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People's Republic of Bankrupt [1]

['This Content Is Not Subject To Review Daily Kos Staff Prior To Publication.']

Date: 2023-07-15

By David Glenn Cox

I’ve hesitated to write about this subject because the story comes from overseas. This is America and Mericans don’t care much about the goings on overseas. We don’t care much about Canadian forest fires, only when the smoke drifts across our borders. We might pay attention to natural disaster or two or wars for a week or so, and then go back to contemplating our Merican navels.

But at the same time this story hits close to home. I’m a veteran of the 2008 financial collapse just like millions of you. I understand that meaningless financial headlines are sterile and will turn the audience off. Yet, the question before us is can the second largest economy on the planet implode without the tsunami reaching our shores?

Who wants to talk about Covid-19? Nobody, that’s who. But Covid-19 is a big part of this story. While we’ve all put away our masks the issue still persists in China.

Since China joined the World Trade Organization it has been money a go go in China. While investment returns in this country might yield 3 or 5 or 7%. In China, returns were better than 10%. Growth is/was everything. All the big boy corporations rushed to China for the low production costs. Let the good times roll!

The money rolled in and how do you keep the party going? You reinvest the money before it gets cold in your hands. Money equals growth and growth equals money. And as long as things were going good, no one questioned the details or watched the corruption. But sooner or later the music is going to stop just as it stopped in 1929. Sooner or later, the growth stops, and a general reckoning occurs.

So, a Chinese Real Estate developer goes to the bank to borrow money to build a huge 40 building 40 story apartment complex. The project is immediately approved. Chinese workers are working hard and want that home we all want. But in China, you buy your apartment before they build it. You make your down payment and start making your monthly payments. Then, in three or five years, when the building is complete, you can move right in.

Then when the building is roughed in and most of the apartments are sold the developer gets his profits which they immediately invest in another project. Work slows on your apartment because that is now a drag on the developers’ profits. It is estimated there are over a million unfinished apartments and the developers are going belly up, just like they always do.

Government agencies were under the same mandate to spend, spend, spend to spur growth. And so, the government has spent trillions of dollars on infrastructure projects. High-speed rail to the planned developments where no one wants to live. Beautiful train stations serving two trains a day with few passengers. The government has tried relocating universities and government agencies in the name of lowering congestion in Beijing. But it also helps growth to force people to relocate into empty planned developments.

One day, the rain and the reckoning come, and the growth stops as the economic engine can no longer climb the hill and begins to roll back.

The Merican economy is a mile wide and a mile deep. The Chinese economy depends almost exclusively on exports and is a mile wide, but only inches deep. There are no social safety nets. There is no FDIC in China.

We all know what Covid-19 did to our economy, but for China it knocked the props out from underneath the growth forever strategy. Manufacturers began to diversify production moving to other Asian nations due to supply disruptions. Goldman – Saks has put most of major Chinese banks on the sell list. No more money coming in. But the growth was supposed to last forever.

All the profits have been spent, and none were saved for a rainy day. The Chinese auto market has collapsed with cars selling below the wholesale price, if they sell at all. The car companies got together and made a deal not to cut prices anymore and literally broke the agreement the very next day. New car dealerships are going belly up by the thousands. This leads to more layoffs and factory closings and speeds the ball rolling downhill.

The unemployed can’t make their mortgage payments for the apartment that isn’t finished and is two years behind schedule. It goes back to the banks whose profits evaporate with the empty apartment developments and empty factories. So, when the depositors try to use their debit cards, they find their money is frozen with limits placed on withdrawals.

In Merica when a bank fails, they lock the door and go home. In China, the doors stay open, and they politely tell you they don’t have your money. Maybe someday we will, so don’t call us, we’ll call you. High net worth Chinese saw this coming and have left the country in droves same as it ever was. The rich get richer, and the poor and middle class take it up the backside.

All this bellicose talk about invading Taiwan and military maneuvers all going back to the old government adage that when the going gets tough, the tough change the subject. Angry denunciations of the United States are nothing more than “Hey, look over there! Look what they’re doing!” The gambler who has lost all their money and now believes the game has been fixed all along.

The Chinese government policy has been growth uber allis. The sun is shining, and it will never rain again. But we know that is not true. Our American economic experience is more mature, but in China the market always goes up. So now you can see and understand the problem. The government has spent all the money and put none away for a rainy day. Growth equals money and money equals growth until it doesn’t.

The Chinese government began issuing 25-year bonds that pay no interest for four years and the banks are highly encouraged (if you know what’s good for you) to buy. Coerced lending on highly leveraged and over extended banks. And that’s why you can’t get your money out of the bank anymore.

But can the second largest economy on the planet implode and exempt the United States or Europe? Will the contagion not reach our shores? Yeah, but what about Hunter Biden’s laptop!

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[1] Url: https://www.dailykos.com/stories/2023/7/15/2181414/-People-s-Republic-of-Bankrupt

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