How China will collapse in a bloody mess (Its only a matter of time, WF)

[Dispel]

Say was not an Austrian. He was a classical economist.

No shit. But in the here and now barely anyone outside the Austrian school argues that its correct why applied to the real world, its the de facto Austrian position.

Simply reason this out. To claim that Say's Law is wrong (supply creates its own demand), you would have to refute the notion that goods must be paid for with goods. You would have to buy into the "geopolitical" nonsense that demand leads supply and not the other way around. That people can buy things even if they produce nothing in exchange. That if enough people demand stuff, even if they can't pay for it, that necessitates the creation of supply.

The Chinese economy produces things, and therefore has purchasing power (Say's Law). If Americans, or Brits or Frenchmen stop buying Chinese goods, the Chinese will happily equip their homes with washing machines, plasma TVs and leather furniture. There is no reason why a Chinaman would prefer to give away a washing machine he built for a foreign bonds that are unsustainable in the long run, when he could keep the washing machine and use it himself. The only reason this is occurring, is because there are skewed incentives by his own government, and the government of the people he is selling to.

Put differently, whenever a vendor has to pay his customers to buy his goods (vendor finance) that is bad for the vendor (China) but is much worse for his customer (the West), if the market should change because the vendor has purchasing power, the customer will have none, and no good credit on which to change suppliers.

The maths says Say's law is correct and it is correct in the very long-term and if you simplify the economy into a barter system, as you have done, as opposed to one based on money, which creates delays and inefficienies of destribution. And if geopolitical realities did not interfere your 'theory' would be correct - a domestic market should arise to replace the export market.

However in the short term the attempt of making such a switch would create massive unemployment. This is already happening in China after the GFC - millions of people are going back to their farms as their factories are closing. Millions of people living on $2 a day are having even that taken away. When people start starving they get violent. Again, this is already happening - there are thousands of instances of civil unrest, riots, attacks on government officials in China that the Chinese try to suppress. Where this to happen on a massive scale, as it eventually HAS TO the Chinese government will crack down violently, it will not sit back and wait for the magical market corrections to bring Say's Law into effect, it will turn even more draconian and shit will hit the fan.

For this reason the statement 'Since China cannot absorb its own goods, it must export them to keep afloat.' is absolutely correct - it cannot absorb them in a short enough amount of time to avoid massive social unrest.

The resulting political situation will not result in a domestic market replacing the export markets and allowing the economy to continue growing, it can only result in a massive economic contraction/correction. At best it can result in Japan-like stagnation (that was Stratfor's forecast until the above discussed restructure of Bretton Woods).

Either way - following the above analysis or Stratfor's previous analysis (stagnation due to prolonged artifially low interest rates etc), China will collapse in a bloody messy.

Austrianism is all the rage these days because it has been consistently right.

If it was so consistently right it would have been a little more consistently discussed. But it kind of looks like noone at all discussed for a long time before 2008:
Google Trends: Austrian school

It is far from perfect, but it is by far the best of economic theory developed over the last 300 years and has a solid foundation on which to build and revise.

Possibly. But in the context of geopolitical significance some systemic approximations outside the Austrian school seem to do well enough. Maybe the Austrian School will prove more accurate still. Not if its foundations are as 'relevant' to reality as Say's Law however.

Peter Schiff called the housing bubble, and he also called the dotcom bubble. He did that because methodologically, his understanding of capital and credit is sound. When he calls market timing, he is not acting as an economist, he is acting as a speculator. Speculation is not Austrian economics. It would be like saying Peter Schiff was wrong about his first wife, therefore that brings the veracity of Austrian economics into question because he understands and applies Austrian economics sometimes.

An odd and irrelevant example, but I think that's because you misunderstood my point. My point was that economists, of the Austrian School or otherwise, make predictions based on economic theory only, without understanding the geopolitical reality that underpins the economics (more on that in a minute). Schiff predictive model was based on theories adhered to by the Austrians and within economics his model may have been more correct then other currently popular models. However what may have been 'black swan' events for him are not if you have a better understanding of geopolitics, which is more 'complete' science.

Now, it is possible that current geopolitical theory + elements of the Austrian School economic theory makes an even better predictive model, I don't know.

I am losing my point here, as I really need some sleep... basically economic events are trumped by geopolitical events, except in rare cases. The housing bubble of itself was not geopolitically significant, and neither are general regular recessions. However the GFC was.

I'm curious, did STRATFOR call the housing bubble? Did it call the stock market crash of 2008?

I cant remember exactly - they discussed it a lot, but its hard to remember how much of that came before the event and how much during and after and I was more focused on issues in places like the Middle East, EU and former Soviet Union, then the US economy. If I remember correctly they did discuss the housing bubble and the possibility subprime may lead to a recession, but they did not predict just how bad the crash would be, thats for sure. Over the years thats probably the biggest 'mistake' I've seen them make. When it comes to purely economic matters thats were they've shown some weakness, while being top notch in every other aspect (taking into account political, military, social, cultural, geographic issues or currencies, commodities, petrochems etc).

they actually had a discussion of the subprime crisis which outlined their approach to economic issues, that I was trying to get at above. I'll post it in the next post, as its long (and subsription only, so cant link). you should have read the rest of the original post for the explanation of the geopolitical significance of Bretton Woods though.

 

[Dispel]

analysis referred to in my previous post, for guerilla. note its from aug, 2007

Subprime Geopolitics
August 13, 2007 | 1917 GMT

By George Friedman

The subprime crisis is worth analysis in its own right, though it also gives us the opportunity to discuss our own approach to economic issues. STRATFOR views the world through the prism of geopolitics. In geopolitics, there is no such thing as separating a country’s economy from its national security or its political interests. A nation is a nation. Academic departments divide themselves nicely into areas of study. In the real world, things are much too intertwined and sloppy for that. Geopolitics views the international system and nations as consisting of a single fabric of relationships, with economics being one of the elements.

Not all events have geopolitical significance. To rise to a level of significance, an event — economic, political or military — must result in a decisive change in the international system, or at least a fundamental change in the behavior of a nation. The Japanese banking crisis of the early 1990s was a geopolitically significant event. Japan, the second-largest economy in the world, changed its behavior in important ways, leaving room for another power — China — to move into the niche Japan had previously owned as the world’s export dynamo. The dot-com meltdown was not geopolitically significant. The U.S. economy had been expanding for about nine years — a remarkably long time — and was due for a recession. Inefficiencies had become rampant in the system, nowhere more so than in the dot-com bubble. The sector was demolished and life went on. Lives might have been shattered, but geopolitics is unsentimental about such matters.

The Russian default of 1998 was a geopolitically significant event. It marked the end of the post-Cold War period and the beginning of the new geopolitical regime that is increasingly showing itself in Russia. The global depression of the 1920s and 1930s was enormously significant, transforming the internal political and social processes of countries such as the United States and Germany, and setting the stage for political and military processes that transformed the world. The savings and loan (S&L) crisis of the 1980s had no real geopolitical effect, and the collapse of Enron meant nothing. However, the consolidation of Russian natural gas exports under Gazprom’s control is certainly a major change.

The measure of geopolitical significance is whether an event changes the global balance of power or the behavior of a major international power. Looking at the subprime crisis from a geopolitical perspective, this is the fundamental question. That a great many people are losing a great deal of money is obvious. Whether this matters in the long run — which is what geopolitics is all about — is another matter entirely.

The origins of the crisis seem fairly clear. Traditionally, when banks look at mortgages on homes, they carefully study the likelihood that the loan will be repaid, as well as the underlying collateral. Their revenue and profits come from the repayment of the loan or the ability to realize the value of the loan through the forced sale of the house.

Two things changed this simple model. The first started a long time ago. Encouraged by the federal government, banks that issued mortgage loans began selling those loans to other entities. This, then, created a large secondary market in bundled mortgages — huge numbers of mortgages grouped together and sold and traded as if they were simply financial instruments, which, of course, they are.

As a result, banks began to view mortgages less as long-term investments than as transactions. They made their money on closing costs, rapidly selling the mortgages to aggregators, which in turn passed them on to others. The banks then loaned the money again. The more mortgages banks racked up, the more money they made. The risk was transferred to others.

In the past few years, two new groups of players entered the scene, one on either end of the spectrum. The first group comprised mortgage companies and brokers, nonbanking institutions whose business model was built primarily around the transaction. The brokers in particular had no skin in the game. Every time they executed a mortgage, they made money. If they didn’t execute one, they didn’t make money. The role of evaluating the borrower increasingly fell to these entities, neither of which was going to hold on to the debt instrument for more than a moment.

The second group was the final buyers of bundled mortgages — increasingly, hedge funds. Hedge funds are monies gathered from various “qualified” investors — otherwise known as rich people and institutions. They are private partnerships, so what they do with their money is between the managers and partners. No federal agency is responsible for protecting the private placement of money by the wealthy.

In a world of relatively low interest rates, wealth-seeking investors flocked to these hedge funds. Some of the older ones were superbly managed. The newer ones frequently were not. With a great deal of money in the system, there was a restless search for things to invest in — and the secondary market in subprime mortgages appeared to be extremely attractive. Carrying relatively high rates of return, and theoretically collateralized by fairly liquid private homes, the risks of these deals appeared low and the returns on the mortgages — particularly when you looked at the contracted increases — seemed extremely attractive.

The fact is that no one really worried about defaults. The mortgage originators that prepared the documentation for these riskier loans certainly didn’t care. They just wanted the mortgages to go through. The primary lenders didn’t worry because they were going to resell them in hours or days anyway. The mortgage aggregators didn’t care because they were going to resell them, too. And the final holders didn’t worry because they assumed the system would permit easy refinancing of loans at sustainable interest rates, and that — in a worst-case scenario — they at least owned a portfolio of houses that they could bundle and sell to real estate companies, perhaps even at a profit.

The final owner of the mortgage, of course, is the loser. The assumption that subprimes could be refinanced if need be failed to take into account that higher interest rates priced these people out of the market. But the worst part is this: Many hedge funds leveraged their purchase of mortgages by using them as collateral to borrow money from the banks.

That was the tipping point. When the subprime defaults started to hit, the banks that had loaned money against the mortgage portfolios re-evaluated the loans. They called some, they stopped rollovers of others and they raised interest rates. Basically, the banks started reducing the valuation of the underlying assets — subprime mortgages — and the internal financial positions of some hedge funds started to unravel. In some cases, the hedge funds could not repay the loans because they were unable to resell their subprime mortgages. This started causing a liquidity crisis in the global banking system, and the U.S. Federal Reserve and the European Central Bank began pumping money into the system.

Told this way, this is a story of how excess emerges in a business cycle. But it is not really a very interesting story because the business cycle always ends in excess. As economic conditions improve, more people with more money chase fewer investment opportunities. They crowd into investments that seem to guarantee vast or sure returns — and they get hammered. The economy contracts into a recession, as it tends to do twice every decade, and then life goes on.

 

[Dispel]

continued

There currently are three possibilities. One is that the subprime crisis is an overblown event that will not even represent the culmination of a business cycle. The second is that we are about to enter a normal cyclical recession. The third, and the one that interests us, is that this crisis could result in a fundamental shift in how the U.S. or the international system works.

We need to benchmark the subprime crisis against other economic crises, and the one that most readily comes to mind is the savings and loan crisis of the 1980s. The two are not identical, but each involved careless lending practices that affected the economy while devastating individuals. But looking at it in a geopolitical sense, the S&L crisis was a nonevent. It affected nothing. Bearing in mind the difficulty of quantifying such things because of definitions, let’s look for an order of magnitude comparison to see whether the subprime crisis is smaller or larger than the S&L crisis before it.

Not knowing the size of the ultimate loss after workout, we try to measure the magnitude of the problem from the size of the asset class at risk. But we work from the assumption that proved true in the S&L crisis: Financial instruments collateralized against real estate, in the long run, limit losses dramatically, although the impact on individual investors and homeowners can be devastating. We have no idea of the final workout numbers on subprime. That will depend on the final total of defaults, the ability to refinance, the ability to sell the houses and the price received. The final rectification of the subprime will be a small fraction of the total size of the pool.

Therefore, we look at the size of the at-risk pool, compared to the size of the economy as a whole, to get a sense of the order of magnitude we are dealing with. In looking at the assets involved and comparing them to the gross domestic product (GDP), the overall size of the economy, the Federal Deposit Insurance Corp. estimates that the total amount of assets involved in that crisis was $519 billion. Note that these are assets in the at-risk class, not failed loans. The size of the economy from 1986 to 1989 (the period of greatest turmoil) was between $4.5 trillion and $5.5 trillion. So the S&L crisis involved assets of between 8 percent and 10 percent of GDP. The final losses incurred amounted to about 3 percent of GDP, incurred over time.

The size of the total subprime market is estimated by Reuters to be about $500 billion. Again, this is the total asset pool, not nonperforming loans. The GDP of the United States today is about $14 trillion. That means this crisis represents about 3.5 percent of GDP, compared to between 9 percent and 10 percent of GDP in the S&L crisis. If history repeats itself — which it won’t precisely — for the subprime crisis to equal the S&L crisis, the entire asset base would have to be written off, and that is unlikely. That would require a collapse in the private home market substantially greater than the collapse in the commercial real estate market in the 1980s — and that was quite a terrific collapse.

Now, many arguments could be made that the estimates here are faulty or that different concepts should be used. We will concede that there are several ways of looking at this crisis. But in trying to get a handle on it strictly from a geopolitical perspective, this gives us a benchmark with which to analyze the mess.

Can it balloon into something greater? The big risk is that the weak hands in the game, the hedge funds, are suddenly coming into possession of a great number of houses that they will have to put on the market simultaneously in fire sales. That could force home prices down. At the same time, most homes are not at risk, and their owners are not hedge funds. Moreover, it is not clear whether most of the hedge funds that own subprime mortgages will be forced to try to monetize the underlying assets. It is far from clear whether the crisis will affect home prices decisively. If home prices were to collapse at the rate that commercial real estate collapsed in the 1980s, we would revisit the issue. But, unlike commercial real estate, in which price declines force more properties on the market, home real estate has the opposite tendency when prices decline — inventory contracts. So, unless this crisis can pyramid to forced sales in excess of the subprime market, we do not see this rising to geopolitical significance.

From this, two conclusions emerge: First, this is far from being a geopolitically significant event. Second, it is not clear whether this is large enough to represent the culminating event in this business cycle. It could advance to that, but it is not there yet. We cannot preclude the possibility, though it seems more likely to be a stress point in an ongoing business cycle.

Apart from discussing the subprime issue, this crisis offers us an opportunity to explain how we view economic activity. First, we try to understand, at a fairly high level, what exactly happened, much as we would approach a war or a coup. Then we try to compare this event to other events whose outcomes we know. And, finally, we try to place it on a continuum ranging from fundamental geopolitical change to normal background noise. This is more than normal background noise, but it has not yet risen even to the level of a routine, cyclical shift in the business cycle.

 

[Dispel]

Suggestion that trade wars (reducing trade) will only hurt China greatly, but have acceptable losses to the US demonstrates a lack of understanding about protectionism, and the historical effects of similar ideas like the Smoot Hawley tariff during the Depression.

What you're saying there is the exact OPPOSITE of the stratfor analysis is saying, but you didn't bother to actually read the whole thing. Its talking about the removal of protectionism, particularly on the Chinese side (allowing the yen to appreciate for example and removing their own protectionist measures). And of the US trying to actually make its exports competitive and demand the removal of other countries' barriers against their exports, which it has currently excepted as part of the post-Bretton Woods arrangement.
ie the exact thing that shot down Japan in the 80s. Which will now shoot down the Chinese. Again - the example of history trumps pretty economic theories.

 

[Dispel]

Your production is your purchasing power. If you earn $1000 a day, you can purchase $1000 worth of goods. So if you make a TV, how can you not afford a TV?

And if "China" was a person that would actually be relevant to the real world.

Perfect illustration of why Say's Law is correct mathematically but does not apply in this case. In the real world this "number crutching" will quickly turn into "head crunching".

 

[leewang]

Last one.


How could you not afford what you produce?

It's a rhetorical question.

Your production is your purchasing power. If you earn $1000 a day, you can purchase $1000 worth of goods. So if you make a TV, how can you not afford a TV?

The price of what you make at work is not how much money you get paid. Workers that make hundred million dollar air planes in factory do not get paid hundred of millions dollars a year.

The labor cost is only a portion of the total cost to make a product. For expensive products it is sometimes a small portion. The cost of materials to make a product can be a very large portion of the cost and the labor only a very small fraction.

 

[dsm56]

The price of what you make at work is not how much money you get paid. Workers that make hundred million dollar air planes in factory do not get paid hundred of millions dollars a year.

The labor cost is only a portion of the total cost to make a product. For expensive products it is sometimes a small portion. The cost of materials to make a product can be a very large portion of the cost and the labor only a very small fraction.

*sigh*

We are looking at millions of workers here, who are all working their arses off to fund either corporation's profits, or US debt indirectly.

The fact that those entities take off a percentage of the work produced by a person does not mean that they have not produced a certain amount of value.

If you want to break it down to a more understandable level, if I produce a bow and an arrow, I can exchange that, for a bow and arrow that is exactly the same. Or three eggs or whatever. But my production value is a bow and an arrow.

If I produce a plasma tv or washing machine, or part of it, that is my work. If I produce a plasma TV, that should be mine. In a perfect world I should be rewarded for exactly that. Yet in today's world, much of that is taken from the worker by say... exported dollars.

If I stop buying dollars instead of keeping my TV, I suddenly have a TV.

And if a chinese person realises this, he might get just as greedy as an american. Why doesn't he just keep the TV then?

 

[Dispel]

The price of what you make at work is not how much money you get paid. Workers that make hundred million dollar air planes in factory do not get paid hundred of millions dollars a year.

The labor cost is only a portion of the total cost to make a product. For expensive products it is sometimes a small portion. The cost of materials to make a product can be a very large portion of the cost and the labor only a very small fraction.

You're completely missing the point (of Say's Law).

 

[leewang]

And if a chinese person realises this, he might get just as greedy as an american. Why doesn't he just keep the TV then?

It is because the workers cannot make a TV by themselves. The machines used to make owned by rich coporation. The materials used to make owned by rich coporation. The factory it is made in is owned by rich coporation.

It doesn't matter if the rich coporation is American, Chinese, European or any other country.

 

[Falian]

Your production is your purchasing power. If you earn $1000 a day, you can purchase $1000 worth of goods. So if you make a TV, how can you not afford a TV?


How do you know that? I don't know that. I agree, they might prefer different types of furniture, different types of TVs or none of this stuff at all. But to say that the Chinese have no need or desire for a higher standard of living makes them almost sound like a different species.

The issue is not that the Chinese make goods they do not want, but the claim from STRATFOR (among others) that the Chinese have no domestic demand or purchasing power for their own labor and capital, and so they are FORCED to export it.

The article actually makes a lot of sense to me and I have to side with Dispel on this point.

Guerilla, I think your missing the point of the article, which is the rapid economic growth of China.

The article isn't saying that China cannot "afford" it's own products, It's saying that if China was forced to "afford" it's own products then that would severely slow down the growth of their economy.

According to the article, China has maintained near-total savings of income. These savings go back into the State Bank. The state bank is then able to give interest-free loans, which stimulates additional economic growth.

If it's citizens are maintaining a "near-total savings of income", then they currently do not have much purchasing power/consumer base. The less they spend, the more China can lend.

If all of a sudden, China's exports dried up then sure, The citizens can purchase what they produce (the article even goes into this). However, This means that there isn't a "near-total savings of income." This significantly reduces the available lending capital and as a result China's economic expansion is curtailed and possible reversed.

 

[HotHat]

Oh god! You guys should seriously get back to work. You are not gonna change anything or achieve anything from debating the shit out of this topic here. Capice?

Holy words, friend.
They'd need some old good porn.

 

[hellblazer]

I honestly don't trust China's economy. It seems really sketchy and it seems, from what I've heard, that there's a lot of central planning going on behind the scenes.

For example, this article states the government is essentially loaning money to itself, hiding the debt, and continuing the cycle. According to them, China is broke. Whether that's true or not, I don't really know.

But they don't strike me as a healthy economy, built on solid principles. There's been a lot of cheerleading in the media about China's 'meteoric economic rise' and nobody can dispute their growth rates.

But it just seems to me that the CCP is behind much of the management of the economy and ultimately who knows how it's structured.

If they could really stand self-sufficiently, why put up with the U.S. borrowing money it clearly can't repay? Why create your entire economy around the fact that you artificially manipulate your currency into being dirt cheap, thus good for exports?

I agree with Guerrilla that STRATFOR minimizes the pain the U.S. would feel should Obama pursue this protectionist policy, but with that said China does not strike me as a particularly healthy economy either.

Either way, it has to end soon, in either hyperinflation or bankruptcy for us.

One thing is interesting, though. If you accept that their system is unsustainable (and I think it is), and they've been pumping their profits into building a massive war machine, and they know eventually the money will dry up, what's their endgoal?

"[SIZE=+1]Therefore, our military battle preparation appears to aim at Taiwan, but in fact is aimed at the United States, and the

preparation is far beyond the scope of attacking aircraft carriers or satellites. Marxism pointed out that violence is the

midwife for the birth of the new society. Therefore war is the midwife for the birth of China's century."

- Chi Haotian, Chinese Defense Minister, 2005[/SIZE]

[SIZE=+1]
[/SIZE]

 

[Dispel]

I honestly don't get China's economy. It seems really sketchy and it seems, from what I've heard, that there's a lot of central planning going on behind the scenes.

For example, this article states the government is essentially loaning money to itself, hiding the debt, and continuing the cycle. According to them, China is broke. Whether that's true or not, I don't really know. But they don't strike me as a healthy economy, built on solid principles.

Its as far as you can get from a healthy economy and solid principles. The government owes all the banks and controls all the interest rates. It simply sets the interest rate to almost 0% and then lends the money to itself and to various private or semi-private enterprises, who then produce crap really cheaply because they GET FREE MONEY. Amazingly (note: sarcasm!) these goods which cost fuck all to produce (financed by FREE MONEY, yeah?) are really competive on the international market and China makes a profit. It then stores the profit in US bonds because it is the only SAFE and STABLE place to store their money. Their own economy is sure as fuck is not safe and stable, so they won't store at home. Or in Japan, which is has not had growth in 20 years. Or in Europe, were the euro is in its infancy, the ECB has no control and look at the whole frigging mess anyway. And that leaves NO OTHER OPTIONS. They store their wealth in the US, despite all the drawbacks, because they don't want to risk any other option. They realise US military and political power will even in the bitter guarantee guarantee the safety of their investment even if all else fails.

There's been a lot of cheerleading in the media about China's 'meteoric economic rise' and nobody can dispute their growth rates.

Not all growth is good. Its a bubble. Remember the free money? They're hardwiring massive inefficiency into their markets, by breeding inefficient firms, that are kept safe from failing, because they can just keep getting FREE MONEY from the banks. Its not hard to grow under those conditions, especially when they protect the yen from rising (also keeping their exports low cost) AND keep others from entering their own market. The end result is Japan. It also fueled growth with near 0% interest rates. Then, when they started to get too powerful, theUS forced Japan to let the value actual rise to its market value and open their markets up, Japan crashed and never recovered.
Ditto the Asian tigers in the 1997 Asian Economic Crisis - all following that same flawed East ASian model, geared towards SOCIAL STABILITY (maintaining employment) while sacrificing efficiency.

But it just seems to me that the CCP is behind much of the management of the economy and ultimately who knows how it's structured.

micromanaging to the last yuan and freaking out about losing control

If they could really stand self-sufficiently, why put up with the U.S. borrowing money it clearly can't repay?

see above

Why create your entire economy around the fact that you artificially manipulate your currency into being dirt cheap, thus good for exports?

well, it has brought money and investment into the country for now. The idea was to grow artifially like this, but then transition to a more stable model... problem is they didn't think that last part through too well. They had no choice - even be left far behind as a communist basketcase or take on free market elements. The chose the latter. But they saw what happened to Russia when they tried to simply transition to a free market completely - it destroyed them and they spent 20 years recovering. China did not want to fall into that trap so they tried what Japan did instead - before Japan itself started failing. Now they're up shit's creek without a paddle, neither here nor there.

I agree with Guerrilla that STRATFOR minimizes the pain the U.S. would feel should Obama pursue this protectionist policy,

What? The analysis discusses the possibility of what may happen to China is the US pursued the EXACT OPPOSITE of a protectionist policy. ie it would burst the Chinese bubble as it did it Japan.

but with that said China does not strike me as a particularly healthy economy either. Either way, it has to end soon, in either hyperinflation or bankruptcy for us.

Well, thats another story entirely.

 

[papajohn56]

in before riddarhusetgal says huge national debt is a good thing

 

[Dispel]

Pretty sure that Chi Haotian "speech" (in Hellblazer's post) is fake. The Epoch times is a crazy anti-Communist China propoganda rag.

 

[hellblazer]

Pretty sure that Chi Haotian "speech" (in Hellblazer's post) is fake. The Epoch times is a crazy anti-Communist China propoganda rag.

That speech has been analyzed by several people who believe it to be true, for a variety of reasons which you can research yourself if you're interested enough.

Obviously if it happened and if it represents the real thinking going on in the CCP, they wouldn't admit to it and they would probably launch a campaign to discredit it.

It has to be taken in context with their other actions, and their military buildup (i.e. double digit percentage increases in the military budget every year and huge under-reportings in their real military spending) suggests a goal disproportionate to simply Taiwan.

If somebody wants to debate who would win that fight, that's a legitimate conversation that can take place. But first their intentions vis a vis foreign policy must be accurately divined, and I have to say a lot of things the CCP does strike me as extremely shady.

And the Epoch Times may be anti-Communist, but they're hardly 'crazy' or 'propaganda'. They also weren't the first to report the speech, which you might have noticed if you read the article. Many of its writers were personally tortured by the CCP's police and they do an excellent job documenting the Communist regime's crimes and reporting on the many Falun Gong members and Chinese Christians tortured and killed by the CCP every day.

I suppose their massive chronicling of thousands of stories and reports of torture are all 'propaganda' too? Not saying it proves the speech, but to paint them as 'propaganda' is dishonest and a disservice to the good work they're doing standing up for the victims.

 

[ricdes]

SOMEBODY NEEDS TO GET LAID

 

[amanda11]

Just no ... CHINA will strive, unless Wal-mart starts buying their shit from Africa where they make 2 and a half cents an hour. Either way, I honestly don't give a shit if China collapse or not. Some other countries will export cheap shit, AM I RITE GUYS?

 

[LazyHippy]

One thing is interesting, though. If you accept that their system is unsustainable (and I think it is), and they've been pumping their profits into building a massive war machine, and they know eventually the money will dry up, what's their endgoal?

I think the same can be said of the US and one possible benefit of moving away from Bretton-Woods would be reduced military spending as America is forced to close it's bases in the UK, Germany, Japan, etc. Or maybe if trade is taken out of the equation the military side would become reciprocal. Japanese troops in Alabama?

I'm not sure I agree with the reports conclusions, but the current situation certainly isn't sustainable for China, the US or anyone else. China should open up it's currency and America needs to bite the bullet and buy back the debt, accepting the pain that goes with that.

Unfortunately, few politicians think past the next election and the massive spending cuts and tax rises that would be needed to responsibly take control of that debt would be political suicide, so it won't surprise me if they keep acting like the ship isn't sinking until it's way too late.

Without having to worry too much about popularity with the electorate, China is arguably in a better position to make the radical changes needed. If they managed to open up their currency and markets while retaining the goal of full employment and focussed on raising wages and living standards they could easily be in a better position than America in a few decades, most likely avoiding many of the pitfalls of consumerism and reliance on credit.

Considering the core philosophies of Buddhism and Taoism which the majority of the Chinese follow, it seems that even if they were able to afford to buy the goods they produce they would be unlikely to have the same desire for the bigger, better, shinier things that many westerners have. So China will always need to export the luxury goods it currently produces, although shifting production to the essentials needed to raise living conditions for the Chinese really wouldn't be a hard job if they chose to do that.