

Is China actually bankrupt? - known
http://articles.moneycentral.msn.com/Investing/JubaksJournal/is-china-actually-bankrupt.aspx?page=all

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tjic
Much as I dislike it, the fact is that any government can raise taxes (until
they hit the point on the Laffer Curve where higher rates == lower revenue ...
and it's far from clear that China is at that point).

Thus, China's "bankrupcy" is nonsense as long as the government is willing to
up taxes.

Also, just as you have to evaluate the P/E ratio of a company in the light of
its growth rate, you have to evaluate the debt of any entity in terms of _its_
growth rate.

E.g.: would I be happy to loan $100k to someone earning $25k/yr ?

No.

...but what if I knew for a fact that the person's income was going to double
every year for the next 10 years?

Well, that's a different story: in 10 years, the person's income will be $25
mill/year, and the debt will be trivially easy to repay.

China has had a 10% GDP growth rate for a decade now. That means that every
decade their GDP is 2.5x higher than before.

A "high" debt load (measured in % of current GDP) seems a lot less worrying in
that context.

To really nail the issue down, you need to figure out if they're going to keep
up that growth rate, and China won't grow at that rate forever ... but another
10 or 20 years sounds like a safe bet.

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mark_l_watson
Interesting - I am not sure if I buy into this, but an interesting article.

In the USA, we stopped publishing our M3 figures 7 or 8 years ago -- a
stunning lack of transparency, but as the article says, all governments lie
about their finances.

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swombat
Would love to hear some analysis of this by people who actually know a thing
or two about economics. Is it more of the usual baloney?

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weego
The basic outcome of that article is that any country is bankrupt on paper if
you apply the right criteria and filter them through some historical
information super-imposed onto what may or may not be happening now.

The fact they picked China gives it a high propaganda rating in my eyes.

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berntb
I would have felt calmer if that assuring voice wasn't the third comment from
a month old account. :-)

Anyone really _know_?

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weego
We _know_ that the UK, and while it isn't within my direct sphere of
knoweldge, it seems common knoweldge the US too are in a fairly dire financial
situation, though their AAA credit rating and various other orchestrated
advantages cover that for them (oil bought in Dollars for example). Also we
can see that plenty of other countries that don't have similar advantages are
closer to real trouble (Greece being propped up by massive EU funding, Spain
also are cutting a very fine line).

What exactly is there to find calming about this smoke-screen information?
That China might not be in as much trouble as us? I guess considering the
incredible amounts of Dollars they hold that might be comforting incase they
start to sell them off. Or that if they aren't in so much trouble then perhaps
we aren't either? I can assure you that that isn't the case whatever the truth
about China.

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Nwallins
> _whatever the truth about China._

The question at hand is essentially: _What is the truth about China_? I am not
sure why you are bringing up US and UK finances and itching to make the
comparison.

Sure, making China look bad might further interests in the west, but it says
nothing as to the article's accuracy. It is good to note that the article may
be biased against China, but I think the focus should be on the facts and
analysis provided.

> _What exactly is there to find calming about this smoke-screen information?_

I don't think berntb was saying the article made him feel calm -- I think he
was calling into question your credibility, just as you have called into
question the journalist's:

>> _I would have felt calmer if that assuring voice wasn't the third comment
from a month old account._

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berntb
>>I don't think berntb was saying the article made him feel calm

Right, I meant that weego's comment were calming, since China and the West are
connected economically. If one gets big problems it will probably spread to
the other.

I've just seen too many new accounts argue positions like defending China's
behavior in Tibet, etc to trust unknown voices about things that can look bad
for China's government.

I'll take that -4 as a notice to try to write better/clearer. :-)

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olefoo
To speak of bankruptcy when talking about sovereign governments is somewhat
misleading since they have many options that are simply unavailable to even
the largest of private debtors.

Articles like this always strike as being not only fuzzy from an economic
perspective, but also willfully blind to the political implications.

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Teese
Something is odd with this web page. At least using chrome on Win7 x64.

I have VS2008 and SQLProfiler, even the Windows Task manager open in the
background and they all have parts flickering every ~4 seconds when this page
is opened in chrome.

For example in Visual studio the Solution Explorer is refreshing every four
seconds.

anybody have any ideas? it's kind of unnerving. Or maybe it's just me.

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romland
I just tried it with a few configurations. And I can conclude that it's not
just you.

With Chrome and VS2008 with a project open I at least get the Solution
Explorer refreshes you described. I don't have time to investigate further
right now but my first reaction was that it was a bit scary that a webpage
would be able to influence a separate application like that... But a more
likely scenario is that VS has hooked up a debugger to the thread and it
triggers this behavior.

I don't have any experience with .NET on the web, so I can't say for sure. But
I am for sure going to bookmark this and have a look at it later.

Thanks! :)

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Teese
except it's not just VS, Outlook had certain elements flicker too.

If you go to the chrome options page, and look at the under the hood tab, that
whole scroll region flickers too.

Chrome's task manager shows that silverlight is loaded somewhere on that page.
maybe that is it.

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Estragon
Bankruptcy is a legal concept which cannot be applied to a sovereign entity.
All you can really talk about is credibility to potential lenders. I would say
China's credibility is pretty damn good at the moment.

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FLX
Is this US actually bankrupt?

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karl11
One reason I'm skeptical about this is the the United States has a ton of debt
(this is a definite fact), and someone had to lend us the money. China has
over $1T of U.S. Treasury Bonds. It might be plausible that they have cash
flow problems, since they can't exactly liquidate $1T of U.S. Bonds, but then
why do they keep buying them? In any case, I don't buy this one bit,
especially since I haven't heard a single reputable economist ever say
anything like it.

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jbooth
They have to keep buying them -- their economy is based on keeping the yuan
artificially cheap compared to the dollar. In order to maintain this out-of-
balance price, they have to keep buying dollars with yuan, taking dollars out
of the market and increasing the supply of yuan.

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jerf
Is there anyone who isn't?

We're going to be explaining to school children how every sovereign entity in
the world can be in crippling debt simultaneously for centuries. Here's hoping
those next societies actually learn something from this. With a bit of luck
and a whole lot of making hard choices, perhaps ours will be one of them.

