
China May Have $5.8T in Hidden Debt with ‘Titanic’ Risks - aswaedr
https://www.bloomberg.com/news/articles/2018-10-16/china-may-have-5-8-trillion-in-hidden-debt-with-titanic-risks
======
smacktoward
The article kind of assumes that you understand what these "local government
financing vehicles" are. Which is probably true for the median reader of the
story, but it wasn't true for me, so I went looking around for an explainer
and found this from 2013: [https://www.ibtimes.com/chinas-local-government-
financing-ve...](https://www.ibtimes.com/chinas-local-government-financing-
vehicles-lgfv-7-things-you-should-know-about-chinas-1411694)

 _In contrast to state governments in the U.S., most local governments in
China are forbidden to borrow money directly._

 _Historically, land sales have been a large revenue source for local
governments, but since the global financial crisis this revenue source has
diminished. Yet local government spending, especially on infrastructure
investments, has accelerated..._

 _Detroit filed for bankruptcy with debts of $18 billion on July 18, but this
is the average amount of debt for many Chinese cities. A 2012 audit of 36
local governments found $624.6 billion in debt -- suggesting there are at
least a few Chinese cities with debt equal to, or in excess of, the $18
billion that sunk Detroit._

So the news is that what was understood to be ~$625 billion in debt six years
ago has turned into $5.8 _trillion_ in debt today. Which is, like, _322
Detroits._

~~~
panarky
For the sake of argument, let's assume that the headline is true -- local
governments have taken on more debt than they can service in a slowing
economy. What's the endgame? Here are some possibilities, would love to see
some economic modeling to quantify some scenarios.

1) Central government gradually inflates the currency to monetize the debt
with a few defaults along the way. Damage is funded by Chinese creditors
(defaults) and Chinese citizens (inflation), and it takes 20 years to fully
play out.

2) Central government bails out bad loans by selling a portion of their $3T in
foreign reserves, including $1T of US government debt. Chinese creditors,
investors and citizens are made whole. Foreign bond prices fall and interest
rates rise, causing recession and financial crisis in the US.

3) Central government bails out a few well connected players, but mostly
allows market forces to run their course. Shadow banks and local government
financing vehicles go bankrupt, causing a cascade of bankruptcies in the real
economy, and economic growth is 200 basis points under potential until 2022.

~~~
nradov
The Chinese government only holds 6% of US government debt. Selling it
wouldn't cause a recession and financial crisis.

~~~
panarky
Last week's stock market mini-crash is getting blamed on interest rates
increasing a few hundredths of one percent [1].

How much would interest rates rise if $1T gets sold into an already weakening
market?

I don't pretend to know the answer, but I'm pretty sure it's greater than
zero.

[1] [https://www.cnbc.com/2018/10/11/trump-says-the-stock-
market-...](https://www.cnbc.com/2018/10/11/trump-says-the-stock-market-
correction-caused-by-the-federal-reserve.html)

~~~
nradov
A temporary 4% drop in the S&P 500 (based on closing prices) is hardly a mini-
crash. If you check the historical price charts over the past several decades,
movements of that size are common. And analysts make up all sorts of
explanations after the fact for the fluctuations just so that they have
something to talk about on TV. The reality is that we don't know why; maybe it
was interest rates, maybe it was something else.

~~~
ksec
The problem is we haven't seen a 4% drop for years, from a predictive of
recent decades, many who wasn't in the Stock market during 2008, a 4% drop is
a mini crash.

Of coz for those of us who are in it for multiple decades.... 4% drop doesn't
surprise us.

~~~
nradov
There were 10 other trading days in 2009 and 2011 where the S&P 500 index
dropped more than 4.0%. The largest daily decline was -6.7%.

No one cares about investors who only got into the stock market after 2008.
They don't have enough capital to really impact anything.

------
apo
The article mentions LGFVs, without defining the acronym or explaining much
about them.

Here's another article that goes into more detail:

 _Local government funding vehicles (LGFVs) are companies owned and funded by
a local government in order to raise funds for municipal projects. These firms
stem from the taxation system in China that allocates the lion’s share of
revenue to the national government, and from regulations implemented in 1994
that prevent the government from selling bonds. This strict budgetary
regulation was intended to promote sound financial management and prevent
local governments from spending themselves into deficits. LGFVs became
prominent after the Asian Financial Crisis of 1998 and the Great Financial
Crisis of 2008 when central government stimulus packages put the onus on local
governments to raise necessary funds. LGFVs are effectively state-owned
enterprises (SOEs)._

[https://www.strangemarkets.com/chinese-lgfv-bonds-the-
next-g...](https://www.strangemarkets.com/chinese-lgfv-bonds-the-next-great-
default/)

~~~
i_cant_speel
I'm not sure why they thought everyone should know what that meant. As I
looked it up, I came across articles from as far back as 2013 saying that
China's collapse is imminent. Considering that still hasn't been the case,
this may not be as imminent as Bloomberg is making it seem.

~~~
wpietri
Your theory that a large systemic problem is only real if it blows up quickly
is puzzling to me. I was working for financial traders at the time of the
Orange County crisis in 1994 [1], and even then people were concerned that the
rise of complicated financial instruments was concentrating and perhaps even
creating risk in ways that were poorly understood.

Those concerns got louder during the repeal of the Glass-Steagall Act in 1999
[2], as that removed depression-era regulations that kept banks from a lot of
financial speculation.

But this all didn't really blow up until the financial crisis of 2007-8. [3]
Financial instruments with long time horizons (e.g., mortgages and long-term
loans to governments) can be dangerous a long time before the truth comes out.
And large organizations like banks and governments may end up exacerbating the
problem by smoothing over what they think of as small problems but are really
the canaries in the coal mine for major systemic issues.

Closer to home, we could look at Theranos, which took a full 15 years to go
from founding to criminal charges despite never really working. Enron and
Worldcom are two other good examples where booming markets covered up all
manner of sins for years before the music stopped.

[1] [https://www.nytimes.com/1994/12/08/business/orange-
county-s-...](https://www.nytimes.com/1994/12/08/business/orange-county-s-
bankruptcy-the-overview-orange-county-crisis-jolts-bond-market.html)

[2]
[https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the...](https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act)

[3]
[https://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80...](https://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%932008)

~~~
zjaffee
Hell, an even more outlandish example is Bernie Madoff, who ran his Ponzi
Scheme starting in the late 1980s which lasted until 2008.

------
Nokinside
LGFV (Local Government Financial Vehicle) are companies set up, fully owned,
and operated by local governments that borrow money from the banking and
financial system to engage in businesses that are fiscal in nature, like
infrastructure investment and public affairs. Local governments can't sell
bonds and Central government takes most of the taxes so LGFV is the only way
they can finance their projects.

Most of that $5.8 Trillion valuation is not going to vanish because they are
real investments into infrastructure. Most problems come from wrong cash flow
estimates, and lower than estimated returns and some nonprofitable
investments. The actual potential loss or haircuts investors are facing is
some percentage of that sum. Probably few $100's of billions, maybe even close
to $1T.

The reason why there are defaults is because Chinese government wants to fight
moral hazard problem that comes from bailing them out. The government will
allow certain number of LGFVs to default to set an example (like Lehman
Brothers) but if the credit squeeze starts to hurt "Chinese main street" they
will step in.

~~~
sailfast
How much accounting regulation is actually enforced on these? How many ghost
projects or empty infrastructure with revenue booked using estimated values
instead of real sales?

I don’t doubt that it won’t be an entire haircut, but to say these function
like regular bonds seems odd.

Is there a contagion concern here? What other products are collateralized
using these? We saw this of course with well-rated packages of loans actually
being manure. Anything like packaged LGFVs with hedges?

Asking because I have no idea and am legitimately curious about the possible
downsides.

------
rossdavidh
Here's the thing: this sounds bad, but partly because of the massive, massive
scale. However, everything in China sounds ridiculously big to me; the
environmental problems, the amount of stuff being built, everything. So, my
intuition for when "that's too big" turns into "that's so big it will go BANG
pretty soon" is no good, when it comes to China. Thus, the question is, how
big is this, on a China-everything-is-big kind of scale? What will be the
thing that would make this stop? How do we know it's not just an early 90's
S&L crisis kind of thing, that is, big but not catastrophic?

I'm not saying it's not a crisis, I'm just saying I can't tell if it's a
crisis because it's China, everything seems way too big to me, and lots of it
just continues that way for many years.

~~~
crdoconnor
The difference between debts and environmental disasters is that debts can
always be canceled or watered down.

Indeed China's MO is usually to do that indirectly every time, which is why
articles like this have popped up like clockwork for the last decade in spite
of China not facing a recession in that time. Counter cyclical fiscal stimulus
always headed it off.

------
KaoruAoiShiho
Just as I said the last time this story popped up:
[https://news.ycombinator.com/item?id=17542113](https://news.ycombinator.com/item?id=17542113)
People cannot use their intuition built on a western context on China. Unlike
western local governments whose taxes comprise of the majority of their
funding Chinese local governments collect close to no tax. Their funding comes
primarily from money borrowed from other parts of the government which is
standard practice and not alarming.

An analogy is like a company whose sales department generate all the cash and
the engineering department generates no cash and owe billions to the sales
department. Is the eng department in crisis? Obviously not. Still, oversight
needs to be exerted over the eng department to make sure that it doesn't
overspend or develop projects that are low in ROI... an eternal challenge.

------
ChuckMcM
Interesting paper on LGFVs[1] which are "Local Government Finance Vehicles."

If you squint, it looks like an interesting parallel to the lending issues
that plagued Japan in the 90's and eventually brought the economy there to a
standstill. The monetary equivalent of "vapor lock" in a hydraulics system.

I am the first person to admit that the complexity of bond financing in the
Chinese economy really challenges me because it operates on some fundamentally
different assumptions about fiscal policy and monetary policy. That said, I'm
not sure how they unwind that debt without sufficient domestic demand to keep
the system operating.

If they were a third world country they could just devalue the RMB by 1000:1
and then settle the debt with devalued currency, but that option isn't really
available to them.

[1] "The Law of China’s Local Government Debt: Local Government Financing
Vehicles and Their Bonds", D. Clarke -- [https://sci-
hub.tw/10.1093/ajcl/avx036](https://sci-hub.tw/10.1093/ajcl/avx036)

------
onlyrealcuzzo
Here's something that seems simple and I've NEVER been able to get a straight
answer to:

If Chinese wealth per capita is roughly 1/10th that of the average US citizen
-- both in terms of median and mean -- and if Chinese wages are roughly 1/6th
that of the average US citizen -- both in terms of median and mean... How on
Earth are Chinese houses on average MORE EXPENSIVE per square foot than houses
in the US?

My brain just can't understand.

~~~
zjaffee
The incredible thing is that these homes are often not purchased with debt
financing either, and when they do, it's with a much larger downpayment than
in the US as required by law. Chinese citizens have a much higher savings rate
compared to Americans.

~~~
adventured
The Chinese consumer has leveraged up considerably in the last decade, to keep
up with the rapid price increases in the economy. Their debt to household
income ratio is quickly approaching the rate you see in the US. They appear to
be making the same turn that the Japanese did from ~1998 forward, in going
from being a nation of high savers to low savers and high debtors in a short
span of time.

"By the end of 2017, the ratio of total household debt to disposable personal
income hit 107.2 percent. This number is above the level in the US before the
2008 financial crisis. The structure of China's household debt has also
diversified. Housing mortgages only increased slightly in 2017. ... But other
types of loans, especially short-term loans, increased rapidly last year. One
reason for this is that families have to seek other ways to finance their home
purchases due to the tighter controls on mortgages. "

[http://www.globaltimes.cn/content/1115334.shtml](http://www.globaltimes.cn/content/1115334.shtml)

"China’s household finances look more stretched than those in most emerging
markets, though the level of household debt remains less than that in most
developed economies, Fitch Ratings said in a report on Tuesday. China’s
household debt-to-disposable income ratio, a gauge of indebtedness, has jumped
9 percentage points every year since 2015, driven by mortgages and other
consumer debts. If left unchecked, the ratio could hit 100 percent by 2020
versus 82 percent at end-2017, Fitch said. That would put China on par with
the United States and Japan, whose household debt ratios are estimated to be
at 105 percent and 99 percent, respectively."

[https://www.reuters.com/article/china-economy-household-
debt...](https://www.reuters.com/article/china-economy-household-debt/chinas-
household-finances-look-stretched-versus-most-emerging-markets-fitch-
idUSL3N1R92WJ)

"On the back of a boom in property prices, household borrowing has been
climbing for 10 years straight, at a pace that rivals any such run-up in major
economies. At $6.7 trillion, and a record 50 percent of gross domestic
product, private debt is now approaching developed-world levels and crimping
consumer spending power."

[https://www.bloomberg.com/news/articles/2018-04-24/the-7-tri...](https://www.bloomberg.com/news/articles/2018-04-24/the-7-trillion-
debt-pile-looming-large-over-chinese-households)

~~~
onlyrealcuzzo
To me, everything seems to point China's current situation mirroring almost
perfectly Japan in the 90s. I must be looking at things wrong. It seems like
no one is betting on it.

------
kernoble
Who's buying these bonds? I'm assuming it must be mostly Chinese investors and
financial firms?

Also, does it ultimately matter with an economy as productive as China's?
Other commenters are comparing it with Detroit, which has lost most of its tax
base, so I'm not sure that's a fair comparison.

And, if they are state run funds/bond issuing, than isn't it roughly
equivalent to any other kind of monetary stimulus? (genuinely asking, this
isn't my area of expertise)

~~~
village-idiot
Also a non expert.

It seems like a lot of Chinese cities have equal to or greater debt than
Detroit. How bad this is depends on the tax base of said cities and how the
debt is structured, but it’s eyebrow raising at best.

As far as I understand, a lot of valuation of the risk in muni bonds is based
around the assumption that municipalities won’t go bust together at once. It’s
this way in the US. This let’s someone spread their money safely, in theory.

The Chinese economy is so export and manufacturing dependent, it wouldn’t
surprise me to see a lot of cities go bust together at once if the economy
shrinks. They have very little other economic activity to fall back on.

For my part, I think any good usage of debt requires transparency about the
amount and purchase. Any entity, private or public, that tries to hide its
total debt load is suspect _at best_. I would expect such an entity to have
other hidden debts, and possibly be leveraged to an insane degree, hence the
privacy.

------
gscott
China builds ghost cities and also tears down cities and combines them into
new ones. They also have built bridges 26.4 miles long miles long over water
(Jiaozhou Bay). Just the materials alone must cost a great deal even at the
reduced prices the Government pays and the low wages for employees. Not to
mention the huge Government security surveillance and incarceration system.
China chides the USA for it's foreign wars but China is at war with it's
population to control them, the cost must be similar or higher.

~~~
azurezyq
Please do not treat all infrastructure projects as money blackholes.

I'll just contribute a little bit about the Jiaozhou Bay bridge. My
grandparents live near there. It actually makes much sense if you take a look
at the map below:

[https://www.google.com/maps/@36.070127,120.2319581,82460m/da...](https://www.google.com/maps/@36.070127,120.2319581,82460m/data=!3m1!1e3)

Basically, Qingdao is already a mega city with over 6M population in urban
area. But it just cannot expand because it is located on a peninsula (similar
to San Francisco) with its back facing a big mountain. So it's kind of natural
to expand on the other side for more and cheaper land. So to reach the other
land, options are:

1\. Connect the tip of the peninsula to the other side. This is shorter but
you're connecting city centers together (Brooklyn-alike), which doesn't work
well for cargo traffics (Qingdao is also a major seaport). Actually this
tunnel is already built and many people use it for commuting.

2\. Connect the seaport area inside the bay to the other side. This is what
you mentioned. With that, cargo can reach factories on the other side in a
faster fashion without crossing the city center.

3\. Improve the highways around the bay to handle increased demand. First it's
a lot longer, which is something you cannot change. Second it's not cheap
either given you need to get more land and might need more time.

And 2's price tag is not that high (roughly the same cost as San Francisco -
Oakland bay bridge). If you were the decision maker, would you want to build
it?

BTW, with 1 & 2's open, the other side already officially became part of
Qingdao metropolitan area and cross-bay subway will open this year.

~~~
gscott
For the bridge I am saying it is a big infrastructure project and must have
cost a lot of money. I am fascinated by the Chinese ability to just point and
create amazing things but...

I am not sure where are the money comes from and I am afraid if everything
comes crashing down for China they will go the military route and turn their
economy into a military economy then take the whole 9-dash line area by force
(as a keep people busy jobs project). I feel the 9-dash line thing is fake and
designed to be able to stop shipping like we can stop oil coming out through
the middle-east closing by closing shipping lanes.

------
diminish
Your weekly dosis of why China is worse than us and _will inevitably collapse_
delivered by Bloomberg, Economist, Financial Times. Thanks aswaedr.

I'm curious if the prophecy will self-fulfill in 10 years or so. I'm also
willing to hear independent voices and analysis.

~~~
mrep
The USSR did.

~~~
kamaal
A big difference between the USSR and China, and the overall situation is the
wars are now no longer about invasions, military and colonialism. But about
economy and intellectual might.

As a matter of fact China not needling into military affairs is a huge
disadvantage for the US.

One of the underlying themes of Donald Trump's campaign was to convince people
regular politicians can no longer stop China. Because China is fighting it in
an arena very different to what the US is used to fighting since a century.

------
fspeech
Here is the S&P report that the headlines are based upon:
[https://www.spratings.com/documents/20184/0/ChinasHiddenSubn...](https://www.spratings.com/documents/20184/0/ChinasHiddenSubnationalDebtsSuggestMoreLGFVDefaultsAreLikely.pdf/00c1bdd1-70c0-9240-12df-850df192c602)

Might as well read the source for yourself if you are interested in the issue.

------
and-then
The US has $21.6 T in debt, and a total of $71 T in public and private debt.

[http://www.usdebtclock.org/](http://www.usdebtclock.org/)

~~~
propman
US also has a lot more assets though and is an already developed economy.
China’s economy will inevitably slow and for an emerging market, their debt is
significant. Also, this is only local Chinese debt and not even the full
picture for that. According to nationaldebtclocks, China govt debt is $5.2
trillion on paper but they suggest multiplying by at least 3.25 to account for
shadow banking not on the official ledgers and local govt debt the article was
talking about.

------
intopieces
It seems to me that China is riding easy money and sinking it into tangible
assets that, beyond default, are at least usable and semi-permanent. You can't
unbuild a bridge and get the money back. It may collapse in the future, but
not before reaping benefits for the economy where it's sitting.

------
bsaul
Ok, there's something i don't get here. 5.8 trillions in debt, china's total
GDP is 12.5 trillions in 2016... That's a lot.

And now that reminds me of another number. Apple and Amazon have 1 trillion
valuation.

I don't understand if my scales are wrong or if something is seriously wrong
pretty much everywhere.

~~~
btilly
Something is seriously wrong pretty much everywhere.

We are at the end of generations of solving one bubble collapsing by inflating
another one. There is a lot of money on paper. But in reality there are three
main places where money can go.

1\. The USA, which has been effectively printing money like crazy with low
interest rates since 2008. This has been transferring wealth from the real
economy to the paper economy.

2\. Europe, whose common currency is unsustainable without political
integration. There is no general support for political integration, and no
reasonable way to untangle the common currency. (Plus Brexit will be a
disaster.)

3\. China, which has the largest asset bubble in history. When it pops they
are likely to wind up in a deflationary spiral, like the one that Japan has
been struggling with for decades since its real estate market collapsed in the
early 90s. Our last deflationary spiral was during the Great Depression.

Of those options, investors see the USA as the least bad.

~~~
bsaul
And add to the confusion the fact that inflation remained quite low. So this
money really went straight from central banks to financial assets, without
ever reaching the pocket of general consumers.

At which point does all this madness stops ? Whenever a new economy emerges
that provides more sanity and so drains the inflated assets, i suppose ?

~~~
btilly
Everyone is playing kick the can.

A more sane economy is unlikely to outgrow the existing (at least one paper),
so that isn't a viable route out.

What's left is that some day, one of the financial disasters turns into a real
collapse. We're talking a sufficient run on the banks that people stop
believing that banks really have money. The last time this happened was 1933,
and it was resolved by FDR closing all banks, auditing their books, deciding
which to save, and then opening them up again.

Given our tighter electronic integration these days, the complications are
likely to be greater. Think credit cards being refused, ATMs not working, and
general chaos. For values of chaos that include people not knowing if their
employers can pay, or how to buy food in supermarkets.

The possibility of that happening was the nightmare scenario that was used to
convince lawmakers to pass TARP a decade ago. And it is a nightmare with a low
but non-zero probability of happening each crisis.

Unfortunately every time we face that threat and successfully get rescued the
markets become more convinced that big players will be rescued the next time
as well. Which encourages more extreme financial brinksmanship and makes the
next crisis more likely. That phenomena is called "moral hazard". See also
"too big to fail".

------
rahimnathwani
If you're interested in this topic, you might like "China's Great Wall of
Debt", by Dinny McMahon: [https://www.amazon.com/Chinas-Great-Wall-Debt-
Massive-ebook/...](https://www.amazon.com/Chinas-Great-Wall-Debt-Massive-
ebook/dp/B075WW1KXH/)

------
tim333
In another article on the same story

>"And that's a debt iceberg with titanic credit risks," they added, estimating
that the ratio of all government debt to GDP was 60 percent last year.
[https://www.cnbc.com/2018/10/16/china-hidden-local-
governmen...](https://www.cnbc.com/2018/10/16/china-hidden-local-government-
debt-could-be-6-trillion-sp.html)

60% doesn't seem that bad. Compare USA: 82%, UK 78%, Italy 120% etc. And at
least China is still growing fast unlike say Italy which does have some
issues.

------
ordinaryradical
When I look at the jump in defaults this year, all I can think about are all
of the home loans people stopped paying in the lead up to the mortgage crisis
and how they were systematized into the rest of the economy by securitization.
If China's system was built around those so-called "implicit guarantees for
debt," isn't it due for a similar or more severe correction?

It seems like the same story--different sector and different culture, same
greed and assumptions.

~~~
kick_in_the_dor
Jump in defaults? By whom? Can you link to some data?

------
nafizh
Can anyone please do an explain like I am five on this? The article assumes
lots of background which probably is fine considering their target audience.

------
brainpool
I believe China is about to tank as hard as the Russian empire. There is going
to be a revolution. What the trigger will be remains to be seen, but it can be
just about anything. Most likely it will be something within that we see as
inconsequential.

~~~
spiritcat
alternatively, we may find out that this new techno-totalitarianism is
astoundingly effective.

------
narrator
The chinese gov prints money electronically and buys the bad debt off the
banks and the banks keep lending. We don't do this in the west because the
government has to borrow money to create it and sticks the taxpayer with the
bill. The cognitive dissonance on this is astonishing.

------
chasd00
Wouldn't they just take whatever they need from the citizens and then make the
numbers say whatever they want? Any objections from the citizens would be put
down or censored appropriately. Seems like a no brainer for China.

------
machinehermit
I have always found the idea that we in the US shit on China's accounting
practices rather hysterical. If "The pot calling the kettle black" ever
applies it is for that.

------
tw1010
If they're uncorrelated risks, it's still a pretty slim chance that they'll
all explode though, right?

------
rdlecler1
I think China has much less room for error with Trump’s tarrifs than is
commonly believed.

~~~
yourapostasy
Chinese nationalistic fervor however may give the population the incentive to
outlast Americans on the pain of the trade war. Hard to tell, but US is
politically divided while China appears more unified at the moment.

~~~
partiallypro
China appears unified because their government stifles freedom of speech and
thought, with reeducation camps, etc.

------
suanmeiguo
I see more and more propaganda about china recently than before

------
TazeTSchnitzel
Are these LGFVs similar to PFI in Britain, Australia etc?

------
robertAngst
I have great fears that the economy over the next 10 years of my life will be
stagnation.

The Chinese debt is something the world has known, to continue to accept the
debt is the risk for the taker.

The worry is that this will ruin companies and the employees that work for
them. It should be obvious how this cascades and affects the common person.

I also have concerns about the US economy given our comfort level with the
growing debt.

~~~
smacktoward
You say "stagnation" like that's the worst thing that could possibly happen.
My fear is that the next 10-20 years will make us _wish_ we had a stagnant
economy.

~~~
hodgesrm
Indeed. Financial implosions tend to have bad effects on the political system.
If this situation does lead to financial problems the effects probably won't
just be limited to China.

~~~
mywittyname
> Financial implosions tend to have bad effects on the political system

This is the primary driver behind my suspicion that some form of financial
crisis the US economy has begun, but it's not yet visible when people look at
the fundamentals. Unemployment is great, wages are rising, assets prices are
growing, etc.

According to the indicators, the economy is as healthy as it can be. But our
political situation suggests something is awry, people are way more pissed off
than they should be.

~~~
smileysteve
> According to the indicators, the economy is as healthy as it can be.

Unless your indicators include wealth inequality, personal bankruptcies, wage
stagnation, infrastructure repair costs.

~~~
mywittyname
I meant them to be the indicators listed immediately preceding that statement.

You can't deny that most people are saying the economy is doing very well.
Unemployment is low, wage growth is happening, large business profits and
revenues are up, manufacturing activity is high, retail sales are the highest
they've been.

Just about every economic indicator captured by the US Census Bureau is very
strong. But people are still pissed the fuck off.

~~~
warmwaffles
> But people are still pissed the fuck off.

It's possible that people being angry and the economy are not connected. We've
never been able to communicate as fast as we have in the past. Right now we
live in a culture of "what to be outraged about next". Best thing to do, is
not participate in the toxic culture.

~~~
thelasthuman
[https://m.youtube.com/watch?v=rE3j_RHkqJc](https://m.youtube.com/watch?v=rE3j_RHkqJc)

------
qubax
May? Well do they have it or not? So sick of these clickbait nonsense.

If you want to know why bloomberg and financial "news" is a joke and a waste
of time. Nobody in the industry takes them seriously. Only the masses who
don't know better think this is news.

Sept 2018 : "China’s Debt Bomb"

[https://www.bloomberg.com/quicktake/chinas-debt-
bomb](https://www.bloomberg.com/quicktake/chinas-debt-bomb)

Feb 2018 : "Sizing Up China’s Debt Bubble: Bloomberg Economics"

[https://www.bloomberg.com/news/articles/2018-02-08/sizing-
up...](https://www.bloomberg.com/news/articles/2018-02-08/sizing-up-china-s-
debt-bubble-bloomberg-economics)

Nov 2017 : "China's Debt Surge May Increase Risk of Financial Crisis"

[https://www.bloomberg.com/news/articles/2017-11-21/china-
s-d...](https://www.bloomberg.com/news/articles/2017-11-21/china-s-debt-surge-
may-increase-risk-of-financial-crisis)

Aug 2016 : "China’s Growing Debt Problem Isn’t Quite What It Seems"

[https://www.bloomberg.com/graphics/2016-china-
debt/](https://www.bloomberg.com/graphics/2016-china-debt/)

May 2015 : "China's Very High Mountain of Debt"

[https://www.bloomberg.com/news/articles/2015-05-08/china-
s-v...](https://www.bloomberg.com/news/articles/2015-05-08/china-s-very-high-
mountain-of-debt)

Nov 2014 : "Distressed Debt in China? Ain’t Seen Nothing, DAC Says"

[https://www.bloomberg.com/news/articles/2014-11-20/distresse...](https://www.bloomberg.com/news/articles/2014-11-20/distressed-
debt-in-china-you-ain-t-seen-nothing-yet-buyers-say)

There's more but you get the idea. I guess eventually they'll be right. Wish
they'd throw in a "ghost city" or some other china doom story for variety.

~~~
zeusk
Well, the debt didn't just magically pile up in the last two years - it's just
reaching alarming levels in tough times for the country (deleveraging, trade
war, worsening international relations).

~~~
qubax
I know. China was asked to increase their debt during the financial crisis.
John Paulson flew there directly to ask them to leverage.

I'm just pointing out the pathetic chicken little clickbaiting by bloomberg.

As I said, it isn't news. It's just nonsense they created to sell you ads.

~~~
zeusk
Bloomberg's main source of income isn't ads, in fact they don't even have an
anti-adblock script.

They mainly make money from data feeds of financial markets and their terminal
offering.

------
CamperBob2
_There 's nothing literally magical about China and their government isn't
omnipotent, no more than the Soviets were._

The Soviet leaders were omnipotent enough to plunge half of the developed
world into 70 years of darkness and decay.

My guess is that the Chinese communist leaders are no less potent, just a bit
less self-destructive.

~~~
danharaj
> The Soviet leaders were omnipotent enough to plunge half of the developed
> world into 70 years of darkness and decay.

Please read a history book.

~~~
CamperBob2
Let's try to keep the conversation constructive. Any favorites to recommend?

~~~
danharaj
Try Hosking's The First Socialist Society: A History of the Soviet Union from
Within.

Mind, it's just an intro. And its not a happy book. But one doesn't need to
exaggerate or parrot shallow condemnations of a part of the world that had its
triumphs as well as its tragedies.

~~~
CamperBob2
Cool, I haven't seen that one. I'll look at some reviews. It's easy to allow
biases to creep into one's thinking when the only books on socialist history
one's read were written by people like Bo and Solzhenitsyn. Those were
"histories written from within," too, but they neglected the bright spots like
pioneering work in certain scientific and technological disciplines.

My understanding (and, yes, my bias) is that those few bright spots in Soviet
life weren't worth it. We might disagree if, for instance, Hosking extols the
fact that the Soviets were first to feed, clothe and house their entire
population, because I don't agree that housing a large fraction of them in
prison camps while exiling another is a valid solution to that particular
problem.

As an additional example, my thinking is someone, presumably the US, would
have been first to launch an artificial satellite in the absence of Sputnik.
Someone, again presumably the US, would have educated and encouraged the first
female astronaut. It's true that we missed out on those 'firsts'... but how
many opportunities did the Soviets miss because the prerequisite researchers
and teachers died in a gulag somewhere for purely-ideological reasons?

Am I overlooking any other instances of triumph mentioned by Hosking?

------
welder
Anyone else notice Bloomberg's negative focus on China lately? With that
"China Hacking Chips" piece where Bloomberg never backed it up with any
evidence and the companies said it was fabricated. Does management at
Bloomberg have an agenda against China or is this just reflecting what the
people want to hear?

~~~
KaoruAoiShiho
Not really recent. I read Bloomberg often and don't notice a concerted effort
to make China look bad. Negative stories come out regularly and not
infrequently but that should be considered normal. There are just as many non
negative stories and quite a few positive ones as well. What I will agree with
though is that the negative ones have a way of making their way to HN while
the positive ones don't. That's really disappointing but that's what HNers up
vote so would not blame Bloomberg for this.

~~~
mk926
Yes, I do agree

------
torgian
I think this is kinda funny. Talks about this "hidden debt", talks about the
huge debt the USA has, and so on and so on. And what happens?

In the end, I really wonder if any of it actually matters. The people suffer
because of this magical, invisible money, sure, but only because we let it
matter.

Long term, I don't think it matters in the end, because governments will try
to prevent any sort of huge collapse (which will happen anyway, but will
recover over time).

~~~
vectorEQ
this is just some hearts and minds article to get people to worry about things
that shouldn't worry them.

