Dollar to Be 'Discarded' by World: China Rating Agency

Originally posted by Johnze
reply to post by MrXYZ

 

Considering Chinas escalation in manufacturing weapons, do you not think it will stave of said impending economic crisis with war?

War is only profitable for the defence industry. It costs government HUUUUUUUGE amounts of money, something they simply can't afford if they're facing debt issues.

And attacking every country that owes you money isn't a long term solution. Money rules the world, NOT weapons. That's why the US are losing ground as THE superpower. Their military is strong, but their economy is in shambles...partly due to wreckless defence spending and the short term deregulation of the financial industry.

China doesn't want a costly war. The only reason the US is in constant wars is because the defence lobby is that strong...they bought pretty much all the politicians. It's NOT profitable for US citizens, only for defence contractors. Just like oil subsidies give NOTHING back to the people, and only make oil companies richer.

Corporations and industries have highjacked US politics to the point where it's now "for corporations by the people" rather than "by the people for the people".

reply to post by MrXYZ


As inflationary as wars are, they are incredibly helpful for bolstering a nations economy. War economies have many many beneficial effects on a country, such as fending off recessions and advancing technology. America has managed to sustain it for the last 60 years. Though it does rely on continualy having an enemy to fight *cough* terrorism *cough*. Obviously theres a myriad of reaons why a nation should never adopt this course of action of course, but you know, it can often be a handy tool.

Not entirely sure where you got your stats on China's debt to GDP but im pretty sure they can easily afford a war, there one of the few nations who can right now.

Originally posted by Johnze
reply to post by MrXYZ

 

As inflationary as wars are, they are incredibly helpful for bolstering a nations economy. War economies have many many beneficial effects on a country, such as fending off recessions and advancing technology. America has managed to sustain it for the last 60 years. Though it does rely on continualy having an enemy to fight *cough* terrorism *cough*. Obviously theres a myriad of reaons why a nation should never adopt this course of action of course, but you know, it can often be a handy tool.

Not entirely sure where you got your stats on China's debt to GDP but im pretty sure they can easily afford a war, there one of the few nations who can right now.

Again...the gains are mostly limited to certain industries. And the wars since 2001 have just made the economic situation worse for the US. Oil prices increased too mostly because of those silly wars.

As for my China stats, plenty of articles. China assesses their debt differentely than the US, mostly, they completely ignore local government debt. That's as if the US only looked at the federal budget while completely disregarding the local government debt...silly!

China will not go bankrupt, but the bubble will pop and they too will face a crisis in the medium term. The only reason the bubble's still intact is that they benefit from a lot of growth and investor interest given how unattractive the West has become.

It's not just about China being able to afford a war, it's more whether or not it's in their best interest. Investors wouldn't like a large scale war because it increases uncertainty and risk...two things investors don't like. If they stop investing, or tone it down a lot, the economic growth can't make up for the wreckless spending of the Chinese governmetn anymore. Take away the economic growth, like in the US, and you know what the end result is.

As for the % of GDP to debt, experts (google it) estimate China's real debt to be around 80-85% of GDP...comparable to Portugal. The only thing saving them is economic growth. The fact that the middle class is expanding rapidly in China will ensure this growth won't end anytime soon...but eventually it will. In the medium term, they will have to face this debt.

reply to post by MrXYZ


Well the IMF estimated China public debt to GDP at around 20% last year. How has this quadrupled in less than a year?

Something else you have bear in mind also about Chinese debt, it is solely in Chinese currency, which as it happens is wholly controlled by the government and I seriously doubt the Chinese state is going to force a run on themselves. One happy quirk of state ran banking.

Originally posted by Johnze
reply to post by MrXYZ

 

Well the IMF estimated China public debt to GDP at around 20% last year. How has this quadrupled in less than a year?

Something else you have bear in mind also about Chinese debt, it is solely in Chinese currency, which as it happens is wholly controlled by the government and I seriously doubt the Chinese state is going to force a run on themselves. One happy quirk of state ran banking.

The way they assess debt in China (and what the IMF basically repeated without thinking) is flawed as it ignores local government debt. It didn't quadruple in less than a year, they just didn't account for the majority of it. Just like the US changes the way they assess inflation rates every time something bad happens. They leave out stuff (like housing) on purpose to "tweak" the results to their liking.

China also doesn't include a lot of results from STATE OWNED companies. Over 80% of state owned companies have debt to asset ratios of above 90%!! If you know anything about economics, you know what happens once growth slows...they will all have to default or be bailed out, like in the US.

Here are more details about it: LINK

And the debt isn't only Chinese currency, they borrow money too from other governments. And even if it only were Chinese currency, it would STILL trash their economy...just like a US default would crush the US economy.

You know what the scary thing is? Not that many people talk about it, definitely not in China. Why not? Because they know if people also start getting worried about China, the entire world will enter a very very long recession, even worse than what we're seeing now. The Western economies can't take more bad news from another front.

How can you exploit that?

China's only way out right now is spending a ton to keep the economy growing at the rate it currently is, at least long enough until the West recovers. They're already failing a bit as growth is slowing...mostly because their largest buyer markets (the west) are pretty much broke. By artificially stimulating the economy like that, they will have some spectacular growth rates in the short to medium term...so invest in China. But at the slightest sign of trouble you should run for the hills and hedge your investments. Why? Because China won't come out with any really bad news until it's too late. They will try to suppress this as long as they possibly can. They KNOW they need growth to keep the house of cards standing...bad news would demolish it.

China has one advantage though, a growing middle class who might start spending more now that the west can't afford it any longer. They can fill that gap.

In the US, the middle class has been systematically robbed for over 40 years. The massive redistribution of wealth to the top 1% and richest corporations now bites them in the ass. The very people who could stimulate the economy buy spending more, can't. The MAJORITY doesn't have the money to stimulate the economy through consumption like in the past, and the richest people invest where returns are currently greatest...in Asia, and NOT in the US!

If you were holding US bonds for millions, would you be inclined to accept more dollars if you heard this ?



Or how about this kind of denial ?



Would you accept delayed payment from this guy ?

The US are no longer producing anything but red tape ... you can't live of that for ever, real skills and real products are what people pay for, they pay for things that make a difference for themselves.

Printing money is not going to work for ever.

reply to post by MrXYZ


Dont really think it will be a problem for China, any public debt they do have will no doubt be manageable.

www.economist.com...