Tue, 05/08/2012 - 14:45 | 2407611 Sandmann
Sandmann's picture

US became Creditor to the world because Europe IMPLODED TWICE having shipped its Gold and its scientific talent to the USA

Tue, 05/08/2012 - 15:13 | 2407739 Aziz
Aziz's picture

The US imploded once so far having shipped its manufacturing base to China.

Is two or three times out of the question?

Tue, 05/08/2012 - 17:50 | 2408299 Sandmann
Sandmann's picture

So write off Chinese output and close our markets. We can quickly install that same Japanese and German equipment to manufacture in Europe and USA. China may have a big shock coming. It was once the major manufacturing power in the world centuries before Britain industrialised and Spain was once a world power - China has too many hungry people and too few rich ones - time for a Revolution

Tue, 05/08/2012 - 15:06 | 2407716 Dr. Acula
Dr. Acula's picture

>That was the basis of America's development, in fact — manufacturing and credit. Now it's not Detroit, it's Guangzhou.

Yawn... manufacturing is so 20th century.

Tue, 05/08/2012 - 14:44 | 2407603 Sandmann
Sandmann's picture

go broke by accumulating huge piles of cash

 

Forex isn't Cash. When you get to big numbers Cash doesn't exist.  Cash is only for little people - Big People have Paper Claims.

Tue, 05/08/2012 - 14:42 | 2407598 Sandmann
Sandmann's picture

So Aziz explain to me how they sterilise the FX Reserves so they do not lead to Domestic Credit Expansion. Explain how these Reserves are held and just how China stores $3 Trillion of FX Reserves - in what form. Explain how the transmission mechanism of the Chinese State Banking System functions and how the Investment in China is funded and just how much it costs to keep the Renminbi undervalued yet buy in raw materials.

 

China is No1, Japan No2,  Saudi Arabia No.3, Russia No4, Taiwan No5, Brazil No6, Germany No10, USA No17, UK No19

http://www.google.co.uk/url?sa=t&rct=j&q=us%20%20forex%20reseves%20held%...

So what are the US Reserves held in  and how are they deployed - all $149 billion - Euros perhaps ?

China is rather heavy in US Dollars because it has nowhere else to go but Fannie Mae and Freddie Mac and whatever else Goldman and JP Morgan can dish out......Student Loans perhaps ?

No, there is absolutely no way China can go bust holding such valuable AAA-paper as fine investment houses like Goldman and JPM can offer for sale.......the US would never let its main supplier of iPhones down......

 

Tue, 05/08/2012 - 14:48 | 2407628 GeneMarchbanks
GeneMarchbanks's picture

Easy Sandmann, Jeez...

We don't want to scare him off, but yeah he can't 'explain' very much.

Tue, 05/08/2012 - 15:08 | 2407709 Aziz
Aziz's picture

Duplicate.

Tue, 05/08/2012 - 15:13 | 2407729 Aziz
Aziz's picture

China is rather heavy in US Dollars because it has nowhere else to go but Fannie Mae and Freddie Mac and whatever else Goldman and JP Morgan can dish out......Student Loans perhaps ?

Gene gave a good list, and it begins with gold. Continues with farmland, productive assets, etc.

Let me shatter an illusion you seem to have: there's no such thing as a currency manipulator — that's like saying there is a natural price for currency beyond what the market sets. They had an advantage and used it to agglomerate tech, resources, manufacturing, IP (Made in China gives CPC blueprints), and dollars.

Now I don't even think they need our consumption anymore. Consumption is easy under a fiat system. If they wanted to they could set up their own fractional reserve system using their dollars, but that's beside the point (which in a technical sense is what the RMB kind of is). They wanted a strategic international advantage based on a powerful manufacturing base, and now they have it.

And good luck running the U.S. war machine without Chinese co-operation, because they make a lot of the necessary components and sub-components, and have a monopoly in certain resources.

America will pay up. China will get their pound of flesh.

Tue, 05/08/2012 - 15:15 | 2407748 GeneMarchbanks
GeneMarchbanks's picture

Aziz you messed up.

Sandmann Bio

Monetary Economist, Businessman German Speaker



 

Tue, 05/08/2012 - 15:24 | 2407784 Aziz
Aziz's picture

Thing is, this is not really a matter of monetary economics. 

This is about geopolitics, supply chains and the flow and shape of international commerce and trade.

We will see who is right and who is wrong in the next ten years, but believe me when you are the world's productive base in components, sub-components, finished goods, assembly, etc, and have monopolies in lots of things the world in its current globalised consumeristic shape needs that puts your rivals and frenemies over a barrel, and that's just reality. 

Tue, 05/08/2012 - 15:31 | 2407816 GeneMarchbanks
GeneMarchbanks's picture

Last paragraph is what I like to call an ill-proportioned truism. Not that you're wrong but you're seeing one angle only it seems.

The fact that China is a one-trick pony with little flexibility escapes you.

Tue, 05/08/2012 - 15:35 | 2407843 Aziz
Aziz's picture

It pays to be a one trick pony if your one trick is producing the goods that the world in its current consumeristic globalised shape needs to function. 

Tue, 05/08/2012 - 17:31 | 2408239 Sandmann
Sandmann's picture

Not really. Demand is decaying and container shipments from sHanghai are falling. Every dog has its day and the Chinese elite knows it

Tue, 05/08/2012 - 17:47 | 2408285 Aziz
Aziz's picture

Shipments are falling because of a global slump in demand. This has nothing to do with China per se. As I say, it is easier to reinvigorate demand than to rebuild a domestic US industrial base that no longer exists.

Tue, 05/08/2012 - 17:29 | 2408233 Sandmann
Sandmann's picture

Vickers paid Krupp royalties during the First World War for fuses in shells.  Merlin engines were produced by Packard under licence and supplied to the USSR. The MIG fighters in Korea were powered by copies of Rolls-Royce engines supplied by Britain to the USSR in 1946 and the USAF Sabres were powered by derivatives of Rolls-Royce jet engines supplied to GE in 1943.

Supply chains are fun but when push comes to shove products have not been exclusive since Napoleon's Continental System required British manufactured goods. When Germany could not get rubber from british Malaya in WW2 it produced butadiene and when Argentina couldn't get Execote rockets from France durimng the Falklands Condflict it bought them from Israel. China is hardly a major manufacturer - it produces whatever cheap labour and low environmental standards permits - but strategic production is not given to China which is why it engages in so much industrial espionage.

China will one day produce quality goods worthy of being repaired instead of substandard tat - it has no reputation for quality

Tue, 05/08/2012 - 17:50 | 2408307 Aziz
Aziz's picture

China is the major manufacturer of so many components and sub-components, not just in the consumer world, but in things like chips and semiconductors in military hardware. I think you will be hard pressed to find a single advanced technological product that doesn't have at least one sub-component or labour process that has gone through China. Yes, if China start playing a trade war game eventually there will be a shift and supply chains will emerge in different parts of the world but shifting supply chains really isn't as easy as it sounds, particularly when there are many components and resources (particularly in hi-tech) where China has a monopoly today.

Tue, 05/08/2012 - 20:54 | 2408668 Marginal Call
Marginal Call's picture

Chips are made in Japan, and then shipped to China for the worker to install prior to jumping to his death.

Tue, 05/08/2012 - 13:38 | 2407314 Dr. Engali
Dr. Engali's picture

It wouldn't surprise me a bit if things deteriorated to the point where Obummer would try the same thing.

Tue, 05/08/2012 - 13:43 | 2407338 Cognitive Dissonance
Cognitive Dissonance's picture

We already live under a modified version of Martial Law enacted on 09-11-2001. They just figured out that it would go over much better if they didn't tell us slaves.

I've been told that ignorance is bliss. Seems "they" were right.

Tue, 05/08/2012 - 13:48 | 2407357 tarsubil
tarsubil's picture

I think he is deemed so worthless by his handlers that that type of revolt would not end well for him. Perfect false flag. Ubumba I think will go away quietly to his private bath house and mirrored counter tops.

Tue, 05/08/2012 - 13:52 | 2407381 Dr. Engali
Dr. Engali's picture

I disagree. A man with his degree of narcissism doesn't go away quietly.

Tue, 05/08/2012 - 13:40 | 2407326 old naughty
old naughty's picture

"Civil" war.

You don't usually see fighting in the Peoples Congress...

Tue, 05/08/2012 - 13:42 | 2407330 Benjamin Glutton
Benjamin Glutton's picture

Hope and Chang.

Tue, 05/08/2012 - 13:41 | 2407332 smb12321
smb12321's picture

China is moving toward the great decision - whether to continue liberalization in the social as well as business sense or retain Communist party rule and authority.  It cannot have both forever.   Considering their past, I'd choose authoritarian rule and a withdrawl.

Tue, 05/08/2012 - 15:05 | 2407717 A Man without Q...
A Man without Qualities's picture

I agree, but I think it's a bit more nuanced than that.  As can be seen from the Bo Xilai scandal, the "liberalization" has mainly resulted in regional and national CCP members getting very rich, very fast, often through some pretty nefarious means.  They are trying to create modern housing for the rising middle classes, but the elite have used their power to get credit to build property empires which has put prices far beyond the reaches of most.  Added to that, the completely out of control credit markets have pushed up the prices of basic commodities.

There are some at the top who see this as the classic failing of China, very similar to the conditions that Confucius saw - an elite who put personal ego above the system.  They can also see the biggest danger to Chinese "communist" system are many of the members.  What they need is a purge of the corruption, all the way across the nation, but the fear is that many have built very strong ties with the military, so it is a battle they may lose and that could easily destroy China.  History shows when civil wars break out in China, millions starve to death very soon.

Tue, 05/08/2012 - 13:44 | 2407343 azzhatter
azzhatter's picture

In other news, Emporer Obama has decided to delay the November election for a few more months to determine the size and scope of his reign

Tue, 05/08/2012 - 13:48 | 2407360 Cranios
Cranios's picture

What is a "murder scandal" in China? That a party leader didn't commit enough of them?

Tue, 05/08/2012 - 13:49 | 2407366 mayhem_korner
mayhem_korner's picture

 

 

+1 brutally funny, Charlie.

Tue, 05/08/2012 - 13:55 | 2407390 AnAnonymous
AnAnonymous's picture

Ummm, that would be when they adopt US citizenism.

They have to progress toward US citizen civilization with total unaccountability of representatives.

They are still at the barbaric stage that a caught representative is a dead representative.

They need to move to the next stage: a caught representative is a victim.

Tue, 05/08/2012 - 14:00 | 2407416 Joe The Plumber
Joe The Plumber's picture

You should look up the definition of an overvalued idea

I knew chinese were envious of us americans and had a secret inferiority complex. I didnt know that they obsess about us all the time lol

Do you ever go an entire day without thinking about USA citizens? I can go weeks at a time without a single thought on china

Tue, 05/08/2012 - 14:50 | 2407633 AnAnonymous
AnAnonymous's picture

Oh, that is not only the Chinese who are obsessed with adopting US citizenism. To be more accurate, a specific segment of the chinese are obsessed with US citizenism.

As for the rest of the world.

And those are the people who are obsessed with the 'freedom' provided by US citizenism, that is getting away with the negative consequences of their acts.

Go ask any manager who bottles it and faces death penalty if he would not prefer US citizenism and its nihilistic hedonism.

Tue, 05/08/2012 - 16:44 | 2408081 akak
akak's picture

 

Oh, that is not only the Chinese who are obsessed with adopting US citizenism. To be more accurate, a specific segment of the chinese are obsessed with US citizenism.

To be more accurate, your self-created fantasy of "US Citizenism" is nothing but a figment of your own twisted, virulently bigoted and retarded roadside-(and online-)shitting imagination.

Tue, 05/08/2012 - 17:42 | 2408268 TSA gropee
TSA gropee's picture

Corruption is systemic in China at all levels. You effin' assholes wrote the book on it. I know, I deal with the Chinese business culture every day while I'm here. Shit every time I go back home I see more and more of the Chinese trample on one another culture, rules-don't-apply mentality. It's your worthless one-child-only spoiled fuckin' brat mentality that is corrupting the world.

Tue, 05/08/2012 - 13:48 | 2407362 lolmao500
lolmao500's picture

Civil war we can believe in.

In other news, the new ``crop`` of leaders will be chosen this summer with an announcement this october and take power in March 2013.

Tue, 05/08/2012 - 13:55 | 2407397 AnAnonymous
AnAnonymous's picture

The sooner it will happen, the sooner US citizenism will prevail in China, adding another pool of samples to the expression of the eternal US citizen nature.

Tue, 05/08/2012 - 14:01 | 2407427 pods
pods's picture

Okay, we got it.  You were once promised a call the next day by a "US citizen" that never materialized.  

Get over it already.

Tue, 05/08/2012 - 14:55 | 2407670 LFMayor
LFMayor's picture

I think it's because his biological father squirted him out, then fled the scene.  Abandonment issues et al.  

He needs to break out some vintage Clash and ponder the lyrics:

"Let me tell you about your blood, bamboo kid
It aint Coca-Cola. 
ITS RICE."

Tue, 05/08/2012 - 14:02 | 2407432 Joe The Plumber
Joe The Plumber's picture

As a US citizen I am flattered that you and millions of other chinese spend your entire day thinking about us. It really is flattering to loom so large in your life

Tue, 05/08/2012 - 14:50 | 2407639 AnAnonymous
AnAnonymous's picture

There is nowhere to run or to hide from US citizenism. Some like that and embrace it. Others, well, ...

Tue, 05/08/2012 - 14:56 | 2407674 LFMayor
LFMayor's picture

what's that?  Monkey eye father make Big Trouble in Little China?

Tue, 05/08/2012 - 13:57 | 2407409 American Sucker
American Sucker's picture

Sean Corrigan may or may not have anything insightful to say.  But you know what?  He writes so badly it's not worth trying to find his point.

Tue, 05/08/2012 - 14:01 | 2407431 Jake
Jake's picture

May have seen a low..but long side is very dangerous.  Look at chart 3

 

http://stockcharts.com/public/1873388

 

Tue, 05/08/2012 - 14:12 | 2407467 midgetrannyporn
midgetrannyporn's picture

Bang Dae-Ho

Tue, 05/08/2012 - 14:14 | 2407474 robertocarlos
robertocarlos's picture

I heard Obama is having the same two month delay in the election if things don't look good in early October. Who am I kidding, Obama re-election is a lock.

Tue, 05/08/2012 - 14:25 | 2407526 robertocarlos
robertocarlos's picture

Oh good grief. I should read the comments before posting. Do we all think the same?

Tue, 05/08/2012 - 16:54 | 2408135 Elwood P Suggins
Elwood P Suggins's picture

B O is toast - not the slightest chance he'll be re-elected.

Tue, 05/08/2012 - 14:18 | 2407486 MarsInScorpio
MarsInScorpio's picture

This is a great article that brings to the forefront the reality that the Western perception of Red China is a myth. (Wordplay intended . . .)

 

The Reds bring to mind the same near-worship experience the West had with Japan 20 or so years ago. Everybody needed to learn Japanese because they would soon take over the world starting with lower Manhattan. It didn't quite turn out that way.

 

China has hoodwinked the West in the same way - the Drama Queens in the LSM have elevated them to nearly god status. The West stands in awe of their efficiency, their command of the wage slaves (not to mention the actual slaves) they employ, how much better the USA would be if only we emulated them in management and drive, how the future is theirs and nothing can stop them.

 

Baloney.

 

Somehow we miss that their growth numbers include cities without people. How much investment capital does that send into a black hole? We ignore the abject poverty of their people, so of course those at the top appear wealthy beyond imagination - mainly because they have swept all the ROIs into their own accounts, and not because the Reds have delivered for the ordinary among them. Red China is not a very happy place to live.

 

Those brutal realities are harsh enough, but the most glaring error in evaluating the Reds is that they are totally, and completely, dependent on the West for their existence. Without us, they are nothing but shut down factories and a population in revolt.

 

I've read some who tell us that Red China is developing an internal consumer market. That's funny! How much can their people consume when the literacy rate is barely 80%, the masses live on a couple of dollars a day, Red China is still an overwhelmingly rural nation, the corruption is beyond anything in the West, and for all its appeal to the Ultra-Rich who love the idea of worker ants beneath their boots, it is still a command economy unable to meet the basic needs of their people - despite the rhetoric of Red Chinaphiles and the LSM (in a deja vu of the NY Times and Stalin in the 1930s).

 

The real Paper Tiger is Red China. Without our consumption, they are dead in the water. Bowing and stooping to them should tell you just how foolish our leaders are - we hold the chips and they are trying to get them from us. We can bargain from a position of strength because they need us much more than we need them.

 

So watching the Red Chinese repeat the Swan Song of the Japanese will be entertaining. Give it another year or two, with the Second Great Depression stuffing their faux growth numbers right back down their throats, and they will be begging us to bail them out.

 

Because their economy is a fake, and without our money, it is even worse - it is dead.

-30-

Tue, 05/08/2012 - 15:22 | 2407749 Dr. Acula
Dr. Acula's picture

>Because their economy is a fake

Yes.

http://www.heritage.org/index/country/china

"China’s economic freedom score is 51.2, making its economy the 138th freest in the 2012 Index"

"China’s weak judicial system is highly vulnerable to political influence and corruption...  Various forms of corruption severely affect banking, finance, government procurement, and construction."

Remember, GDP is an absurd way to gauge an economy. Per Ludwig von Mises in Human Action:

"it is nonsensical to reckon national income or national wealth. As soon as we embark upon considerations foreign to the reasoning of a man operating within the pale of a market
society, we are no longer helped by monetary calculation methods. The attempts to determine in money the wealth of a nation or of the whole of mankind are as childish as the mystic efforts to solve the riddles of the universe by worrying about the dimensions of the pyramid of Cheops... But what is the meaning of the items in a statement of a nation’s total wealth? What is the meaning of the computation’s final result? What must be entered into it and what is to be left outside? Is it correct or not to enclose the “value” of the country’s climate and the people’s innate abilities and acquired skill? The businessman can convert his property into money, but a nation cannot."

Tue, 05/08/2012 - 15:38 | 2407851 Vince Clortho
Vince Clortho's picture

"China’s economic freedom score is 51.2, making its economy the 138th freest in the 2012 Index"

Always cool to crack the top 150.

Tue, 05/08/2012 - 14:19 | 2407494 Joe The Plumber
Joe The Plumber's picture

By the way chinabot (ananonymouse)

You have had two good posts since you have been here. I would like to see more perspective on chinese strategy in this financial game or how the man on the street thinks. You have made ur point hundreds of times about US citizenism. Give it a rest and give us something new

Tue, 05/08/2012 - 14:55 | 2407664 AnAnonymous
AnAnonymous's picture

I am here to entertain US citizen readers.
US citizens deserve a life of entertainment for the service they have done to humanity.

Two good posts among the ones you read, that is big. That something like a one hundred pc.

Hard to bring anything new on US citizen eternal nature. If it did change that quickly, it would not be that eternal.

But what? Fantasy, propaganda lose their magic, they have to be renewed. Facts, a different story.

Tue, 05/08/2012 - 15:21 | 2407764 TheFourthStooge-ing
TheFourthStooge-ing's picture

AnAnonymous said:

I am here to entertain US citizen readers.

I'm glad that you are so devoted to your responsibilities.

US citizens deserve a life of entertainment for the service they have done to humanity.

I agree. It is admirable that you are able to appreciate everything that has been done for your benefit.

I'll admit that, for the longest time, I thought your negative attitude would never improve. I'm glad to see your newfound positive outlook.

 

Tue, 05/08/2012 - 15:36 | 2407838 Cosimo de Medici
Cosimo de Medici's picture

Did you take your powdered dead baby pill today, little fella?  Is that what you people mean by blobbing, chopping dead babies into pieces then drying them on the stove before turning them into powder?  Remember, though, it's One Powdered Dead Baby per family.  Official policy.

One truly has to love the Chinese citizenism entrepreneur.  Who would have thought Powdered Dead Babies were the next big thing and part of the Chinese Export Miracle?

http://www.telegraph.co.uk/news/worldnews/asia/southkorea/9250438/Pills-...

 

Tue, 05/08/2012 - 16:03 | 2407956 WTFx10
WTFx10's picture

STFU

Tue, 05/08/2012 - 17:35 | 2408250 TSA gropee
TSA gropee's picture

Been in Wujiang for 5 of the last 6 weeks with 5 days to go and is my 11th trip in 3 years.

The Chinese culture is FUBAR, their arrogance is only eclipsed by the magnitude of their indifference to their fellow man. All one needs to see is the video of those two shitheads that run over and all the other POS's that walk by the still writhing body of two year old Yue Yue.

FUCK YOU Anon.

http://www.dailymail.co.uk/news/article-2051679/Yue-Yue-dead-Chinese-gir...

 

 

 

Tue, 05/08/2012 - 14:27 | 2407537 q99x2
q99x2's picture

ahs so(s)

Tue, 05/08/2012 - 14:38 | 2407580 riphowardkatz
riphowardkatz's picture

Not what Munger says according to him China is the bomb, if only the US could have more central planning and totally awesome 5 year plans.

Tue, 05/08/2012 - 15:30 | 2407815 azzhatter
azzhatter's picture

I'm pretty sure Munger died 6 years ago, that's just a wheezing robot that Squicky plays with

Tue, 05/08/2012 - 14:41 | 2407593 Bastiat009
Bastiat009's picture

Are they the same Chinese that are buying gold?

Tue, 05/08/2012 - 14:54 | 2407658 Shizzmoney
Shizzmoney's picture

That picture of the fight with Georgetown is :solidgold

Bet those dudes who *think* that they were hard just b/c they caem from the hood were surpised when it was Chinese dudes came harder than them!

Tue, 05/08/2012 - 17:52 | 2408309 TSA gropee
TSA gropee's picture

Dupe, sorry.

Tue, 05/08/2012 - 17:52 | 2408310 TSA gropee
TSA gropee's picture

I've posted this before but I'll do it again for that a hole anon.

Been coming to China since 92, currently in a rural community outside of Shanghai about 1.5 hrs. 5 of the last 6 weeks spent here with 5 days left.

The Chinese people will continue to denigrate into a society of spoiled rotten, arrogant and inconsiderate pricks. This is due IMHO, to their implementation of the one child only policy in 81'. Now, fast forward to 2012 and you now have 30 year olds starting to enter positions of leadership and power as the product of an only child family. Ever see a well behaved Chinese kid? Yeah, neither have I, they get what they want, when they want, throw hissy fits, and there is next to no discipline.

Think they're belligerent now? Wait until they make their way up.

Tue, 05/08/2012 - 21:12 | 2408706 Marginal Call
Marginal Call's picture

I don't know if I'd blame it on the one child policy.  Chinese society is like a fucking ant hill without the cooperation, they just climb all over each other to get on about what they're doing.  There's a costco in Seattle that is close to the international district that is full of Ornamentals.  80 year old grandmas that will run you over with their shopping carts, and god forbid you get in between a tray of deli-mex taquito free samples and them. 

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