In a recent article, How China Ate America’s Lunch, Clif Carothers described what China has accomplished in the last thirty years:

In thirty short years, China was able to accelerate her GDP from $216 billion to $6 trillion. She amassed reserve capital of $3 trillion. She reversed America’s fortunes from the greatest creditor nation to the greatest debtor nation. She gutted America’s factories while creating the world’s largest manufacturing base in her own country. A measure of output that highly correlates to GDP is energy consumption. In June of this year, 2011, China surpassed the United States as the largest consumer of energy on the planet. While the U.S. consumes 19% of the world’s energy, China consumes 20.3%.

While China was growing their economy by a phenomenal 2,800%, the U.S. GDP grew from $2.3 trillion to $15 trillion – a mere 650% increase, of which 420% was due to inflation. There is no question that China’s progress has been remarkable. The question is whether that growth is sustainable and built upon a solid foundation.

In a February 2010 Casey Report article titled Is China’s Recovery a Fraud?, my thesis was the $2.1 trillion stimulus package rolled out by Chinese authorities after the 2008/2009 financial crash was leading to enormous malinvestment.

The officially announced stimulus package in November 2008 totaled $586 billion and was to be invested in key areas such as housing, rural infrastructure, transportation, health and education, environment, industry, disaster rebuilding, income building, tax cuts, and finance. In reality, the central government pumped an additional $1.5 trillion into the economy in an effort to maintain social stability through the subsidization of its industrial base. Chinese banks funneled cheap loans to state-owned enterprises in order to manufacture artificial profit margins to keep Chinese goods competitive and employment maximized. In the short term, the stimulus produced the desired effect.

Specifically, the Shanghai Index – which had topped out at 5,913 in October of 2007 and had fallen to a low of 1,678 by November 2008 – responded to the stimulus by rebounding to 3,300 in January 2010, as the chart below shows.

As with all monetary and fiscal stimuli, however, the initial high is always followed by a hangover. Today the Shanghai Index stands at 2,350, down 29% from when I penned my article. China is also experiencing accelerating inflation, a real estate bubble of epic proportions, a looming banking crisis due to the billions in bad loans made by Chinese banks as commanded by the Chinese government, and growing social unrest due to rising food and energy prices.

There are few opinions in the middle regarding the China story. People are either convinced China is a juggernaut that can’t be stopped and will become the dominant world power (a recent, global Pew Poll found that 47% of respondents think China is or will be the dominant global power), or they see a colossal bubble that will burst and cause worldwide mayhem. While some might think my world-view has a negative slant, I tend toward what I think is healthy skepticism that causes me to view things in a more realistic manner.

Based on the facts as I understand them, the Chinese government has created a commercial and residential real estate bubble in an effort to keep peasants employed and not rioting in the streets. In the case of the U.S. subprime mortgage bubble, critical thinkers like Steve Eisman and Michael Burry figured out it was a bubble three years before it burst. Jim Chanos and Andy Xei have been warning about this Chinese bubble for over a year. They have been scorned by the same Wall Street shills who denied the U.S. housing bubble. As Eisman and Burry proved (reaping billions), just because you are early doesn’t mean you are wrong.

Inflated Dreams

The table below paints a troublesome picture of rising inflation and gigantic over-investment in real estate. And this takes into account the fact that, much like the Bureau of Labor Statistics (BLS) here in the U.S. massages data, the Chinese statistics are tortured by the Party to paint the best possible picture. Even still, the Chinese government’s own numbers show inflation escalating as economic growth is slowing.

And the trend is not improving: The latest data show year-over-year inflation surging by 6.4% in June and food prices skyrocketing by 14%. With annual disposable income of less than $2,500 in urban areas and just $600 in rural areas, food and energy account for a huge percentage of the average Chinese person’s daily living expenses. The Chinese authorities are terrified by the revolutions sweeping across the Middle East and are desperate to put out the inflationary fires.

To contain stubbornly high inflation, the Chinese central bank has raised the benchmark interest rate three times this year, including the latest rate hike of 25 basis points announced on July 6. In an attempt to rein in excess lending, it has also hiked the reserve requirement ratio six times, ordering banks to keep a record high of 21.5% of their deposits in reserve.

Even with inflation surging, the Manufacturing Output Index fell to 47.2 in July – the lowest in 28 months, and indicating contraction. China’s automobile industry, which overtook the U.S. in 2010 with sales of 18 million autos, has experienced a dramatic slowdown, with growth of only 3% through June versus 32% growth last year. For all of 2011, the China Association of Automobile Manufacturers expects sales to decline versus 2010.

Real Estate Out of Reach

In response to the 2008 worldwide financial collapse, Chinese authorities unleashed $2.1 trillion of stimulus, or almost 33% of GDP. This compares to the U.S. stimulus of $800 billion, or 5.5% of GDP, spent on worthless Keynesian pork. Unlike the U.S., where no jobs were created, China’s command-and-control structure funneled the stimulus into building cities, malls, roads, office buildings, and residential units. Millions of Chinese were employed in creating properties for which there was no demand. Moody’s approximates that China’s banks have funded at least RMB 8.5 trillion (US$1.3 trillion) of the RMB 10.7 trillion of outstanding local government debt, which was a significant portion of the 2008 national stimulus package. When the central authorities tell the banks to lend, the banks ask, “How much?” The result has been soaring real estate inflation and malinvestment.

Everyone has seen the pictures of the ghost cities (Chenggong) with no inhabitants; ghost malls (South China Mall, Dongguan Mall) with no shoppers; residential towers with no residents; and roads with no cars. Analyst Gillem Tolluch from Forensic Asia Limited describes the scene in China today:

China consumes more steel, iron ore and cement per capita than any industrial nation in history. It’s all going to railways that will never make money, roads that no one drives on and cities that no one lives in. It’s like walking into a forest of skyscrapers, but they’re all empty.

There are 218 million urban households in China, and the central government ordered local governments to build 36 million more units by 2015. They just have one small problem: Prices for apartments in Shanghai and other major metropolitan areas have soared by over 100% in the last five years.

The average size of a “cheap” apartment in second-tier Chinese cities is 60 square meters (650 sq ft) and fetches an average price of $1,230 per square meter, or $73,800. Mid-tier apartments in Shanghai or Beijing sell for $3,500 per square meter, or $210,000 for an average size apartment. “When prices are over 20 times more than annual household income, it’s not affordable,” says Andy Xie, an independent economist in Shanghai. Millions of working Chinese have been priced out of ever owning property and blame the corrupt local government cronies and connected speculators. Anger is simmering among the masses.

Confirming the overvaluation, a report by the Chinese Academy of Social Science points out that in the country’s metropolitan centers today, house prices per square meter generally amount to between 50% and 100% of average annual incomes. “To secure a flat of 90 square meters, an average working family in Beijing and Shanghai will have to work for more than 50 years to pay off their loans, compared to five to 10 years in the developed world,” according to the report. Report authors Lu Ding and Huang Yanjie conclude that, “[S]ky-high housing prices have undermined housing affordability and caused great anxiety and resentment among the public, who are wary of the conspiracy among ‘speculators’ – developers and government officials in charge of real estate businesses.”

House of Cards

China has methodically and relentlessly grown their economy for the last thirty years. However, as the U.S. and Europe discovered the hard way with their real estate busts, if one makes an abundance of cheap-money loans to speculators, prices will rise far above the true value of the asset bought with the debt. And in time, the bubble must burst. The pressure in this bubble is mounting. Andy Xie lays out the real situation on the ground in China:

No other government in the world would spend that kind of money. If you go to local Chinese cities, you will see what they spent that money on: Tens of millions on just trees, parks and government buildings.

All of the major ratings agencies are warning about an impending banking crisis in China. Fitch downgraded the country’s credit rating and warned there was a 60% chance the Chinese banking system will require a bailout in the next two years. Just like the U.S., China has too-big-to-fail banks, with five banks accounting for 50% of the lending in China. In a July 2011 report, Moody’s cautioned that the non-performing loans on the balance sheets of Chinese banks could rise to between 8% and 12%, versus the 1% proclaimed by Chinese officials. China’s regulators have belatedly applied the brakes, but it is too late. The house of cards looks susceptible to just the slightest of breezes.

Fraser Howie, managing director at CLSA in Singapore, captured the essence of the coming collapse in his recent assessment:

If you are going to address the misallocation of capital in the banking system and credit system, that’s going to have huge knock-on effects on the profitability and viability of the banks. And if there were a major banking crisis, you would start to see money trying to get out of China. What would the government do to maintain stability? You could have a whole host of problems. It’s almost far too complicated to contemplate.

There is one sure thing regarding bubbles: They always pop. It’s in their nature.

“There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.”Ludwig von Mises

Originally published in the August 2011 edition of the Casey Report.


  1. The China story reminds me of the whole obsession with the success of “Japan, Inc.” in the 1980s and all the predictions about how Japan was going to dominate world commerce from then on out.

    We all know how that turned out.

    This time/country is not different. The only question is how ugly the fallout is going to be.

  2. I was just there last week (including Beijing). It didn’t matter what city I flew into, you could see construction cranes from horizon to horizon. Most of the high-rise apartments are being built on pure speculation…buyers are not moving into them. They have the mindset that what’s happened in Japan, what’s happened in the USA, can’t possibly happen here. Mao said so…it’s all in his little red book.

    The big difference is that China holds the debt and not other countries. Their citizens will bear the brunt of the collapse. And will they be pissed off!

  3. Blah blargle argle blah CHINA WILL TAKE OVER THE WORLD!!!! MUUUUUHHAHAHAHAHAH!!!! Blah blargle argle blah Blah blargle argle blah Get off my lawn, kids!

  4. Many of us think that our government will declare (more) war(s) to cover up the gutting of our real economy.

    Why wouldn’t China do the same thing.

    Lookee there, solving two problems with one solution.

    Our governments can just declare war on each other.

    Problems solved.

    and Fourth Turnings/Mayans /solar flares suck.

  5. It will be interesting to see what happens in China… if you think about it, the Keynesian idea that government can control / manipulate the market in order to avoid collapse — and that deficits don’t matter — works perfectly with their system of governance. If anyone can pull it off, they should be able to.

    But they won’t.

  6. China’s just like Orwell’s “Animal Farm”, where you started with some grand utopian vision and ended up with “All animals are created equal, but some are more equal than others.” And the ruling pigs sent the old horse to the glue factory.

    But wait — now doesn’t that describe what we have as well? “All people are created equal, but a few big banks and multinational companies are people that are more equal than others.”

  7. A friendly reminder:

    #71 The United States has had a negative trade balance every single year since 1976, and since that time the United States has run a total trade deficit of more than 7.5 trillion dollars with the rest of the world. (we’re giving our money away)

    #69 The U.S. trade deficit with China is now 27 times larger than it was back in 1990. (we’re giving vast sums of OUR money to China).

    #63 The United States has lost a staggering 32 percent of its manufacturing jobs since the year 2000. (we gave them our manufacturing)

    #62 If you can believe it, more than 42,000 manufacturing facilities in the United States have been closed down since 2001. (ibid)

    #61 Between December 2000 and December 2010, 38 percent of the manufacturing jobs in Ohio were lost, 42 percent of the manufacturing jobs in North Carolina were lost and 48 percent of the manufacturing jobs in Michigan were lost. (ibid)

    “She amassed reserve capital of $3 trillion. She reversed America’s fortunes from the greatest creditor nation to the greatest debtor nation. She gutted America’s factories while creating the world’s largest manufacturing base in her own country.” (WW3, the economic war, won by China)

    That ship has sailed, and it ain’t coming back. China has wiped out the U.S. already, regardless of what happens in China. Are we going to bring back all the manufacturing and jobs? It would take a decade just to get back what we lost, and we’ll never get the trillions we gave them via trade deficits. Our number one export to China: (#65 In 2010, the number one U.S. export to China was “scrap and trash”). It’s game over, folks.

    So, China decided to follow our lead in how to destroy an empire? They’re doing a great job of pissing away all the money we gave them. They were dumb enough to follow our economic principles, too bad for them, they will, by the looks of things, implode. But the damage is done.

    Btw, Japan Inc. did kick our asses, and they still are. People keep buying Toyotas, Hondas, and Nissans, with no thought whatsoever. Their crony capitalists and corrupt government pissed away all the money they got from us also (just like China).

    The only problem with Asian economies is nobody taught them how to consume. In fact, they are taught not to consume, so the government takes over consumption, as evidenced by stimulus and infrastructure construction and spending in both China and Japan.

    Well, at least they still have our military around to protect and serve. We give them trillions for their “finished products” and we spend trillions on our military to protect them. They must love the U.S. over in Asia. They are laughing all the way to the bank.

  8. If the Chinese can ever count to three without cheating …. maybe then I’ll believe their numbers. Meanwhile, they can go fuck themselves.

    Meet the two biggest fucking liars on the planet.

  9. Once again the arrogance of the elites does itself it. The Party is the best and the brightest and they will direct all the activities of the great unwashed. It didn’t work in Russia, It doesn’t work in the US and it won’t work in China. Now all that is left is for our best and brightest to launch a trade war and watch the jingoism begin. We (the Communist Party) didn’t do this to you, it was the evil Americans. I (President Obama) didn’t do this to you, it was the currency manipulating Chinese. To paraphrase Slim Pickens in Blazing Saddles, “Someone’s gotta go back and get a shitload of bullets”

  10. I love the comparisons of today’s China to the Japan bubble of the late 1980’s.

    In 1989, real estate prices in Tokyo’s financial districts ranged from $85,000 to $93,000 per SQUARE FOOT.

    Japan’s property in 1989 was $20 trillion, DOUBLE the value of the entire world’s stock markets.

    By 2004, prime property in Tokyo’s financial district was less than 1% of its earlier peak.

    Tens of trillions of dollars were wiped out with the collapse of Tokyo stock and real estate markets.

    China today does not remotely resemble the excesses of Japan in the late 1980’s. I mean, that is such a fucking nonstarter that it is laughable.

  11. Smokey – I have been waiting for you to weigh-in here. China in no way can be compared to Japan.

    I have no doubt that China will experience some lumps and bumps, and the rate of growth experienced over the last 30 years (12%/yr) will slow, but I believe that they will dominate the world economy in coming decades (do not forget India as well). As the “developed world” stagnates and self-destructs owing to the FSA/welfare state/short-term thinking, the ever-patient Chinese will continue to plod away – and plot away. The bastards are smart, they are patient, and they have long-term goals – and they are not going away.

    1. Smokey is right. They cheat. Their economic statistics are a fraud. I had to update the Shanghai Index data from two months ago. When I wrote this, the index was down 18% from its high. Now it is down 29%.

      What stock market declines 29% when its country’s GDP is really growing at 9%? Seriously?

      Some people are beyond gullible believing a fantasy. If your two biggest customers (Europe and U.S.) are in recession, who is buying the shit produced by your slave labor?

      I understand someone says it is a stone cold lock that the China bubble won’t pop.

  12. Smokey – they cheat by western standards (boy do they ever). I doubt they even see it that way. For instance, they can look you right in the eye and lie about the age of gymnasts, or put up a swimming (women’s!) team that looks like this, that came out of nowhere, collected a bunch of medals, and then disappeared never to be seen again, all the while swearing there were no steroids involved:


  13. A man I know well who deals a lot with China offered this advice – he said that you must realize that any investment you make in China will be viewed, in general, as a donation. The minute they think the value of a donation is greater than the anticipated future benefits of the relationship, they will simply confiscate the donation, pitch you out on your ass, and offer not even an apology. It was a donation after all, and if you were too stupid to understand that, it was your own fault.

    I have bought container loads of goods from the fuckers, and have the containers actually at the docks ready to be shipped, and find out that someone else offered one cent more per peice, so the Chinese sent my gods to them instead. That I had contracts, etc in place was neither here nor there.

    They do not understand the idea of western contracts nor of investment. Buyer beware is taken to a whole new realm.

  14. llpoh,

    Yes, they are some sleazy assholes. And I don’t doubt that China may have some areas of real estate hit the wall—all the evidence indicates that will happen, primarily in some coastal areas. I could easily see China going flat in growth for a year or two, especially when TSHTF in Europe.

    I just don’t buy all this talk of some sort of collapse—“Dubai times a thousand” so said Jim Chanos. Of course, now he says it was tongue in cheek.

    My take on the empty buildings, sure some of it is overcapacity, for NOW.

    But China has been transitioning her peasants from the fields into the cities for the past three decades. First they build the houses, then they build the roads, sewage and other infrastructure to handle the population. The people move in last. This is an ongoing multi-year transitioning, repeated over and over. This is exactly what they have been doing for twenty years—-building the shit and then moving the population in.

    There are statistics on that stuff——x % lived in rural areas 25 yrs ago—–now 3/5 x live in rural areas and the others have been moved to the cities. ETC.

    1. Some people believe in the Chinese miracle. Some people believe in the tooth fairy. Some people believe that Chinese peasants don’t have to work for 500 years to afford one of the condos being built in Shanghai today. Some people believe ghost cities and ghost malls are just long range planning. Some people believe in Santa Claus. Some people believe there is an imminent terrorist attack happening by September 30.

  15. When they bow with a smile, beware… they are ripping you off.

    When they bow with a smirk, proceed with caution as the deal might be fair.

    When they bow with a scowl, it is because they think you’re fucking with them.

    Under no circumstance should one think they hold “White Barbarian” in any esteem…

    That is why they insist on putting shrimp in my chow mein when I said chicken and smile and wave when you complain. God dammit, what part of chicken don’t they understand?

  16. I remember Admin’s predictions – Phillies a stone cold lock, Obama invading the ragheads by the mid-term elections, etc. And I see Smokey saying that the Chinese will have some lumps coming.

    But I believe that they are a force to be reckoned with, and in the next few decades will come to dominate the world economy by shear weight of numbers, combined with a great focus and legions of college grads educated in sciences/math/engineering and IT. Will a real estate bubble pop? I imagins so. Will it be more than a temporary setback? I doubt it.


  17. Admin predicting the next US invasion of the middle-east:


    And here he is predicitng when Philidelphia will actually win a World Series or Super Bowl:


  18. You make a good case, Admin. China’s got problems beyond their financial sector, deep social issues that will not be squashed. They are trying to combine the iron fist of communism with the invisible hand of capitalism, it won’t be easy.

    That being said, you are totally off your rocker.

    Didn’t they build a gazillion nuke plants? That will sure come in handy when peak oil really puts the stranglehold on growth.
    Food inflation running at 14%, you say? What is it here? 12%? And they are raising interest rates? Isn’t that what we want shitstain Bernanke to do? Sounds like china is preparing for the future.

    Smokey, I can just imagine… A Chinese officer enters a small hut belonging to some peasant farmer in the middle of nowhere. Then explains to the man inside that he is to move to the city of X, where he will start his new life as an advertising executive.

  19. llpoh,

    While I blog here, I’m also watching Rebel Without A Cause, Rudy, V for Vendetta, and the republican debate.

    Herman Cain just packed Ron Paul’s shit in the worst smack down yet in the debates this year. It was fucking brutal, and Cain was defending himself. Each candidate was to ask any single other candidate a question (gotcha type), and that candidate was to respond.

    When it was Paul’s turn, he looked like a whiny old maid and directed his question at Cain. Cain all but called him a liar, and absolutely scorched his ass.

    If Paul had even a prayer, it is history now. I laughed my ass off when blackie unloaded on him.

  20. Admin – you really know you are on the wrong side of an argument when Punk pops up, bitch slaps you, and trots away singing Tra-la-la-a-la. :


    Smokey – Ron Paul simply ain’t got the right stuff. Too bad. He seems like an honorable guy, but that will not get him the presidency. He is at best a fly in the ointment.

  21. Admin is going to need a much bigger flyswatter than he has.

    I need to save the link to that poster – it will bring hours of entertainment to readers of TBP. And the “I told you so” moment will be divine.

  22. Hey Smokey, here is how I smoke Cain’s charred ass.

    Under his 9-9-9 plan anyone making $20,000 per year currently paying no taxes, will pay $1800. Under his 9-9-9 plan slap an addition 9% federal sales tax on every state and city sales tax.

    How could anyone rich or poor vote for that shit? Raise taxes on the lowest bracket, that will go over well given the current mood of the country. Raise taxes on goods purchased, that will hurt rich folks.

  23. Oh my. The big dogs are roaming TBP. Hysterical. Unable to take the Administrator on based on the facts, the BIG DOGS fall back to their usual lightweight tactics. YAWN.


  24. Admin struggles with the difference between fact and opinion. I have found this chart to help him understand the difference:


  25. Petey,

    You don’t need to smoke Cain’s charred ass. Do you really think republican’s would put his black ass on top of the ticket ? Never happen.

    But if the polls reverse, and Obama is the favorite, the republican nominee would be smart to tab Cain as the VP.

    Cain is better than Perry, Paul, Santorum, Huntsman, Bachmann.

    A CNN commentator said a little while ago that Newt Gingrich frames every debate. A CNN co-anchor said Gingrich WINS every debate, but his poll numbers never move.

    Cain, Perry, Paul, Gingrich, Bachmann, Huntsman, Santorum—-none have a prayer.

    The republican nominee will be Romney, so sorry. He’s got the nomination in the bag.

    He’ll never beat Obama. If Obama is ahead in the polls next October, Obama will coast. If Obama is behind in the polls, he’ll ditch Biden and tab Hillary for VP.

    Either way, Obama wins.

  26. Smokey – I do not have a good feel for how it will all play out, but the GOP is in shit city seems to me. Obammy is most likely going to be re-elected. In the midst of perhaps a new depresion. Hooray for the American voting population.

  27. “Do you really think republican’s would put his black ass on top of the ticket ?”
    Yeah, there are some pretty racist Democrats, but Obama got elected.

    Considering my judgement of the masses being totally ignorant of what is going on, ultimately I fear your final conclusion is correct. However, I find it laughable that you use a CNN commentator to back up your statements about Newt. CNN is the epitome of state controlled media.

  28. Admin cannot spell wits, but he can poke fun at those that can.

    wits plural of wit (Noun)

    1. Mental sharpness and inventiveness; keen intelligence.
    2. The intelligence required for normal activity; basic human intelligence.

    mind – intellect – sense – reason – nous

  29. Admin pulls his ridiculous response off of the site, but LLPOH has already spotted it. To all of you who missed it, Admin came on and called me a mongoloid who should be banned for mis-spelling wits. Realizing his mistake, he pulled the post. Gutless. Pure gutless.

    I hereby claim victory – I have forced him into the most despicablre of actions – using his magic Admin button to wipe out the most grossly stupid of comments in order to save face.

    1. llpoh

      Are you loosing your mind?

      Very sad trying to convince people about a phantom post.

      Absolutely pathetic.

      What Ivy League college did you graduate from?

      Your posts should result in U.S. News & World Report dropping the school a few notches.



      Repeat that llpoh.

      So solly.

  30. Smokey,

    Cain flip flopped with his response to Paul. Back in December he flatly denied that the Fed needed an audit. His response was an Obama-esque lie. Who woulda thought?

    See for yourself:

  31. Admin – I haven’t laughed that hard in a long time. Thanks so much for keeping this site alive. Really.

    I near wet myself laughing. You were quick on the delete button, because I was all over that.

  32. llpoh,

    Since 1925, fourteen Presidents have sought reelection. Only four failed. Of those four, one was Jimmy Carter. Another was Gerald Ford, who had never run a major race before, and he barely lost his reelection bid.

    Obama’s approval rating now is 41%.

    No president whose approval rating was 44% or higher come election time has ever lost. Truman’s rating at this point was below 40% and he won. Reagan was at 43% at this point, and he won with 59% of the vote.

    Obama only needs to get his approval rating up 3 points and he wins. And rest assured, the same MSM that motherfucks him now will mass solidly behind him as election day draws nigh, and they will be increasingly motherfucking his republican rival.

    Obama will serve another term.

  33. llpoh

    I’m sure the masses have learned so much from our comments.

    If they didn’t think we were doomed before this post, they do now.

    We’ll be on TBP posting insulting pictures as the nuclear missiles are being launched.

  34. Petey – I trounced him. I forced him to delete a post – he had no choice, as it was a monumental fuck-up. He could not allow it to stand. In the dark of night I expect him to remove these references to it as well. But he and I both know what he said. He needs to cut me a lot of slack for a while to repay the debt.

  35. Admin – what a great site. In the midst of these absolutely ridiculous flamefests, there is a lot of good done. It is a pleasure to watch Jmarz/Colma/Punk/Petey/et al post. I really believe that this site does some good. Really. You should be proud. But do not let it go to your head. Many thanks again.

  36. Petey,

    I agree that CNN eats shit. As do all the majors.

    And believe me, they’d have never made that comment if Newt was alive in this race. They know he’s dead, and they were saying what many people know but refuse to say—–that Newt has done well overall in the debates.

    But it doesn’t mean shit. Michael Vick will be elected POTUS before Newt Gingrich is.

  37. llpoh,

    Don’t roll over like a fucking cur.

    You caught him red-handed in the midst of a despicable, cowardly action and you are not only letting him slide, you are sucking up to him?

    Me and you need to have a talk, reset your priorities.

    You should be going for the kill right now like a rabid rottweiler.

  38. Smokey – I know, I know. But he knows I won, and I know I have won.

    And I am too busy laughing my ass off. Punk/Petey/you and the Admin have me in stitches at the moment. I can not bring myself to kick a man while he is that far down. He fucked up big time, and left himself open for the knockout blow. He needs time to lick his wounds.

  39. Smokey

    I agree that he has done well in the debates. I simply don’t understand why he threw his hat in the ring. He seems like such a retread.

    Jesus, I see it now. Obama wins in 2012, Hillary VP. What a fucking joke this country. A nation of sheep, bitching about debt they signed the dotted line for or wanted to begin with.

  40. Holy shit…

    Cracking me up.

    Petey… tell me you’re not an old fart. You’re on a roll.

    Anyway… fuck China and fuck their ships full of rubber dog shit.

  41. Right on… you gotta tear into some pompous ass again soon.

    You survived getting into the mix…

    The Big Dogs snarl and piss and shit all over Admin’s yard and he comes out in his bathrobe with a rolled up paper smacking a snout here, throwing a stick there… before he knows it, a youngun is nipping at his heel…

    Without fail, and every time, every Dog is barking and lunging for his nuts. He swats, steps in shit, yells and goes to bed… Yet he awakens each day and knows he wouldn’t have it any other way.

    TBP rules.

  42. Colma

    They only sell rubber dog shit to the U.S. Not sure how they deal Eurozone, but about the same size as U.S. The 77% remainder of their exports go elsewhere, slightly better products and better prices than the rebadged stuff they peddle the U.S. now. Time was when their stuff was more expensive here and new products slower to arrive.

    But we don’t have a manufacturing sector for all practical purposes. No local consumer electronics so who can complain about a Chinese DVD player with an obvious Chinese name (as opposed to a Sony [spit] made in China — for $39, that plays all formats and all regions. Yay.

  43. Novista:

    I view the term “Rubber Dog Shit” as cheap novelties designed for entertainment.

    (Says one typing on a product made in China)

  44. Wow, I miss so much in the hours I can’t be here.

    So, what does everyone think about this Iran terrorist ploy?

    China (Russia too) has ever so quietly (to the MSM fed) been aligning themselves with Iran for a long time. They pretty much ignore the UN sanctions and funnel billions of (our) money into Iran.

    Now this “plot” against Saudi and Israel.

    I smell a big commie rat. Pun only slightly intended.

    It is like we are being led along the primrose path to WWIII, which at this point has to be looking like a plan to the PTB.

    What else besides out and out war, since three semi-declared ones just aren’t cutting it, will get us out of this fiat induced hole?

    I’m at a loss to see any other “viable” alternative for our rulers. They KNOW exactly what they are doing.

    The joke is going to be if a war with Iran equates to a war with China. Think China will continue popping our the computer chips, smartphones and bullets needed for both us and them?

    I hate seeing the world this way. I don’t mean that I hate that the world IS this way, it just is and my hatred has zero effect on it, I learned long ago not to bother. Human nature and the rise and fall of societies are the way they are, not much can be done and I have other things to hate. What I meant was I hate that I CAN see it this way.

    It would be so much easier? less stressful? more peaceful? if I just didn’t fucking see it, or think I see what I see.

    So it goes.

  45. Yeah, it must be hellsa late for you right now, T, but I hear you.

    The textbooks say war.

    I just pray the players on the global stage instead opt for the real house cleaning that is in order instead. I pause to hang on the same idea, but…

    Is rubber dog shit worth the trouble of world-wide war, death and famine?

    The textbooks say war.

    God help us.

  46. Dammit Colma, I was hoping for the voice of reason. But I agree.

    Yeah, late here, I need to run off to bed but am teaching myself OpenOffice database and got lost in it. Thought to drop by here before I get my solid six.

    Let’s hope we are both wrong.

  47. Things are bad and Obama well lose to whoever runs against him.Newt sounds very smart,to bad he is an old grey headed white fuck,he cant win.Ron Paul is such a lousy campaigner,he is toast.
    Mitt romney might win.At least he looks like he is alive.
    Obama,well if the economy sucks and current trends continue,whoever is in charge would get canned.unless he declares martial law.

  48. ron – of the things I worry about, Obama declaring martial law isn’t one of them. He would be deposed in under 15 minutes, probably by the officer he was attempting to make the declaration to. And there’s about no one in the USMC and very few in the Army who would follow such orders. I suppose we would have to worry somewhat more about Predators and naval blockades, given the attitudes I’ve found in the various services.

  49. Good- fuck em!
    It seems everyone has a short memory pertaining to the multiple proxy wars we fought against these fuckers in the 50s and 60s.
    They’ve conqured Tibet and and ruled them with a fist as hard as the nazis.
    Destroyed most of their arable land and water table
    Conjoured up this insane growth for the last thirty years-at what point did the real growth and the bullshit debt fuelled growth deviate?
    I’m no economist but i know that command economies NEVER work,only seem to for periods of time.
    That time has come for China, Japans crash and subsequent 20 year depression were absorbed by a population with high incomes and a high standard of living.
    The coming implosion will be affecting the hundreds of millions who never saw the benifits of the boom.
    What will be the net result?
    Revolution,war,famine fuck knows how bad its going to get.
    Ive read papers on the seething social discontent during the years of plenty-what will be the response to the party that promised wealth in exchange for obedience?
    When the Soviet Union economy floundered and led to the revolution how many civil wars and instances of genocide/ethnic cleansing occured from this?

    1. Credit Suisse Buries China’s Banks

      Submitted by Tyler Durden on 10/12/2011 10:55 -0400

      Wonder why China just bailed out its banks, preemptively, on Monday? Here’s why. In a report issued by Credit Suisse’s Sanjay Jain, the China strategist, who joins such now infamous skeptics as Bank of Countrywide Lynch’s David Cui, has revised his base case Non Performing Loan ratio forecast from 4.5%-5.0% to 8.0%-12.0%: a unprecedented doubling in cumulative losses. Why unprecedented? Because as he explains, this could “would work out to 65–100% of banks’ equity.” Crickets? Yes, Credit Suisse just singlehandedly said the equity value of the entire Chinese banking system is between 66% and 100% overvalued (with a downside case of $0.00). So for those putting two and two together, on one hand we have the four horsemen of the Chinese apocalypse, already presented visually before by Bank of America, consisting of i) a surge in underground lending, ii) a property downturn, iii) bad bank debt and iv) and “hot money” outflows, and on the other we have the vicious loop of what this means in terms of a central planning reaction. Simply said look for China to scramble to undo all the signals that it had been trying to spark while it was fighting with the Fed-inspired inflation bubble. Only problem is that like in the US and Europe, finding the Goldilocks point where all 4 are in equilibrium will be next to impossible, especially if investors in the country’s banks realize the equity they hold is worthless and scramble to get the hell out of Dalian. Then the fears over a parliamentary vote in Slovakia will seem like a pleasant walk in the park.

      Summary from Credit Suisse:

      How bad could things get?

      A view on China’s banks is completely a call on the potential impairment. Hence, we attempt here to dig deeper into the various sources of credit risk, both on- and off-balance sheet. Real estate, manufacturing, local government and SMEs are the four main sources of risk. They account for about 55% of the loan book, in our view, and are expected to contribute more than 80% of potential NPLs. We revise our overall NPL ratio forecast to 8.0–12.0% (from 4.5–5.0% earlier) of loans in the next few years, and NPLs would work out to 65–100% of banks’ equity. Still, we note that this is at best an estimate, and the impairment range could vary, depending on the economic growth and backdrop.

      Assuming a loss ratio of 60%, typically the case in many banking crises, the potential loss on the revised NPL range would be 40–60% of the equity in the banking system. At the individual bank level, we recognise the differences (ABC and Minsheng have the highest real estate exposure, BOC and CITIC have grown real estate the fastest, Minsheng has lent the most to small enterprises and has the highest exposure to real estate and local government, etc.). However, we believe they are operating in the same environment and the margin of error would not be significant if we apply the 8–12% NPL range. The results are largely similar, with potential loss being 40–60% of their equity.

      What is the market pricing in?

      Using the Gordon Growth Model and current P/B, we estimate the market-implied ROE for each bank. Then we back-calculate the market-implied credit cost, which works out to 170–180 bp annually. This corresponds to incremental NPLs of 3.0% of loans every year.

      Introducing price-to-adjusted book

      How to value banks when we cannot rely upon the earnings and, possibly, even the book value? If we apply our base case range of 8–12% NPL ratio, the price-to-adjusted book would work out to 1.6–2.1x using consensus profits for 2012E. As a corollary, every 1% NPL ratio jump would shave off roughly one-fifth of the profits, and NPL ratio rising beyond 5% would wipe out the consensus-projected profits for 2012E.

  50. What I want to know is how is this coming crash in China is going to effect the dollar, us treasury prices, gold, silver, DOW, nasdaq, s&P 500, DAX, etc.?

    It seems to me that if China were to say to Bernanke that they needed to cash in trillion dollars worth of chips, that the fed would have to buy them, lock stock, and barrel, to avoid a bond price melt down and yield melt up. Any alternate theories that make any sense?

    They could call it QE 3.5, lmao………….

  51. a mere 650% increase, of which 420% was due to inflation

    Were number two!

    Were number two!!

    Asians who comprised 3% of the US population comprised one-fifth of Harvard’s enrollment, and Jews, who comprised 2.5% of the population comprised between one-fourth and one-third of Harvard’s student body. -Paul Craig Roberts

    Huh. Whodathunk.

  52. KB – where you been? -llpoh

    Hospital. Had a blood clot in pulmonary arteries making it hard to get oxygen into bloodstream. Almost saw the pearly gates I did,.

    Now I am taking warfarin [rat poison] anti-coagulant medicine to live. Ironic eh? =)

  53. Damn, KB, that is not good. Hope the nurses were accomodating at least. I hope that all is well now, and that the rat poison will do the job. It is really good to have you back. Kick some ass.

  54. Shit, KB, glad you’re still with the living!

    I wish you a speedy recovery…

    I just remember you saying something about kids karate kicking their mums and then you disappeared.

    Glad you’re back.

  55. Damn, KB, that is not good. Hope the nurses were accomodating at least. I hope that all is well now, and that the rat poison will do the job. It is really good to have you back. Kick some ass. -llpoh

    Weird thing is my heart is just fine, The clots will eventually dissolve over the next few months. The nurses were just great. It was me that could not accommodate them =(

    As for ass kicking it looks like the big dogs done leapt from the porch and have whupped the yappy ankle biters already.

  56. Kill Bill,

    That fucking blows.

    Hope you are permanently out of the woods. -Smokey

    Thx Smokey. I am out of the woods. Thank Heavens.

    Released from hospital monday and now resting at home.

  57. I just remember you saying something about kids karate kicking their mums and then you disappeared. -Colma

    Lol. Yeh I remember that, but unrelated to my near demise. Guess I could have taken laptop to hospital but didnt think about it as fire dept carried me off to emergency room and when I did remember they refused to turn around. Damn public servants =)

  58. KB:

    Your not out of the woods, partner. Make sure you get your coags checked as directed. Coumadin is nasty stuff, too much and your brain bleeds. Not enough, and those pulmonary emboli start growing again.

    That said, you survived something most people die from. They don’t make it to the hospital alive. Glad you made it. Just a question, if you don’t want to answer, no prob, but are you a little heavier than you should be? Just curious. Again, I’m glad you survived, whatever caused it, don’t do it again. PE is deadly.

  59. I know very little about China, but the author appears to know very little about basic economics.
    “There are 218 million urban households in China, and the central government ordered local governments to build 36 million more units by 2015. They just have one small problem: Prices for apartments in Shanghai and other major metropolitan areas have soared by over 100% in the last five years.”
    Let me explain. If prices are too high and people have been priced-out, then quite likely there is a shortage of housing. If so, these extra units will solve the shortage problem, bring prices down, and allow people to live in the units. That will be good in my opinion.
    This is basic economics. If there are too many, then price falls and less are made. If too few, then price rise and more are made. This is how even a half-decent market works. I’m not talking free market religion. I am talking about the most basic function of any market. If prices are too high and people are suffering then MORE SUPPLY WILL SOLVE THIS PROBLEM. I look forward to seeing the suffering solved by the extra units and lower prices.

  60. Kill Bill

    I’ve been left to kick Smokey’s ass all over the site day after day without your help. I’m glad your back to resume your rightful place of chief Smokey ass kicker.


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