Chinese ghost city
Posted on 05/14/2012 12:41:11 AM PDT by bruinbirdman
All key indicators of China's money supply are flashing warning signs. The broader measures have slumped to stagnation levels not seen since the late 1990s.
Chinese ghost city
Narrow M1 data for April is the weakest since modern records began. Real M1 deposits – a leading indicator of economic growth six months or so ahead – have contracted since November.
They are shrinking faster that at any time during the 2008-2009 crisis, and faster than in Spain right now, according to Simon Ward at Henderson Global Investors.
If China were a normal country, it would be hurtling into a brick wall. A "hard-landing" later this year would already be baked into the pie.
Whether this hybrid system of market Leninism – with banks run by Party bosses – conforms to Western monetary theory is a hotly contested point. The issue will be settled one way or the other soon.
What seems clear is that China's economy did not bottom out as expected in the first quarter. It is flirting with real trouble. Yao Wei from Societe Generale says a blizzard of awful data "screams out for easing".
China's electricity output – watched religiously by bears – slumped in April. It is up just 0.7pc over the last year. State investment in railways has fallen 44pc, with an accelerating downward lurch over recent months. Highway construction has dropped 2.7pc. "The data shows extreme weakness in the Chinese economy," said Alistair Thornton from IHS Global Insight in Beijing.
The Yangtze shipyards tell the tale. Caixin magazine said eight of the 10 largest builders in the country have not received a single new order this year. "A wave of closures in the shipbuilding industry has yet to begin. A hurricane is approaching," said one official.
Housing sales slumped
(Excerpt) Read more at telegraph.co.uk ...
I’ve read quotes from Chinese officials and generals stating much to the effect that if some economic crash came to China, they would direct the frustrations and energies of their people “into a fist, striking outward.”
Close, but not quite accurate.
We’ll see hyperinflation re necessities (obama is already causing this re energy, and entirely on purpose), but deflation of all non-necessities. Since non-necessities make up the majority of the world’s economies, this will mean few people will be able to afford necessities.
This is a recipe for utter disaster, and it’s almost too late to change paths...
The article overlooks a fundamental difference between China and other countries, that being the savings rates of its citizens. Traditionally the Chinese save 50 percent of their income or more.
Chinese are also far more used to doing without. Pent up consumerism certainly was unleashed in the last 15 years so they have gotten more comfortable but the Chinese are still far more adept at doing without and making do.
This article mentions Chinese rail construction has slowed. But that construction has put in a national system of bullet trains in just 10 years. It is as if the writer thinks that pace should go on forever.
Certainly China’s bankers have been pressured to make loans they would not otherwise prudently make. Perhaps that is going to cause a crash.
If that is the point then fine. But I can’t help think that if China is bad off for that, then what does it say about the U.S. The U.S. financial position seems far, far worse.
“We’ll see hyperinflation re necessities (obama is already causing this re energy, and entirely on purpose), but deflation of all non-necessities. Since non-necessities make up the majority of the world’s economies, this will mean few people will be able to afford necessities.”
Deflation looks like it is in the cards. China is the clincher.
I knew something was up when gold dealers on TV started advertizing selling at dealer cost with little or no commission. That told me that the smart money was selling their hoard or at least a lot of it.
I know the story about hyperinflation replacing deflation but when? You better have some cash on the side in the meantime.
Maybe Helicopter Ben will given every home owner 100K in cash if the fhit hits the san this time. Maybe that will help get it going.
I think it is inevitable that their economy is going to slow, for a variety of reasons, including the fact that more and more people are starting to avoid the purchase of made in China goods. The ‘fist striking outward’ approach will just hurt them more as it will breed a consumer backlash.
I’ve heard convincing arguments that the core of the problem lies with the repeal of the Glass–Steagall Act around 1999. Only 8 years later, we had our inevitable crisis.
All the smart money was in deflation, and is still in deflation. Why do you think Bernanke panicked back in 2009? It was because prices were going down not up, to reflect lowered demand, and that was going to crush Bernanke’s debt positions.
At some point the thing about missing 70,000,000 women has to start to create gigantic grief.
Dropping money out of a helicopter won't fix anything, you have to create money and then spend it INTELLIGENTLY AND PRODUCTIVELY. It's those last two items which are tricky. Also it's best if governments at some level can simply create money rather than borrow it into existence as our government does. At least if a government creates money out of thin air itself we're not sitting here paying interest on it to banks which create it out of thin air.....
See, all those who have insisted the debt was going to result in hyperinflation have been hard pressed to explain why prices have just not been going up much, or fast. Well, if China is experiencing heavy deflation, it would more than offset inflationary tendencies here.
Remember this? Seems growing the economy can’t be done by Stimulus, in the long term. China also had no debt like the USA does.
Chinese economic stimulus program
http://en.wikipedia.org/wiki/Chinese_economic_stimulus_program
he 2008–2009 Chinese economic stimulus plan is a RMB¥ 4 trillion (US$ 586 billion) stimulus package announced by the Central People’s Government of the People’s Republic of China on 9 November 2008 as an attempt to minimize the impact of the global financial crisis on the world’s second largest economy.
I’ve been saying similar for a few years. I bet at some point many of the excess males end up in Africa.
You get inflation from the destruction of the means of production/service of an economy.
Why did Zimbabwe get hyperinflation? They took over their farms and gave the farms to non-farmers.
OK, why do you get deflation? In a credit-based economy, you get deflation when credit availability is destroyed.
Thus, if printing more cash destroys more credit availability, then you get deflation.
Deflation is an economic reaction to a slowing speed of money. Lower prices encourage spending sooner.
On Sale Now, Sale Ends in 24 hours!
You seen some of the editorial work I've been up to?
BTW: I'm SO different than when you knew me.....
The point is, in an integrated worldwide economy, the velocity of money in major countries (I don’t think Zim really counts here) is closely tied to ALL business expectations, not just those of the US or Europe. A Chinese contraction would cause velocity everywhere to slow.
Falling prices over time reward delayed purchases, creating a vicious cycle as sellers become increasingly desperate for buyers, who begin to delay every purchase as much as possible. Credit naturally contracts without deliberate intervention due to bad debt caused by loss of collateral value.
What we’ve seen is massive intervention resulting in commodity bubbles. Stimulus is finding its way into the few areas with reliable demand.
Slumping overall demand is the root cause for deflation.
We owe the Chinese lots and lots of money. Just Friday it was announced that the Green River oil shale had about as much recoverable reserves as the entire rest of the world. http://www.freerepublic.com/focus/news/2882771/posts?page=41
The United States currently has 20 million people unemployed as a consequence of these processes. We'll probably end up with another 20 million unemployed from the same processes in just a decade.
We have to figure out how to keep folks employed and paid.
The biggest item in most people’s budgets is a place to live. While homes could deflate still further, rental costs will likely inflate.
How about the Post Office?
;^)
Now what do you imagine news like that does to the price of gold?
If you wanted to do a study on DEFLATIONARY PRESSURES AND THEIR CONSEQUENCES you could start at USPS.
Since the early 1970s they had a 700% increase in productivity per workhour. I was one of the first of the budding young employees at Headquarters to come up with a device that would displace one employee for every one device purchased. That became a goal or ambition of others as well, and they worked it to the bone.
That would enable you to pay off the mortgage before you'd exhausted the depreciation.
BINGO!!
The dynamite (CRF) was already in place, but Gramm-Leach-Bliley (1999) put the match to the fuse.
Those spare billion would not, even with a doubling or tripling of income, be able to capitalize on their newfound wealth. Rather, fewer would starve, or die young, or be slaughtered as babies.
More hootches would be built, but they'd be the same mud-walled tarpaper augmented roof designs everybody else has. Pig breeding would not be done in a more elegant fashion ~ that being limited to the amount of food available, and no more fields would be put to the plough than they are now able to work.
The ducks would quack, the noodles would slurp, green onions would pop up in protected window boxes ~ and China ~ the real China ~ would slumber on into the immedate post neolithic future!
I mean, it's worked for so many decades....
;^)
We got rid of that stuff years ago. Nobody just stands around looking disinterested. They were incorporated into the operation of the Great Machine at the heart of the planet (or which will be eventually).
And those savings were used to back the construction of those “ghost apartments” pictured above
I knew something was up when gold dealers on TV started advertizing selling at dealer cost with little or no commission. That told me that the smart money was selling their hoard or at least a lot of it.
I don’t know if it is still going on, or even what the details were (minimum purchases?)but I saw some ads a few months ago where dealers were offering $250 cash or so to first time gold buyers.
I am also unsure if MSM covered Soros and Buffet predicting a *gold bubble*, but when I mentioned it to a friend who is heavily invested in physical and miners, she was scathing that the fundamentals didn’t support the term *bubble*. That’s true, but all I could think of was that in a manipulated market, none of the old methods still operate. She eventually agreed.
I mentioned those two predictions to an extreme liberal and she turned absolutely bloodless. I thought at the time that it was interesting that even die-hard supporters of zerO and Co. were hedged with gold.
And yet: still another friend works for an international manufacturer with a lot of infrastructure in China. They are actually all over the world and our friend spends half his time in a plane going to Saudi, Japan, China and a couple of places here in the USA. His employer is doing alright to the point where the employee is putting off retirement as long as possible.
There just may be a lot of denial out there or people are expecting enough government intervention to change the predicted outcome. Or the predictions are overwrought to begin with. I just don’t have enough real information to judge, however, I expect bi-flation and would not be surprised to see price controls at some point.
The worst of all worlds, in other words.
I sold my NoVA house in 2006 when the market was at its peak. Prices have about halved since then. According to my old neighbor, the guy who bought my house would like a word (or more) with me. But, hey, no one put a gun to his head. That’s what homes were selling for at the time.
All the stuff we bought at Walmart provided a bunch of the money too. My guess is the biggest threat to the ordinary Chinese citizen's savings will be inflation, not those buildings but I could be wrong.
The banks that loaned out the money will collapse taking the investors with them.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.