STRAFOR founder, George Friedmen, is positing that the Chinese economy is now acting like one giant Ponzi scheme, with the CCP at the top and the only thing holding it up is continual, unsustainable growth.
“China's economy (according to China) needs 8% annual growth, to keep the roughly 16 million new people entering the work force from rising in jobless protest—and to keep up with climbing wages and to sustain a growing retired population. A combination of exports, loose lending practices, super low margins, and government spending help keep up the growth. Sound healthy to you?”
As there is nothing on the planet that can sustain growth indefinitely then it is fair to surmise that this same law of the universe will also bind the Chinese economy and it will be eventually subject to a collapse. No matter how many economists predict that it will be the second-tier cities in China that will sustain the needed growth, I’m going to have to go with Friedmen on this one. Any description of anything that coins the term “miracle” so liberally should also be taken with extreme caution: That’s another law of the universe.
The scary thing is not a collapse, the Chinese economy should be mature enough to go through an inevitable decline, like any modern economy. What is scary is that in a ponzi scheme, the people at the top usually clear-out with everyone’s money before it all implodes. Unfortunately for China there are a small group of elites controlling vast sums of wealth in off-shore bank accounts, just like in a ponzi set up.
China is funding its growth like the US, print fiat currency thru the thin air. National financing can increase revenue and reduce payout at will, while Ponzi Scheme can do neither of those tricks which are the root of Ponzi Scheme failure when it no longer can collect enough to cover the payouts. If Ponzi scheme artists could print money like the Fed, the Ponzi scheme would never fail. National financing and Ponzi Schemes are totally unrelated financing models.
ReplyDeleteChina has one more advantage over the US, China does not need to pay interest to use RMB, but USA needs to pay interest to use USD. If China economy is a giant Ponzi Scheme, then US economy must be a gigantic Ponzi Scheme with imploding fuse already burning.
The article just putting some bad terms together to defame China without substantiating its prediction on dire outcome of China’s economy.
“Unfortunately for China there are a small group of elites controlling vast sums of wealth in off-shore bank accounts.” Is it same in all nations, that only a handful of government key personnel are authorized to dispense government money and they are accounted for the money to the people? Why does the same setup in China make it scary and a Ponzi set up not in the other nations? The logic where the article drew its conclusion is puzzling.
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