Krugman.

China’s Naked Emperors

Does this guy write every fucking Friday? Krugman, some other color than blue for once, okay? Let's see what he has to say:





Politicians who preside over economic booms often develop delusions of competence.... We’ve seen it in many countries: I still remember the omniscience and omnipotence ascribed to Japanese bureaucrats in the 1980s, before the long stagnation set in.

Words can be hurtful, Paul. I invested in the Japan Fund in the early '80's. Didn't get quite "full return" on my investment.
...
This is the context...understand...strange goings-on...China’s stock market. In and of itself...shouldn’t matter... But the authorities...chosen...put...credibility on... line...trying to control...market...

Yes, they have.

...are in the process...demonstrating...China’s remarkable success over the past 25 years notwithstanding,...nation’s rulers...no idea what they’re doing.

You can't notwithstand 25 years for godssake. Okay, go on Krugman:

...fundamentals,,,: China...end of an era...era of superfast growth, made possible...large part...vast migration...underemployed peasants...cities. This reserve...surplus labor...dwindling...growth must slow.

That was the part I got tired on before. Don't have enough peasants now, thought there were too many. Not enough. Okay.

But China’s economic structure is built around the presumption of very rapid growth. Enterprises, many of them state-owned, hoard their earnings rather than return them to the public, which has stunted family incomes; at the same time, individual savings are high, in part because the social safety net is weak, so families accumulate cash just in case. As a result, Chinese spending is lopsided, with very high rates of investment but a very low share of consumer demand in gross domestic product.

That is the next paragraph but it doesn't flow. He just ditches the peasants. Don't use "But" then, Krugman. He wrote that before, too. Too much hoarding not enough investment, like the Japanese.

This structure was workable as long as torrid economic growth offered sufficient investment opportunities. But now investment is running into rapidly decreasing returns. The result is a nasty transition problem: What happens if investment drops off but consumption doesn’t rise fast enough to fill the gap?

Gettin' tired again. Isn't that circular? I don't know.

What China needs are reforms that spread the purchasing power...

Said that before, too. I understood it. Can't hoard, gotta buy toys. Gotitgotitgotit. Next.

Meanwhile, China’s leaders appear to be terrified — probably for political reasons — by the prospect of even a brief recession.

That makes total sense, although I've said that before.

So they’ve been pumping up demand by, in effect, force-feeding the system with credit...

Don't get that. If people aren't using the money they have--they're hoarding it--why would they want to use credit to buy? In other words, he's saying the Chinese have some dough, they're just not spending it. In my experience anyway people who stuff money under the mattress aren't going to spend money they don't have, i.e. on credit, incurring interest rates however minimal, when they won't spend the money they do have. The image I have of those people is millionaires living in shacks, driving old rust-bucket cars like mine. 

 ...including fostering a stock market boom....

How does fostering a stock market boom increase purchasing power?

Such measures can work for a while, and all might have been well if the big reforms were moving fast enough. But they aren’t, and the result is a bubble that wants to burst.

There is a bubble! Bubbles aren't good, we know that!

China’s response has been an all-out effort to prop up stock prices. Large shareholders have been blocked from selling; state-run institutions have been told to buy shares; many companies with falling prices have been allowed to suspend trading. These are things you might do for a couple of days to contain an obviously unjustified panic, but they’re being applied on a sustained basis to a market that is still far above its level not long ago.

That's the next paragraph and that is what Zhongnanhai is doing...I don't know why they're doing that and KRUGMAN ISN'T EXPLAINING IT TOO GOOD!

What do Chinese authorities think they’re doing?

I don't KNOWWWWW! 

In part, they may be worried about financial fallout. It seems that a number of players in China borrowed large sums with stocks as security, so that the market’s plunge could lead to defaults.

Eyes glazing over.

But it also looks as if the Chinese government, having encouraged citizens to buy stocks, now feels that it must defend stock prices to preserve its reputation...

Gotitgotitgotit.

...And what it’s ending up doing, of course, is shredding that reputation at record speed.

Indeed, every time you think the authorities have done everything possible to destroy their credibility, they top themselves.

Then why are they fucking doing it if they're shredding their reputation, huh? What, do they think they're creating a market for reputation shredders? Maybe people will buy reputation shredders instead of paper shredders? If you see that they've bird pumped, if even I see that this market intervention is a bird pump, why doesn't Zhongnanhai see it as a bird pump? Maybe Zhongnanhai sees it as keeping 25 years of...What did you say?..."remarkable growth" going? 

So what have we just learned?

I haven't learned SHIT from this?

China’s incredible growth wasn’t a mirage, and its economy remains a productive powerhouse. The problems of transition to lower growth are obviously major, but we’ve known that for a while. The big news here isn’t about the Chinese economy; it’s about China’s leaders. Forget everything you’ve heard about their brilliance and foresightedness. Judging by their current flailing, they have no clue what they’re doing.

Times, do you have to have this guy write EVERY Friday? Is that what we've learned? Who amongst us learned that from this article? All I learned was there aren't enough peasants. Pisses me off every time.