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Jim Chanos Debunks The Myth Of China As The World's "White Knight"

Tyler Durden's picture




 

One of the recurring themes on Zero Hedge in the past several months has been the continued mockery of the seemingly global conventional idiocy that China can bail out the world, when it itself is on the verge of a huge credit bubble popping and requiring the rescue of China itself by the rest of the global pyramid scheme (which however will be far too busy monetizing its own debt by then). Why, we vividly recall this quote from July 4, "So let's get this straight: a country which has 10% of its GDP in the form of bad debt, is somehow expected to be credible enough to buy not only Greek debt, but the EURUSD each and every day? Mmmmk. In the meantime, Dagong downgrades the US to junk status in 5, 4, 3..." Well, Dagong did since downgrade the US (as did S&P), although not to junk just yet, and somehow the world still continues to labor under the illusion that China (whose shadow banking system we also covered most recently here), is somehow healthy because it is far better than Europe (and the US) in hiding the true severity of its problems. Naturally, as long as that persists, the global ponzi will always have the benefit of pulling out a "white knight" whenever needed, regardless of just how ludicrous such an presumption has become. Today, famous China bear Jim Chanos appeared on Bloomberg TV and recapped his thesis which summarizes the bulk of these points, further extrapolating based on the Andy Lees analysis posted yesterday which estimates what a true economic growth rate is when one factors for bad debt and loss severities. His conclusion: "If we assume that China will grow total credit this year between 30% to 40% of GDP, and half of that debt will go bad, that is 15% to 20%.  Say the recoveries on that are 50%. That means that China, on an after write off basis, may not be growing at all. It may be having to simply write off some of this stuff in the future so its 9% growth may be zero." And this stagnant, overlevered behemoth is somehow supposed to be... the world's white knight?

Highlights:

On the Chinese government's balance sheet:

"The Chinese government's balance sheet directly does not have a lot of debt. The state-owned enterprises of the local governments and all the other ancillary borrowing vehicles have lots of debt and its growing at a very fast rate. The assumption is that the state stands behind all this debt. We see that the debt in China, implicitly backed by the Chinese government, probably has gone from about 100% of GDP to about 200% of GDP recently. Those are numbers that are staggering. Those are European kind of numbers if not worse."

On how a Chinese property bubble will play out:

"I think that will be the surprise going into this year, and into 2012 - that it is not so strong. The property market is hitting the wall right now and things are decelerating. The CEO of Komatsu said last week that he is having trouble getting paid for his excavator sales in China. Developers are being squeezed. They're turning to the black market for lending, this shadow banking system that is growing by leaps and bounds like everything in China.

"Regulators over there are really trying to get their hands around the problem. In the meantime, local governments have every incentive to just keep the game going. So they will continue with these projects, continuing to borrow as the central government tries to rein it in."

Chanos on his long and short positions:

"We are short Chinese banks, the property developers, commodity companies that sell into China, anything related to property there is still a short."

"We are long the Macau casinos. It's our long corruption, short property play. We feel that there's American management and American accounting. They are growing at a faster rate even than the property developers."

On the IMF lowering growth estimates for China:

"A lot of people are assuming that half of all new loans in China are going to go bad. In fact, the Chinese government even said that last year relating to the local governments. If we assume that China will grow total credit this year between 30% to 40% of GDP, and half of that debt will go bad, that is 15% to 20%.  Say the recoveries on that are 50%. That means that China, on an after write off basis, may not be growing at all. It may be having to simply write off some of this stuff in the future so its 9% growth may be zero."

 

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Tue, 09/20/2011 - 18:12 | 1690279 Careless Whisper
Careless Whisper's picture

The Careless Whisper Evening Report

 

Secret ATF Tapes; Agent Saying Superiors Must Tell Sen Grassley "You're Gonna Have To Sit Your Ass Down"

http://www.cbsnews.com/8301-31727_162-20108965-10391695.html?tag=stack

Inside Mayor Bloomberg's Townhouses; Secret Photos; Decor Described As "Rober Baron Chic"; $1,000,000 Chippendale Couch

http://gothamist.com/2011/09/20/mayor_bloombergs_taste_in_home_deco.php#...

On Star Starts Selling Your Personal GPS Location, Speed, Seat Belt Usage; Data Could Be Subpoened In Lawsuits

http://www.zdziarski.com/blog/?p=1270 

Newly Elected Pirates Pose For Photo

http://www.spiegel.de/international/germany/0,1518,787417,00.html

Full Tilt Poker Accused Of Dealing From The Bottom Of The Deck

http://www.foxnews.com/us/2011/09/20/feds-say-full-tilt-poker-site-was-p...

Endless Bullying, Buffalo Gay Teen Suicide; Did Vid For "It Gets Better"

http://www.youtube.com/watch?v=-Pb1CaGMdWk

OneMillionMoms Call For Boycott Of Ben And Jerry's Schweddy Balls

http://www.rightwingwatch.org/content/schweddy-balls-make-afa-squirm

 

 

 

Tue, 09/20/2011 - 18:42 | 1690343 spiral_eyes
spiral_eyes's picture

China has a property bubble. It is also the world's greatest industrial behemoth, controlling the world's supply chains in many key components, and is becoming an increasingly powerful player in energy markets thanks to its buy-out of Venezuela and its close ties to authoritarian Eurasian energy powers like Russia, Iran and Pakistan

The United States destroyed its industrial productive capacity, has a zombified financial system (including a huge derivatives ponzi that is yet to come down), stagnating labour market, stagnating infrastructure, a moronic Keynesian academia and government, and its currency is about to lose global reserve currency status. I suppose one thing we could be bullish about with the US is that they have the highest declared global gold reserves of any sovereign (still, gold would have to be at $11,000 an ounce to back all the dollars they've printed) — but we all know there's something fishy (i.e. tungsteny) about that.

China has a cold. U.S. has congential haemerrhoids, restless legs syndrome, diabetes, and its child has autism.

When are you going to publish something more balanced on China, Tyler? 

Tue, 09/20/2011 - 18:59 | 1690375 eisley79
eisley79's picture

TPTB in the US know exactly what is going on, and what they are doing.  They will keep playing the status quo game as long as they can, and once the music stops,  the will just change and do whatever they want next.

China will get obliterated far worse than the US as a government/military/financial hegemony.

The US people, and lots of US companies, like China, will get crushed.

 

But dont think for a second the US isnt fully aware of everything that is going on, and whats coming.  They can and will end all free trade, not pay debt, devalue the dollar, create a new dollar, put interest rates to the moon, WHATEVER suits their interests best to keep the financial hegemony going. 

They will squeeze every last drop from the current system first, and then change to anything they want.

Tue, 09/20/2011 - 19:07 | 1690409 spiral_eyes
spiral_eyes's picture

"They can and will end all free trade, not pay debt, devalue the dollar, create a new dollar, put interest rates to the moon, WHATEVER suits their interests best to keep the financial hegemony going."

No doubt, they can do all of that. That won't rebuild the American economy, though. It'll just alienate America from a world which America is increasingly dependent on. Every day, America becomes more dependent on foreign oil and resources. The argument I often hear is "yeah, but  America has nukes, we can order other countries to do things and they will do it". But ever since mutually-assured destruction that hasn't been true. America needs the global resource and trade infrastructure. That's why we're in Iraq, Afghanistan, Yemen, Pakistan. That's why there are hundreds of bases around the world and why America spends trillions policing the world. 

If you don't control your supply chains, you have a geostrategic problem, period. China grasped the importance of supply chains, and has made itself the spider at the centre of the web of global trade. America grasped they could get a free lunch with US treasuries and that free lunch destroyed their productive capacity.

Tue, 09/20/2011 - 20:12 | 1690562 Stax Edwards
Stax Edwards's picture

China has put itself in the position that it cannot upset the apple cart as far as supply chain goes.  It is just that they think they can "cheat" on their balance sheet and never have to pay the piper.  I think they are wrong.  I am firmly in Chanos camp on this.

Tue, 09/20/2011 - 21:18 | 1690705 alex_g
alex_g's picture

Every day, America becomes more dependent on foreign oil and resources

 

BS.  America imports less than half of our oil, and the %age of imported oil goes down every day.  Except for oil, we import almost no resources.  We may be fucked up in other ways, but we are resource rich, something China longs to be.

Tue, 09/20/2011 - 21:31 | 1690734 spiral_eyes
spiral_eyes's picture

From a highly prescient article in 2006 from the The Trumpet:

 

"Until the recent spike in oil prices, few realized the extent of America’s reliance on foreign oil. America is by far the world’s largest oil consumer, importing 63.5 percent of its daily oil needs. In 2004, America imported as much oil as Japan, Germany, China and India combined.


The world’s demand for oil and other resource commodities is rapidly increasing. China and India especially seem to be snatching up each new resource supply that enters the market. Oil, gold, silver, copper, zinc, nickel, and many other commodities, have all recently set multi-year or -decade price records—some, like oil, have set nominal all-time price records.

America is facing a massive problem—as a nation it relies on the kindness of foreigners to provide the things Americans need most. The sad reality is that America relies on foreign nations for everything from manufactured goods to energy, raw commodities and strategic minerals to providing money to finance its massive fiscal deficits.

Evidence is mounting that foreign nations are starting to take notice of America’s weakness."

I love America — it's consistently been the freest and most capitalistic nation in the world. Why can't it sort out its damn supply chains, manufacturing and resource infrastructure and quit this free lunch bullshit that Kissinger and Nixon introduced in the 70s? 

 

Tue, 09/20/2011 - 21:57 | 1690783 alex_g
alex_g's picture

Old data my friend.  2010 we imported 49% of our oil.

http://www.eia.gov/energy_in_brief/foreign_oil_dependence.cfm

Tue, 09/20/2011 - 22:29 | 1690839 spiral_eyes
spiral_eyes's picture

Let's assume that this figure is less smudged than those produced by other .gov departments (CPI, anyone?) 

What would happen to the American economy if some black swan caused an oil shock that took 20% of that imported oil off the table?

America would face severe disruption.

Hence dependency.

Also:

http://205.254.135.24/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTTNTUS2&f=A 

Reagan cut imports at the start of his Presidency, but America never quite weaned itself off the habit, and bounced much higher later... There's not much to say that the dip from 2008 isn't just lower demand (with lower demand, the first cuts would obviously be to imports) as opposed to less dependency per se.

http://en.wikipedia.org/wiki/Energy_in_the_United_States#Oil_consumption 

Tue, 09/20/2011 - 22:45 | 1690878 alex_g
alex_g's picture

Did you even bother to look at why the #'s have changed?  And they are correct.  We would be in better shape than China, India and Europe if 20% of imports came off the table, because we export more refined product than that 20% represents.  Look at the numbers...this has all happened w/o an energy policy.  NGL's and biofuels are over 3mm bpd, and growing.  Our energy sector is performing...hopefully we don't fuck that up.

Tue, 09/20/2011 - 21:18 | 1690708 alex_g
alex_g's picture

Every day, America becomes more dependent on foreign oil and resources

 

BS.  America imports less than half of our oil, and the %age of imported oil goes down every day.  Except for oil, we import almost no resources.  We may be fucked up in other ways, but we are resource rich, something China longs to be.

Tue, 09/20/2011 - 22:09 | 1690809 Payable on Death
Payable on Death's picture

a_g, you da man. I'll go you one more, peak oil advocates are idiots.

China is only to be feared for the consequences of its collapse. A centrally planned economy cannot prevail. But, P.O.D., there's a billion of 'em! Right, and we're losing money, but making it up on volume.

Tue, 09/20/2011 - 23:01 | 1690901 alex_g
alex_g's picture

Peak oil advocates don't count subsitution or unconventional oil/NatGas and the NGL's that come with them, or energy efficiencies that come w/ advances in technology.  Or the worlds slowing population growth.  Oil over $100 a barrel equals behavior change, which solves the problem.  Shale oil is profitable at $40 a barrel, shale gas at $3-4 per MMbtu.  Less if it is liquids rich.

Tue, 09/20/2011 - 23:16 | 1690943 Payable on Death
Payable on Death's picture

The threat to future oil supplies is that much is controlled by governments.

Tue, 09/20/2011 - 23:32 | 1690983 slewie the pi-rat
slewie the pi-rat's picture

china's just about as full 0'shit as we are...
FREE TIBET!!!

Tue, 09/20/2011 - 22:11 | 1690816 palmereldritch
palmereldritch's picture

If by "white" you mean "red" and by "knight" you mean "pawn", then sure...a white knight it is...

Tue, 09/20/2011 - 22:02 | 1690792 Stuck on Zero
Stuck on Zero's picture

Yeah.  But we have the most extravagant and expensive weapons in the world!

Tue, 09/20/2011 - 20:18 | 1690554 philipat
philipat's picture

Americans don't understand Asia and should stick to what they know best: destroying their own economy. Chanos is wrong about China and will lose money on the trade. Ackman is also wrong about the HGD and will lose money on that trade also.

 

Interestingly SSEX, a useful leading indicator, is holding major support at 2400 and appears ready to rally?

 

Sincere apologies for the multiple posts below, something went wrong with my connection to the net and Windows 7 went mad. I couldn't find a way to delete the duplicated posts. Sorry again.

Tue, 09/20/2011 - 20:11 | 1690555 philipat
philipat's picture

Americans don't understand Asia and should stick to what they know best: destroying their own economy. Chanos is wrong about China and will lose money on the trade. Ackman is also wrong about the HGD and will lose money on that trade also.

 

Interestingly SSEX, a useful leading indicator, is holding major support at 2400 and appears ready to rally?

Tue, 09/20/2011 - 20:11 | 1690556 philipat
philipat's picture

Americans don't understand Asia and should stick to what they know best: destroying their own economy. Chanos is wrong about China and will lose money on the trade. Ackman is also wrong about the HGD and will lose money on that trade also.

 

Interestingly SSEX, a useful leading indicator, is holding major support at 2400 and appears ready to rally?

Tue, 09/20/2011 - 21:26 | 1690723 chump666
chump666's picture

yeah well the Shanghai B (mostly equities owned by non Chinese - major players) has been selling since the start of 2011.

China is done.  That's it.  Black money, grey money, corruption and bubbles.  Full implosion due, like Chanos said... end 2011.

Check Copper

Tue, 09/20/2011 - 21:42 | 1690761 Kali
Kali's picture

Apparently, the philipat American doesn't understand how to post comments.

Tue, 09/20/2011 - 20:11 | 1690557 philipat
philipat's picture

Americans don't understand Asia and should stick to what they know best: destroying their own economy. Chanos is wrong about China and will lose money on the trade. Ackman is also wrong about the HGD and will lose money on that trade also.

 

Interestingly SSEX, a useful leading indicator, is holding major support at 2400 and appears ready to rally?

Tue, 09/20/2011 - 20:11 | 1690558 philipat
philipat's picture

Americans don't understand Asia and should stick to what they know best: destroying their own economy. Chanos is wrong about China and will lose money on the trade. Ackman is also wrong about the HGD and will lose money on that trade also.

 

Interestingly SSEX, a useful leading indicator, is holding major support at 2400 and appears ready to rally?

Tue, 09/20/2011 - 20:11 | 1690560 philipat
philipat's picture

Americans don't understand Asia and should stick to what they know best: destroying their own economy. Chanos is wrong about China and will lose money on the trade. Ackman is also wrong about the HGD and will lose money on that trade also.

 

Interestingly SSEX, a useful leading indicator, is holding major support at 2400 and appears ready to rally?

Tue, 09/20/2011 - 22:25 | 1690843 Fukushima Sam
Fukushima Sam's picture

Ah yes, the "global ponzi" is "monetizing the debt".  21st century for "the Master is ass-raping your wife and there's nothing you can do about it."

Tue, 09/20/2011 - 22:42 | 1690872 Freddie
Freddie's picture

Chanos knows his stuff but at the Clinton Global Initative with a semi ripped off EU logo?   Clinton is a global grifter who skims tens of millions off of all the BS he does. Bush was an idiot to give African tens of billions and he let Clinton run the aid program.  Poppy Bush and M Barker Bush loved the Clintons.  One world vermin.

Chanos should know better than to be associated with a slime ball like Clinton. 

Tue, 09/20/2011 - 18:15 | 1690288 TK7936
TK7936's picture

Im a white Knight, not China.

Tue, 09/20/2011 - 18:28 | 1690312 theXman
theXman's picture

The "long corruption" move could backfire when revolution sweeps across the corrupt nation.

Tue, 09/20/2011 - 18:17 | 1690291 Absalon
Absalon's picture

China is the problem, not the solution.

Tue, 09/20/2011 - 18:19 | 1690299 X.inf.capt
X.inf.capt's picture

china's bubble

they'll go to war long before that bursts

this situation sucks!

Tue, 09/20/2011 - 20:16 | 1690574 Stax Edwards
Stax Edwards's picture

Dis information captain...right?

Tue, 09/20/2011 - 20:40 | 1690627 X.inf.capt
X.inf.capt's picture

???

Tue, 09/20/2011 - 21:17 | 1690704 Stax Edwards
Stax Edwards's picture

Your moniker I thought.  What does x.inf.capt mean?  Disinformation Captain?

Tue, 09/20/2011 - 21:20 | 1690712 X.inf.capt
X.inf.capt's picture

as in use to be a NG inf capt

go troll somewhere else...

Wed, 09/21/2011 - 00:02 | 1691063 stev3e
stev3e's picture

with who?

Wed, 09/21/2011 - 01:54 | 1691193 X.inf.capt
X.inf.capt's picture

my guess, china establishing a trade route to europe through pakistan, plus trying to replace the oil they lost from the REBELION in libya. hope im wrong.

Tue, 09/20/2011 - 19:59 | 1690303 TruthInSunshine
TruthInSunshine's picture

I worship no man, and all men are fallible, but I deeply respect Chanos for his consistency in making top notch long term calls.

I do think Chanos' thesis on China will ultimately prove Jim Rogers (who I really like, also) to be dramatically wrong on his 'China bull' case.

Tue, 09/20/2011 - 18:22 | 1690304 thefedisscam
thefedisscam's picture

Chanos knows NOTHING at all about China! but just as many Westerners, he thought he knew a lot. What an irony! What a Tragedy! How Pathetic!

Tue, 09/20/2011 - 18:35 | 1690332 DaBernank
DaBernank's picture

This is not an endorsement of the US, this is merely explaining his thesis vis-a-vis China based on data about the bad debts in the system. Hard to see how this is pathetic unless you are "religiously" invested in the position of China being infallible.

Tue, 09/20/2011 - 18:48 | 1690353 Ahwooga
Ahwooga's picture

Got any data or ideas any more specific than, " he thought he knew a lot," champ?

Tue, 09/20/2011 - 19:14 | 1690428 Ricky Bobby
Ricky Bobby's picture

Yes economic laws don't apply to the PRC. It is different this time.

Tue, 09/20/2011 - 20:15 | 1690571 Stax Edwards
Stax Edwards's picture

Well put RB.  It is ALWAYS different this time.  Particularly in state run enterprises.

Wed, 09/21/2011 - 15:51 | 1694128 BigJim
BigJim's picture

Yes, economic laws only apply to free-market capitalism. Clever central planners can make all consequences of mis-allocation of capital, credit bubbles, and corruption disappear by edict.

Tue, 09/20/2011 - 19:27 | 1690462 nyse
nyse's picture

Says the Chinaman.

Tue, 09/20/2011 - 19:38 | 1690487 Double down
Double down's picture

This is the real bubble:

Chanos knows NOTHING at all about China! but just as many Westerners, he thought he knew a lot. What an irony! What a Tragedy! How Pathetic!

Tue, 09/20/2011 - 19:38 | 1690488 Double down
Double down's picture

This is the real bubble:

Chanos knows NOTHING at all about China! but just as many Westerners, he thought he knew a lot. What an irony! What a Tragedy! How Pathetic!

Tue, 09/20/2011 - 18:22 | 1690305 hambone
hambone's picture

Chanos doesnt get it - Keynesianism is a religion and all it takes is unlimited belief.  The Chinese reeeeaaaallllyyyy believe.

Tue, 09/20/2011 - 18:23 | 1690306 papaswamp
papaswamp's picture

Have to keep the masses busy...can't have them idol.

Tue, 09/20/2011 - 18:24 | 1690307 malikai
malikai's picture

This is bullish.. For war.

Tue, 09/20/2011 - 18:28 | 1690313 caerus
caerus's picture

jim rogers thinks there's a chinese property bubble but disagrees with chanos about the effects on the broader chinese economy...

jim rogers - china property bubble

Tue, 09/20/2011 - 18:44 | 1690349 kito
kito's picture

absolutely. ill take it from jimmy, who actually lives in asia and has his finger on their pulse, rather than, as rogers puts it, people who only recently learned to spell c-h-i-n-a. so far, chanos has been wrong, wrong, oh, and wrong. 

Tue, 09/20/2011 - 18:49 | 1690359 caerus
caerus's picture

agreed...btw maybe congress should learn something from the chinese regarding the "infrastructure bank"

china's empty city - nov 09

Tue, 09/20/2011 - 18:54 | 1690368 Shell Game
Shell Game's picture

So, the collapse of China's opaque, ghost city galore, uber-bubble won't effect the economy?  I think Rogers is hitting the Jiu a little heavy..

Tue, 09/20/2011 - 19:12 | 1690422 caerus
caerus's picture

agreed...as much as i like jim rogers i don't understand how he can be so sanguine...my best guess is that it's a matter of timing...jim's probably thinking long term...he always says he's a terrible trader after all

Wed, 09/21/2011 - 00:08 | 1691074 Freddie
Freddie's picture

Exactly.  I think they may both be right.  Chanos is shorter term.  The question is how long the Chinese govt can prop it up.  Rogers is bullish over the long term.  Rogers could be wrong though because of demographics.  China has FU'ed demos.  Too many men, too old.  Old like Japan.  Poor Japan - post the nuke disaster has no future.   

Tue, 09/20/2011 - 18:30 | 1690319 Stelan
Stelan's picture

Chris Matthews seems fixated on Republican women and hired help.

Tue, 09/20/2011 - 19:07 | 1690405 knukles
knukles's picture

"As a nation we must fixate on Republican women and their press ganged child labor."
          - Chris's brother Dave

Wed, 09/21/2011 - 00:13 | 1691089 Freddie
Freddie's picture

Dave Matthews that dumb South African fu*k with the incredibly lame ass music?  He makes that arse Bono and U2 look original.  Press ganged labor? Sounds like Nike and Apple - two big Dem contributors.

Tue, 09/20/2011 - 18:30 | 1690320 jm
jm's picture

China doesn't have market-based interest rates.  It's banks are absolutely tools of state policy.  It doesn't even have a convertible currency.  It has bonds, but they don't trade.

China is too different from the context to which we are accustomed.  I'm not sure where one should even start when evaluating posts like this.  Other than ask some Chinese people at the outset.

Tue, 09/20/2011 - 18:36 | 1690335 unum mountaineer
unum mountaineer's picture

exactly. they are commies. and the plan in 100 year plots. we can't wait long enough for the premeire of glee for crimony sake

Tue, 09/20/2011 - 19:08 | 1690413 knukles
knukles's picture

Amazingly, ever time I ask a Chinese about it they say not to hold my breath.

Tue, 09/20/2011 - 20:22 | 1690583 Stax Edwards
Stax Edwards's picture

Hatred of the regime is expressed internally and behind closed doors.  Outside they can't get enough.  Again, they believe they can cheat their way to the top.  BTW, they will continue to build our trinkets, they are absoultely dependant on it.  Even as inflation goes <line through) remains through the roof, they need to build our trinkets.

Tue, 09/20/2011 - 22:14 | 1690825 X.inf.capt
X.inf.capt's picture

I humbly disagree.
What the Chinese need is oil, specifically the oil they lost from Libya.
That is why japan fought us in ww2.
We put trade embargo against japan for their invasion of china.
( sound familiar)
I would suggest a few MS courses to understand this.
The Chinese need to work, whether as civilians or soldiers,
Lets hope as civilians

Tue, 09/20/2011 - 18:56 | 1690374 jm
jm's picture

My first questions are these:

I see a lot of publically traded, debt-free companies with big current ratios.  Will these companies get taxed to death in a downturn?

It is a solid lock that large Chinese banks will be recpaitalized by the states.  Are there city/provincial banks that have less solid guarantees? 

Will non-bank bailouts show up as forebearance on bank balance sheets?

 

Tue, 09/20/2011 - 19:13 | 1690425 Smiddywesson
Smiddywesson's picture

China doesn't have market-based interest rates.  It's banks are absolutely tools of state policy...It has bonds, but they don't trade.

OMG, you didn't just say that JM.  And we do?  Too funny bro.

Tue, 09/20/2011 - 20:30 | 1690608 jm
jm's picture

When Obama tells Goldman what to do, I'll stand corrected.

Tue, 09/20/2011 - 21:14 | 1690693 Rockfish
Rockfish's picture

Agreed jm

China will outlast chanos.

Wed, 09/21/2011 - 06:54 | 1691579 Withdrawn Sanction
Withdrawn Sanction's picture

"...China will outlast chanos."

Perhaps, but at least Chanos has the courage of his convictions and puts his money there. IOW, if you're so sure he's wrong....bet against him. Should be easy money.

China as a culture has lasted for centuries (so in 1 sense you're right), but the current Chinese nation-state is unlikely to last because of the huge contradictions inherent in its operation. It is approaching the age when the Soviet Union imploded and it will soon follow that path and for the same reasons.

Tue, 09/20/2011 - 18:32 | 1690326 americanspirit
americanspirit's picture

Those of us still around in 3-5 years will look back at what has happened to China (along with Europe, the US, India, the Middle East, Russia and Brazil) and say that all the signs were in plain sight but that almost everyone was too blind to see. Chanos is a one-eyed clear-seer in the kingdom of the delusionally blinded.

Tue, 09/20/2011 - 18:33 | 1690328 PulauHantu29
PulauHantu29's picture

 

The times are very interesting to live in....lets hope the best wish of them all comes true....that we all learn to live peacefully and prosper.

 

Tue, 09/20/2011 - 18:34 | 1690331 the last bagholder
the last bagholder's picture

I reall like Chanos, but don't buy into the China hard landing theory. No matter how you slice it, China will dominate the western world economically for the next 50 years, at least. Like it or not, that's what's happening.

Tue, 09/20/2011 - 18:45 | 1690351 kito
kito's picture

+100

Tue, 09/20/2011 - 18:58 | 1690365 reader2010
reader2010's picture

Fuck that. They basically said the same thing about Japan some 20+ odd years ago.

Tue, 09/20/2011 - 19:22 | 1690450 kito
kito's picture

you know for all of the hype about how horrible japans lost decades were, i just dont see it. despite their "deflation", real estate in japanese cities over the past 20 years has been among the highest in the world. their citizens are among the worlds most responsible savers. their consumer technology is leaps and bounds ahead of ours. their export sector has been solid since their "supposed crash" in the 90s. oh, their stock market has slumped. so is that how we measure success now?...by the stock market? well then, gee, the u.s. is doing just fine then.

Tue, 09/20/2011 - 19:30 | 1690473 Captn Morgan
Captn Morgan's picture

I think FUK-U-SHIMA will take care of those real estate prices.

Tue, 09/20/2011 - 19:47 | 1690506 Kayman
Kayman's picture

Yeah ? For all the Japan-hating that China does, they have copied exactly the Japanese method. Kill your currency to keep the economy up and the citizens docile.

The problem today is that everyone wants to kill their own currency. 

 

 

Tue, 09/20/2011 - 20:50 | 1690644 the last bagholder
the last bagholder's picture

The difference between any discussion of China vs Japan model: China will soon (~2013) revalue (eventually free float) the RMB as it transitions to a self-sustaining consumer economy; and China will be successful. Japan could never have made this transition due to its tiny demographics.

"Never before in the history of man has something smaller ruled over something larger." This was said of Gret Brition in reference to the 13 Colonies, and it's true now of America vis-a-vie China.

China's internal economy trumps all others.

Demographics is destiy.

Tue, 09/20/2011 - 21:00 | 1690667 reader2010
reader2010's picture

Japan had about 200 million population at the time of their currency appreciation thanks to the Plaza Accord. And the time, the average Japanese household income was about $58,000 in 1986 dollars. Fast forward to today,  we have roughly 200 million "middle-class" Chinese population with average household income of $20,000 in today's dollars. Yes, China has huge population; but, compared to Japan, the Chinese middle-class consumer base doesn't even count. 99.99% of what you hear everyday about China in this country is simply brainwash carried out by presstitudes. 

Tue, 09/20/2011 - 21:16 | 1690699 the last bagholder
the last bagholder's picture

Be careful when comparing eras. For instance, the USD in 1986 was much stronger than it is today, there were about 40,000 more active manufacturing factories in operation, much lower unemployment, as well as substantial and growing GDP.

The erosion of our middle class is accelerating to the point of endangered-species status while China's middle class population is multiplying--the middle class of China alone is larger than the entire populace of America. I don't know what the average Chinese middle class income is, but once the RMB is free floated, fully appreciated, and the dollar fullly depreciated--well, it's pretty clear whose dominating who here.

Tue, 09/20/2011 - 21:41 | 1690759 reader2010
reader2010's picture

RMB free float? I don't think we can see that in the near future.  The Chinese ruling elite carefully studied the Plaza Accord and its impact on the Japanese economy, and they won't allow the RMB *free float*.  China ain't Japan since China has not much knowledge-based industries and know-hows. They can only compete in labor cost, environment cost, the economy of scale and the super powerful facist state to make sure all those business costs are at minimun.  Nothing else. 

Wed, 09/21/2011 - 01:00 | 1691199 the last bagholder
the last bagholder's picture

China wants to be taken seriously and knows ultimatly the only way to do so is to let their currency float. China wants to be a real player, a true alternative to the USD. Various Chinese officials are now on the reord essentially saying as much.

Dismissing China as simply another "Japan" is dangerious. China is so much more capable than Japan ever was.

This time it really is different.

Wed, 09/21/2011 - 16:01 | 1694182 BigJim
BigJim's picture

China wants to be taken seriously and knows ultimatly the only way to do so is to let their currency float. China wants to be a real player

'China' wants no such thing. You're anthropomorphizing. There may be sub-sections of the Chinese government that want that, but are their voices louder (policy-wise) than those of manufacturers, who want a currency peg?

In some ways China is more disadvantaged than Japan was 20 years ago, because its central planners have more power, and it is more corrupt.

Tue, 09/20/2011 - 20:53 | 1690649 reader2010
reader2010's picture

Before the bubble,  there was lifetime employment policy in Corporate Japan for salarymen and I never saw any homeless people in Tokyo.  Today, lifetime employment policy is unheard for the Japanese salarymen, and you see homeless sleeping in the parks in Tokyo.  the list can go on and on about those dramaic changes that we have witnessed in Japan. And you're saying there is no debasement of lifestyle since 1990 in Japan? 

Wed, 09/21/2011 - 05:51 | 1691535 chindit13
chindit13's picture

Even though Japan is still expensive, it is but a whisper of what it was in 1989.  RE prices are down 80-95% over that time.  No longer is Tokyo valued at more than the rest of the planet Earth combined.

As for savings, the national rate has gone negative.  An elderly population and twenty years of ZIRP made that possible.

You may not want to ask about unfunded pension liabilities.

Thu, 09/22/2011 - 03:57 | 1695978 fajensen
fajensen's picture

You may not want to ask about unfunded pension liabilities.

They fixed that: To be eligible to recieve your pension savings in Japan you had to produce an obscure document which was part of the wad of documents you recieved when the pension savings account was opened. Millions of people had thrown that away with all the other bumf they got ... like ... 60 years ago. No paper - No Pension.

The Japanese are the kind of people who just accept their fate - while very angry for being screwed over and sad for having to get relatives to support them (or starve) they never do the sensible thing and torch some government buildings over the injustice.

 

Tue, 09/20/2011 - 18:36 | 1690336 Pancho Villa
Pancho Villa's picture

"White knight" is not exactly the term I would use to describe China. Maybe "greater fool" would be a better choice.

And even China were a knight (and not the dragon), it would demand to sleep with the damsel before rescuing her.

Tue, 09/20/2011 - 18:47 | 1690354 malikai
malikai's picture

What greater fool gets to industrialize that rapidly thanks to foreign subsidy and purchase of goods produced? How many greater fools have their shark come to their house and build a business for them, only to turn around and buy the products they make?

Are you sure you know who the fool is?

Tue, 09/20/2011 - 19:04 | 1690398 Pancho Villa
Pancho Villa's picture

China has not industrialized very rapidly. Good grief! Their government has been in power for over 60 years and China is still a third world nation. Japan and Germany only took 20 years to reindustrialize after WW2. And Chine is way behind Taiwan and South Korea in GDP/person.

I think that China subsidizes the west much more than the west subsidizes China. They might industrialize a lot faster if their government wasn't so fixated on subsidizing cheap goods to the US.

I define the "greater fool" as the one who ends up holding the worthless government debt when the fiat system collapses. Right now, China looks to be a prime candidate for the position.

Tue, 09/20/2011 - 21:39 | 1690756 spiral_eyes
spiral_eyes's picture

There's one thing missing from your analysis — China might be carrying the worthless debt, but they're also the nexus of the global trade system, control a lot of resources and supply chains. 

America manufactures glee, nukes, chicken feet, treasury bonds and failed middle eastern regime change. None of those things will secure America many resources in the 21st century. 

Kissinger and Nixon failed. 

Tue, 09/20/2011 - 18:43 | 1690348 qussl3
qussl3's picture

China would do ANYTHING to keep the masses employed.

If that entails bubbles to infinity then so be it.

They will build until they run out of steel or land, then tear down and build somemore.

As long as they have a trade surplus to recycle, this can continue ad infinitum.

Only other constraints are water and food.

Wed, 09/21/2011 - 07:01 | 1691582 Withdrawn Sanction
Withdrawn Sanction's picture

They will build until they run out of steel or land, then tear down and build somemore.

As long as they have a trade surplus to recycle, this can continue ad infinitum.

Really? Found the magical solution have they? You might want to think a little more systematically about what you just said. It's really nothing more than Keynesian "hole digging." In such an argument, it matters not WHAT is produced, so long as something is. Rubbish.

Thu, 09/22/2011 - 04:21 | 1695993 fajensen
fajensen's picture

It's not Keynes, it is Marx. Marx believed that the cost of something should be fully determined by the value of the ressources spent in making it. In a Marxist system, therfore, it makes perfect sense to set up a factory to make mudpies and sell them at cost+ in the market. When that does not work - they will send the commisar to put a bullet in the head of the burgois loser who refuse to pay for his damn mudpie lunch. 

Tue, 09/20/2011 - 18:47 | 1690355 Ramboy
Ramboy's picture

The analogy is poor.  China doesn't write 100 trillion $ in derivative contracts against garbage construction gypsum home and sell to euro banks and pension funds.  There is a construction bubble in China but assume % of home debt goes bad, you don't have the same derivative exposure against those mortgages.  

Tue, 09/20/2011 - 19:07 | 1690410 laomei
laomei's picture

mortgages in china are full recourse loans. banks are flexible with repayment terms and the only "bubble" is in first tier cities.  anyone who claims that the bubble is popping has no damned idea what they are talking about.  the government specifically put dampers on the sector to cool it down and deflate it before it got too out of hand.

 

also... over here, we don't fuck around that much with credit.  stuff here tends to get paid in full in cash.  oh the finger pointing is getting hilarious the more you realize you are all fucked and have nothing you can do about it.

Tue, 09/20/2011 - 19:12 | 1690423 reader2010
reader2010's picture

You know what? You know shit. All assets are priced in margin. Nuff said.

Tue, 09/20/2011 - 19:22 | 1690451 laomei
laomei's picture

i live in china? i own property in china? i do business and work in china?  you don't get the chinese mindset at all and that's why any attempt you make over here will be met with utter failure.

 

here's a hint for ya: the vast majority of chinese don't buy housing as a quick-flip investment.... and over here we like paying in full.

 

the funnier thing is when everyone is complaining about "bad loans" for infrastructure projects.  guess what.  virtually none of that was ever intended to make profit.  it's a job sink during a rough economy that provides great benefit for decades later... and thus pays for itself over time.

Tue, 09/20/2011 - 19:51 | 1690514 Kayman
Kayman's picture

So China and Chinese individuals have NO DEBT ?  Well, excuuuuse me !  Better get new info from your Chicom masters.

Tue, 09/20/2011 - 20:01 | 1690529 Dr. Acula
Dr. Acula's picture

>you don't get the chinese mindset at all and that's why any attempt you make over here will be met with utter failure.

This is some kind of fallacious appeal to polylogism.

"the funnier thing is when everyone is complaining about "bad loans" for infrastructure projects.  guess what.  virtually none of that was ever intended to make profit.  it's a job sink during a rough economy that provides great benefit for decades later... and thus pays for itself over time."

This is hare-brained economic thinking at it's finest. It's a failure to understand Bastiat's "That which is seen and that which is not seen". It's a failure to understand time preference and economic calculation. It embraces destructive socialistic policies. 

Wed, 09/21/2011 - 16:07 | 1694211 BigJim
BigJim's picture

...virtually none of that was ever intended to make profit.  it's a job sink during a rough economy that provides great benefit for decades later... and thus pays for itself over time.

To elaborate on Dr Acula's point above, infrastructure is a cost. It may or may not enable greater productivity, but building it for its own sake is a waste of resources.

Central planners are notoriously poor at guessing what investments will (or will not) provide future economic benefit.

Tue, 09/20/2011 - 20:26 | 1690596 Stax Edwards
Stax Edwards's picture

Blinded by the light, revved up like a duece....

Wed, 09/21/2011 - 02:12 | 1691339 chump666
chump666's picture

China is a fraud cap x million, that and a communist government running the show.  You about to get a wake up call from hell...

That's capitalism for you, take the pain.

HK learnt that in the 90's, now it's your turn.

Wed, 09/21/2011 - 02:57 | 1691405 chindit13
chindit13's picture

You are a very funny guy!  I love this line:

"over here, we don't fuck around that much with credit"

In 2010 Chinese banks loaned out the equivalent of 45% of GDP.  Chanos estimates (the first figures are Chinese Government numbers) they might match that over the next year.

SOMEBODY in China is "fucking" with credit.

Perhaps your experience is different that mine.  Chinese young people I know borrowed from parents or relatives for the down payment.  The parents or relatives borrowed against their company, from a major bank if the company is large enough, from the shadow banking system if not.

What is the theoretical value of all Chinese real estate assets?  Has China generated anywhere near that much real wealth ever?  Hardly.  The only explanation is that the asset values are being supported by debt.  I remember these exact same arguments re Japan in the late 1980's, that is, minimal debt involved in real estate purchases, and a government that had everything under control.  Bank lending as a percent of GDP did not even match what China has today.  RE in Japan has fallen anywhere from 80-95% since 1990.  It can happen.  The people in Japan who sounded exactly the way you sound now got hammered.  Of course, maybe this time is different, eh?

 

Tue, 09/20/2011 - 18:47 | 1690356 greenback8
greenback8's picture

Chanos is a nothing but a phoney like Barton Biggs and Jim Rogers.

Tue, 09/20/2011 - 18:48 | 1690358 Ramboy
Ramboy's picture

Barton Biggs pees in urinals with his pants dropped to the floor.

Tue, 09/20/2011 - 18:58 | 1690383 Smiddywesson
Smiddywesson's picture

Rogers was actually singing the praises of China during the conflageration of 2008.  He is a tool.

Tue, 09/20/2011 - 18:55 | 1690369 Smiddywesson
Smiddywesson's picture

Naturally, as long as that persists, the global ponzi will always have the benefit of pulling out a "white knight" whenever needed, regardless of just how ludicrous such an presumption has become. 

Repeat post for those who missed it.  Been drinking a bit, so please excuse the typos.

John Kennith Galbraith, in his book, The Great Crash of 1929, wrote that "incantations" characterized the atmosphere after the top, when markets oscillated near the edge of the cliff.  The most common of these was that "great men" would join forces to suport the market in a showing of "Organized Support."  Organized support was on the lips of every Wall Street talking head, until the market swept the chattering magpies away, and stole their nest eggs.  

I have heard the China incantation for four years, and called it what it was, a bunch of bullshit, while gamblers rode their motorcycles and gave interviews about how China was going to pull their customers out of bankruptcy.  Do you know what I learned my fellow ZH readers?  Humility.  The gamblers knew that Wall Street works on bullshit.  They made money on Sinoforest and other frauds, while the people who were right refused to succumb to the illusion.   On March 9, 2009, the gamblers strode forth on the biggest bullshit injection in the history of the world, ramping the markets like no other time in history on taxpayer money.  Did you gain from this or did you sit on the sidelines because you knew you were right?  Today's incantation is that Uncle Ben and company will come to the rescue.  Well, I guess we will find out tomorrow.  

Good luck all.  The lesson I have learned is that you have to be a bit of a momo chasing gambler, and an informed contrarian.  My money is on the gamblers for tomorrow, but it's all good.

Tue, 09/20/2011 - 18:57 | 1690372 fdisk
fdisk's picture

F* China counterfeiting everything.. I mean look, their GDP growth is near or over 9%?

Alright, check f* FXI Chinese etf.. ANYBODY, please explain to me, how with 9% GDP growth

Chinese stock market constantly going down??? How that's f* possible? FRAUD everywhere..

These guys counterfeiting GDP numbers, APPLE product, Versace, Gucci, Prada, cars, software,

everything.. Otherwise how the f*ck it's possible? Shanghai stock market trading like a pink sheet

stock which is about to collapse.. Symbol (FXI) 9% growth my A$$...

Tue, 09/20/2011 - 19:10 | 1690417 Smiddywesson
Smiddywesson's picture

Read Bad Samaritans.  It concerns the South Korean's view of how the emerging markets are treated by the developed nations.  It is also a real eye opener to have our own history about what we did when we were a developing nation thrown in our face.  It's a very balanced discussion and well worth your time.

Tue, 09/20/2011 - 19:15 | 1690430 laomei
laomei's picture

you really don't "get" china at all or have any damned clue how shit works here

Tue, 09/20/2011 - 19:28 | 1690459 fdisk
fdisk's picture

Alright, can you explain why many Chinese companies listed on US exchanges are fraud and why Chinese stock market are constantly going down while Chinese economy growing at rates 8%+? Any particular reason? Looks like it's lost decade in China as well at least in terms of Stock Market performance.. I'm guessing if Chinese Gov can execute few stock market fraudsters, things can get better and Chinese Companies could have higher than 2.0 P/E valuation on US stock exchanges..?

Tue, 09/20/2011 - 19:56 | 1690526 Kayman
Kayman's picture

Anyone who understands fraud "gets" China.

Tue, 09/20/2011 - 20:07 | 1690547 Stax Edwards
Stax Edwards's picture

(Un)fortunately it really is kind of that simple.  China really thinks they can cheat their way to the top.  I remain steadfast in my position that China is in for a hard landing. 

Remain bullish on US equities regardless of what Bernankenstein says tomorrow.  BTFD.  Mispriced equities all over the place due to high correlations, etf's, algos, etc.  Stock picking paradise IMO, get you some...

Disclosure: Net long(er day by day)

Sat, 09/24/2011 - 20:13 | 1706320 Ramboy
Ramboy's picture

Guess you got f*cked.

Wed, 09/21/2011 - 03:16 | 1691427 chindit13
chindit13's picture

China has an approximate GDP of $6 trillion and a population of about 1.35 billion.  Let's use that and determine a per capita GDP.

OH SHIT!  It's $4444.44  Better either grow or shrink really fast to get away from that deadly number!

Now you are "there" so perhaps you can explain.  There are some 60 million empty residences.  98% of the population earns 40,000 yuan or less, which is roughly $6300.  What is the average price of a residence in China?  After eating, riding to and from work, paying school charges and incidentals like medical care, not much can be left from that $6300 to save for a home, yet you claim few people "fuck" with credit.  So all these people rent?  If so, given that they cannot afford to pay too much rent, the ROI on RE has to be pretty dismal.  Playing it for capital gains, are they?  A greater fool?  Good luck with that.

A poster below noted official PBOC figures regarding bank reserves and the PBoC's balance sheet, which suggests twice or more debt to GDP.  Those are the official figures and do not include the shadow banking system, a good portion of which would not show up in those figures.  As I noted below, it seems SOMEBODY is messing with credit in China.

Wed, 09/21/2011 - 16:13 | 1694238 BigJim
BigJim's picture

you really don't "get" china at all or have any damned clue how shit works here

I'm sure 'shit' works the same in China as it does everywhere else.

Thu, 09/22/2011 - 08:41 | 1696386 fajensen
fajensen's picture

Lay off the meat-flavoured-cardboard sandwitches. It is making you cranky.

Tue, 09/20/2011 - 18:55 | 1690373 sdmjake
sdmjake's picture

It seems like the pundits don't realize but... China only cares about China. When they go into another country to get resource deals they don't care if you are a democracy or a dictator. They don't try to effect policy. They just say "what you giving me? Let's make a deal" China is all about China. They are not interested in being a white knight. Quit viewing it through the WesternCentric lens... China is for China and the rest of the world can suck it.

Tue, 09/20/2011 - 19:08 | 1690411 reader2010
reader2010's picture

Fuck that. China aint all about China. It only cares about perpetuating the Chinese Communist Party's rape its people.

Tue, 09/20/2011 - 22:33 | 1690855 X.inf.capt
X.inf.capt's picture

.  to both

lotta that going around the world.

Tue, 09/20/2011 - 18:57 | 1690376 James T. Kirk
James T. Kirk's picture

Now matter how you slice it, a rose is still a rose, and fiat money in any culture is still based on nothing. We might have single-family forclosure problem, but the chinks are going to have a "ghost-city" forclosure problem. The West developed amnesia regarding the basic principles of free enterprise almost 100 years ago, when the Fed redefined capital as something you print out of thin air, instead of SAVE. However, true free enterprise is still in our collective genes. What we have fogotten, the Chinese have not even learned. All they know how to do is ape the corruption that the US currently practices.

Tue, 09/20/2011 - 19:00 | 1690387 Caviar Emptor
Caviar Emptor's picture

The Apples-to-oranges thingy comes to mind when attempting to compare market and non-market economies. 

In 1971, China was an ailing communist economy on the brink of disaster emerging from the turmoil of the cultural revolution. In 1971, the US was an ailing capitalist economy on the brink of disaster from the inflationary spiral coming out of the combined Vietnam war and cold war (with associated political turmoil). The two countries survived by becoming mutually dependent. 

I've been saying a long time here that I think the only outcome possible is for gradual convergence of the two economic systems (US and China). They've both already come a long, long way to accomplishing this. It's the only way for each economy to remain afloat without a radical reset and rebuild that could span decades and risks major political side-effects. 

 

Tue, 09/20/2011 - 19:16 | 1690433 reader2010
reader2010's picture

Fuck that. The intergration of two economies didn't start untill 1991. In retrospect, 1971 was more about a unified front against their common enemy Russia.

Tue, 09/20/2011 - 19:38 | 1690452 Caviar Emptor
Caviar Emptor's picture

A superficial opinon. but glad you can see what I mean about convergence

Tue, 09/20/2011 - 20:40 | 1690622 reader2010
reader2010's picture

But back in 1971, the trade was secondary to the unified front against Soviet Union. After the collapse of the USSR, the trade started to take the driver seat.

Any sensible man could see the convergence even well before Nixon's trip to China. 

Remember 

 

“Marilyn Mao” by Philippe Halsman, which was photographed in 1952.

 

http://img261.imageshack.us/img261/9301/2342868113ccb63f6e6b.jpg

 


“Mao Monroe” by Dali, which was painted in 1967.

http://img413.imageshack.us/img413/91/534ab04d70fcc8de.jpg

 

 

Wed, 09/21/2011 - 09:09 | 1691904 matrix2012
matrix2012's picture

Did you mean U.S.S.R ???:D

Wed, 09/21/2011 - 11:04 | 1692418 X.inf.capt
X.inf.capt's picture

i remember that matrix,

that was ugly for the russian people

coming to a u,s. corner near you!

Tue, 09/20/2011 - 19:54 | 1690524 sethstorm
sethstorm's picture

That's the very thing that is worse than unhelpful - but actually harmful to the US.  China's still a despotic nation - they only give freedom to the Party apparatus and businesses that locate in that country.  What would be more helpful is if the US severed its links with China.

 

 

Tue, 09/20/2011 - 20:10 | 1690553 Dr. Acula
Dr. Acula's picture

>China's still a despotic nation

>What would be more helpful is if the US severed its links with China.

What's despotic is threatening to shoot or cage Americans who continue doing business with China. Which is the only way available to "sever" the links with China.

But of course thinking 1 or 2 steps beyond your bullshit opinions would require rubbing a few brain cells together.

Tue, 09/20/2011 - 22:18 | 1690788 sethstorm
sethstorm's picture

Given the nations that China partners with, it would make sense to do that to those "fellow travellers".  By offering economic aid and comfort to the enemy, those people stand with China and the equally despotic partners of the Middle Kingdom - not the US/EU.  Even South America's nations have regretted their partnership, given how China's practices offend those nations.  If these people wish to do business with China, they must be willing to accept the consequences of being a partner with a known enemy.  Perhaps they should reconsider if the costs of being with such a country are really worth being pursued, shot, caged, and repatriated by the US and/or EU.

Another point to be made is that the debt purchases are not much more than a return favor for the Opium Wars.  Cutting them off might be painful initially, but it would help the US regain its footing - while giving China a chance to reconsider whether it wants such a despotic government. 

 

Just as a pre-emptive on China:

Offering the lie of "we're not here to conquer" to equally despotic nations only says that China is there to conquer. 

Tue, 09/20/2011 - 19:10 | 1690418 knukles
knukles's picture

Maybe if we all bought some more Chinese shit they'd have enough money to bail everybody out?

Tue, 09/20/2011 - 19:20 | 1690441 chump666
chump666's picture

Legend.  He must be hammering the ASX200 on a given day

Tue, 09/20/2011 - 19:21 | 1690446 chump666
chump666's picture

China is the PIIGS X1000

Tue, 09/20/2011 - 21:46 | 1690766 Hacksaw
Hacksaw's picture

Bingo

Tue, 09/20/2011 - 19:45 | 1690502 SparkySC
SparkySC's picture

China is looking out for one country. 

CHINA.

 

 

They are NO FRIEND OF THE WORLD.

However they've done a great job of getting the World to 'flip' their economic switch seemingly within a few decades.

 

Don't fear, they'll pull the rug out in no time. Get ready world.

 

 

Tue, 09/20/2011 - 20:38 | 1690589 Dr. Acula
Dr. Acula's picture

>However they've done a great job of getting the World to 'flip' their economic switch

I'm not sure what you mean.

China has done USA a great favor by providing us with subsidized goods at low prices. This frees us up to use our labor and resources on other needs - e.g. infrastructure, technology, medicine, leisure, etc.

We should thank China. If it weren't for China's generous gifts, US would be in even worse shape caused by its own self-destructive tendencies. For example, I think our fiat currency would have collapsed by now without China's help.

Unfortunately, for China and its paupers, it was for naught. The US debt held by them will be hyperinflated away. Their malinvestments will soon be revealed: worthless US paper and aging factories that one can't afford to operate.

Tue, 09/20/2011 - 21:20 | 1690711 James T. Kirk
James T. Kirk's picture

Excellent post. They HAVE done us a favor, and the whole relationship will be shown to be a giant multi-decade international fiat ponzi scheme when it finally caves in on BOTH nations. They will be left with crap paper, with no genuine political/economic system to internally utilize their own production capacity. We, on the other hand, will be left with crap paper, and a fossilized productive infrastructure.

Tue, 09/20/2011 - 22:43 | 1690873 sethstorm
sethstorm's picture

The US(and elsewhere) would be far better off without China than it would be with China.  The only favor worth returning them is causing China to turn against its own despotic government and to turn against those outside China that assist China.

You incorrectly assume that freeing up that person doesn't just put them in a worse situation.  Given how things have gone since the 1970's, more people have fallen into the worse situations that happen when you partner up with countries like China.  You would rather write the people off that are in these worse situations and hide them under the rug - when they provide the nasty truth that you cannot explain away. 

Given how the Third World countries are, those aren't gifts from China.  If they were gifts, they would accompany an instant transition for all that are dislocated to that mythical "better thing".  Instead of that better thing you keep on talking about for all, we get more dislocation and more junk from the thugs in China.

 

Sat, 09/24/2011 - 20:16 | 1706329 Ramboy
Ramboy's picture

CHINA has a 5 year/20 year and 100 year plan and doesn't care about rest of world.  If rest of world gets in the way they will intervene some.  IN the end, they don't care about Europe or the US.  Other continents are just stores for them to buy their goods to do their thing.  They don't care about you.

Tue, 09/20/2011 - 19:46 | 1690503 billwilson
billwilson's picture

NOTE: He also said Taxes have to go up, and anyone who thinks they don't have to is nuts. Great interview.

 

Another good one - simple explanations: http://youtu.be/htX2usfqMEs

Tue, 09/20/2011 - 19:51 | 1690516 malek
malek's picture

Can we now also do this "total credit growth x%, half of that debt will go bad, recoveries are 50%" for the US in 2011 and previous years, please?

Tue, 09/20/2011 - 20:07 | 1690539 Pinktip
Tue, 09/20/2011 - 21:35 | 1690745 ??
??'s picture

agree but you're early

comeback in 2020 when H2O will have long since replaced Au as the topic du jour

Tue, 09/20/2011 - 20:09 | 1690550 Left Right Wrong
Left Right Wrong's picture

Big announcement tomorrow morning and I'm not talking FOMC

Tue, 09/20/2011 - 20:29 | 1690603 Stax Edwards
Stax Edwards's picture

So what is it or STFU!

Tue, 09/20/2011 - 20:30 | 1690609 Jack Burton
Jack Burton's picture

I admit to little knowledge as regards China, other than what one reads on economic blogs like ZH. What control the old communist party has msut have been totally corrupted by having it's hands in the private sector growth machine. I assume no busness can prosper in China without communist approval and this must mean kick backs and bribery on a massive scale. One assumes that deep problems underlie the great Chinese manufacturing miracle. But for now they look like they are destroying the competition in the developed world. So many western jobs have gone to China that Europe and the USA are in deep trouble trying to employee their people now that most manufacturing has left for China.

The Chinese housing bubble seems ripe to explode. Their growth is bumping up against a water resource problem and pollution and climate change problems of massive scope. The CHinese growth machine looks about to suffer a major bump in the road. When it hits and how deep it is is beyond my limited knowledge. But if it comes, it will be a world shaking event.

 

Tue, 09/20/2011 - 22:03 | 1690794 Hacksaw
Hacksaw's picture

Some stuff on China, it's people don't park their money in the bank, it goes into real estate. Much of the real estate boom in China is due to people buying property as long term investments. They don't care if it stays empty long term, that's why the ghost towns don't seem to be a large drag on the economy. When the property bubble bursts in China, mom and pop investor are going to be out their life savings because they bought with cash. The banks there are dealing with a ton of bad loans, this has to stay under the radar because most of them are to local governments. All China has is slave labor and a trade surplus, someday the biscuit wheels will fall off their gravy train.

Tue, 09/20/2011 - 22:47 | 1690880 sethstorm
sethstorm's picture

Then the most logical thing to do to help them on their way would be to cut China off from the US and EU.  it wipes out the trade surplus, incentivises the slave labor to assert its freedom, and takes the wheels off their gravy train.

 

Tue, 09/20/2011 - 20:33 | 1690614 long-shorty
long-shorty's picture

Speak it, brother Chanos! CLF to 40 by January.

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