Opinion

Felix Salmon

Counterparties

By Nick Rizzo
December 20, 2011

EU governments are propping up their banks in unusual ways — WSJ (paywall)

Why China is the “Michael Jackson” economy — Streetwise Professor

Companies are manufacturing in Puerto Rico, while off-shoring their taxes — Bloomberg

No-brainer issue of the year: let high-skill immigrants stay — The Atlantic

After all, immigrants founded almost half of the top US startup companies — Reuters

But that doesn’t mean we’re in favor of this development cash for visas scheme — NYT

Hedge funds can — legally! — pay for tips on laws before they’re passed — WSJ (paywall)

Mets and poker enthusiast David Einhorn explains why he’s short Green Mountain — Reuters

The new migrant workers: seasonal Amazon employees living in RVs — WSJ (paywall)

And VCs earned an average of 1.3%  for their investors over the last decade — Entrepreneur

Comments
7 comments so far | RSS Comments RSS

the streetwise professor thinks China is in for a big fall, but if that happens, they will at least have a few trillion dollars in reserves to to keep their economy running until Europe and the US can afford to resume deficit spending on a Bush-era scale, before they have to start printing their own money.

He calls the Chinese government fascist, which is wrong – fascism is when the big businesses tell the government what to do (like in the U.S.), which is definitely not the case in China.

the professor also says:

“Moreover, China’s supposedly wise planners have created a financial system that would make Rube Goldberg proud, and which exhibits all the pathologies and brittleness of past systems that have collapsed in ugly crashes.

The Chinese have constructed a system that is intended to (a) channel savings via big banks for lending to the kinds of companies and projects that the government wants to support, and (b) generates spreads for banks to help them generate income to overcome the consequences of past bad investments. This system involves paying very low rates to depositors who have limited investment alternatives. Most Chinese depositors actually earn negative real returns.”

this sounds a lot like the U.S.. Anybody who thinks our financial system is not brittle or immune to ugly crashes must have just woken up from their time capsule. And we have a financial system that is channeling savings to banks to help them generate spreads to generate income.

He’s kidding, right? He’s really talking about the U.S., isn’t he?

Posted by KenG_CA | Report as abusive
 

Ken G @ 6:22 pm: Bullseye; +1.

The words ‘pot’ and ‘kettle’ come to mind.

Posted by crocodilechuck | Report as abusive
 

“fascism is when the big businesses tell the government what to do (like in the U.S.), which is definitely not the case in China.”

Fortunately for our analysis, there has only ever been one Fascist country in the history of the Universe. It was run by a man named Benito Mussolini. can you please provide an example of a businessman who told Mussolini what to do? And bonus question, what island was he sent to after that?

thanks

Posted by johnhhaskell | Report as abusive
 

ok, JohnH, let me re-phrase it: fascism is when government is run for the benefit of big businesses.

Posted by KenG_CA | Report as abusive
 

KenG_CA, this is unfortunately yet another one of these fallacies that the idiot media have put out. That is that China has a giant pot of cash, sitting on the side, just waiting to be inserted in to the economy. This is simply false. The RMB that the PBoC printed in return for those USD are already in the economy so that money is already being spent. Furthermore, even if it was a piggy bank, looking at those reserves only is like saying LEH has hundreds of billions in assets, ie you are wholely ignoring the liability side of China and assuming those reserves are unencumbered.

Finally, if you think the US is “run for big business”, I suggest you spend some extended time in China or try to do business there. Or failing that, do a quick check on the backgrounds of the senior businessmen there.

Seriously, go out, open your wallet and buy a clue before pontificating on subjects you clearly know nothing about

Posted by Danny_Black | Report as abusive
 

Danny, China has over $3 trillion in foreign reserves. They may have internal debt, but like the U.S., they can print all of their own currency that they want, except they don’t need to get the approval of a cult that masquerades as a political party to do so. They don’t spend dollars internally, they only need them for foreign purchases, and their trade surplus seems to be covering that fine.

If you don’t think that big businesses have enormous influence over the U.S. government, then maybe you have been in the same time capsule as the professor who thinks our financial system is not prone to ugly crashes. Even big businesses wouldn’t deny that they have a lot of influence over the creation of laws and regulations.

As far as China goes, the Chinese government effectively owns half of every company there. So tell me who runs things, when the government is still run by the Communist (not the fascist) party.

Posted by KenG_CA | Report as abusive
 

KenG_CA, you obviously have not been paying attention to what is happening to China’s trade flows – they have been NEGATIVE for at least the last two months, they were also negative in Feb but that is probably because of chinese new year.

You also apparently have not been paying attention to how they are financing themselves, ie securing a large portion of the debt in USD – the Dim Sum market being rather tiny at the mo. Nor, apparently, are you aware of the huge stresses they are having in non-performing loans. This year China spent 10% of its GDP bailing out local governments and those governments after that bailout are STILL insolvent. This was a hard cash, money down the drain bailout, not the fake outrage “1.2trillion wholely collateralised loans to banks which they immediately paid back with interest” bailout that the US but the real McCoy.

As for “influence”, sure. So do unions. In China, big business don’t have “influence”, there ARE the goverment. The government in China is effectively a few families running the country for their own enrichment. Anyone paying the slightest attention to the news will know about a protest going on in Wukan, where the former mayor – and whose daughter is now the 11th richest person in China – is head of the property development company that buys land from the local government and magically seems to always immediately flip it for a 70% profit. Despite all evidence to the contrary, I find it hard to believe that anyone is dumb enough not to see the huge difference.

Posted by Danny_Black | Report as abusive
 

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