Monday, June 13, 2011

First It Was the US, Then Iceland, Ireland and Greece. Is China Next?

America's prophet of fiscal doom, Nouriel Roubini, is warning that China now faces a "meaningful probability" of a hard economic landing.   Roubini came to prominence by warning of the US housing bubble and a global fiscal meltdown.

China's problem?  Excessive infrastructure investment that now represents 50% of the People's Republic's GDP:

"There is a meaningful probability of a hard landing in China after 2013, "   he told a financial conference in Singapore.

Roubini said investment was already 50 percent of gross domestic product. Sixty years of data had shown that over- investment led to hard landings, he said, citing the Soviet Union in the 1960s and 70s, and East Asia before the 1997 financial crisis.

"I was recently in Shanghai and I took their high-speed train to Hangzhou," he said, referring to the new Maglev line that has cut traveling time between the two cities to less than an hour from four hours previously.

"The brand new high-speed train is half-empty and the brand new station is three-quarters empty. Parallel to that train line, there is a also a new highway that looked three-quarters empty. Next to the train station is also the new local airport of Shanghai and you can fly to Hangzhou, "  he said.

"There is no rationale for a country at that level of economic development to have not just duplication but triplication of those infrastructure projects. "


Deno said...

The entire world is headed over the next few years for a massive hyperinflationary event and a devastating depression after that will take the US to 3rd world status which will take the Americans generations (if ever) to come out of. While China and India will be hit hard during this coming hyperinflation and world wide downturn they will come out of it as the new economic superpowers and world leaders.

The west (Europe and North America) will see our power and influence massively diminish as the rest of the world (rightly) blames us for the coming depression that will make the 1930’s look like a picnic.

This coming hyperinflation (that has already begun) was guaranteed to happen the moment on Aug 15 1971 Nixon took the US and because of the Breton Woods Agreement of 1944 the rest of the world off the gold standard into a fully fiat (socialized money) monetary system.

What we are about to experience over the next few years is the death of socialized (fiat) money, not the failure of capitalism.

With the coming death of the fiat monetary system so will the nanny state (social programs) die a messy death leaving 100’s of millions newly impoverish North Americans to their own devices just when they will need government help the most.

The connection between fiat money and the nanny state was always there. You could of never had Socialist liberal democracies (Canada, Sweden, Germany, etc) survive over the long term without a fiat (the ability to create or print money out of thin air) monetary system to pay for bloated governments

. The problem with a fiat monetary system is they will ALWAYS collapses into a hyperinflation event which destroys the middle class and creates a huge wealth transfer from the many (middle class who does not own any precious metals) to the few (the banking elites who own most of the gold and silver.) This has happened many times throughout human history and we are about to live through it again.


The Mound of Sound said...

I'm not entirely convinced about your cataclysmic views on monetarism. There has already been an enormous transfer of wealth to the ultra-rich. Three decades of Middle Class income stagnation in the face of massive increases in productivity are the proof positive of that.

It's curious that the same "socialist liberal democracies" you single out have best weathered the Wall Street meltdowns and remain the healthiest economies in their respective regions.

The global meltdown, to my understanding of it, was driven by deregulated "casino capitalism" rather than monetary policy. In either case our societies today are becoming destabilized and unrest is spreading. Welcome to what some are already calling the "century of revolution."

Steve said...

I have what many would call a useless degree, its in History. So all I can do is draw conclusions about what factors made the world the way it is now. If history were ever to repeat itself I expect people like myself would be in high demand. Some suggest the reason this has never happened throughout history is that people are paid mucho donaro to not see evidence.

My take on this is much like Jim Morrisons, "I hope to have a lot of kicks before the whole shithole goes down". The shithole has gone done innumerable times in human history, and I belove we are only one of the cycles, yep there have been advanced human civilizations a couple of times before ours. No matter even in our own history we can document con men taking over th whole economy and bringing it down, and that were we are and our pols should just say so. So whats going to happen, well we have built a huge house of unsustainable cards in North America, and we will take the biggest hit. But the good news is that in twenty years it will all look like a good lesson. See WW2.