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07/10/2012

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Anywhere But Here Is Better

Boy, did I get it wrong. For 10 years, I've been boring the pants off strangers and especially young people, advising them to learn Mandarin if they wanted to make a good living in the post-Chinese takeover of the global economy (not to be confused with the tasty Chinese takeaway in every town).

My analysis was based on what the Chinese were doing all over Africa - inserting Chinese managers in state enterprises and quietly stripping out natural resources.

Little did I know that this tiger would be imbued with the same thinkless thinking as promulgated by Wall Street's finest. Just as the US Empire rose and fell faster than the British Empire, and the British Empire faster than the Roman Empire, so the Chinese Empire is falling faster than the American variation on the theme. The stony faced power elite in Beijing must be beginning to ruminate on why ever did they bother waking up from their 2,500 year slumber, for all the good it has done for the country in the long run. (Except for the handful who've become ridiculously rich at the expense of 800 million peasants.)

Watch now as the various regions in China start to kick off violent secessionist movements Tibet-style, with the ebbing away of the Chinese 'miracle'. Few in the West seem to know or understand that China has never been all that cohesive below the surface. Just one example of inane central bureaucracy: there is only one official time zone in a country spanning five world time zones. This must be a royal pain in the ass for many of the 1.3+ billion. And there are dozens of religious and ethnic minorities bubbling away with deep injustices.

Of course, witnessing this latest in the long line of Homo unsapient cliff-falls presupposes that internet and TV broadcasting will still be functioning in the near future. This is far from certain.

Bill McDonald

In hindsight, how smart was it to put most of the money received from Americans back into American treasuries, the mobile execution vans might be paying visits to a few government ministry buildings soon.

Yep, stick a fork in 'em- the world's economy is heading straight down the shit tubes- I just hope the long suffering people wake up and start building a few guillotines so that the "elites" that rule us can share a little bit of the "fun" that is heading our way.

Wanooski

Hopefully they'll stop being able to pay poachers to decimate endangered species for their various parts for use in "medicine".

Ben

The National People's Congress (NPC) has been boosting spending on domestic security, or "stability maintenance", ahead of their leadership transition later this year.

Liu Kaiming, head of the Shenzhen-based Local Social Observation Research Institute, said the domestic security budget was known in academic circles as the "stability fee."

"The cost of maintaining public security is greater than the defense of the country," Liu said. "This shows that our society is actually very unstable, if so much has to be spent on maintaining stability."

- if you want to know where China is heading just look at how the CCP is appropriating funds for internal security:

China had a 11.5% increase in its domestic security budget this year, to 701 billion yuan (U.S.$111 billion), with Chinese Wizard of Oz, Wen Jiabao, pledging a full modernization of the People's Armed Police.

Mike Weber

Truly hopeful news!

Anybody with even one eye open can see that there's no way around what's coming; the only way is through it, and the sooner the better. Though I disagree with him about the worth of many Western "values" that he thinks we should be saving, I've come to agree with Morris Berman about the importance of getting things over as quickly as possible by, in the US for instance, electing somebody like Bachman or Palin and giving them Republican/Tea Party super-majorities in both Houses.

This 15,000-year-old Ponzi scheme is collapsing; the chain letter can only come back to the originators now. Let's git 'er done!

John D

Dave, where you get it right is looking at a country's energy inputs and outputs to determine its financial situation. Most financial 'experts' look at money supply, interest and inflation rates and believe they know it all. Economics is about energy and resources, only economists haven't figured this out yet.

Back to China. It is inevitable that a centralized economy implodes under its own complexity sooner than a decentralized one does. I guess I'm not surprised at this. Maybe a little bit at the speed of it.

R W

Dave Let's not go crazy with this call here. China going from 10% down to about 5-6% is hardly "China going down" or crash & burn, or whatever else you want to call it. China will surpass US GDP in about 4 years enroute to becoming the new world superpower.

Dave Cohen

@R W

Unfortunately, China expert Michael Pettis disagrees with you. He thinks their growth rate will slow to 3%/year for the next 10 years.

http://globaleconomicanalysis.blogspot.com/2012/04/12-predictions-by-michael-pettis-on.html

Re: China will surpass US GDP in about 4 years enroute to becoming the new world superpower

There is no basis for this prediction, and it is so unlikely that the chances of it happening might as well be zero. Do you know the sizes of the Chinese and American economies in trillions of dollars (real GDP)?

If you did know, you would never have made that statement.

-- Dave

R W

I think Michael Pettis is wrong. By PPP measures it is going to happen, so my basis for making the assertion is factually based. By PPP China is about 13 trillion and the US is about 15 trillion. China is expected to surpass the US by this measure in 4 years. The Empire is declining, but a new one is rising to take its place. Thanks for responding.

Dave Cohen

Do you know what I love?

It's when a reader who doesn't know anything argues with me by further proving that he doesn't know anything.

PPP (purchasing power parity) can not be used as you seem to intend, and is certainly irrelevant to anything Michael Pettis (or I) say.

And to actually think that you feel qualified to make statements like "Michael Pettis is wrong."

The mind reels.

-- Dave

R W

So Dave, why is PPP measure unacceptable, and why was this post deleted? I am a regular reader but I cannot understand the hostility torward positions/ideas that conflict with yours. Still an avid reader regardless.

rjs

one caveat; they are buying a lot of iranian crude at well below brent prices...so cutting prices domestically wont hurt refiners as much as alleged...

rjs

the CIA uses GDP by PPP to compare countries, calling it "the measure most economists prefer"

that said, they have the US at $15.04 trillion & china at $11.29 trillion...

https://www.cia.gov/library/publications/the-world-factbook/rankorder/rankorderguide.html

Dave Cohen

Re: "the measurement most economists prefer"

Perhaps you meant to quote the entire text from the CIA--

This entry gives the gross domestic product (GDP) or value of all final goods and services produced within a nation in a given year. A nation's GDP at purchasing power parity (PPP) exchange rates is the sum value of all goods and services produced in the country valued at prices prevailing in the United States in the year noted. This is the measure most economists prefer when looking at per-capita welfare and when comparing living conditions or use of resources across countries.

OK, now you DO understand that China is still a very poor country, right? And they're talking about per-capita welfare! Yet the PPP measurements show that China's economy is 11/15ths the size of America's. Let's continue.

The measure is difficult to compute, as a US dollar value has to be assigned to all goods and services in the country regardless of whether these goods and services have a direct equivalent in the United States (for example, the value of an ox-cart or non-US military equipment); as a result, PPP estimates for some countries are based on a small and sometimes different set of goods and services. In addition, many countries do not formally participate in the World Bank's PPP project that calculates these measures, so the resulting GDP estimates for these countries may lack precision.

In other words, we're just making this PPP shit up as we go along.

For many developing countries, PPP-based GDP measures are multiples of the official exchange rate (OER) measure. The differences between the OER- and PPP-denominated GDP values for most of the wealthy industrialized countries are generally much smaller.

Multiples of the official exchange rate. This is simply more making it up as you go along. I wonder what "multiple" they used for China when they were computing the value of ox-carts.

God only knows why the CIA uses this measurement. That certainly does not mean it's a good measurement. And very conveniently, it makes China's economy look very much larger relative to ours than it actually is. How nice for the CIA!

And please, please remember what I always say on DOTE--

Human bullshit is endless

-- Dave

The Practician

ppp is complete bullshit. for example, The Economist pretty much just uses the BMI (Big Mac Index) to calculate which countries have "overvalued or "undervalued" currencies by comparing the officical exchange rate to the price of a big mac in the country of questions currency to that of the U.S., and then seeing how much the difference is. this rather meaningless statistic is generated on the basis of what Neoclassical economists call the "Law of one price" Which is basically adherence to an completely ideologically based idea that everything everywhere should cost the same once currency value differentials are accounted for. The bottom line is that most economists are under the misguided impression that they are practicing a science and that the things they learn in schools are laws and facts when they are not, and they never get beyond that. Never trust an economist.

Gordon Gray

If world BAU does not collapse within the next few years either from a financial collapse or a credit freeze I can not see China becoming a world superpower simply because she can not build the navy, naval infrastructure or get overseas port facilities to protect it's own yet to be acquired empire other than Tibet & Mongolia, or shipping needed to keep itself going with food & raw resources. The US already has all that in place mainly thanks to it's payoff from winning the Second World War in gaining naval bases worldwide from thankful nations.Personally I think few nations would open it's land to Chinese bases. Also the US naval fleet was built with pre high oil prices & metal prices. Try building that fleet & infrastructure at today's prices. China could not afford it.She has yet to prove she can suppress internal uprisings once food prices escalate during the next food price spike which could be as early as next year if the US drought continues & or spreads beyond the present 5 states.Remember North Africa. China could be next.
Then there is Climate Chaos to add into the mix if you wish.
Just my honest opinion folks.

Lin S

Question for the DoTE roundtable:

I'm seriously considering retiring early from my current position as a CA high school social science teacher to take one of two positions currently being offered to me in Taiwan. I have 19 years in CA's system but the state is bankrupt and in a state of collapse, so I'm not so sure there will be any pension for me here, in any event.

I have family and property in Taiwan and can easily obtain citizenship there. I have lived there before and it agrees with my personality and interests.

The only reason I have stayed here is because I'm scared of what China will do to/with Taiwan over the long-term. If China is indeed going down and facing a lot of internal strife and turmoil, will this mean Taiwan's prospects for security increase, or decrease?

Right now things are better between Taiwan and China because Taiwanese firms are doing a lot of investing and generating a lot of commerce on the mainland. Chinese tourists can now fly directly to Taiwan and are spending a lot of money there. For now, the vibes are good and things are calm.

As a regular reader of DoTE it's plain to me that the US is in decline and appears headed for a police state and Dollar collapse. Would moving to Taiwan be a good idea? Or a bad one?

Hoping to get good advice from the brighter and wiser minds than mine, here...

Anywhere But Here Is Better

Lin S - You ask a difficult question and I don't think anyone can answer it with any certainty. It seems to me that the entire world in 2012 is the equivalent of the Titanic in 1912. By the world, I mean Homo sapiens, not planet Earth.

We are heading for the iceberg, which is now fully visible to anyone with a functioning brain. (This appears to exclude the goggle-eyed greed merchants "in charge" of the world economy.)

Whether Taiwan is a good bolthole is unclear. Is the bow or the stern a better place to be on the Titanic? The engine room or the crow's nest? You will have to make up your own mind, and take your chances.

There is an old adage: If in doubt, do nothing. That may be as sensible guidance as Fortune favours the brave.

Best wishes from equally destablised Britain.

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