Chinese Economy in Free Fall
Chinese economy is in a state of perpetual free fall since the mid 1990s. It has to be. From the most respected economist, experts, analysts, and seasoned columnist to the senior treasury and FED officials, all have been predicting the ‘‘unavoidable’ collapse of the Chines economy and the ‘imminent’ ‘bubble burst’ of the Chinese real estate and financial sector for more then two decades. How could they all be wrong?
Chinese economy has to be in the gutter – actually, dead and buried deep under the ground by now.
But, to the bafflement and shame of our Teflon coated “experts and pundits”, the Chinese economic juggernaut has metamorphosed into, what is commonly referred to, ‘The Chinese Miracle’ – an unprecedented growth, expansion, and advancement in real economic terms that has never been witnessed before in the known human history. The Chinese economy has emerged as the unstoppable economic engine that is pulling the entire global economy. The reality of expansion and growth in the Chinese economy is something more than the mere GDP numbers.
Still, the experts are not ready to give up the hope that one day their predictions may come true and they will be able to wipe out the stigma of decades of blunders and false predictions. Lately, the cacophony of the doomsday predictors is rising on the decibel scale again.
The current phase of the ‘Chinese economic collapse and bubble burst’ media blitz traces its roots in the financial meltdown of the Western financial system in 2008.
The clueless – or an accomplice in the crime, farmer US Secretary of Treasury, Henry Hank Paulson – the Time’s Person of the Year 2008, was assuring the Americans and the world on the Fox News(sic) on March 16th, 2008, “We’ve got strong financial institutions . . . Our markets are the envy of the world. They’re resilient, they’re…innovative, they’re flexible. I think we move very quickly to address situations in this country, and, as I said, our financial institutions are strong.”
It was almost the same period that the high power Treasury and FED officials were visiting Beijing and warning them of an impending financial collapse and systemic failure of Chinese banks unless they fully adopt to the western banking standards and ‘open up’ to the West.
These buffoons were fully aware of the then coming financial tsunami that was going to hit home in just a few months, and were hoping that the Chinese would eagerly mingle with the western banking system and swallow some of the toxic waste that their banks and investment houses were about to spew out.
The Chinese were sure laughing their buts off.
The entire banking and financial system in the West collapsed in 2008. Tens of trillions of dollars and euros have since been created (as debt to the banks) and infused in the financial sector and the stock markets to further enhance the wealth of the super wealthy and to keep the charade of growth going on for the benefit of a gullible public. Millions lost their homes, properties, and businesses to the same banks who were bailed out by the public funds. The coming generations of Americans and Europeans have been put under the yoke of an enormous amount of debt that they are not even aware of and will never be able to ever pay off – they will have to keep on working harder and harder to keep on paying the ever increasing interest on the ‘principle’. The population is
Such are the prospects of the touted economic recovery and growth in the West – from Ireland and Greece the USA, on the face of which the experts and economists in the US have been pipe-dreaming the imminent collapse Chinese economy.
The sheer number of the books, theses, essays, and articles – each one harping on the same string, written on the subject is large enough to necessitate the use of scientific notation. Listed below are a few of the latest ‘nice tries’ by the US media and their experts:
- China looks a lot like the U.S. in 2008
- Yahoo: China’s economy: It’s worse than you think
- Knowing China’s economy is slowing is like knowing you can save 15% or more on car insurance with GEICO. Everybody knows that (!).
- Earlier this month, China set its 2015 GDP growth target at around 7% which is the lowest in 11 years and down from 7.4% in 2014. The economy is being weighed down by a slowdown in real estate and overcapacity at its factories as well as growing local debt.
- China’s central bank has cut interest rates twice since last November and freed its banks to lend more over the past few months.
- The Chinese government is also expected to see its largest budget deficit since the global financial crisis.
- The managing partner at Gabriel Investments, says it’s not the public debt that is so worrisome. He says investors should look closely at ballooning private debt in China.
- The big underlying problem is the fact that private debt and the money supply have both been growing far too rapidly in China. According to Forbes, M2 in China increased by 13.6 percent last year.
- Overall, M2 in China is up by about 1000 percent since 1999. That is absolutely insane.
- ‘Perfect storm’ to hit China economy in 2016 – Courtesy of CNBC.
- But fewer people are focused on the magnitude of China’s slowdown, much less considered the potential far-reaching implications for U.S. policymakers, investors and consumers.
- Data released this week for the January-February time frame have raised alarm bells among China watchers. Notably:
– – A 6.8% year-over-year growth in industrial production is “the weakest year-over-year reading ever (China’s IP data starts from 1995) outside the global financial crisis,” according to Goldman Sachs.
– – Year-over-year retail sales growth of 10.7% is the lowest in over 9 years, according to IHS.
– – A 13.9% year-over-year increase in fixed-assets investment is the lowest in 14 years, according to IHS.
– – The Producer Price Index fell 4.8% vs. the prior year, the steepest drop since 2009.
– – Electrical consumption rose just 1.9% year-over-year after climbing 3.2% in 2014, the weakest in 16 years.
- Goldman Sachs, JPMorgan, and Barclays each cut GDP estimates for China in reaction to the latest numbers.
The economists and experts have also been trying to hook their hopes to the argument that the cheaper labor markets like India, Vietnam, Indonesia, and Thailand will ultimately eliminate the Chinese advantage as the manufacturing wold shift to the cheaper labor economies. They couldn’t be further lost on this count – they forget the significance of “infrastructure” and the manufacturing prowess.
It has been almost a biannual ritualistic indulgence on part of our western experts to launch a media blitz against the Chinese economy – rejuvenating their aging predictions of impending collapse of the entire Chinese economic and industrial system. To their dismay, China is still the world’s fastest growing economy. They seems to be unable to comprehend it.
the problem with the economists and experts in the West is that they are incapable of venturing beyond the walls of their “box”. They are entrapped in the theories of Adam Smith and John Keynes – and, that on the assumption that they are not outright shills of established interests. Anyhow, the Chinese model, it seems, is beyond their grasp. They are attuned to the economies in the West where the recessions every five years and deep contractions every ten years have been the norm. Chinese economic model just gets them flabbergasted. Whatever they seems to try, doesn’t work.
China, even though adopted the same western fractional banking system, has its economic model set for longevity and continuous growth. Their are some major differences between the western and Chinese economic models.
First: Unlike the West, where the economic model is the sucking blood out of the working class – depriving them of the living wages, China has opted for the Ford model – continuously increasing the purchasing power of the masses to keep the economic engine running full blast. Following on this scheme, China has been able to sustain the highest income growth rate in the world for its masses for more than two decades – no other economy come even close to it.
Second: China, unlike the West – in particular the US, where the privately owned central banks (the Federal Reserve Bank in the US) hold the economy hostage, owns and controls its central banks. As such, all the interest earned by and through the central bank is recycled back into the economy – it doesn’t end up into the coffers of the major banks.
Third:The real Chinese Miracle is the ever expanding and modernizing manufacturing and service sector. It is a perpetual growth model with no expiry date attached to it – there is no limit to the modernization, and the consequential growth.
Fourth: In conjunction with the third, is the Chinese vision for an ever expending infrastructure – high-speed railways, super highways, airports, and a cobweb of facilities encompassing the entire country. Growth in the construction sector is expected to continue for at least twenty more years. Then, it will be the next generation of the infrastructure that will evolve out of the technological innovations – Welcome to the world that was envisioned in many science fictions – ultra high-tech city clusters – self sufficient, but working synergistically together.
Five: Another major difference between the West and China is that, even though China is also a major producer of multi-millionaires and billionaires, it is not infested with the parasitic banking dynasties who have wrung the public dry.
With all the sympathy to the plight of our dear economists, experts, and analysts, as long as China keeps itself free of such parasitic infestation, China’s economy is not going to collapse – It will keep on growing indefinitely, as it is supposed to be.