China proudly takes its place in the debtors’ Hall of Infamy

It is very interesting (and highly disturbing) to watch the rate at which the former Red China is developing the same blues as the West from whom it “learned” how to become a globalist bourse player. Two things are becoming all too clear as the Shanghai index slips a lot, rallies a little, gets controlled some more by the Politburo, and then falls some more:

1. You can’t be a serious poker player unless you’re in debt bigtime to the House; and

2. quite soon the genuine physical export growth runs out of steam, at which point you need a property bubble on the back of Western QE, and then when it bursts, one has to fall back on virtual trading in woolly financial services to keep up appearances. This chart of financial services’ share of Chinese gdp since last year makes the point neatly:

chinagdpfinshareThe blue line represents the huge spike in share trading, and the red line shows the gdp share of financial services.

The collapse of China’s Shanghai Index has been accelerated by the immediate need for investors to sell stocks in order to pay off the loans they incurred to buy them in the first place.

Then there is the “national debt” on all levels. The U.S. total debt to GDP, which includes household and corporate debt, is nearly 335%: a horrendous number, but China is catching the Americans up with a debt to gdp percentage, using the same criteria, at around 285%.

The Page 1 reason for all this nonsense is obvious: with an austere, maxed-out West no longer able to soak up Chinese exports, Beijing’s growth is regressing quarter by quarter. As always with global neoliberalism, the only ways to maintain belief in the impossible dream of infinite growth are first, to be hocked up to the eyeballs; and second, to start ascribing value to worthless bits of paper derived from surreal leverage ratios.

Just as it was completely unprepared for the African refugee crisis, so too the EU is going to be gobsmacked when Chinese bigwigs stop buying all the Volvos, Mercedes, Purdeys and Ports that have been made available thanks to Franco-German opportunism and the demands of the Troikanauts.

37 thoughts on “China proudly takes its place in the debtors’ Hall of Infamy

  1. Must say that the mammories airborne scenario has been a long time coming and to be honest – I’ve long since stopped holding my breath as the ‘elite’ seem to find ever more ways to keep the illusion burning ! I know that it cannot go on but I just can’t see how the reset will be able to happen. Elitist denial seems to give life to the lies and the voices all shout in unison the emporors cloathes are real !!!

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  2. And the UK’s Debt/GDP ratio is approximately 550%. That’s without interbank lending that takes the ratio to around 900%. we are still truly world class when it comes to debt.

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  3. Napier is first class. Doesn’t get as wide recognition as he deserves because he is an academic living in Edinburgh.

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  4. Debt is not bad. In fact its an essential part of the capitalist system.

    We need debt to back savings (esp as the UK population ages), money (bank credit) is always backed by debt and company profits. The world is one interconnected balance sheet where one companies revenue equals another companies expenses. So total (combined) profits mainly come from increases in capitalized expenses (eg buildings) and debt increases. Without ongoing debt increases the world would crash into a huge depression.

    The issue at present is there is far too little Govt debt and too much non Govt debt. Govt debt (a liability) exactly equal non Govt assets. So whenever the Govt takes on debt we (the non Govt sector) all become wealthier. But fear of Govt debt (created by journal entries) could destroy the West. The key is the UK and China is monetary sovereign. Greece and all Euro countries are not. So they rely on the ECB and QE. The UK have their own central bank so can create debt as required when required to fund Govt spending (go overboard of course might = inflation or currency depreciation but the UK is far from this point). Bonds are only issued to drain excess reserves. And will always be purchased by pension funds when the population is aging.

    China needs more Govt debt. But even when debt is used to fund investments (valuable Govt assets) it’s still given the thumbs down. Such is the madness and ignorance that has gripped the world.

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  5. Humans have been playing the “let’s pretend everything is ok” for a lot longer than neo-liberals have been around. The Roman elites did it as the Roman Empire was collapsing, the Chinese have done it several times over, the Easter Islanders probably did it as they were cutting down the last trees. To focus on one group and to blame them for what is essentially a predicament caused by basic human nature – go forth and multiply combined with status-seeking behaviours – masks the underlying predicament. Even if all neo-liberals vanished from the face of the Earth overnight, our basic human tendencies to over exploit natural resources while still deluding ourselves that everything is fine would remain.
    Climate scientists have spent 30+ years warning about the dangers of rapid climate change; and for their efforts have received death threats, threats made against their families and children and places of work, been sued, compared to Nazis or worse, or told that nothing they say is valid because they’re only in it for the money. The plight of Cassandra times a hundred thousand. Humans just don’t like living in reality – it depresses them for some reason. Probably because, deep down, we are all too aware of how stuffed we really are, how deep the hole we have dug for ourselves actually is.
    Take an average person and give them a high status lifestyle – money, flash cars, nice house, holidays, personal staff, the whole lot – and then observe how quickly that person will convince themselves that they “earned” that lifestyle, that they “deserve” it. Their political views will skew to the right, their tolerance to those “less fortunate” diminishes and that formerly average person becomes an “elite”, dedicated to keeping their own fortune intact at the expense of others. Think I’m wrong? If you live in a Western “democracy” you are an elite to most of the rest of the world. You didn’t earn your healthcare and pension systems, or your transport and communiction networks, or your clean streets, or your civil service and police force – you were just lucky enough to be born in a country where these things exist. And will you give up your high-tech lifestyle so that others in the world can get basic healthcare or schooling? No, didn’t think so somehow.
    The task is not to oust the current elite – they will promptly be replaced with a new elite, making the same mistakes. The task is the almost-impossible – to change human nature itself.

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  6. Another point. Why do you think a property boom has anything to do with QE. QE swaps one asset (Govt bonds) for another one (central bank reserves and / or bank credit depending on who sells the bonds. a bank or non bank).

    I don’t know what the answer is but MMT economists (who do understand this subject. Most economists do not) think a QE bond swap does not cause asset prices to rise. That it’s a myth.

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  7. The only thing that will stuff us is collective ignorance and stupidity. I think the climate warming alarmist is all garbage. But the only solution is nuclear (esp mini nukes) if Co2 is a huge danger. Funny how we are not moving in this direction. And embracing new technology rather than ignoring it (maybe the reason is the money that can be made from carbon credits, useless wind power and oil and gas etc).

    Likewise with debt and money. It’s created by journal entries. The UK Govt can do these journal entries as required when required to fund Govt spending. But we would sooner have pensioners freezing or starving. And a massive housing shortage etc. Due to confusion about this topic. Where many politicians and economists thank that a monetary sovereign Govt is just like a household

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  8. I’ll offer up another lie similar to AGW – the US food pyramid. it may have killed more people through its recommendation to eat more carbs – oddly enuff – wheat based stuff – the cheapest-to-produce and most profitable commodity. I’m no “dieter” but last autumn I started to eat less wheat and more protein – eggs for breakfast basically – and went in weeks from 85 kg to 80 with no effort. The Youtube video “Sugar the bitter truth” by Robert Lustig triggered it off for me. It is our insulin levels which determine our health.

    Eating a more “paleo” diet is the key. Yet a negating article appeared in the Ministry of Love (The Guardian) this winter and I lost respect for the Graun after that.

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  9. “the demands of the Troikanauts.”

    The source from the Commission also noted that the group formerly known as Troika is now being renamed as “Quadriga”, to note the inclusion of the ESM in the talks.
    “Quadriga is the name inspired by Commission President, Jean-Claude Juncker for the new Greek project” the Commission source said, adding that “the EU side is a bit nervous of not knowing the IMF stance.”

    The best known example of a Quadriga is on top of The Brandenburg Gate

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  10. Some odd theories in there Rowan.
    It’s called a birthright, and each generation maintains and improves for future generations. Did the motorways and hospitals just fall from the sky one day?

    Recent generations are struggling to maintain and improve but it’s mainly down to the last stages of a ponzi scheme coupled with the end of very cheap fossil fuels.

    And those outside looking in could take care of their own countries if it wasn’t for the same f***** ** system bring imposed upon them.

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  11. Actually, Rowan, the answer is to reduce the human population to a sustainable level.

    You said it yourself indirectly, but then managed to advocate the impossible. There’s nothing wrong with human nature; it’s its level of consciousness that’s the problem. Unless one is inherently evil, consciousness begets responsibility. The abundance of wrinkled children, alas, tends to suggest there is not a lot of either.

    Otherwise, you’re spot on. The human race vastly overrates itself and is, on the whole, abysmally ignorant of what it actually means to be human.

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  12. Don’t fall for the overpopulation myth, THH, try http://www.agbioworld.org/biotech-info/topics/borlaugh/special.html
    Norman Borlaugh developed a better wheat & saved a billion lives, while eugenicist doomsayers like Paul Ehrlich were predicting huge famines. The chicken little “The Sky is Falling” types always forget to factor in human ingenuity.

    May I recommend the website of drtimballDOTcom & suggest putting Overpopulation in his search box?
    You get his essay: Overpopulation: The Fallacy Behind The Fallacy Of Global Warming

    The good Dr Tim is a top climatologist & is expert on the machinations of Rothschild/Rockefeller frontman Maurice Strong who set up the bureaucracies, unaudited of course, which have progressed the CAGW swindle for the past ~ 20 years.

    As for the kindergarden wish to reform human nature, what we need is a society where the legal/justice system would bang up behind bars for life, psychopaths & warmongering mass murderers instead of rewarding them with £millions.

    John Doran.

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  13. That’s UN bureaucracies.
    Ted Turner, multi-billionaire media mogul pledged $1 billion to Maurice Strong to administer through the UN.
    Ted Turner advocates a 95% world population reduction.
    http://www.foxnews.com/2007/02/08/at-united-nations-curious-career-maurice-strong.html

    There would be no wrinkled children in the world if those at the top were not putting the produce of millions of acres of US farmland into their fuel tanks instead of into childrens’ bellies. If they spent 1/20th on suchlike instead of wars, this could be a decent planet.

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  14. http://www.wattsupwiththat.com/2014/06/08/opinion-global-warming-claims-are-largely-and-deliberately-a-product-of-bureaucratic-activity/
    Dr. Tim Ball on how politicians are dominated by bureaucrats & media. How Maurice Strong & the Eugenicist Club of Rome UN think tank set up the various UN bodies – UNEP, UNFCCC, & IPCC to publish & progress UN Agenda 21, the depopulation & deindustrialisation UN project for the 21st century.

    Hello feudalism, here we come, what’s left of us.

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  15. John – now that site from Tim Ball may be an eye opener.

    The last 10 years I have planted a veg garden and of course adopted some principles of Permaculture. Over the years I have observed phenomena which my earlier brainwashing said “Global Warming” whenever a strong storm hit us here north of the Alps. On a deep level I became uncomfortable with some of the tenets of Permaculture as I am questioning how much of ecology itself is valid. Physics, chemistry and biology yes seem to me to be measurable valid disciplines, but ecology seems intuitively to me to be an artificial construct akin to social sciences. Am I barking up the right tree?

    And the quote in that site from Michael Crichton is hmmm… the bloke blew my mind with his “State of Fear” book certainly.

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  16. This link is correct, I’ve just checked my history for yesterday, but as so often now, my remarks are wiped or impeded thus.
    Big brother IS watching, children.

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  17. Yeah sure ! Look ill free every slave I ever owned and pay them a million quid in compo each if you’ll stop ‘feelin their pain’ ! Fair dinkum ?!!!

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  18. Aren’t Communist Governments meant to be taking stakes in private companies? Shouldn’t the Chinese Government be doing more not less of this?

    The way ahead for China is obvious. For years, private consumption has been too small a part of GCP and corporate investment too great. Political and economic liberalisation is required for China to innovate and develop. If Chinese companies did this, there would be even less excuse for paying their workers so badly. Their workers could increase consumption out of earned income. A reduction in corporate profits would probably only be noticed in the property and share markets and not in the real economy.

    Why then is the Chinese Government not doing this? Because the elite prefer to remain in control of a failing economy than relinquish control.

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  19. @ kfc1404

    What’s lacking in the article is an analysis of where the capital flowing out of China is going. Unlikely perhaps but, if enough goes back into the US Treasury market to replace official outflows, then the only change for the market is a change in who owns Treasuries and not in yield levels. The Treasury selling by the PBOC would also dry up, if the Chinese allowed the RMB to devalue against the dollar (almost certainly the ultimate outcome). Finally, US Treasuries would be the ‘safe haven’ in the case of equity market weakness, meaning that other parts of the markets might take the heat.

    The more interesting question concerning China is why such large capital outflows are permitted from what is meant to be a controlled economy.

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  20. The graph accelerates rapidly upwards to cover the hole in the economic model between real & virtual values but the deal is those with nothing and certainly no excess to play this game just get left farther and farther behind AND WILL BE FORCED TO ACT or die take your pick.

    USA / China / EU or any other bourse players when the economic model eventuality runs out of steam … question is how does a poor person exist in a society then with nothing to live on etc. before they proceed to attack those who actually created this society.

    I don’t think it is far off now myself and just fingers crossed I am gone before it starts.

    Some may say coward, I would rather consider the middle classes children being sucked into this nothingness by the greed of their own parents and grandparents as they believe all the deceit of elites.

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  21. @Glory,
    How ironic that you just proved my point. You refer to a birthRIGHT, like you are entitled to a modern lifestyle merely because of the luck of where you were born. We build things for ourselves, not future generations, humans are not that altruistic.

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  22. Thanks I watched that. However he is a proponent of GM rice in Asia. My washed brain says “all GM is baaaaaad” but I’d have to know who is behind the GM – is it Monsanto the baddie or another biotech firm? Then I’m more open.

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  23. GM is just a tool, Jeremy, which can be used for good or evil. Just as a gun or knife can be used for assault or defense.

    The GM Golden has vitamin D added, which gives it the golden colour, which rice, the staple diet in the Philippines does not have. The lack of vitamin D causes wholesale blindness & early deaths, running into millions during the 12 years the now people hating & evil Greenpeace have managed to delay the introduction of this golden rice.

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  24. @JS – I would echo your sentiments on the validity of ecology as a science. I was a teenager in the early 1970s when it was all ‘back to the land’, wholefoods, self sufficiency and Gaia. I read lots of books on things like permaculture (which I admired but was never successfully able to put into practice) and also seed sowing, etc by the phases of the moon. This latter activity is unbelievably complicated (there are all sorts of books on the subject if anyone is interested) and adherents claim that the results in terms of crop yield are superior. Again, this was a concept that I honoured more in the breach than in the observance.

    A couple of years ago, no longer working full time, I started experimenting with seed sowing and the cultivation of my veg garden and, guess what? all this mystical, new-age pseudo science is claptrap! I’ve returned to old-fashioned allotment principles as set out by the likes of Lawrence Hills and sow seeds at times that I judge to be best in terms of warmth, weather etc. Germination rates and yields this year have been far better than before.

    ‘Ecology’ was invented in the 1970s. I cannot recommend too highly Adam Curtis’ three-part documentary ‘All Watched over by Machines of Loving Grace’. It’s now difficult to find on UK websites but, having watched it originally on the Beeb, I have found it subsequently on Russian You-Tube. The first episode explodes the myth of ecology – I found the third episode so harrowing that I have never been able to watch it again.

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  25. There is also the problem of food wastage. Apart from the appalling waste here in the West, I have recently read that India wastes one quarter (!) of its entire food production (which is billions of £’s worth) because of poor infrastructure, lack of suitable storage etc. Huge quantities of rice and grain simply rot due to damp storage conditions.

    The biggest cause of starvation and malnutrition is that the people at the top (pols, bureaucrats, corporations) simply do not care. If they did, then food production, storage and distribution would be at the top of the world agenda.

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  26. Rowan,

    I think you are confusing birthright, with it’s attendant responsibilities and obligations, to an over entitlement culture.

    Your argument is actually ridiculous because the logical conclusion says that wild animals are not entitled to feed off a landscape rich in food because it was there when they were born. Or a fetus has no right to medical care, or babies should be left to take care of themselves when they leave the womb.

    I certainly do believe I have every right to take advantage of the existing infrastructure, at the same time I pay tax to maintain it. If my level of tax is not enough to maintain it then I would be happy to make an informed decision, more tax to maintain, or less tax for less services or less infrastructure. That way future generations would not be weighed down with debt they did not consent to.

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