Is China’s Economy Overheating?

Much interest – and muted apprehension – has been focused on the rapid growth of China’s economy. The Great Recession barely put a dent on the country’s continuing expansion, in stark contrast to the troubled economies of the First World.

Yet now an interesting thing is occurring; one hears murmurs about weakness in the Chinese economy, murmers which were not heard last year. Analysts are starting to advance the possibility that China’s economy is overheating. This is based upon economic indicators such as rising inflation (a classic sign of an economy running too fast).

Perhaps the most widely held view is that China faces a property bubble, whose bust would do quite a bit of damage to the economy. The New York Times, for instance, has written several articles examining excesses in China’s property boom. One article talks about a city named Ordos in northeastern China, full of recently built apartments that sit empty of residents. Such stories strongly recall tales during America’s property bubble, of empty suburban lots built around cities like Phoenix and Las Vegas, founded on the confident assumption that prices would keep on rising forever.

To be fair, there is a rationale for the speculation in Ordos. Despite its economic success, China has a lot of room to grow. Per capita income in China is still below that of Jamaica, for instance. So the new houses in Ordo will be filled, eventually, as poor peasants migrate to the cities.

Another article in the Times describes the building boom in Hainan Island – something that is harder to defend as economically rational. The Chinese government is apparently hoping to make the place a tourist destination, and such plans have set up an orgy of new construction. It is not immediately apparent, however, why Hainan Island is a better tourist spot than anyplace else in the world. In ten years its numerous golf resorts may well be languishing in red ink. The Hainan Island boom constitutes a strong indication of a property bubble.

China’s government seems to be recognizing these signs; the official rhetoric has shifted to cooling down the economy. Recently China’s central bank surprisingly raised interest rates in an attempt to do just that.

What would a property bust in China look like?

Well, China has actually had a previous property boom go awry. This was in the 1990s, and it may have temporarily lowered growth rates from ~12% to ~8% (although that bust apparently had little effect on the average Chinese person). The last time China had non-Chinese growth rates was in 1989 and 1990; the last time it had negative growth was during 1976, the year Chairman Mao Zedong died.

Given the political turmoil that occurred on both dates, a bad enough property bust might spark similar unrest. On the other hand, China’s government probably has enough domestic credibility to weather even negative economic growth. Moreover, the country’s economy probably has enough steam – the percentage of GDP in investment and savings is unparalleled in modern history – to continue growing at >6% per year even were such a bust to occur. It would take quite a shock to throw the economy off from its current upsloping course.

--Inoljt, http://mypolitikal.com/ 

 

Banker Bonuses: Not Such a Wonderful Life?

Astonishingly, bankers may have surpassed lawyers, journalists, and child pornographers as the country’s most reviled people. They did this through a combination of tanking the world economy; extorting money and property from customers and the government; and downright, naked and stupid greed.

Oh, and complaining they weren’t paid enough to do it.

A recent informal Vanity Fair poll indicated 56% of banking greedheads felt their bonuses weren’t large enough. Clearly, this is indicates an IQ so low or hubris so large they shouldn’t be trusted with piggy banks, much less handle your life savings and the wealth of the world.

What’s the Big Deal?
Many have made a big deal about the unfairness of this arrangement. Many have claimed the inequities of the US corporate compensation system is making us into a country of overwhelming class division. In short, many have been right. But the emphasis on class warfare and inequality is only half – maybe less than half – of the picture.

The It’s a Wonderful Life banks of yore were paragons of charity and virtue compared to the ginormous money-maws of today. Despite bankers being beholden to no one other than their hand-selected boards and compensation committees, they make business decisions based on a monthly horizon to enhance their ‘pitiful’ quarterly bonuses. A banker looking beyond a quarter would be locked up in the Insane Banker’s Asylum for the Criminally Greedy. One looking out into the vastness of time – next year – would be executed for their danger to society.

That short-sightedness explains their Nostrasdumbassian inability to have seen the economic crash coming. That blindness to the danger of their own practices screwed their customers, the public – and not least of all – their investors. And now that they’ve good and thoroughly fu*cked their investors, they’re back to the same asinine practices as before, except – like a anitbiotic-immune bacteria – they’ve strengthened and widened the gap between what is legal and what is common sense.

Exercising their much vaunted “skills”, they’ve used taxpayer money, much of which was skimmed off for last year’s bonuses, to ‘reinvest’ and reap near-record profits this year – thereby clinching this year’s bonuses too. The only people dumber than the bankers are their stockholders. They’ve cheered as bankers laundered the money into record profits, either blindlessly stupid or so greedy they don’t recognize this as what it is…a ponzi scheme.

Bernie Madoff must be so proud.

Because they need binoculars to see the ends of their noses, they don’t see that everything will happen again. Their penchant for driving resources offshore to avoid the taxes that comprised last quarter’s stunning economic ‘recovery’ make it harder and harder to extort money from a US government with less and less of it to give. Meanwhile, all those cozy offshore havens – many of which are as friendly to America as a pack of rabid wolverines – are perfectly positioned to nationalize our money to pay for their own bait and switch schemes.

And as the macro-economic robbery continues, the bankers will again be shocked at another “completely unexpected” event. All those jobs that moved or disappeared to make companies more “profitable” steadily depleted the pool of potential customers with money for the banks to steal use to continue the ruination of their Holy Grail – capitalism.

Oh, and that’ll be a $130 million bonus for the trouble.

Where Do I Sign Up?
Bankers – in fact, almost all business US Big Wigs – receive huge bonuses if profits go up or they go down. They receive bonuses from the very companies they ran into the ground to keep their “expertise” with the company. They get bonuses because they successfully lobby each banking reform attempt into a cozier and cozier government/business alliance that – guess what – awards them bigger bonuses. Investors look the other way as long as money is coming into the Ponzi triangle and most complain for show only when the dividends come due and the banks can’t pay them. Then, they angle for a big bonus to pay their wizards of financial acumen to figure out some other way to steal twice as much money – partly used for big bonuses – next quarter.

Many supporters of corporatism über alles claim the execs deserve the big bucks because they are risk takers. The only problem with that axiom is that they take those risks with other people’s money and get paid whether the risks pay off or not.

Unbridled greed is leading them to not only kill the goose that laid the golden egg, but eat the egg, dine on the goose, and steal  their neighbor’s fowl for another mighty fine meal. One paid for with unsustainable bonuses.

Ain’t it a wonderful life?

Cross posted at The Omnipotent Poobah Speaks!

 

 

Banker Bonuses: Not Such a Wonderful Life?

Astonishingly, bankers may have surpassed lawyers, journalists, and child pornographers as the country’s most reviled people. They did this through a combination of tanking the world economy; extorting money and property from customers and the government; and downright, naked and stupid greed.

Oh, and complaining they weren’t paid enough to do it.

A recent informal Vanity Fair poll indicated 56% of banking greedheads felt their bonuses weren’t large enough. Clearly, this is indicates an IQ so low or hubris so large they shouldn’t be trusted with piggy banks, much less handle your life savings and the wealth of the world.

What’s the Big Deal?
Many have made a big deal about the unfairness of this arrangement. Many have claimed the inequities of the US corporate compensation system is making us into a country of overwhelming class division. In short, many have been right. But the emphasis on class warfare and inequality is only half – maybe less than half – of the picture.

The It’s a Wonderful Life banks of yore were paragons of charity and virtue compared to the ginormous money-maws of today. Despite bankers being beholden to no one other than their hand-selected boards and compensation committees, they make business decisions based on a monthly horizon to enhance their ‘pitiful’ quarterly bonuses. A banker looking beyond a quarter would be locked up in the Insane Banker’s Asylum for the Criminally Greedy. One looking out into the vastness of time – next year – would be executed for their danger to society.

That short-sightedness explains their Nostrasdumbassian inability to have seen the economic crash coming. That blindness to the danger of their own practices screwed their customers, the public – and not least of all – their investors. And now that they’ve good and thoroughly fu*cked their investors, they’re back to the same asinine practices as before, except – like a anitbiotic-immune bacteria – they’ve strengthened and widened the gap between what is legal and what is common sense.

Exercising their much vaunted “skills”, they’ve used taxpayer money, much of which was skimmed off for last year’s bonuses, to ‘reinvest’ and reap near-record profits this year – thereby clinching this year’s bonuses too. The only people dumber than the bankers are their stockholders. They’ve cheered as bankers laundered the money into record profits, either blindlessly stupid or so greedy they don’t recognize this as what it is…a ponzi scheme.

Bernie Madoff must be so proud.

Because they need binoculars to see the ends of their noses, they don’t see that everything will happen again. Their penchant for driving resources offshore to avoid the taxes that comprised last quarter’s stunning economic ‘recovery’ make it harder and harder to extort money from a US government with less and less of it to give. Meanwhile, all those cozy offshore havens – many of which are as friendly to America as a pack of rabid wolverines – are perfectly positioned to nationalize our money to pay for their own bait and switch schemes.

And as the macro-economic robbery continues, the bankers will again be shocked at another “completely unexpected” event. All those jobs that moved or disappeared to make companies more “profitable” steadily depleted the pool of potential customers with money for the banks to steal use to continue the ruination of their Holy Grail – capitalism.

Oh, and that’ll be a $130 million bonus for the trouble.

Where Do I Sign Up?
Bankers – in fact, almost all business US Big Wigs – receive huge bonuses if profits go up or they go down. They receive bonuses from the very companies they ran into the ground to keep their “expertise” with the company. They get bonuses because they successfully lobby each banking reform attempt into a cozier and cozier government/business alliance that – guess what – awards them bigger bonuses. Investors look the other way as long as money is coming into the Ponzi triangle and most complain for show only when the dividends come due and the banks can’t pay them. Then, they angle for a big bonus to pay their wizards of financial acumen to figure out some other way to steal twice as much money – partly used for big bonuses – next quarter.

Many supporters of corporatism über alles claim the execs deserve the big bucks because they are risk takers. The only problem with that axiom is that they take those risks with other people’s money and get paid whether the risks pay off or not.

Unbridled greed is leading them to not only kill the goose that laid the golden egg, but eat the egg, dine on the goose, and steal  their neighbor’s fowl for another mighty fine meal. One paid for with unsustainable bonuses.

Ain’t it a wonderful life?

Cross posted at The Omnipotent Poobah Speaks!

 

 

Weekly Audit: Tax Cuts for the Rich Extended

By Lindsay Beyerstein,  Media Consortium Blogger

Congressional Republicans and the White House  struck an agreement in principle on Monday night to extend all the Bush tax cuts for 2 more years in exchange for extending unemployment benefits. The GOP agreed to the so-called “Lincoln-Kyl compromise” a partial 2-year extension of the Bush estate tax cuts on estates worth over $5 million. If the deal had not been struck, estate taxes on estates over $5 million would have gone back up from 0% to the pre-cut rate of 55%. Instead, the rate will be 35% for the next 2 years.

The GOP also agreed to a short-term “stimulative” 2 percentage-point cut off the 6.2% payroll tax we all pay on income up to $106,800. The good news is that a payroll tax holiday will provide the most noticeable tax relief to low- and middle-income Americans. The bad news is that payroll taxes fund Social Security, so cutting the tax means starving a program that most directly benefits average people. Social Security is not in crisis yet, but steps like these could push the program into worse financial straights where significant benefit cuts become inevitable. It’s almost as if the GOP, having failed to spark panic about an as-yet non-existent Social Security crisis, is determined to engineer one.

All these gimmes for the rich were the price of a partial extension of unemployment benefits. The stakes couldn’t have been higher. If Congress had failed to act, 2 million people stood to lose their benefits this month and another 7 million would have run out before the end of next year, reports Andy Kroll of Mother Jones.

Meanwhile, unemployment continues to rise. The economy only added 39,000 jobs in November when analysts were expecting about 150,000. “At the beginning, some people just thought it was a printing error,” said reporter Motoko Rich on the New York Times‘ weekly business podcast. The overall unemployment rate climbed to 9.8%.

At ColorLines, Kai Wright argues that the time has come for President Obama to seize the opportunity to debunk conservatives’ bad faith arguments for tax cuts above all else:

At the same time, the anti-government crowd’s political hand—if forced—has never been weaker. A depressingly large number of middle-class and working-class Americans now know all too well what economists have long understood: You get a great deal more economic bang out of keeping lots of people from becoming destitute than you do by helping a few people horde wealth. People remain enraged about the no-strings-attached bank bailout, for instance, because they intuitively understand its ramifications. Wall Street is now enjoying a narrow, taxpayer-financed recovery while unemployment, hunger and poverty all continue climbing through the former middle class.

Extending UI makes sense

Tim Fernholtz of TAPPED tackles some of the bad arguments against extending unemployment insurance. Economist Greg Mankiw claims that extending unemployment insurance is just a surreptitious ploy to redistribute income to the poor from the wealthy. Actually, as Fernholtz points out, the point of a UI safety net is to prevent people, 3 million of them in 2009, from becoming poor in the first place. Poverty is very expensive for society at large. If we can keep the unemployed in their homes, spending their benefits in their communities, we can keep the socially corrosive effects of poverty at bay until the economy improves. The social costs of child poverty alone have been estimated at $500 billion a year, Fernholtz notes. The deeper we allow people to sink into poverty, the more difficult it will be for the economy to rebound. On this view, UI is a shared investment in a well-ordered society, not just a lifeline for jobless families.

Why corporate tax cuts won’t create jobs

Jack Rasmus of Working In These Times explains why tax cuts will not create jobs. Simply put, banks and big companies are sitting on over a trillion dollars. Among the nation’s biggest banks, lending to small and medium size businesses, the engines of job creation, has dwindled over 2009 and 2010. America’s biggest companies are sitting on a hoard of $1.84 trillion dollars, which they are not investing in job-creating projects. The Deficit Commission recommended slashing corporate taxes, ostensibly to spur investment and job creation, which would ultimately generate taxable income to help balance the budget. As Rasmus points out, this wishful thinking is predicated upon the assumption that if only corporations had more money, they would invest it to create jobs. The fact that companies are already sitting on huge piles of cash suggests that shoveling more moolah on the pile won’t change the basic dynamic. Perhaps companies are waiting to invest because they know that consumers aren’t keen to buy goods and services when they are unemployed or fearing job loss.

Economic disobedience

At In These Times, Andrew Oxford interviews sociologist Lisa Dodson about her new book on getting by in the low-wage economy. Her research shows that as economic instability mounts, many Americans are quietly taking matters into their own hands:

To understand how fair-minded people survive in an unfair economy, Dodson interviewed hundreds of low-wage workers and their employers across the country, examining what she terms the “economic disobedience” now pervasive in the low-wage sector. From a supervisor padding paychecks to a grocer sending food home with his employees, these acts of disobedience form the subject of her latest book, The Moral Underground: How Ordinary Americans Subvert an Unfair Economy.

Winner-take all economy

In an interview with Democracy Now!, Yale political science profesor and  Jacob Hacker explains why the Deficit Commission has it all wrong when it comes to tax cuts vs. unemployment benefits.

Hacker studies inequality. He has written a book on how the richest Americans cornered an unprecedented share of the country’s wealth for themselves over the past three decades. The richest Americans have never been in a better position to help the country grapple with the deficit. Yet, as Hacker points out, the Deficit Commission wants to balance the budget on the backs of middle- and lower-income Americans by cutting spending on programs that disproportionately benefit working people and readjusting the tax code to make it even more favorable to the rich.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

 

 

Boosting the Economy--One Big Screen TV at a Time

 

by Walter Brasch

 

          Even the most casual observers would believe that the U.S. is making an economic recovery if they saw the hordes descend upon retail stores on Black Friday.

           Americans began lining up four hours before the stores opened as early as midnight. And they weren't shopping just for necessities. Sale of large-screen TVs and video games were up significantly from two years ago. The consumer Electronics Association predicts a 4.1 percent increase in sales over a year ago.

           About a third of all American adults shopped on Black Friday, up from slightly more than one-fourth of all Americans a year ago, according to analysts from Goldman Sachs.

           About 80 million Americans went into retail stores on Black Friday, according to the National Retail Federation (NRF). These Americans spent about $10.7 billion in retail stores, slightly more than last year, according to research analysts at ShopperTrak. For the three-day weekend, sales were about $20.5 billion. Not included in the ShopperTrak data were sales from major retail discounters, including Walmart and Target. Walmart reported sales up 30 percent from last year.

           Sales were pushed by online purchases. PayPal reports online sales increased 27 percent on Black Friday from a year ago. FirstData says sales from credit and debit cards rose 8.6 percent from last year. Overall, retail and cyber sales are expected to increase 2.3 percent from 2009, to $688.9 billion this year, according to data from the NRF.

           But, Black Friday spending isn't the only indicator of a recovering economy. The non-partisan and impartial Congressional Budget Office (CBO) reports that the Recession that began in 2007 probably ended late last year.

           Overall, the economy is up 2.8 percent in 2010, according to the CBO. Bloomberg, Wells Fargo, and Morgan Stanley, plus dozens of others who track the economy also show at least a 2 percent increase this year, with at least a 3 percent increase next year. Even the conservative Wall Street Journal points out the economy is up 2.5 percent, with a 2.8 percent increase predicted for 2011. The National Association for Business Economics, analyzing data collected by 51 professional economists, notes the gross domestic product grew about 2.7 percent this year, and will rise 2.6 percent next year.

           In related data, the Dow Jones average, which plunged at the end of the Bush–Cheney years, is up about 10.5 percent in the past six months. The CBO reports that although unemployment is hovering at 9.6 percent, without the Obama Administration's stimulus plan, unemployment would be between 10.4 and 11.6 percent.  By the end of 2011, unemployment is expected to drop to 8.7 to 9 percent, according to several major analysts, including the Wall Street Journal.

           Since December 2009, employment in the private sector has risen

by 1.1 million, according to the Bureau of Labor Statistics. About 2.5 million jobs are expected to be added in 2011, according to the American Bankers Association’s Economic Advisory Committee  Unemployment, according to the ABA, should decline to about 8.5 percent.

           But, there are still almost 15 million unemployed, most of whom saw their companies downsize or send jobs overseas. At the same time that Congressional Republicans blocked extending unemployment benefits, they have protected the wealthiest 2 percent of Americans. Under the Obama plan, individuals earning less than $200,000 a year would continue to receive the Bush-era tax cuts. The cost to protect the rich would be more than $3 trillion over 10 years. It appears that President Obama, under heavy political fire, will yield to the Republicans, who campaigned heavily on a promise to cut spending—except for their own special interests, of course.

           Related to the unemployment problem, more than a million Americans, will lose their homes to foreclosures. The sub-prime mortgage crisis began when government regulators and the Bush–Cheney Administration disregarded numerous warnings and then fell asleep while financial institutions became even more greedy between 2006 and 2009, and lured millions into a false sense of security.

           Overall, America is slowly on the path to recovery. But, to those who lost their jobs and then their homes, it just doesn't seem that way.

  

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