I finally have enough time to write a response, please pardon my tardiness.
The reason I hated the article so much is it followed one of the main China story archetypes without explaining why they do what they do from a behavioral economic standpoint, where it looks crazy from the outside but makes perfect sense from the inside. I also hated the pie-in-the-sky thinking that China if they could do it again would do things to improve people’s standard of living, I think this was mainly so he could enter the country and not get harassed.
He makes it seem like China gets to keep all of that 10% without realizing that some of it has to be spent on imports to make the products that China is exporting as China is more an assembler than a manufacturer though that is changing. Even a casual reader of Asian business affairs would know that China has been a boom to Japan, Taiwan and South Korea by importing their advanced manufactured goods to assemble other products that the Chinese then export.
I don’t follow this as that was an unmitigated disaster. China only started turning around after they opened up farming and allowed farmer’s markets. I remember reading about this when I was younger and how revolutionary it was for them at the time.
I would disagree with this as a lot of countries undervalue their currencies and use currency controls to avoid runs. China does it better due to it being a massive fascist police state. Different, no; better, yes because you can get shot in the head or sent off to be an organ donor.
The author also fails to follow the massive amount of Chinese money in the sub-prime market. This is the elephant in the room and if you can find any reporter brave or stupid enough to talk about it, I’d love to read it. He leads a casual reader to believe it was all in US treasuries.
Are you being facetious again? I’m not sure, so I will explain it. Basically with a raging market in T-bills before and now, the interest rates got driven down, the problem being there wasn’t enough t-bills and the rates weren’t all that great. So a lot of money went into Fannie and Freddie Mac products thinking that since it was a US govt backed entity(not sure of the exact wording at the time, but you can call it this now) They could never go bad and were in effect T-bills with different names. This is how they found the money for all of those mortgages. It was like Japan in the 80’s, you loaned cash to whoever wanted it because you had so much cash to loan.
Some highlights form the article:
[quote]Without China’s billion dollars a day, the United States could not keep its economy stable or spare the dollar from collapse. [/quote]Without US’s billion dollars a day loan rate, the China could not keep the Renminbi stable or spare the country from collapse.
[quote]Suppose the CIC makes another bad bet—not another Blackstone but another WorldCom, with billions of dollars of Chinese people’s assets irretrievably wiped out.[/quote]It’s already happened with sup-prime lending and you can hear crickets chirp before you get an answer.
[quote]Years ago, the Chinese might have averted today’s pressures by choosing a slower and more balanced approach to growth. If they had it to do over again, I suspect they would in fact choose just the same path[/quote] This is just hilarious. You can’t even make this stuff up. China had no choice but to go the path it did. Deng Xiaoping knew that. The country was heading towards bankruptcy unless things really changed. They are facing a demographic old/young ratio, not enough jobs and a sex balance ratio that in any non fascist police state would cause instant turmoil and violence of the armed insurrection kind. Not once does the author bring up the disaster that will happen as fewer young people support a larger population of elderly non-working adults due to the one child program. What if all those US dollar assets were meant to act like retirement program for the Chinese state in the 2nd half of the 21st century? I don’t know because no one asks the right questions. FFS, reading China articles is like a Groundhog Day version newspaper reporting. The varieties are China will rule the world, China will collapse, and the Chinese are just misunderstood. China also chose this path because it worked for every other successful Asian economy.
[quote]The dollar’s value has been high for many years—unnaturally high, in large part because of the implicit bargain with the Chinese.[/quote]I would change this from Chinese to SE Asia.
China has enough problems that you really don’t have to worry about them. Anyone who says they know China, is probably lying. Chinese lie all the time about their growth, exports, cash, factories, etc. At one time people thought that the USSR was going to grow at 3% average forever and that we’d better learn to accommodate them, not realizing that in the final decade of their rule over 50% of their electricity generated was being stolen. At another time, people thought Japan was going to overtake the US and be the #1 economic power in the world. What they didn’t realize was the inflationary effects that a govt sponsored undervalued currency would have on their economy leading to binge spending and lending. While I’m quite bearish on the US at the moment, I wouldn’t bet against them as long as they don’t lose their laissez-faire attitude to business to the socialist mindset that has caused so much world misery.