Empty Factories Join the Empty Cities
It could be that economies like ours and China’s are displaying early indications of deflation. Not good.
China emerged from Maoism with a sure-fire business model: High quality labor sold dirt cheap. It couldn't lose, in the short term.
But it was also inevitable that the Communist owners/managers would screw the pooch. The demographic nightmare that they created by edict was by itself enough to doom them.
The problem with civilization, regardless of economic system or government is that civilization is authoritarian. Civilizations, nations, empires... they don't last, because leaders of these polities lead in the interests of the leaders and thereby create instability. The institutions of civilization are authoritarian, from the law to the economy and everything else in between.
This authoritarianism drives competition instead of cooperation. A problem noticed by both Aristotle and Plato in their thoughts on markets, though they differed on how to deal with the issue. And competition is itself inherently destabilizing and creates a spectrum of problems that simply can not be solved through institutions or hierarchies of authority. This is because these problems arise FROM the use of authority. From the willingness to force others and groups into compliance against the individual or group's clear interests.
In fact this authoritarianism is the whole point of civilization... a way of living together in which layers of authority are used to distill the effort, talent, and wealth of civilized society into a few hands. And all such systems inevitably create the instability that destroys them.
So, sure China is on the upswing. But China is using hierarchies of authority... that is what civilizations do. That mean China will also face exactly the same problems that every other hierarchical system of authority faces.
We have about 12,000 years of history now of the failures that result from using systems of hierarchical authority. China is in a good position now... but it will fall victim to the same dissipation that you so clearly despise from the West.
A view I share, oh by the way.... even as a citizen of the USA. On the other hand, it's probably a mistake to think that you can toss everyone in the West into one basket and figure you are being in any way accurate. If that is what you are going for instead of just biased rhetoric.
Talking about the 'doom loop' all read the new story about Craftsman Tools ( u remember sold at sears ), they tried to rebuild the factory and remake the famous brand, spent $50M USD in Texas, couldn't get employees, couldn't get product materials ( to standards ), they just closed up and quit.
Congratulations on covering a subject few dare to do because of the corrupt influence the CCP has over much of the media, business and governmental interests. Yes, China and it's people are in a precarious position, moving forward. They are extremely challenged by demographics and a command control system that is losing control. I believe you're most salient point is "This raises fears of a Japan-style deleveraging leading to potentially years of slow growth. Deflation, of course, makes those debts even bigger. This limits China’s easy options." I see all of this, similarly, developing in China, though currently in the early innings. I also agree that the flooding of cheap Chinese Goods will have an effect in our country on deflation. No one currently is talking about deflation, but there are a number of metrics that are lining up for that distinct possibility coming down the pike. And of course, this will be to the detriment of the US middle working class.
The lau bai jing people of China and the New Federal State of China deserve better.
The Bush family is hurt most by this news. So sadz. :(
I'm curious (and a bit terrified) about what happens when a country with 1.4 billion people reaches rock bottom.
Very much enjoyed
Mercantilism to emerge as the “solution?”
The BOSTON TEA PARTY was not about Tea, it was about "Opium being dumped on the Colonys by UK"
The USA colony's knew well what Opium was doing to china and wanted no part of the USA women having to become whores.
So they dumped the "OPIUM" into the sea and that pissed off the "East India Company" ( original CIA corporation ), and the rest is history, that you aren't taught
1871 UK London took ownership of DC, because Lincoln couldn't repay the civil-war debt, afterward they silence Lincoln, who was bitter about the terms.
Assuming this is correct, does it make China more or less likely to start a war?
In 2008, the Chinese government allowed itself to be convinced by its Western counterparts that Keynesian style government spending was the correct 'solution' to the financial crisis. Since then, it has engaged in substantial deficit spending, and has to an extent printed money to finance this. The bill for all this money printing has now arrived, as the resulting asset price bubble in the real estate market seems to have finally popped.
However, at least to our knowledge, this spending did not go into subsidies for manufacturers. In fact, the manufacturing sector has not been 'hot' for at least a decade; uncollateralized loans were hard to get. The hot money flowed into sectors like real estate and crypto instead. Moreover, until very recently nominal interest rates in China charged to corporate debtors, while still low, never dropped under 5%, with rates during those years closer to 10% for most private sector borrowers. Very few manufacturers are state-run companies, and besides, the share of the economy held by state-run companies has been declining for decades, with zero job creation coming from that sector.
Nor were mortgage rates particularly low for that matter. Certainly in real terms they were much higher than in, say, the United States. Moreover, minimum down payment was always 30% for your first property and 50% for your second one. This is in stark contrast to, say, the US real estate bubble prior to 2007. Instead, the money driving the bubble was ultimately coming from all that government spending.
A crash was always inevitable. As you say, they will no doubt print some more money to paper over the worst of the consequences, but this time it looks like the government is not going to be able to kick the can down the road as it did in times past. Which is just as well.
What is more problematic is the restoration of general business confidence. To its credit, the government has openly signaled its willingness to implement changes. Thus far these however remain for the most part platitudes and the business community remains skeptical. If there were real change, confidence could be restored quickly. If not (which is more probable), then it will be a slow drawn-out process. We shall see.
Be that as it may, not all is doom and gloom. Our take on the situation from an Austrian perspective is here: https://austrianchina.substack.com/p/chinas-economy-the-good-the-bad-and-the-ugly-pt1
Coming out of WW2 USA was the only country on earth with its manufacturing still operational, meaning everybody on earth had to buy USA shit
Prior to WW2 USA was an AG country, where 90% lived on the farm, and the harelips were not know about much other than FORD made auto's all in black
by happenstance post ww2 USA was last man standing but shortly thereafter CIA brought in +2,000 nazi homo scientists called 'operation paperclip' to create CIA, NSA, NASA, CDC, WHO, UN ... all Rockefeller babys
By 1960's the USA was being mind fucked by CIA via mk-ultra, and hollywood mind fuckery, by 1970's the USA went bankrupt, and had to sell its children as sex slave to saudis to get them to accept USD fiat paper toilet paper money, ergo the "PEDO DOLLAR" was born, that last 50 years until now, and today the SAUDI's no longer want USA kids that are all full of fentanyl, meth, and crack
I doubt that youth unemployment will play a role in any Chinese invasion plan of Taiwan anymore than such concerns affected the Russian Federation's SMO in Ukraine.
Most of the USA was poisoned long ago, say the tannerys around Boston, and the naval shipyards
Heavy industry like manfuacturing and mining base metals was killed in USA long ago, and like virginity in a whore house it aint' coming back;
Like the story I posted above about "Craftsman Tools" trying to make a come-back, even with $50M and their first target was just to re-manufacture the simple open-ended wrench, nobody can cast anymore, simple tasks like polishing grinding the cast like 99% of parts destroyed, the gave fucking up, that was in Texas, were the only people who would even to the work were Mexicans, but even they couldn't to the repeat quality.
Sure there was a day in USA for machining, and its GONE
Today its all CNC, and you see the crap they're turning out, just little better than 3D printing sure its exotic looking
American zombies on meth, fentanyl, and crack don't want to work and employers don't want them near the factorys, so GOV puts them all on UBI, and gives them free drugs to hurry up and die.
Case in point texas again the new TSMC factor, $200M USD, and US-GOV paid a lot of it to build a factory and this isn't even 4nm, its like a 12nm old-school, they can't find anybody to work, even the chinese in area will NOT work 24/7 like they do in TAIWAN, and sleep on site, and live next to the fab and be on call 24/7/365.
So they have to bring Taiwan engineers to Texas to run the FAB, but eveybody hates living in Texas, because outside the FAB all the white, browns, and Black are ASSHOLES
So the TSMC factory in Texas is FUCKED
Another well written article. I hope somewhere along the lines. People begin to see that these types of events don’t play out well for anyone. Anywhere. Keep up the good work Peter.