Posted on 07/22/2016 11:10:48 PM PDT by dennisw
Having followed China's biggest risk with great interest for the past year, which incidentally is not its $36 trillion in debt, nor its defaults, its zombie companies, its ponzi "wealth products", its currency, its capital outflows, its crony capitalism and corruption, nor its gargantuan capital misallocation, but the threat of a social revolution as a result of a surge in unemployment as entire zombie industries fail, that has always been true biggest risk for Beijing (something the Politburo knows very well), we found it less than surprising when last September a Chinese coal company announced it would fires 100,000.
That was just the tip of the iceberg for China's insolvent commodity sector, which just happens to employs tens of millions of no longer needed workers.
Things then rapidly escalated, and as we reported in March, China's mass layoff wave was only just starting when it was revealed that China aims to lay off 5-6 million state workers over the next two to three years as part of efforts to curb industrial overcapacity and pollution.
We expect that tens of millions more will or already have been fired as China struggles to resolve it gargantuan "overcapacity" problem.
But if indeed millions of workers have already been fired, then what are these recently laid off workers doing, and why have they not rioted as Beijing, is so terrified they will?
We now have an answer: according to South China Morning Post, Didi Chuxing, the ride-hailing company which is China's equivalent of Uber, is claiming to have given more than a million jobs to former heavy industry workers across China, according to new research from the firm.
That’s exactly what I’ve expected to see happen. They have a huge problem with excess males due to decades of female infanticide during the enforced 1-child policy era . . .
They also have a longer-term demographic nightmare worse even than Japan’s or ours, due to this.
They didn’t plan for a sequel because the world was saved from ultimate evil.
What next; little baby elements that save a nursery?
Imagine being rescued from a lifeboat after the sinking of the Titanic, then going straight away to see the movie. That’s what it was like for me. I took a break overnight and watched the rest the next day.
If that's what you got from the movie, then you bought the political propaganda and Krugmanism it is selling (i.e., "Wall Street and big banks are responsible for the Great Recession and people should have gone to jail and big financial institutions need to be broken up and we need a lot more regulation of "Wall Street" and the banks") behind a pretty good story by Michael Lewis about few (not even the largest, by far) short sellers who figured out how to use leveraged CDS (Credit Default Swaps) — issued mostly by AIG's London-based financial derivatives office, to insure against mortgage "paper risk" — to short the MBS/ CDO market. One of the big problems was that because there was no central clearance, CDSs were seriously oversubscribed, which exacerbated but by no means caused the Great Recession.
Read more in Did 'The Big Short' Get It Right? - Newsweek, by Jeffrey A. Tucker, 2016 January 2
There are several movies about the period, most are crappy left-wing pseudo-documentaries (like Charles Ferguson's Inside Job (2010) or Michael Moore's Capitalism: The Love Story (2009) etc. etc.) that make up the "facts" about "Wall Street" or "The Fed" but completely leave out or mention only in passing the role of the government regulations and mandates (like CRA, FHA and HUD, among others) and Fannie Mae and Freddie Mac which have been responsible for relaxing the lending standards and forcing banks to make certain percentage of subprime loans — which they had to package into MBSs and CDOs and sell, often to the agencies, to reduce their own risk (which was neither illegal nor imprudent)...
From the rest, though, I would only recommend Margin Call (2011) and Too Big To Fail (2011), in that order...
I agree with you, however we were flooded with stories of people working in McDonald’s getting 500K mortgages. When the collapse happened, the story out of Washington was it was our fault. They blamed poor loan decisions and the fact that the poor banks were forced to lend to minorities. Well, we had no other choice but to bail them out. “It wasn’t the banks fault.”
I think the movie does a good job of pulling the curtain back.
Depending on who was telling the "story," one of the many different "stories" out of "Washington" (i.e., the same politicians who created the regulatory mess in the first place) was that it was "our" fault... "We" (the people / humans) have what is known as a "confirmation bias", so we tend to see, hear and choose the "stories" we would like to believe in the first place (or be comfortable with, or get angry about — depending on whichever your natural tendencies or preferences usually are and/or whichever chemical, hormonal or situational/circumstantial mood is at the time)...
Just because the "Big Short" is telling you just one of the "stories" and manages to make sweeping conclusions by injecting its political "color" and point of view (however clumsy, as Jeffrey Tucker and others pointed out) doesn't mean that it is the correct point of view unless you really want to believe it, or have no [other, real] facts before you.
They blamed poor loan decisions and the fact that the poor banks were forced to lend to minorities.
And you don't see anything wrong with them laying off that blame on someone else, other than themselves? As an example, isn't Dodd-Frank law named after the two people who were the principals in demanding relaxed lending standards to accommodate certain "disadvantaged minorities" and "poor" (not necessarily poor, but those who were not able to afford higher mortgages when market prices went up which is usually what happens with higher demand) and who were screaming the loudest, standing in the way of reforming the "accountable" federal agencies and GSEs, in the name of the "social justice"? "We" always want to put the blame on someone else for "our" own mistakes or misfortunes — those who were able to "flip" the properties and were the winners in the "musical chairs" game of "flipping" real-estate before mortgage market collapsed felt/feel pretty smart for taking advantage of the opportunity provided to them by the government and dutifully executed by the banks, some of which saw the danger and have taken the measures to protect themselves — i.e., "insurance" or selling most of the "paper" in the forms of MBS and CDOs to others who were either "greedy" or had no [real] choice in the matter). Are we ever blaming or asking the questions of those who were buying the properties knowing they had no means or reserves to pay back the mortgage? Well, we had no other choice but to bail them out.
The "bank bailout" really had nothing to do with whose "fault" it was, it had everything to do with stopping the collapse of the [U.S. and the world's] financial system, which was necessary and proper, as the government (and the Fed / Central Banks) is ultimately the "last resort" in these rare occasions. And of course, the government was in great measure responsible for this particular financial crisis (compare with the Dot-Com / Internet / telecom / technology crash of 2000-2001 when no "heroic measures" needed to be and were not taken because the "financial system" was not affected while the finances of many people, financial institutions, pension funds that participated in the "bubble" became vapor or suffered greatly...)
And the "bank bailout" eventually didn't cost taxpayers a penny, most of the loans were repaid with interest and in the aggregate the Fed and the government ended up with the surplus of money made on the "bailout"... not even mentioning the money from all the phony "nuisance" and "social justice" lawsuits against the surviving banks that followed and are still going on today from federal agencies and states' and cities' Attorney Generals and every two-bit "regulators" who see the banks as nothing more than a "pot of money" they can tap whenever they want money and burnishing their political cred, ambitions and careers.
"It wasn't the banks fault."
Sorry, but unfortunately, that's not the prevailing view, probably not even on FR, where I constantly see the incessant blame for Great Recession and sluggish economy laid on the "banksters" and The Fed and calls for wholesale "perp walks."
Again, "we" always want to blame someone else for the troubles, and the politicians who are often actually responsible for the societal problems (minimum wage, mandates, regulations, ObamaCare, "public" debts and deficits, just to name a few) are great at pointing fingers and convincing people — who are not known for researching the facts, especially when they are drowned in media carrying the [liberal / Krugmanian] point of view on most things of financial nature — of some large scale "industry" malfeasance.
"Big Short" is not swimming upstream here, trying to sell people on what they either already believe, or are very receptive to believing... In terms of Hollywood's "production values" it is well made and has plenty of stars, it's also a fun "commercial" for ill-advised and stifling Dodd-Frank "reform" of banking industry, giving even more power and creating more (and more expensive) government bureaucracies.
We are going to have to agree to disagree. The banks were able to pay the money back because the Fed has kept interest rates artificially low, basically free to the big banks.
They refused to foreclose on properties because if they did, they would have to report the loss against thier balance sheet.
They packaged worthless financial instruments and fraudulently rated them (and still are btw).
They went to Congress and threatened tanks in the streets if they didn’t get bailed out. Congress determined they where “too big to fail” and wrote them a blank check of the people’s money.
You can apologize all you want for the Banksters, but we should have let them fail. This how the free market system is designed to work. These lenders should have been imprisoned.
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