Two weeks ago, Marc Faber provoked the fury of a broad segment of the population by daring to tell America that it is lazy, needs to work more, and is overly-reliant on a welfare government which is an eager parasite of the welfare system cocoon in which it has wrapped the majority of the population knowing full well it can get away with anything due to threats it can pull the (otherwise insolvent) social safety net at any given moment if the status quo is threatened. Needless to say, European readers were delighted and amused by Faber's statements. We wonder, then, what the US (and correspondingly, European) response will be to the news that last week it was the turn of Jin Liqun, chairman of the China Investment Corporation (CIC), the sovereign wealth fund all too often (by the overeager European media) tasked with bailing out, to channel Faber: "Europe is not really short of money. Europe needs to give a clear picture to the Europeans themselves and to the rest of the world that their problems could be worked out. The root cause of the trouble is the over-burdened welfare system, built up since the Second World War in Europe - the sloth-inducing, indolence-inducing labour laws. People need to work a bit harder, they need to work a bit longer, and they should be more innovative. We (the Chinese) work like crazy." Translation: China is finally announcing that it is unhappy with the work output of its debt slaves. And since China, courtesy of its trade surplus or something, will sooner or later also have to apply the same bailout hypermathematics which indicate that despite having to bail out its own banking system it can bail out the world, expect comparable announcements about its latest shipment of debt slaves situated conveniently between the Atlantic and Pacific oceans.
More on Liqun's displeasure with his subordinates via the Telegraph:
"European countries have a lot of advantages. They just need to tap these advantages and they will be back on their feet."
This is not the first time Mr Jin has aired his views on the inner workings of Western economies.
Last month, at a forum organised by The Economist magazine, he said he was "concerned about the unravelling of the situation" in Europe.
He told guests he was "sorry if I have ruffled feathers", adding: "China cannot be expected to buy into high risk in the eurozone without a clear picture of debt work-out programmes."
Mr Jin, a graduate of Boston University, was formerly China's deputy finance minister and vice-president of the Asian Development Bank.
He is now chairman of CIC, China's sovereign wealth fund, which has a budget of around $300 billion.
And further clarifying what Liqun meant, especially with the sloth reference, here is JPM's Michael Cembalest with some very provocative insights:
For the benefit of our urban clients, a sloth (megalonychidae) is a slow-moving, tree-dwelling animal that sleeps 15 hours a day and is covered in beetles. There are many ways to react to this: a wake-up call for the West; an unfair diatribe, given China’s currency intervention which arguably contributes to the economic challenges facing the US and Europe; or a reflection of inevitable wage convergence, driven by 2.6 billion people in China and India entering the global workforce after decades of self-imposed isolation. Whatever the truth is, Jin’s comments seem in sync with other Chinese assessments of Western fiscal policies (see August 6th article in Xinhua: “China, the largest creditor of the world's sole superpower, has every right now to demand the United States address its structural debt problems and ensure the safety of China's dollar assets.”).
To stress-test Jin’s assertion, we recreated a chart from Eugene Steuerle, former Deputy Assistant Treasury Secretary for Tax Analysis, now with the Urban Institute. He calls the chart a measure of “fiscal democracy”: the degree to which Congress can spend revenues not already committed to mandatory programs. In 2009, for the first time, all US government revenue was pre-committed to mandatory spending (social security, healthcare entitlements, farm subsidies, unemployment insurance) and interest. After a brief rise over the next couple of years (due to projected declines in unemployment insurance), it is estimated by the CBO to fall back to zero again. The chart confirms the post-war shift to a more entitlement-heavy economy, a shift former U.S. Comptroller David Walker describes as crowding out the kind of productive discretionary spending needed for the US to compete against China and India.