Wires got crossed. I was quoting someone in order to refute them. Personally I think that China has a lot of concrete that can be poured.

I’ve always quite respected your comments here, which is why it is so surprising to see this: “China has the most leeway, with its available cash, but their infrastructure is already overbuilt given their internal demand. How many more half-empty highways/airports do they need ?”

I didn’t see empty highways and airports in the past five years or so, and only a very mild easing of congestion in the past 12 months. Besides, there are many, many other kinds of infrastructure badly in need of being built. Schools, hospitals, sewers, water systems . . . the list continues.

I agree with the conclusion, about cheap labor + excellent infrastructure, but the labor is no longer all that cheap and spending on infrastructure never stops.

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RE VAT: “VAT taxes include lots of taxes from intermediate producers such as concrete and steel.”

Um, not true. What is paid for concrete and steel is the price plus VAT. But, what is paid for the product made of concrete and steel is price plus VAT minus VAT already paid.

Same for every good or service along the chain: the seller collects the gross VAT and that partially off-sets the VAT he paid to his own suppliers.

Ya. I’ve been worried that’s where things are headed.

I hope World Leaders can make up their mind which way we are headed. Since carbon taxes won’t make carbon go away (we need solutions, not another big missallocation of capital program), the only effect they can have is reduced world output. That will make carbon go down somewhat, where carbon is “elastic” in the economic sense. But if they combine that with deficits, credit bubbles, etc… all in the name of stimulating the global economy, then I don’t know what we end up with.

Investment was such a huge part of growth across emerging asia. There was an investment bubble there just as there were real estate bubbles in the OECD.

The investments relied on belief in unending growth. Reality has intervened.

Also we’re learning how full of holes the alleged results of Indian and Chinese firms were, even in good times.

Asia, like the US and Europe, will be a mess for years.

The good news is that Obama’s carbon and business taxes will stimulate more overseas expansion, relocation and outsourcing by US firms. This should help Asia medium-term.

The bad news is that Obama’s reaction to this could be to slap tariffs on Chinese goods in order to protect the environment (note that Europe has already been talking about tariffs on countries without carbon taxes and pollution controls).

Asia’s biggest attraction and its biggest failing is its perceived market, the population is huge, its potential is there but potential needs time and effort to mature, the capacity to consume at more developed levels is questionable at present.

The biggest worry is the rapid pace at which everything has collapsed, the very speed seems to have caught most people off guard. Those who didn’t learn the loan/debt finamncing lessons of 97/98 are now facing a potential crisis in repayment.

One big difference though, the SWFs. Perhaps they have learnt they aren’t immune either, the brains they employed have been well paid for their brilliance over the years but they seem as hesitant as the rest of Wall Street to take punitive action well a mess is created. Sure much of the losses are attributable to major economic and financial developments but surely just as they are rewarded for their bringing in profits, those who decide on investments which result in losses should also be made to face consequences for the losses. Consequences and rewards are 2 edges of the same sword.

Speaking of Venezuela, the new balance of payments report from there shows what may be a worst-case scenario for export-oriented countries. A current account surplus of $17.9 bilion in q3 fell to a deficit of $4.5 billion in q4.