What if World Business Cycles are less US-centric?

China economy on a GDP purchasing power parity basis became the largest in 2013 and it is now 25% larger than the USA. China’s economy will be 30% larger in 2019 and 50% larger in 2023.

China’s GDP statistics do not show recessions but the transparent Shanghai stock exchange showed a hard crash in 2015 and had bear markets in 2016 and 2018.

The parts of the US economy that industrial and agricultural had a recession which is now categorized as an overall mini-recession in 2015 and 2016.

China’s consumer spending is still only $5 trillion versus $12.8 trillion for the USA. However, China will be at about $7 trillion by 2022 versus $14 trillion for the USA. China will be at about $10-11 trillion by 2027 and about 65-75% of the US consumer spending level.


source: tradingeconomics.com

A Seeking Alpha writer and investment advisor and owner of True Vine Investments wrote an article under the assumptions that there was a recession in 2015 and 2016 and that China’s larger PPP GDP economy is a larger factor in the overall world business cycle.

He came to the following conclusions:

There will 3 to 4 years before there is a recession.

The next few years will see
* Lower U.S. dollar
* Renewed strength in commodities and quality developing markets
* The outperformance of U.S. large caps versus small caps
* Higher interest rates globally

104 thoughts on “What if World Business Cycles are less US-centric?”

  1. It does not matter where the cycle is based it will always happen for the same reason, unless the value of the land has ceased to be speculated in. That was the cause of the 2007 economic crisis and it will be the cause of the next one (expected in 2025 according to the Georgist schools of economics). The theory behind this understanding was first proposed by Henry George in his classic book “Progress and Poverty” of 1879, which is still in print and has sold at least 3 million copies. It is land owners who speculate in the prices of real-estate and with the help of the banks allow mortgages to be attractive to those who want to join in with this gamble. When the price of land becomes so high that builders no longer find it worthwhile to participate, the bubble bursts and many mortgagees and banks find themselves in serious financial trouble as the price of their real-estate begins to fall.

    Reply
  2. It does not matter where the cycle is based it will always happen for the same reason unless the value of the land has ceased to be speculated in. That was the cause of the 2007 economic crisis and it will be the cause of the next one (expected in 2025 according to the Georgist schools of economics). The theory behind this understanding was first proposed by Henry George in his classic book Progress and Poverty”” of 1879″” which is still in print and has sold at least 3 million copies. It is land owners who speculate in the prices of real-estate and with the help of the banks allow mortgages to be attractive to those who want to join in with this gamble. When the price of land becomes so high that builders no longer find it worthwhile to participate”” the bubble bursts and many mortgagees and banks find themselves in serious financial trouble as the price of their real-estate begins to fall.”””

    Reply
  3. It does not matter where the cycle is based it will always happen for the same reason, unless the value of the land has ceased to be speculated in. That was the cause of the 2007 economic crisis and it will be the cause of the next one (expected in 2025 according to the Georgist schools of economics). The theory behind this understanding was first proposed by Henry George in his classic book “Progress and Poverty” of 1879, which is still in print and has sold at least 3 million copies. It is land owners who speculate in the prices of real-estate and with the help of the banks allow mortgages to be attractive to those who want to join in with this gamble. When the price of land becomes so high that builders no longer find it worthwhile to participate, the bubble bursts and many mortgagees and banks find themselves in serious financial trouble as the price of their real-estate begins to fall.

    Reply
  4. It does not matter where the cycle is based it will always happen for the same reason unless the value of the land has ceased to be speculated in. That was the cause of the 2007 economic crisis and it will be the cause of the next one (expected in 2025 according to the Georgist schools of economics). The theory behind this understanding was first proposed by Henry George in his classic book Progress and Poverty”” of 1879″” which is still in print and has sold at least 3 million copies. It is land owners who speculate in the prices of real-estate and with the help of the banks allow mortgages to be attractive to those who want to join in with this gamble. When the price of land becomes so high that builders no longer find it worthwhile to participate”” the bubble bursts and many mortgagees and banks find themselves in serious financial trouble as the price of their real-estate begins to fall.”””

    Reply
  5. It does not matter where the cycle is based it will always happen for the same reason, unless the value of the land has ceased to be speculated in. That was the cause of the 2007 economic crisis and it will be the cause of the next one (expected in 2025 according to the Georgist schools of economics).

    The theory behind this understanding was first proposed by Henry George in his classic book “Progress and Poverty” of 1879, which is still in print and has sold at least 3 million copies. It is land owners who speculate in the prices of real-estate and with the help of the banks allow mortgages to be attractive to those who want to join in with this gamble. When the price of land becomes so high that builders no longer find it worthwhile to participate, the bubble bursts and many mortgagees and banks find themselves in serious financial trouble as the price of their real-estate begins to fall.

    Reply
  6. You know, I got to thinking about what you just wrote, and I think there’s a demographic time-bomb of another sort built into it. Rapid personal insolvency in retirement. Namely, the world-class savers of China saved their beans on one hope: that they could save enough to — with the help of their sons’ families — sigh into retirement, with enough “pin money” to buy stuff of their own, to contribute to the extended family, and perhaps even, if blessed with nothing but girl children — or none — to fund their own retirements when age comes upon them, as inevitably it does to all of us. The problem is that the average person’s savings — specifically the coming and present elderly — is expected to fund the FUTURE’s costs-of-living. Based on costs-of-saving from decades and decades ago. This is a problem. When Mr & Mrs Huang (as an example) were making 300 yuan a week ans able to save 50 in 1995, when they were in their 30s and had their single girl child, there was no thought that inflation would render that 50 yuan worth perhaps only 5 yuan today in purchasing power in China. Now the banks, motivated (and owned) by The State, mandated to Keep the Peace economically, have done a reasonably good job defaulting on no savers even though — if you can believe the reports both cited and anecdotal — they may well be bankrupt, propped up by the Govenment’s willingness to bend Bretton Woods II paper money minting covenants, even so, Mr. and Mr.s Huang are able to retrieve money that they’ve saved, perhaps now a balance of 1,000,000 yuan, as they need. Yet, with Chinese bank interest being nowhere near enough to keep up with the last 5 years, the present, and very likely the upcoming future inflation, that million yuan “in the kitty” is depleting rapidly. Far more rapidly than the actuarial statistical age to which Mr. and Mrs. Huang will live. _______ And that’s my point. Savings, during economic expansion, is diminished sans withdrawals just by inflation alone

    Reply
  7. You know I got to thinking about what you just wrote and I think there’s a demographic time-bomb of another sort built into it. Rapid personal insolvency in retirement. Namely the world-class savers of China saved their beans on one hope: that they could save enough to — with the help of their sons’ families — sigh into retirement with enough “pin money” to buy stuff of their own to contribute to the extended family and perhaps even if blessed with nothing but girl children — or none — to fund their own retirements when age comes upon them as inevitably it does to all of us. The problem is that the average person’s savings — specifically the coming and present elderly — is expected to fund the FUTURE’s costs-of-living. Based on costs-of-saving from decades and decades ago. This is a problem.When Mr & Mrs Huang (as an example) were making 300 yuan a week ans able to save 50 in 1995 when they were in their 30s and had their single girl child there was no thought that inflation would render that 50 yuan worth perhaps only 5 yuan today in purchasing power in China. Now the banks motivated (and owned) by The State mandated to Keep the Peace economically have done a reasonably good job defaulting on no savers even though — if you can believe the reports both cited and anecdotal — they may well be bankrupt propped up by the Govenment’s willingness to bend Bretton Woods II paper money minting covenants even so Mr. and Mr.s Huang are able to retrieve money that they’ve saved perhaps now a balance of 1000000 yuan as they need. Yet with Chinese bank interest being nowhere near enough to keep up with the last 5 years the present and very likely the upcoming future inflation that million yuan “in the kitty” is depleting rapidly. Far more rapidly than the actuarial statistical age to which Mr. and Mrs. Huang will live. _______And that’s my point.Savings during economic expansion is diminished sans withdrawals just by inflation alone.

    Reply
  8. You know, I got to thinking about what you just wrote, and I think there’s a demographic time-bomb of another sort built into it. Rapid personal insolvency in retirement.

    Namely, the world-class savers of China saved their beans on one hope: that they could save enough to — with the help of their sons’ families — sigh into retirement, with enough “pin money” to buy stuff of their own, to contribute to the extended family, and perhaps even, if blessed with nothing but girl children — or none — to fund their own retirements when age comes upon them, as inevitably it does to all of us.

    The problem is that the average person’s savings — specifically the coming and present elderly — is expected to fund the FUTURE’s costs-of-living. Based on costs-of-saving from decades and decades ago.

    This is a problem.

    When Mr & Mrs Huang (as an example) were making 300 yuan a week ans able to save 50 in 1995, when they were in their 30s and had their single girl child, there was no thought that inflation would render that 50 yuan worth perhaps only 5 yuan today in purchasing power in China.

    Now the banks, motivated (and owned) by The State, mandated to Keep the Peace economically, have done a reasonably good job defaulting on no savers even though — if you can believe the reports both cited and anecdotal — they may well be bankrupt, propped up by the Govenment’s willingness to bend Bretton Woods II paper money minting covenants, even so, Mr. and Mr.s Huang are able to retrieve money that they’ve saved, perhaps now a balance of 1,000,000 yuan, as they need.

    Yet, with Chinese bank interest being nowhere near enough to keep up with the last 5 years, the present, and very likely the upcoming future inflation, that million yuan “in the kitty” is depleting rapidly. Far more rapidly than the actuarial statistical age to which Mr. and Mrs. Huang will live.
    _______

    And that’s my point.

    Savings, during economic expansion, is diminished sans withdrawals just by inflation alone.
    Which either (or both) will keep Mr. and Mrs. Huang working longer (seems unavoidable)…
    And which stands to make them financial burdens on their kith and kin.

    The population, I am given to understand, is apparently already newly invigorated with petitioning the Powers that Be for substantially higher personal income: the price of things alone has been rising, but moreso, the number, type, quality and variety of things that the average worker hopes to be able to nominally afford has risen, and continues to rise.

    If the banks really are in arrears, the Great Goose Egg almost certainly cannot be expected to remain dormant forever. It will eventually hatch. And that hungry, ugly duckling isn’t to be triffled with.
    _______

    Just saying,
    GoatGuy

    Reply
  9. Out of curiousity I tried to model this. I think you are right that it will be sooner, and then suddenly (like the adage of going broke). Some data from PBOC, CEIC, UN and other places, so take this with some skepticism. Then again, the direction is clear. All figures 2018 June and backward. Chinese households save about 33% of their take-home pay. This is to pay for medical, housing (35% cash down payment on apartments) and taking care of Popup/Memaw. This is based of a median gross income of $5,100/yr (NOT the often touted median “urban”, ie total), or they save about $1,700/yr. The rest they spend, of course (biggest ticket is food, then housing). Now the kicker: for the first time “in recorded history” (melodrama), total retail deposits (savings) have plateaued compared to prior year. IE the giant Chinese savings machine stalled. You can see the buffer being replaced by a commensurate increase in bank borrowings. IE China is being just like everyone else, a credit driven economy. The “savings economy” of China is a myth. It has been for some time on the commercial side and is now present on the household side. Then, the working age population peaked in 2012 at about 940 million and has declined since, but more importantly the decline is accelerating. Currently it’s at 900m. By 2030 (in 12 years) expected to be 830m and 700m by 2050. So if you pull 70 million working stiffs out of the income pool who need to survive on a take-home of say $5k a year, that will add up to $350bn a year by 2030, and an amazing $1tr per year in 2050. I am conservative here since those urbanites outside the work force will need about 50% more to survive. The ONLY way to plug this gap is to increase incomes and corresponding savings. China could borrow this by doing a massive QE but the down pressure on the CNY would be intense because the CNY “has nowhere else to go”. In order to plug this, median SAVINGS (from incomes) will need to increase about 7-8% per year, and in 12 years

    Reply
  10. Out of curiousity I tried to model this. I think you are right that it will be sooner and then suddenly (like the adage of going broke). Some data from PBOC CEIC UN and other places so take this with some skepticism. Then again the direction is clear.All figures 2018 June and backward. Chinese households save about 33{22800fc54956079738b58e74e4dcd846757aa319aad70fcf90c97a58f3119a12} of their take-home pay. This is to pay for medical housing (35{22800fc54956079738b58e74e4dcd846757aa319aad70fcf90c97a58f3119a12} cash down payment on apartments) and taking care of Popup/Memaw. This is based of a median gross income of $5100/yr (NOT the often touted median urban””” ie total) or they save about $1700/yr. The rest they spend of course (biggest ticket is food”” then housing).Now the kicker: for the first time “”””in recorded history”””” (melodrama)”” total retail deposits (savings) have plateaued compared to prior year. IE the giant Chinese savings machine stalled. You can see the buffer being replaced by a commensurate increase in bank borrowings. IE China is being just like everyone else”” a credit driven economy. The “”””savings economy”””” of China is a myth. It has been for some time on the commercial side and is now present on the household side. Then”” the working age population peaked in 2012 at about 940 million and has declined since but more importantly the decline is accelerating. Currently it’s at 900m. By 2030 (in 12 years) expected to be 830m and 700m by 2050. So if you pull 70 million working stiffs out of the income pool who need to survive on a take-home of say $5k a year that will add up to $350bn a year by 2030″” and an amazing $1tr per year in 2050. I am conservative here since those urbanites outside the work force will need about 50{22800fc54956079738b58e74e4dcd846757aa319aad70fcf90c97a58f3119a12} more to survive. The ONLY way to plug this gap is to increase incomes and corresponding savings. China could borrow this by doing a massive QE but th”

    Reply
  11. In my personal experience, albeit with tools rather than clothes (the average Chinese stuff doesn’t fit me) the reverse is true. The stuff made for westerners is often absolute rubbish*. Drills that will die after 20 hours use, that sort of thing. And there is a market for that: “men” who want to do something “manly” like some home renovation, or at least hang a picture on a wall. So they buy a $20 drill, drill 5 holes. Pick it up 6 months later and drill 3 more. Pick it up 1 year later and the battery is dead (because it’s totally discharged over that time.) But then there is the drill made for Chinese buyers. And this is a worker who is paying $80 for a drill, and it’s a weeks wages. So he wants something that he can hammer on for 10 hour days for years. And so that’s what he gets. It’s rough, has lousy ergonomics, doesn’t meet western OHS requirements, weighs 3x what the equivalent deWalt does… and you can use it for 10 hours a day and it just keeps working. *The “western” high quality deWalt drill is ALSO made in China, but now it’s a $300 drill. And it’s as pretty and light as the $20 rubbish while lasting as long as the $80 working man’s drill.

    Reply
  12. In my personal experience albeit with tools rather than clothes (the average Chinese stuff doesn’t fit me) the reverse is true.The stuff made for westerners is often absolute rubbish*. Drills that will die after 20 hours use that sort of thing. And there is a market for that: men”” who want to do something “”””manly”””” like some home renovation”” or at least hang a picture on a wall. So they buy a $20 drill drill 5 holes. Pick it up 6 months later and drill 3 more. Pick it up 1 year later and the battery is dead (because it’s totally discharged over that time.)But then there is the drill made for Chinese buyers. And this is a worker who is paying $80 for a drill and it’s a weeks wages. So he wants something that he can hammer on for 10 hour days for years. And so that’s what he gets. It’s rough has lousy ergonomics doesn’t meet western OHS requirements”” weighs 3x what the equivalent deWalt does… and you can use it for 10 hours a day and it just keeps working.*The “”””western”””” high quality deWalt drill is ALSO made in China”””” but now it’s a $300 drill. And it’s as pretty and light as the $20 rubbish while lasting as long as the $80 working man’s drill.”””

    Reply
  13. What happens when intellectual property is regarded as a non-scarce good and capitalism collapses unto itself like a dying star? See you on the other side Bry Guy.

    Reply
  14. What happens when intellectual property is regarded as a non-scarce good and capitalism collapses unto itself like a dying star?See you on the other side Bry Guy.

    Reply
  15. No, quite suddenly. This time next year, the average working Chinese will be older than the average working American. And when retirees start to draw down, they draw down. Our own Baby boomers will drive up interest rates — and keep them up for a while — within the next 5 years. Doesn’t require everyone to start retiring at the same time…just for the first part of the tsunami wave to hit shore.

    Reply
  16. No quite suddenly. This time next year the average working Chinese will be older than the average working American. And when retirees start to draw down they draw down. Our own Baby boomers will drive up interest rates — and keep them up for a while — within the next 5 years.Doesn’t require everyone to start retiring at the same time…just for the first part of the tsunami wave to hit shore.

    Reply
  17. Not much. China is being slammed by a demographic collapse, a geopolitical realignment that they can’t stop/control but will destroy their ‘business model’ and a debt problem….all at the same time.

    Reply
  18. Not much. China is being slammed by a demographic collapse a geopolitical realignment that they can’t stop/control but will destroy their ‘business model’ and a debt problem….all at the same time.

    Reply
  19. Out of curiousity I tried to model this. I think you are right that it will be sooner, and then suddenly (like the adage of going broke). Some data from PBOC, CEIC, UN and other places, so take this with some skepticism. Then again, the direction is clear.

    All figures 2018 June and backward. Chinese households save about 33% of their take-home pay. This is to pay for medical, housing (35% cash down payment on apartments) and taking care of Popup/Memaw. This is based of a median gross income of $5,100/yr (NOT the often touted median “urban”, ie total), or they save about $1,700/yr. The rest they spend, of course (biggest ticket is food, then housing).
    Now the kicker: for the first time “in recorded history” (melodrama), total retail deposits (savings) have plateaued compared to prior year. IE the giant Chinese savings machine stalled. You can see the buffer being replaced by a commensurate increase in bank borrowings. IE China is being just like everyone else, a credit driven economy. The “savings economy” of China is a myth. It has been for some time on the commercial side and is now present on the household side.

    Then, the working age population peaked in 2012 at about 940 million and has declined since, but more importantly the decline is accelerating. Currently it’s at 900m. By 2030 (in 12 years) expected to be 830m and 700m by 2050. So if you pull 70 million working stiffs out of the income pool who need to survive on a take-home of say $5k a year, that will add up to $350bn a year by 2030, and an amazing $1tr per year in 2050. I am conservative here since those urbanites outside the work force will need about 50% more to survive. The ONLY way to plug this gap is to increase incomes and corresponding savings. China could borrow this by doing a massive QE but the down pressure on the CNY would be intense because the CNY “has nowhere else to go”.

    In order to plug this, median SAVINGS (from incomes) will need to increase about 7-8% per year, and in 12 years about 10% per year thereafter. It doesn’t do any good to just increase incomes if the money is being consumed. The trend is definitely not pointing to this happening, but the opposite – China incomes are stagnating. Given that Chinese banks have non-performing loans significantly larger than China’s USD reserves, there is no “extra” buffer here either. It appears, that by around 2030 money will run out. China can’t force the elderly to work either because there won’t be money to pay for them.

    The big Q I guess is, as this deficit progresses in the coming 4-6 years, what policy actions with China take? If (it seems likely) China experiences a middle income trap, then they will need to make it up with exports. Huge exports. Or, do something radical. Preservation of the state goes before everything else.

    Reply
  20. Well… that would be my sentiment, too. But thinking both positively, and “out loud” here, what might you guess as to China’s domestic upside potential in the next 10 or so years? On a PPP basis, of course. GoatGuy

    Reply
  21. Well… that would be my sentiment too. But thinking both positively and “out loud” here what might you guess as to China’s domestic upside potential in the next 10 or so years? On a PPP basis of course.GoatGuy”

    Reply
  22. World business cycles are not likely to be less US-centric in the future” Quite the opposite. As the globalist ‘free’ trade over continues to fall apart, so will what limited US involvement in international trade (US is already one of the least traded connected nations, internationally..despite what everyone falsely believes), also falls. Thus the US business cycle will impact the rest of the world less and less.

    Reply
  23. World business cycles are not likely to be less US-centric in the future””Quite the opposite. As the globalist ‘free’ trade over continues to fall apart”” so will what limited US involvement in international trade (US is already one of the least traded connected nations internationally..despite what everyone falsely believes)”” also falls. Thus the US business cycle will impact the rest of the world less and less.”””

    Reply
  24. In San Francisco it is No matter how good or bad business is doing” the homeless will sh!t on your front door””.”””

    Reply
  25. 40% or so of defaulted loans on the books” That figure is the ‘official’ number. Which means the real number is a lot, lot more.

    Reply
  26. 40{22800fc54956079738b58e74e4dcd846757aa319aad70fcf90c97a58f3119a12} or so of defaulted loans on the books””That figure is the ‘official’ number. Which means the real number is a lot”””” lot more.”””

    Reply
  27. Makes me think that CHINA still has a huge potential upside in domestic growth.” …you can’t sell $1,200 iPhones to the Chinese. Thus they need to export them to us who will. Domestic sales will never make up for lost exports on a value basis.

    Reply
  28. Makes me think that CHINA still has a huge potential upside in domestic growth.””…you can’t sell $1″”””200 iPhones to the Chinese. Thus they need to export them to us who will.Domestic sales will never make up for lost exports on a value basis.”””

    Reply
  29. In my personal experience, albeit with tools rather than clothes (the average Chinese stuff doesn’t fit me) the reverse is true.

    The stuff made for westerners is often absolute rubbish*. Drills that will die after 20 hours use, that sort of thing. And there is a market for that: “men” who want to do something “manly” like some home renovation, or at least hang a picture on a wall. So they buy a $20 drill, drill 5 holes. Pick it up 6 months later and drill 3 more. Pick it up 1 year later and the battery is dead (because it’s totally discharged over that time.)

    But then there is the drill made for Chinese buyers. And this is a worker who is paying $80 for a drill, and it’s a weeks wages. So he wants something that he can hammer on for 10 hour days for years. And so that’s what he gets. It’s rough, has lousy ergonomics, doesn’t meet western OHS requirements, weighs 3x what the equivalent deWalt does… and you can use it for 10 hours a day and it just keeps working.

    *The “western” high quality deWalt drill is ALSO made in China, but now it’s a $300 drill. And it’s as pretty and light as the $20 rubbish while lasting as long as the $80 working man’s drill.

    Reply
  30. yeah, they are buying a lot of paint! The NPL’s is basically turning into a massive debt-equity swap. It means the 30 year experiment of private enterprise is done with the state owning quite a chunk of private business. They had no history of capitalism (killed everyone who had remembered how to do) and so their entry into this was a doomed project. Given the no.1 priority of the state is to keep the state, it doesn’t matter what “the rules are”, except there are no rules. The failure of “market forces” means they can’t create value. Not even by stealing technology because they don’t know how to manage it into something. Economies only grow when value is being created. Methinks they are heading for middle income trap and will plateau. I really encourage anyone to listen to Uncle Xi’s 3 hr “famous” speech to the Politburo. I know, it’s the most boring thing to do, but he details the road map. State security is number one. State mobilization and control (emphasis on control) of hundreds of millions of potential consumers is number 2. Exporting China to rest of world number 3. He doesn’t have that much money to maneuver with. It is plain to the US that diminishing the Chinese cash pile is key to throwing a huge wrench into these plans.

    Reply
  31. yeah they are buying a lot of paint!The NPL’s is basically turning into a massive debt-equity swap. It means the 30 year experiment of private enterprise is done with the state owning quite a chunk of private business. They had no history of capitalism (killed everyone who had remembered how to do) and so their entry into this was a doomed project. Given the no.1 priority of the state is to keep the state it doesn’t matter what the rules are”””” except there are no rules. The failure of “”””market forces”””” means they can’t create value. Not even by stealing technology because they don’t know how to manage it into something. Economies only grow when value is being created. Methinks they are heading for middle income trap and will plateau. I really encourage anyone to listen to Uncle Xi’s 3 hr “”””famous”””” speech to the Politburo. I know”” it’s the most boring thing to do”” but he details the road map. State security is number one. State mobilization and control (emphasis on control) of hundreds of millions of potential consumers is number 2. Exporting China to rest of world number 3. He doesn’t have that much money to maneuver with. It is plain to the US that diminishing the Chinese cash pile is key to throwing a huge wrench into these plans.”””

    Reply
  32. 40% defaults on bank loans? Where else in the world could one find a banking sector that silently “handles” that kind of financial failure, yet remain open-for-business(-as usual)? I guess it is as it always has been: the Chinese Government has a long, long history of making international covenants to inject value in their currency through the Bretton Woods II mechanism, which strictly prohibits minting coin and counter except by two routes. Route 1: payout of sovereign reserve bank bonds Route 2: replacement of worn out, AND destroyed old currency Like the United States (and its Route 3 cheat, popularized after the 2007 financial crisis, called “quantitative easing”, a doublefaced misdirection if there ever was one), China sees fit to “float its banks” bad loans through outright new-currency injection outside of Route 1, 2 … or 3. This in turn is why — though it is intensely unpopular and even politically self-undermining to engage in the practice — this is why the international money-markets haven’t come to embrace China’s renminbi significantly as a solid reserve of recognized conservatıve policy value. Its like a lot of things in China, I’ve come to learn in this lifetime. They can SAY whatever they like, to satisfy international expectations of plausible credibility. But they also don’t have to DO whatever they say, just find convenient misdirection actions that slew the focus of international concern toward something they’re supposedly doing right. Remember the Chinese koan: “when business is slow, paint your front door”. Kind of says it all. Doesn’t it? GoatGuy

    Reply
  33. 40{22800fc54956079738b58e74e4dcd846757aa319aad70fcf90c97a58f3119a12} defaults on bank loans?Where else in the world could one find a banking sector that silently handles”” that kind of financial failure”” yet remain open-for-business(-as usual)? I guess it is as it always has been: the Chinese Government has a long long history of making international covenants to inject value in their currency through the Bretton Woods II mechanism which strictly prohibits minting coin and counter except by two routes. Route 1: payout of sovereign reserve bank bondsRoute 2: replacement of worn out AND destroyed old currencyLike the United States (and its Route 3 cheat popularized after the 2007 financial crisis”” called “”””quantitative easing”””””” a doublefaced misdirection if there ever was one)”” China sees fit to “”””float its banks”””” bad loans through outright new-currency injection outside of Route 1″” 2 … or 3. This in turn is why — though it is intensely unpopular and even politically self-undermining to engage in the practice — this is why the international money-markets haven’t come to embrace China’s renminbi significantly as a solid reserve of recognized conservatıve policy value. Its like a lot of things in China I’ve come to learn in this lifetime. They can SAY whatever they like to satisfy international expectations of plausible credibility. But they also don’t have to DO whatever they say”” just find convenient misdirection actions that slew the focus of international concern toward something they’re supposedly doing right. Remember the Chinese koan: “”””when business is slow”””” paint your front door””””. Kind of says it all. Doesn’t it?GoatGuy”””””””

    Reply
  34. I’m suspicious of your opinion’s verification. Are the Chinese themselves truly beset with clamoring sweatshop ”Outlet Stores” (AKA open-air bazaars and souks), proffering hopelessly substandard goods that fall apart shortly after purchase?

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  35. I’m suspicious of your opinion’s verification. Are the Chinese themselves truly beset with clamoring sweatshop ”Outlet Stores” (AKA open-air bazaars and souks) proffering hopelessly substandard goods that fall apart shortly after purchase?

    Reply
  36. What you say is true. And it remains — for China — one of their quietly whitewashed social failures. Its not just that there are so MANY dirt-poor (over 700,000,000, or nearly twice the population of the United States!), but that their ascent up the Magical Chinese Miracle Economy just hasn’t happened. In the trackless hinterlands, donkeys still pull haycarts on rubble roads. Everywhere. Not, of course that I have anything against donkeycarts, but it is “a sign”. GoatGuy

    Reply
  37. What you say is true.And it remains — for China — one of their quietly whitewashed social failures. Its not just that there are so MANY dirt-poor (over 700000000 or nearly twice the population of the United States!) but that their ascent up the Magical Chinese Miracle Economy just hasn’t happened. In the trackless hinterlands donkeys still pull haycarts on rubble roads. Everywhere. Not of course that I have anything against donkeycarts but it is a sign””.GoatGuy”””””””

    Reply
  38. So… That’s a SILLY graph, showing the 14:1 to 2:1 decline-in-ratio between American and Chinese domestic spending. Because it ignores the potential of POPULATION. … The US has 325,700,000 (2018) people. … China has 1,379,000,000 (2018) folk. US domestic spending might (in 2022, per article) might be $14,000,000 million (lets use millions throughout). Chinese domestic consumption is projected at around $7,000,000 million. … US: $14,000,000 ÷ 335 → $41,800 per person … CX: $7,000,000 ÷ 1450 → $4,830 per person … Ratio = 8.7 : 1 Well that’s not 2:1 per the article, which appears to be fanning the flames of Watch Out, USA, we’re Coming sentimentalities. China remains quite a way back. I kind of wonder too about “purchase price parity”, which is to say $100 in America will buy you ‘X’. What will $100 buy the consumer in China? Or is that included in the above projections? Makes me think that CHINA still has a huge potential upside in domestic growth. Even if there is a 2:1 domestic spending advantage in China natively (which doesn’t seem outlandish), comparing $9,000 (China, 2022) to $42,000 (USA, 2022) per person normalized spending shows that China still has the potential for more waves of domestic prosperity growth. No conclusion, other than to remember Mark Twain’s (Samuel Clemens’) famous quip: “Dishonesty, boy, comes in three varieties: Lies, Dâhmned Lies and Statistics”. Truer words aren’t often heard. Just saying, GoatGuy

    Reply
  39. So…That’s a SILLY graph showing the 14:1 to 2:1 decline-in-ratio between American and Chinese domestic spending. Because it ignores the potential of POPULATION.… The US has 325700000 (2018) people.… China has 1379000000 (2018) folk. US domestic spending might (in 2022 per article) might be $14000000 million (lets use millions throughout). Chinese domestic consumption is projected at around $7000000 million. … US: $14000000 ÷ 335 → $41800 per person… CX: $7000000 ÷ 1450 → $4830 per person… Ratio = 8.7 : 1Well that’s not 2:1 per the article which appears to be fanning the flames of Watch Out USA we’re Coming sentimentalities. China remains quite a way back. I kind of wonder too about purchase price parity””” which is to say $100 in America will buy you ‘X’. What will $100 buy the consumer in China? Or is that included in the above projections?Makes me think that CHINA still has a huge potential upside in domestic growth. Even if there is a 2:1 domestic spending advantage in China natively (which doesn’t seem outlandish) comparing $9000 (China 2022) to $42000 (USA 2022) per person normalized spending shows that China still has the potential for more waves of domestic prosperity growth. No conclusion other than to remember Mark Twain’s (Samuel Clemens’) famous quip: “Dishonesty boy comes in three varieties: Lies Dâhmned Lies and Statistics”. Truer words aren’t often heard.Just saying””GoatGuy”””””””

    Reply
  40. I tend to agree with you: it doesn’t take a genius to recognize that it is a geopolitically poor idea to outsource hundreds of critical sub-manufacturing specialties to a competitor who is trying avidly to monopolize those industries, then when monopolized, “call the shots” as to the New Price for the same goods. Undercut, eliminate domestic competition, then milk the market. Fiscal (and industrial, and military, and even pölïtical) conservatives tend to “see the writing on the wall” a few years after The Wave of outsourcing takes hold and the progressives are queuing up to shovel more demand into China’s in-box. And being the “party of the methodical”, they are slow to intercede, to put up a yellow warning flag, to say politically and pragmatically, “Whoa… hold up there, Hoss… are you SURE we want to let our motor-making, our chip-making and our plastics industries go off-shore entirely? ” Just saying. The trendiness of outsourcing to a future monopoly is usually caught. In time. To avert socioeconomic disaster down the road. Its why both conservatives and progressives need to embrace each other’s strengths. Just saying, GoatGuy

    Reply
  41. I tend to agree with you: it doesn’t take a genius to recognize that it is a geopolitically poor idea to outsource hundreds of critical sub-manufacturing specialties to a competitor who is trying avidly to monopolize those industries then when monopolized “call the shots” as to the New Price for the same goods. Undercut eliminate domestic competition then milk the market. Fiscal (and industrial and military and even pölïtical) conservatives tend to “see the writing on the wall” a few years after The Wave of outsourcing takes hold and the progressives are queuing up to shovel more demand into China’s in-box. And being the “party of the methodical” they are slow to intercede to put up a yellow warning flag to say politically and pragmatically “Whoa… hold up there Hoss… are you SURE we want to let our motor-making our chip-making and our plastics industries go off-shore entirely? ”Just saying.The trendiness of outsourcing to a future monopoly is usually caught.In time. To avert socioeconomic disaster down the road. Its why both conservatives and progressives need to embrace each other’s strengths. Just sayingGoatGuy”

    Reply
  42. IMO, the largest driver of consumption in china is products that are made purposely inferior in order to drive sales… If you buy a pair of fashionable jeans…and they last until the next time you wash them… then you might say that drives consumption because they are effectively disposable wear once jeans… you buy them an keep throwing them away once a week because they were purposely designed to fall apart when you wash them so that they could sell more of them… call it the teen shopper economy…

    Reply
  43. IMO the largest driver of consumption in china is products that are made purposely inferior in order to drive sales… If you buy a pair of fashionable jeans…and they last until the next time you wash them… then you might say that drives consumption because they are effectively disposable wear once jeans… you buy them an keep throwing them away once a week because they were purposely designed to fall apart when you wash them so that they could sell more of them… call it the teen shopper economy…

    Reply
  44. Don’t forget you are talking about the urban areas. Half the Chinese population live in rural areas (or rural migrants) and are dirt poor, ie nothing to consume.

    Reply
  45. Don’t forget you are talking about the urban areas. Half the Chinese population live in rural areas (or rural migrants) and are dirt poor ie nothing to consume.

    Reply
  46. Not so sure. The saving rate is very high for the reason you mentioned (and no universal healthcare). So huge buffer. But I think long term you are probably on target once these savings dry up IF China experiences a middle income trap, which I think they will.

    Reply
  47. Not so sure. The saving rate is very high for the reason you mentioned (and no universal healthcare). So huge buffer. But I think long term you are probably on target once these savings dry up IF China experiences a middle income trap which I think they will.

    Reply
  48. Chinese stats are impressive but their social engineering from the 70’s is about to bite them in the ass soon when their population ages and the one child is left to pay the bill for their retirement. There isn’t enough to prop up their growth.

    Reply
  49. Chinese stats are impressive but their social engineering from the 70’s is about to bite them in the ass soon when their population ages and the one child is left to pay the bill for their retirement. There isn’t enough to prop up their growth.

    Reply
  50. The reason why Chinese consumption doesn’t match US consumption is because the living style is entirely different. Sprawl in China means putting up another 10 story apartment building with average living space of 1000 square feet with no gargage storage or car parking spot. Sprawl in the US means finding another track of unused land and filling it with single family house with 2 garagage, large yards, swiming pool, utility shed and 2000 square foot of living space all in need of filling it with stuff. Chinese spend more of their disposable income on food and entertainment, and pocketing it away like little squirels. verses americans that spend more on material consumption and trying to buy more than they can afford on cerdit to fill all the living containers in their life. The day that 90% of americans decide to throw away half their stuff and cram themselves into 10 story apartment buildings with 1000 squre foot of living space relying on public transportion without a car is the day that chinese consumption matches US consumption on a per person bais.

    Reply
  51. The reason why Chinese consumption doesn’t match US consumption is because the living style is entirely different. Sprawl in China means putting up another 10 story apartment building with average living space of 1000 square feet with no gargage storage or car parking spot. Sprawl in the US means finding another track of unused land and filling it with single family house with 2 garagage large yards swiming pool utility shed and 2000 square foot of living space all in need of filling it with stuff. Chinese spend more of their disposable income on food and entertainment and pocketing it away like little squirels. verses americans that spend more on material consumption and trying to buy more than they can afford on cerdit to fill all the living containers in their life. The day that 90{22800fc54956079738b58e74e4dcd846757aa319aad70fcf90c97a58f3119a12} of americans decide to throw away half their stuff and cram themselves into 10 story apartment buildings with 1000 squre foot of living space relying on public transportion without a car is the day that chinese consumption matches US consumption on a per person bais.

    Reply
  52. Yes, the Chinese economy has implications for rest of world, but not as much as many think. I just got back from there, road trip around Asia. The economic downturn in China is still on but they are importing more and more. Sounds illogical but I’ll explain. Their imports are up 14% from last year (as of 8/18) and that’s about $250bn more of stuff, on a $1.8tr base. In the big galactic picture of things it isn’t huge, but it is material in a couple industries – energy and food. Their exports are increasing about 10% yoy or about $230bn, and it’s mainly rice and aluminum and the usual electronics/gadgets/stuff. So the Chinese still need to eat and keep the lights on and rest of world still buys stuff from them albeit not as much as before. However “big” the Chinese economy is, it is ring-fenced. The currency is irrelevant to global financial flows (which is 17-20x the size of all global goods and services trade) and THAT is what dictates the “importance” of the size of an economy. Chinese outbound FDI is only about $100 bn a year, which is really not even on a radar screen. The US outward FDI is $6trillion, or 60x bigger. It does not matter how “big” the Chinese economy is, it is not very important to the rest of the global economy, because it’s an internalized economy. The main culprit is the lack of RMB as a freely convertible currency. That won’t change anytime soon as long as Uncle Xi is in charge. Besides, he has his hands full with the 40% or so of defaulted loans on the books of his banks. That is a huge amount of debt to equity conversions, or roughly $4 trillion of loans to fund. Put this in perspective: the Chinese loan defaults is about 2.5x the US sub-prime problem for an economy half as big. That will keep the country very busy for a while absorbing capital that would have been used elsewhere.

    Reply
  53. Yes the Chinese economy has implications for rest of world but not as much as many think. I just got back from there road trip around Asia. The economic downturn in China is still on but they are importing more and more. Sounds illogical but I’ll explain. Their imports are up 14{22800fc54956079738b58e74e4dcd846757aa319aad70fcf90c97a58f3119a12} from last year (as of 8/18) and that’s about $250bn more of stuff on a $1.8tr base. In the big galactic picture of things it isn’t huge but it is material in a couple industries – energy and food. Their exports are increasing about 10{22800fc54956079738b58e74e4dcd846757aa319aad70fcf90c97a58f3119a12} yoy or about $230bn and it’s mainly rice and aluminum and the usual electronics/gadgets/stuff. So the Chinese still need to eat and keep the lights on and rest of world still buys stuff from them albeit not as much as before. However big”” the Chinese economy is”””” it is ring-fenced. The currency is irrelevant to global financial flows (which is 17-20x the size of all global goods and services trade) and THAT is what dictates the “”””importance”””” of the size of an economy. Chinese outbound FDI is only about $100 bn a year”” which is really not even on a radar screen. The US outward FDI is $6trillion”” or 60x bigger.It does not matter how “”””big”””” the Chinese economy is”” it is not very important to the rest of the global economy because it’s an internalized economy. The main culprit is the lack of RMB as a freely convertible currency. That won’t change anytime soon as long as Uncle Xi is in charge. Besides he has his hands full with the 40{22800fc54956079738b58e74e4dcd846757aa319aad70fcf90c97a58f3119a12} or so of defaulted loans on the books of his banks. That is a huge amount of debt to equity conversions”” or roughly $4 trillion of loans to fund. Put this in perspective: the Chinese loan defaults is about 2.5x the US sub-prime problem for an economy half as big. That will keep the country very busy for a while absor”

    Reply
  54. What happens when intellectual property is regarded as a non-scarce good and capitalism collapses unto itself like a dying star?

    See you on the other side Bry Guy.

    Reply
  55. No, quite suddenly. This time next year, the average working Chinese will be older than the average working American. And when retirees start to draw down, they draw down.

    Our own Baby boomers will drive up interest rates — and keep them up for a while — within the next 5 years.

    Doesn’t require everyone to start retiring at the same time…just for the first part of the tsunami wave to hit shore.

    Reply
  56. Not much. China is being slammed by a demographic collapse, a geopolitical realignment that they can’t stop/control but will destroy their ‘business model’ and a debt problem….all at the same time.

    Reply
  57. Why would the Chinese ruling class want a weaker Dollar? All their wealth is in European/American banks and real estate, denominated in USD. They’ll continue manipulating the Yuan down into nothing if necessary to keep up the looting of their own nation.

    Reply
  58. Why would the Chinese ruling class want a weaker Dollar? All their wealth is in European/American banks and real estate denominated in USD. They’ll continue manipulating the Yuan down into nothing if necessary to keep up the looting of their own nation.

    Reply
  59. For greater clarity: World business cycles are not likely to be less US-centric in the future. Even without something like a hot war in Southeast Asia over sea disputes (in which case, global manufacturing steps reshore to the US almost immediately,) the trend has been away from Chinese manufacturing for the past several years, since around 2015.

    Reply
  60. For greater clarity: World business cycles are not likely to be less US-centric in the future. Even without something like a hot war in Southeast Asia over sea disputes (in which case global manufacturing steps reshore to the US almost immediately) the trend has been away from Chinese manufacturing for the past several years since around 2015.

    Reply
  61. Well… that would be my sentiment, too.

    But thinking both positively, and “out loud” here, what might you guess as to China’s domestic upside potential in the next 10 or so years? On a PPP basis, of course.

    GoatGuy

    Reply
  62. “World business cycles are not likely to be less US-centric in the future”

    Quite the opposite. As the globalist ‘free’ trade over continues to fall apart, so will what limited US involvement in international trade (US is already one of the least traded connected nations, internationally..despite what everyone falsely believes), also falls.

    Thus the US business cycle will impact the rest of the world less and less.

    Reply
  63. “Makes me think that CHINA still has a huge potential upside in domestic growth.”

    …you can’t sell $1,200 iPhones to the Chinese. Thus they need to export them to us who will.

    Domestic sales will never make up for lost exports on a value basis.

    Reply
  64. I’m afraid I have no idea what you mean. “They” (who? Chinese? Americans? Business cycles? “won’t be” (won’t be what? Won’t be less US centric?)

    Reply
  65. I’m afraid I have no idea what you mean.They”” (who? Chinese? Americans? Business cycles? “”””won’t be”””” (won’t be what? Won’t be less US centric?)”””

    Reply
  66. Not actually addressing the story though, are you? The story isn’t about “who will be the preeminent superpower”. It’s about “will the rise of another major economy of comparable (not greater, or even equal) size mean that internal Chinese business fluctuations will start to affect the world business cycle the same way internal US stuff does now?”.

    Reply
  67. Not actually addressing the story though are you?The story isn’t about who will be the preeminent superpower””. It’s about “”””will the rise of another major economy of comparable (not greater”””” or even equal) size mean that internal Chinese business fluctuations will start to affect the world business cycle the same way internal US stuff does now?””””.”””

    Reply
  68. China’s economy nominal GDP is 50% smaller than the US and will still be smaller in 2023. US preeminence in the military and finance as well as political alliances will keep it a First among the two superpowers for at lease next 30 years and quite likely indefinitely.

    Reply
  69. China’s economy nominal GDP is 50{22800fc54956079738b58e74e4dcd846757aa319aad70fcf90c97a58f3119a12} smaller than the US and will still be smaller in 2023. US preeminence in the military and finance as well as political alliances will keep it a First among the two superpowers for at lease next 30 years and quite likely indefinitely.

    Reply
  70. yeah, they are buying a lot of paint!
    The NPL’s is basically turning into a massive debt-equity swap. It means the 30 year experiment of private enterprise is done with the state owning quite a chunk of private business. They had no history of capitalism (killed everyone who had remembered how to do) and so their entry into this was a doomed project. Given the no.1 priority of the state is to keep the state, it doesn’t matter what “the rules are”, except there are no rules. The failure of “market forces” means they can’t create value. Not even by stealing technology because they don’t know how to manage it into something. Economies only grow when value is being created. Methinks they are heading for middle income trap and will plateau.

    I really encourage anyone to listen to Uncle Xi’s 3 hr “famous” speech to the Politburo. I know, it’s the most boring thing to do, but he details the road map. State security is number one. State mobilization and control (emphasis on control) of hundreds of millions of potential consumers is number 2. Exporting China to rest of world number 3. He doesn’t have that much money to maneuver with. It is plain to the US that diminishing the Chinese cash pile is key to throwing a huge wrench into these plans.

    Reply
  71. 40% defaults on bank loans?

    Where else in the world could one find a banking sector that silently “handles” that kind of financial failure, yet remain open-for-business(-as usual)?

    I guess it is as it always has been: the Chinese Government has a long, long history of making international covenants to inject value in their currency through the Bretton Woods II mechanism, which strictly prohibits minting coin and counter except by two routes.

    Route 1: payout of sovereign reserve bank bonds
    Route 2: replacement of worn out, AND destroyed old currency

    Like the United States (and its Route 3 cheat, popularized after the 2007 financial crisis, called “quantitative easing”, a doublefaced misdirection if there ever was one), China sees fit to “float its banks” bad loans through outright new-currency injection outside of Route 1, 2 … or 3.

    This in turn is why — though it is intensely unpopular and even politically self-undermining to engage in the practice — this is why the international money-markets haven’t come to embrace China’s renminbi significantly as a solid reserve of recognized conservatıve policy value.

    Its like a lot of things in China, I’ve come to learn in this lifetime. They can SAY whatever they like, to satisfy international expectations of plausible credibility. But they also don’t have to DO whatever they say, just find convenient misdirection actions that slew the focus of international concern toward something they’re supposedly doing right.

    Remember the Chinese koan: “when business is slow, paint your front door”.

    Kind of says it all.
    Doesn’t it?

    GoatGuy

    Reply
  72. I’m suspicious of your opinion’s verification. Are the Chinese themselves truly beset with clamoring sweatshop ”Outlet Stores” (AKA open-air bazaars and souks), proffering hopelessly substandard goods that fall apart shortly after purchase?

    Reply
  73. What you say is true.

    And it remains — for China — one of their quietly whitewashed social failures. Its not just that there are so MANY dirt-poor (over 700,000,000, or nearly twice the population of the United States!), but that their ascent up the Magical Chinese Miracle Economy just hasn’t happened. In the trackless hinterlands, donkeys still pull haycarts on rubble roads. Everywhere. Not, of course that I have anything against donkeycarts, but it is “a sign”.

    GoatGuy

    Reply
  74. So…

    That’s a SILLY graph, showing the 14:1 to 2:1 decline-in-ratio between American and Chinese domestic spending. Because it ignores the potential of POPULATION.

    … The US has 325,700,000 (2018) people.
    … China has 1,379,000,000 (2018) folk.

    US domestic spending might (in 2022, per article) might be $14,000,000 million (lets use millions throughout). Chinese domestic consumption is projected at around $7,000,000 million.

    … US: $14,000,000 ÷ 335 → $41,800 per person
    … CX: $7,000,000 ÷ 1450 → $4,830 per person

    … Ratio = 8.7 : 1

    Well that’s not 2:1 per the article, which appears to be fanning the flames of Watch Out, USA, we’re Coming sentimentalities. China remains quite a way back. I kind of wonder too about “purchase price parity”, which is to say $100 in America will buy you ‘X’. What will $100 buy the consumer in China? Or is that included in the above projections?

    Makes me think that CHINA still has a huge potential upside in domestic growth. Even if there is a 2:1 domestic spending advantage in China natively (which doesn’t seem outlandish), comparing $9,000 (China, 2022) to $42,000 (USA, 2022) per person normalized spending shows that China still has the potential for more waves of domestic prosperity growth.

    No conclusion, other than to remember Mark Twain’s (Samuel Clemens’) famous quip: “Dishonesty, boy, comes in three varieties: Lies, Dâhmned Lies and Statistics”. Truer words aren’t often heard.

    Just saying,
    GoatGuy

    Reply
  75. I tend to agree with you: it doesn’t take a genius to recognize that it is a geopolitically poor idea to outsource hundreds of critical sub-manufacturing specialties to a competitor who is trying avidly to monopolize those industries, then when monopolized, “call the shots” as to the New Price for the same goods.

    Undercut, eliminate domestic competition, then milk the market.

    Fiscal (and industrial, and military, and even pölïtical) conservatives tend to “see the writing on the wall” a few years after The Wave of outsourcing takes hold and the progressives are queuing up to shovel more demand into China’s in-box. And being the “party of the methodical”, they are slow to intercede, to put up a yellow warning flag, to say politically and pragmatically, “Whoa… hold up there, Hoss… are you SURE we want to let our motor-making, our chip-making and our plastics industries go off-shore entirely? ”

    Just saying.
    The trendiness of outsourcing to a future monopoly is usually caught.
    In time. To avert socioeconomic disaster down the road.

    Its why both conservatives and progressives need to embrace each other’s strengths.

    Just saying,
    GoatGuy

    Reply
  76. They won’t be. In fact, I think it’s likely to get worse as time moves on, except for the US tech sector, which is overbuilt and too expensive for what it’s produced lately (a wet fart’s worth of innovation)

    Reply
  77. They won’t be. In fact I think it’s likely to get worse as time moves on except for the US tech sector which is overbuilt and too expensive for what it’s produced lately (a wet fart’s worth of innovation)

    Reply
  78. IMO, the largest driver of consumption in china is products that are made purposely inferior in order to drive sales… If you buy a pair of fashionable jeans…and they last until the next time you wash them… then you might say that drives consumption because they are effectively disposable wear once jeans… you buy them an keep throwing them away once a week because they were purposely designed to fall apart when you wash them so that they could sell more of them… call it the teen shopper economy…

    Reply
  79. Not so sure. The saving rate is very high for the reason you mentioned (and no universal healthcare). So huge buffer. But I think long term you are probably on target once these savings dry up IF China experiences a middle income trap, which I think they will.

    Reply
  80. Chinese stats are impressive but their social engineering from the 70’s is about to bite them in the ass soon when their population ages and the one child is left to pay the bill for their retirement. There isn’t enough to prop up their growth.

    Reply
  81. The reason why Chinese consumption doesn’t match US consumption is because the living style is entirely different. Sprawl in China means putting up another 10 story apartment building with average living space of 1000 square feet with no gargage storage or car parking spot. Sprawl in the US means finding another track of unused land and filling it with single family house with 2 garagage, large yards, swiming pool, utility shed and 2000 square foot of living space all in need of filling it with stuff. Chinese spend more of their disposable income on food and entertainment, and pocketing it away like little squirels. verses americans that spend more on material consumption and trying to buy more than they can afford on cerdit to fill all the living containers in their life. The day that 90% of americans decide to throw away half their stuff and cram themselves into 10 story apartment buildings with 1000 squre foot of living space relying on public transportion without a car is the day that chinese consumption matches US consumption on a per person bais.

    Reply
  82. The US interest rate is already going up so that is not much of a forecast. As for the recession I think it will be earlier. I give it a year.

    Reply
  83. The US interest rate is already going up so that is not much of a forecast. As for the recession I think it will be earlier. I give it a year.

    Reply
  84. Yes, the Chinese economy has implications for rest of world, but not as much as many think. I just got back from there, road trip around Asia. The economic downturn in China is still on but they are importing more and more. Sounds illogical but I’ll explain. Their imports are up 14% from last year (as of 8/18) and that’s about $250bn more of stuff, on a $1.8tr base. In the big galactic picture of things it isn’t huge, but it is material in a couple industries – energy and food. Their exports are increasing about 10% yoy or about $230bn, and it’s mainly rice and aluminum and the usual electronics/gadgets/stuff.

    So the Chinese still need to eat and keep the lights on and rest of world still buys stuff from them albeit not as much as before. However “big” the Chinese economy is, it is ring-fenced. The currency is irrelevant to global financial flows (which is 17-20x the size of all global goods and services trade) and THAT is what dictates the “importance” of the size of an economy. Chinese outbound FDI is only about $100 bn a year, which is really not even on a radar screen. The US outward FDI is $6trillion, or 60x bigger.

    It does not matter how “big” the Chinese economy is, it is not very important to the rest of the global economy, because it’s an internalized economy. The main culprit is the lack of RMB as a freely convertible currency. That won’t change anytime soon as long as Uncle Xi is in charge. Besides, he has his hands full with the 40% or so of defaulted loans on the books of his banks. That is a huge amount of debt to equity conversions, or roughly $4 trillion of loans to fund. Put this in perspective: the Chinese loan defaults is about 2.5x the US sub-prime problem for an economy half as big. That will keep the country very busy for a while absorbing capital that would have been used elsewhere.

    Reply
  85. Why would the Chinese ruling class want a weaker Dollar? All their wealth is in European/American banks and real estate, denominated in USD. They’ll continue manipulating the Yuan down into nothing if necessary to keep up the looting of their own nation.

    Reply
  86. For greater clarity: World business cycles are not likely to be less US-centric in the future. Even without something like a hot war in Southeast Asia over sea disputes (in which case, global manufacturing steps reshore to the US almost immediately,) the trend has been away from Chinese manufacturing for the past several years, since around 2015.

    Reply
  87. Not actually addressing the story though, are you?

    The story isn’t about “who will be the preeminent superpower”.

    It’s about “will the rise of another major economy of comparable (not greater, or even equal) size mean that internal Chinese business fluctuations will start to affect the world business cycle the same way internal US stuff does now?”.

    Reply
  88. China’s economy nominal GDP is 50% smaller than the US and will still be smaller in 2023. US preeminence in the military and finance as well as political alliances will keep it a First among the two superpowers for at lease next 30 years and quite likely indefinitely.

    Reply
  89. They won’t be. In fact, I think it’s likely to get worse as time moves on, except for the US tech sector, which is overbuilt and too expensive for what it’s produced lately (a wet fart’s worth of innovation)

    Reply

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