Brad Setser

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Cross border flows, with a bit of macroeconomics

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(Green) bamboo shoots?

by Brad Setser
April 19, 2009

Economists scouring the globe for highs of hope (or at least a slower rate of decline) have found a few green shoots in China. A smaller fall in the March import data. A faster y/y rise in industrial production in March than in February. Signs of life in the housing market. The (undeniably) large increase in bank lending.

I would feel a bit more comfortable, though, if China’s trade data wasn’t tracking the US trade quite so closely. China exports a bit more than the US and imports a bit less, but they are basically comparable in size. And, well, the y/y change in a rolling 3m sum of China’s exports doesn’t look much different that the y/y change in US exports; and the y/y change in China’s imports doesn’t look much different than the y/y change in US imports.

The green shoot from the March import data shows up in the chart – the pace of the y/y decline in China’s imports slowed in March. But the overall story from the trade data is still quite grim. Making judgments on the basis of a single indicator — especially a nominal indicator influenced by price swings – is always risky. But the trade data doesn’t suggest that China’s economy is in robust health.

The simplest explanation for the tight correlation between US and Chinese imports would be a fairly synchronized downturn in both the US and China. That would explain why both countries are importing substantially less – and both are experiencing larger falls in their imports than can be explained by the fall in commodity prices.

Other explanations are obviously possible: About ½ of China’s imports are for re-export, so a large share of the fall in China’s imports is a reflection of the fall in China’s exports. And China may import more commodities than the US, and thus falling commodity prices (though there are limits here: the US imports a higher share of its oil than China does) may have a bigger impact on the data.

Both the “import-to-export” and “commodity price” effect would impact China’s imports from the US – but presumably they would have a smaller impact. And, well, if US exports to China are in any way a proxy for Chinese demand, Chinese demand turned down last summer, in July–

The US data ends in February – so it would miss any recent pickup in activity. But it, like the global data, hardly suggests robust Chinese demand growth. A comparison of the y/y change in US exports to China and US imports from China tells a similar story. The fall in US exports to China is actually larger than the fall in US imports from China – and US exports to China turned down before US imports from China headed south. I suspect that the slowdown in US exports to China reflects the broader slowdown in China’s economic growth brought about by the slumping equity market and the slump in private construction – a slowdown that clearly preceded the post-Lehman global crisis.

It is true, as the Economist notes, that US import growth hasn’t been driving Chinese growth for the past couple of years. But that doesn’t mean that exports weren’t driving Chinese growth. US domestic demand started to cool in late 2006 – and that, plus the RMB’s appreciation against the dollar, slowed the growth in US imports from China. Overall Chinese export growth though remained quite robust (see the first chart). China offset slower growth in its exports to the US with more exports to the emerging world – and the RMB’s weakness against the euro propelled strong growth in China’s exports to Europe too. The US, remember, isn’t China’s only market, or even its largest market.

The RMB didn’t depreciate against the dollar over the past six years. It did depreciate against many other currencies. It consequently shouldn’t be a total surprise that the growth in China’s exports to the US lagged China’s overall export growth. Exchange rates do matter.

The Economist continues to assert that exports mattered less to China’s growth than many think.


But the “net exports” unambiguously accounted for between 2 and 3% of China’s growth for most of the past four years. The fall in the imported content of Chinese exports over this period is a big reason for the increase in China’s trade surplus even as China’s commodity imports soared. And recent work by a Li Cui, Chang Shu and Xiaojing Su suggests that fast export growth also spurred a lot of investment. They find, in a paper published by the HKMA, that 10% real export growth produces a 2.5% increase in overall growth – more than can be explained by the direct impact of stronger external demand. During periods when real exports were growing by 20% (or more), their work implies that fast export growth would explain something like 5 percentage points of China’s growth.

Another of the Economist’s arguments – namely that the size of the fiscal stimulus has been unduly discounted — is more persuasive. Consider that a mea culpa, as I have argued that the large size of China’s announced stimulus overstated China’s true stimulus. China’s headline deficit of 3% of GDP just isn’t that impressive, and the swing in the government’s fiscal balance was far less than the announced size of the stimulus.

But it is now pretty clear that the shift in the government’s formal budget wasn’t the only mechanism for providing stimulus to the economy.

China’s banks are state owned. They were liquid, as lending had been curbed to try to keep China’s economy from overheating. And when told to lend more – whether to state firms looking to invest, state firms looking to stockpile commodities or local governments free to spend on ambitious infrastructure projects, they clearly did.

China’s state banks before the current crisis were a bit like the US Agencies before the August subprime crisis. At the peak of the housing boom, the Agencies’ ability to grow their portfolio was constrained (as a result of past accounting irregularities and the like). Their market share was falling. After the subprime crisis curbed private label securitization though, Washington lifted curbs on their activity, and they responded. Similarly, the state banks ability to lend was constrained by lending curbs and a rising reserve requirement at the peak of China’s boom. When the curbs on their lending were lifted, they responded, and in a big way.

The increase in their lending in the first quarter is staggering. The state banks are a far larger part of China’s financial system than the Agencies are in the US, so the expansion of their lending seems to have had a macro impact.

Wang Tao of UBS has produced a graph that shows that the increase in bank lending in the first quarter looks a lot like the increase in late 2002 and 2003. That blowout eventually led to an uptick in inflation, and then to a decision to curb the state banks’ lending growth.* The current blowout looks bigger.

As a result, y/y investment growth in China in q1 was around 30%. That is huge. It presumably reflects a huge rise in public not private investment.

It likely will have a future fiscal cost. The likely losses on these loans probably can be thought of an additional form of fiscal stimulus.

And if Cao Jianhai of the Chinese Academy of Social Science is right, China retains a lot of underlying vulnerabilities, not the least that home prices are over ten times urban income, and thus there is underlying downward pressure on property prices.

But a surge in lending that keeps Chinese demand up until the world recovers isn’t the worst outcome either. The world needs demand – and a lot of public investment, even money-losing investment, in China is one way to generate the needed demand.

China’s 2009 outlook then shapes up as a race between falling private investment (and shrinking exports) and rising public investment, with the trajectory of private consumption the wildcard. 2010 probably won’t be that different.

Moreover, the internal basis for China’s growth still looks imbalanced. The stimulus to public investment has been far stronger than the stimulus to private consumption. Stephen Green of Standard Chartered has this right; I second his call for another initiative to help boost consumption.

Bottom line: I would be a lot more comfortable saying China had turned the corner if there were stronger signs that China’s imports were starting to pick up, and there were stronger signs that the stimulus was starting to spill over into demand for the rest of the world’s goods.

The blowout in lending growth in 02, 03 and early 04 was accompanied by a strong rise in China’s imports. For now, though, China’s imports are shrinking faster than US imports.

Hopefully, that will change soon. A solid pickup in Chinese import demand would be a real green shoot.

* That decision combined with the decision to allow the RMB to depreciate along with the dollar to produce the big increase in China’s surplus. Until lending was curbed, imports were growing almost as fast as exports, and it was possible that the rise in Chinese inflation would have produced a real appreciation that would offset the real depreciation linked to the dollar’s fall.


  • Posted by Rajesh

    A lot of the bank loans were used by companies to invest in inventory. Keep the workers working and we’ll worry about selling the stuff later.

    And when a state owned enterprise invests in building a new factory, is that private investment or public investment?

  • Posted by DJC

    China Prime Minister Wen Jiabao says world needs to “…strengthen surveillance of the macroeconomic policies of major reserve currency issuing economies, and develop a more diversified international monetary system.” Chinese officials have recently expressed their concern about their country’s investments in dollar-denominated assets.

    Wen told the conference that China’s economy was faring “better than expected.” China said last week that its economy grew at an annual rate of 6.1% in the first quarter, a slowdown from 6.8% in the fourth quarter of 2008.

    Wen said China would seek to expand currency swap agreements that are seen as a step toward eventually making the yuan more of a global reserve asset.

    “We should give full play to bilateral currency swap agreements and will study expanding currency swaps in scale and to more countries,” Wen was quoted as saying.
    China’s central bank has signed six such swap deals since late 2008, totaling 650 billion yuan ($95 billion).

    China will set up a $10 billion cooperation fund to support infrastructure projects in countries in the Association of Southeast Asian Nations, Wen said.

  • Posted by DJC

    The international monetary system’s breakdown is underway. The end of the global US Dollar hegemony regime.!-summer-2009-the-international-monetary-system-s-breakdown-is-underway_a3129.html

    The next stage of the crisis will result from a Chinese dream. Indeed, what on earth can China be dreaming of, caught – if we listen to Washington – in the “US dollar hegemony trap” of its 1,400-billion worth of USD-denominated debt (1)? If we believe US leaders and their scores of media experts, China is only dreaming of remaining a prisoner, and even of intensifying the severity of its prison conditions by buying always more US T-Bonds and Dollars (2).

    In fact, everyone knows what prisoners dream of? They dream of escaping of course, of getting out of prison. LEAP/E2020 has therefore no doubt that Beijing is now (3) constantly striving to find the means of disposing of, as early as possible, the mountain of toxic assets which US Treasuries and Dollars have become, keeping the wealth of 1,300 billion Chinese citizens (4) prisoner. In this issue of the GEAB (N°34), our team describes the “tunnels and galleries” Beijing has secretively begun to dig in the global financial and economic system in order to escape the US dollar hegemony trap by the end of summer 2009. Once the US has defaulted on its debt, it will be time for the every country for himself.

  • Posted by bill j

    I think your use of 3m averages is problematic if you’re looking for a turning point.
    If Dec/Jan was the low point then the March upswing is going to be hidden as a result.
    Personally given the scale of bank lending alone not just this year but from November onwards it would be pretty remarkable if the recovery doesn’t strengthen.
    Dial in the easing of credit worldwide, reflation, slowing of the rate of decline etc. It would seem to be pretty much a certainty.

  • Posted by bsetser

    all measures have their problems. a 3m moving average misses turns — or rather picks up turns with a lag. anything other than a 3m moving average applied to the chinese data will be heavily affected by seasonality. the y/y data for march is subject to monthly volatility. and picking up a rebound in march is hard b/c there is always a rebound from the jan/feb lows given the (very high) seasonality in chinese output.

    but i would like to see a sustained rebound in real imports to confirm the pick up in activity in china.

  • Posted by jolly

    let’s all be honest, if it were not for the United States, the development of China would not be close to where it is today. Through Free trade the United States developed a child.

    The child learned and adapted quickly. the child learned western culture, western technology, adapted western train of thought and worked hard.

    now the child realizes that he no longer will need as much support, the question will be as the child grows older will he flip the coin and support his parents who got him started?

    That is the million dollar question.

    Does China have a moral obligation to assist the United States through the difficult times ahead?

    I think it’s in everyone’s interest for father and son to always have a solid relationship.

    But as in any household, differences can always have an emotional outcome.
    Buckle your seatbelts. Rollercoaster we are all on.

  • Posted by Bob_in_MA

    Brad: “But a surge in lending that keeps Chinese demand up until the world recovers isn’t the worst outcome either.”

    We’re all Alan Greenspan now?

    State firms borrowing to buy commodities to stockpile is completely insane. Wouldn’t it be smarter to let commodity prices fall and make them cheaper for other state enterprises that are actually producing something? What happens if commodity prices fall anyways? Now those firms have debts backed by falling assets. Sound familiar?

    When I first bought Chinese shares, the Economist was very cautious about its prospects. Now, their reporting on China borders on the delusional. I wouldn’t invest in China even if it does become cheaply priced again. You would have to be a total believer in Soviet-style central planning.

  • Posted by jonathan

    I don’t like to think on Sunday but I’ve been wondering about the loan activity since it became public. Rajesh’s point is an issue, and I haven’t seen anything that says where the money is going. As an example, the NYT spoke about how China is now less interested in greening industry in favor of production, but it seems that greening would be a useful use of funds while producing to produce could be harmful. I also wonder about inventory, as Rajesh notes, because there has been a slight uptick in containers – empty? full? – and seasonal change and model replacement does require product, from clothing to washing machines, etc.

    I saw Larry Summers came clean on Meet The Press, as best he could, that improvement is more an absence of completely awful. My latest worry is that things will solidify at a low level because that will drive many more bad events in the US: more lending losses as the string runs out, more retail bankruptcies, more push to move production to lower cost places, etc. that could themselves push us further down, especially as the equity markets would then likely go down, increasing pressure on pensions and healthcare and so on in a vicious circle. Hope not.

  • Posted by DJC

    Brad S: but i would like to see a sustained rebound in real imports to confirm the pick up in activity in china.

    DJC: The pickup in Chinese economic activity won’t show up in imports. The multi-trillion yuan, state funded construction of railways utilizes almost 100% domestic content of concrete, steel, and industrial components. Even the Chinese Bullet Trains are mostly of domestic manufacturing and engineering today. In railway engineering technology, the Chinese have advanced far ahead of the United States. CRH is assumed to stand for China Rail High speed (geddit?).

  • Posted by bsetser

    DJC — well, if china wants to export, it has to trade its exports for something. And if doesn’t want little green pieces of paper, presumably china needs to find some goods the rest of the world makes that it wants to buy …

    most stimuli have a lot of domestic content. but a big boom in chinese investment usually spills over into demand for the rest of asia (if not the world) too. mechanically, by using more savins at home, the stimulus also should tend to reduce the savings and thus the current account surplus — unless, of course, the fall in private investment is stronger.

  • Posted by jolly

    what happened to “indian investor”????

    although controversial i thought he added some spice to this blog:) made it somewhat interesting although not all of us agreed on his views…

  • Posted by Rien Huizer


    Despite your comments about the structure of Chinese imports (half directly related to exports and the other half less dominated by oil than the US) I am very interested in the effect of lower commodity prices (and also import volumes after an apparent China-wide inventory correction that started last fall). The international sector of China’s economy has become very complex (and the accelerating economic integration with Taiwan under the benign guidance of CPC’s sister party GMD makes it even more complex) and we lack statistics to make much more than broad guesses. I think step 1 should be to consolidate the trade figures of HK, Taiwan and the PRC and focus on volumes, as well as bilateral/triangular flows (eg China-Japan vv or Japan China-US)

    Much more speculative, I would expect that trade with Japan and Korea (and especially FDI from these countries) will have sen its high-water mark for a while. Trade with commodity suppliers and component makers outside the control of Japanese/korean firms may well surpass last year’s average during the second half of this year. In volume terms, of course..

  • Posted by Thomas

    One thing I’ve so far failed to understand regarding China’s recent numbers:

    According to China’s Q1 GDP release, overall GDP is up 6.1 % yoy. But investments (nearly 50 % of GDP) are up 29 %, retail sales (as a proxy for consumption) are up 16 %, and the net trade position is up 50 %.

    Can anybody explain to me how GDP can grow by “only” 6.1 %, if every component of it is growing a lot faster? Can destocking be of such a huge scale? (inventory changes were not disclosed in the GDP release)

  • Posted by guest

    I too deplore the absence of Indian investor as he was giving an other discourse to the unidimensional world of economists.
    There is a commun thoughts when history has proved from Justinian to … that barbarians were always inside the gates.

  • Posted by bsetser

    Thomas — a couple of pointers, though the mega answer is that China’s GDP data is always hard to make add up.

    1) retail sales is a poor proxy for consumption, so the rise in retail sales isn’t indicative of comparable increase in consumption.

    2) net exports is calculated in real terms, and it may be subtracting from GDP (as the improvement in the trade balance reflects in part a fall in commodity prices)

    3) I was looking at stephen green’s latest and it presented a lot of data that seemed consistent with weak growth in consumption (but still growth, to be clear) rather than blowout growth.

  • Posted by Thomas

    Thanks for the comments, Brad.

    I agree that “retail sales” doesn’t equal “consumption”, but find it hard to believe that overall consumption is only growing at (say) less than 5 %, if retail sales are up 15 % (after all, retail sales should be a very substantial portion of overall consumption, and government consumption should also be up strongly considering the various stimulus initiatives).

    Regarding net exports, I agree with your general point. However, I wonder if that effect can be strong enough to transform a 50 % increase into a negative adjusted number.

    And I certainly agree with your “mega answer”…

  • Posted by Twofish

    Thomas: I agree that “retail sales” doesn’t equal “consumption”, but find it hard to believe that overall consumption is only growing at (say) less than 5 %, if retail sales are up 15 %.

    I don’t think it’s that difficult. The retail sales numbers don’t include big ticket items like cars and houses, so the numbers make sense if you argue that consumer demand for small items is robust, but if no one is interested in buying cars or houses.

  • Posted by Thomas


    Retail sales data does include car sales, you can look it up in the press release.

    It even includes hotel accommodation and restaurants.

    As for houses, I suppose those would be classified as “investments”, no?

  • Posted by Thomas

    And if you want to know the number: Car sales were up 11 % year-on-year in nominal terms, says the National Bureau of Statistics.

  • Posted by Thomas

    Total Q1 “retail sales of consumer goods” as reported in the GDP press release equal 45 % of GDP. Seems to include pretty much all of consumption, considering that consumption is less than 50 % of GDP.

  • Posted by DJC.

    China’s Economy Rebounding from $585 billion Stimulus Package – Bloomberg

    April 17 (Bloomberg) — China’s economy, the world’s third largest, may rebound this quarter as Premier Wen Jiabao’s 4 trillion yuan ($585 billion) stimulus package cushions the effects of the global recession.

    Urban fixed-asset investment surged by almost a third in March and industrial-output growth accelerated, reports accompanying China’s gross domestic product figures showed yesterday. First-quarter GDP grew 6.1 percent, the slowest pace in almost a decade, as exports slumped.

    “The economy has gained significant momentum since February,” said Sun Mingchun, an economist at Nomura Holdings Inc. in Hong Kong, who predicts the economy will expand 8 percent this year. “We still expect a V-shaped recovery.”

    A pickup in China will contribute “strongly” to growth in the rest of Asia by increasing demand for commodities and products from around the region, according to the World Bank.

    Barclays Capital raised its estimate for economic growth this year to 7.2 percent from 6.7 percent because of the first- quarter data. UBS AG increased its forecast to as much as 7.5 percent from 6.5 percent previously and Royal Bank of Scotland’s estimate rose to 7 percent from 5 percent.

    Merrill Lynch expects second-quarter growth of 7.2 percent, climbing to 8 percent for 2009.

    “China got its stimulus plan started months ahead of the U.S. and it’s really working,” said Frank Newman, chairman of Shenzhen Development Bank, who served as a deputy secretary at the U.S. Treasury from 1994 to 1995. “We see a lot of it in action because we are financing it.”

    Economists have been increasing their forecasts since February. The median estimate of 15 surveyed by Bloomberg News before the release of yesterday’s data was for 7.7 percent growth this year, up from 7.2 percent in February.

    Nissan Motor Co. said its sales of passenger cars in China rose 36 percent in March from a year earlier as stimulus measures boosted confidence and attracted more buyers into showrooms. Anhui Conch Cement Co., China’s biggest maker of the building material, said this month that sales volume jumped 15 percent in the first quarter from a year earlier.

  • Posted by DJC.

    Latest from Henry Liu. The US Foreign policy elites still view the Chinese as the “Primary Strategic Threat” to US Global hegemony.

    Brzezinski’s vision of harmony with China is not shared by all in the US. Within days after Hillary Clinton’s maiden foreign visit to Beijing as Secretary of State, in which she declared US-China cooperation as imperative for enhancing the national interests of both countries and for pulling the world from the current financial crisis, the US Navy staged a provocative intrusion into Chinese territorial waters by a US low-frequency sonar surveillance ship near China’s submarine base on Hainan Island in the South China Sea, mapping deep-sea routes for submarines leaving and entering their base.

    Press reports on computer hackers allegedly associated with the governments of Russia and China having embedded software in the US electricity grid and other infrastructure that could potentially disrupt service or damage equipment are suddenly appearing even though such concerns have been simmering for years within government security establishment. President Obama reportedly has started a 60-day review of all the nation’s efforts at cyber security that is expected to be completed by April 17.

    Chinese Foreign Ministry spokeswoman Jiang Yu at a regular press conference on April 8 denied China had any involvement with mapping or hacking into the US electrical grid to leave behind software programs that could be used to disrupt the system, noting that the White House had denied the media reports.

    China as Protector of Developing Countries

    China’s view of itself is one of a natural member of what during the Cold War was called the Third World, now generally known as developing countries, in the struggle against Western imperialism, now known as neoliberalism, but not as its leader either by design or by default, as each country must seek its own way of struggle according to its historical conditions. Nor does China maintain a foreign policy of exporting revolution to other countries that do not want a revolutionary path. China has formally declared its determination never to seek hegemony and has openly declared a policy of no-first-use of nuclear weapons.

  • Posted by DJC.

    Foreign central banks and investors are getting antsy. In recent months China has slowed its purchases of US Treasuries, traded tens of billions of USD in currency swaps, and gone on a spending spree for raw materials; all to protect itself from weakness in the dollar. According to Bloomberg:

    “People’s Bank of China Zhou Xiaochuan called for the establishment of a “super-sovereign reserve currency” last month after Chinese Premier Wen Jiabao said he’s worried a weaker US dollar may hurt China’s investments. Inflation and a depreciating dollar would erode the value of US holdings owned by international investors.”

    Again, Bloomberg:

    “China, Japan and Korea should establish a routine mechanism to diversify the region’s reserve currencies away from the dollar”, the China Securities Journal reported, citing central bank adviser Fan Gang. “The Asian countries need to consider setting up a transitional arrangement to help reduce reliance on the dollar before the problems in the international financial system are resolved”.

  • Posted by bsetser

    does china/ korea/ japan want to push the euro higher? the aud/ cad higher? or so they want to buy each other’s currencies for their reserves (which might work if the flows offset, but, well, china is the biggest and it won’t let the others buy its currencies for its reserves). not quite sure i see how this all works …

  • Posted by jolly

    any predictions on a timeline when China will let her currency float freely?

    the huge surge in lending may assist internal demand in 12 months out, but does that really assist us? what does the u.s. plan to export to China?

    also any predictions what position Geithner may get at Goldman Sachs after his stint at the Treasury?

    I’ve almost come to conclusion that Geithner will say all 19 banks passed the stress test, that way all the financials will continue to march in wonderland but the trust of the entire market will be shaken…
    we have gotten to a point where nobody knows what is on any ones balance sheet.

    sorry for being so off topic, but for god sakes just NATIONALIZE the damn banks (from Citi to Goldman, Goldman to BAC) and set the record. TG bro, make it happen and restore confidence in the United States! Once and for all!

  • Posted by Twofish

    jolly: any predictions on a timeline when China will let her currency float freely?

    Probably 10 years at the absolute earliest.

    jolly: Also any predictions what position Geithner may get at Goldman Sachs after his stint at the Treasury?

    He is probably going to academia like Sommers did. I don’t see any reason to think that Geithner is acting in self-interest against the national interest. He may be delusional about what the national interest is, but he isn’t getting bribed.

    Also if he were getting bribed by GS, Citigroup, Morgan-Stanley and JP Morgan would have his head. Most of the complaints that GS was having too much of an influence under Paulson, really came from the other banks.

    Finally, they choose Geithner because of all of the possible candidates, he is the one with the fewest conflicts of interests.

    jolly: I’ve almost come to conclusion that Geithner will say all 19 banks passed the stress test, that way all the financials will continue to march in wonderland but the trust of the entire market will be shaken…

    I don’t think so. There will be nothing unusual in any of the stress tests because any data from the stress tests you can figure out from the earnings reports. The markets are having more confidence because some of the more extreme scenarios seem unlikely. If we have a “garden variety recession” none of the top 19 banks are going to have huge problems.

    jolly: we have gotten to a point where nobody knows what is on any ones balance sheet.

    I think things are stabilizing because everyone knows what is on everyone’s balance sheets. The boogey-man looks less scary once you open the closets and see that there is a giant rat there rather than a man-eating monster.

    jolly: sorry for being so off topic, but for god sakes just NATIONALIZE the damn banks (from Citi to Goldman, Goldman to BAC) and set the record. TG bro, make it happen and restore confidence in the United States! Once and for all!

    Life doesn’t work that way. It’s not a movie where you “nationalize” and then that’s the end of the story. People are looking at what life looks like after nationalization (AIG, Freddy, and Fannie) makes people not enthusiastic about doing it.

  • Posted by DJC.

    It’s a recipe for a trans-Pacific trade war when the Chinese economy does recover, but the United States economy remained mired in deep recession/depression. Recently the US newsmedia with Pentagon backing is making the ridiculous claim that the Chinese government is waging a cyberwar threatening the US national powergrid. What purpose would it serve to shutoff the lights at the local Walmart for a couple of minutes? It would be most regrettable if the US doesn’t look inward at the serious issues that have left the country in its current fiasco (ie. stupid Middle East wars, Cold War mentality toward China and Russia, lack of proper financial regulation, undisciplined fiscal budget deficits, foreign policy arrogance towards the rest of the world, and the military projection power backed US Dollar hegemony regime).

  • Posted by RN

    Twofish wrote:

    “People are looking at what life looks like after nationalization (AIG, Freddy, and Fannie) makes people not enthusiastic about doing it.”

    Quite wrong. In fact, opposition to nationalization is principally on political, real politik, or in the best of cases, practicality terms. Looking at what happens afterward is the least of the issues.

    Twofish wrote:

    “If we have a “garden variety recession” none of the top 19 banks are going to have huge problems.”

    Perhaps on some planet, they’re having a “garden variety recession.” But certainly not this one.