By: straightarrow34
22/04/2009
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mentawaisurf said: "Deflection and distraction only clouds the real issue"
I agree entirely. For good measure though, let's add the other "d" word. Dissembling also clouds the real issue. |
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By: straightarrow34
22/04/2009
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yes mentawaisurf, I did a thorough search of the net for those 2/3 figures as well, but blow me down, I couldn't find them either. They seem to have disappeared. I did find the missing paragraph from your previous post though and included it in my last post.
Pleased to see you rely on the Chinese press for your information from China - although, wait a minute - didn't you say you didn't? |
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By: straightarrow34
22/04/2009
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Ah, I see what has happened mentawaisurf. You've inadvertantly left out a paragraph or two from your AFP post. Really, you should be a little more careful. The bit you left out should have been between the first and second paragraph of your post. Here is the bit you left out:
A total of 98,568 cases involving labour disputes were filed in Chinese courts in the first three months of 2009, up 59 percent year on year, the China Daily said, citing figures from the nation's supreme court.
"Amid the global financial crisis, the number of businesses going into the red or going bankrupt continues to grow, leading to more disputes over salary claims," Du Wanhua, a top official with the court, was quoted as saying.
Du said the rise was also likely due to the introduction last year of a labour contract law that provided a more solid legal footing for complaints and increased workers' awareness of their rights. |
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By: mentawaisurf
22/04/2009
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"Up to two-thirds of China's factories are either closed, closing or face potential closure due to plummeting orders from around the world". This is a direct quote I copied from an online news service a few weeks back but my searches so far could not locate the source. Hopefully your friends factory is not one of those effected.
However you cut it, or whatever figures you chose to believe or dismiss, this is truly a global deflationary crisis effecting every nation, and yes even China and Australia. Deflection and distraction only clouds the real issue - that of building global deflationary forces and a looming depression.
Regarding the research of these figures, you may have more time than I but here is the latest from Nouriel Roubini, who was one of the few to warn of the debt deflation now unfolding;
The global economy is in the middle of a synchronized contraction that will push global growth into negative territory in 2009 for the first time in over fifty years. This will be the worst financial crisis since the Great Depression and the worst global economic downturn in decades. Global trade volumes face their sharpest contractions of the postwar era - trade is expected to contract 12% in 2009 due to the severe and prolonged global demand slump, excess capacity across supply chains and the continued crunch in trade finance. China will have a hard landing with GDP growth falling to 5.5% - far below the 8% growth required just to maintain economic stability and sustainable employment. |
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By: straightarrow34
22/04/2009
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| I've forgotten to ask whether the magic 8% figure also applies to India. Does it - and if not, why not... Does it apply to any other country? Certainly it can't apply to Australia, otherwise we'd all be in the streets rioting by now and would have been for a long time. Australia has never had a growth figure anywhere near approaching 8%. Sorry if I sound obtuse mate, it's just that you point to gloomy statistics a lot on this board, and as you no doubt have investigated them, I thought you might be able to explain them to us. |
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By: straightarrow34
22/04/2009
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Mentawaisurf, I'm sorry mate, but I've re-read your last post several times but for the life of me, I can't see where it says 2/3 of all of China's factories are closed or are closing or will close. Perhaps I'm not reading it properly - could you please point out where it says that?
I'm also still not clear on that 8% figure. Does unrest in China begin when the growth figure is 7.9% and does it become greater the lower the figure goes? In other words, are the two inversely proportional? The article you posted also says rather obliquely that "Chinese leaders" have said that the 8% growth was the minimum required to maintain order, but I am non the wiser as to who those "leaders" are or how they have derived the 8% figure. Could you help us out there? |
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By: mentawaisurf
22/04/2009
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BEIJING (AFP) Wednesday April 22, 2009, 2:58 pm -
The number of labour disputes in China have soared amid the global financial crisis as laid-off employees seek salaries owed to them by suddenly defunct companies, state press reported on Wednesday.
The newspaper said the increase followed a 93 percent surge in such cases in 2008 to 286,221.
Chinese officials have repeatedly warned of the potential for widespread unrest if unemployment continues to grow.
The World Bank last month forecast China's economy would grow 6.5 percent in 2009.
That would be its slowest expansion in nearly two decades and well below the eight percent level that Chinese leaders say is needed to keep enough people in work and to avoid unrest.
The economy, which grew nine percent in 2008, has slowed sharply amid the collapse of overseas markets for China-made goods due to the world economic downturn.
Thousands of factories and other businesses have failed in recent months, throwing millions out of work and leading to protests in some areas as angry workers demanded back pay owed by failed companies. |
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By: straightarrow34
22/04/2009
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| Mentawaisurf, I'm sorry to be a nuisance, but I completely forgot to ask you where you got the information that 66% of China's factories have closed or are closing. An aquaintance of mine owns an engineering company in China and I want to inform him realiably that his business is about to close. Thanks in advance for the info. |
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By: straightarrow34
22/04/2009
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mentawaisurf, we're still waiting on your analysis of the 8% figure.
Surely you've read something somewhere that would help to explain why the figure is 8% and not 9 or 3 or 2.7 or 1.8 or 10.5 or...
Or have you simply read the figure and accepted it as fact. If that is so, all of your gloomy predictions may be predicated on fallacious information. In other words, as the Chinese government has reported a slightly lower figure than that, the 8% figure might just nicely correspond to your gloomy perspective. Any info on that figure?
In fact, from your posts, you don't appear to trust anything the Chinese government says. If that's the case, how do you know they aren't telling porkies about their growth rate? You question everything else about them, why not that too? Maybe they are trying to lull the west into a false sense of gloom in order to keep our commodity prices down... Oh oh, I'm putting thoughts into your head... |
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By: mentawaisurf
22/04/2009
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As the West consumed, China boomed. But that has now changed - at least until the next consumption driven cycle still many years off.
The latest independent reports out of China tell a truly shocking story. Up to two-thirds of China's factories are either closed, closing or face potential closure due to plummeting orders from around the world.
China's unemployed is rapidly rising which will quash any hopes of domestic demand resucitating the local economy. Instead, it now presents the real threat that growing social and political unrest throughout China will escalate further. The Chinese Government will try anything to suppress this threat, including fudging 'official' figures and cracking down on up-risings.
China may eventually emerge from this unfolding global deflationary crisis as an economic world leader, but that transition may prove to be a long and painful one. Indeed, interesting times ahead... |
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By: lasty49
22/04/2009
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jay,
The 8pct growth rate is western spin.
If you take a look here and read the comments you will see what I mean about the value of the Chinese GDP numbers.
http://www.chinability.com/GDP.htm
But for the doom and gloomers of China, here is an interesting article that may let them stop and think.
http://www.istockanalyst.com/article/viewiStockNew s/articleid/3201937
I take particular interest in the last paragraph.
J@pan's economy in the 1970's had exactly the same vision. |
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By: jaymarcel
22/04/2009
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| I've heard a bit about this 8% growth required for China, is there any reason why this figure & why China is any different to any other country. |
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By: houseofjoseph2000
22/04/2009
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| The real threat is the ones that are trying to fix it.. and what they appear to be no addressing.. We want a long term solution and not just a sweep under the carpet of many bad practices.. Then the world will bounce back.. |
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By: straightarrow34
22/04/2009
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mentawaisurf, it's nice to read another of your gloomy progostications.
I've also read in various newspapers, on and off-line, that without at least an 8% growth rate, China will fall prey to another revolution, riots in the street, etc. Or as you put it, in China an 8% growth rate is required to "stave off social unrest".
As you have quoted the figure 8%, I wonder if you would be so kind as to break that figure down for us and descibe for us at what the outcomes will be on a scale from a growth rate of 7.9% downwards. What for example will the Chinese economic and social structure look like should their per annum growth rate be 6.1% or 5.6% or 4.1% or 3.8%. It would also be interesting to hear your views on when the Chinese economy will be free of the yoke of an 8% growth rate per year without drastic social consequences or in your view, will China always have to have a growth rate of 8% to maintain social stability and why? |
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By: mentawaisurf
22/04/2009
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The commodity story is also quickly entering a dark chapter.
A drop in China's consumer prices in February further darkened the country's economic outlook and reinforced worries of deflationary pressures. Sustained price declines are concerning to policy makers because deflationary expectations often lead consumers to defer purchases, resulting in further downward price pressure. This will further hamper Beijing's efforts to coax the world's third-largest economy out of its most severe growth slump in more than a decade.
Goldman Sachs economists said in a note that based on month-on-month CPI readings, which have been negative for seven straight months, China has long been in deflation. But the fact that CPI also declined on a year-on-year basis should push the central bank to cut benchmark interest rates further.
The World Bank slashed growth forecasts for China bringing their economic outlook to only 6% GDP growth. This is well below the 8% required just to maintain economic stability, employment and stave off social unrest.
The World Bank also flags deflation as the looming threat for China.
Australia's largest export, coal, has slumped 60% in value from last years contract price. Add heavily reduced order volumes due to waning demand and it's a major blow for Australia's economy moving forward.
All asset classes have already fallen during these early phases of deflation. This is typical of deflation and it is occuring around the world for the first time since the 1930's. There is no where to hide, except the safest of cash assets (the purchasing power of cash is the only asset that rises in value during deflation). |
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By: silvdale
22/04/2009
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Menta, I think those in the know realize that deflation is the real threat. The point is what can the banks do? It is too late to admit assets are overstated. In fact Banks argue there loan book is good. You and I know underlying asset values have a long way to fall before reaching fair value. Banks and the government are praying all this nasty business will go away and fortress Australia under Ruddbank will sail through whilst asset prices recover.
The only thing going for Australia is the commodity story but this will not hold up real estate values as you and I know. |
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By: mentawaisurf
21/04/2009
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Our central banks are old hands at creating money (credit) out of thin air. The problem is if people are unwilling to borrow it does not matter how much money banks create. It is like pushing on a piece of string - it will have no effect.
As deflation develops and all asset classes continue to fall then people will not borrow money, no matter how cheap or easy it is to come by, to buy an asset that is falling in value. This is the key issue that many, including our central banks and governments, do not comprehend. |
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By: almurrie1@y7mail.com
21/04/2009
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| Banks use a practice called fractional-reserve banking whereby they abide by a reserve requirement, which regulates them to keep a percentage of deposits in 'reserve'. The remainder, called 'excess reserves', can be used as a basis for lending. The increase in deposits from the quantitative easing process causes an excess in reserves and private banks can then, if they wish, create even more new money out of 'thin air' by increasing debt (lending) through a process known as deposit multiplication. The reserve requirement limits the amount of new money. For example a 10% reserve requirement means that for every $10,000 created by quantitative easing the total new money created is potentially $100,000. The US Federal Reserve's now out-of-print booklet Modern Money Mechanics explains the process. |
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By: almurrie1@y7mail.com
21/04/2009
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Wikipedia - for every $10,000 created through "quantitative easing" banks can magic this into $100,000!
In layman's terms, quantitative easing refers to the creation of a significant amount of new money (usually electronically) by a central bank. This money is created to stimulate the economy, in particular to promote lending by banks. The central banks add cash by buying up large quantities of securities from banks, giving them new money to lend. These securities could be government bonds, commercial loans, asset backed securities, or even stocks. Quantitative easing is usually used when lowering official interest rates is no longer effective because they are already close to or at zero[1].
'Quantitative' refers to the fact that a specific quantity of money is being created; 'easing' refers to reducing the pressure on banks.[2] A central bank can do this by using the new money to buy government bonds (treasury securities in the United States) in the open market; or by lending the new money to deposit-taking institutions; or by buying assets from banks in exchange for currency; or any combination of these actions. These have the effects of reducing interest yields on government bonds and reducing interbank overnight interest rates, and thereby encourage banks to loan money to higher interest-paying bodies. |
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By: almurrie1@y7mail.com
21/04/2009
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Menta
the Banks are betting the opposite, that inflation will take hold dramatically, so are increasing their fixed term mortgage rates. Personally I agree that deflation is happening but with massive "quantitative easing" the result must be massive inflation.
Al |
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By: cxo99
21/04/2009
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australian banks are increasing interest rates on fixed rate mortgages now.
they say its because of the increase in wholesale funding.
so not everyting is deflating...! |
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By: mentawaisurf
21/04/2009
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WASHINGTON (AP) - Consumer prices dipped unexpectedly in March, leaving inflation over the past year falling at the fastest clip in more than a half-century. The recession is expected to keep a lid on inflation as widespread layoffs dampen wage pressures and weakening consumer demand keeps companies from raising prices.
Job cuts across the economy are expected to keep a lid on wage demands and overall inflation. The U.S. has not had a prolonged bout of deflation since the Great Depression of the 1930s, although J@pan suffered through a deflationary period during the 1990s. That may be about to change.
While in Australia, even after our record fiscal stimulus packages and the lowest interest rates in over 50 years, PPI figures just released show a fall for the first time in 6 years.
Australia's TD Securities Inflation fell to 2.6% in the year to March, down from 3.1% in the preceding month. Signs of slowing price growth give the Reserve Bank of Australia more room to surprise economists calling for rates to remain at 3.25% with a rate cut at a policy announcement later this week.
Watch out for the CPI figures due out soon. They may just confirm the deflationary trend here in Australia.
The media still use the phrase "inflation falling", instead of the word deflation, as if it's a good thing. There is simply no "good news" in those facts; if anything, they would help explain why one bad trend (falling capacity & layoffs) leads to another bad trend (falling prices & deflation). But what we are told instead is that falling prices are not a bad trend and are not deflation. If you really want to see what deflation looks like on a chart, without the government and media spin, then check this out (just close the gaps on the web address);
https://www.elliottwave.c om/freeupdates/archives/2 009/04/15/First-Real-Defl ation-in-50-Years.aspx |
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