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| Author: | SpiderX [ Tue Jan 21, 2014 12:44 am ] |
| Post subject: | Re: Economics |
In summary, there is a bubble in China that is waiting to burst ? Or will the govt cover it up ? What would be the ramifications when it burst ? Cheers |
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| Author: | nanningbob [ Tue Jan 21, 2014 4:56 am ] |
| Post subject: | Re: Economics |
In a previous post, I posted an article that said that China has not had a lower GDP from year to year since Mao died. In other words it has gone up for almost 40 years. This is not normal market movement. Economies need to retrench every so often to weed out the inefficient parts. That has not happened in China. The govt. keeps interfering with the process so the inefficient parts keep growing. For example when 2008 happened economies all over the world suffered and retrenched. Poorly run businesses went under and efficient ones survived (See Ford VS. GM as an example) GM had to reorganize with bankruptcy and govt. bailouts. Imagine GM allowed to keep running and the govt. just covering up its debts but not dealing with the problem. (see USA banks which were given a free ride) GM had to reorganize, get rid of its unprofitable divisions, and shore up its profitable ones. Now it is #1 in the world again. Ford which ran a much more conservative and financially solid company survived on its own. USA banks, the govt. is still buying up mortgages (QE3) so they can survive, banks did not go through reorganization and are still run by the same group. They kept much of their inefficiencies. But that is only one industry in the USA. In China this is true in almost every single industry. I live in a complex here in Nanning that is over 30 years old. It was built solid and endures. I can take you to buildings less than 6 years old that have cracks, discoloration, leaks, etc. Why? The building materials are made so cheaply and plentifully that construction companies have to cut corners like crazy to try to profit. Roads that are freshly built are being repaired within 6 months of being finished. You probably remember the story in Shanghai of the 14 story building that just toppled over. It wasnt even finished yet. When will this all come crashing down? I have no idea. Japan has struggled for 30 years now since their crash. They are still trying to restart their economy. Unlike the West, Chinese individuals still buy, homes, cars, big ticket items with cash. Real estate in many cities is 30,40,50:1 income to cost ratio. The USA bubble burst when it hit 7:1. So it is hard to comprehend and explain. All I know is China has three bank credit freezes last year and the USA had one in 2008. At some point they wont be able to cover the inefficiency anymore. I have no idea where that point is but the cracks are showing. |
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| Author: | SpiderX [ Tue Jan 21, 2014 5:13 am ] |
| Post subject: | Re: Economics |
Hi Bob Ironically this weeks issue of John Maudlins newsletter seems to be indicating that Gold would go up in 2014. However if the Chinese bubble bursts the AUD goes down with it and so would gold. What do you think would most likely transpire for gold in these circumstances ? Cheers |
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| Author: | nanningbob [ Tue Jan 21, 2014 6:29 am ] |
| Post subject: | Re: Economics |
Some people equate gold with the AUD. I dont, gold just follows the rise and lowering of tension in the markets. Gold has been going down because of surplus production and the cashing in on the secondary market. Everytime gold goes up companies mining it increase production to increase their profits. At some point production meets demand and gold comes back down. Also as economic tensions ease gold will go down. Soooooo............ what happens with gold next? Obviously if a major bubble bursts, like China, I would believe gold goes up as people scramble for a hedge during tough times. However, I am not a hyper-inflationist at this time. I think other things have to play out first before inflation becomes an issue. Just a side note: Inflation is a lot easier to control than deflation. All you have to do is raise taxes and bring enough money back in to slow it down to control inflation. Deflation--we are still working on that one and is still a possibility. In other words I worry more about the dangers of deflation than inflation. Inflation is easier problem to solve than deflation. |
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| Author: | nanningbob [ Tue Jan 21, 2014 11:27 am ] |
| Post subject: | Re: Economics |
OK China is good for another .............. x months. Kick the can down the road again and see what happens. Back to trading. (Reuters) - China's central bank moved to head off another destabilizing cash squeeze on Tuesday with a big injection of cash - flagged in advance in a surprising act of transparency to relieve anxious markets. Faced with an abrupt rise in benchmark interest rates on Monday, which saw the benchmark seven-day repo rate quoted as high as 10 percent at one point, the People's Bank of China (PBOC) announced it had provided an unspecified amount of emergency cash directly to some banks through its short-term lending facility (SLF). It also committed to injecting money into the financial system during regularly scheduled open market operations on Tuesday - an unusual behavioral change for the central bank, which usually remains cagey about such plans. As good as its word, the PBOC dumped 255 billion yuan ($42 billion) into the interbank market, the first injection since December 24 and the largest amount in one day in 11 months. The central bank also set up a lending facility specifically for smaller banks, who often complain they are squeezed out of the interbank market by bigger players. http://www.reuters.com/article/2014/01/ ... DV20140121 |
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| Author: | SpiderX [ Tue Jan 21, 2014 2:44 pm ] |
| Post subject: | Re: Economics |
Hi Bob, Does this mean that China is printing money the way US is doing to bail out their banks ? Would there be a limit to this type of activity ?...or would they be able to continue with this indefinitely ? P.S: your links seem to be incomplete for the past few post, think you need to fix them. Cheers |
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| Author: | nanningbob [ Wed Jan 22, 2014 12:10 am ] |
| Post subject: | Re: Economics |
When you cut and paste the URL somehow it edits it when I post it. I dont know what does that. |
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| Author: | SpiderX [ Wed Jan 22, 2014 11:37 am ] |
| Post subject: | Re: Economics |
Hi Bob, The links work now but you still havent put an answer to my earlier questions yet. Cheers |
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| Author: | nanningbob [ Thu Jan 23, 2014 5:00 am ] |
| Post subject: | Re: Economics |
The concept of the USA is just printing money is inaccurate in how it is presented. For example QE1 covered the hole produced by the 2008 collapse. It replaced money down the drain. QE2 covered the hole from the euro mess and Greece. QE3 is the buying of mortgages so banks/financial institutions can give real estate loans and and construction industry can recover. QE3 is recoverable money if prices ever advance enough to break even or get close to breakeven. In other words these things have goals and purpose even though we may not like them. Bernanke estimated a 30-40 recovery and repayment period. He did this instead of collapsing into a full scale depression and collapse. The danger is we dont recover and under the present Congress and President we are not doing this right. At least in my opinion. China decided in 2008 to not let their economy go down like the West and went into a huge building program acceleration to keep everyone employed so they pumped money into the system like crazy. For example when I came to China in 2002 there were no known billionaires. Today there are over 180. Thats a lot of cash to dump into the market to create them. (I think the USA has over 800 just for comparison) So yes they dumped more money if you compare % to GDP than the USA did. So the China miracle continued. China did this hoping the West would recover and they could slow debt down as economies improved and their exports improved. However, 15% of Chinese GDP is from real estate (USA about 7%) so as it cools so goes this big booming economy. If real estate gets to a more normal 7-8% of GDP then you have a no growth/sluggish economy, much like the West is enjoying now. So that is what the cash outlays did for the USA and for China. Same program different emphasis. My viewpoint is different from most people. The USA can recover for 100% to GDP debt ratio. It has done it twice before and has the ability to do it again. However, it will take some leadership in economy recovery and we dont have that now. We have STOP OBAMA and MORE GOVERNMENT PROGRAMS from our political parties and neither will solve the problems we are facing. China just announced the formation of 6 groups at the top each committed to working on the problems they are facing. They will come up with something. My suspicion is what ever keeps them in power is the solution they will come up with. So they will try some economic reforms of some kind. They have a real tough nut to crack. So the answer to your question is YES they have been printing money like crazy. Many items I buy here now are more expensive than the USA. It used to be McDoanlds was one of the most expensive restaurants in town. Now they have slipped to average/below average. Interesting times. When I first came here a Dove chocolate bar was about 4-50 cents. Now they are 1.25 to 1.50 or double to triple in price. |
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| Author: | nanningbob [ Fri Jan 24, 2014 3:55 pm ] |
| Post subject: | Re: Economics |
1/3 are now gone http://www.nbcnews.com/business/wealthy ... =obnetwork |
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