September 2, 2015

china won't be buying us anytime soon

I know we more discuss free markets rather than finance markets here, but bear with me, as the freedom message rings out loud and clear from this column drawn off Yahoo's finance page by Rick Newman.

It's amateur hour in China

This is the next superpower? You’ve got to be kidding
Investors began to think stocks were close to a peak, so they sold to lock in profits. Not what the government was expecting. The government tried to stem the selloff by enacting stimulus measures, instituting new rules and even preventing some institutional investors from selling. Authoritarianism displaced capitalism.

and just like Pravda when the latest 5 year plan failed:

China’s government has now reverted to the ultimate absurdity: Blaming critics of the markets’ performance for the whole fiasco.

and, noting that our GDP/capita is seven times' China's:

That gap might widen rather than narrow if China keeps trying to force-feed economic growth while American capitalism continues to rely on market forces and innovation.

but enough about China:
Western markets also tolerate short sellers and others who bet against stocks because it serves as a check on the system: When there’s money to be made by stocks going down, it forces better diligence among those betting stocks will go up. Abuses? Sure. But unleashing market forces in every direction—not just the one you want prices to go in—generates confidence that prices will gravitate toward an equilibrium based on reality.

Tolerate? Hell, they get their own TV show....

We’ve got plenty of problems here—including our own variety of political ineptitude—but at least we let supply and demand determine most prices. When China’s leaders let that happen, maybe it will be time to worry.

Let's hope! Senator Sanders certainly thinks we can't choose our own products, or prices... please nominate him!!! Let freedom reign, and rain its benefits widely.

Posted by nanobrewer at 11:36 AM | Comments (4)
But Keith Arnold thinks:

I read an article last night - and I'd include a link if I could remember where it was, but somewhere reputable, I'm sure - in which the writer said he hoped the Chinese government continued with their economic shenanigans, for three reasons:

(1) Devaluing the yuan would reduce the value of America's debt;

(2) The commensurate reduction in the cost of Chinese goods would mean Walmart would have a lower cost of goods to sell, and could either reduce the price passed on to consumers, or increase the number of hours given to employees, to make up for the reduction recently, which was in turn caused by their new $15/hour minimum wage; and

(3) It would continue to force a correction on the Dow, which is currently hyperinflated; few American investors realize that a Dow today at 15,000 is equal to about 5,000 in real money. The inflated value comes from the Fed pumping Monopoly money into the marketplace.

In other international financial news, I see that ISIS has announced production of gold dinar coin money and has eschewed the use of fiat money. Now, if only it was based on wealth they were producing and not just stealing and extorting...

Posted by: Keith Arnold at September 2, 2015 12:23 PM
But johngalt thinks:

Oh, great. Another black eye for the sound money movement. I can't wait to hear what the newsprint peddlers do with that unfortunate coincidence.

Posted by: johngalt at September 2, 2015 2:35 PM
But jk thinks:

I need a time frame to decide how much to disagree with DJIA's being 5000 when denominated in "real money." Civil War gold? 1912? 1950? 2010?

Posted by: jk at September 2, 2015 4:26 PM
But johngalt thinks:

You're right. Usually these statements include the phrase "in 19xx dollars" or something to that effect. So by "real money" does the writer mean, before Nixon took silver out of the coinage, or before FDR took us off gold, or before the Fed was invented? All three would produce, it seems to me, a "real money" value far lower than $5000.

I'll take a guess that he means since the start of QE - The Original Series.

Posted by: johngalt at September 4, 2015 1:47 PM

April 28, 2012

A New Down

After promising not to "spike the football" by "trot[ting] out this stuff [bin Laden's killing] as trophies" President Obama's re-election campaign is now spiking the football. Fair enough, I say. But the "game" of leader-of-the-free-world isn't over. China's fear-society now offers "quarterback" Obama a chance to score another touchdown.

"You must see to the bottom of this," the activist said. "Even though I am free, my family ... are still in their grasp. While I was there, they were repeatedly harmed. Now that I'm gone, I can only imagine how it has blown up."

Chen's rescue appears to have been timed to coincide with U.S.-China discussions on human rights this week. His case has attracted global attention.

It was easy enough for the President to say "yes" when his defense secretary told him, "We have found Osama bin Laden and planned an operation to capture or kill him. May we proceed?" Let's see if he has the loins to tell China, "Protect your citizens from their government."

Posted by JohnGalt at 4:18 PM | Comments (5)
But jk thinks:

Big topic.

I am of course appalled at the human rights abuses of China. But I do not wish for the United States -- certainly under this Commander-in-Chief to play world police here.

Perhaps the President could welcome the Dalai Lama against China's objections or refuse to visit certain places there. I could appreciate a statement of sorts.

Yet, I believe ultimately in the liberating power of trade and economic freedom. We're not going to do regime change on our bankers and best customers. Let's let trade work its magic.

Posted by: jk at April 29, 2012 12:04 PM
But johngalt thinks:

Regime change is not called for, just an "I disagree" from the President of the United States. A "Tear down this wall" sort of statement, in the spirit of the "power of the solidarity of the free world." Think we'll see it from President Obama? Me neither.

Thanks for weighing in. The topic is discussion worthy.

Posted by: johngalt at April 29, 2012 2:12 PM
But johngalt thinks:

And it can't just be ignored - the dissident, Chen Guangcheng, is a refugee on U.S. soil ... our embassy in Beijing.

Assuming it has Chen, it is inconceivable that the United States would turn him over to the Chinese authorities against his wishes, said current and former U.S. officials.
Posted by: johngalt at April 29, 2012 7:47 PM
But Keith Arnold thinks:

And a dozen years ago, I had thought it inconceivable that the United States would turn Elian Gonzalez over to Cuba - much less take possession of him at gunpoint. If those "current and former U.S. officials" mentioned include either Janet Reno or the current Secretary of State (who, not to rub it in or anything, happens to be married to the former President who oversaw that fiasco), it's very conceivable, and not even Vizzini would call it otherwise.

Posted by: Keith Arnold at April 30, 2012 12:46 AM
But jk thinks:

Two things.

One: All hail Brother Keith, the undisputed King of the allusion! I am unfit to handle your backup tapes, my friend.

Two: jk will be travelling for fun this week and needs to rethink his position; I clearly underestimated where we are. I meant every word I typed but need to contextualize this is in the Walter Russel Mead view.

Last fall, the Obama administration pulled off a diplomatic revolution in maritime Asia -- the coastal and trading states on and around the Asian mainland that stretch in an arc from Korea and Japan, down to Australia and Indonesia, and sweep around through southeast Asia to India and Sri Lanka. Via Meadia has been following this story closely; it is the biggest geopolitical event since 9/11 and, while it builds on a set of US policies that go back at least as far as the Clinton administration and were further developed in the Bush years, the administration's mix of policies represent a decisive turning point in 21st century Asian history.

Posted by: jk at April 30, 2012 10:01 AM

December 1, 2011

Oh My!

No, it is not April Fool's Day. Nor was I perusing the magnificent Onion.

No, the WSJ Ed Page actually carries a piece from SEIU thug boss and most frequent White House guest Andy Stern. And I know I have a reputation for hyperbole. But I am serious: Stern claims the free market has failed us and that we need central planning like...wait for it...China.

While we debate, Team China rolls on. Our delegation witnessed China's people-oriented development in Chongqing, a city of 32 million in Western China, which is led by an aggressive and popular Communist Party leader--Bo Xilai. A skyline of cranes are building roughly 1.5 million square feet of usable floor space daily--including, our delegation was told, 700,000 units of public housing annually.

Meanwhile, the Chinese government can boast that it has established in Western China an economic zone for cloud computing and automotive and aerospace production resulting in 12.5% annual growth and 49% growth in annual tax revenue, with wages rising more than 10% a year.

For those of us who love this country and believe America has every asset it needs to remain the No. 1 economic engine of the world, it is troubling that we have no plan--and substitute a demonization of government and worship of the free market at a historical moment that requires a rethinking of both those beliefs.

There's plenty more and I suggest you read the whole thing. Contra Tom Friedman, Stern does not really even do a "yes but they do murder all but first born babies and occupy Tibet and incarcerate those who would do Falun Gong exercise in the park,,," No, it is really a full-on Walter Duranty cheering session for central planning.

UPDATE: James Pethokoukis did not seem to care for it either...

Posted by John Kranz at 2:47 PM | Comments (1)
But Keith Arnold thinks:

What's not to love? China has one union, and everyone's a member. Even children, convicts, and political prisoners. It's Card Check on steroids.

Of course, it means ignoring the recently increasing labor unrest, an economy that's shakier than a Mexican space shuttle, and a built-in inability to collectively bargain for wage increased. But like J.R. Ewing once said, once you give up your integrity, the rest is a piece of cake.

Posted by: Keith Arnold at December 1, 2011 4:26 PM

January 26, 2011

Chump in Chief

Yesterday, Rush Limbaugh brought to light a deep insider insult to Obama and America in general during the recent state dinner for China. Chinese-American pianist Lang Lang closed the program with a solo of "My Motherland," supposedly a simple Chinese song. The problem is, that it is actually a Korean War era anti-American anthem well known to the Chinese populace at large. Nicholas Eberstadt, writing for AEI's "The American" explains fully:

"My Motherland" is not a "Chinese song" in any ordinary meaning of the term. Instead, it is a Mao-era propaganda classic: the theme from "Triangle Hill" (Shangganling), a film in which heroic Chinese forces fight, kill, and eventually beat Americans in pitched battle during the Korean War.

"My Motherland" epitomizes the "Resist America, Aid [North] Korea" campaign that Beijing embraced during and after the Korean War. It celebrates Sino-American enmity. The gist of the tune can be seen in its lyrics (see the Wikipedia translation):

When friends are here, there is fine wine
But if the wolves come
What greets it is the hunting gun.

(Two guesses who "the wolves" are.)

"My Motherland" is still famous in China; indeed, it is well-known to practically every Chinese adult to this very day. Unfortunately, this political anthem and its significance were evidently unknown to the many members of the administration's China team--the secretary and deputy secretary of State, the assistant secretary of State for East Asia and the Pacific, and the National Security Council's top two Asia experts--who were on hand at the state dinner and heard this serenade. Clueless about the nature of the insult, they did not know to warn the president that he would embarrass himself and his country by not only sitting through the song, but by congratulating Lang Lang for it afterward.

To be fair to the POTUS, The Refugee and nearly every American would have been equally clueless. But assuming the program was pre-published and approved, someone at State should have caught on.

Eberstadt goes on to explain the implication of this incident for the future of Sino-American relations. The Refugee cannot do it justice - you'll just have to read the article for yourself. Very enlightening.

Posted by Boulder Refugee at 11:43 AM | Comments (4)
But jk thinks:

There were suggestions early on that the outrage was whipped up by Falun Gong supporters. I certainly have not followed this closely and am disinclined to distrust the AEI too much, but I have some concerns on this one...

Posted by: jk at January 26, 2011 12:40 PM
But johngalt thinks:

Corroborated by this Singapore news site. "Chinese web users are acclaiming pianist Lang Lang's choice of tune for a White House state dinner given in honour of President Hu Jintao - a patriotic theme song from an anti-US war film."

I think that Eberstadt's point might be that, perhaps, the president's China team should have at least one person intimately familiar with Chinese culture.

Thanks for blogging this BR. I heard it from KOA's Michael Brown (heckuva job, Brownie) this week and meant to look into it.

Posted by: johngalt at January 26, 2011 2:38 PM
But Boulder Refugee thinks:

My initial analysis was that Obama was merely being played for a chump, as the post states. Upon further reflection, I wonder. Obama is many things, but dumb is not one of them. Maybe I'm inventing a conspiracy, but I don't discount the possibility that this was Obama taking his American Apology Tour from Europe and the Middle East to Asia. What better way to "reach out" to China and absolve our sins than a subtle message that all Chinese and no Americans will understand? Perhaps the only people being played for chumps here are Americans by our very own Dear Leader.

Posted by: Boulder Refugee at January 26, 2011 4:39 PM
But johngalt thinks:

Why does "everyone" always insist that President Obama is so wise and smart and cool? Oh yeah, it's Bush's fault.

Posted by: johngalt at January 26, 2011 7:44 PM

December 2, 2010

Funny Money

Michael Ramirez nails it again.

Posted by JohnGalt at 3:32 PM | Comments (2)
But Keith Arnold thinks:

Clearly faked. Obama's not bowing.

Posted by: Keith Arnold at December 2, 2010 4:31 PM
But johngalt thinks:

OK brother Keith, here's one just for you.

Posted by: johngalt at December 2, 2010 9:10 PM

September 19, 2010

Got to Break Some Eggs to Make an Omelet

Mao Zedong, founder of the People's Republic of China, qualifies as the greatest mass murderer in world history, an expert who had unprecedented access to official Communist Party archives said yesterday.

Forty-five million on four years! That Hitler fellow was an underachiever.

This from an review of a new book on "the great leap forward" (they do do PR okay).

[Frank Dikötter's] book, Mao's Great Famine; The Story of China's Most Devastating Catastrophe, reveals that while this is a part of history that has been "quite forgotten" in the official memory of the People's Republic of China, there was a "staggering degree of violence" that was, remarkably, carefully catalogued in Public Security Bureau reports, which featured among the provincial archives he studied. In them, he found that the members of the rural farming communities were seen by the Party merely as "digits", or a faceless workforce. For those who committed any acts of disobedience, however minor, the punishments were huge.

State retribution for tiny thefts, such as stealing a potato, even by a child, would include being tied up and thrown into a pond; parents were forced to bury their children alive or were doused in excrement and urine, others were set alight, or had a nose or ear cut off. One record shows how a man was branded with hot metal. People were forced to work naked in the middle of winter; 80 per cent of all the villagers in one region of a quarter of a million Chinese were banned from the official canteen because they were too old or ill to be effective workers, so were deliberately starved to death

Dikötter points out that this almost (45M vs. 55M) the number of people who died in WWII.

Yet capitalism is evil. Walmart* employees have to pay for their own health care. Hat-tip: Instapundit

Posted by John Kranz at 12:19 PM | Comments (0)

May 14, 2008

Chinese Hegemony?

An opinion piece written in the Wall Street Journal by Mark Helprin on Tuesday, May 13 2008 urges Americans to not take our military superiority for granted. He sites a number of statistics regarding China’s rapid GDP growth and its ability to spend significant resources on military hardware in the coming years. His solution is for the United States to roughly quadruple our military capabilities including aircraft carriers, other combat ships and F-22 aircraft. While Mr. Helprin is no doubt more knowledgeable than Your Humble Blogger, this Boulder Refugee feels compelled to disagree with his pining for the launch of a new Cold War. The reasons are numerous.

The Chinese GDP growth rate is unsustainable – While some economists predict that Chinese GDP will equal the US by 2026, John M. Berry of Bloomberg News makes a pretty good case that this is highly unlikely. With China’s current GDP at $1.93 trillion and a growth trend of 11% (9% real, 2% inflation) and the US GDP at $11.73 trillion and a historic growth rate at 5.5% (3.5% real, 2% inflation), it would take 35 years for the math to add up. However, as Berry points out, sustaining 11% average growth over 35 years is almost impossible. At some point, the economy is so large that it is impossible to increase productivity that much. As we learned from the Soviet “experiment,” foreigners trying to keep up with the General Jones’s will go bankrupt.

The world is still MAD – “Mutually Assured Destruction” still defines traditional military clashes between titans. Unlike some crazy mullahs, the Chinese have no death-wish. While the US may still have significant technological superiority, we’re not spoiling for a fight with the Chinese, nor are they interested in a direct military entanglement. Even if one accepts the straight-line projection of military power that Helprin submits, it will be an unimaginably long time before they had such overwhelming force such that we would simply give up without a fight.

We’re not in it alone – As the recent Japanese consideration of starting a nuclear weapons program demonstrates, the Japanese would never allow a Chinese hegemony. They would join the arms race. So, it is not just our GDP that China must eclipse. Tally Japan to our side… and South Korea… and Taiwan… and Australia… and India.

Chinese range of motion – China’s desire for influence seems largely confined to Asia (although this is an opinion from the Refugee’s very limited perspective). Although China could cause trouble in the region and enable rogues around the world, it’s hard to imagine that China would risk a direct confrontation with the US over Thailand or even South Korea. Taiwan maybe, but the Chinese know the price would be huge. (Side note: an Obama administration might change Chinese calculus vis-à-vis Taiwan. They know Obama would never go to war over the ROC.)

Inevitable social change – Chinese society cannot remain unchanged as the economy skyrockets. The Chinese have historically been strong entrepreneurs. As the middle class grows and demands more freedom, the communist government cannot keep the freedom genie in the bottle forever. Once out, it’s out for good. The emergence of a middle class also lessens China’s advantage of cheap, abundant labor.

One must also remember that Mao unified a regionalized China with different languages and customs. A Balkanized China is not an unthinkable scenario. Internal evolution, or even revolution, is a far greater threat to the central government than US military intervention.

Finally, China is an ecological disaster in progress. Those chickens will come home to roost within the next two decades in the form of social discontent and costly clean-up.

Central planning – No government planners can ever keep up with market changes the way a more capitalistic system can. Despite the efforts of our government to implement ever more onerous regulations that hamstring American business, we are still light-years ahead of China. China has figured out how to steal secrets and mass-produce cheap knock-offs, but has yet to prove that it can create even a modicum of innovation.

Does anyone remember MITI, the Japanese Ministry of International Trade and Industry? In the 1980’s, pundits and politicians alike shouted that the US needed such an agency to facilitate similar financial-manufacturing partnerships and long-range planning. Japanese-style 25 year plans were all the rage. (This Refugee even bought into the hype and took a Japanese language class.) Although Japan has some notable successes (e.g., Toyota), This Refugee believes that is more a result of our execution problems (e.g., the auto industry) than the success of MITI. Contrary to projections at the time, the cumbersome Japanese model could not keep up. (Similar argument applies Germany.)

This Refugee won’t dispute that China will become an even more significant power in Asia and maybe even another super power. However, there is no need to panic and quadruple our defense spending now; we would only be creating soon-to-be-obsolete weapons at a time when we are not threatened. Chinese culture is famous for having a patient perspective that encompasses generations while westerners reputedly can’t think past the next news cycle. Ironically, time is on our side. This is one case where we can out-wait them.

Posted by Boulder Refugee at 10:56 PM | Comments (1)
But jk thinks:

I want to welcome Boulder Refugee to ThreeSources and applaud his inaugural post. There used to be a great joke about Colorado Governor Dick Lamm, who loved these gloom and doom extrapolations. The joke was that he called his son's pediatrician in panic, noting that the baby had doubled in size in six weeks -- Doctor, at this rate the child will weigh 40 tons by 2017!!!

I'm more worried about China's having a significant economic retraction which would hurt the US and could derail the movement to openness that economic freedom has brought.

Posted by: jk at May 15, 2008 10:25 AM