Ghosts in Chinatown

Like many people who actually understand how T-bills work and what a trade deficit is, (i.e. - pretty much everyone except journalists), I'm sick to death of hearing about what a financial powerhouse China has become. It's all a load of crap.

The journos push the hogwash about China because they're a bunch of lefty liberal fuckwits and they're desperate for a communist state to succeed. They'll die waiting of course, but in the meantime we have to listen to the likes of Katie "Casting-Couch" Couric spout her inane drivelings about China. (I'm not even gonna go into the "muslim Cosby show" thing, since: 1) it's off-topic and; 2) I don't think my mind can de-tune enough to be able to understand the naive vapidity which that stupid cum-catcher substitutes for logic.)

Back on topic, the politicos and their vulture capitalist pals pump up the China balloon because it keeps the populace in a state of edgy near-panic. "The yellow boogey-man is gonna get you if you don't pay more taxes, work extra hours for free, and stop bitching about the fact that you haven't had a raise in eight years."

Fortunately some people live in reality, like these guys over at Fortune. They're pulling back the mandarin robes and pointing at the scrawny, shriveled emperor underneath.

It seems the Red Chinese government is building dozens of huge, sprawling, modern cities. Problem is, no one lives in them...

We're not talking ghost towns of the old West type, the ones that time passed by and left as mere intersections with a saloon and a hardware store. We're talking massive cities that the Chinese government is in the process of building in the hopes that people will come. But the people have not come. Yet the billions are in the process of being spent.

[Analyst Gilem Tulloch says,] "If you want to ruin a banking sector, you would do three things. First, grow its loan book too quickly. Second, have the government direct its lending. Third, have some of that lending go to the government itself. China is in the process of doing all three. Did I mention that the Chinese government pays about 200 basis points less than most creditors and it has a history of a high percentage of non-performing loans? They have mispriced capital in a most egregious way, and have created a bubble."

Translation: Communism doesn't work. Never has, never will. Why people have to keep re-learning this simple fact is quite beyond me.

Tulloch and his partner, Dr. Jim Walker, the longtime chief economist at regional brokerage powerhouse CLSA, have created a subscription-based research business at Forensic Asia that they hope will enlighten in ways beyond the usual dregs that come out of sell-side research operations. Enlighten and terrify, more like it. Or excite: well-known short-seller and increasingly vocal China bear Jim Chanos is a fan – he's the one who alerted most of the press to the report in the first place. Says he: China is on "an economic treadmill to hell."

I'll say it again: that's because communism doesn't work. Of course, modern China (post '99) is increasingly coming to resemble fascism, defined as state control of privately-owned industry. Either way, it won't work long term. Red China will flounder economically, just like the Europeans are currently flopping around in their socialist latrine. In fact, it wouldn't surprise me if the fall of the yuan triggers the collapse of the eurodollar -- or vice versa.

In case you're thinking that'd be bad news for the good ol' US of A, remember that we aren't tied to them, they're tied to us. They buy our T-bills (i.e. - our debt) and they export to our consumer market, which is the largest in the world by several orders of magnitude. The trade deficit works in our favor in the event of a currency crash in Europe or the Pacific Rim. We can survive (and in my opinion, thrive) without Europe and China. The reverse is not true at all.

Our economy is based on private capital and profit motive -- and provided we can get this leftist dipshit out of the White House in 2012, it will stay that way. There is no other functional form of economy for creating wealth. Anyone who thinks differently is either delusional, a poor student of history, or a mixture of both.