We're not sick, quit (atchoo) saying we are

Nothing says "healthy culture" like an hysterical inability to tolerate disagreement.
Given the accumulated costs of decades of state-driven lending, massive malfeasance by local officials in cahoots with local banks, a towering property bubble, and vast industrial overcapacity, China is as ripe as a country can be for a massive economic correction. Even a small initial shock could lead to a massive bonfire of the vanities as all the false values, inflated expectations and misallocated assets implode. If that comes, it is far from clear that China’s regulators and decision makers have the technical skills or the political authority to minimize the damage—especially since that would involve enormous losses to the wealth of the politically connected.

7 comments:

sykes.1 said...

If everywhere in that paragraph you would substitute "America" for "China," I would agree.

China's economy is one-third larger than the US' (PPP), and it is growing three times as fast. Its industrial sector is very much larger than ours, and it is very much more diverse, socks to supercomputers. Without Chinese industry, there is no Apple, no Microsoft, no Walmart, no Target...

It is arguable whether their Communist Party is more corrupt than our Republican and Democrat parties. I think our parties take the prize for corruption.

Every department and agency of our government is utterly corrupt. That includes specifically the military, intelligence agencies, law agencies, courts (including the Supreme Court), Congress, the Presidency, and even the science agencies like EPA.

To date the Chinese Communist Party has exhibited a much greater skill at economic management than has our elite. Our elite has destroyed our economy. We even import 70% of our prescription drugs. Our elite has destroyed our education system K through post-doc. We have a Potemkin stock market, this week down 3,200 points.

This country is on the brink of a potential hot civil war. A Sanders Presidency is possible, and he is a Stalinist Communist who will build the gulags and death camps.

So, I am betting that China and its CCP ride out this storm.

Dad29 said...

"Skill at economic management"?

You mean they can massacre (or let die) all sorts of "useless eaters". That's the Communist way, pal.

Yes, the Washington crowd (and NYC, LA, SFO, CHI) are corrupt as Hell. But there's a glimmer of light called Donald Trump.

Grim said...

I think there's still a point to be made here. Companies have long now become accustomed to investing in China, assuming that the cheapness of its labor was protected (rather than otherwise) by the authoritarian oppression of its politics. China allegedly protects the workers' right to unionize, being communists, but practically it would stomp on the unions if they tried to strike. Worker conditions could be abominable (when I was there welders were not even supposed to have safety glasses, and would weld until they went blind trying to make enough money to retire before they couldn't see). No OSHA-type legislation would be forthcoming that might raise corporate costs.

In other words, the allegedly-communist country would instead act as a Mussolini-style fascist nation. Mussolini said that he thought 'fascism' should really be called 'corporatism' because it aligned the interest of the state and the corporations into one body (i.e. "corpus"). China represented an apparently ideal investment, which is one reason it got so much Western money.

The virus has exposed both the costs associated with authoritarian schemes, and also the dangers of a single point of failure in a supply chain. Both will need to be re-priced by the market now. And because the shock is big enough that everyone will be doing it, the market is free to shift large chunks of capital to the new consensus about where it's safe to plant capital and grow it. If open societies prove better capable of containing outbreaks, that'll be telling. A whole lot of capital may shift as a result of this.

Assistant Village Idiot said...

@ sykes. Having spent time in Romania and being close with a person who worked over a decade in China, I don't think American corruption, neither Republican nor Democrat, is on near the same scale as other countries. We receive a lot of foreign doctors at my hospital who come from connected - that is, corrupt, and therefore likely to defend their country - families who say the same, that we just don't see how good and reliable law, promotion, and business are here.

I think what you are seeing is the difference between what we knew as children and young adults and what we see now. Some of that, I believe, is deterioration since the initial post-WWII era(though my reading of American history suggests there was more corruption in earlier eras). A lot of Americans saw how horribly other places were run and resolved to do better, which worked for a while and we still reap the benefit of. But also, we didn't pay as much attention to what the bastards in Washington were doing then. We made cynical jokes, but didn't act as if we were all that concerned. Now we have our noses rubbed in it daily.

Texan99 said...

Can we quit beating about the bush and just call it Marxism now? https://hotair.com/archives/john-s-2/2020/02/27/4237353/?bcid=0861c706df42c9efc784706f921a70ca&utm_campaign=nl&utm_medium=email&utm_source=hadaily

It's not skill at economic management. It's a pernicious tyranny that leads to murder and starvation. Not by accident, not because by bad luck socialist dictators always get around the confiscating the last of the inevitably dwindling resources for a few cronies, but because economic failure is built into the ideology, and everyone gets desperate when the food runs out.

Dad29 said...

Grim, you've mentioned a small part of the "cheaper in Communist China" formula.

Not only is there no OSHA; there is no SocSec, no Fair Labor Standards Act, no EPA (VERY important) and............Ta Da!!!!....no lawyers representing "workers"--at least, no long-lived such creatures.

Oh, yes: no ObamaCare, no Medicare for all......no health insurance whatsoever. Income taxes? Be serious!!

Of course, the Chinamen will rob you blind and cheat you out of your underwear. THAT is the "cost of doing business" there.

It's not really the "cost of labor" alone. Not by a long shot.

Ymar Sakar said...

China stocks will crash. Good time to buy when they rock bottom.

They have growth yes but... china manipulates their markets by having gov or shell corps buy stock dips. It is profitablr too but the point is that china stock prices are artificial like dot com.

Alibaba may be exception. Rails are real. The rest like 5g? Death sentence. Huawei ninjas?