Over the past several years, China has been the engine of global growth and the world’s most important creditor. Its economy muscled its way through the financial crisis largely unscathed. When bad debt knocked Western banks to their knees, China emerged as the global creditor of last resort, financing the U.S. government’s massive bailout programs.
But now, experts are warning that China’s red-hot economy is catching a contagion of its own. The country is increasingly awash in runaway loans, a development that could have serious implications for China and the global economy.
The situation has become so precarious that Fitch Ratings, a global credit analysis firm, issued a report last month revealing a litany of messy banking practices associated with aggressive Chinese loan making. The report stated that these practices — involving transferring loans off of banks’ books — constitute “the most disconcerting trend Fitch has observed in China’s banking sector in recent years.”
Credit is the lifeblood of an economy, the vital fuel of the marketplace. But too much credit can derail an economy. And that’s what China is now confronting.
In 2010, central planners struggled to restrain the unbridled banking sector. They capped lending at 7.5 trillion renminbi (about $1.1 trillion). That failed. Instead, lending exceeded an estimated $2 trillion, according to China Confidential, a research service connected to the Financial Times. That’s more than $1,500 for every Chinese citizen, a substantial sum in a country with a (nominal) per-capita income of about $4,000.
The credit explosion is fueling inflation. That’s a worrying development for a government whose legitimacy relies on improving living standards year after year. Rising prices triggered unrest in China in the run-up to the 1989 Tiananmen Square massacre; now with rice jumping as much as 30 percent, officials are wary of renewed discontent.
It’s also possible that this excessive lending could cause a financial crisis — especially since nearly half of the new loans are being made in a subterranean world of opaque, unregulated finance. And given the U.S. government’s addiction to huge loans from the Chinese government, there could be a significant impact stateside if Beijing were to need to divert its financial might toward rescuing its own banks.
The runaway loan problem stems from China’s quirky socialist-market approach to managing its economy. To grasp the predicament, it’s important to understand how Beijing strays from the usual market management practices.
In capitalist countries, central bankers use interest rates as the brake and gas pedal of growth. During a recession, they reduce interest rates, making money cheaper for spending and investment, thereby accelerating growth. When inflation rises, they boost interest rates to slow growth and bring price increases under control. The system doesn’t always work well — as illustrated by the bubble-and-bust cycle in the United States in recent decades. But it is widely regarded as the most effective method for expanding wealth over the longterm.
The Chinese government takes a different approach. Instead of relying solely on interest rates, it regulates the volume of loans that banks issue. When the Chinese economy sputters, as it did in 2009, central planners instruct the country’s banks to increase lending. When inflation rises, regulators decrease loan quotas.
But now, Chinese consumers and businesses are hungry for more credit than the government will allow. As a result, bankers, entrepreneurs and even neighborhood loan sharks have taken matters in their own hands.
China may be losing control of its economy
Bill O’Reilly Has the Evidence of Existence of God
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Fox News: Healthcare Reform Could Be Repealed
With the new Congress just days away from being sworn in, Fox News has already began to distort reality by telling its viewers that, “President Obama’s healthcare law may be just weeks away from becoming a footnote in history.”
On Fox and Friends Gretchen Carlson said, “It is one of the biggest achievements of his presidency, but President Obama’s healthcare law may be just weeks away from becoming a footnote in history. What?” That does sound like big news, and I suppose if you were a Tea Party supporting Fox News viewer you might be ready hang the mission accomplished banner from your front porch, but once again, the news source that you defend as the only one that tells you the truth has lied to you.
According to The Hill, Eric Cantor’s office has announced that the vote to repeal healthcare reform will take place on January 12, “”Obamacare is a job killer for businesses small and large, and the top priority for House Republicans is going to be to cut spending and grow the economy and jobs,” Cantor spokesman Brad Dayspring said. “Further, ObamaCare failed to lower costs as the president promised that it would and does not allow people to keep the care they currently have if they like it. That is why the House will repeal it next week.” (What Cantor’s spokesman doesn’t tell you is that most of the cost cutting provisions of the law have not kicked in yet).
Whoopie, Obamacare is history. Break out the tea bags, Martha. However before you Fox Newsers celebrate, you might want to hear what the Democratically controlled U.S. Senate had to say. In a letter to incoming Speaker John Boehner, Democrats have vowed to block any repeal of healthcare reform, “If House Republicans move forward with a repeal of the health care law that threatens consumer benefits like the “donut hole” fix, we will block it in the Senate. This proposal deserves a chance to work. It is too important to be treated as collateral damage in a partisan mission to repeal health care.”
Well that pretty much takes care of that, so why is Fox News lying to their viewers about healthcare reform being repealed? My guess is that they have to do everything they can to distract their viewers from the reality that the new Republicans in Congress are going to be able to do nothing that they promised Republicans they would do on the 2010 campaign trail. Politically, they see the symbolic vote to repeal healthcare reform as an advantage. What they can’t seem to comprehend is that the American people are dissatisfied with the current reform, not because it goes too far, but because it doesn’t go far enough.
With the Republicans in Congress unable to accomplish anything that they promised to do, Fox News has no choice, but to lie to their viewers, and make up accomplishments like the repeal of “Obamacare.” FNC has already conditioned their viewers to not trust any other news source, so it is easy for them to spread false information to viewership that has been brainwashed into believing that only one news network is capable of telling the truth.
This is a new tactic for Fox News though. Now they are not just making up details, but creating an alternate political reality, where the Republican minority actually has the ability to repeal the legislation passed by the party that controls half of the legislative branch and the executive branch. The truth is that healthcare reform is not going anywhere.
No matter what Fox News may tell its viewers, if House Republicans want any legislation signed into law, they are going to have to go to Obama and ask for it. The Republican victory has only gotten them a better bargaining position. The fact that they have the power to legislatively accomplish nothing is a secret that Fox News will never tell their viewers.
Taliban's are using Wikileaks
Yesterday, The Times, which is, sadly, behind a paywall, ran a report by Tom Coghland that was very worrying:
That is clearly not Wikileaks’ fault. But it does demonstrate the extreme risk many Afghans took in choosing to oppose the Taliban domination of their homes. I should note The Times, along with the New York Times, the Guardian, and Der Spiegel (and, frankly, every major paper that’s covered this story) has chosen to redact the Afghan names contained in the Wikileaks data. Despite withholding some 15,000 incident reports for “safety reasons,” thousands of documents in the archive do identify Afghans by name, family, location, and ideology.After the disclosure in this newspaper yesterday that the WikiLeaks Afghan “war logs” contained possibly hundreds of named Afghan intelligence sources for US forces, The Times has uncovered many new cases.
One example from 2006 described an encounter between US officers and an Afghan. The Times has redacted the report to ensure that no individual or their relatives could be targeted.
Yesterday the account of Mr [X]’s meeting was accessible to anyone on the internet with the thousands of others published by WikiLeaks. When The Times sought to track down Mr [X] to ask his response, he was found to be dead.
He was killed by the Taleban two years ago after being suspected of spying for American forces. Twenty-eight other named Afghan individuals in just a few hundred files examined in detail by The Times on the site are, however, thought to be alive.
The Times (firewalled again, I’m sorry) asked Wikileaks founder Julian Assange what he thought of it:
• He claimed that many informers in Afghanistan were “acting in a criminal way” by sharing false information with Nato authorities.Leaving aside the immaturity and callousness of such a stance—we didn’t mean to hurt anyone but instead of thinking through the consequences of our actions, we though, hey, fuck it, let’s publish anyway, it’s war!—Assange is giving us a wonderful lesson in why things are classified during war. His cavalier attitude toward the safety of the people he exposes to mortal danger, as if a really terrible context like a war provides justification for adding further risk to their lives (and his repeated, and thus far unsupported, accusations that Afghans who help us are criminals), is beyond immaturity and callousness, though—it is monstrous.
• He said the White House knew that informants’ names could be exposed before the release but did nothing to help WikiLeaks to vet the data.
• He insisted that any risk to informants’ lives was outweighed by the overall importance of publishing the information.
Mr Assange said: “No one has been harmed, but should anyone come to harm of course that would be a matter of deep regret — our goal is justice to innocents, not to harm them. That said, if we were forced into a position of publishing all of the archives or none of the archives we would publish all of the archives because it’s extremely important to the history of this war.”
Julian Assange is the worst sort of moralist, one whose sense of justice is so selective (secrecy is of utmost concern for Wikileaks’ sources and employees, but not the government), and his comprehension of consequences so short-sighted and defined by ideology rather than fact, that he doesn’t care who he has to offer up to murderous bastards to satisfy his sense of moral outrage. It is the same morality that leads the ELF to destroy car dealerships using chemical explosives out of a concern for the environment.
Anyway, so the Taliban are doing exactly what I said they would do, in my pieces for PBS and CJR: they are vowing to hunt down and murder anyone who is identified in the Wikileaks archive as having worked for the U.S.
Exclusive: The Taliban has issued a chilling warning to Afghans, alleged in secret US military files leaked on the internet to have worked as informers for the Nato-led coalition, telling Channel 4 News “US spies” will be hunted down and punished.I hope Julian Assange sleeps well at night. His victims certainly won’t.
Speaking by telephone from an undisclosed location, Zabihullah Mujahid told Channel 4 News that the insurgent group will investigate the named individuals before deciding on their fate.
“We are studying the report,” he said, confirming that the insurgent group already has access to the 92,000 intelligence documents and field reports.