Global economic meltdown, Part Deux: China?

[2muchcoffeeman]

A very interesting article popped up on Politico today:<blockquote>The conventional wisdom in Washington and in most of the rest of the world is that the roaring Chinese economy is going to pull the global economy out of recession and back into growth. It’s China’s turn, the theory goes, as American consumers — who propelled the last global boom with their borrowing and spending ways — have begun to tighten their belts and increase savings rates.

The Chinese, with their unbridled capitalistic expansion propelled by a system they still refer to as “socialism with Chinese characteristics,” are still thriving, though, with annual gross domestic product growth of 8.9 percent in the third quarter and a domestic consumer market just starting to flex its enormous muscles. . . .

But there’s a growing group of market professionals who see a different picture altogether. These self-styled China bears take the less popular view: that the much-vaunted Chinese economic miracle is nothing but a paper dragon. In fact, they argue that the Chinese have dangerously overheated their economy, building malls, luxury stores and infrastructure for which there is almost no demand, and that the entire system is teetering toward collapse. </blockquote>There's a developing consensus that China is approaching the point of being able to produce far more than it's able to sell.

Just when you thought you saw a light at the end of the tunnel ...

 

[TheSportsPredictor]

Just wait til China tries to collect all the money we owe them. SUCKERS!!

 

[Flying Headbutt]

All of China is this close to working at 7-11.

 

[BTExpress]

that the much-vaunted Chinese economic miracle is nothing but a paper dragon.

What miracle?

When an economy of 1,300,000,000 wakes up after sleeping for 95% of the 20th century, it's going to have a lot of energy.

 

[The Big Ragu]

This was a quote in your link from Tim Geithner's trip there during the spring:

“Purchases of U.S. consumers cannot be as dominant a driver of growth as they have been in the past,” Treasury Secretary Timothy Geithner said during a trip to Beijing this spring. “In China, ... growth that is sustainable will require a very substantial shift from external to domestic demand, from an investment and export-intensive growth to growth led by consumption.”

That is wishful thinking, not a realistic outcome.

China's fortunes rose when they liberalized and allowed more foreign trade. The growth numbers are very impressive, but it is much easier to grow that fast and that dramatically when you are starting from a base of near zero. China has a controlled economy (it's markets are not free) and corruption is rampant. It doesn't have the ability to generate domestic demand to sustain the growth they have seen any more than any other poor country can just make up its mind to be rich. China's growth has been coming on the back of the U.S. and the western world. As long as those countries are in an economic malaise and can't import Chinese goods, it's OBVIOUS that the growth they have been reporting (false prosperity) is a paper dragon that is unsustainable.

If anyone is worried about China being a savior of any sort, what they should be worried about is that the Chinese have lost all faith in the dollar and are already not buying our debt at the levels they had been. They have been boosting their gold reserves. And the dollar is at a 52-week low. If (and it is way more likely that it does happen than doesn't) their tissue paper economy crashes because of a world economic malaise, it kills both the U.S. and China. We've stupidly dug a huge hole of debt and we are relying on the Chinese to prop us up even a bit so our hole doesn't turn into a black hole. And even though most of China lives on a dollar a day, enough have tasted enough prosperity that if their economy collapses there will be regime change -- which is why the corrupt dictators in power are doing everything they can to create false prosperity right now.

 

[Michael_ Gee]

China makes stuff. An economy built on making stuff has its ups and downs, but it will take a punch better than an economy based on whatever the hell it is ours is based on.

 

[RickStain]

China makes stuff. An economy built on making stuff has its ups and downs, but it will take a punch better than an economy based on whatever the hell it is ours is based on.

We make a lot of stuff too.

 

[Bubbler]

China makes stuff. An economy built on making stuff has its ups and downs, but it will take a punch better than an economy based on whatever the hell it is ours is based on.

We made a lot of stuff too.

Fixed.

 

[Football_Bat]

It's been plain to me for some time now that if China goes down, we go down. Our economies are inextricably linked. They're holding much of our industry and most of our notes, and we're buying their goods cheap (thank you Wal-Mart).

If China collapses, it'll be a double whammy. The disruption of manufacturing will make many items scarce, and the financial chaos will send the dollar through the floor. Combined, the inflation that'll result will make Argentina look like the paragon of stability.

Gold is starting to look pretty good right now even at $1,100.

(GOLD!) :D

 

[2muchcoffeeman]

Here we go?<blockquote>BEIJING – China moved to curtail bank lending Friday for the second time in a month in the latest effort to cool down its supercharged economy.

Chinese leaders worry that a stimulus-driven torrent of lending is fueling a dangerous bubble in stock and real estate prices. They also are concerned that the flood of money surging through the economy is adding to inflation.</blockquote>http://news.yahoo.com/s/ap/20100212/ap_on_bi_ge/as_china_economy

 

[Stoney]

China makes stuff. An economy built on making stuff has its ups and downs, but it will take a punch better than an economy based on whatever the hell it is ours is based on.

We make a lot of stuff too.

Not even remotely close to as much as we used to. That's the problem.

 

[RickStain]

China makes stuff. An economy built on making stuff has its ups and downs, but it will take a punch better than an economy based on whatever the hell it is ours is based on.

We make a lot of stuff too.

Not even remotely close to as much as we used to. That's the problem.

I'm curious if that's actually true, or just one of those things "everyone just knows" that isn't actually true.

 

[Stoney]

China makes stuff. An economy built on making stuff has its ups and downs, but it will take a punch better than an economy based on whatever the hell it is ours is based on.

We make a lot of stuff too.

Not even remotely close to as much as we used to. That's the problem.

I'm curious if that's actually true, or just one of those things "everyone just knows" that isn't actually true.

You obviously don't live in one of the industrial states that have been ravaged by outsourcing and globalization policies over the last 15 years. It is true. I could take you on an extensive empty-factory tour attesting to its truth.

 

[RickStain]

You obviously don't live in one of the industrial states that have been ravaged by outsourcing and globalization policies over the last 15 years. It is true. I could take you on an extensive empty-factory tour attesting to its truth.

So in other words, no actual evidence, right?

I know manufacturing jobs have all disappeared. That's not the same as manufacturing disappearing.

 

[RickStain]

Did some googling, here's a good site I found:

http://blog.american.com/?p=8593

Confirms what I've argued here before: While manufacturing jobs did plummet, they mostly didn't get overseas. That's the type of job loss that gets an emotional reaction, but most manufacturing job losses were due to improvements in technology that meant fewer people were needed to produce more stuff.

From the link:

"Amazingly, if the U.S. manufacturing sector were a separate country, it would be tied with Germany as the world’s third-largest economy. ... Despite declines in employment, the productivity of manufacturing workers has never been higher, and the United States is still the world’s largest manufacturer."

So yeah, we still make stuff.

Edit to add, here's a good visual on the subject:

 

[Stoney]

Well, all I know is that the former factory workers I encounter did not lose their careers because the plant found better technology, they lost them because the plant shut its doors entirely and left the country for lands of cheaper labor.

I suggest you do some research into the percentage of the world's automobiles, electronics, textiles, steel, and virtually any other tangible consumer good, that were manufactured in the United States three decades ago, compared to what percentage are now. I'll concede I don't have the numbers before me right now, but I'm damn certain you'll find a drop off a cliff in nearly every category. And I'm hard-pressed to think of any substantial consumer good area where our domestic manufacturing share has increased over that period.

I dare you to tell former autoworkers in Michigan or textile workers in the South that "it's just a myth, we still manufacturer as much as we ever did." I'd enjoy watching the reaction.

 

[2muchcoffeeman]

You obviously don't live in one of the industrial states that have been ravaged by outsourcing and globalization policies over the last 15 years. It is true. I could take you on an extensive empty-factory tour attesting to its truth.

So in other words, no actual evidence, right?

I know manufacturing jobs have all disappeared. That's not the same as manufacturing disappearing.

If the manufacturing jobs have disappeared, it stands to reason that the associated manufacturing has also disappeared. At least, for anyone who understand the fundamental tenets of logic. But since you want actual numbers ...

According to the U.S. Bureau of Labor Statistics, manufacturing employment in the United States fell to 14.5 million in December 2003, at the time its lowest level in 45 years. That number peaked in 1979 at 19.5 million manufacturing jobs. By July 2009, according to researchers at the Federal Reserve Bank of St. Louis, that statistic had dropped to 11.8 million, which is less than 9 percent of the total workforce in America.

But you think manufacturing is disappearing in America. Yeesh. Fine: According to the authors of the 2009 book Manufacturing a Better Future for America, about 40,000 manufacturing plants in the United States have closed since 2001. That addresses your particular claim.

 

[cranberry]

Did some googling, here's a good site I found:

http://blog.american.com/?p=8593

The American Enterprise Institute blog? A good site? I guess it depends upon your orientation.

 

[RickStain]

The American Enterprise Institute blog? A good site? I guess it depends upon your orientation.

The *facts* listed on the blog were illuminating to this conversation. Unless you want to dispute them?

As far as their overall site, I have no idea who they are.

 

[RickStain]

Like what, exactly?

You name it. What did we make before that we don't make now?
As the information I've cited in this thread shows, we make more stuff than ever before. As a percentage of our GDP, manufacturing has never waivered.