china, China, CHINA

[mettkeks]

@Skid Well if you stand right next to a person that gets hit by a 30mm explosive round shot from an Apache cannon, you have the chance to inhale the dust of the round as long as it's in the air. For a couple of seconds, you know, Uranium is a heavy metal, it's not going to float. When that thing sticks in the ground, there's not much happening.

Epidemiological research is not really research anyways. It just links outcomes to whatever reason they want. More interesting is that the children who show abnormalities are polluted with all kinds of toxic stuff, but not Uranium or radiation. Just like the findings in Kosovo.

Read this:

https://link.springer.com/article/10.10 ... 016-5491-0

And BTW: I'm not arguing that this is not a shitty thing, just that the Headlines around anything containing Radioactivity tend to be overly scaremongering followed by unscientific articles that do nothing but spread horror and misinformation.

[MPhelps]

Also, China is just flat out evil with its human rights abuses against the Uighurs and other ethnic minorities. They haven't quite made it to gas chambers, but I'm not sure if it's not a long way off.

https://apnews.com/269b3de1af34e17c1941a514f78d764c

LOL - Having 7 children is a responsible thing to do in an overpopulated country of 1.4 billion people. Seems like there are laws against that which apply to everyone in China, but my human rights are being abused...

America killed off most of their ethnic minorities (Indians). Or, How many Iraqi children died because US sanctions on medicine, or the wholesale destruction of its infrastructure, or lest I forget the tons of depleted uranium polluting/radiating the country with a half life of billions of years.

How do you figure that Native Americans were minorities? I'm sure you mean that they became minorities, but surely they were the majority before Europeans showed up.

And the Uyghurs occupy a province in the Tian Shan with a population density of 40/square mile. Not exactly densely populated. There probably aren't many living in apartments in Beijing.

[DoctorWho]

Hold on. I thought depleted uranium is lead. Does that term mean "partially depleted"?

@Skid
Not sure I've ever seen a defense of China's limits on having children (at least on a "it's not big deal" basis, rather than "steps req'd to save the world" basis), minimization of its ethnic cleansing, etc. But if we are going to use past history in our judgments, where do you put China's Great Leap Forward and Cultural Revolution relative to pre and post US treatment of Native Americans?

[mettkeks]

Hold on. I thought depleted uranium is lead. Does that term mean "partially depleted"?

Nope. Natural Uranium has 3 isotopes. U238 (non-fissile), U234 and U235 (both fissile). Natural Uranium is 99.2% U238 and 0.7% U235. Depleted Uranium is 99.6% U238 and 0.3% U235. Lead is the final Decay Product of Uranium.

[Skid]

Hold on. I thought depleted uranium is lead. Does that term mean "partially depleted"?

@Skid
Not sure I've ever seen a defense of China's limits on having children (at least on a "it's not big deal" basis, rather than "steps req'd to save the world" basis), minimization of its ethnic cleansing, etc. But if we are going to use past history in our judgments, where do you put China's Great Leap Forward and Cultural Revolution relative to pre and post US treatment of Native Americans?

Wow, something wrong with the forum software as this is the third attempt to post...

I'm not defending anyone, especially communists since I am pretty right wing politically. I'm just having a bit of a hard time with the hypocrisy. Also, I've read some history on the cultural revolution and the worst of it was likely overstated but I can't say for sure since i'm not an expert.

The West has humiliated China for 200 years (and early in that period did all kinds of atrocities to the Chinese people). Recognize that those days are now over.

[Rasmusb]

I'm not defending anyone, especially communists since I am pretty right wing politically. I'm just having a bit of a hard time with the hypocrisy. Also, I've read some history on the cultural revolution and the worst of it was likely overstated but I can't say for sure since i'm not an expert.

Yeah, you definitely aren't.

The US has borrowed $1.1 trillion from the Chinese. That is a terrible weapon to give any country. Especially one that is not our friend.

Please understand how balance of payments work instead of buying into the narrative that China has somehow "lent" $1.1 trillion to the US. It is not a weapon, it cannot be used against the US in any way shape or form. In fact, it can easily be used as a weapon against China.
For example, Chinese banks are currently revamping contingency plans in anticipation of US legislation that could penalise banks for serving officials who implement the new National Security Law for Hong Kong. This includes blacklisting which will limit or cut off access to US currency.

What China can do is sell off the USD. At the moment there is a high demand for USD, so it won't be a problem for other countries to purchase. End result: Status Quo. Absolutely no change. Even if the value falls, that simply means that China takes a huge loss on their investment, but not likely as USD demand rise during uncertainty.

Recommended reading: https://carnegieendowment.org/chinafina ... kets/79218

[Culican]

Recommended reading: https://carnegieendowment.org/chinafina ... kets/79218

Sort of along the same lines:
https://foreignpolicy.com/2011/09/07/an ... nt-burden/

[Rasmusb]

Recommended reading: https://carnegieendowment.org/chinafina ... kets/79218

Sort of along the same lines:
https://foreignpolicy.com/2011/09/07/an ... nt-burden/

Indeed. If you browse through Michael Pettis' articles on Carnegie, there are actually several covering exactly the topic of the exorbitant burden. I couldn't read the one on Foreign Policy as it sits behind a paywall, but from the summary it seems to be in line with Pettis' thoughts on the matter.

It annoys me to no small degree to see the myth repeated again and again that China has somehow benevolently lent trillions to USA. It is simply not the case. Believe me, if China's $$ holdings could be weaponised, they would have done so a long time ago.

[Wilhelm]

@Rasmusb, someone here recently shared https://outline.com/ for reading articles behind paywalls.
Says it works for NYTimes and WaPo.
It also works for our little podunk local paper.
Just paste the article url in and it generates the article. (if it can, i suppose)

[aurelius]

Please understand how balance of payments work instead of buying into the narrative that China has somehow "lent" $1.1 trillion to the US. It is not a weapon, it cannot be used against the US in any way shape or form. In fact, it can easily be used as a weapon against China.
For example, Chinese banks are currently revamping contingency plans in anticipation of US legislation that could penalise banks for serving officials who implement the new National Security Law for Hong Kong. This includes blacklisting which will limit or cut off access to US currency.

What China can do is sell off the USD. At the moment there is a high demand for USD, so it won't be a problem for other countries to purchase. End result: Status Quo. Absolutely no change. Even if the value falls, that simply means that China takes a huge loss on their investment, but not likely as USD demand rise during uncertainty.

Recommended reading: https://carnegieendowment.org/chinafina ... kets/79218

It is pretty basic. We have a long running trade deficit with China. Meaning they trade real goods and services for unequal value in real goods and services. Leaving them with a surplus in dollars. Dollars are not a currency the Chinese can use to pay workers in China. So the Chinese instead buy US bonds with the surplus (or invest the US dollars in US assets). Which is essentially accepting less payment today for more payment in the future. The US bets the US economy will be more productive in the future in this arrangements. All trade is between willing partners. The only reason a trade partner would accept less than the real value of their goods and services is for promise of greater future payment. In macroeconomic terms, this functions similar to a loan. And in discussions is referred to as such.

It absolutely can be used as a weapon. Devaluing a nation's currency has a long history in warfare. The Germans dropped fake pound notes on London in WWII. I have read multiple articles and books that discuss the following: the Chinese could sell their loans (US bonds) at cut rate prices and devalue the US dollar. That could critically weaken the US economy under the right circumstances. Would this hurt them to? Yes. Is it likely? No. But it is there. And China is not a Democracy. They can take short-term and long-term economic hits. US politicians can't. So it is better as a weapon of threat in negotiations with US politicians. Consider what is the net economic impact of US politicians bargaining less optimal deals with China of decades?

So notice that there are a couple of bets by both the US and China in this arrangement. The US bets that future economic growth will outpace our debt obligations. China bets that sometime in the future it can trade surplus US dollars for real goods and services.

Japan owns more US debt than China. Take the case of the Japanese automakers. They ended up in investing in US assets. Building manufacturing plants here with their surplus US dollars because they can pay US workers in US dollars. So this arrangement is not necessarily bad. But Japan is a democracy with independent corporations. China is a different beast all together.

That analysis assumes demand for US dollars will always be high (US economy will always be strong). Which is fine for a short-term analysis. Financial and economic analysis that assumes such things to make long-term conclusions are BAD.

Is it the biggest thing to worry about with China? No. But there are a lot of serious people that are concerned. You appear not to be. Okay.

[Rasmusb]

You stil don't seem to understand.

If China was to sell, then someone needs to be willing to buy. They CANNOT use existing dollar holdings as a weapon however counterintuitive it must seem.
What they could do is to buy less US bonds in the future which would either have no or a positive impact on the US.

And no... China cannot just take economic hits. Especially not now with an estimated 270 million unemployed after the corona crisis.

Again, if China could weaponise their dollar holdings, they would have done so a long time ago to prevent a trade war with the US.

[Rasmusb]

Here's a good rundown of the current China situation. Kyle Bass is spot on with almost everything he says here.

[aurelius]

If China was to sell, then someone needs to be willing to buy. They CANNOT use existing dollar holdings as a weapon however counterintuitive it must seem.

You just stated that demand for US dollars was high so the status quo would be maintained. Now you are claiming no one will buy them. Which is it? And the underlined is simply incorrect. China holds US treasury bonds. Or interest bearing US dollars. Not existing dollars. Big difference.

And that sentence is just...you do realize the WORST thing that could ever possibly happen is international investors and countries stop buying US bonds? That would mean US treasuries wold be worthless. That would be a success beyond China's wildest dreams.

We are talking the bond market. China holds US treasuries which it buys and sales to facilitate trade regularly. As you state, this requires willing partners. Since demand for US treasuries is high, this is not an issue. Fast forward: relationships with the US and China are fraught. China decides to hurt the US economy and dumps $1 trillion in US treasuries on the bond market. What would happen?

Supply dramatically increases, price for US treasury bonds goes down. China could keep lowering the price until somebody decided it was a good buy. I seriously doubt anyone would think the US would go insolvent so at some fraction of a dollar all of the bonds would be bought. But China would have effectively devalued the US dollar.

How would the Fed respond to the dollar being devalued and US bonds being sold at discounts? It would move to protect the dollar by raising interest rates to make US treasury bonds more attractive to buyers. There would be a feed back loop as China was willing to sell at a greater and greater discounts while the US treasury kept raising rates to support the value of the dollar. What happens when the Fed raises rates? Liquidity in the financial markets is reduced. As the 2009 Financial Crisis illustrated, liquidity in the financial markets is vital to the global economy.

This is a very simplistic analysis. And leaves out the possibility of a panic that often accompanies these types of situations. What if international investors get spooked? This is the scenario that everyone starts dumping US treasuries. And no one is buying. Worst case (and super unlikely).

This would probably be all fine and dandy with little fuss and muss if the US economy was strong. But what if the US economy was already in trouble? What if the US economy was dependent on near zero interest rates for over 10 years to achieve growth? I don't think it would be all so fine and dandy.

China could use the 'nuclear option', dumping their US Treasury bonds on the open market. In order to do this they must be willing to accept pennies on the dollar. Essentially 'spending' $1 trillion in US dollars in economic warfare. The purpose would be to devalue the US dollar, destabilize world financial markets, and drive interest rates higher. It is an economic weapon. Meaning that its outcome and impact are not certain and there would with negatives for China. But if they are willing to take the substantial losses in an attempt to devalue the US dollar and destabilize global financial markets, they have a feasible economic weapon to do so.

To go back to an idea you brought up: this option, the debt in form of US treasuries China owns, is only possible because of the long-term trade deficit with the US. You describe earlier it is ridiculous to think that China benevolently loaned the US money. Agreed. The US has been only too happy to enter into this arrangement with a trading partner that is not benevolent. That was and is a mistake.

https://www.forbes.com/sites/leonlabrec ... 25962c1d88

To be clear, China HAS been selling its US treasuries (divesting itself). But this appears to be in the normal course of trade versus a prelude to the nuclear option.

https://www.marketwatch.com/story/china ... 2020-06-02

https://www.reuters.com/article/us-usa- ... SKCN1SY0BS

I'd also point out that rational economic analysis of China is a fools errand. China is not driven by the same ideology and philosophy of the West. Their institutions and people think very differently than we do. Fundamentally, they have different values. While the self-inflicted economic damage of the nuclear option would be untenable to the West, that may not be the case with China.

It would seem the hedge fund manager you are referencing is discussing relatively short term as in the next few years. And I would agree in the short-term there is little risk of what we are discussing. You seem to be projecting that as an absolute.

[Kregna]

Also, China is just flat out evil with its human rights abuses against the Uighurs and other ethnic minorities. They haven't quite made it to gas chambers, but I'm not sure if it's not a long way off.

https://apnews.com/269b3de1af34e17c1941a514f78d764c

LOL - Having 7 children is a responsible thing to do in an overpopulated country of 1.4 billion people. Seems like there are laws against that which apply to everyone in China, but my human rights are being abused...

America killed off most of their ethnic minorities (Indians). Or, How many Iraqi children died because US sanctions on medicine, or the wholesale destruction of its infrastructure, or lest I forget the tons of depleted uranium polluting/radiating the country with a half life of billions of years.

China has the fastest aging population in the world. They need to have more children, but the single-child policy and abortion of female babies has left them with too-great-a-proportion of men in the population

[Rasmusb]

If China was to sell, then someone needs to be willing to buy. They CANNOT use existing dollar holdings as a weapon however counterintuitive it must seem.

You just stated that demand for US dollars was high so the status quo would be maintained. Now you are claiming no one will buy them. Which is it? And the underlined is simply incorrect. China holds US treasury bonds. Or interest bearing US dollars. Not existing dollars. Big difference.

And that sentence is just...you do realize the WORST thing that could ever possibly happen is international investors and countries stop buying US bonds? That would mean US treasuries wold be worthless. That would be a success beyond China's wildest dreams.

We are talking the bond market. China holds US treasuries which it buys and sales to facilitate trade regularly. As you state, this requires willing partners. Since demand for US treasuries is high, this is not an issue. Fast forward: relationships with the US and China are fraught. China decides to hurt the US economy and dumps $1 trillion in US treasuries on the bond market. What would happen?

Supply dramatically increases, price for US treasury bonds goes down. China could keep lowering the price until somebody decided it was a good buy. I seriously doubt anyone would think the US would go insolvent so at some fraction of a dollar all of the bonds would be bought. But China would have effectively devalued the US dollar.

How would the Fed respond to the dollar being devalued and US bonds being sold at discounts? It would move to protect the dollar by raising interest rates to make US treasury bonds more attractive to buyers. There would be a feed back loop as China was willing to sell at a greater and greater discounts while the US treasury kept raising rates to support the value of the dollar. What happens when the Fed raises rates? Liquidity in the financial markets is reduced. As the 2009 Financial Crisis illustrated, liquidity in the financial markets is vital to the global economy.

This is a very simplistic analysis. And leaves out the possibility of a panic that often accompanies these types of situations. What if international investors get spooked? This is the scenario that everyone starts dumping US treasuries. And no one is buying. Worst case (and super unlikely).

This would probably be all fine and dandy with little fuss and muss if the US economy was strong. But what if the US economy was already in trouble? What if the US economy was dependent on near zero interest rates for over 10 years to achieve growth? I don't think it would be all so fine and dandy.

China could use the 'nuclear option', dumping their US Treasury bonds on the open market. In order to do this they must be willing to accept pennies on the dollar. Essentially 'spending' $1 trillion in US dollars in economic warfare. The purpose would be to devalue the US dollar, destabilize world financial markets, and drive interest rates higher. It is an economic weapon. Meaning that its outcome and impact are not certain and there would with negatives for China. But if they are willing to take the substantial losses in an attempt to devalue the US dollar and destabilize global financial markets, they have a feasible economic weapon to do so.

To go back to an idea you brought up: this option, the debt in form of US treasuries China owns, is only possible because of the long-term trade deficit with the US. You describe earlier it is ridiculous to think that China benevolently loaned the US money. Agreed. The US has been only too happy to enter into this arrangement with a trading partner that is not benevolent. That was and is a mistake.

https://www.forbes.com/sites/leonlabrec ... 25962c1d88

To be clear, China HAS been selling its US treasuries (divesting itself). But this appears to be in the normal course of trade versus a prelude to the nuclear option.

https://www.marketwatch.com/story/china ... 2020-06-02

https://www.reuters.com/article/us-usa- ... SKCN1SY0BS

I'd also point out that rational economic analysis of China is a fools errand. China is not driven by the same ideology and philosophy of the West. Their institutions and people think very differently than we do. Fundamentally, they have different values. While the self-inflicted economic damage of the nuclear option would be untenable to the West, that may not be the case with China.

It would seem the hedge fund manager you are referencing is discussing relatively short term as in the next few years. And I would agree in the short-term there is little risk of what we are discussing. You seem to be projecting that as an absolute.

So you're talking about a hypothetical perfect storm of unprecedented bad events for the US economy where China "might" me able to use the nuclear option? Got it.

Nice dig by calling him a hedge fund manager. Michael Pettis is a professor of economics at Tsinghua University in Beijing and an accomplished author.

You also seem to be convinced that China can "take a hit" because they're not a democracy. This is not the case. The CCP is in power because it provides the Chinese people with economic growth. Living conditions that have improved drastically over the last few decades. This economic miracle is coming to an end, they didn't even set a growth target for 2020, although understandable still unprecedented.
Hundreds of millions of people have lost their jobs during the corona crisis. China already spends more on internal security than they do on defence. If the economy keeps worsening, they will have uprisings to quell on a daily basis.

There is a concept called "the mandate from heaven". This is the mandate by which China is ruled. When the emperors were no longer able to provide for their citizens, peasant uprisings would happen and overthrow the dynasties. Worsening economy, natural disasters, famine etc. would signal that a dynasty had lost its mandate from heaven, and it was a matter of time before they were overthrown.
This might sound fantastic, but it is a real thing in Chinese culture. This is why CCP is investing so heavily in the state security apparatus, facial recognition, internment of uighurs, etc. They know the economy will slow down and people will be disgruntled and lose their faith in the party.

So even if the international environment made it possible for China to weaponize their US bonds, it would be too costly domestically to take any kind of hit to the economy.

[Rasmusb]

Standard Chinese tactics.

[aurelius]

stuff

So you are unable to offer a basic explanation at how if the Chinese dump a trillion dollars of bonds at a discounted rate on the open market in a short period of time it would not hurt the US economy.

Instead, you discuss fucking nonsense. And ignore that the Communist Party has ruled China with an iron fist long before the recent economic growth. You even add discussion on how the Communist Party has invested in security measure to control the population if there is an economic set back...okay.

I don't think you have any idea what you are talking about, lack an understanding of basic macroeconomics, and are simply against the consensus expert opinion on this issue (you are arguing against Nobel Price winners in Economics). Your hedge fund manager you discuss who is on the bank roll of the Chinese (that you openly admit) only discuss the short-term). And news flash, a hedge fund manager is not necessarily an expert at macroeconomics. Just like a central bank manager is not necessarily the best manger of a hedge fund. Thanks for sharing your clearly wrong thoughts on the matter.

[Rasmusb]

stuff

So you are unable to offer a basic explanation at how if the Chinese dump a trillion dollars of bonds at a discounted rate on the open market in a short period of time it would not hurt the US economy.

Instead, you discuss fucking nonsense. And ignore that the Communist Party has ruled China with an iron fist long before the recent economic growth. You even add discussion on how the Communist Party has invested in security measure to control the population if there is an economic set back...okay.

I don't think you have any idea what you are talking about, lack an understanding of basic macroeconomics, and are simply against the consensus expert opinion on this issue (you are arguing against Nobel Price winners in Economics). Your hedge fund manager you discuss who is on the bank roll of the Chinese (that you openly admit) only discuss the short-term). And news flash, a hedge fund manager is not necessarily an expert at macroeconomics. Just like a central bank manager is not necessarily the best manger of a hedge fund. Thanks for sharing your clearly wrong thoughts on the matter.

Do you engage with people in this way in real life too? Or are you just a dick online?

The consensus opinion is not that China is able to weaponize their US bond holdings, quite the opposite. It is the consensus in media, though, as it sells more newspapers. Why do you think the Trump administration is not worried about this scenario? I will grant you that IF US bonds are no longer considered a safe haven, China might be able to hurt the US economy by dumping their US bonds. Firstly, that is not the case, and secondly, it would hurt the Chinese economy just as well.
The Communist Party in USSR likewise ruled with an iron fist and few (if any) foresaw the fall of the Soviet Union. Is the CCP likely to fall in the near future? No. But all it takes is the right set of conditions for it to happen. You seem to think they can take economic hits at will, and as a person who speaks, reads and writes Chinese and has been living in China for over 13 years, I can tell you that that isn't the case. Especially now with the level of unemployment and lack of economic growth.

A hedge fund manager is not necessarily an expert in macroeconomics, correct. This one just happens to be. What does his employment at a Chinese university have to do with it? His opinion is obviously against the official narrative here in China.

[aurelius]

stuff

So you are unable to offer a basic explanation at how if the Chinese dump a trillion dollars of bonds at a discounted rate on the open market in a short period of time it would not hurt the US economy.

Instead, you discuss fucking nonsense. And ignore that the Communist Party has ruled China with an iron fist long before the recent economic growth. You even add discussion on how the Communist Party has invested in security measure to control the population if there is an economic set back...okay.

I don't think you have any idea what you are talking about, lack an understanding of basic macroeconomics, and are simply against the consensus expert opinion on this issue (you are arguing against Nobel Price winners in Economics). Your hedge fund manager you discuss who is on the bank roll of the Chinese (that you openly admit) only discuss the short-term). And news flash, a hedge fund manager is not necessarily an expert at macroeconomics. Just like a central bank manager is not necessarily the best manger of a hedge fund. Thanks for sharing your clearly wrong thoughts on the matter.

Do you engage with people in this way in real life too? Or are you just a dick online?

The consensus opinion is not that China is able to weaponize their US bond holdings, quite the opposite. It is the consensus in media, though, as it sells more newspapers. Why do you think the Trump administration is not worried about this scenario? I will grant you that IF US bonds are no longer considered a safe haven, China might be able to hurt the US economy by dumping their US bonds. Firstly, that is not the case, and secondly, it would hurt the Chinese economy just as well.
The Communist Party in USSR likewise ruled with an iron fist and few (if any) foresaw the fall of the Soviet Union. Is the CCP likely to fall in the near future? No. But all it takes is the right set of conditions for it to happen. You seem to think they can take economic hits at will, and as a person who speaks, reads and writes Chinese and has been living in China for over 13 years, I can tell you that that isn't the case. Especially now with the level of unemployment and lack of economic growth.

A hedge fund manager is not necessarily an expert in macroeconomics, correct. This one just happens to be. What does his employment at a Chinese university have to do with it? His opinion is obviously against the official narrative here in China.

You have yet to explain how China dumping $1 trillion in US bonds at a disconnect rate on the bond market will not have a negative impact on the global economy (which despite your assertion is against the economic communities consensus). Still waiting on you for that explanation. If you cannot or will not provide a basic macroeconomic explanation for us to discuss, I will assume you do not know what you are talking about and will not respond to you further.

Your hedge fund manager (not an expert) did not say it would not be a big deal. Just said it would not be likely in the short term. Which I already agreed with. Because macroeconomics is not about predicting short term trends but about identifying long-term risks. Anyone's opinion on will China do this in the long-term is simple speculation based on conjecture. China is not going to play by Western rules. What matters is China CAN do this. And that should be a cause of concern. One which we should start mitigating.

Do not pass go, do not collect $200.

[Rasmusb]

You have yet to explain how China dumping $1 trillion in US bonds at a disconnect rate on the bond market will not have a negative impact on the global economy (which despite your assertion is against the economic communities consensus).

Because the dumping means they have to take in an alternative currency (EURO bonds), that will then pick up the USD Bonds. Unless you are implying that China will give away USD for free? Then it might have an impact. But then China would have no money to buy commodities for. This should be obvious if you would bother to move your analysis beyond media talking points.

Let's look at the longer term too then. China's economy is slowing, demographics aging, they are Japan on steroids. In a matter of years pension funds will be negative and the dire situation the Chinese government finds itself in is illustrated further by their recent announcement of wanting to tax Chinese citizens on their global income.
In other words, we are not moving towards an economic environment where it becomes increasingly likely that China is more able to "take a hit". This likelihood is decreasing.

Yes, of the infinite amount of events in this universe, China dumping their US bond holdings is there. Is it on the spectrum of likely events? No, definitely not. Should we in the same way worry about a UK nuclear attack on France because they are physically able to carry out this action?

Please stop your smug assertions when you are the one demonstrating little to no deep thinking on the subject.