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Samnospam
Advisor

a Keynesian dream

 

Here’s where the addiction shows: According to the BBCs Robert Peston, “China has built a new skyscraper every five days, more than 30 airports, metros in 25 cities, the three longest bridges in the world, more than 6,000 miles of high speed railway lines, 26,000 miles of motorway, and both commercial and residential property developments on a mind-boggling scale”. All in just the past five years.

While debt rose at a very rapid clip of 15% of GDP every year(!), to go from 125% to 200% of GDP in those same five years. Peston is ever so right when he says: “when a big economy is investing at that pace to generate wealth and jobs, it is a racing certainty that much of it will never generate an economic return“. Like the west, China has tried to buy growth, and borrowed to pay for it. In doing so, it went way beyond what Bernanke and Draghi would have even dared to dream of, ignored all economies of scale and ran headfirst into a giant diminishing returns sinkhole.

Analyst Charlene Chu: “In 2008, the Chinese banking sector was roughly $10 trillion in size. Right now it’s in the order of $24 to $25 trillion. That incremental increase of $14 to $15 trillion is the equivalent of the entire size of the US commercial banking sector, which took more than a century to build.

China will have replicated the entire US system in the span of half a decade. 

 

http://www.theautomaticearth.com/debt-rattle-feb-17-2014-a-racing-certainty/

 

On china's real estate boom.   https://www.youtube.com/watch?v=trs_udhjWqc&feature=youtube_gdata_player

12 Replies
bruce MN
Advisor

And,,,,,,

....what is reported there and actually has been predicted and reported on for some tiome now is going to do what to old Sammy?  Going to do what to the wife and kids? 

 

It's scarier that hell, but I don't thiknk that proer response to a massive global economy matter can be found in Hayek or Von Mises. They wanted to make sure that their little farms, gardens, shops and businesses could remain the dominant culture in the idylic naturally fortressed areas where they lived.

 

Makes for some cute stuff...and neat old movies.   

Samnospam
Advisor

Re: And,,,,,,

What does mass scale deflation mean to you. 

 

But surely you're not saying, you could not be saying....that the k-man, the krugster,  the Nobel genius who's pontifications entrall you, who's books you read to your children as bed time stories,.......ah....oh....could be wrong........that massive unrestrained borrowing and spending for no purpose is not the solution?    China did exactly as krugo would have had the USA do.   You can't be saying it was not a good idea.  

 

 

hardnox
Advisor

Re: And,,,,,,

The circumstances are probably better described by Marx than by Keynes.

 

Despite a lack of demand, money is created to flow into more fixed investment and speculative real eastate demand.

 

Actually a problem for Keynesians- the lack of a transmission mechanism from the money creation to consumers. Krugman actually doesn't have the problem- he advocates more progressive taxes, more redistribution and spending on things like infrastructure. There is certainly a need for infrastructure in this country although it is hard to be very optimistic about a very far reaching vision- building out to a 6 lane to the next suburban stop because it is shovel ready probably doesn't qualify.

 

Also a problem to supply siders- if you build a factory, consumption will follow. Supply leads demand. That's the Job Creators thing.

 

Keynes actually wrote quite a lot about the danger of letting The Game become The Economy although he probably stole that from Adam Smith.

kraft-t
Senior Advisor

Re: a Keynesian dream

In the first place they have over a billion chinese that they are trying to bring into the 21 century. It's a huge investment in modernization of infrastructure as opposed to what we are doing with trillions of infrastructure that needs modernization.

 

I think our last big thing was the Eisenhower interstate system. It can't be a republican iniative or it would have been comprised of gravel roads.

 

I guess when you consider all spending as spending and not investment, I suppose you think it is all wasted if it don't put a dollar or leave a dollar in your pocket.

 

I really don't know how some of you ever succeeded with the negative mindsets you have. Why would you ever plant a crop when there is no absolute guarantee that you would ever get a crop back.

 

 

hardnox
Advisor

Re: And,,,,,,

Also interesting to me that the Keynesians are so deeply loathed by the Internet Austrian movement.

 

Keynesians have most definitely not been the central force of academic economic thought over the last 30 years.

 

The dominant, almost monopolistic school of thought has been Chicago driven- to such a degree that it is well known that it is absolutely necessary to include rational actor microfoundation math in an academic submission in order to get it published. And if you're have a newly printed doctorate and want a tenure track job, and to get tenure, you have to get published.

 

There are important differences but the Chicago Boys are a lot closer to the short Austrian branch on the evolutionary tree than the Keynesians are.

Samnospam
Advisor

Re: And,,,,,,

Krugman advocated spending on anything, remember the alien invasion comments.  China's expansion was enabled by lax monetary policy, a Keynes thing.

johnaa
Advisor

Re: And,,,,,,

 

  Any system which relies on government is insane or very stupid or/and crooked.   The only exploitation for the human condition I can imagine is this is the planet for the insane.  I can't remember when they brought me here and it seems no one else can, which just about proves my theory.

Samnospam
Advisor

Re: a Keynesian dream

It is like you commented without viewing or reading anything that was linked.   

 

Some others I don't think did either, this was in it:

 

'So with encouragement from the US government (we interviewed the then US Treasury Secretary, Hank Paulson), the Chinese government unleashed a stimulus programme of mammoth scale: £400bn of direct government spending, and an instruction to the state-owned banks to “open their wallets” and lend as if there were no tomorrow.'

 

 

hardnox
Advisor

Re: And,,,,,,

This particular credit bubble, like ours was, is mostly getting blown in the shadow banking system outside the official monetary one.

 

That isn't to say that at some point governments don't don't appreciate and abet it- there is a more subtle and nuanced treatment on the role of the GSEs but it is too complicated for a 3 minute propaganda youtube.

 

But anyway, like ours, the failure falls more into the category of the regulatory/supervisory role of a central bank than strictly monetary policy.

 

But when you got an Austrian hammer da guvmint is your nail.