The End of the Communist Dynasty

[cobben]

Re: The End of the Communist Dynasty

iTulip has been consistently expecting some form of property bubble bursting in China - however this is a far cry from a full scale Ponzi which is what Tindale, Mish, and israelfinancialexpert are saying, the latter two both being 'Austrians'.

Tindale's background (according to himself, of course, but I have no reason to doubt this):

" . . . Its a shame I havent got more time to devote to writing up my experiences on site at Chinese banks. Ive been onsite looking at credit,risk and process management at probably +50 banks throughout Asia in the past decade.

These are not just executive suite visits but visits made to review practices at the departmental level . ive been involved in credit and risk management since the early 80s and for instance ran Amex's credit operations in the late 1980s.


So I have a reasonable claim to be a regional subject matter expert on credit and risk management."

[photon555]

Re: The End of the Communist Dynasty

jk has it right. It's obvious that war is the answer to all these problems for all concerned. Sink excess shipping, destroy excess inventory, suck excess population and production into military uses, obscure any financial irregularities with a flood of new spending and debt, and most importantly, distract the populace of all participating nations from realizing the shenanigans of their respective elites/rulers with a wave of patriotic fervor. What's not to like? The only real question is whether the war is orchestrated with the connivance of the "opposing" rulers or starts from some seemingly insignificant event that "mushrooms" out of control due to the appearance of Murphy. The end result is the same; almost everyone gets what they want. Even the lowliest of the sheeple get to feel important/meaningful as they participate directly or indirectly in the "Struggle against tyranny/oppression/evil/foreign devils/fill_in_the_blank." Many people will gladly risk their lives to gain a sense of purpose. It's been 67 years since the end of WWII, almost an entire generation. Time for a new generation to see the elephant.

[BadJuju]

Re: The End of the Communist Dynasty

. Time for a new generation to see the elephant.

The only thing is that I don't know if a proper WW3 would occur. Who is going to wage conventional warfare with a country that has nuclear weapons?

[jk]

Re: The End of the Communist Dynasty

The only thing is that I don't know if a proper WW3 would occur. Who is going to wage conventional warfare with a country that has nuclear weapons?

conventional wars will be waged via proxies, while the central actors build high tech weapons and shadow-box.

[jk]

Re: The End of the Communist Dynasty

Apple Pulls Chinese Game With Japan Ninjas Invading Island Chain

A “Plants vs. Zombies”-style game that depicts Japanese ninjas and sumo wrestlers invading an island chain claimed by Beijing and Tokyo has been pulled from Apple Inc.’s (AAPL) App Store.
The game, “Defend the Diaoyu Islands,” which had been available on the Chinese-language version of the App Store, was no longer listed Wednesday. The company that made the game, Shenzhen ZQGame Network Co., said it was given no explanation for the move, the China Daily newspaper reported today.
The company apologized to players and is in negotiations with Apple over the game, China Daily said.
In the game, players defend the islands by unleashing various attacks on the invaders, which include soldiers carrying Japanese flags, ninjas and sumo wrestlers. The game plays music from “Tunnel Warfare,” a Chinese movie about the Second Sino- Japanese War.
Apple’s terms of service say that games on its App Store “cannot target a specific race, culture, real government or corporation or any other real entity,” China Daily said.
Apple’s Beijing-based spokeswoman Carolyn Wu didn’t immediately return calls to her office and mobile phones, or respond to an e-mailed request for comment.
The islands, known as the Senkaku in Japanese, are about 140 kilometers (87 miles) north of Japan’s Ishigaki Island between Taiwan and Okinawa. Sovereignty over the area would give the holder control of undersea natural gas and oil fields.

http://www.bloomberg.com/news/2012-0...and-chain.html

[c1ue]

Re: The End of the Communist Dynasty

China in fact faces three major structural causes of capital flight.
First, the empirical portion of this paper will conduct three calculations to show that the wealthiest 1% households in China commands wealth that is at least as large as 2/3 of the foreign exchange reserve and possibly as high as nearly twice its size.
Thus, if the top 2.1 million households in a nation of 1.3 billion people decide to move even 30% of their wealth overseas, the foreign exchange reserve will reduce by a trillion dollars or more.
Second, despite official foreign exchange control, numerous channels, especially those through China’s current account, exist to move capital in and out of China.
Third, households, which are net savers, face a negative 3 plus percent in real return from bank deposits and Chinese treasury bonds, forcing them to constantly look for higher returns than inflation rates.
These three conditions combine to create extremely fragile conditions for China’s foreign exchange reserve, which is the backbone of the entire financial system of China.
If the foreign exchange reserve is depleted by capital flight, the central bank will need to resume large scale money creation, as it did in the 1980s and the 1990s, to maintain the solvency of the banking sector (Walter and Howie 2011; Shih 2004).

Yes, I've seen this before. I follow Victor Shih's work.

The problem is this: if in fact the 1% actually are the government - what exactly is the reason for capital flight?

The primary circumstance by which this 1% would want to flee would be exactly the loss of control of government - something which is far from clear. The secondary circumstance would be the 'rats off a sinking ship' syndrome, but this presumes that the CCP acts like an African dictator as opposed to the group which as run China for going on 70 years now. Not clear to me at all.

Secondly, the Chinese government has much stricter controls over capital flows, both in and out, than most other nations.

The more money you have, the harder it is to move out.

Tindale's background (according to himself, of course, but I have no reason to doubt this):

" . . . Its a shame I havent got more time to devote to writing up my experiences on site at Chinese banks. Ive been onsite looking at credit,risk and process management at probably +50 banks throughout Asia in the past decade.

These are not just executive suite visits but visits made to review practices at the departmental level . ive been involved in credit and risk management since the early 80s and for instance ran Amex's credit operations in the late 1980s.

It seems strange then that Mr. Tindale is unable to provide anything more definitive than other people's anecdotes - given his superlative credentials.

As I said, I completely agree all sorts of shenanigans are going on. What is still very unclear to me is the ratio of bad to good, or more correctly productive to counterproductive.

conventional wars will be waged via proxies, while the central actors build high tech weapons and shadow-box.

How will proxy wars help the US economy? Or do you mean Iraq/Afghanistan style proxy wars, as opposed to Nicaragua type proxy war?

[lakedaemonian]

Re: The End of the Communist Dynasty

I am not sure a draft would be necessary. The military has had to basically turn people away in the US because of record recruiting numbers. Back during Iraq, you could be a raving maniac. These days, if you have a stubbed toe and a runny nose, you are out.

+1000

The US military is quickly shifting towards a post-war rationalization......possibly reminiscent of the Post Cold War peace dividend during the Clinton Administration.

[lakedaemonian]

Re: The End of the Communist Dynasty

i didn't mean to say there would be a draft. i'm saying that high unemployment means more people want to "volunteer" for the military.

I reckon that's a little bit of a dim view....making it sound involuntary

I would agree that higher unemployment makes volunteering more attractive.

There are some genuine advantages for many folks who do volunteer compared with their peers in the civilian world, mostly around intelligent use of G I Bill education benefits. I know a number of people who've used the tax payers money to fund their medical education, served their commitment, voluntarily remained in the Reserves/Guard...and are creaming it as civilians compared to their peer group since they carry no student debt. Including a great guy who grew up as a homeless street kid in Ecuador.

An interesting thing is happening with US military recruiting at the moment:

*war winding down
*persistent high unemployment
*military headcount set to shrink again

The bar to enter, or just remain, is going up......

[jpatter666]

Re: The End of the Communist Dynasty

+1000

The US military is quickly shifting towards a post-war rationalization......possibly reminiscent of the Post Cold War peace dividend during the Clinton Administration.

Agreed -- and too bad for two of my nephews.

Perennial troublemakers who turned 18 a year ago. After a failed stint in Hollywood where they were convinced they were going to be "the next big thing" they came back dead-broke but still talking big. They turned down their grandfather's offer of paying half their college education anywhere they could get into so they could hang out with their little group.

Well, turns out they were embarking on becoming career criminals -- 10 felony counts of robbery and grand larceny.

I'd hoped we could maybe reach a plea bargain where they'd enter the military but I got cleared up on that real fast.

Not a snowball's chance in hell.

[lakedaemonian]

Re: The End of the Communist Dynasty

The only thing is that I don't know if a proper WW3 would occur. Who is going to wage conventional warfare with a country that has nuclear weapons?

I take a dim view on nuclear weapons....specifically, I believe there is a reasonably good chance of a nuclear weapon being used in anger in my lifetime.

I believe it is POSSIBLE for direct conventional conflict between two nuclear armed nations without it leading towards the use of nuclear weapons. But I think it would require one nation to possess overwhelming military capability over the other....such as US/Pakistan, US/North Korean, US/Iran, or possibly US/China(until China has developed a persistent and survivable nuclear deterrent).

But possible is not the same as likely.

[lakedaemonian]

Re: The End of the Communist Dynasty

Agreed -- and too bad for two of my nephews.

Perennial troublemakers who turned 18 a year ago. After a failed stint in Hollywood where they were convinced they were going to be "the next big thing" they came back dead-broke but still talking big. They turned down their grandfather's offer of paying half their college education anywhere they could get into so they could hang out with their little group.

Well, turns out they were embarking on becoming career criminals -- 10 felony counts of robbery and grand larceny.

I'd hoped we could maybe reach a plea bargain where they'd enter the military but I got cleared up on that real fast.

Not a snowball's chance in hell.

Yeah, the days of the courts giving kids a choice of the Marine Corps or jail are truly over......and were overblown by Hollywood in the past.

Sorry to hear about your nephews....hopefully they can put it all behind them someday....but I would think in a very tough economy, with no tangible skills, and multiple felony convictions they are on a path to perpetual under-class

[BadJuju]

Re: The End of the Communist Dynasty

I take a dim view on nuclear weapons....specifically, I believe there is a reasonably good chance of a nuclear weapon being used in anger in my lifetime.

Anything is possible, but any first strike use of a nuclear weapon, at least against another nuclear power, is simply signing your own death warrant. There is never a point in which it becomes a good idea. So it just seems very unlikely two nuclear powers would ever wage a nuclear war against each other or at least not major nuclear powers.

edit: Your second scenario is certainly more likely, though. I could see Israel deploying nukes on a first strike basis.

[lakedaemonian]

Re: The End of the Communist Dynasty

My view is that while the US is agitating for a new Cold War, China is not.

My understanding is that the CCP is actually the one holding back the nationalist sentiments of the crowd of young single men. When necessary, it allows their exuberance to pop up, but in general they realize full well the dangers of letting that mob get its head.

Certainly if the economic situation gets bad enough, this may change. However, I have yet to see any type of definitive evidence that the bubble bursting in China is going to be as bad as the AEPs, Mishs, and various other Austrian doom and gloomers say.

I still look forward to reading the narratives coming from these types, but perhaps I am overly spoiled by the depth and breadth of analysis behind the iTulip thesis.

The doom and gloom scenarios - even if they come true - don't have the same quality of data or analysis behind them.

But it's not "the nationalist sentiments of the crowd of young single men" that is writing the ad copy for the aggressive tone of official statements from China regarding such ridiculous claims and actions as what is happening in the Spratleys is it?

Some of the official statements(more like angry warnings) coming out of China sound exactly like they WERE written by a crowd of nationalistic young undersexed single men....at the very least they come across as quite abrasive and lacking in diplomatic finesse.

[lakedaemonian]

Re: The End of the Communist Dynasty

Anything is possible, but any first strike use of a nuclear weapon, at least against another nuclear power, is simply signing your own death warrant. There is never a point in which it becomes a good idea. So it just seems very unlikely two nuclear powers would ever wage a nuclear war against each other or at least not major nuclear powers.

I'd agree that the use of nuclear weapons today is completely insane.

I'd also agree on the very unlikely part as well with one exception.

But I do think the relative disparity of military capability between some potential nuclear armed combatant pairs, combined with "time and space", results in some realistic scenarios where nuclear weapons could be successfully used by one over the other with a far lower order risk of nuclear retaliation.

Pakistan, North Korea, and Iran do not possess the capability of striking at the US directly/conventionally with the exception of regional nodes, while the US possesses the capability of decapitating PAK/NK/Iranian strategic nuclear force projection capabilities as well as mitigating some of the risk of tactical/regional "leaks".

I'm not privy to China's current capabilities.....but I do know their recent capabilities could potentially be largely negated if the US threw the conventional kitchen sink at it...leaving China with little to no strategic counter force.

Do I believe a direct conflict between China and the US is possible? Yes.

Do I believe it is likely? Definitely not.

Do I believe Cold War 2.0 is developing? Absolutely.

But I do not share C1ue's views that it is being "agitated" largely by the US.

Is it US pressure on the Philippines or is it the Philippine government/people inviting the US back to Subic Bay due to Chinese aggression towards the Spratleys after kicking the US out a generation ago? Is it the US making the Philippines ban Huawei from strategic IT infrastructure in the Philippines?

Is it US pressure that has seen India and Vietnam develop a military/security partnership that will see the crews of Vietnam's flashy new submarines being trained by India?

Is it US pressure that has seen India and South Korea conducting joint naval exercises recently?

Yup...the US is dumping approx. 60% of it's global US Navy assets into the Pacific tub....but Asia is wary of China....my belief is that there will be no return to SEATO, but more of individual Asian/Pacific Rim nations playing China/US off of each other and trying their damnedest to avoid being nailed down as being clearly defined as a jersey wearing member of either China's or the US's team. I think the region will be filled with countries trying to stay as unaligned as possible.

Back to the nuclear thing.

My biggest concern always has been and always will be Pakistan/India.

Their proximity alone represents a complete lack of "time and space".

No time and no space means a small intentional or unintentional military engagement can more quickly and more easily spiral out of control.

No time and no space leaves military chain of command and/or civilian leadership with compromised OODA loops.

Observe
Orient
Decide
Act

Then you combine a compromised decision making process with nuclear weapons control procedures of unknown quality robustness/resilience creating a genuinely possible recipe for disaster.

[BadJuju]

Re: The End of the Communist Dynasty

Very insightful, sir. I agree with the thrust of what you say here, especially with regards to India/Pakistan being a powder keg region.