Not A Problematic Economic Situation At ALL!

In addition to shadow bankers disappearing/committing suicide/going bankrupt/leaving the country, China's economy is in the middle of another body blow.

Say you're a Chinese businessman "needing" a loan. Go to the bank! No, not the shadow banks, a legit REAL bank. They have been ordered by the Communist national government to lend, regardless of your credit-worthiness. All they want is collateral. Tell them about your warehouse full of steel, and they'll give you a loan.

Well let's say your business plan wasn't as great as you thought. You end up in default on the loan. Here comes the bank looking for their collateral warehouse-full of steel. Except you lied, and there is no steel.

Or, probably, copper and other commodities. To say this is a huge problem is an understatement. Let's see if the Chinese government lets the banks take a hit, even on paper, or if bailouts become "necessary" to "save" the banks in China.

Are We Going to Start Another Space Race - with China, Now?

The question came up on the Boortz show this morning: SOMEbody is apparently going to build a base on the moon. Do you want it to be China, or do you want it to be us? The question is almost rhetorical. Of COURSE you want it to be us. Then the reaction I had: Neither! We shouldn't be building [deleted] on the moon! Not our moon!

Of all the things where weights and balances are critical, the MOON is high on the list. Seriously? You make it too heavy and 'here she comes!' and if you make it too light (mining) 'there she goes!' WHO thinks it's a good idea to mine the moon or add tons and tons of mass all in one spot on the surface? This is foolish talk!

Oh sure, we will make sure it's done right. Sure, sure. International treaties to ensure mass distribution stays nominally the same. Right. Except OOPS oh well we'll make it up next year. Then next year comes and OOPS oh well we'll make it up next year. Then next year comes and HEY has anybody seen the Moon lately?

Leave the Moon ALONE. I like the tides. I like the night sky illumination. The female hormonal cycle we could do without, but . . . .


oh, wait a minute. Nevermind, mine the [deleted] out of the moon and make it go away!

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(that was a joke. I'll take tides and global winds with PMS over the alternative, thanks)

"Absolute Victory"

It's okay Japan, you don't have to offer annual apologies for getting us into World War II. We kicked your face in, and we DID see Absolute Victory, just like Roosevelt said we would.

Quote of the Day: "China apparently is preparing for war. What are we preparing for?" -Laura Ingraham, 07 Dec 2011, the day they told their Navy to prepare for combat.

Setting the Stage for Armageddon?

China has an army that could easily march a few million men into Israel. Israel will (if you read it that way) be the location of a battle that will include so many casualties that blood flows as deep as a horse's bridle for 200 miles.

But China has nothing to do with Israel! Why would China figure into the last battle just before the return of Jesus to Earth? They wouldn't, right? It was always some sort of vague "they'll come from the Kings of the North" type of thing. Until now.

China says they'll protect Iran even if it starts World War Three. Iran, of course, is on Israel's short list of "Nations to attack before they wipe us off the map." WWIII here we come.

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The maths are open for debate(check the comments!). Depending on how you run your made-up numbers, it could be about the right volume of blood to mean everyone left on Earth dying in the same place. That seems . . . perhaps high to me.

An Unrelated Twist on Decoupled Economies, USA vs. China

"...[I]n the event of a confrontation with the United States, China’s entire supply chain and overseas investments are helpless hostages."

This is something I (and probably a lot of us) had not previously considered. China is becoming the manufacturer of all things for all nations, but they are not a country rich in natural resources. So they are not only a leading exporter of finished goods, they are an importer of raw material and (as in the linked story) energy. If China were to start some sh*t and get the USA involved, the USA and other nations would possibly be able to take steps to completely cripple the Chinese economy, causing domestic revolt in China, by preventing access to key resources in foreign nations where China gets their stuff to make your stuff.

So if China acts up, China loses almost automatically*? Wow.


Hat tip: Instapundit

*assuming competent response by the other players on the world stage, that is!

Decoupling Theory Soon To Be Tested.

If you think the American and Chinese economies don't necessarily rise and fall together, or the European and world economies, you will have a rare opportunity: your theory is about to be tested In Real World Conditions. China: headed off the cliff, just in time for the Presidential elections. Europe: Bailout deal 100% ready to rock except for the fundamental portion of the deal is unresolved.

If you think the USA's economies can survive China, Australia, Greece, Portugal, Italy, and Spain all crashing at once while France and England are faltering, I can hope with you . . . . but I expect my long-awaited double-dip is going to be nasty. Here's hoping the global food supply holds out. You can't eat a CDS certificate.

Most Favored Nation Status: Bring On The Prosperity!

Well, in a way. I mean, after all it was World War II that ended the (first) Great Depression. Now we have all of China's neighbors complaining that it has its elbow on their side of the back seat.

Also, perhaps unsurprisingly, China was selling arms to Qaddafi . . . while we were giving arms to Al Quaeda the "rebels" fighting Qaddafi. Raise your hhttp://www.blogger.com/img/blank.gifand if this setup reminds you of something.


Hat tip: Instapundit

What's the Worst That Could Happen?

I mean after all, they are one of our Most Favored trading partners!

General Electric makes electronics. General electric makes avionics. Avionics are required in airplanes. A company in China is making a new airliner. They need avionics. General electric is going to give the technology to their Chinese partners to put in the new airliner.

Problem: China is a communist nation. A Chinese company is the Chinese government is the Chinese military. Concern: China is on the way to becoming a world military super-power. A COMMUNIST world super-power.

And: Avionics for airliners transfer nicely to military fighter, bomber, and command & control aircraft.

"The last capitalist we hang shall be the one who sold us the rope." -Karl Marx

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P.S. if you think I'm paranoid about not flying on Airbus aircraft, just wait until a Chinese company starts making planes! Hint: You will NOT catch me in the air in a Chinese-built airliner. Oh wait, I forgot: I'm repeating myself!

P.P.S. In China, they are highly original thinkers. For example, they never would steal someone else's well-proven idea. I mean, this airplane has NO resemblance at ALL to any existing airplanes!

Quote of the Day 08/06/2011

"...in spite of all the misguided huffing and puffing of numerous analysts, it is China who fears not buying US debt. Otherwise, they would not buy it!" -Michael Shedlock

If you are concerned that the US Dollar will lose its position as the prominent world reserve currency, you are either a) a dummkopf, or b) not reading Michael Shedlock's Global Economic Analysis blog.

The Chinese buy US government bonds because they (practically) have to. This is a natural function of international trade the way Americans like to trade these days. Do not sweat this problem.

Another Reason to Read Mish:

Remember the scary headline from mainstream economists saying China was going to dump U.S. Treasuries and blah blahs about a new world reserve currency being something beside the US Dollar?

Well, Michael Shedlock pooh-pooh'd it at the time, and now it turns out instead of buying less US debt, China was buying more than previously disclosed.

"Unexpectedly"

Hyperinflation! Yuan will be New Reserve Currency! Everybody Panic!!!1!

From a real economic analyst who knows what is happening (and called it before it happened): Not so much.

Shell Games and Open Secrets

zOMG CHINA DUMPING US TREASURIES Oh Noes!!!1!

So went the hysteria in certain circles. Then some cooler heads followed a bouncing ball and recently figured out that China never stopped buying US treasuries, they just stopped buying them from us.

That the USA runs a trade deficit with China means China will buy something from us with our dollars. The money runs in a great big circle across the Pacific Ocean, because they don't put it all into capital investments in China. If we run a trade deficit, they will buy our dollars, or someone else will, and pass the value of them on to China some way. That you didn't understand this paragraph means you were cheated of an education, but trust me: trade deficits mean we sell them bonds when we buy their plastic crap toys.

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NP asked me about this today and I gave him an explanation somewhat as follows. He was uncomfortable at the idea of the Chinese buying our debt, and wondered what would happen if they stopped . . . what would we do if nobody financed our deficit spending anymore? The answer is we would cut spending to the point that we would not spend more than we took (at gunpoint) from taxpayers. What then happens to the national debt? It continues to go away.

Yes, continues. What we have right now is a credit card with a $14.2T limit and a $14T balance. What the big spenders in Congress would like to do is increase our line of credit to $15T or $16T and keep right on spending money we don't have. This, by the way, will be what happens (and then some) if Obamacare is not repealed. What the right-thinking small-government types would like to have happen is that we NOT increase our maximum credit limit anymore.

If you have a credit card with a $14,000 limit and a $14,000 balance, and they won't increase the limit for you, what do you do? You stop charging it up, is what. You stop going out to restaurants and movies on the credit card. I imagine we would start shedding Federal agencies left and right, if we stopped running trillion-dollar annual deficits. This would lead to massive unemployment for government workers, but everyone else would have an effective pay rise, long-term.

But what about the debt? Aren't we in big trouble there?

Not yet, not really. If you can make the $340 minimum monthly payment on your credit card, you can "afford" to have the $14,000 balance carry over month-to-month. If you can ONLY afford the $340 minimum payment, and you charge up more debt, and then you COULDN'T afford the $400 minimum payment on a $16,000 balance, you would be in trouble. But we can afford it still. Every year, we sell more bonds to finance the operation of our national government. Every year, we have to pay a little more on the minimum payment, to satisfy the bond holders.

Eventually, we could charge up so much debt on our T-Bill credit card that we would be unable to make the minimum payments. At THAT point, we would be 100% screwed, and would have to default and cut back on our spending. If we were to cut back so much that we ran a balanced budget starting today, nothing bad would happen with the national debt.

If you continue to make the minimum payments on your credit card, in 30 years it will be paid off. If we continue to make minimum payments on the bonds we issue, the bond holders will be made whole as their bonds mature. In 30 years we will be 100% debt-free as a nation.

Whether this is a Good Thing is a separate argument.

Don't Go Investing In Chinese Skyscrapers Just Yet

Those who are unaware that China is headed for a depression will be surprised I guess. Those paying attention ought not to be. Apparently China is the only place there is currently any action in the ridiculously-tall skyscraper industry. That's swell for the people getting paid to work on the towers, but not so great for anyone after they're done.

In case you missed it, not only does China have a surplus of see-through buildings, there was an entire city built where nobody lives. China is only not in a real-estate crash right now because they are extend-and-pretending like everybody else did whose markets have already crashed. Once these new skyscrapers are complete, the developers will be bankrupted because nobody will use the buildings. The towers will remain largely tenant-free for the foreseeable future, like the other new buildings in China.

China is going down, hard, soon. If you have your money over there building record-setting skyscrapers, there is no time like the present to pull it out. If someone tries to sell you Chinese skyscraper company stock, walk away.

China Resumes Rare Earth Metal Shipments?

A full month and more after China stopped shipping rare earth metals to their trading 'partners' and mere hours before Secretary Clinton was to wave her finger at them and threaten to write them a nasty letter, China started letting rare earths out of their ports again.

This can be seen as a won or failed attempt, depending on what they were trying to accomplish. I am inclined to think it was a failure, as their main customers started recycling and their secondary customers started making moves to open up their own rare earth mines again. We'll see how this is spun in the news in the coming days.

Chinese Trade War: Didn't Have To Affect Us!

We used to make things in America. We used to make things out of materials mined in American soil. Specifically, we used to make high energy-density motors and magnets here, with rare earth metals mined here. Most people would be astonished a all the products they use which contain rare earth elements.

Then the safety nazis got ahold of the mine and shut it down. Now our rare earths come from china. China ships it to Japan. Japan processes it. We buy it. Japan and China have been kicking sand at one another and calling ugly names recently, and Japan took a Chinese fisherman for fishing in disputed waters. China responded by cutting off the supply of unrefined rare earths to Japan. To say that this has potential to disrupt the world's economy is an understatement.

We'll see what happens, but it looks like China holds the cards here. They may be getting some relatively high-tech jobs in China, and we may be getting even more-dependent on that communist Most Favored Trading Partner of ours for materials we use in our warfighting and life-living activities.

Q: What happens when you don't make your own bullets and you end up in a war with the people who do?
A: Hint: it rhymes with "shoe ruse"

Now people are coming to their senses in America and trying to re-open the rare earths mining industry, but this time with subsidies from the Taxpayer because it's not profitable (otherwise it would still be in operation). Free trade got us into a mess here. We'll see how bad it ends up, and if we are able to get out of it.

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P.S. remember: everything you buy from China is funding their military. If you buy a $1.00 toy then you bought a handful of bullets for the Red Army. Of course, we are all very best good friends now, and we would never get in a war with China, so that is probably okay . . . right?

Oh Good. I Was Just Thinking We Needed A Trade War.

You know, just the other day I was thinking to myself that what we really need is to start a trade war with our largest trading partner. Nothing like higher prices and international animosity to gin up some good ol' economic recovery, eh?

Well, There Goes China.

Mish says that the housing bubble in China has apparently collapsed. Blame may be (incorrectly) laid at the feet of the Chinese government, which tried to slow the apparent growth in the Chinese economy recently. That wasn't the problem (bubbles always burst, was the problem) but if it helps convince the people in China that the Communists need to be evicted from power, I'm all for it.

Note: this happens just after Canada's housing bubble began to burst, and when the US is slipping into the double-dip we have been waiting for.

The economic news heading into this mid-term election is going to be murderous on incumbents.

Yet Another Reason To Buy American: Cancer Villages in China

My company makes tens of thousands of dollars per month recycling stuff that can't be reused or resold. We might make many more thousands of dollars per month, if we sold our recyclables off to China. We choose not to do so.

My family pays more for goods produced in America, or other nations with labor and pollution laws better than China's. We could save lots of money on lots of things we buy. We choose not to do so.

Because China is a third world nation trying to play in the deep end of the pool. They are kicking off the sh*tty part of the bargain to the countryside. Eventually, you get stories about whole towns going from none to lots of cancer cases after the river changes color, after the factory moves in to town.

When you buy your cheap junk from china, you are getting it cheap for a reason. Part of the reason is that they are killing people with environmental pollution.

Buy American.

Hat tip for the link: Moonbattery

China Still Headed For A Fall

I have been blogging on this theme for one year this month*. I still maintain that the Chinese economy is getting ready for a huge collapse, along the same lines and for similar reasons that we had one in the USA.

Our economy was in the tank when home prices here fell by half. Is it different when home prices in China fall off by a third?

When china implodes and takes 1/4 or so of the world's manufacturing capacity with it, what does that do to the world economy? Is it possible that the Chinese collapse will be blamed in the minds of the people of China on the Communists? Will the Great Depression, China Edition lead to capitalism!?

Hat tip: Mish

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*Update: Whoops, make that LAST month.

Quote of The Day 03 May 2010

Overheard @ my house:

My Darling Wife and I were discussing a desire on the part of #1 to learn to speak Chinese. I got to thinking about how we here in Texas can slaughter American English, so a damn yankee foreigner person from elsewhere who nominally speaks English can't really understand us and I came out with

" . . . the thing about Chinese, is that it's completely different. For somebody with a Texas accent, you tell somebody you want french fries, and you're telling them their dog is orange." -me, 2 minutes ago