According to this Forbes piece, yes. This seems to be partially a reaction to the government pouring more money into the public sector.
What does that mean? Hell if I know. But it makes sense. After all, if you could get out of China, wouldn’t you?
But between this and China’s housing bubble, it goes a long way to show that China’s “economic miracle” is a lot more fragile than the likes of Thomas Friedman would have you believe…
Andrew Lilico in the Telegraph (via McArdle, via Insta) has a sobering look at what will happen when Greece defaults (“It is when, not if”). It starts out:
Every bank in Greece will instantly go insolvent. The Greek government will nationalise every bank in Greece. The Greek government will forbid withdrawals from Greek banks.
And then gets even less pleasant, including martial law and the European Central Bank going insolvent. The real European crisis hasn’t happened yet, and when it does, it will probably be much worse than the current U.S. recession.
Meanwhile, Greeks continue to protest long-overdue austerity measures. I am doubtful Greece is willing to actually implement real austerity. After all, the Greek government only recently decided that it might want to stop paying pensions to the dead. instead of solving the problem of an out-of-control welfare state, the ECB and the IMF have decided to let Greek slip even further into debt in exchange for implementing reforms and austerity they’ve shown no signs at all of being willing to implement; in other words, to kick the can down the road and hope that gives the other PIGS time to get their respective houses in order before the Euro collapses.
Meanwhile, Ireland’s crisis is so severe that not only are they going to start taxing private pension funds, they’re actually going to start fining trustees that don’t hand over pensioner’s money. “Threatening scheme trustees with huge fines that are not covered by trustee indemnity insurance if they refuse to or cannot collect the levy, is a guaranteed way to stop anyone coming forward to be a trustee. I expect the other consequence of the Finance Bill (no 2) 2011 will be the resignation, post-haste of hundreds of scheme trustees.”
The chances that various transnational and euro bureaucrats will succeed in rescuing all the PIGS (and thus the Euro) is slim to none: “The ‘troika’ [ECB, IMF, EU] is doubling down on its losing bet in Greece and is playing with the dice loaded against them.”
How bad is it going to get?
Austerity is going to mean hellishly bad deflation, high and rising employment, and depression in the indebted countries.
There is $600 trillion in derivatives now loose in the world. Who knows which banks have written them and to whom? Who are the counterparties? We did not fix this with the last political fix. The next crisis has the potential to be just as bad or worse than 2008, which is why I think Europe’s leaders are so dead set on avoiding a day of reckoning. If you look under the hood, as they most assuredly have, it must be frightening. And with pushback from voters?
Contagion, thy name is Europe. And with the US economy slowing down, it might not take much to push us over the edge
And that’s the best case scenario, the one where the PIGS actually bite the bullet and implement austerity. It’s entirely possible that one or more of them will reject austerity measures and, in doing so, set off a run on the Euro.
Also via Insta comes news that China has divested itself of 97% of its holdings in Treasury Bills. As Mark Steyn has pointed out, where Greece is now is where Obama wants to take us, with ObamaCare as just the down-payment on a full-blown European welfare state. We’re not nearly as far along as Greece is to financial collapse, but our debt is already starting to look like a bad bet.
Certainly we’re not so far along that we can’t turn back, but the Paul Ryan Roadmap is probably the minimum we need to be doing to get our debt under control. Less than that and we’re asking for serious trouble. It’s already looking like Carter era stagflation is here.
As the recent Texas legislative session showed, it is in fact possible to actually shrink the size of government, not just slow the rate of increase. Or at least it’s possible when you have Republican Supermajorities in the House, Senate, and Executive branch. By contrast, the Obama administration and Harry Reid’s Senate have shown no sign of being willing to address the problem, or even to admit it exists. They too want to kick the can down the road and keep piling blocks of debt onto the backs of your children. But, as the Euro crises shows, such actions have a way of catching up with you sooner rather than later.
You can only kick the can down the road so far before you run out of road.
Taking some time to get back into the post-Memorial Day swing, so here are a few links of interest:
We are all agreed that someone had an interest in sending a picture of Rep. Weiner’s erection to a coed. Even Rep. Weiner agrees on this much—he’s basically told us yeah, that’s my junk. And he’s proud of that. Would I sound very boring if I were to suggest that the person with the means, opportunity, and motive to send Rep. Weiner’s dicpic to the coed was none other than Rep. Weiner himself?
Some people have asked me if I’ll be reviewing the Atlas Shrugged movie, since one of my gigs is reviewing science fiction movies, and Ayn Rand’s original novel certainly qualifies as science fiction. (I’m also familiar enough with the novel to craft this parody of it.) But I thought it would be nearly impossible to do justice to the source material in movie form; a TV miniseries would probably be more appropriate to fit that sprawling, didactic story.
So I’m glad the inimitable P.J. O’Rourke has saved me the trouble. He’s seems to have done a good job of dissecting the movie’s flaws (and advanced word has been very negative just on the story-telling and movie pacing fronts) without rejecting the underlying message.
“Texas Democratic Congressman Ruben Hinojosa – a member of the House Financial Services Committee – filed for personal bankruptcy late last year.”
The eight-term congressman was forced to file for bankruptcy after Wells Fargo Bank won an arbitration hearing that found Hinojosa owed the bank $2.6 million. That left him with $2.9 million in liabilities against less than $1.5 million in assets.
If I put this in a novel, an editor would reject it for heavy-handed symbolism…
(Hat tip: Instapundit)
Mark Steyn is justly famous for many things: His stalwart opposition to Jihad, his grasp of demographics, his clever and eminently readable prose, and his once (and future?) gig on the last page of National Review (currently held by the also-formidable James Lileks). He’s also known for stating that China, thanks to its one-child-per-couple mandate, will get old before it gets rich.
However, on reading this Lawrence Solomon piece on China’s inevitable collapse, something occurred to me. Particular in response to this part:
Like the Soviet Union before it, much of China’s supposed boom is illusory — and just as likely to come crashing down
In 1975, while I was in Siberia on a two-month trip through the U.S.S.R., the illusion of the Soviet Union’s rise became self-evident. In the major cities, the downtowns seemed modern, comparable to what you might see in a North American city. But a 20-minute walk from the centre of downtown revealed another world — people filling water buckets at communal pumps at street corners. The U.S.S.R. could put a man in space and dazzle the world with scores of other accomplishments yet it could not satisfy the basic needs of its citizens. That economic system, though it would largely fool the West until its final collapse 15 years later, was bankrupt, and obviously so to anyone who saw the contradictions in Soviet society.
The Chinese economy today parallels that of the latter-day Soviet Union — immense accomplishments co-existing with immense failures. In some ways, China’s stability today is more precarious than was the Soviet Union’s before its fall. China’s poor are poorer than the Soviet Union’s poor, and they are much more numerous — about one billion in a country of 1.3 billion. Moreover, in the Soviet Union there was no sizeable middle class — just about everyone was poor and shared in the same hardships, avoiding resentments that might otherwise have arisen.
In China, the resentments are palpable. Many of the 300 million people who have risen out of poverty flaunt their new wealth, often egregiously so. This is especially so with the new class of rich, all but non-existent just a few years ago, which now includes some 500,000 millionaires and 200 billionaires. Worse, the gap between rich and poor has been increasing. Ominously, the bottom billion views as illegitimate the wealth of the top 300 million.
How did so many become so rich so quickly? For the most part, through corruption. Twenty years ago, the Communist Party decided that “getting rich is glorious,” giving the green light to lawless capitalism. The rulers in China started by awarding themselves and their families the lion’s share of the state’s resources in the guise of privatization, and by selling licences and other access to the economy to cronies in exchange for bribes. The system of corruption, and the public acceptance of corruption, is now pervasive — even minor officials in government backwaters are now able to enrich themselves handsomely.
In light of that: What if “one child per couple,” like paying taxes for members of the Obama administration, is just for the little people? What if the upper crust of China feels such rules don’t apply to them? Assume both that the Chinese ruling class can pop out offspring to their heart’s content and still manages, somehow, to avoid the explosion Solomon posits. (Dictatorships can run a whole lot longer than you think possible. Just ask Saddam Hussein or Kim Jong-Il.) Just how much cheating would it take for China to put off its demographic crash until they do get rich?
Last week I mentioned that China’s Housing bubble is already worse than America and Japan’s respective bubbles.
Today the Wall Street Journal provides even more confirmation:
It’s impossible to say definitively that a market has strayed into bubble territory until after the collapse. But prices rising out of the reach of average buyers is one indicator. Housing prices in the U.S. peaked at 6.4 times average annual earnings this decade. In Beijing, the figure is 22 times.
The figures get even worse when you consider that the “shadow market” (i.e., banks making “off book” loans) means the bubble is even worse than it seems:
Local governments and banks have set up off-balance sheet vehicles to conceal loans and keep the spending boom going. Fitch Ratings estimates that not only did banks exceed the central bank’s 7.5 trillion yuan ($1.1 trillion) cap on lending for this year, they made an additional three trillion yuan of these shadow loans.
Something that can’t go on forever won’t. That’s especially true of a housing boom in a country aging as rapidly as China (which Mark Steyn famously said “will get old before it gets rich”); and don’t forget that a rapidly aging populace was also a factor in Japan’s own “lost decade.”
The big question is whether China’s housing bubble or Europe’s Sovereign Debt Crisis pops first. The aftershocks of both will certainly be felt in our own economy…
Guess which one is the better place to live?
When the Internet economy allows an increasing number of people to live anywhere, low costs win. Texans spend 8.4% of income on state and local taxes compared with 11.7% for New Yorkers. Dollars that would rent a fifth-floor walk-up in New York City instead can buy a small ranch and maybe even acreage in Texas’ suburbs, where prairie begs to be paved for another Applebee’s.
Texas creates jobs like a fiend, in part because businesses large and small have no worry of obstacles such as plaintiff-friendly courts, consumer-friendly regulators or oversight-friendly lawmakers. Pro-business isn’t just a mantra; they put it in the water.Oil and gas still play a huge role here, but are increasingly overshadowed by technology, medical and defense jobs. Texas has more Fortune 500 company headquarters than New York.
A few bite-sized links of interest for the holiday season:
(Hat tips: Instapundit, mostly.)