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January 22, 2013

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Very interesting presentation, Emil.

Just curious, in Chinese mythology, Russian mythology and American mythology what is the symbol for corruption?

After witnessing events over the past couple of decades, any analysis of the world's banking activities being conducted "out in the sunlight", need to have a factor of maybe $2 out of every $3 being lost to corruption.

Emil,

This is not meant to be personal, but only meant to make a point.

The corrupt head of Countrywide Home Mortgage made $500,000,000 during the past decade.

I was a tad shy of that amount. How about you?

Excellent work, Emil. Add in social unrest, the corruption of the communist party, growing nationalism in the standoff with Japan, Vietnam, etc., pollution and popular anger about it...and we live in interesting times.

Here is a ten minute video that reinforces the concern of a housing bubble in China.

I think I may give up on html code.

Here:http://youtu.be/pngdQo205fM is a ten minute video that reinforces the concern . . .

The deserted streets in the video reminded me of downtown Phoenix on evenings and weekends.

So China accomplished in 10 years what it took Phoenix 100 years to do.

That's progress, right???

My profound thanks once again to Mr. Talton for the fine opportunity afforded me. His generosity and guidance are surely appreciated.

One of the links was duplicated (my fault): here is the blow-up showing Chinese components of GDP courtesy of The Economist:

http://media.economist.com/sites/default/files/images/2012/10/blogs/free-exchange/contributions.png

Here is the link documenting Hong Kong banks' exposure to mainland China:

http://twitpic.com/71krv9

And finally, here is the omitted first Foreign Affairs link:

http://www.foreignaffairs.com/articles/138449/lynette-h-ong/indebted-dragon?page=show

Mr. Talton wrote:

"...growing nationalism in the standoff with Japan..."

IMHO it's all about oil:

http://www.eia.gov/countries/regions-topics.cfm?fips=ECS

Isn't the historical pecking order in the far east:

Japan
China
Korea
Vietnam
Laos, Cambodia, Thailand
and the rest.

The only reason Japan holds it's spot is because of it's Uncle named Sam.

Didn't Japan attack us and all the British interests in the far east, because we and Britain were going to cut off their oil, rubber and other war supplies?

I hope they'll hold off for about ten years while we wrap up our new wars in Africa.

So many continents and not enough time to kill/destroy/birth new democracies.

What's a super power to do????????????

PUNT

From the Dragons flaming mouth (and in China I am a dragon)
Countries come and go but the 5000 (now 5002) people that run the world stay in control.
“The good news is that the species at greatest risk is industrial man.”

AzRebel, that was part of the reason for Japan's attack of the Pacific Fleet. They wanted to neutralize the American threat while they advanced on Malaya and the Dutch East Indies. They wanted natural resources, which did include oil and rubber, since the U.S. declared an embargo on Japan. The U.S. had been a major supplier of oil to the empire.

Very interesting piece Emil. No doubt the heavy investments made by Hong Kong financiers will have ramifications in London (the global financial center). To what extent is my question and will this impact American interests due to the complex globalization of financial institutions?

Aside from that, I now know the etymology of "draconian" and "dragon". However, was Draco not a real ruler in Greece? Thus, not a character of mythology? Or did I read that part incorrectly?

The economic locomotive engine that the financial community currently looks to to pull the global economy out of its doldrums is largely a house of cards?

jmav, The industrial/technological/military/free market financial baron driven plan will keep enriching the 5002 while povertizing the rest until the planet becomes a red ball of fire.

Interesting gathered up and organized article of mostly known previously available quoted data. I would have liked a little more rabble rousing verbal emotion tossed into the blog bowl.

Oil, It occurs to me that one can look back to Sinclair for more about how we got here.

AZREB, left you note 13 at the MLK blog

I recently heard China's government referred to as a kleptocracy. I thought that was amusing.

cal, I was not familiar with Sinclair’s book ‘Oil’. I did see the 2007 movie based on the book ‘There Will Be Blood’. Here is a trailer link: http://youtu.be/f3THVbr4hlY

I understand that the movie was nominated by several leading publications, Rolling Stone, Chicago Tribune etc. to be the best film of the first decade in the 21st century.

Kleptocracy. I like it.

That is exactly what we have been doing. Setting up new kleptocracies in the world modeled after our own.

Sinclair had a great voice but was ignored by the critics.

"There will be blood" that's what I thought after I saw Benson's political cartoon with Obama the fifth president on the Mountain.

AzRebel, Japan's place in the "historical pecking order" has been displaced by China, which now has a larger GDP than Japan and promises to grow larger than that of the U.S. in years to come, once it graduates into a fully developed consumer market. After all, there are more than a billion inhabitants.

http://www.forbes.com/sites/kenrapoza/2011/10/15/chinas-cash-position-swells-to-record-high/

Cal Lash, most information is "previously known", though I dare say not to you personally. That applies to most journalism (which this isn't) and particularly, to news analysis and commentary (which this is).

An original interview with Chinese officials was not forthcoming (though it still would have been a "quote" had it in fact been available), nor do I have a network of agents in place, or access to restricted state archives.

But it's nice of you to call it "interesting".

I like to think of this column as a combination of news analysis, open-source intelligence, warning, and conversation starter. That may be overweaning, but not unrealistic as a goal to shoot for.

If you're simply looking for blood and thunder, there is plenty of that to be found on the Internet. You won't get empty bombast from me, however much you call for it.

phxSUNSfan, there are two schools of thought as to the possible ramifications of a Chinese economic meltdown.

The first, I dub the "tsunami" theory: this views the phenomenon as an earthquake generated in China, causing large and destructive waves to hit major Asian (regional) economies; but by the time those waves reach the United States, far away, they have lost most of their energy.

The second theory, which I am more inclined to consider (though I stress that I am by no means decided on the matter), is that financial and commodities markets act more like repeater stations in an interlinked communications web; the strength of the original waves may be amplified or attenuated in the course of transmission, in somewhat unpredictable (at least to me) ways; and the wave is likely to travel around the world more than once rather than travel unidirectionally and with increasing weakness.

I'm simply not sure how loads of hot money sent to the United States, along with an appreciating (?) dollar and kneecapped commodities prices will affect the U.S. economy.

Could this actually be good for the U.S. economy, providing additional capital while decreasing production costs?

Could decreased commodities prices instead result in deflationary price drops, wage decreases and layoffs, and a vicious circle of these?

Could inflationary pressures be triggered by all that hot money flowing in?

Would China feel inclined to cash in any substantial portion of its Treasury securities?

Then, as I suggest, there are the financial aftershocks, which may or may not be the most serious.

My point is not to offer the last word, but to suggest that the problem is potentially more serious than many would like to think.

?

phxSUNSfan, the Latin for dragon (or serpent) is draco, and the Greek (rendered in the Latin alphabet) is drakon. The Greek word comes from a root which means "to gaze keenly".

Exactly how the Athenian legislator came to be called Draco is an excellent question, but one which I cannot answer at the moment.

cal, I believe that my comment above is misleading, not worded very well. The movie, ‘There Will Be Blood’ is based on the book, ‘Oil’ by Upton Sinclair.

In Buddhist tradition the dragon’s symbolism represents the quality of power, dominance of the sea; therefore it is hidden. Dragons hold power of complete communication. Tigers represent unconditional confidence, disciplined awareness. The tiger is dominant on land.
The story of Crouching Tiger, Hidden Dragon is Taoist in origin; it relates a virtue in concealing ones strengths or combative talents as to take others off-guard.

Cal Lash wrote: "Sinclair had a great voice but was ignored by the critics."

The Jungle received critical and popular acclaim, and has also been described by the FDA as "the final precipitating force behind both a meat inspection law and a comprehensive food and drug law."

Also well received critically and popularly was the Lanny Budd series of novels (the third, Dragon's Teeth, won a Pulitzer Prize in 1943), which "attempted to trace the history of the United States from 1913 into the Cold War through the eyes of the fictional Budd, an anticommunist with socialist sympathies".

http://books.google.com/books?id=rvP8qEFuwdUC&pg=PA769&lpg=PA769

Just an addendum to my comment to AzRebel above:

Note that China has a population of roughly 1.3 billion, or four times that of the United States. If per capita consumption in China reaches a level only half as high as that in the United States, then its GDP would still be twice as large.

No wonder, then, that international corporations fawn over it and -- being the power behind the throne of American politics -- put an end to the annual debate over Most Favored Nation trading status (a debate in which China's police state brutality was regularly brought before the public and congressional eye):

"Clinton had been the subject of heavy lobbying by American business interests and his economic advisers to continue China's trade privileges. With China now the world's fastest growing economy the United States exports $8 billion a year there, which sustains up to 150,000 American jobs. Many major American businesses see even greater potential in Chinese markets, expecting China to become a massive purchaser over the next decade of the phones, electronic gadgets and thousands of other products made in America."

"I think we have to see our relations with China within a broader context" than simply human rights, Clinton said, adding that the link between rights and trade was no longer tenable. We have reached the end of the usefulness of that policy," he said.

http://tech.mit.edu/V114/N27/china.27w.html

This was in 1994. Far sighted, aren't they? All of that crap about benefiting the American consumer with lower prices, was just an excuse to build a new consumer society there which would provide an unprecedentedly larger end market for their products.

I will always consider Clinton and his administration as the traitors who handed over vital ballistic missile technology to China under the guise of helping Motorola access cheap Chinese missiles to launch the Iridium satellites.

Another example of American leaders selling out their country for personal gain.

China gets brought up to speed on the latest US missile technology and we get a worthless satellite phone system.

What a great trade.

Emil, All of that crap about benefiting the American consumer with lower prices, was just an excuse to build a new consumer society there which would provide an unprecedentedly larger end market for their products. Yup, I think you have hit the nail.

I think China’s economy is more like a paper tiger with gold teeth.

There was a timely story in the Business section of today's New York Times headlined "Suit Hints At Behavior By Bankers In Bubble". Excerpt:

On March 16, 2007, Morgan Stanley employees working on one of the toxic assets that helped blow up the world economy discussed what to name it. Among the team members’ suggestions: “Subprime Meltdown,” “Hitman,” “Nuclear Holocaust” and “Mike Tyson’s Punchout,” as well a simple yet direct reference to a bag of excrement.

Ha ha. Those hilarious investment bankers.

Then they gave it its real name and sold it to a Chinese bank.

...the documents suggest a pattern of behavior larger than this one deal: people across the bank understood that the American housing market was in trouble. They took advantage of that knowledge to create and then bet against securities and then also to unload garbage investments on unsuspecting buyers.

http://dealbook.nytimes.com/2013/01/23/financial-crisis-lawsuit-suggests-bad-behavior-at-morgan-stanley/

Of course, this doesn't directly address the China issue today. But it does suggest a pattern of behavior by bankers that might still be relevant to the current bubble...

U.S. exports to China were $100 billion in 2011. U.S. GDP in 2011 was $15.1 trillion. That means U.S. exports to China represented just 7/1000th of one percent (0.007) of U.S. GDP in 2011.

http://export.gov/china/doingbizinchina/index.asp

Yet, "By 2020, China‘s middle class is expected to account for around 45 percent of the population, or approximately 700 million people."

North Korea threatening the U.S. with nuclear weapons. Just what someone like McCain needs to start talk about a new war and preemptive strike. I don't think the North Koreans realize they are dealing with Republicans just as crazy as they are...only difference is that our weapons can actually reach their military installations.

http://www.npr.org/blogs/thetwo-way/2013/01/23/170122496/north-korea-threatens-nuclear-test-targeting-u-s

Sinclair, Not enough in my opinion and some other really old folks I know.

Sinclair was highly influential in a time of progressive reform. Sadly, many now question why we need gub'ment, clueless about life before, say, federal meat inspections.

Now theres some dangerous words "progressive reform "

A quick correction: $100 billion is roughly 7/1000 of $15.1 trillion, but in converting to percentazges one needs to multiply by 100. So, U.S. exports to China are actually 7/10 of one percent of U.S. GDP.

From a sheer size of economy point of view, China is the head honcho in the region.

From an ass-kicking point of view, the Japanese still hold sway over the Chinese. (Due to what the Japanese did to China in WWII and due to the big lap dog Japan still has at it's beck and call - U.S. Pacific Fleet.)

$100 billion in exports to China.
$400 billion in imports from China.

How much you want to bet that when China's middle class reaches 700 billion, the above numbers will read:

$100 billion in exports to China
$400 billion in imports from China.

The minor difference between the US and China is that in their system of government, they could snap their fingers and make their middle class disappear over night.

At least in our Kleptocracy it will take a few more decades for them to make our middle class go extinct.

There is still a middle class. I think not.
just rich, poor and poorer!

UPDATE 1:

I still expect major problems in the near term in China because of an economic crisis stemming from the collapse of its housing bubble.

However, this may not happen as soon as I thought. From a current Bloomberg news story updating that (note the reference to "housing slaves"):

"The volume of residential property sales in China will rise this year, driven by improved funding to developers, Fitch Ratings said in a Jan. 29 research report. . . . Loose monetary policy will drive housing prices and sales up in the near term, Hong Kong-based Jinsong Du, Credit Suisse Group AG’s head of property research, wrote in a report Feb. 18."

http://www.bloomberg.com/news/2013-02-19/china-housing-slaves-helping-property-rebound-mortgages.html

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