The Macroeconomics of Chinese kleptocracy
Jun10
on June 10, 2012
at 11:55 pm
John Hempton from Bronte Capital expands on the theme of systemic challenges currently facing the Chinese economy that we touched on last week with The End of the Communist Dynasty
The Macroeconomics of Chinese kleptocracy China is a kleptocracy of a scale never seen before in human history. This post aims to explain how this wave of theft is financed, what makes it sustainable and what will make it fail. There are several China experts I have chatted with – and many of the ideas are not original. The synthesis however is mine. Some sources do not want to be quoted.
Discussion (4) ¬
I find these posts on China a little extreme but there is truth to them. I would suggest reading these two articles from The Economist for a more fact/data based view on the matter:
http://www.economist.com/node/21552555
http://www.economist.com/node/21554234
Claiming “things are not all that bad” “no need to worry” “those ideas are little extreme ” “we need fact based views” is a thematic quality of the GFC since 2008 . The reality in China is “extreme”, the western memes that are reflected in our media are mostly untested, most of the broadly accept ” truths” about China are simply CCP propaganda themes unsupported by data or facts, repeated without critical review and now accepted without question. There is a deep psychological need in the community to believe in stability no matter what the facts or data tell us, in Australia this manifests itself in the “best economy in the world” themes we hear so often. The reality that is unfolding though is diametrically opposed to those broadly accepted beliefs about the future , this reality is not shaping up as some diluted middle path, it is shaping up as a crisis of gargantuan proportions.
Fraud infects every level of the Chinese economy, every single sector is impacted , for example nearly all the steel traders who hold nearly $400 B in debt face imminent collapse
http://in.reuters.com/article/2012/06/07/china-steel-loans-idINL3E8H53R620120607
The wheels are falling off and this fact/data based reality will flow through to resource economies like Australia very quickly.