― George Carlin
QUOTE OF THE DAY
― George Carlin
I watched the GOP debate last night. Here are my impressions:
“I’m a modern man, a man for the millennium. Digital and smoke free. A diversified multi-cultural, post-modern deconstruction that is anatomically and ecologically incorrect. I’ve been up linked and downloaded, I’ve been inputted and outsourced, I know the upside of downsizing, I know the downside of upgrading. I’m a high-tech low-life. A cutting edge, state-of-the-art bi-coastal multi-tasker and I can give you a gigabyte in a nanosecond!
I’m new wave, but I’m old school and my inner child is outward bound. I’m a hot-wired, heat seeking, warm-hearted cool customer, voice activated and bio-degradable. I interface with my database, my database is in cyberspace, so I’m interactive, I’m hyperactive and from time to time I’m radioactive.
Behind the eight ball, ahead of the curve, ridin the wave, dodgin the bullet and pushin the envelope. I’m on-point, on-task, on-message and off drugs. I’ve got no need for coke and speed. I’ve got no urge to binge and purge. I’m in-the-moment, on-the-edge, over-the-top and under-the-radar. A high-concept, low-profile, medium-range ballistic missionary. A street-wise smart bomb. A top-gun bottom feeder. I wear power ties, I tell power lies, I take power naps and run victory laps. I’m a totally ongoing big-foot, slam-dunk, rainmaker with a pro-active outreach. A raging workaholic. A working rageaholic. Out of rehab and in denial!
I’ve got a personal trainer, a personal shopper, a personal assistant and a personal agenda. You can’t shut me up. You can’t dumb me down because I’m tireless and I’m wireless, I’m an alpha male on beta-blockers.
I’m a non-believer and an over-achiever, laid-back but fashion-forward. Up-front, down-home, low-rent, high-maintenance. Super-sized, long-lasting, high-definition, fast-acting, oven-ready and built-to-last! I’m a hands-on, foot-loose, knee-jerk head case pretty maturely post-traumatic and I’ve got a love-child that sends me hate mail.
But, I’m feeling, I’m caring, I’m healing, I’m sharing– a supportive, bonding, nurturing primary care-giver. My output is down, but my income is up. I took a short position on the long bond and my revenue stream has its own cash-flow. I read junk mail, I eat junk food, I buy junk bonds and I watch trash sports! I’m gender specific, capital intensive, user-friendly and lactose intolerant.
I like rough sex. I like tough love. I use the “F” word in my emails and the software on my hard-drive is hardcore–no soft porn.
I bought a microwave at a mini-mall; I bought a mini-van at a mega-store. I eat fast-food in the slow lane. I’m toll-free, bite-sized, ready-to-wear and I come in all sizes. A fully-equipped, factory-authorized, hospital-tested, clinically-proven, scientifically- formulated medical miracle. I’ve been pre-wash, pre-cooked, pre-heated, pre-screened, pre-approved, pre-packaged, post-dated, freeze-dried, double-wrapped, vacuum-packed and, I have an unlimited broadband capacity.
I’m a rude dude, but I’m the real deal. Lean and mean! Cocked, locked and ready-to-rock. Rough, tough and hard to bluff. I take it slow, I go with the flow, I ride with the tide. I’ve got glide in my stride. Drivin and movin, sailin and spinin, jiving and groovin, wailin and winnin. I don’t snooze, so I don’t lose. I keep the pedal to the metal and the rubber on the road. I party hearty and lunch time is crunch time. I’m hangin in, there ain’t no doubt and I’m hangin tough, over and out!”
― George Carlin
“We’re so self-important. So arrogant. Everybody’s going to save something now. Save the trees, save the bees, save the whales, save the snails. And the supreme arrogance? Save the planet! Are these people kidding? Save the planet? We don’t even know how to take care of ourselves; we haven’t learned how to care for one another. We’re gonna save the fuckin’ planet? . . . And, by the way, there’s nothing wrong with the planet in the first place. The planet is fine. The people are fucked! Compared with the people, the planet is doin’ great. It’s been here over four billion years . . . The planet isn’t goin’ anywhere, folks. We are! We’re goin’ away. Pack your shit, we’re goin’ away. And we won’t leave much of a trace. Thank God for that. Nothing left. Maybe a little Styrofoam. The planet will be here, and we’ll be gone. Another failed mutation; another closed-end biological mistake.”
― George Carlin
“I like it when a flower or a little tuft of grass grows through a crack in the concrete. It’s so fuckin’ heroic.”
― George Carlin
“I went to a bookstore and asked the saleswoman, ‘Where’s the self-help section?’ She said if she told me, it would defeat the purpose.”
― George Carlin
“Some people see the glass half full. Others see it half empty.
I see a glass that’s twice as big as it needs to be.”
― George Carlin
“Honesty may be the best policy, but it’s important to remember that apparently, by elimination, dishonesty is the second-best policy.”
― George Carlin
“Scratch any cynic and you will find a disappointed idealist”
― George Carlin
“Laugh often, long and loud. Laugh until you gasp for breath.”
― George Carlin
“Life gets really simple once you cut out all the bull shit they teach you in school.”
― George Carlin
There’s a great site worth checking out. In the same vein as the Occupy Wall Street crowd who claim to represent 99% of Americans, there’s another site dedicated to the JUST 53% of Americans that actually pay federal income taxes. After all, if it weren’t for those 53%, who would pay for the 47% of Americans who presently pay no federal income taxes?
It’s a culmination of pictures and stories outlining how Americans who started from humble beginnings have pulled themselves up and made something of themselves. They have had their challenges, and they still do – but they are contributing back to society by starting businesses, working long hours and notably, paying federal taxes and living the American dream.
“The planet is fine. The people are fucked.”
― George Carlin
“That’s why they call it the American Dream, because you have to be asleep to believe it.”
― George Carlin
“Some people see things that are and ask, Why?
Some people dream of things that never were and ask, Why not?
Some people have to go to work and don’t have time for all that.”
― George Carlin
“I don’t have pet peeves – I have major psychotic fucking hatreds.”
― George Carlin
“Religion is like a pair of shoes…..Find one that fits for you, but don’t make me wear your shoes.”
― George Carlin
“I do this real moron thing, and it’s called thinking. And apparently I’m not a very good American because I like to form my own opinions.”
― George Carlin
“I don’t like ass kissers, flag wavers or team players. I like people who buck the system. Individualists. I often warn people: “Somewhere along the way, someone is going to tell you, ‘There is no “I” in team.’ What you should tell them is, ‘Maybe not. But there is an “I” in independence, individuality and integrity.'” Avoid teams at all cost. Keep your circle small. Never join a group that has a name. If they say, “We’re the So-and-Sos,” take a walk. And if, somehow, you must join, if it’s unavoidable, such as a union or a trade association, go ahead and join. But don’t participate; it will be your death. And if they tell you you’re not a team player, congratulate them on being observant.”
― George Carlin
There’s an old rule of thumb that if you can refinance at an interest rate 1% or more below your current rate, it’s a good deal. That advice is too broad and may not be true in many circumstances.
There’s an old rule of thumb that if you can refinance at an interest rate 1% or more below your current rate, it’s a good deal. That advice is too broad and may not be true in many circumstances. It doesn’t take into account so many factors like how far into the current loan you are, what the transactions costs are (they vary widely by state and financing outfit), what your future plans are for moving. Taking this a step further though, with record low mortgage rates, many people are jumping from 30 year loans into 15 year loans. This begs the question as to what the right interest rate spread is if jumping from a 30 down to a 15 and my assessment is that the spread must be MUCH wider than 1% to make sense – or in many cases, it doesn’t make sense at any interest rate! While it’s admirable to seek to pay down your loan quickly, it’s a move that may not provide any benefit while adding risk to your financial situation. Here’s Why:
Continue Reading: Even at 3.25%, Refinancing Makes NO SENSE! Here’s Why
This was happening two blocks from our location in Times Square. Nothing like calling out the horses to deal with peaceful protestors. Does this look like a passing storm to you?
this is a post on my blog from a week ago. a couple of folks thought it would be appropriate here. i’m not sure this is anything new to the burning platform crowd, but here goes. maybe spark some discussion at least. or some good insult throwing.
the system is broken. a lot broken.
10/8/2011
17:05
if you need a simple, focused message, you’re welcome.
this simple, focused message that the folks downtown at Occupy Wall Street offer to the nation is clear and obvious. except to the people who will not, or can not, accept either the message, or the reality.
and Occupy Wall Street is a success. a smashing success. after only three weeks. sure, the success may be temporary. but they are Winning-Duh!
the fact that the system is broken is now part of the conversation. it was not a month ago. now it is, on the tee vee, in the new york times, even occasionally on the murdoch (including the occupied wall street journal; while the street proper is still safe from the mobs, for the moment they got into dey heads.)
that is a success without a single demand. or a list of demands. i’m sorry, i missed that part of the revolutionary cookbook–that demands must be produced, err, on demand. there was an old term from the 60s and before. consciousness raising. still counts.
on the demand front, another way of looking at it i read earlier in the week. when there is a single injustice–we’ll have a single demand. when there is a simple, uncomplicated injustice, we’ll have a simple, uncomplicated demand.
see me; hear me; even mace me and arrest me; those are the demands of the day. and the success–being seen, being heard. that only took a matter of days. well done, OWS.
like i said, it may be temporary. very likely, it will be dust and memories by winter. temporary success is not failure. from small things mama, big things one day come.
enough about the messengers. let me hammer the message yet again.
the system is broken. a lot broken. to the point of failure. requiring massive overhaul, including replacement or rebuilding of many key components. possibly requiring junking and replacement, which becomes more likely the longer the crippled system is driven w/o the necessary overhaul.
the political component of the system has failed; it no longer performs its democratic function. Obama and his administration has functioned 100% in the best interests of the banks, the lobbyists, the huge corporations. not one single action, regarding war, economy, health care policy, has failed to supply those interests with everything they demand, at the expense of the population at large.
we have three years of historic record to serve as proof of this claim.
the party or individual identity of the president has ceased to matter. red/blue, democrat/republican makes zero difference in the day to day and year to year policies and actions of the federal government.
the finance industry component of the system has failed. despite being given every support and every dollar they demanded after their failure was obvious to the world in 2008, they again are on the brink of an extinction event. they cannot even maintain their stock prices, as boa, morgan and goldman shares tumble over the past year.
the larger economic component of the system has failed. in our system, economic prosperity requires growth. growth used to come from savings and investment; those inputs were replaced by debt. debt (and credit) is by definition based on confidence–a reasonable expectation that the debt will be repaid.
when debt grows beyond a certain point, the confidence fails, and debt growth stops. and economic growth, and prosperity, stops.
the problem appears to be how to replace/restore debt growth. the problem in actuality is too much debt. adding more debt only breaks the system more, compounds the failure.
all the efforts to feed the failed system serves only to foster more failure. more “stimulus” only stimulates 1) more money in the pockets of the rich, the corporate and banking heads; 2) more jobs to china and higher unemployment here; 3) more debt that will never be repaid. (paraphrased/stolen from Jessé at his blog today, Jessé’s Cafe Américain
the further myriad failures–education, health care delivery and profit taking, infrastructure, government bureaucracy–merely outcomes of and symptoms of the above component failures.
simple, really. the system, that we have all participated in and enjoyed our entire lives is broken. really really badly broken. no republican or democratic president or group of congressmen is going to fix it. because all they will do is a tune up–change the oil, new spark plugs, maybe wheels and a coat of paint. that is all they know how to do.
the bad news–that is the good news. that only a small percentage of americans are willing or able to accept the fact that the system is severely crippled is grim. but OWS has chipped away at that, if only for a short while.
the really bad news–we are not gonna overhaul and repair the system until it seizes up. not until a catastrophic full-stop failure. despite the opportunities, the multiple clear warnings, the wake up calls. it looks like we may be blessed with yet another opportunity, to watch it happen in europe, with maybe time to avoid it here. (i doubt it; i think when europe blows, we will have about three minutes before the first bank failure here, then its party on garth.)
i try my best not to fall in love with and commit to my forecasts and predictions (i don’t limit that to women.) most of the time, i don’t even like my predictions. including these two today. that Occupy Wall Street will fade away; either by co-option by the entrenched left or the labor movement or the Democratic Party; or alternatively in a spasm of violent suppression, orchestrated or not. and that america will not wake up to the severity of the failures of politics, finance and economy and demand overhaul until after the broken system is totaled.
as usual, i hope i’m wrong.
(on a brighter note than usual…)
I love being a dad, I really do. But sometimes my kids do things that, well, test me. Last night I received a frantic call from my wife that water was pouring through the ceiling, soaking multiple rooms going all the way down to the basement. By the time I got home, I found pools of water in the dining room, a constant stream of water running down our chandelier, an entire section of carpeting soaked upstairs and water making its way all the down to the basement. It was quite a site. Here’s what happened:
Continue Reading Why My Kid Flooded Our Home and Share Your Worst Kid Story!
You want to know why the Occupy Wall Street Movement is happening? The chart below says it all. It isn’t about the poor versus the rich. It is about Wall Street bankers pillaging the middle class with their fraudulent debt instruments. Look at the 1980s. From 1983 through 1991 were pretty good years for the American economy and the average salary on Wall Street was between $70,000 and $90,000 and the average workers’ salary was about $40,000.
You can see what has happened since. The average salary soared to $400,000 for the big swinging dicks on Wall Street while the average salary for John Q. Citizen “soared” to $60,000. I’m sure you would agree that creating fraudulent mortgages, luring middle class Americans into debt, blowing up the world financial system in 2008, and then forcing John Q. Citizen to pay for their world destroying risk losses, certainly deserves compensation on an epic scale.
These Wall Street maggots have taken a dramatic pay cut to $360,000 per year since crashing our economic system, driving our national debt up by $4 trillion, and causing unemployment to rise by 7 million people.
Jamie Dimon, Lloyd Blankfein and their friends on Fox News can’t understand why all these “socialists” and “communists” protesting on Wall Street are so angry.
Hat tip Jesse
Washington’s Blog doing yeoman work on the Occupy Movement. As expected, the police state will start to flex their muscles. That is what they do best. As this movement continues to grow the authorities will become more nervous and twitchy. There are many thugs and psychopaths in law enforcement. Some are itching for conflict. Somebody will do something stupid and then all hell will break loose. Count on it.
Occupy Boston protesters before being evicted by police
In response to police statements that Occupy Boston had to vacate the park because they didn’t have a permit, protesters responded:
We have a permit, it’s called the constitution.
Veterans formed a line to try to protect the protesters:
But police tore down an American flag and harassed the veterans. Police started by arresting the veterans — who included a female veteran of the Iraq War.
As Salon notes:
On Monday night, Boston police broke up the Occupy Boston protest, and in the process, they tore down an American flag and knocked down at least one American military veteran.
A group of Veterans for Peace stood in a line in front of the Occupy Boston protesters, and after the police warned the entire group to disperse, a line of cops marched out of the darkness and seemed to move on the veterans first.
John Nilles, a 74-year-old Vietnam veteran, told the Boston Globe he was knocked down during the arrests. “I have absolutely no use for police anymore,” he said. “I don’t know what I’m going to do.” You can hear protesters on the video screaming over and over, “We are veterans of the United States of America.” It’s chilling.
The video is dark, so it’s hard to see exactly what’s happening, but when the American flag starts to totter, it’s like the Iwo Jima moment in reverse.
There are reports that peaceful protesters were beat up, although we have not been able to confirm these reports.
Here are photos from AnonOps:
In related news, here is video of a San Francisco police officer hitting a protester with his night stick:
After reading this article I was curious as to how much the world population grows each year. Farrell is wrong with his 50 million per month figure. The world adds 84 million people per year. Every four years the world adds a United States population to the world. That sounds unsustainable considering the amount of oil, food, and water on this planet. What Farrell ignores is the likelihood of a Fourth Turning war. Nothing like a thermonuclear exchange to get world population back in alignment.
By Paul B. Farrell, MarketWatch
SAN LUIS OBISPO, Calif. (MarketWatch) — Last year Bill Gates said if he had “one wish to improve humanity’s lot over the next 50 years” he would pick an “energy miracle,” some magical “new technology that produced energy at half the price of coal with no carbon-dioxide emissions,” says CNN editor Fareed Zakaria in the New York Times.
And he said “he’d rather have this wish than a new vaccine or medicine or even choose the next several American presidents.”
Yes, all good stuff, but ultimately undermining the possibility of discovering a magical energy miracle.
Worse, if that energy miracle is discovered anywhere its value could easily be wiped out by the world’s out-of-control population growth, forecast to reach 10 billion by 2050 from 7 billion today, one brief generation.
So why is Gates not focusing solely in his energy miracle? Better yet, why is he ignoring what he agrees is the world’s biggest problem? Even undermining the solution?
What happened to Gates and his $26 billion mission? When Warren Buffett added more than $30 billion to Gates’s foundation a few years back, Buffett said: “Don’t just go for safe projects. Take on the really tough problems.”
Well, to put it bluntly folks, the Gates Foundation is not spending the money on the “really tough problems.” It is indeed playing it safe.
So what does Gates see as the world’s other “biggest problem?” Not global warming. Nor poverty. Not peak oil. The absolute biggest? One like the trigger mechanism on a nuclear bomb? One that could throw a monkey wrench into global economic growth, end capitalism, even destroy civilization? The one that if not solved soon renders all efforts to solve all the other global problems — including global warming, poverty and fossil fuel depletion — irrelevant, futile and impossible ever to solve?
Overpopulation. That was the consensus “biggest problem” when a group of billionaires that included Gates got together at a secret meeting in Manhattan a couple of years ago.
Get it? Out-of-control population is the world’s No. 1 problem. Yet, governments with their $65 trillion global GDP aren’t even trying to solve the world’s overpopulation problem. They’re clueless. Can these philanthropists and their billions stop the coming disaster? No. In fact, their billions are accelerating the problem.
So what will shock the world awake? A catastrophe. Only a major disaster, a massive global collapse bigger than anything in world history is needed to alter the inevitable.
Scientists estimate that the Earth’s natural resources can reasonably support about 5 billion people. We already have 7 billion. Get it? We’re 2 billion over Earth’s carrying capacity. Plus we’re racing headlong to 10 billion by 2050, adding over 50 million more each month.
Simple math, high school economics and minimal psychological common sense tells us we’re deep in denial and headed into a disaster.
And still, no adults are dealing with overpopulation, the “toughest of all problems.” Instead, they’re dealing with “safe projects” that make them feel good in the moment, short-term solutions that ironically make the long-term problem worse not better.
The truth is that Gates and his billionaire buddies are in denial, trapped in what Mother Jones columnist Julia Whitty calls “The Last Taboo.” She says population is hidden in a “conspiracy of silence” that “unites the Vatican, lefties, conservatives and scientists” and now the world’s richest philanthropists have joined this “conspiracy of silence.”
Scientific American also warned that population is “the most overlooked and essential strategy for achieving long-term balance with the environment.” Why? Politicians ignore this “last taboo,” denying the fact that if all nations consumed resources at the same rate as America, we’d need six Earths just to survive today.
Check the math: First World citizens now consume 32 times more resources such as fossil fuels, and put out 32 times more waste, than do the inhabitants of the Third World. Now they want what we have.
By 2050, with a population of 10 billion, including 1.4 billion each in China and India, we are in effect committing suicide.
“One of the disturbing facts of history is that so many civilizations collapse,” warns Jared Diamond, an environmental biologist and author of “Collapse: How Societies Choose to Fail or Succeed.” Many “share a sharp curve of decline,” that often begins “only a decade or two after it reaches its peak population, wealth and power.”
Some warn: “It’s already too late.” “We’re past the point of no return.”
Gates billionaire buddies should reexamine the effect of the world’s out-of-control population problem as it ripples through the lens of Diamond’s “collapse equation.” It’s very simple: “More people require more food, space, water, energy, and other resources … There is a long built-in momentum to human population growth.”
So take a moment and ask yourself how the world’s explosive population growth from seven to 10 billion in one short generation, plus their increasing demand for more resources per capita, will ripple through Diamond’s other 10 key variables:
Oil, natural gas, coal: They’re all near or past their tipping points. With costs accelerating, new technologies and alternatives, biofuels, solar, nuclear power, will never be enough. Unfortunately, by 2050 demand for fossil fuels will still be 80% for 10 billion.
Two billion global poor live on $2 a day, depend on fish and wild foods that are dying off for protein. Increasing food prices make matters worse. Green revolution failing: United Nations study says new production technologies have not improved food access.
Water problems destroyed many earlier civilizations: Today a million lack safe drinking water. By 2015 two-thirds of the world will live in water-stressed countries.
Water, wind eroding crop soils many times faster than new formation.
We’re losing rain forests and protective timber reserves at accelerating rates.
Our air, soil, oceans, lakes and rivers are dying from toxic chemicals.
Sunlight’s limited. By 2050 we’ll use 100% photosynthetic capacity.
Our CO2 is destroying our ozone protection, reducing solar energy.
Wild species, populations, genetic diversity, lost, rest out of balance.
Transferring species to new lands destroying native species.
Diamond’s historical research tells us that leaders are myopic, motivated more by self-interest, expediency and money than by courage, convictions and long-term thinking. They fail to act in time. Unprepared, their worlds crumble fast. They may respond to a catastrophe. But in the end, history tells us over and over that most leaders live in denial, avoiding timely decisions, failing even in time of crises, till it’s too little, too late.
Gates’s Billionaire Philanthropist Club probably knows in their hearts the truth. They’re not in denial. They’ve given up. The problem will never be solved. So they’re not even trying to fix the overpopulation problem, instead, focusing on short-term feel-good efforts, knowing that in the not-too-distant future the planet, our civilization and the human species will fade to black.
Let’s pray that Uncle Warren gets back into the game demanding they “don’t just go for safe projects. Take on the really tough problems.”
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.
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.
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.”
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.