JoeP
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Ilargi wrote: It’s time to shorten your comments. And we’ve seen enough references to the ultimate history for now.
Triv,
I don’t think your comments are too long – you should see how long some of Ashvin’s fundy comments are at The Diner :woohoo:
…and there is absolutely no censorship there. You should make a visit:
In my previous post, I forgot to say I think Steve’s essay is very thought-provoking…I think it’s a great essay.
wrote: What this means is China is structurally half as productive as the US: to obtain the same unit of output as super-guzzler USA China must burn twice as much fuel. For China to have the same level of goods- output as the US it must double its already staggering fossil fuel waste or reconfigure its energy use infrastructure to be twice as efficient. It is hard to see how the Chinese can do this on top of the massive (mal)investments already made in the capital-intensive sectors.
From Economic Undertow:
Merkel Capitulates, World is Saved, Now What?
Posted on July 6, 2012 by steve from virginia“Here is distributed vulnerability in a zero-sum world: China is as dependent as Greece on outside capital, almost as dependent as the US on petroleum imports. China isn’t support for the world economy, it cannibalizes the world economy instead: petroleum consumption chart is from Jonathan Callahan’s excellent Mazama Science Energy Export Databrowzer (BP Data).”
“boom and bust”…Chinese glut in cement mixers (& other):
From “The Looting of China by the Kleptokapitalist Bourgeoisie Roaders”
Elsewhere , Zoomlion the concrete and industrial machine giant is seeking Rmb140bn ($22bn) in fresh credit, fuelling fears the company is at the centre of a growing debt bubble. Zoomlion only has a market capitalization of $12.5B and is one of the most shorted stocks on the Hong Kong market with over 30% on loan at any one time to short-sellers. This company certainly lives up to its name, we know we have a bubble when a company with a business model like this one can raise just less than twice as much as the Facebook who raised $12.B by selling 12.3% of the company.
Zoomlion has an interesting business model, it is similar in many of ways to Caterpillar, except whereas Caterpillar report falling sales, Zoomlion reports astounding sales growth with a fivefold increase in revenue since 2007. Zoomlion customers sometimes buy ten concrete mixers when they planned to initially by one or two. They have a perverse incentive to buy more than they need because these concrete trucks are purchased via finance packages supplied by Zoomlion.
Then the machines can be garaged and used as collateral to borrow further funds from other lenders. Zoomlion continues to grow while cement sales have plunged. In May, cement output increased 4.3 per cent YoY, down from 19.2 per cent recorded last year. Zoomlion’s new debt of $22.5B buys roughly 900,000 trucks which could produce enough concrete (at six loads a day) to build over thirty Great Pyramids of Giza a day .
Every sector is infected with these kinds of perverse business practices, steel traders used loans meant for steel projects to speculate in property and stocks , it has been common (apparently) for steel traders to secure loans to buy steel then use this same steel as collateral to borrow funds to invest in property development and the stock market. In many ways this is the steel version of the Zoomlion model. A fundamental foundation of any lending market is the ability of the lender to ensure title and guarantee ownership of collateral.
Chinese Data Mask Depth of Slowdown, Executives Say
Money quote:
Indeed, officials in some cities and provinces are also overstating economic output, corporate revenue, corporate profits and tax receipts, the corporate executives and economists said. The officials do so by urging businesses to keep separate sets of books, showing improving business results and tax payments that do not exist.
I’m shocked. 😆
davefairtex wrote: Your estimate of 450B euro losses assumes the 15% of bad loans are total writeoffs. In Ireland, the haircuts applied to loans transferred to NAMA ranged from 40-60%. So you need to cut your estimate in half to 225B, and you’re closer to the range of the other analyst’s estimates.
I’m guessing you are correct. Thanks again for answering a derivatives related question I had a while back. Let’s see, we got the IMF at 40B and Ilargi at 500B…somewhere in the middle is “comfortable” for me.
LG wrote: It involves the use of the United Nations as the governmental arm, use of NATO as the military arm, use of the IMF as the financial arm, and use of the multinational media corporations and the Vatican as the propaganda arm of central control of the planet.
I think the power of NATO is gradually diminishing and this is in part due to the “growth” of the SCO. Russia and China are currently members of SCO with India and Pakistan joining the party soon. That’s a lotta nukes.
Maybe this is a expected precedence of events leading to WWIII
Looks like China is attempting to reflate it’s propery market and it’s working…so far.
Recently from Zarathustra:
China giving up on rebalancing?
New life in China’s property bubble
I guess this is where the half-life thing comes into play. I agree with the following comment to the 2nd post:
campbeln wrote: The AU Gov did the same with the doubling/tripling of the FHB Grant in 2008. The US government did the same with the $7000 HB tax rebate thing-y in 2007/8-ish. Both halted the slide for a number of months, but only ended up waisting government cash by creating a dead cat bounce. China has done the same by allowing for the gaps in funding %ages talked about here this and last week. I’m sure Ireland and the UK played similar games as well.
This is why these things go on far longer than outsiders with knowledge of the situation can fathom; You have 1,000s of highly intelligent (well, highly *creative* at least) policy wonks working feverishness to keep the game going.
This is the nature of things. This will likely result in some measure of dead cat bounce in Chinese RE, but as we’ve seen in Europe, $100 billion Dollars/Euro/etc. used to buy us months/years (AU and US FHBGs). Now it buys us mere hours.
Excellent post Ilargi.
If you think this through, and include Italy ceasing to be a Eurozone emergency fund creditor, with other countries on the verge, you’re left with Germany in the not too distant future paying over 50% of what’s needed to “save Europe”. If the Germans accept that at all (they probably won’t), it will do so only with very stringent strings attached, like a much stronger political and fiscal union effectively run by Berlin. There is zero chance of a consensus for that in all member countries.
What choices does Germany have other than “accepting” the 50% deal? And I mean choices that would not cause a “derivatives event”.
“The EFSF had hoped to sell yuan “Panda bonds” but this may prove hard.”
Sounds like a pretty cheesy name for bonds to me.
RE wrote: Why is it that I remian Fracking Unconvinced that this Fracking Shit will work? Is it just me?
I think Stoneleigh splained fracking why in Get ready for the North American gas shock
Debt Collector Is Faulted for Tough Tactics in Hospitals
Hospital patients waiting in an emergency room or convalescing after surgery are being confronted by an unexpected visitor: a debt collector at bedside.
This and other aggressive tactics by one of the nation’s largest collectors of medical debts, Accretive Health, were revealed on Tuesday by the Minnesota attorney general, raising concerns that such practices have become common at hospitals across the country.
Ash,
Sounds like you get some satisfaction seeing your fellow players “implode spectacularly into a pit of despair”…or am I dramatizing this?
Jack,
In case you haven’t noticed there have been several “moments of friction” here recently between Ash and…well, there’s El G, Ben, and RE…am I missing someone? Of course this is TAE and Ash is always right …and the people I mentioned just must be “misunderstanding” what he is saying – but he clearly understands everything they are saying.
RE,
Enjoyed reading the discussion on deflation/inflation at The Diner. I wouldn’t really call it a debate – did anyone really voice much support towards the probability of inflation? But I think the discussion is really about more than “probabilities”…which is good.
Steve from Virginia,
Great comment – as usual. Unless there is an imposter out there, your comment to the NY Times (Krugman post/article?) was equally impressive.
“Finance creates credit out of thin air”
Yup.
Back to your post here, do you think Spain will “go down the chute” before Portugal?
A couple of good posts from ZH today:
Is The Chinese Stock Market About To Crash?
After reading these, I thought it was peculiar that the word “deflation” was in neither post. Seems to me that both posts point to this.
Then for giggles, I checked out the baltic dry index (stockcharts.com). The $BDI has made an impressive bounce recently…but if you expand the range to a 3yr chart – not so much. Dead cat?
ZPE (zero point energy) – can anyone point me to a good paper on ZPE?
Wiki defines it as pseudoscience? Now is that really fair?Ashvin wrote: The US maintains peace throughout the world with its military might?
Of course not. But what would China do with the equivalent of the US military? Is Darfur an example? Sorry, time to grow up.
Winston,
Help me understand the connection between NWO and Jews. I googled New World Order and didn’t see squat about the Jews except one small bit about the Red Scare. Is this what you are basing the connection on?
Credit Cards vs. Debit Cards: A Comprehensive Comparison
Some checking accounts offer yields on balances that may be dependent on whether the transaction is a debit or credit. The CU I use has a checking account that says you need to use your debit card 30 or more times each month to get a 2.51% APY (but it actually accepts both debit and credit transactions towards the requirement):
Probably remedial reading to many here, but well written:
Gorilla Update #0001:
This looks like a pretty good evaluation of the Greek CDS situation:
Greece Has Defaulted – Which Country In Europe Is Next?
But for now the buck has been passed on to those that issued the credit-default swaps. As mentioned above, the ISDA says that there are approximately $3.2 billion in Greek credit-default swaps that will need to be paid out.
However, that number assumes that a lot of hedges and offsetting swaps cancel each other out. When you just look at the raw total of swaps outstanding, the number is much, much higher. The following is from a recent article in The Huffington Post….
[indent]If you remove all hedges and offsetting swaps, there’s about $70 billion in default-insurance exposure to Greece out there, which is a little bit bigger pill for the banking system to swallow. Is it possible that some banks won’t be able to pay on their default policies? We’ll find out.[/indent]
Yes, indeed. We will find out very soon.
If some counterparties are unable to pay we could soon see some big problems cascade through the financial system.
gezelle,
…”made good” and moved to greener pastures and their Mc mansions elsewhere…
Nice post. The quote above made me think of the the couple my spouse and I are visiting next weekend. in ’05, they lived in a .5M home on an island in SC. Hint – there is an Elton John song that shares this name. Then they flipped to a 1.4M house and this basically became their “retirement plan”. Really, this was all of it. They are both over 50 yrs old. They were really loving RE then. The jumbo loan paperwork was done in ’06 (took awhile to build this huge complicated facility I guess) so I think you could say they bought at the top. They recently rented out the “frog room”. This made me think of the quote I guess. I was wondering if any of the “recent influx” are moving into the McMansions – this would be a positive as far as capacity utilization goes.
The have a shower “on steroids” in one of the upstairs bathrooms. Lots of jets and pressures and knobs. I’m sure it wastes a lot of good water too.
This article is basically an excerpt from Michael Pettis’ most recent newsletter. For those who do not already know – he is regarded by many as an expert on China’s economy:
There is a growing amount of unrepayable debt in China and ultimately most if not all of it will end up on the government’s balance sheet.
The World Bank report apparently doesn’t say, but the consensus has been slowly moving down towards 5-6% annual growth over the next few years. That’s better than the crazy numbers of 8-9% most analysts were predicting even two years ago (and some still are), but it is still too high. GDP growth rates will slow a lot more than that. I still maintain that average growth in this decade will barely break 3%. It will take, however, at least another two or three years before a number this low falls within the consensus range.
Tonite I made the monumentally wrong decision of explaining my new thoughts to my spouse on what may have happened on 9/11 and what side of the fence I was on. My new thoughts were not received very well.
Bluebird,
I can relate – my spouse knows things are “messed up” but has no interest in preparing for what will come. It can be frustrating.
snips:
In 1943, President Franklin Roosevelt acknowledged as much when he signed Executive Order 8926, which stated that, “the defense of Saudi Arabia [is] vital to the defense of the United States.”United States Secretary of the Interior Harold Ickes, several months earlier, suggested to President Roosevelt that the United States be more involved in organizing oil concessions in Saudi Arabia not only for the war effort, but “to counteract certain known activities of a foreign power which presently are jeopardizing American interests in Arabian oil reserves.” That “foreign power” was Great Britain. In fact, there was immense distrust of British intentions in the Middle East, and specifically in Saudi Arabia, on the part of the State Department’s Division of Near East Affairs (NEA). A great deal of this tension and antagonism, however, emerged from Saudi diplomacy which sought to play off the two great powers against one another in the hopes of securing for itself a better deal.
A 1945 memorandum to President Truman written by the Chief of the Division of Near Eastern Affairs in the U.S. State Department, Gordon Merriam, stated: “In Saudi Arabia, where the oil resources constitute a stupendous source of strategic power, and one of the greatest material prizes in world history, a concession covering this oil is nominally in American control.” Adolf A. Berle, one of Franklin Roosevelt’s closest advisers, particularly in relation to the construction of the post-War world, years later remarked that controlling the oil reserves of the Middle East would mean obtaining “substantial control of the world.”
If you trust the figures and methodology used by the authors of China’s $22 trillion time-bomb
China has a debt to GDP ratio of 149%:
Now let’s total up the few trillions we have unearthed. As of 2011, this figure amounted to a tad over $10 trillion! And the ratio of total debt to GDP becomes a more ominous 149 per cent. Mind you, there may be other debts that are obligations of the central government that we don’t know about since reliability of data in China is suspect, to say the least. It is eminently possible that debt is understated and GDP overstated.
Plenty of debt everywhere you look.
Destructive Myths – economic theories:
Jeremy Grantham wrote: You don’t have to be a PhD mathematician to work out that if the average Chinese and Indian were to catch up with (the theoretically moving target of) the average American, then our planet’s goose is cooked, along with most other things. Indeed, scientists calculate that if they caught up, we would need at least three planets to be fully sustainable. But few listen to scientists these days. So, do you know how many economic theories treat resources as if they are finite? Well, the researchers at the O.E.C.D say “none” – that no such theory exists. Economic theory either ignores this little problem or assumes you reach out and take the needed resources given the normal workings of supply and demand and you can do it indefinitely. This is a lack of common sense on a par with “rational expectations,” that elegant theory that encouraged the ludicrous faith in deregulation and the wisdom of free markets, which brought us our recent financial fiascos. But this failure in economic theory – ignoring natural limits – risks far more dangerous outcomes than temporary financial crashes.
Re: previous comment
Commenter Comay Mierda wrote: “…the laws of thermodynamics failed that day and thick vertical steel columns with a melting point of 2700 degrees farhenheit melted in 1200 degree fire. (ignore the countless dust samples taken by scientists that found thermite enriched with silicon for more explosivity)”
As Renée Kathleen Zellweger might say “Comay had me at dust samples”
Mike Krieger Asks Whether September 11, 2001 Is Our Big Lie
Steven Rattner – Lead auto advisor in the United States Treasury Department under President Barack Obama:
“I think it may fall a little bit into the category of things you just kind of don’t want to know.”
New post from Golem XIV:
Propaganda Wars : Our Version – Risk Weighted Lies.What scares the banks is any criticism that goes beyond claims of greed or fraud or even incompetence, and instead questions the system itself. The sanctity and perfection of the system and its right to ‘regulate’ itself, is what they are totally committed to protect. The system is what gives them their status and wealth. Question that and you threaten them where they are vulnerable.
When should a commenter use “Quick Reply”? I googled it, but all I found was something about it turning off formatting. What formatting?
