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Location: Sitting on a bar stool. Guinness in hand.
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Ok guys. I understand that a lot of folks don't like Roubini. I know a lot of people are poo pooing "experts" (in a lot of cases rightfully so.) But what I'm looking for here is for you guys to either poke holes in his logic/analysis in this article or to explain why you think he is right.
I mean it very easy to pick out/on the reputation/and past predictions of a economist.......or really anyone....I mean look at weathermen in general.....and say this guy don't know Jack off handily. But usually it not so easy to make a solid (full explanation) argument why they don't know jack.
But that's what I'm looking for here in this thread.
Asian countries have generally done a very poor job at monetizing their domestic economies, in part due to the high savings rate. What happens, in many cases, is instead of spending the money on disposable, consumer goods, it gets poured into real estate investments, effectively driving up the next generation's cost of living and making it impossible for them to consume.
Naturally you have a huge amount of price appreciation, leading to mass amounts of wealth for those who get in early, but after the peak, all new entrants into the economy are burdened with extremely low standards of living and a burdensome amount of their income spent on housing. This leads to relatively low amounts of money spent purchasing discretionary goods, and lower amounts of child rearing (kids cost money).
This happened in Japan, Taiwan (to a degree, not as extreme) and is happening in Singapore and Hong King now. My guess is it will happen in mainland China too, and it's certainly on course for it to occur. But as another poster has mentioned, China has a long way to go in its development process.
he chinese saved at such high rates because they remmeber not having ;more than say we do. Just has the greatest generation remmebered the great deopression, Also if you get sick in china the hospitals and providers want payment up front.
Why must there always be a American reason why the Chinese save more than they spend? How about a moral reason; it's not right/fair for financially responsible citizens' to pay for irresponsible citizens' reckless, spendthrift lifestyle!
Maybe the game of life becomes trivial when a Country just keeps adding to the money supply with no WORK/VALUE associated with it?
The Chinese saved at such high rates because they remmeber not having ;more than say we do. Just has the greatest generation remmebered the great deopression, Also if you get sick in china the hospitals and providers want payment up front.
^^This^^
When you don't have anything and you get some money, you understand the difference between needs and wants. You'll prioritize having money and financial security over having stuff.
Americans have gotten comfortable and complacent. They want financial security, but expect "the government" (i.e. "other taxpayers") to provide it for them.
The generation that grew up durin the Depression understood the difference between needs and wants, but they're mostly all dead now.
The recession we're recovering from wasn't bad enough for people to change their behavior long term. People are crisis oriented creatures and do not change unless they are hit over the head really, reallly hard.
Be interesting to see savings rates among younger Chinese in large cities, most of whom grew up with much fuller bellies than their parents generation.
I said this about 5 years ago well before the financial crisis hit.
In the Great Depression (Re: Hard times) people spent money only on what they needed to survive and no more.
My girlfriends mom, now dead was a product of the great depression, and she could never understand how her mom would save so much junk, would never go out to eat, and was very tight with money, even though she had a lot.
The lesson to learn is not about the great depression though, but how to do so much with what little you have, and to extend it as far as you can.
A generation of Chinese that learned that lesson from their parents and lived it, no matter how much they make, will not all of a sudden become generous spenders just because they have a lot of money.
It takes a generation or two, like where the American Society went from the depression, spending money only on what you need to the baby boomers, spending what you have and then to todays out of control spenders, spending more than you have.
There is a lot of Psychology involved as well where generations go from not having as much to having a little more to expecting more, hence entitled syndrome.\
It also explains the reasoning that we think each generation should do better when in the majority of cases, history shows this to be the opposite where cycles exist.
But, its also part of arrogance and the ego we hold where we think this time it's different and this age is more modern and civilized and knows it all compared to the ages of old.
Although only a few have even touched on the points made in the article, several have alluded to the article in basic agreement:
1. The Chinese save a lot because they fear the unexpected.
2. The Chinese have little in the way of social safety nets and need to rely on savings to a greater degree.
3. It may take a generation or more to see substantial change in their current approach/outlook.
No one is addressing the highlighted issues which are what the Chinese need to do to address the shrinking trade surplus, low domestic consumption and excessive investment.
Overall, I see nothing in the article that seems to lack a factual or observationally common sense viewpoint. Seems like an accurate description of the challenges China faces going forward. No predictions or solutions are offered.
But, its also part of arrogance and the ego we hold where we think this time it's different and this age is more modern and civilized and knows it all compared to the ages of old.
Ouch! Guilty as charged. I will admit the Keeping up with the Joneses at any cost mentality is a fatal, genetic flaw that The People haven’t conquered!
However, I do believe this time is different because the younger generation has been inadvertently shown the blatant shenanigans of the financial industry too early in life—this is critical IMO! It’s been customary to replace the mature “bulls” just as they learn how the game is played. That’s not going to happen in today’s world; the mature “bulls” are now in their early 20’s. BTW, I consider this progress.
Since the USA continues to choose the lipstick on a pig Economy, I will be rooting for the Confucian consumers’ blueprint to lead/fix the NEW World Economy.
It's hard to compare a third world country like China to developed nations like the US or those of the EU, or even Japan in the 1970's and 80's. While it's true that the huge balance of payments imbalance and associated buildup of dollar reserves can easily spiral out-of-control into asset or RE bubbles, we've got to also remember that huge swaths of China in outlying provinces are dirt poor with little infrastructure development and no special economic zones.
When we see images of wealthy hip Chinese rocking LV bags & driving CL Benzes, we're only seeing the very top echelon located in the coastal cities or Beijing. Hopefully if the master Chinese economic planners wake-up & smell the coffee of bubbles past, they'll take pro-active steps to redistribute savings accumulated by the SOE's to rural impoverished areas. or better yet, send that cash back stateside & maybe buy up all of our upside down mortgages..... JK!
The part of sending cash back stateside to buy U.S. mortgages is pipe dream.
On the other hand the Chinese government has been extremely astutue at slowing down their economy by increasing capital reserve requirments of banks to slow down lending. Also the Chinese governmnet is very aware that condition in the rural areas of China need to be improved.
Also the largest metropolition area in China isn't Beijing or Shanhai its Chongqing city right in the heart of China.
In 2007, the municipality of Chongqing had a population of 31.4 million.[1] It has jurisdiction over 19 districts, 17 counties, and four autonomous counties. With an area of 82,300 km² (31,800 mi²), it is the largest direct-controlled municipality, larger even than one province and an autonomous region, as well as Taiwan.[2] It is possibly the world's largest municipality by population and one of the largest by area.
You might want to revisit your assertion that wealth in only being created along the coastal cities of China.
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BTW, I consider this progress.
