From Warren Meyer (Coyote Blog):
The totalitarianism that is, depressingly, so admired by the US intelligentsia is just going to lead China into the abyss. Already we can see bubbles emerging due to the state’s forced mispricing of key economic inputs, from capital to oil. The burden of spending on triumphalist projects like super-bridges and mega-buildings and Olympics and high speed trains is going to start appearing over the next few years.
Here is my prediction: The Chinese are going to have a bubble burst that will rival any such economic explosion that we have seen in the last century. I have been looking at the situation and by a number of metrics, the bubble is already huge. I would bet against China, but the problem (as with all shorts) is timing.
5 comments:
My son is over there now. He sees many echoes of the '80s when everyone thought that the Japanese were 12 feet tall. He sees a lot of state sector companies run by dogmatic bureaucrats. When your labor costs are under $1/hr and those of your competitors are 10 or 20 times higher, you don't have to be a genius to make a profit. Double the value of the yuan and suddenly they aren't such great geniuses anymore.
That being said, they have a lot of natural advantages - their people are hardworking, crime is low, welfare dependency non-existent. Although they have some small minorities, for the most part there is no racial strife or hereditary underclass. Every bike repairman is under the impression that he could own a car company (because all the founders of car companies owned bike repair shops not too long ago.) In the US, a tremendous amount of energy and capital has to be directed toward security caused by the existing of a (mostly racial) underclass - nailing down every park bench, all sorts of armed guards, burglar alarms, etc. and this creates a drag on civic life. In China , a "bicycle lock" is something that goes between the spokes to keep the wheels from turning - the bicycle is just left in the parking spot, not chained to anything. You can imagine how well this would work in any US city.
K
I sent this to my son and this was his reaction:
"I enjoyed that very much, couldn't agree more. Any major economic calamities will likely be put off at least until the next major party congress next year."
K
All that is true. In the end, a centrally planned economy is unsustainable. But China is so big that it can go on for generations.
Possibly, but as we saw in the Soviet Union and are seeing now in Egypt (and ALMOST saw at Tiananmen) , it call all fall apart quite suddenly and it is almost impossible to know when that will happen - it could be in 20 years or 50 years or it could be tomorrow.
K
Of course, they could always start a war or two to distract the masses.
Anon.
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