US Asset Bubbles Crack as Frantic China “Restricts” Outbound Investments

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What happens to prices when the biggest, reckless buyer walks away?

China’s State Council has issued guidelines on what Chinese companies can and cannot acquire overseas. The purpose is to “promote healthy growth of overseas investment and prevent risks.” These risks would be that the $18 trillion of Chinese corporate debt will balloon further, though much of this debt is already going bad, and that it will blow up, triggering a spectacular financial crisis. This is to be avoided.

So Chinese companies have been given priorities, and their efforts to invest in overseas commercial real estate – such as office towers and apartment buildings – in hotels, and in Hollywood will be axed.

What’s on:

The guideline intends to drive the output of China’s products, technology and services, and deepen cooperation with countries involved in the Belt and Road Initiative.

The government will support “eligible” Chinese companies “to make overseas investment and join in the construction of projects in the Belt and Road Initiative.”

These enterprises should take the lead to export China’s superior technology and equipment, upgrade the nation’s research and manufacturing ability, and make up the shortage of energy and resources through prudent cooperation in oil, gas and other resources.

What’s off:

Other investments will be “restricted,” particularly those “against the peaceful development, win-win cooperation, and China’s macro control policies.” These policies are now being implemented to dodge this spectacular financial crisis.

Among those outbound investments and acquisitions that will be “restricted” and that directly impact US markets and valuations are:

  • “Real estate”
  • “Hotels”
  • “Entertainment”




There have already been examples of big deals in the US in these three categories that got scuttled – or that succeeded and the Chinese acquirer is now being pushed to unload the property – because Chinese authorities have been putting pressure on their state-owned banks to curtail lending to fund these overseas acquisition binges at peak prices by Chinese conglomerates. Here are just a few:

Real Estate: In April 2016, LeEco, a Chinese company that had surged out of nowhere, bought Yahoo’s 49 acres of land in Santa Clara, Silicon Valley, for $250 million. LeEco was going to build its global headquarters on it and hire 12,000 people. Earlier this year, LeEco scuttled those plans and pulled back from the US, after China’s state-owned banks had refused to lend it more money. It is now trying to unload assets, including this property.

Hotels: Anbang efforts in September 2016 to acquire Starwood Hotels & Resorts Worldwide fell apart. In June this year, its chairman was detained by the Chinse government.

Entertainment: In March this year, Eldridge Industries said that it had terminated its agreement, made in November, to sell its Dick Clark Productions – the company behind the Golden Globes telecast – to China’s Dalian Wanda Group for $1 billion because Wanda had “failed to honor its contractual obligations.” The state-owned banks had turned off the spigot. This comes after Wanda had bought movie producer Legendary Entertainment for white-hot price of $3.5 billion. Wanda, under pressure from Chinese authorities, has since been unloading a number of it Chinese properties.

China outbound M&A targeting US companies has plunged 65% so far this year, compared to the same period last year, according to Dealogic, “amid growing regulatory scrutiny.” Last year, Chinese companies made $65.2 billion in acquisitions in the US, including HNA’s acquisition of 25% of Hilton Worldwide.

“Since then, regulatory agencies have been reviewing and rejecting an increasing number of transactions,” Dealogic said. This is “an effort to stem capital flight and depreciation of the yuan.” There was also more intense scrutiny in the US, particularly by the Committee on Foreign Investment, which is concerned that Chinese investments may threaten national security.

How big of a deal is this Chinese crackdown on outbound investments for the US?

Chinese firms have acquired $17 billion of just commercial real estate – such as office and apartment towers – over the past two years in the US. And it was concentrated in just a few trophy cities.

In Manhattan, Chinese entities accounted for half of the commercial real estate purchases in the second quarter. This includes the $2.2 billion purchase in May of the 45-story office tower at 245 Park Avenue.

In terms of funding new real estate projects, China ranked Number 1 among foreign investors in US commercial real estate in 2016, according to Cushman & Wakefield. In 2016 alone, China invested $19 billion in commercial real estate projects, with the top three targets being: Manhattan, the San Francisco Bay Area, and Los Angeles.

Chinese money is “transforming LA’s skyline, revitalizing neighborhoods, and inspiring additional investment,” the report gushed in March, concerning LA Downtown’s super high-end condo towers Metropolis, the forthcoming Oceanwide Plaza, and other skyscraper mega-projects funded with Chinese money that have been announced, including a complex with three towers by Shanghai-based development firm ShengLong Group. One of the towers will be among the tallest in the city.

Rumors have been swirling for months about how Chinese authorities are strangling the credit flow to the big conglomerates to curtail their growth and reckless borrowing and speculation, and perhaps force them to shrink. One of the big issues was that these companies were borrowing heavily to buy at the peak of the market, after asset prices have run up into the stratosphere for the past eight years. Chinese authorities are worried about the debt, and a financial crisis, and they’re taking steps to get a grip on the risks.

Now we have the official pronouncements, instead of rumors.

For valuations in the US, this is a killer. China has been a big buyer and a big developer, and prices didn’t matter – the higher, the better, it seemed, on the principle that this is just borrowed money. As the money flow from China is succumbing to strangulation by Chinese authorities, other big reckless buyers supported by reckless state-owned banks may not readily materialize. And then the music stops.

Chinese authorities have a lot of tools to keep their debt construct propped up. The upside is fake stability. The downside is too ugly to contemplate. Read…  So When Will China’s Debt Bubble Finally Blow Up?




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  120 comments for “US Asset Bubbles Crack as Frantic China “Restricts” Outbound Investments

  1. Hiho
    Aug 20, 2017 at 12:59 am

    Good for the chinese. They will show the world how planning and mixed economies beat magical thinking and the invisible hand.

    • Rocky Dennis
      Aug 20, 2017 at 1:20 am

      You do not seem to understand the concept of antifragile.

    • nick kelly
      Aug 20, 2017 at 1:52 am

      Too late. They are by far the furthest out the limb. It’s a question whether the CCP regime and its ‘one percent of one percent’ aristocracy will survive.

      Planned? Along with empty cities, the Chinese built the world’s largest mall complete with a ‘Venetian’ canal a mile long. It never got past 5% occupancy and may be torn down.

      • Cynic
        Aug 20, 2017 at 7:41 am

        I agree.

        About as much wise advanced planning as my bird-dog sniffing the undergrowth.

        The gods mock the plans of men, anyway.

        Always wise to bear that in mind. :)

        • Cynic
          Aug 20, 2017 at 7:44 am

          And although he is the finest of dogs, from an incomparable line, he still doesn’t know what is good or bad fr him to eat.

          Humans are no better.

          If people watched Nature more, they’d understand economics a lot better.

          And our fate.

    • Otto Maddox
      Aug 20, 2017 at 3:10 am

      You’re going to eat those words

      • Meme Imfurst
        Aug 21, 2017 at 6:35 am

        Well….what I won’t eat again, is Smithfield products which the Chinese bought. Tough ham, barely warm it and it shrinks 30%, more fat and bone….not the old Smithfield that is clear. Three times, and all the same junk.

        • Robert
          Aug 22, 2017 at 1:12 am

          It’s their revenge for Spam.

    • Winston
      Aug 20, 2017 at 10:03 am

      “They will show the world how planning and mixed economies beat magical thinking and the invisible hand.”

      How? Magical thinking (garbage models based upon simplistic, garbage theories) and the VISIBLE hand using same (central banks) is what LED TO their and the world’s problems. More of the same only accomplishes what it has thus far, delaying the inevitable bad results which that serious tampering itself laid the groundwork for.

      • cdr
        Aug 20, 2017 at 10:42 am

        Yes, the Chinese made a lot of mistakes by expanding too quickly. Now they appear to be trying to fix the problems they created. Do you want to see over a billion members of the Chinese citizenry devolve into screaming babies who demand fairness or see crazy monetize debt schemes invented to keep the plate spinning, like the ECB is doing with the Eurozone.

        • MC
          Aug 20, 2017 at 4:59 pm

          Uh, can’t be that bad, see the marches in the US, very peaceful, antifa and BLM are the best. Very peaceful and civic minded, talking about things of great importance.

          Our ruling class loves this stuff, all the while we get robbed blind. But at least we will have our civil liberties, oh wait, forgot Google and FB are busy censoring stuff. At least it is hate speech though.

      • RangerOne
        Aug 20, 2017 at 2:13 pm

        Most economists believe they can mitigate crashes in a real economy but no active approach yet has eliminated market crashes and it is arguable that increased interference makes things worse.

        China more than any other government is willing to attempt manipulate all aspects of the market to keep the gravy train going. Governments are okay at short term financial solutions. The problem is you always need 10 more fixes to deal with fallout from your prior fixes. And the longer you prevent crashes it seems the harder you fall when you run out of tricks to prop shit up.

        This is just another trick to prevent the inevitable. It will either make things worse as we all find new ways to prop up assets in the effected markets, or it will cause a correction or worse a crash.

        • cdr
          Aug 20, 2017 at 2:41 pm

          china has kept their stock market from blowing asset bubbles. They do not have negative rates. They are somewhat attempting to control the theft of assets from the country.

          Yes, the empty cities and more were mistakes. The wealth management savings is an open question.

          But, they do NOT have monetized financing of sovereign debt and commercial debt or forced negative rates just to keep the plate spinning a little longer like the ECB. They do not scam the stock markets like the SNB. They do not print money endlessly like the BOJ as financial engineering to repair damage from the prior attempt at financial engineering that nearly bankrupted the country. They are only somewhat like the Fed that supports the globalist effort at low rates, low labor costs, and flexible labor sources at the expense of the 99%.

        • Smingles
          Aug 21, 2017 at 11:23 am

          @cdr

          “china has kept their stock market from blowing asset bubbles.”

          The Shenzen Stock Exchange (A shares) is down 40% from its highs in 2015… that was after it went up 300% between 2013 – 2015.

          And your last paragraph is incorrect in its inferences, and at least part of your facts. The People’s Bank of China is buying stocks– they do it through controlled subsidiaries that are wholly owned by the state.

        • cdr
          Aug 21, 2017 at 2:32 pm

          Smingles,

          Exactly, they are not supporting an elevated an unsustainable equity market. They attacked it by causing a large drop but decided that it need a certain value. They popped the bubble mercilessly.

          Lots of point to them for not emulating the US idea of Fed stock market support. You decide if propping up an asset at a flatish value is a big scam.

    • cdr
      Aug 20, 2017 at 10:04 am

      You could not be more wrong.

      Years ago the Chinese made a lot of money exporting to the world. The cash they earned remained within China. Chinese do not use dollars as an internal currency. Basically, the only way to use the dollars received via trade is to spend them where they are accepted … meaning being exchanged for other currencies or invested in US debt or invested in US assets in the US.

      Wealthy Mandarins, being oligarchs and not different than oligarchs everywhere, stole their share and contrived a multitude of reasons to get their dollars out of China and into the US. They paid any price, even excessive prices, for US assets.

      From a big picture perspective, allowing this means Chinese resources were converted into US dollars, then these dollars were stolen by Mandarins and converted into personal assets outside of China. The theft is occurring over a decade or so, not over a couple of years so it is less obvious to see. China proper is not receiving benefits from the trade of a decade ago as a result.

      This is what they are trying to stop.

      Also,, they have another reason, I suspect. Japan in the 1980s was an export powerhouse. The yen was undervalued and the Japanese used financial engineering to prosper. One scam was Enron financing on a national scale … stock was acceptable collateral for loans and even bank reserves. As stock prices rose, junk collateral replaced real collateral. The Japanese paid massively excessive prices for assets outside of Japan. Laundering 101, but with excessive arrogance … they appeared to believe their own PR about being masters of the universe. It only took a few years for Japan to fail and they are still failing in many ways by trying new monetary scams to prosper once again.

      The Chinese are trying to avoid this problem, too. A massive financial collapse in China would send over a billion screaming Chinese into the world looking for a fix to their problems. Do you really want this?

      • cdr
        Aug 20, 2017 at 10:31 am

        Hiho,

        oops my mistake. I misread your post. We ARE on the same page.

        My apologies.

        Their planning is key to holding China together, even if we disagree with their methods.

      • nick kelly
        Aug 20, 2017 at 11:30 am

        Japan is still an export power house. Look in a driveway near you. Their exports just hit a record by the way.
        It is a far safer more stable society than the US.
        Their debt although large is held internally.
        Almost forgot, they have just passed China as main holders of US debt at 1.3 trillion.

        China makes it to number exporter purely on volume. Germany achieves 93% of the VALUE of China’s exports with about 8% of the workers.

        The other China, Taiwan, has a per capita GDP about three times that of the Mainland.
        If the Chinese Nationalists had won instead of Mao’s Communists China would have become the world’s largest economy decades ago.
        The CCP proclaims itself as geniuses for abandoning Marxism but Mao set China back 40 years.
        At least the Soviet Union made a (sort of) apology for Stalin’s excesses.

      • Bill Shortell
        Aug 20, 2017 at 7:31 pm

        I’m not sure why you say China “made a lot of money years ago. ” Don’t they still have a favorable balance almost everywhere? All of this cash has to find a return. They cannot spread it equally across the globe.

        Japan, as you said, ran into the same problem when they ruled the worlds exports. 8 of 10 of the worlds largest banks in the 80’s were Japanese. They wound up over-investing in markets that they understood, home, and the Asian tigers, until there was a spectacular blow up.

        Pouring investments into areas that do not have enough demand to buy the products is the root cause of cyclical downturns. The inbalance between supply and demand, caused by a concentration of the results of growth in a few hands is the root of instability.

        This is the same pattern, but bigger. Hold onto your hats.

    • no_free_lunch
      Aug 20, 2017 at 12:36 pm

      “Magical thinking” is a result of manias and delusions, caused by mal-investment, which is in turn due to the ‘Visible Hand’ of gov’t. + central banks interfering in free markets. Centrally planned, command economies exert the ‘Visible Hand’, with predictably disastrous results to the economy. This is the economic theory of Socialism, where the State controls the means of production and just about everything else.

      “The enduring lesson of the 20th century is that socialism is a failure, and free markets are a success. But the politicians keep advocating just a little more socialism.” – Milton Friedman

      http://www.investopedia.com/terms/i/invisiblehand.asp

      What does ‘Invisible Hand’ mean [?]

      The term “invisible hand” is a metaphor for how, in a free market economy, self-interested individuals operate through a system of mutual interdependence to promote the general benefit of society at large. It was introduced by Scottish enlightenment thinker Adam Smith in his book “An Inquiry into the Nature and Causes of the Wealth of Nations” (1776).

      http://economictimes.indiatimes.com/definition/invisible-hand

      Definition of ‘Invisible Hand’

      Definition: The unobservable market force that helps the demand and supply of goods in a free market to reach equilibrium automatically is the invisible hand.

      • Bill Shortell
        Aug 20, 2017 at 7:39 pm

        The trouble with the invisible hand come when it slaps people down, instead of infallibly picking the best participants. The hand always finds an equilibrium, but at what cost, after what turmoil?

        The size of the turmoil: a few thousand redundant blue collar workers turning to booze, or millions of people laid off with millions more flowing into no job market…depends on the stage of the cycle.

        This boom is of historic length. Any think the business cycle is a phenomenon of the past?

    • Wilbur58
      Aug 20, 2017 at 1:18 pm

      Wow, a lot of people piled on Hiho, except for cdr.

      Personally, I’m with Hiho.

      Our founding fathers believed in a strong, central government… despite what all the “constitution!” freaks think. You know, those types who have never actually read the constitution (doesn’t take long). There’s a reason why they revised the thing from the early Philadelphia version.

      People who kneel down and pray to “free markets” never understand that they worship monopolies and oligarchies. You need an outside actor who can force society towards better ends than individual profits alone.

      Hiho is correct to say that a hybrid of state planning and regulated markets will make for the healthiest economy. After all, it was this design, thanks to the New Deal, that built the greatest middle class the world has ever known.

      Now today, America is going to “be great again”. Everyone knows that means the 50’s and 60’s. But the sad thing is… we’re trying to be great with policies that are completely contrary to those we had when we actually were great.

      • Gary
        Aug 20, 2017 at 2:23 pm

        Wilbur58, if I may chime in with my two cents:

        I was surprised to learn that the original definition of “free markets” actually was not what most people think. The concept that most people have is that “free market” means “unregulated market”. Of course, such as thing is too absurd to exist (can you imagine what advertisements could claim if there were no restrictions or liabilities???)

        From what I understand, the original definition of “free market” was another way of saying “low rent costs”, since rent is just a deadweight-loss and takes away from productive entrepreneurs (according to Adam Smith, David Ricardo, etc.).

        So, in this respect, Capitalists and Marxists are actually on the same side: against the Feudal Overlord. They will both lose though, like every other pie-in-the-sky salvation.

        [a real-world example would be the diminishing role of the pharmaceutical researcher finding new cures (entrepreneur, capitalist), versus the Big Pharma player that just tries to buy up rights and do wealth extraction, along with other ‘tricks’ (feudal)]

        • Wilbur58
          Aug 20, 2017 at 9:24 pm

          Correct, Gary.

          We’ve all learned from Michael Hudson that “free markets” traditionally meant freedom from rent extraction. Today, it’s an insidious, manipulative fraud that presents the freedom to extract rent (the polar opposite) as an element of personal liberty. Hence why the libertarians are such suckers for it.

          Just as the elderly get suckered into signing their trusts over to personal medical assistants… the libertarians fall for trickle-down economics and its many faces over and over again. It’s sad.

      • kam
        Aug 20, 2017 at 2:42 pm

        Monopolies and oligopolies are the spoiled children of political dirty hands. Look carefully and see how to get access to markets where only a few players control everything.
        You will see government fingerprints everywhere including the Central Bank monopoly on money and credit.

      • no_free_lunch
        Aug 20, 2017 at 5:26 pm

        The Founding Fathers believed in limited (Federal) Government. Power is to be primarily within the states.

        Your statement that “Our founding fathers believed in a strong, central government…” is fallacious and ridiculous; it betrays your left-leaning views and ignorance of historical facts.

        “The truth is incontrovertible. Malice may attack it, ignorance may deride it, but in the end, there it is.” – Winston Churchill

        https://aclj.org/us-constitution/the-bill-of-rights-importance-limited-government

        The Bill Of Rights And The Importance Of Limited Government

        [The] ten amendments list our basic rights and place limits on the federal government. They include the freedoms of speech and religion, the right to bear arms, the right to be free from unreasonable searches and seizures, and an assurance that the powers not delegated to the federal government in the Constitution are reserved to the states and the people.

        The Bill of Rights illustrates that our Founders understood that for personal freedoms to be broad, the power of the federal government must be limited.

        Our nation, however, has moved away from its founding principles, especially during recent decades. Our ever-growing federal government is intervening into more and more aspects of our lives, especially through bureaucratic regulations, and is reducing our personal freedoms in the process.

        U.S. Constitution – Amendment 10
        The powers not delegated to the United States (Federal Gov’t.) by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

        • Wilbur58
          Aug 20, 2017 at 9:33 pm

          Fail.

          Of course some libertarian can only link to a radical right wing evidence for fake facts.

          The Articles of Confederation didn’t create a strong enough central government so our fathers did a do-over. A stronger central government with the power to declare war, peace, make treaties, levy money, and regulate commerce, etc.

          Er, here… I’ll let George Washington take over. And for god’s sake, keep the fake facts away from this fine blog:

          “Sir, We have now the honor to submit to the consideration of the United States in Congress assembled, that Constitution which has appeared to us the most advisable. The friends of our country have long seen and desired, that the power of making war, peace, and treaties, that of levying money and regulating commerce, and the correspondent executive and judicial authorities should be fully and effectually vested in the general government of the Union.

          But the impropriety of delegating such extensive trust to one body of men is evident — Hence results the necessity of a different organization. It is obviously impractical in the federal government of these states, to secure all rights of independent sovereignty to each, and yet provide for the interest and safety of all: Individuals entering into society, must give up a share of liberty to preserve the rest.”

          George Washington (yes, that one)

        • Dan Romig
          Aug 21, 2017 at 6:16 am

          George Washington also declared:

          “If freedom of speech is taken away, then dumb and silent we may be led, like sheep to the slaughter.”

          “Firearms are second only to the Constitution in importance; they are the peoples’ liberty’s teeth.”

          “It will be found an unjust, and unwise jealousy to deprive a man his natural liberty upon the supposition he may abuse it.”

          “The Constitution is the guide I will never abandon.”

        • Smingles
          Aug 21, 2017 at 12:04 pm

          “Our nation, however, has moved away from its founding principles, especially during recent decades. Our ever-growing federal government is intervening into more and more aspects of our lives, especially through bureaucratic regulations, and is reducing our personal freedoms in the process.”

          Reality check. The Founding Fathers lived in an agrarian society where the vast, vast majority of people lived and work on farms.

          It’s 2017.

          The world is about 100,000 times more complicated today than it was in 1776. That requires a more involved government. Period.

          Did the Founding Fathers have to worry about industrial pollution? Clean drinking water? Clean air? Transportation systems? I mean steam engines were JUST becoming mainstream. It was a pre-agrarian society. The industrial revolution changed EVERYTHING.

          I’m not arguing that the heavy hand of government hasn’t become too excessive at points, but to suggest that we could operate in 2017 as we did in 1776 is astoundingly silly.

          I mean when I hear people reference the Founding Fathers and talk about “limited government” in 2017, it’s an immediate turnoff; you pretty much know you’re talking to someone who hasn’t given an iota of critical thinking to what that would mean in the grand scheme of things, and instead will choose to simply defer to their ideologues of choice to make their points for them– in this case, you chose the illustrious legal wing of the Christian Broadcast Network, a veritable powerhouse in the field of US history.

          And it’s ironic that you would quote the ACLJ when talking about individual freedom, in light of the last few years of progress in gay rights… seeing as, you know, anti-gay rights are one of their single biggest fundraising campaigns. Priceless.

          Also that Winston Churchill quote… wow, totally insufferable.

        • JZ
          Aug 21, 2017 at 1:05 pm

          There is NO “correct” amount of gov/market ratio like all human involved affairs.

          No power means nothing (like pollution) can be done.
          Power also means corruption which is the center of the founding principle. To remove corruption is to remove power.

          Correct ratio? Like all religions, there is NO “correct” God.

        • Wilbur58
          Aug 21, 2017 at 2:32 pm

          Dan,

          You’re on a complete tangent. The subject is, did the founding fathers design a strong, central government? Yes, they did.

          But on your tangent, I find it so absurd when people conflate the right to bear arms and revolt against the military with the right to walk through a mall with an AK47.

          If you, Cletus, and Bubba think you can load up and take out drones, F16’s, tanks, scud missiles, etc, knock yourselves out.

          And as for Freedom of Speech, the concept isn’t mutually exclusive from a strong, central government.

          But thanks for playing.

        • TJ Martin
          Aug 21, 2017 at 3:28 pm

          Wilbur58 ;

          re; Your 8/21 2:32pm comment . Agreed 150% . And thanks for posting it saving me the time and effort not to mention the potential wrath that might of occurred if I had .

        • TJ Martin
          Aug 21, 2017 at 3:44 pm

          As for Amendment 10 . May I remind you good sir that the Right has done as much if not more to get around the vague meaning of Amendment 10 as anyone .. going so far as to not only expand and enlarge both the scope , authority and influence of big government under their reign but expanding the office of the presidents authority and reach as well . As an example without naming any names … a book recommend

          ” What We’ve Lost ” by Graydon Carter

          Ironic aint it .. how they’re always the ones complaining the loudest and the most when someone else takes advantage of the very situation they created . Too bad they seem to of conveniently forgotten about another one of their creations . Amendment 25 Article 4

          But back to Amendment 10 .. as with Amendment 2 and many others Amendment 10 is vague and obtuse on the very best of days due to the intentions of those writing them assuming as times and circumstances changed so must the interpretation of those and other Amendments in order to keep these United States current and viable .

          e.g. Change ..tis the genius of the US Constitution and Bill of Rights … its what the Founding Fathers planned for … and its the only healthy way to move forward ( ” That which does not change dies ” ) So my suggestion ? Deal with it .

      • George
        Aug 21, 2017 at 11:07 pm

        WOW!

        So the only reason that the articles of confederation failed is that it didn’t support a strong, central government?

        Amazing, all the founding Fathers showed up in Philadelphia, with one central concept on their minds…i.e. Create a strong central government to rule them all….

        You claim to have read the constitution…
        Have you ever read anything about the pain staking process it took to create the create the US constitution?

        Had the founding fathers foreseen entities such as PAC’s, Lobbiests etc, the ability of central government to obtain the control is does today would have been eliminated!

        To pretend that the founding fathers endorsement of the constitution was an endorsement of big government is a disgrace!!!

        • Robert
          Aug 22, 2017 at 1:49 am

          George is right, though some of the founding fathers, such as Hamilton were more statist than others, and Thomas Paine, who had led the fight for liberty complained, for example that he was aping Britain in his support of a central bank like the Bank of England. Under the Constitution, each state was empowered to print money- but only to the extent it was a certificate for gold or silver, each note signed by two bank officers, and redeemable under penalty of death. The problem was that if someone presented a Maine dollar in Virginia, the only way to prove it was real was to take it back to Maine.
          But the point is that the intent was to retain states rights to the greatest extent possible consistent with providing for a common defense against Great Britain, who came knocking again just one generation later, and providing a framework for national judicial and commercial standards. The extraordinary compactness and simplicity of the Constitution was a testament to their intent to not burden the nation with the sort of Lilliputian shackles of
          Obama’s “Affordable” Care Act 10 times wordier than the Constitution(and passed in violation of it), or a Dodd-Frank monstrosity that was derided as “too big to read.”

        • Smingles
          Aug 22, 2017 at 8:39 am

          “Had the founding fathers foreseen entities such as PAC’s, Lobbiests etc, the ability of central government to obtain the control is does today would have been eliminated!”

          What? They would’ve just eliminated lobbyists. You could have NO central government at all, just state governments, and it would change absolutely nothing about lobbying apart from it being done at the state level, instead.

    • William Ripskull
      Aug 22, 2017 at 4:38 pm

      How many times does this have to fail before you catch on? Japan is a good example where business and government centrally plan their economy. It has been an unmitigated disaster with Japanese debt now exceeding 250% of GDP and climbing (less than 100% starts the red “danger” signs flashing). Nothing government involves itself in ever turns out well. The invisible hand works just fine. Socialism, and anything that approaches Socialism, is a disaster in the works.

  2. Jas
    Aug 20, 2017 at 1:37 am

    Who will live in luxury condo’s if no one can afford them? I get the sense that the end is near, here in San Francisco. Every block has luxury condo’s coming on line, wish there was data on how many sit empty.

    • Shawn
      Aug 20, 2017 at 2:13 am

      What about houses, bought for an insane amount of money, that sit empty? How about some stats on those. I can show you a few streets in SF like this.

    • Gershon
      Aug 20, 2017 at 6:51 am

      In our oligarch-pillaged economy, people simply cannot afford to spend half of their income on rent, while the Fed’s debasement of the dollar destroys their purchasing power and they are taking on more debt just to keep from going under.

      • kam
        Aug 20, 2017 at 2:45 pm

        But, but, but, but…. Your honest government tells you inflation is less than 2% and even with 100 million working age adults unemployed, we are almost at “full” employment.

  3. OutLookingIn
    Aug 20, 2017 at 1:41 am

    “Chinese authorities have a lot of tools to keep their debt construct propped up”.

    1/ They do not owe other countries trillions of dollars.
    2/ Their infrastructure is mostly new and top line.
    3/ They are still the worlds largest manufacturer.
    4/ Their national savings rate is one of the best in the world.
    5/ They are the worlds largest producer of gold.
    6/ Their foreign reserves are still over a trillion dollars.
    7/ It is well founded that their gold reserve is in excess of 20,000 tons.
    8/ The population forms the largest consumer base in the world.

    Compare how some of the G20 countries stack up against those stats.
    Most don’t.

    • Shawn
      Aug 20, 2017 at 2:24 am

      1/ 18 trillion in money printing speaks for itself.
      2/ A lot of bridges to nowhere.
      3/ With an appreciating currency they won’t be for much longer.
      4/ Yes true, should come in handy to bail out all their banks.
      5/ Not sure if that is relevant, perhaps a gold bug here can chime in.
      6/ And falling
      7/ See point 5
      8/ The population is ageing. And with all the economic and financial instability in China, people are going to save, not spend.

      What about inflation, is it a good or bad.

    • Joe
      Aug 20, 2017 at 6:36 am

      Oh, really?

      https://en.m.wikipedia.org/wiki/National_debt_of_China

      And what are your sources for their “20,000 tons” of gold holdings? Reputable links, please, or GTFO.

      • JungleJim
        Aug 20, 2017 at 7:40 am

        While unlikely, the figure of 20,000 metric tons is possible. For years the Chinese have been at or near the top in gold mining but have not exported what they produced. In addition, the Chinese have imported quite a bit from overseas. Those appear to have been primarily private purchases and the government has encouraged the public to do it. The real question is what do they plan to do with the gold.

        The Chinese leaders are control freaks so it is doubtful that they really want to be a reserve currency because of the crap that it entails.

      • Tinky
        Aug 20, 2017 at 7:51 am

        Actually, I defy anyone to find a more reputable source than Koos Jansen, who recently estimated China’s gold reserves at over 20,000 tons, and backs up his claim substantially.

        Here’s a link:

        https://www.bullionstar.com/blogs/koos-jansen/estimated-chinese-gold-reserves-surpass-20000-tonnes/

        • Bobby
          Aug 20, 2017 at 8:30 am

          Yes, the Chinese “domestic” amount of gold held. OutLookIn’s point 7 above is definitely far fetched to think Chinese Gov. owns this much in their reserves unless they steal every ounce from every citizen.

        • Tinky
          Aug 20, 2017 at 8:47 am

          @Bobby

          Yes, there is a distinction, but given that the Chinese government policy is to encourage the accumulation of gold by its citizens, it should be easy to see that what is held in private hands is hardly disconnected.

    • Nicko2
      Aug 20, 2017 at 7:10 am

      1/ They do not owe other countries trillions of dollars.
      —- and who will borrow to China?

      2/ Their infrastructure is mostly new and top line.
      —- low standards and poor building materials means huge upkeep down the line

      3/ They are still the worlds largest manufacturer.
      —- they are tooled for the 20th century, not the 21st. Robots are on the march.
      4/ Their national savings rate is one of the best in the world.
      —- yes….savings of what? Their average household income is $10,000 — population gretying quickly with near non-existent social or healthcare programs
      5/ They are the worlds largest producer of gold.
      —- you can’t eat or wear gold.
      6/ Their foreign reserves are still over a trillion dollars.
      —- China can’t spend most of that.
      7/ It is well founded that their gold reserve is in excess of 20,000 tons.
      — again with the obsession with Gold. South Africa has plenty of gold, how are they doing?
      8/ The population forms the largest consumer base in the world.
      — potentially…..if only they were good consumers and shopped ’til they dropped….which they aren’t…

    • cdr
      Aug 20, 2017 at 10:16 am

      Good list, OutLookingIn.

      You forgot they are a closed society to a large degree. Thanks to this, there are no screaming babies who demand equality, as defined by a bizarre concept of fairness at the expense of the rights of others. It’s a foreign concept there while it’s the daily news cycle here. A civil war in China would end the world as we know it here.

      • OutLookingIn
        Aug 20, 2017 at 11:17 am

        cdr – Thank you.

        Yes closed, only to the degree they want it to be.
        The Chinese concept of time greatly differs from that of the west.
        They think in generational terms, rather than single lifetimes.
        Whereas in the west, very long term planning is a lifetime.
        Mostly its planning to the next pay check. If that!

        Also if you talk to any Chinese about their society, you will ascertain fairly quickly that the individual owes their success to that society. They “know” that the health of the society is directly connected to their own well being and individualism is only tolerated to a certain level, after which its frowned upon.
        Unfortunately the western mindset in the young is opposite.

      • Les Francis
        Aug 21, 2017 at 6:02 am

        Have you spoken to any Chinese people lately?
        I have – I’m married to one. She speaks to her friends – many ex mainland and current mainland Chinese.
        The stories from back home are that “I” everything is changing the Chinese society. Technology is becoming more dominant to the younger generation than respect for their elders.
        Another few years and the Chinese society might be more aligned with western thinking than you could have ever imagined.
        This is of course a real concern to the central government. External risks are in a different category compared to the risks of an uprising of a demanding new generation.

    • Singaporan
      Aug 20, 2017 at 3:35 pm

      9/ Their economy is collapsing.

  4. MC
    Aug 20, 2017 at 1:48 am

    I wonder how long this effort to curb capital flight will last.
    Chinese authorities tried before to curb excesses in their own real estate market, but relented after people took to the streets to beat on their pans. Now Shanghai and Shenzhen “investment grade” real estate has a higher square meter price than San Francisco. The real estate market in so-called Tier 4 cities is on fire.
    The same authorities also tried to curb “industrial overproduction”, especially of heavy industries. Much publicity was given to the closure of some 70’s vintage steel mills and aluminum smelting plants.
    Again people took to the streets to beat on their pans, and again authorities relented: as anticipated by record iron ore exports from Port Headland, Chinese steel production in the first seven months of 2017 jumped 5% to an all time high 492 million tons.

    Of course things this time may be different, but I wouldn’t hold my breath.

    • Les Francis
      Aug 21, 2017 at 6:08 am

      On the two adjacent blocks of land next to my residence a luxury 36 apartment building is ready to be built. The developer is Chinese.
      They have sold 86% of the apartments off the plan.
      A demolition contractor to demolish the existing structures has been engaged, He was supposed to start work in June.
      A building contractor has been engaged. Construction work was supposed to start last Friday. The builder needs to wait for demolition of the old buildings and clearance of the land.
      I rang the developer asking what the delay is.
      Quote : No approval from the finance companies to start work.

      I have a gut feeling the buyers of that 86% of apartments potentially may lose their deposits.

      • Aug 21, 2017 at 7:26 am

        Can you say what city or region you live in? Thanks.

  5. alex in san jose
    Aug 20, 2017 at 1:59 am

    What happens when a “whale” leaves the casino?

    (A “whale” is gambling language for a guy who gambles with huge amounts of money, often to lose, because gambling addiction is a real thing.)

    • Lee
      Aug 20, 2017 at 3:28 pm

      The Chinese offer a unique solution to that problem: go after the casinos and the employees – the whales get the message.

      For more detail see what happened to Australian Crown Casinos.

  6. Alister
    Aug 20, 2017 at 2:04 am

    We don’t have to worry about the Chinese economy. They have been the largest economy for 95% of world economic history…yes the west has had its few hundred years…but it will be back to economy by numbers of people and the Chinese will reign supreme again. China plays a long game and the long game always wins…they follow the art of war. And not to worry about all those empty cities with empty apartments….it’s all part of the plan…when those that are not getting sweept up in economic progress try and rise up the Chinese government will give them each a new apartment and peace will once again reign. What will Uncle Sam give its huddled masses when they have no work, no health care, and no future….

    • Gershon
      Aug 20, 2017 at 6:53 am

      Somebody drank the Kool-Aid….

    • Nicko2
      Aug 20, 2017 at 7:15 am

      Actually, the Chinese government is now granting mortgages to those poor farmers in exchange for their land…. one can see the problems with such a scheme immediately. Firstly, endemic corruption leads to undercutting and skimming of values by middle-men (land-grabbing). Perhaps more importantly, when/if those newly minted urban ‘former-farmers’, flush with $5-10,000 in their pockets hit hard times, they will not have the countryside to fall back on, they’ll be destitute.

      • Frederick
        Aug 20, 2017 at 8:28 am

        That’s everywhere Not only China Look at the percentage of Americans living on farms now compared to during the Great Depression

    • Cynic
      Aug 20, 2017 at 7:38 am

      This time it will be different: ecological catastrophe will over-take them.

      Both at home (which they have abused terribly, as did the West) and abroad -Africa, S. America – where they seek their resources and food.

      No wiser than the rest of us, and heading down the same road.

      Of course, in musical chairs someone is the first to get left without a chair and so eliminated. China has many advantages from its vast landmass and location, and others will be knocked out of the game first.

      But,in the end, the lights and heating go off, and the party is over.

    • R2D2
      Aug 20, 2017 at 10:55 am

      Alister, that’s a good joke. Buying real estate at inflated prices in US, Canada, Australia, and elsewhere doesn’t tell us they have much of a wisdom. These are characteristics of cumpulsive gamblers, rather than wise, deep thinking people and cultures. Chinese strike me more like gamblers at casinos

      There is this 24 hours Starbucks that I tried to go to in order to do some late night work, and every night it is packed with young Chinese playing cards all night till 5:00 AM. Just playing cards, and going outside and smoking. Exactly what a gambler does. A few gamblers get lucky, but generally compulsive gamblers end up hanging themselves after losing hefty money and owing a huge amount of to shadowy characters.

      • alex in san jose
        Aug 20, 2017 at 9:28 pm

        R2D2 – I have two “casinos” (in California this actually means card houses) near me but that was not enough, and a little hole-in-the-wall restaurant called “Buddy’s” or something like that, was just down the street. The sign had a “thumbs up” symbol on it so I called it the “Thumbs Up Bar”. It was just a burgers and fries and beer kind of place that was open really late, so once night I went in because I thought it might be a good place to go with my night-owl boss for a burger and a beer. I went in and it was all Vietnamese people, and they were not too happy to see me. There was that schmaltzy music the older Viet people like playing, and I kind of looked around quickly and then went right back out. It turns out it was really a gambling den, for when you got tired of the other two, legal, gambling dens within walking distance.

        A bit later, a guy got shot in there and that kind of ended the place. It’s no longer there.

        I’ve been in Bay101 and M8trix plenty of times and the clientele is hugely Asian. I don’t know why, but it’s a documented fact that gambling is a huge thing in Asian cultures. M8trix even got into legal trouble for marketing their “services” especially to Chinese people, on Chinese-language radio stations and so on. They took their slap on the wrist and kept on doing it, too.

  7. Truth Always
    Aug 20, 2017 at 2:44 am

    Residential real estate bubble doesn’t seem to be cracking at least in the SF Bay area?

    Is their a way Wolf to find out how many overseas investors / buyers are buying up the houses distinguishing them from the H1B workers who technically are also foreigners but reside here?

    • Anonymous.1
      Aug 20, 2017 at 3:44 am

      “Is their a way Wolf to find out how many overseas investors / buyers are buying up the houses distinguishing them…”

      Plus how many of them are landlords?

    • Aug 20, 2017 at 9:39 am

      Foreign non-resident investors buying homes in the US as investment and leaving them vacant is one of those data points that everyone wants to know. There is no real data on this. Anecdotally, I hear a lot of stories from my broker friends.

      One thing we do know: all major brokerage firms in the US, including Warren Buffett’s Birkshire Hathaway HomeServices (second largest brokerage in the US), are directly marketing US homes in China on their Chinese-language websites. Some of them have sales staff in China…
      http://wolfstreet.com/2017/04/17/warren-buffett-berkshire-hathaway-markets-u-s-homes-in-china-juwai/

      So this isn’t something that is accidental. US brokers are driving this.

      • Gershon
        Aug 20, 2017 at 9:51 am

        As housing becomes unaffordable for locals, more and more municipalities are passing laws that penalize absentee homeowners whose vacant houses sit empty during a time of scarcity. Paris just slapped punitive taxes on empty, “investor”-owned residences and a lot more cities look poised to follow suit. Foreign “investors” are always going to be low-hanging fruit for the tax man and municipal politicians, especially with public anger over unaffordable housing and low inventories on the rise.

      • cdr
        Aug 20, 2017 at 10:23 am

        ” There is no real data on this. Anecdotally, I hear a lot of stories from my broker friends.”

        As mentioned above, Laundering 101. China probably has an exception to rules outlawing cash leaving the country if it involves real estate.

        Think of it as dollars being repatriated to the US. Someday, if those homes are foreclosed on, they will probably go back to being US owned real estate. If owned outright, they will be confiscated by the Chinese govt and sold back to US owners, however this means the dollars will return to China.

        Then again, maybe the Mandarins who originally stole the cash used to buy the home will sell it an any price simply to have legal cash safe in the US.

        You need to add a time frame to your analysis. All things come from somewhere and go to somewhere else. The thing that just happened did not happen in a vacuum.

      • Ambrose Bierce
        Aug 20, 2017 at 11:32 am

        nothing is more embarrassing to an autocratic government than to watch its best people sneaking out of the country (following their money) rich Chinese immigrants or poor Mexicans? let’s build a wall that will help you focus your attention on the real issue. all politics is a diversion.

      • Ed
        Aug 20, 2017 at 2:00 pm

        Might it be more fair to say that U.S. brokers are trying to “catch the wave” or “get in on the action” rather than “driving this”?

        I have been supposing what is driving this is the mass of Chinese looking for safe investments outside of the country. Whether the effort to get money out of the country is due to concern about the capriciousness of the government there or merely garden variety effort to diversify, I can’t say for sure, but I’d hazard “both”.

  8. MD
    Aug 20, 2017 at 3:37 am

    China’s continuing takeover of the world remains a bit of a problem for ‘libertarians’ (ie people who don’t want to pay tax…) and their laughably naiive free-market principles and ideas.

    They appear to be as quiet as a mouse when confronted with the fact that the world’s largest ever centralised command-and-control economy, replete with Stalinist 5 year plans, is spectacularly successful.

    The irony is even more bitter when one considers the fact that these very same ‘free market’ principles have resulted in the hollowing-out of the manufacturing sector in countries which have slavishly followed neoliberal dogma (ie the UK and the USA) and it is consequently the wealth creating by this very sector which has handed China its power.

    Reap what you sow.

    Once you had great factories; now you have coffee shops, tattoo artists, online gambling and real estate speculation.

    The rest will seen to be history.

    • IdahoPotato
      Aug 20, 2017 at 10:51 am

      Word. Libertarians have consistently demonstrated a galactic lack of self-awareness, history and irony.

      • Duke DeGuise
        Aug 20, 2017 at 5:23 pm

        Call them Glibertarians, please: they don’t deserve the self-proclaimed title, which originated on the Left, and referred to people who believed in things like legal contraception, women’s suffrage, strict separation of church and state, etc.

        As far as I can tell, it’s a vanishingly small number of Glibertarians who wouldn’t step on their grandmothers’ throat to grab a tax cut or deregulation of business, while the rise of ever-more powerful oligopolies and an intrusive surveillance state – public and private – doesn’t really seem to bother them at all.

        • Dan Romig
          Aug 21, 2017 at 7:06 am

          MD, IdahoPotato and Duke DeGuise: Wow, that’s quite the generalized anti-Libertarian view you seem to have.

          I am a ‘Moderate Libertarian’, and I do believe we should have a federal tax structure to pay for the essential services government provides its citizens. However, unlike the current IRS tax code that’s been put upon the people by the duopoly, we should have a flat tax. But, a modest living wage should be exempt from tax liability, then every dollar of wages, capital gains, dividends and interest carried should be taxed at an equal rate – say 20%.

          Duke, I am bothered by ever-more powerful oligopolies. My state of Minnesota had until 2007 a law against ticket brokering that allowed an illegal monopoly (which TicketMaster used) provision that allowed certain parties to re-sell tickets above face-value. I not only fought against this in the Executive, Legislative and Judicial branches of my government, I also was arrested, jailed and fined for asserting my God-given right to conduct free enterprise. When eBay bought StubHub in January 2007, the Minnesota Legislature did an about-face and the law was repealed. It mattered not that the law violated the Sherman Antitrust Act and Minnesota’s Restraint of Trade Statute to my State’s Attorney General as he was doing what the pro sports teams wanted him to do until eBay’s lobbyists paved the way for free enterprise to be legal in my state.

          Finally, those in the FBI, CIA and NSA who violate the 4th Amendment are traitors who do not deserve to walk freely amongst the people of the USA!

        • Duke De Guise
          Aug 22, 2017 at 1:03 pm

          Dan Romig,

          Good on ‘ya for your stated opinions and actions, but from where I stand you are a gross outlier among what typically amounts to a bunch of overgrown college Republicans with arrested development, and who never got over reading Ayn Rand in high school.

          Calling most of these people “Glibertarians” is being way too polite, but out of respect to Wolf and his efforts, I’ll keep it civil.

    • Kraig
      Aug 23, 2017 at 12:58 am

      Indeed the UK at its zenith was strongly mercantile, which has quite a few economic similarities, even with Imperial tarrifs floated before change of government bought in free marketers

  9. JR
    Aug 20, 2017 at 6:07 am

    The China ForEx reserves, having dropped by $513B in 2015 and $320B in 2016 (BIS87th annual report) – are now hovering above the magic $3T USD mark. One billion Chinese thumbs are instructed to plug one billion leaks in the Great Wall of ForEx. The Chinese people aren’t dumb. They understand that the first to swim out of the Great Red Ponzi, as Stockman calls it, are the winners. But you can expect the weight of a billion thumbs to dry up the flows to the real estate laundromats in Vancouver, NYC, and Sydney, etc.

  10. Kent
    Aug 20, 2017 at 7:11 am

    The Chinese are incentivizing investments that create more jobs, better productivity and long-term economic growth. Instead of asset flipping which just helps the flipper but adds no real value to society as a whole.

    • Frederick
      Aug 20, 2017 at 8:26 am

      In other words they are discouraging “malinvestment” as Ron Paul calls it

    • Michael
      Aug 20, 2017 at 10:12 am

      I am not sure how funding commercial real estate and residential real estate in the US is creating Chinese jobs. In fact it seems to me this only fuels the asset bubble.

      • George McDuffee
        Aug 20, 2017 at 11:21 am

        Indeed such speculative investment and “market skimming” contributes little to nothing and extracts much from the aggregate “economy.”

        On both the pragmatic and ideological levels, the PRC is restricting these “investment opportunities” and is apparently attempting to divert this money into activities which will produce real aggregate socioeconomic benefits for the PRC, the investor, and the host country if a foreign investment.

        Some examples are the [re]construction of rail transport in Africa, economically justified by the inexpensive transport of minerals from the mine-head to seaports for export, improvements in local agricultural practices, including PRC manufactured tractors and other machinery, to produce a surplus which can be exchanged for PRC produced manufactured/processed goods, which requires rail transport both ways, and in the longer term the diffusion of ideas, knowledge, and people in the areas served by the new rail systems, reducing tribal tensions and improving the QoL. The PRC is also improving the port facilities in many areas.

  11. George McDuffee
    Aug 20, 2017 at 7:11 am

    It has long been known, albeit frequently ignored by huge numbers of people, that trees don’t grow to the sky…

    • Gershon
      Aug 20, 2017 at 9:08 am

      No, but it’s a proven fact that the trees waving make the wind blow….

  12. david
    Aug 20, 2017 at 7:32 am

    My fellow readers! Nothing lasts forever. History says hang on it going to be a long fall from these asset bubbles.

    • polecat
      Aug 20, 2017 at 3:01 pm

      I’m at ground (up) level …. so there’s that …
      No swan-diving for me !

      Now, if we were talkin fraudster/grifters, well ….

  13. Drango
    Aug 20, 2017 at 8:22 am

    The second largest economy in the world, with trillions in foreign reserves, is worried about a few billion in capital outflow? Why would a country with a healthy economic system need to worry about that? Probably because China is doing whatever it takes to hide its titanic dollar problem, and terrified that one small mistake will initiate a massive, economy destroying currency crisis. They can try to fool the world with growth based on ghost cities and “one road” to nowhere, but the price they pay to fend off a rising dollar is more than all of their public distractions combined.

  14. Gershon
    Aug 20, 2017 at 9:22 am

    The wiser Chinese see what’s coming and are bracing for impact. The fools are rushing into Bitcoin or parking their ill-gotten gains in property bubbles overseas.

    http://www.scmp.com/business/companies/article/2107559/all-glitters-profit-chinas-gold-mines-demand-safe-haven-boost

  15. Petunia
    Aug 20, 2017 at 10:23 am

    What I found the most interesting of the China crack down was the restrictions on the vices of gambling and sex. Entertainment in America no longer sells well, not even here. I spend most of my tv time watching foreign programming on Netflix.

    Russia and China seem to get that the promotion of immorality eventually leads to societal decay. Maybe they have been paying attention to where all the immorality has led us.

    Since the only thing America understands is money, maybe these restrictions will help cleanup the smut, that passes for entertainment here.

    • Barbara
      Aug 20, 2017 at 1:50 pm

      Check out the comments on youtube of Yuri Bezmenov, a KGB agent. Best way to take down a country is to rot it from the inside. With a lack of a moral compass a society destroys itself.

      • Cynic
        Aug 20, 2017 at 2:49 pm

        It’s a comforting theory, and an attractive one, but false.

        18th century Britain was very corrupt financially -breathtakingly so – lots of prostitution; dreadful clergy; up to its neck in the slave trade; and mistresses were bought and sold like sheep.

        Didn’t stop Britain from becoming mistress of vast Empire.

        It had the necessary ships, the trade, the energy (domestic and imported) the manpower, the intellect, the patriotism , and was completely devoted to a ruthless pursuit of power.

        Morality has nothing to do with such growth: that’s a fairy tale for children.

        The Chinese are utterly amoral: they’ll do well. :)

    • polecat
      Aug 20, 2017 at 3:24 pm

      What ! … no ‘Game of Thrones’ ?!! … ‘;]

      Once all the easy to extract hydrocarbons and various mineral resources have been found, and used up, then we’ll revert to a real-life G of T ‘economy’ ..
      Just look at how unglued societies are becoming, even while we still have some resources to put to beneficial use …

      Winter really IS coming ! … it’s only a matter of when, and if we get into a squirrely ‘nukular’ fist fight with one or more … then it will be double-plus bad ..

      • Cynic
        Aug 21, 2017 at 4:17 am

        Oh yes, ‘Winter’ is coming.

        ‘Over-shoot’ is a reality, and Malthus will be vindicated: believe that you can get more from Mother Earth than she can give, and you will get a good spanking and sent off to the ‘long bed’ without your supper.

        This is what the Chinese do not grasp, it is the wall they will run into head-first.

        The same goes for those who believe that all we have to do is clean up the banking system and end gross inequality.

        All civilisation has over-stepped the mark, to an extent unprecedented in history, and only pain lies ahead.

        • OutLookingIn
          Aug 21, 2017 at 9:53 am

          True: “civilization has overstepped the mark”

          The present population of the world owes their existence to cheap, abundant energy – oil. This paradigm is quickly coming to an end.

          It has taken 200,000 years for the worlds population to reach 1 billion and just 200 years to reach 8 billion. By the year 2050 this is projected to reach +10 billion.

          Time will run out when the oil runs out. Then its well and truly game over.

    • Smingles
      Aug 21, 2017 at 12:58 pm

      Oh, c’mon, Petunia. I don’t even think you know what you’re trying to say here.

      That Russia is more moral than the US? Because they… what, restrict “smut that passes for entertainment”? About 25-30% of Russian men die before the age of 60, mostly alcohol related. But they don’t watch whatever you deem to be “smut” so they’re more moral? Or something? Please elaborate.

      “Entertainment in America no longer sells well, not even here.”

      C’mon… stop doing this. You can’t just say stuff without having any idea of whether what you’re saying is even remotely true.

      HBO just posted a record 1st quarter profit. Entertainment companies are doing better than ever. The distribution networks are far more global, reaching ever expanding audiences. TV ratings are down, but only because streaming has more than taken up the slack. The top 20 most streamed TV programs globally on Netflix are all US, by the way.

      You literally could not be more wrong. As for cleaning up US entertainment, how about instead of trying to enforce your outdated moral standards on what other free people want to watch, you just stop watching it? Watch foreign programming. It’s a free country, until people like you get the reins.

      • Aug 21, 2017 at 4:29 pm

        Facebook is entertainment too, as is YouTube.

      • Petunia
        Aug 22, 2017 at 11:49 am

        I don’t think the Russians or Chinese are particularly moral. But they are not blind and can see that all the political division in America is fed by the media. It is an easy conclusion to make that cutting back on the fringe elements would be better than letting them run amok, like we have done here in America.

        While US entertainment may be selling well overseas, your statement. It is not selling well here. We haven’t been to the movies once this summer and I can’t remember if you’ve gone at all this year. The financial markets report almost one million cord cutters on cable this past quarter. Ninety percent of everything I’ve watched on Netflix is foreign.

        I don’t consider nudity to be smut necessarily, but an overload of it, in everything is too much. Gratuitous copulation in the opening credits leaves nothing to the imagination and is boring. I have seen more than one movie start this way. The Turkish soap opera I am currently watch took 20 hours to get to the first kiss and it was much sexier than any of the American smut.

        And BTW, I usually have a good grasp on what I’m saying.

  16. r cohn
    Aug 20, 2017 at 11:13 am

    China has complained about the reserve status of the dollar for years.
    Why doesn’t China allow its currency to freely float?

  17. Ambrose Bierce
    Aug 20, 2017 at 11:26 am

    redux: a trade war with China, or tariffs will not work, and neither will capital controls. in the first case there is no cooperation, in the second case there could be. the genie came out of the bottle with venture capital funding twenty years ago. unless the US regulatory function is willing to tear all that down and make every dollar match a specified investment (cooperate with Chinese authorities, and betray Chinese capitalists like they betrayed Democracy protestors) there is no hope, and there is no hope.
    like MBS when the property finally lands in bankruptcy court and there is no clear path to ownership (VC fund X owns half of Manhattan CE, who is that?) You may imagine they will be forced to open their nonexistent books. The judge will usually side with the banks, the Title Companies will throw their hands in the air and the banks will own the land.

    • Vespa P200E
      Aug 20, 2017 at 1:15 pm

      Currency war with China the grand currency manipulator is inevitable. They say currency wars leads to trade wars and it just began last Mon with Trump rightfully accusing Chinese of IP theft.

      It will lead to more intense tit for tat currency/trade wars and history says real war is next just in time for the global economies drunken on CB inspired liquidity pumped up deflates and way to divert attention of sheeples from depression.

      • Ambrose Bierce
        Aug 21, 2017 at 2:45 pm

        it wont work, there are too many workarounds built into the system. suppose everyone devalues their currency at the same time? for example the US regulators fined China for dumping steel the Chinese print money and buy up the commodity index and levitate the price, there, no more dumping, our steel is more expensive, and you can be sure that if you are a domestic buyer there are incentives to buy Chinese steel.

  18. Plano Renter
    Aug 20, 2017 at 12:17 pm

    In Plano, Texas the Chinese are buying up more than half the houses. It is easy to see, they never use American brokers to sell or lease them. Over half the rentals are Chinese owned. I’m looking for a house to rent and I see that the Chinese buy a house, rip out the carpet, put in cheap laminate flooring throughout.

    I rented a house owned by a Chinese guy. It was his personal house. Yet he still refused to hire any American to do maintenance if there was a Chinese person who could do it. If Americans had the same attitude towards Chinese people, they would not even be in our country in the first place.

    • North
      Aug 20, 2017 at 7:03 pm

      Wow I thought that sort of rort only happend in Australia.

    • Jon
      Aug 21, 2017 at 2:41 pm

      same thing in socal here where i can see this happening first hand..

  19. Wilbur58
    Aug 20, 2017 at 1:19 pm

    Please lord let this lead to a US real estate crash. (Not holding my breath.)

  20. Realist
    Aug 20, 2017 at 2:13 pm

    Hmm, as a certain person uses to constantly repeat :

    The business of China is business, the business of the USA is war …

    • Mike G
      Aug 20, 2017 at 9:07 pm

      Encouragingly, the Chinese are starting to devote major resources to wasteful military vanity projects like an aircraft carrier

  21. Tom kauser
    Aug 20, 2017 at 2:41 pm

    Federal reserve had a chance to sell its balance sheet of junk mortgages when 10 trillion in negative yielding debt existed? So sorry not in hurry no audit just digital cookies.

  22. Tom kauser
    Aug 20, 2017 at 2:45 pm

    How can anything really collapse if banks get free sugar? bTFD. It’s a fraud? Only less in market than investors is shares to buy? What they did to gold they do to bonds only on more hugely basis and stocks can we talk?

  23. Gershon
    Aug 20, 2017 at 3:58 pm

    Chinese movies with patriotic themes are huge hits at the box office, suggesting the Chinese populist – especially young people – are becoming more nationalistic and jingoistic. And out to ensure China’s “rightful place” in the world.

    Just like Japan in the ’30s.

    http://www.scmp.com/business/china-business/article/2107542/patriotic-action-films-set-lift-chinas-box-office-second

    • Rates
      Aug 20, 2017 at 6:51 pm

      Wouldn’t trust the box office numbers. Early this year, late last year there was a scandal in China regarding the box office. Basically distributors were inflating the numbers quite significantly. No doubt they’ll say that it only happens for foreign movies but actually a bunch of them were Hong Kong movies.

  24. roddy6667
    Aug 20, 2017 at 7:57 pm

    It seems everybody is too young or too old to remember the Japanese in the late Eighties. They did all the same things the Chinese are doing, and they didn’t need the American press dressing it up as “money fleeing an evil empire”. At the peak of the real estate mania it all stopped. A lot of Japanese lost a lot of money, but the world did not end. Life went on, life was good in Japan. Life is still good there. They have a higher standard of living than Americans and live longer.

    • alex in san jose
      Aug 20, 2017 at 9:37 pm

      Actually, if you don’t mind being “forever gaijin”, Japan looks like a hell of a great place to retire. I’ve not paid much into SS (but am paying in more these days) but I’d still get $700 or so a month if I were old enough to retire now, and while that would not go far in Tokyo, it would allow me to live fine in a small town there.

      (But instead I’m hoping to fatten that up quite a bit by paying a lot more in through taxes, and to build up a nest egg too, and then take it to Tel Aviv.)

  25. nick kelly
    Aug 21, 2017 at 1:59 am

    THE ECONOMY AS A SYSTEM

    ‘Unfortunately, there is an assumption implicit in this story which, in my opinion, is completely untrue. The assumption is that the underlying drivers of economic activity, that is GDP, are somehow independent of the process of credit expansion, so that it is possible to talk about reining in credit growth and maintaining GDP growth as if these were two separate things.’
    Source: Carnegie

    Wow! GDP growth not independent of credit expansion!

    How’d you like to get paid for figuring that out ?

  26. meme Imfurst
    Aug 21, 2017 at 6:58 am

    The Chinese do not want the currency to be prostituted as the US dollar has become.
    They don’t want the currency to loose respect and value. The really big picture is the IMF and World Bank intending to move to China, why? Anticipated exchange rate stability between Asian countries, and the demise of the petrodollar.
    The lynch pin is the Hong Kong Gold Exchange, and the West knows this…that is why we are in their backyard, to disrupt it. Imagine buying oil and NOT having settlement in dollars. That is enough to make the Treasury go ballistic. Imagine, China buying oil from Iran or Russia and settling in the gold exchange not via international US bankers. It is like blockchain ‘money, threatening the empire.
    Follow the cookie crumbs and you will see the USA fear standing in the shadows.

    • Nicko2
      Aug 21, 2017 at 2:39 pm

      That won’t work. Iran and Russia don’t make anything besides oil. They will always have to convert to Dollars or Euros. 55% of all global transactions are settled in Dollars. That will not change significantly for several decades.

      • J
        Aug 23, 2017 at 4:42 am

        But China does make other stuff and will trade with Russia and Iran-that is the point

  27. Stevedcfc72
    Aug 21, 2017 at 10:59 am

    What does everyone think about Chinese Company buying Fiat Chrysler potentially?

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