When the facts change, I change my mind. What do you do? -- John Maynard Keynes

Monday, June 25, 2012

The Truth about China?

Financial Repression, Chinese Style - NYTimes.com - Paul Krugman: "Financial Repression, Chinese Style I have no idea whether this John Hempton piece on China is at all right, but it’s a terrific read, and provides food for thought. Hempton basically argues that China has turned financial repression — controlled interest rates on deposits, which ensure a negative real rate of return — into a giant engine of kleptocracy. The banks extract rent from depositors, transfer those rents on to state-owned enterprises in the form of cheap loans, and then the Party elite essentially embezzles the money. Underlying the whole system is a high savings rate that Hempton attributes to the one-child policy."

Bronte Capital: The Macroeconomics of Chinese kleptocracy: "China is a kleptocracy. Get used to it. I start this analysis with China being a kleptocracy – a country ruled by thieves. That is a bold assertion – but I am going to have to assert it. People I know deep in the weeds (that is people who have to deal with the PRC and the children of the PRC elite) accept it. My personal experience is more limited but includes the following . . . (go to the link above and read the full post) . . . .This however is only the beginning of Chinese fraud. China is a mafia state – and Bo Xilai is just a recent public manifestation. If you want a good guide to the Chinese kleptocracy – including the crimes of Bo Xilai well before they made the international press look at this speech by John Garnaut to the US China Institute."

One of the interesting things revealed in Hempton's article is that the Chinese are getting a better return on their low-interest U.S. securities, than the lower (or even negative) returns from their other investments.

And finally, take everything above with a "grain of salt"--I would also recommend reading the comments to Krugman's post referenced above.


The Big Picture

Financial Crisis - The Telegraph

JohnTheCrowd.com | The Sailing Website

Craig Newmark - craigconnects