The Long Fall: A Market Without Parachutes

[metalman]

Re: The Long Fall: A Market Without Parachutes

The world is not ending. I know there is a strong awareness on this forum about the mistakes the US is making and our potential for decline. but as I pointed out on a different thread, the dynamic is not so much the decline of the west as it is the rise of the east.

I would like to think we remain clear eyed realists about this and understand that the other 6 billion people around the world have the same hopes and ambitions we do. This is perfectly legitimate and is the responsibility of political and business leaders to feed this desire the best way possible. To see only disaster does a diservice to all involved.

As for the decline of the west, I remember we had a lively discussion a while back about the labor cost advantage enjoyed by China with one person saying in exasperation, "we don't make anything anymore"


Please note on this link a summary of the top exports from the US to ROW. I think you may be surprised at what we don't make anymore.


http://tse.export.gov/NTDChartDispla...-11-10-16-40-8

that is an incredible site. site! thanks for turning me into it. only a $1 trillion worth of stuff last year. we sold a few trillion in financial assets, but it does show "anything anymore" is nonsense.

on another thread someone posted a piece about how russiascomingup! yeh, right.

"No country faces as severe a population decline as Russia. Disease, accidental death, and a decline in healthy newborns are to blame. In fact, deaths in Russia outnumber births, and most of those who die are in the 20-49 age group, the most productive segment of the population. Leading experts on the subject say such a population decline has a devastating impact on the workforce, military recruitment and family formation."
Russia Losing Battle in Population Growth to Disease, Low Birth Rates

[BiscayneSunrise]

Re: The Long Fall: A Market Without Parachutes

Yes, Hudson strikes me as one of those professional west/America bashers. Easy to to take swipes at the big guy, especially knowing there is no retibution, and likely warm accolades from various other anti-west groups.

My point is that it is obvious we have some serious problems but so does everyone else. To only look at the negative makes one a less successful prognosticator and investor.

[metalman]

Re: The Long Fall: A Market Without Parachutes

Yes, Hudson strikes me as one of those professional west/America bashers. Easy to to take swipes at the big guy, especially knowing there is no retibution, and likely warm accolades from various other anti-west groups.

My point is that it is obvious we have some serious problems but so does everyone else. To only look at the negative makes one a less successful prognosticator and investor.

agreed. the "are you a doomer?" piece here is good for anyone here who doesn't share that view. have to be aware of risks but focus on risks leads to too much caution.

where does hudson's careful critique of the western political economy leave off and his ideological dislike of the system pick up? socialists like hudson offer great criticism but his solutions... ugh! on the other hand, i get just as frustrated at the ideology of the austrian school.sites like mises.com cram everything into the austrian school mold. i like that itulip goes at this with an open mind and tries to take the best from the different schools. it's a real challenge. no easy solutions.

i'll try to summarize the msg i think i've learned here over the years...

- capitalism is the only way to fly
- but some things can't be left to markets (e.g., environmental protection)
- too much regulation stifles markets
- too little regulation leads to abuse of the system... wealth stripping and redistribution under the guise of "free markets"
- national industrial policy abdicated to wall street = fire economy is what we got
- finance dependent economy crashes, leads to crisis
- crisis causes political backlash that kills the goose that laid the golden egg with too much regulation (like now in the real estate market)
- at the same time peaking oil causes series of economic shocks
- if the crisis gets really bad, rising authoritarianism in russia and usa start to be a problem
- economic crisis + rising authoritarianism / peaking oil = invest in industries that will be inflated by government

how's that?

[c1ue]

Re: The Long Fall: A Market Without Parachutes

My view on China is more and more that they are blindly employing the mercantile model - as opposed to fortuitously taking advantage of their national resources to modernise the Chinese nation.

The problem is that the world has not seen a mercantile nation so much larger than its customers.

As for capitalism - I'm assuming you mean representational democracy plus capitalism? It is not clear that you MUST have capitalism with democracy, only that we haven't seen it yet.

Whatever the case, all forms of government have their problems.

My personal view is that American representational democracy plus capitalism has been better solely because it has thus far the most efficient mechanism for removal of the incumbent.

This allows very efficient changing of the national government to fit the desires of the people.

You'll notice I don't mention needs.

However, the jury is still out as to whether the American system is truly best.

I'm noted before that the United States has uniquely been positioned to take advantage of European internal wars to surpass that region as the pre-eminent power in the past 100 years.

Now that neither Europe nor Asia have wars to distract them, and in fact that the US in contrast does, it will be interesting to see how the 'best government is capitalism' idea survives.

Lastly I'd like to point out another interesting contradiction: what people desire is not necessarily what they need, nor are these desires necessarily consistent.

As Clinton found out - pandering to the 'every man's desire is easy, but sooner or later you get a situation where several desires conflict with each other.

Such was 'low taxes' and 'better social services'.

And what the definition of 'is', is.

[touchring]

Re: The Long Fall: A Market Without Parachutes

As for capitalism - I'm assuming you mean representational democracy plus capitalism? It is not clear that you MUST have capitalism with democracy, only that we haven't seen it yet.

For a developing nation, it is possible to have capitalism without democracy. But democracy is necessary for a nation to attain developed status. Without which the nation will always remain as "developing" and there remains the danger of social upheaval as coups are needed to replace unpopular governments.

[GRG55]

Re: The Long Fall: A Market Without Parachutes

For a developing nation, it is possible to have capitalism without democracy. But democracy is necessary for a nation to attain developed status. Without which the nation will always remain as "developing" and there remains the danger of social upheaval as coups are needed to replace unpopular governments.

This view of the necessity for representative (democratic) government ("of/by/for the people") to achieve "developed" status is one that appears (to me) to have strong affinity to Judaeo-Christian values and concepts.

For example, actions such as the separation of church and state (render unto Caeser...) have been seen by us as necessary, indeed essential, elements to create a successful, peaceful (free from persecution) democratic society. Even Kemal Ataturk felt secularisation necessary after deposing the Caliph and embarking on a path to develop a modern Turkey (Ataturk removed Islam from the constitution). But unlike Christianity, which distinguishes between the duties owed to God and duties owed to Caesar, the teachings of Islam make no such distinction between the secular and the sacred.

I am sure there are Muslim members on this site who can articulate and explain this much better than I, and perhaps we'll hear from some of them. My comments that follow come from observations and experiences from living out here...

Devout Muslims strive to guide their lives in every respect by the word of God. A very large and growing number of them regard dogmatic secularism as a threat to the core values of their religion, and reject it with increasing determination.

In its mildest form this rejection is expressed as resentment of "man made" governments that monitor them and meddle in their lives (sound familiar?), and objections to what are seen as negative "western" influences such as permissive advertising targeting youth, and the selling of alcohol.

The conservatism spreading in the Gulf (and now elsewhere), influenced by the aftermath of the Iran revolution, the first Gulf War, and now Iraq is drawing a strengthening reaction against many of the secularising reforms of the predominantly western educated rulers, particularly in the spheres of education and law. Perhaps to avoid an outcome similar to Iran (and under pressure from US objections to continued repression), officials have become more responsive to these opinions. An example is the expanded application of shari'a beyond its dominant role in family law (witness the political debates underway in Turkey, or the banking and insurance systems that have become very adept at creating shari'a compliant financial products that are now in high demand).

Although most Muslim societies are a long way from restoring an Islamic political order and Holy Law as might be defined by the most traditional religious teachers (who successfully achieved this in Iran in 1979) or the militant movements (who denounce even nationalism as an anti-Islamic impediment to the reunification of Muslims worldwide), there are numerous, observable shifts along the spectrum in that direction.

Now, if the statement "But democracy is necessary for a nation to attain developed status" is true, what does that portend for the growing mass of humanity who regard our secular forms of democracy as an alien concept, inconsistent with the deeply held values that guide their lives?

I am passing no judgement here folks. Just asking the question...

[BiscayneSunrise]

Re: The Long Fall: A Market Without Parachutes

C1ue,

Interesting take on the political history of capitalism.

A couple of thoughts:

We have seen capitalism w/o democracy: Roman Empire, Medieval Europe/Hanseatic League, modern S. Korea and Taiwan come quickly to mind. What is interesting is that the Medieval Europe and the Asia Tiger models (perhaps including Communist China) eventually morph from a monarchy/ military dictatorship to a modern economy with popular elections. Perhaps, is necessary to have a strong man government to smoothly transition a feudal society to a modern market economy.

Regarding the publics' wants vs. needs. It was De Toqueville, I think, that said when the voting public realizes they can elect politicians that will use the power of government to spread largess among the people is when the democracy will be doomed.

[c1ue]

Re: The Long Fall: A Market Without Parachutes

BiscayneSunrise,

I think we both study the past to be prepared for the future, but have a different emphasis on the relative weight of the last 100 years.

I have to consider your assertion that the Roman empire was capitalist; given the relative scarcity of money at the time, plus the military/political tradition of giving land to soldiers for retirement, I'd argue that most economic lessons from that era no longer apply.

Politics, on the other hand, is eternal. Bread and Circuses!

Medieval Europe and the Hanseatic League, as well as South Korea/Taiwan are also interesting examples, unfortunately all 3 are examples of mercantilism.

Capitalism and mercantilism can be related, but they are not theoretically inseparable.

Be that as it may, the one commonality which allowed Europe, S. Korea, and Taiwan to transition to 'democracy' was relative wealth.

China will never achieve the relative wealth of Europe; even S. Korea and Taiwan is problematic given the relative resource profile necessary.

Thus it is unclear to me that the path taken by these 3 examples can even be attempted by China, nor that China would want to.

Even the American Founding Fathers had an extremely poor opinion of the 'common man', hence my reference to American government as 'representational democracy'.

The horrors of Athens held meaning for these men.

Lastly I return to the Roman Empire.

It has been argued that the Roman Empire fell not because the Visigoths and Huns were stronger, but that the empire grew so large that effective coordination was impossible.

My own take is that this was a factor, but the ending of the tradition of giving land to soldiers was just as large of one.

When the majority of people who support and defend you have nothing to gain in doing so, that's when government gets in trouble.

It will be interesting to see if the USA is getting to this state of affairs.

[touchring]

Re: The Long Fall: A Market Without Parachutes

China will never achieve the relative wealth of Europe; even S. Korea and Taiwan is problematic given the relative resource profile necessary.

I would not use the word "never", it might take 50 years for nuclear fission and recycling, but the main reason for saying this being one third of China - the urban one third - is already using as much resources as a middle income nation.

Do not believe in the statistics that the Chinese government releases, they would try to suppress consumption figures as much as possible to allay international attention*. Commodity prices will be a better gauge.

*I'm sure outback oracle will agree with what i say. ;)

On hindsight, i wished i knew they would use so much resources 10 years ago, or i would have made a pile investing in steel mills.

[c1ue]

Re: The Long Fall: A Market Without Parachutes

Touchring,

If you mean middle income as defined by world bank figures - i.e. around $2500 per capita, then you might be right.

Let's see...

According to: http://devdata.worldbank.org/wdi2006...s/Table1_1.htm

Middle income defined as $2274 gross national income per capita.

China ex. Hong Kong: $1500

Another middle income nation: Brazil

Brazil GNI/capita: $3000

Brazil population vs. China: 188M vs. 3.1B

Brazil oil consumption vs. China: 2.1M bpd vs. 7M bpd

Thus Brazil is using 0.0118 vs. China's 0.00225 bpd per person

Brazil also has extensive subsidies on ethanol, my presumption is that Brazil's oil consumption is somewhat lower as a result.

In contrast - in this earlier post - I noted that Venezuela's oil consumption is 0.488 and the USA's is 1.346 bpd per person

If your assertion is correct: that 1/3 of China's population - the urban third - is using as much as a middle income nation, then China's bpd per person just using Brazil's 0.0118 would be 1.7x what they are using now.

Put another way, China should be using 12M bpd instead of their present 7M bpd.

Using another middle income nation as an example: Thailand at $2240 GNI/capita

Thailand oil consumption: 1.89M bpd, population 65M, oil consumption per capita: 0.029 bpd

If China's urban third imitates Thailand's "middle income" consumption of oil, then China should be using 4x what they are now - or 28M bpd.

So to summarize:

Touchring assertion: China's urban third is consuming as much as any middle income nation

Brazil and Thailand are both middle income nations.

If China's urban third consumed like Brazil, China as a whole should be using 1.7x or more as much oil as is stated in world figures.

If China's urban third consumed like Thailand, China as a whole should be using more than 4x as much oil as is stated in world figures.

BZZZZZZZZZZZZZZZZZZZZZZZZZZT!

I would not use the word "never", it might take 50 years for nuclear fission and recycling, but the main reason for saying this being one third of China - the urban one third - is already using as much resources as a middle income nation.

Above statement is just plain wrong. Or is it official information from the MPS?

[Guest]

Re: The Long Fall: A Market Without Parachutes

Just an opinion: China's petroleum consumption seems so low relative to global comparative benchmarks for developing nations that it alone poses a major risk to supply / demand equilibrium - starting right now, and extending right through the next two decades.

Ultra low relative per capita oil consumption, in a nation growing faster, longer, and more consistently than any other, with by far the largest population. This is what there seems massive complacency about in the industrialised world. This per capita consumption combined with this particular scale of demographic is spring-loaded to tip over the global supply / demand applecart very brusquely indeed.

Fascinating thread. All iTulipers seem at the top of their form posting here.

[medved]

Re: The Long Fall: A Market Without Parachutes

This view of the necessity for representative (democratic) government ("of/by/for the people") to achieve "developed" status is one that appears (to me) to have strong affinity to Judaeo-Christian values and concepts.

Most of the "developed" countries have affinity to Judeo-Christian concepts. I know of no developed Muslim country, unless we consider Turkey "developed". It looks like some countries in the South-East Asia may get there relatively soon, but they are not there yet, so, still, no historical precedent of a "developed" Muslim country.

Back in the Middle ages a country could be "developed" without democracy. At that point the roles were reversed. Muslims were the advanced dynamic civilization, and Christians, mostly, illiterate slobs. It was the Muslims, that ushered Cristian Europe into the age of renaissance.

Since then Christianity underwent a long process of adaptation to the democratic political system. Islam did not.

Now, if the statement "But democracy is necessary for a nation to attain developed status" is true, what does that portend for the growing mass of humanity who regard our secular forms of democracy as an alien concept, inconsistent with the deeply held values that guide their lives?

They will stay where they are now (namely, seriously lagging behind the West). Some of them will do better due to the commodities cycle in progress (e.g. Russia), or leveraging oversupply of a very cheap labor (e.g. China, India).

m.

[touchring]

Re: The Long Fall: A Market Without Parachutes

MPS? They can't be bothered with economics. These guys are busy catching political activists in China and craps.

Unless you do a field visit to various parts of China, rural, urban, inland, coastal, you will know that statistics don't count.

Beijing alone has more than 3 million cars, half the entire car population of the entire Taiwan, and Beijing is not even among the top 10 major China cities in income per capita.

Above statement is just plain wrong. Or is it official information from the MPS?

[touchring]

Re: The Long Fall: A Market Without Parachutes

As many as 15 chinese cities already got or are building subways and light rail networks. I think this might alleviate the oil problem for the time being.

Just an opinion: China's petroleum consumption seems so low relative to global comparative benchmarks for developing nations that it alone poses a major risk to supply / demand equilibrium - starting right now, and extending right through the next two decades.

[c1ue]

Re: The Long Fall: A Market Without Parachutes

MPS? They can't be bothered with economics. These guys are busy catching political activists in China and craps.

No, they also do internet propaganda. Unless you're involved with the MSS...

Beijing alone has more than 3 million cars, half the entire car population of the entire Taiwan, and Beijing is not even among the top 10 major China cities in income per capita.

I won't even talk about what income per capita means when 1% of the population makes 90% of the money.

If there are 12.8M Chinese in Beijing, or 1 in 4 with cars, then that means the 3.1B/4 = 800M Chinese 'urban third' - 1/4 of which have cars, collectively own 200M vehicles?

I don't think so.

According to the government, the number of privately owned vehicles just passed 20M in 2006.

http://english.peopledaily.com.cn/20...28_353091.html

This article goes on to say that China has 30 cars per thousand people vs. the world average of 120 cars per thousand.

And the US? Over 800 per thousand.

Even doubling the private-owned number to 40M to represent the 'People's government' owned vehicles, your assertion is again just plain wrong.

Unless you do a field visit to various parts of China, rural, urban, inland, coastal, you will know that statistics don't count.

It looks more and more like your 'on the ground' insights are restricted to those peak areas primarily benefitting from the export boom.

Although China is producing cars rapidly - even at 5M or even 10M a year it will take a long time to hit 200M. And even before that, where will all of these cars go? Traffic is already nightmarish.