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All the signs coming from the economic data show that China is in big trouble

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posted on Jul, 19 2013 @ 07:47 AM

By Paul Krugman

All economic data are best viewed as a peculiarly boring genre of science fiction, but Chinese data are even more fictional than most. Add a secretive government, a controlled press and the sheer size of the country, and it's harder to figure out what's really happening in China than it is in any other major economy.

Yet the signs are now unmistakable: China is in big trouble. We're not talking about some minor setback along the way, but something more fundamental. The country's whole way of doing business, the economic system that has driven three decades of incredible growth, has reached its limits. You could say that the Chinese model is about to hit its Great Wall, and the only question now is just how bad the crash will be.

Start with the data, unreliable as they may be. What immediately jumps out at you when you compare China with almost any other economy, aside from its rapid growth, is the lopsided balance between consumption and investment. All successful economies devote part of their current income to investment rather than consumption, so as to expand their future ability to consume. China, however, seems to invest only to expand its future ability to invest even more. America, admittedly on the high side, devotes 70 percent of its gross domestic product to consumption; for China, the number is only half that high, while almost half of GDP is invested.

How is that even possible? What keeps consumption so low, and how have the Chinese been able to invest so much without (until now) running into sharply diminishing returns? The answers are the subject of intense controversy. The story that makes the most sense to me, however, rests on an old insight by the economist W. Arthur Lewis, who argued that countries in the early stages of economic development typically have a small modern sector alongside a large traditional sector containing huge amounts of "surplus labor" - underemployed peasants making at best a marginal contribution to overall economic output.


So the proverbial verb is about to hit the fan.... Now lets see who wrote this Article

Paul Robin Krugman

Paul Robin Krugman is an American economist, Professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, Centenary Professor at the London School of Economics, and an op-ed columnist for The New York Times. In 2008, Krugman won the Nobel Memorial Prize in Economic Sciences for his contributions to New Trade Theory and New Economic Geography. According to the prize Committee, the prize was given for Krugman's work explaining the patterns of international trade and the geographic concentration of wealth, by examining the effects of economies of scale and of consumer preferences for diverse goods and services.

edit on Sun Jul 21 2013 by DontTreadOnMe because: shorten quotes, ex tags IMPORTANT: Using Content From Other Websites on ATS

edit on Sun Jul 21 2013 by DontTreadOnMe because: Starting a New Thread?...Look Here takes pride in making every post count. Please do not create minimal posts to start your new thread.If you feel inclined to make the board aware of news, current events, or important information from other sitesplease post one or two paragraphs, a link to the entire story, AND your opinion, twist or take on the news item, as a means to inspire discussion or collaborative research on your subject.

posted on Jul, 19 2013 @ 07:57 AM
reply to post by maddy21

Paul Krugman is a dumbass federal government shill! u listen to anything he says is a waste of what is between your ears.

if china is in economic trouble, well then they just need to reclaim the 1 trillion+ dollars theyve loaned to the U S of A.

i only saw the headline of this post and clicked on it to say this. and there it was at the top "paul krugman"


posted on Jul, 19 2013 @ 07:58 AM
reply to post by maddy21

China has been falling into economic crisis for years now. I think Mr. Krugman is a little slow on he jump.

More recently, China has been haunted by little things like using lead paint in products, and the "MADE IN USA" brand. I don't see their situation improving anytime soon unless they come up with a real brainstorm.

Sad to say but they are not the only country enduring a worsening economic hardship.

posted on Jul, 19 2013 @ 08:40 AM
Big Trouble in Big China?

This is not exactly news, but the detail in the text here is very interesting indeed.

posted on Jul, 19 2013 @ 09:04 AM
Deny ignorance?
China are starting to slip, overstretched to keep their economy buoyant.
If they slow down so will the whole world.
They cant recall debt because nobody has any money

It had to happen

posted on Jul, 19 2013 @ 09:12 AM
reply to post by maddy21

Krugman is a hack. He's a big government, deficit spending cheerleader. Policies he advocates for have only served to bury this country deeper in debt.

His arguments have been picked apart time and again by many people, including Dr. Ron Paul

posted on Jul, 19 2013 @ 09:22 AM
reply to post by seabag

That is as maybe (about Krugman) but what he is discussing has been obvious for years to pretty much anyone that has any understanding of economics.

It is a situation all BRICS nations will have to face up to - indeed all newly industrialised nations will have to face up to this at some point in their development.

posted on Jul, 19 2013 @ 09:23 AM
China does seem to have some serious issues coming in the not too distant future. I'd done a thread about some of this recently myself and came to learn how China has a bubble all it's own at about the same time. Our Bubbles started with Internet Tech and the .Dot Com implosion and then moved on to the traditional core of American economics by blowing out real estate.

China is facing a Commercial investment bubble among other things, and as the OP says, indeed, they have their own dim days coming down the road. The problem I see is simple. In the past, the world has seen plenty of economies rise and fall. Boom and Bust. It's happened large (Soviets) and small (Zimbabawe) alike. What hasn't generally happened in recent history is seeing no one standing half way strong while others crash. It's not nice to have every major power on Earth in dire economic trouble at once;

This could get ugly when nations soon realize the phone ringing isn't offers of assistance, but requests for it ...and that bad experience is shared in capitals across the world.

posted on Jul, 19 2013 @ 09:26 AM
reply to post by Wrabbit2000

There is a bit of hope in that nations like Qatar have a slush fund for investment standing at around $500 Billion. The problem is that they don't want to invest anywhere at the moment because they won't get any returns!

posted on Jul, 19 2013 @ 09:41 AM

Originally posted by Flavian
reply to post by seabag

That is as maybe (about Krugman) but what he is discussing has been obvious for years to pretty much anyone that has any understanding of economics.

It is a situation all BRICS nations will have to face up to - indeed all newly industrialised nations will have to face up to this at some point in their development.

The thing Krugman isn’t taking into consideration is that unlike the US of A, China has no significant foreign debt so any collapse of a bubble could be easily weathered.

The only reason I attacked Krugman personally rather than his points was because Krugman is consistently unreliable; he gets it wrong more often than not.

edit on 19-7-2013 by seabag because: (no reason given)

posted on Jul, 21 2013 @ 04:27 AM
Agree with Wrabbit. It's the global picture that makes the situation that much more precarious. China is in trouble in the sense their growth has come at massive amounts of investment that cannot be unwound orderly should there be a crisis. Their investment dollar is creating an escalating diminishing return on economic growth. Even if they have surpluses on tap elsewhere, if they have to pull from those wells, it might have major impacts somewhere else.

The OP is an unusual break from Krugman's usual optimistic view of economics. Maybe he is starting to wise up finally and concede there is more wrong in the global economy that could launch some kind of fresh global economic crisis (though the last one was never resolved) and he might be preparing his readership in a way so that when something does break, he will be able to claim he was aware of it prior.

posted on Jul, 21 2013 @ 04:45 AM
reply to post by Flavian

Qatar has been investing good enough on the Anglo-American strategy of War. From Libya to Syria.

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