[Peace-discuss] Economic crisis and China
E. Wayne Johnson
ewj at pigs.ag
Mon May 11 18:19:18 CDT 2009
China is better understood as a patchwork of cultures aggregated within
a set
of borders rather than as a single monolithic unit. Xindaihua
(modernization) notwithstanding, economic inequality might not be a
good measure of personal well-being in China, because the pursuit of
happiness would not be on an American scale.
China is probably doing twice as well as the US on every index of
economic growth.
Twenty-Five million people is not quite 2% of the population in China.
They have very little debt.
If the same percentage of Chinese workers were unemployed as what we see
in the US that would
be 224 million people unemployed (& with massive levels of personal debt).
Their short to intermediate term risk of losing the export market to the
US is near-zero,
since the US no longer has the means of production.
(That slow motion trainwreck, loss of the means of production, has been
in process for ~30 years...)
China will be raising their prices to the USA, and there is very little
that the USA will be able to do about it in the short term.
On 5/11/2009 1:52 PM, unionyes wrote:
> The huge inequalities factor is absolutely true !
> Which makes me more inclined to accept the validity of your original
> statement as opposed to my info.
> David J.
>
> ----- Original Message -----
> *From:* n.dahlheim at mchsi.com <mailto:n.dahlheim at mchsi.com>
> *To:* unionyes <mailto:unionyes at ameritech.net>
> *Cc:* Peace-discuss at anti-war.net <mailto:Peace-discuss at anti-war.net>
> *Sent:* Monday, May 11, 2009 1:29 PM
> *Subject:* Re: [Peace-discuss] Economic crisis and China
>
>
> But, China has huge inequalities and much of that domestic economy
> is supported by its export-led economy. Also, China relies
> heavily on imports as well from other companies based in other
> regions of the world. China is being hurt just as badly, if not
> worse, than other players in the global economy. Niall Ferguson
> talks about this a lot actually. I saw him at a Foreign Policy
> Association meeting in NYC discussing the rise of "Chimerica" and
> how China still depends a great deal on the US and that China will
> not develop the kind of domestic economy capable of sustaining the
> high level of growth Beijing wants.
>
> -------------- Original message from "unionyes"
> <unionyes at ameritech.net>: --------------
>
>
> Well your info about China is different from mine.
> What I had read is that China has over the last 15 years or so
> built-up a healthy domestic economy.
> Now I do know that China has a very large export sector,
> mainly to the U.S..and that if for whatever reasons they would
> loose all access to the U.S. market, they would be in very bad
> economic shape.
> So what I am saying is that the exports to the U.S. have not
> stopped, only slowed because of less demand, although when one
> drives by Walmart it seems as crowded as ever.
> So I guess it is a question of to what degree China's domestic
> economy has been able to offset the reduced exports ?
> David Johnson
>
> ----- Original Message -----
> *From:* n.dahlheim at mchsi.com <mailto:n.dahlheim at mchsi.com>
> *To:* unionyes <mailto:unionyes at ameritech.net>
> *Cc:* Peace-discuss at anti-war.net
> <mailto:Peace-discuss at anti-war.net>
> *Sent:* Monday, May 11, 2009 10:59 AM
> *Subject:* Re: [Peace-discuss] Economic crisis and China
>
> China has been hurt actually quite badly by the crisis.
> It's economic model had been totally dependent upon
> export-led manufacturing growth, and its economy is not
> structured to favor a large enough or fast enough increase
> in domestic consumpion to offset the falling demand in the
> rest of the global economy. Furthermore, the loss of tens
> of millions of manufacturing jobs in the last two
> quarters in China has left a flood of unemployed people
> concentrated in the cities---something that greatly
> worries the government in Beijing. Also, the unemployed
> factory workers no longer have the money to pay
> remittances to their villages and farmer families residing
> in the rural areas---this will greatly exacerbate rural
> poverty and the growing inequality and tension between
> city and country that has been growing throughout the last
> decade in China.
>
> Do I think China is well-positioned in the long-run to do
> OK from a conventional economics perspective? Yes. Do I
> think their long-term position is better than that of the
> United States? Yes. But, their short-term position is
> definitely worse vis-a-vis the United States.
>
>
>
>
> -------------- Original message from "unionyes"
> <unionyes at ameritech.net>: --------------
>
>
> I also disagree with the articles over emphasis on
> stock market performance, as well as the over emphasis
> on hyper inflation.
> I also disagrre with the analysis of the stimulus. The
> problem with the stimulus is not the size, it should
> be TEN TIMES as large, BUT the poblem is that it has
> not been used strategicly. IE. the money has been "
> Thrown down a bottomless rat hole" . The bank's
> depositers and pension funds should have been
> protected, but the rest should have been allowed to fail !
> HOWEVER, I also disagree with your analysis. What you
> state has traditionally been the case, but the times
> are a changing.
> China has hardly been effected by the recent downturn
> and Brazil ( as well as the majority of the South
> American Economies ) have been slowly but
> systematically focusing more of their trade amongst
> themselves, ie. regional independence from the U.S. in
> particular and the world markets in general.
> What I see happening soon, that will cause major
> shifts in past assumptions and fall backs, will be a
> re-negotiation of the 60 - year old Bretton Woods
> agreement, which will end the role of the U.S. dollar
> as the world reserve currency, and replace it with a
> new international currency based on a " basket " of
> the current major currencies ( U.S. Dollar, Chineese
> YUAN, The Euro, British Pound, Swiss Franc, etc. ).
> When that happens, here in the U.S., our standard of
> living is going to have a downward push.
> It won't be pretty !
> Major economic suffering, and subsequent social /
> political turmoil.
> Unlike the French, who will fight back at the
> slightest assualt on their standard of living,
> Ameican's typically will accept and endure and ignore
> until their backs are pushed so far to the wall that
> they will explode into an uncontrollable rage.
> This will be very bad news for the ruling class and
> the phoney Obama, but unfortunately there will be a
> great danger that instead of a populist revolution,
> there will be a fascist / racist assualt that will be
> very ugly and harmful for all of us.
> David Johnson
>
> ----- Original Message -----
> *From:* n.dahlheim at mchsi.com
> <mailto:n.dahlheim at mchsi.com>
> *To:* E. Wayne Johnson <mailto:ewj at pigs.ag>
> *Cc:* Peace-discuss at anti-war.net
> <mailto:Peace-discuss at anti-war.net>
> *Sent:* Sunday, May 10, 2009 7:36 PM
> *Subject:* Re: [Peace-discuss] Don’t Be Fooled by
> Inflation
>
>
> Schiff is largely correct, but his analysis fails
> to capture the political dynamic of the current
> financial crisis---and why I don't see
> hyperinflation as a near-term risk much less even
> significant inflation such like that seen in the
> 1970s. The reason: the world will invest in US
> T-bills for the forseeable future. Why? As Niall
> Ferguson notes, the US, as badly as this
> depression has hammered its economy, is hurt far
> less when compared to the EU nations (especially
> those in Central and Eastern Europe), China,
> Russia, Japan, and Taiwan. Other emerging market
> countries such as Brazil will also begin to feel
> the effects of the crisis very acutely because of
> the heavily export-driven economic model that
> drives their economy. The US is also more
> politically stable than these other economies, so
> it is likely that the US will be looked to for the
> political solution to the current economic
> downturn. Therefore, expect continued investments
> in US debt because of the political dynamics alive
> and well in the world economy today.
>
> Best,
> Nick
>
> -------------- Original message from "E. Wayne
> Johnson" <ewj at pigs.ag>: --------------
>
> Peter Schiff is one of the Austrian school
> (which is not the "Chicago School") economists
> who predicted this current economic collapse.
>
> He writes for lewrockwell.com today:
> *
> Don’t Be Fooled by Inflation
> by Peter Schiff*
>
> Strike up the band, boys, happy days are here
> again! Recently released short-term economic
> data, including unemployment claims, non-farm
> payrolls, home sales, and business spending,
> which had been so unambiguously horrific in
> February and March, are now just
> garden-variety awful. With the Wicked Witch of
> Depression now apparently crushed under the
> house of Obamanomics, the Munchkins of Wall
> Street have sounded the all clear, pushing the
> Dow Jones up 25% from its lows. But the
> premature conclusion of their Lollipop Guild
> economists, that the crash of 2008/2009 is now
> a fading memory, is just as delusional as
> their failure to see it coming in the first place.
>
> Once again, the facts do not support the
> euphoria. Over the past few months, the
> government has literally blasted the economy
> with trillions of new dollars conjured from
> the ether. The fact that this “stimulus” has
> blown some air back into our deflating
> consumer-based bubble economy, and given a
> boost to an oversold stock market, is hardly
> evidence that the problems have been solved.
> It is simply an illusion, and not a very good
> one at that. By throwing money at the problem,
> all the government is creating is inflation.
> Although this can often look like growth, it
> is no more capable of creating wealth than a
> hall of mirrors is capable of creating people.
>
> We are currently suffering from an overdose of
> past stimulus. A larger dose now will only
> worsen the condition. The Greenspan/Bush
> stimulus of 2001 prevented a much-needed
> recession and bought us seven years of
> artificial growth. The multi-trillion dollar
> tab for that episode of federally-engineered
> economic bullet-dodging came due in 2008. The
> 2001 stimulus had kicked off a debt-fueled
> consumption binge that resulted in economic
> weakness, not strength. So now, even though
> the recent stimulus administered a much larger
> dose, we will likely experience a much smaller
> bounce. One can only speculate as to how much
> time this stimulus will buy and what it will
> cost when the bill arrives.
>
> My guess is that, at most, the Bernanke/Obama
> stimulus will buy two years before the
> hangover sets in. However, since this dose is
> so massive, the comedown will be equally
> horrific. My fear is that when the drug wears
> off, we will reach for that monetary syringe
> one last time. At that point, the dosage may
> be lethal, and the economy will die of
> hyperinflation.
>
> As always, the bulls fail to understand that
> investors can lose wealth even as nominal
> stock prices rise. As a corollary, the bearish
> case is not discredited by rising stock
> prices. While there are some bears that
> mistakenly cling to the idea that deflation
> will cause the dollar to rise, those of us in
> the inflation camp understand that the
> opposite will occur.
>
> In the meantime, stocks are not rising because
> the long-term fundamentals of our economy are
> improving. If anything, the rise in global
> stock prices is due to investors realizing
> that cash is even riskier then stocks. The
> massive inflation that is the source of the
> stimulus is essentially punishment for those
> holding cash. To preserve purchasing power,
> investors must seek alternative stores of
> value, such as common stock.
>
> It is important to point out that despite an
> impressive rally, U.S. stocks have
> substantially underperformed foreign stocks.
> In the past two months, while the Dow Jones
> has risen 30%, the Hang Seng and the German
> DAX have risen by over 50% in U.S. dollars.
> Commodity prices are also rising, with oil
> hitting a five-month high. And gold is shining
> as well, with the HUI index of gold stocks up
> 30% during the past two months, and 2/3 of
> those gains occurring in the past month. If
> this rally really were about improving
> economic fundamentals, gold stocks would not
> be among the leaders. Further, during those
> two months, the U.S. dollar index fell by 7%,
> with commodity-sensitive currencies such as
> the Australian and New Zealand dollars surging
> 20%.
>
> To me, the relative strength of foreign stocks
> and currencies indicates that perhaps the
> global economy is not as impaired as many have
> feared. It has been my view all along that
> after the initial shock wears off, the world
> will be better off – once it no longer
> subsidizes the American economy. The shrinking
> U.S. current account deficit is evidence of
> this trend in action. Renewed strength in
> foreign stocks and weakness in the dollar may
> indicate that not only is the world decoupling
> from the U.S., but benefitting as a result.
>
> So let the Munchkins dance for now. But
> remember, the Witch is not dead; only
> temporarily stunned by an avalanche of fake money.
>
> /May 10, 2009/
>
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