Is China’s Goose Cooked? And Other Bedtime Stories

Economically, China needs a powerful recession to get rid of businesses being kept alive by loans. Politically, China can’t afford the cost of unemployment. The re-emergence of a dictatorship in China under President Xi Jinping should be understood in this context. China is trapped between an economic and political imperative. __ Cooking Its Own Goose

China’s Goose is Cooked

China’s huge and growing “debt mountain” is unsustainable. China accounts for half of global debt since 2005, and Chinese debt has been increasing dramatically in the last few years.

Non-performing loans and bond defaults are mushrooming — especially in the “state owned enterprise” economic sector. Chinese investment is losing its punch, as it requires 3 units of currency to achieve 1 unit of growth. This means that failing enterprises must take out new loans to pay the interest on previous loans. This situation is sometimes referred to as a debt pyramid, or credit bubble.

Without the election of President Trump, China could have limped along for another 4 or 5 years without serious reforms, as its debt mountain continues to build. But with the election of US President Donald Trump, China is in great difficulty. President Trump’s threats to rejuvenate US manufacturing and to meet Chinese tariffs with new tariffs of his own — tit for tat — represent a huge threat to China’s economic (and military) plans.

The Chinese economy is experiencing a real and worrisome slowing — slow enough that even defence spending must be slowed. It is generally believed by wise China observers that China will grow old before it grows wealthy, on a per capita basis. The Chinese workforce is already beginning to shrink, as large population cohorts are ageing into the senescent years.

Notice the abrupt dropoff in population as the teen cohorts move into young adulthood.
China’s working age population is dropping off, representing significant problems for the workforce, agriculture, and the military.

China’s economic miracle, like that of Japan before it, is over. Its resurrection simply isn’t working, which shouldn’t surprise anyone. Sustained double-digit economic growth is possible when you begin with a wrecked economy. In Japan’s case, the country was recovering from World War II. China was recovering from Mao Zedong’s policies. Simply by getting back to work an economy will surge. If the damage from which the economy is recovering is great enough, that surge can last a generation.

… China has a massive industrial system linked to the appetites of the United States and Europe. It is losing competitive advantage at the same time that political systems in some of these countries are generating new barriers to Chinese exports. There is talk of increasing China’s domestic demand, but China is a vast and poor country, and iPads are expensive. It will be a long time before the Chinese economy generates enough demand to consume what its industrial system can produce. __ China’s Continued Decline

China and Russia: 2 Nations With Neo-Imperial Ambitions Facing Economic/Demographic Straits

Although both China and Russia find themselves facing serious economic obstacles in their quest for neo-empire, neither nation has toned down its bellicose rhetoric or violent acting-out on the international stage. Russia is refining the accuracy and stealth of its nuclear missile forces, and China is attempting to build its own ability to project military force far beyond its borders.

Russia faces a severe reduction in its ethnic Russian population over the next few decades, especially in its working age cohorts. China’s demographic situation is not nearly so severe, although the impact of a shrinking workforce will put a painful squeeze on many of the CCP’s ambitions.

Innovation and productivity are both relatively poor in China/Russia, and entrepreneurial opportunities are restricted to the few well-connected persons at the top of these corrupt societies. In the face of shrinking foreign investment and reduced technology transfer from overseas, neither nation can expect to escape from the existential hole their respective governments have dug for their societies. Massive misallocation of resources into their corrupt military and propaganda sectors only aggravates the long term problems for these misfits.

Back in the US, Trump Attempts Radical Reform

The greatest fear of the American media, academia, and the Deep State, is that Trump might actually succeed in bringing about a much needed economic remodeling and rejuvenation in the US. Thus the deranged hysteria which dominates American media outlets, university campuses, and Deep State sleepers deep inside multiple government agencies and departments. And yet for all their efforts, these reactionaries are panicking and making mistakes that are likely to come back to haunt them.

Meanwhile, chief executive officer Donald Trump continues to follow his basic plan — to drain the swamp, kill the parasites, and create conditions for profitable commerce and job formation to return to the US.

The U.S. tax system has undermined capital formation by taxing productive savings and investment several times at high rates. The proposals to greatly reduce the corporate tax rate and to expense investment (an immediate write-off) will do much to make the United States internationally competitive again. These tax changes, along with a large reduction in individual tax rates that are above the long-run revenue and growth maximizing rates, will spur growth. The House Republicans have proposed a controversial border adjustment tax to fill a projected revenue hole from the tax rate reductions. It may be illegal under the World Trade Organization rules, and would be unnecessary if greater spending cuts were made…

As has been widely recognized, the United States has been suffering from a huge regulatory drag. Those responsible for producing all of the new regulations failed to do serious cost-benefit analyses and, hence, hundreds of thousands of regulations have been issued in which the costs far outweigh the benefits to the economy. The administration has already begun a rollback of the most destructive regulations, and a concerted effort to get rid of all of the counterproductive ones might add as much as 1 percent to economic growth.

Economic growth comes about from capital formation — the use of more and better tools, and more and higher-skilled labor. The labor force participation rate is at a three-decade low, indicating that, with the right incentives, there are many millions who might re-enter the work force. There are endless true stories about the mismatch between the skills that employers need and what people are trained to do. Too many young people are pushed into college where they take many useless courses — making them, in some cases, less employable — rather than obtaining a tech education or entering apprenticeship programs for which the Swiss and Germans excel. __ Roll Back the Constraints

Don’t Forget Immigration

What the US government could learn from Australia on immigration:

Today, after more than two decades of change, Australia maintains a list of skilled occupations for which practitioners get visa preferences. Applicants for visas must qualify by accumulating points for various characteristics, including competency in English, post-secondary education or certification in a trade, and a history of skilled employment. The emphasis pays off in workers who more quickly integrate into the country’s economy and boost its economic output. According to the Productivity Commission report, the median annual income of Australia’s skilled immigrants is above that of the population in general, while the income of those entering the country under family preferences is below the median. And family-preference immigrants have higher rates of unemployment than the overall population, while skilled migrants are more likely to be employed.

Reformers have tried to move America toward such a system, but opponents denigrate the idea as a violation of “family values.” When in 2007 Republican Senator John McCain and Democratic Senator Ted Kennedy proposed reform legislation that would adopt a skills approach, then-presidential candidate Barack Obama objected, as did Hillary Clinton, claiming that the reforms would separate families. This idea, however, ignores the fact that most immigrants come here willingly, not by force; no other country assumes that when an immigrant arrives, he gains the right to bring over his entire family. Under most skills-based systems, workers who gain entry can bring their spouses and their minor-age children—but not adult relatives. __

Most intelligent and observant people now understand that it was former president Obama’s intent to weaken the US both domestically and internationally. Obama’s intentional degradation of an already corrupt and broken system of immigration is as clear an evidence of his malign intent as any of the dozens of other destructive policies that the former Illinois state senator foisted onto the longsuffering American people.

Useful reading to clarify context and expand mental peripheries:

The Great Equalizer by David Smick
The Accidental Superpower by Peter Zeihan

There are reasons why the US catapulted from a deeply indebted hodge-podge of small new world colonies to the wealthiest nation on Earth in just 100 years (1790 – 1890) — despite suffering a bloody mulit-year interruption in the middle of this growth period (US Civil War 1861-1865). The degree to which the USA represented a radical departure from the traditional way of doing things was reflected in the rapid rise from one of the most impoverished nations to the most wealthy nation on the globe just 100 years after the US Constitution was ratified.

There are four basic guidelines to maintaining [this ascent]: (1) guarantee the rule of law over the rule of personality, group or ideology, (2) keep knowledge open and transferable, while at the same time protect rights to ideas, (3) ensure peace and tranquility, and (4) have a private and transparent venture capital system that will make investments — and reap the benefits from those investments — based on the value of the project not on whether the project is politically well-connected.


And even now, over 200 years since, the “Accidental Superpower” threatens to extend its economic leadership for another century, if necessary reforms are carried out.

Unstable Eurasia Disintegration Alert

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