Comments by "" (@craigkdillon) on "Eurodollar University"
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I wish analysts would stop talking about the world and China as if the events in both are tightly linked.
They ARE linked, of course, -- there is trade.
HOWEVER -- the link is not tight.
The problems China is experiencing has to do with the collapse of its internal structure --
1. The collapse of the real estate market -- which is bigger than just the market. Real estate speculation is central to how local and provincial governments fund themselves.
2. Bankruptcies of local and provincial governments. This is a HUGE structural issue.
3. The exodus of foreign manufacturing - Samsung, Kia, Apple, Toyota, FoxConn, and so many others is a profound and permanent change in China. It is NOT cyclical. They are NOT coming back.
4. Unemployment, and commercial vacancy rates are high, will go higher, and will be permanent for years, maybe decades.
5. Supporting businesses - restaurants, hotels, and retail stores that serve the employees of all those companies that left, are shutting down. Malls are empty. Car dealers have no customers.
What we see in China is very different from the normal cyclical economic issues we see elsewhere.
STOP talking about them as if they were similar in kind or scope.
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Banking, government finance, real estate, and wage decline must be understood as a combined entity in China.
The BIG mistake being made, as I see it, is that these things are talked about AS IF they were related in the same
way they exist in the west.
In China, they are directly linked.
That direct linkage helped China's meteoric growth.
Now, they are acting in unison to bring down China's economy.
Local governments are going bankrupt --
as evidenced by the fact that teachers, transit workers, and police are being paid partial wages,
and sometimes not getting paid at all.
China's economy is crashing.
It is disintegrating.
In ten years, it won't be recognizable.
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