8 ms·

A very successful Chinese entrepreneur once described Chinese economic policy to me in terms I will diplomatically paraphrase as the inexperienced leading the l

by rrggrr 11y ago

A very successful Chinese entrepreneur once described Chinese economic policy to me in terms I will diplomatically paraphrase as the inexperienced leading the less experienced. His point was that China lacked the long history of economic mistakes, and economic success necessary to successfully manage complex economic systems at scale. The ups and down to come are necessary, but they will certainly carry the rest of the world in a contagion with them - and in that mistake I'm afraid the US is gaining experience as well.

ausjke 11y ago
this busted cycle is a bit different from others, the government is the _sole_ one pushed the stock up before it crashed(using its controlled media to pump up the stock with lots of promising articles over a few months), the stock index had been staying at around 2200 for quite a few years, then shot to ~4600 last year and now it's swinging back. to justify this crash, quite a lot fund managers are now in prison, who became the scapegoat for the government--the real one initiated all this mess.
- isomorphic 11y ago
  Reading your phrase "controlled media" made me think of the 200-some news articles telegraphing the recent Fed rate increase, months ahead of the actual event. Controlled or not, the Fed knows how to use the media to achieve the Fed's goals. Believing the proposition that one can control something as complex as an economy requires a certain amount of arrogance and/or hubris, neither of which are in short supply in the States. But from one naïve American's perspective, the Chinese leadership act like it's their divine right of nature.
  - jcyw 11y ago
    You have no idda how China controls media and press. Recent incident in Hong Kong revealed China abducted 5 bookstores staff because they publish book about political gossip of the communist party. Journalist and Newspaper were directly controlled by the Party in China. Media companies are required to have a Party Secretary in their board. Comparing that to Fed is vastly irrelevant.
    - avn2109 11y ago
      "The Americans are so natural. Far superior to us,” - Joseph Goebbels [0] The Yankee propaganda machine is smooth and suave so we hardly realize it exists. It makes the Chinese look heavy handed by comparison, and our Overton window is much wider than theirs. But don't confuse that suavity and width with the absence of propaganda. [0] http://www.newyorker.com/magazine/2013/09/16/hitler-in-hollywood http://www.newyorker.com/magazine/2013/09/16/hitler-in-holly...
      - rtpg 11y ago
        There's a difference between the government running a news outlet and the government actively shutting down other news outlets.
      - prewett 11y ago
        I don't think anyone is saying there isn't propaganda/spin/marketing in the US. But to compare it to Goebbels or China is irresponsible, unless you have some serious sources. China bullys reporters (Chinese and foreign) [1], refuses visas to foreign reporters of papers that publish things that contradict the party line [2], jails Chinese reporters that contradict whatever the Party wants at the moment [3], blocked nytimes.com ever since it published an expose of Hu Jintao's (the president of China at the time) financial affairs [4], has been bullying Hong Kong newspapers that do not tow Beijing's line despite a promise to not control Hong Kong until about 2046 [unfortunately, can't find sources on this, as it is a bit subtle, but, for example, the South China Morning Post was bought by Alibaba executive; think it's going to publish anything out of line?] [1] http://www.poynter.org/2014/covering-china-for-foreign-and-domestic-press-self-censorships-the-threat/236418/ http://www.poynter.org/2014/covering-china-for-foreign-and-d... [2] https://cpj.org/blog/2015/03/how-china-uses-j-visas-to-punish-international-med.php https://cpj.org/blog/2015/03/how-china-uses-j-visas-to-punis... [3] http://america.aljazeera.com/articles/2015/8/27/chinese-journalist-jailed-over-stock-market-crash-coverage.html http://america.aljazeera.com/articles/2015/8/27/chinese-jour... [4] http://www.nytimes.com/2012/10/26/world/asia/china-blocks-web-access-to-new-york-times.html http://www.nytimes.com/2012/10/26/world/asia/china-blocks-we...
  - prewett 11y ago
    "divine right of nature": I think I finally figured out how the Communist Party deals with information control. They simply state whatever they wish were actually true as if it were true, and then bully, punish, jail, block or otherwise try to stamp out any other perspective. So, they say "Taiwan is part of China" when it manifestly is not part of China, and they encourage an angry response to anyone who says it is not true. But other than national messaging, it seems like the State media actually does their own stories, because you often see it run a story which then gets deleted off the web site a couple hours or a day later, after the government decides what the message should be.
    - wilsynet 11y ago
      But Taiwan refers to itself as "The Republic of China" while China refers to itself as "The People's Republic of China". From the outside looking in, China and Taiwan are merely part of a long running civil Cold War.
      - umanwizard 11y ago
        North Korea and South Korea are obviously different countries but they are both called the "Republic of Korea" (one with various adjectives tacked on). I don't think you should read too much into names. Taiwan is neither internationally recognized as part of China nor does it function as part of China in any way.
- robszumski 11y ago
  I honestly don't get why they let it get so crazy? In what world would a gain at that rate be sustainable without a huge crash? The worst part is they executed the public awareness campaign which convinced the middle/lower class to fund this bump, Then, take significant loses during the correction. Why not take some action before it came to this if it was artificial?
  - ausjke 11y ago
    this dangerous move could lead to instability, which is the worst thing the party expected to see, the only explanation, as once mentioned by a radio host, is most likely the current leaders have no idea what to do. In the past 20~ years the leaders in China are graduated from the best engineer school in China, the current one is far from that, somehow he became overly confident and to some extent reckless, I feel that's one way to explain what are happening there nowadays, including this busted stock cycle.
  - adventured 11y ago
    It was a mistake of desperation. They had previously inflated a massive property bubble, both residential and commercial, that was in the process of exploding and severely damaging the economy. The stock market bubble they intentionally created, was meant to offset that event (perhaps both economically and psychologically). As the stock market bubble began, people shifted their capital from housing to stocks - many were relying on the perpetual upward movement to keep themselves solvent vs the losses in their real estate assets. China is still a heavy-handed command economy in many ways. The Communist Party's reputation and 'people authority' is directly tied to the economy delivering continual material progress gains (which the party then takes a lot of credit for, with the downside being the implied responsibility if things go badly). The desperation stems from 2007-2009, when the global economy crashed, and ended their over-boom (some of it was fake, backed by highly leveraged consumers and a slightly cheap currency that had been pegged to an artificially cheap dollar). At that point, China made a decision to inflate bubbles rather than accept much slower growth. The real estate bubble bought them a couple of years before it turned back against them. China is now eating through their capital reserves rapidly, while trying to prop up the most over-valued stock market on earth, and simultaneously dealing with a manufacturing sector that has been shrinking for five straight months (to go with the big bust in several specific segments like steel). They're trying to fight reality, when they should have instead learned from Japan's similar past mistakes in trying to prop up fake growth with bubbles (China is even making the same zombie corporation mistakes that Japan did).
- tim333 11y ago
  The government pushing the stock market up seems a new thing under the present leadership (since 2012?) and kind of dumb like they don't understand markets. Having the stock market priced high doesn't make people richer in real assets although they may imagine their bits of paper worth more. On the other hand it can lead to real assets being misallocated to doomed but overpriced dot coms for example.
  - dnautics 11y ago
    I mean isn't that what the US does?
    - simonh 11y ago
      No, they do exactly the opposite. They act to moderate the market. When markets are down they drop interest rates to stimulate investment, but when markets are booming they raise interest rates and limit the money supply to try and calm them down. Western economists and central bank leaders are very well aware of how damaging over inflated markets can be and one of their primary goals is to moderate the boom and bust cycle.
      - dnautics 11y ago
        That's the narrative, yes, but given that the market has been bull for six+ years and the Fed only recently raised rates, and not by much (real rates may still be negative)... The evidence does not support your assertion
        nbouscal 11y ago
        The Fed's mandate is inflation and unemployment, so judging whether they should act based on stock prices reflects a misunderstanding of their goals.
        sleeping_pills 11y ago
        You provide zero evidence that the US stocks are overvalued (I'm not saying they aren't) so you should refrain from demanding evidence from others. Furthermore, why do you think the FED should've raised raters earlier? Supporting the stock market is not their mandate and it is thus not directly relevant whether and how long has the current bull market lasted. A big market crash just a few years after 2008 (and 2011) would've certainly had a dampening effect on recovery so they might have felt justified in increasing the money supply. Inflation is running low, economic growth and labor markets were very weak for many years after the 2008 crash. They had pretty good reasons to be supportive.
- TeMPOraL 11y ago
  So in other words - in the US, bankers fuck up and the government has to pay for it. In China, the government fucks up and bankers have to pay for it. A strange world we live in. I guess I'll be moving to Iceland.
  - nolok 11y ago
    Why Iceland ? There the government fucked up as much as the bankers, and then used their power to make the bankers alone pay for it ... Lots of people consider what happened there good because with our western view bankers never pay for their mistake and they do in iceland, blissfully ignoring the action from their government that triggered them and helped them get there.
    - TeMPOraL 11y ago
      Probably because it seems that I was misinformed about Iceland, believing what you say lots of people believe. Then again, it still looks like they're better. They at least jailed half of the responsible parties.
      - nolok 11y ago
        It is not my area of expertise and I wouldn't want to go much into it at the risk of misinforming (although there is a detailed wikipedia page which could be a decent starting point), but at the very least should be considered the fact that when Icelandic banks started being too big and other countries warned Iceland and refused to allow some acquisitions, their government went out of their way to guarantee all deposits in Icelandic banks, even of non Icelandic citizen. When things went wrong, they then went back of that promise, paid deposits to their citizen and ignored the others. At their height, the Icelandic banks possessions was worth eleven times the GDP of Iceland, and were in part fueled by promise of their government to other countries, promise that they went back on the moment things went south. Imagine if another country did that to yours, say a Chinese bank buy a bank where your country's citizens have deposits and then the chinese govenment reneg their promise and let creditors in your country either lose their money or be repaid by your own government, would you consider the chinese government "the good guys who stood up to bankers" ? > On 6 October, the Icelandic legislature instituted an emergency law which enabled the Financial Supervisory Authority to take control over financial institutions and made domestic deposits in the banks priority claims. In the following days, new banks were founded to take over the domestic operations of Kaupthing, Landsbanki and Glitnir. The old banks were put into receivership and liquidation, resulting in losses for their shareholders and foreign creditors. Outside Iceland, more than half a million depositors lost access to their accounts in foreign branches of Icelandic banks. This led to the 2008–2013 Icesave dispute, that ended with a ESA ruling that Iceland was not obliged to repay Dutch and British depositors minimum deposit guarantees. > In 2001, banks were deregulated in Iceland. This set the stage for banks to upload debts when foreign companies were accumulated. > his inflation was exacerbated by the practice of the Central Bank of Iceland issuing liquidity loans to banks on the basis of newly issued, uncovered bonds effectively, printing money on demand. > In response to the rise in prices – 14% in the twelve months to September 2008, compared with a target of 2.5% – the Central Bank of Iceland held interest rates high (15.5%). Such high interest rates, compared with 5.5% in the United Kingdom or 4% in the eurozone for example, encouraged overseas investors to hold deposits in Icelandic krónur, leading to monetary inflation: the Icelandic money supply (M3) grew 56.5% in the twelve months to September 2008, compared with 5.0% GDP growth Again, not saying the bankers weren't responsible. They were. But I don't like the praise to how the icelandic government handled it because they were just as responsible and then turned around and beat their accomplice while trying to make themselves appear the good guys.
x5n1 11y ago
Who has a long history of any understanding of the voodoo that's economics. The whole idea of a Caplitalist economy is 500 years old. American leadership is what like 70 years old, since WWI. No one know what they are doing, they just have money and so that have the ability to coerce people to do work to generate more money. As long as people work and money is generated through sales, you can make any rules to keep the game in play.
- deleted 11y ago
  [deleted]
- meric 11y ago
  Yes exactly. If the Federal Reserve knew what it's doing, it would have seen the Dotcom bubble, or the 2008 Financial Crisis coming.
- sirkneeland 11y ago
  As long as people work and money is generated through sales, you can make any rules to keep the game in play I hope you would make this into a paper and dub it "The Calvinball Principle" (ahh, memories: https://en.wikipedia.org/wiki/Calvin_and_Hobbes#Calvinball https://en.wikipedia.org/wiki/Calvin_and_Hobbes#Calvinball )
lvs 11y ago
Western countries have a long history of economic mistakes that we continue to perpetrate as a matter of course.
- adventured 11y ago
  All countries have a long history of economic mistakes, in fact. There's absolutely nothing special as it applies to the West. See: Japan's recent 25 year rolling disaster. China had hundreds of years of economic mistakes prior to the last 40 years or so. Asia is littered with demonstrations in very bad economic governance over the last 50 years.
  - marincounty 11y ago
    Japan and China are very different. I trust Japan. I know it's politically correct to think we're all alike, or well meaning. It just seems like every Chinese company, I have looked into, is beyond crooked. I would still love to know what NQ Mobile Inc. does? As a kid, we had a Japanese exchange student. I would trust her with my life. Japanese, and Chinese cultures are vastly different. I know your talking about economic mistakes, but in my eyes, it's more than mistakes. If you have a horrid foundation, you can't expect a structure to rise, or hold it's own weight. Let the strapping begin--hopefully from a recent college graduate.
FreedomToCreate 11y ago
"inexperienced leading the less experienced." hmm sounds about right when describing Wall Street and the Fed as well. There are definitely extremely knowledgable people running the show, but around them are people who when they see an easy way for a short term gain, they think economic policies can be bent.
sirkneeland 11y ago
just "gaining experience" in damaging the global economy through our own bad policy? I'd argue we've been doing that since Smoot-Hawley, or in the dying days of Bretton Woods ("the dollar is our currency, but your problem")... Isn't there that old saying, "when the US sneezes, the world catches a cold"?
- devbug 11y ago
  Canada definitely is! :'(
jcyw 11y ago
They are not lacking experience. Communist believe in centralized control, not free market.
- um_ya 11y ago
  Same with the Bernie Sander folks.
  - beedogs 11y ago
    breitbart is that way -->
- pczzy 11y ago
  Stopped trading about 30 minutes. China's stock market is a super large casino, childish, speculation, ignorance. https://medium.com/@Mfrbee/china-stock-trading-halted-early-after-7-plunge-447c4301010e#.sji1oy49h https://medium.com/@Mfrbee/china-stock-trading-halted-early-...
- adventured 11y ago
  They are entirely lacking experience. China's capital markets are very new. Most of it is still so new it's considered embryonic and barely functional. Mass population speculation on and ownership of stocks is entirely new. Large scale real estate ownership by the Chinese people is relatively new. 30 years ago none of this existed. That's the very definition of inexperienced in the fields we're talking about.
  - aerioux 11y ago
    I mean for a new market it's going pretty well :) - their trading and exchange systems don't seem to be having issues
- umanwizard 11y ago
  The Chinese "Communist" party is not in fact communist in the classical sense. They are mostly technocratic and pragmatic, and modern China has a market economy. Don't read too much into names.
doxcf434 11y ago
This resonates with what a good Taiwannese friend explains to me, that the population is very immature compared to the rest of the world, hence the censorshipe issues being nesscary for example. The cultural revolution for example being complete immature and setting the entire country back 50s years, not to mention the destruction of heritage that took place. Quite insightful, and I'm sure it applies economically as well.
- TeMPOraL 11y ago
  In what way are Chinese "immature"? I suppose you don't mean they're all bunch of children who hadn't adapted to the reality yet, because that is factually untrue. Could you elaboate on your intended meaning?
zappo2938 11y ago
>contagion Remember that the US has a huge trade deficit with China. That means we were that dependent on them purchasing our goods and services, upper management and tech, than they are on us. That means a collapsing Chinese economy will not effect the US as bad as some might think. The worst case scenario is the property values in the Bay Area will drop some which honestly won't be a bad thing.
- rrggrr 11y ago
  We remain dependent on China for most manufactured goods, for the purchase of our debt, for workmanlike stewardship of its nuclear arsenal, for its mangement of North Korea, and to stave off a deflationary spiral. Our fates are intertwined.
flexie 11y ago
The US has had many generations of freee market economy with lots of both good and bad experiences. Still, the Great Depression and the Great Recession happened. I believe we have seen plenty of spectacular stock market crashes in the US as well.
- rrggrr 11y ago
  The standard is not the absence of volatility, or black swan events. The standard is what steps are taken afterward. The US leads the world in financial transparency at the corporate and state levels. We have many mechanisms that imperfectly reinforce transparency and accountability. These are the lessons China must learn if prosperity and harmony are to be achieved.
collatz 11y ago
> China lacked the long history of economic mistakes, and economic success necessary to successfully manage complex economic systems at scale. Are there ANY complex economic systems that have been successfully "managed" at scale?
- rrggrr 11y ago
  Depends on what you mean by 'managed'. We know centally managed economies spectacularly fail given enough time. We know that opaque financial entities implode. We din't yet know what the future holds for moderately regulated, mostly free market capitalism, except that the entire global economy has relied on it at great benefit the past 100 years or so. The fat lady has not yet sung.

by rrggrr 11y ago

ausjke 11y ago

this busted cycle is a bit different from others, the government is the _sole_ one pushed the stock up before it crashed(using its controlled media to pump up the stock with lots of promising articles over a few months), the stock index had been staying at around 2200 for quite a few years, then shot to ~4600 last year and now it's swinging back. to justify this crash, quite a lot fund managers are now in prison, who became the scapegoat for the government--the real one initiated all this mess.

isomorphic 11y ago
Reading your phrase "controlled media" made me think of the 200-some news articles telegraphing the recent Fed rate increase, months ahead of the actual event. Controlled or not, the Fed knows how to use the media to achieve the Fed's goals. Believing the proposition that one can control something as complex as an economy requires a certain amount of arrogance and/or hubris, neither of which are in short supply in the States. But from one naïve American's perspective, the Chinese leadership act like it's their divine right of nature.
- jcyw 11y ago
  You have no idda how China controls media and press. Recent incident in Hong Kong revealed China abducted 5 bookstores staff because they publish book about political gossip of the communist party. Journalist and Newspaper were directly controlled by the Party in China. Media companies are required to have a Party Secretary in their board. Comparing that to Fed is vastly irrelevant.
  - avn2109 11y ago
    "The Americans are so natural. Far superior to us,” - Joseph Goebbels [0] The Yankee propaganda machine is smooth and suave so we hardly realize it exists. It makes the Chinese look heavy handed by comparison, and our Overton window is much wider than theirs. But don't confuse that suavity and width with the absence of propaganda. [0] http://www.newyorker.com/magazine/2013/09/16/hitler-in-hollywood http://www.newyorker.com/magazine/2013/09/16/hitler-in-holly...
    - rtpg 11y ago
      There's a difference between the government running a news outlet and the government actively shutting down other news outlets.
    - prewett 11y ago
      I don't think anyone is saying there isn't propaganda/spin/marketing in the US. But to compare it to Goebbels or China is irresponsible, unless you have some serious sources. China bullys reporters (Chinese and foreign) [1], refuses visas to foreign reporters of papers that publish things that contradict the party line [2], jails Chinese reporters that contradict whatever the Party wants at the moment [3], blocked nytimes.com ever since it published an expose of Hu Jintao's (the president of China at the time) financial affairs [4], has been bullying Hong Kong newspapers that do not tow Beijing's line despite a promise to not control Hong Kong until about 2046 [unfortunately, can't find sources on this, as it is a bit subtle, but, for example, the South China Morning Post was bought by Alibaba executive; think it's going to publish anything out of line?] [1] http://www.poynter.org/2014/covering-china-for-foreign-and-domestic-press-self-censorships-the-threat/236418/ http://www.poynter.org/2014/covering-china-for-foreign-and-d... [2] https://cpj.org/blog/2015/03/how-china-uses-j-visas-to-punish-international-med.php https://cpj.org/blog/2015/03/how-china-uses-j-visas-to-punis... [3] http://america.aljazeera.com/articles/2015/8/27/chinese-journalist-jailed-over-stock-market-crash-coverage.html http://america.aljazeera.com/articles/2015/8/27/chinese-jour... [4] http://www.nytimes.com/2012/10/26/world/asia/china-blocks-web-access-to-new-york-times.html http://www.nytimes.com/2012/10/26/world/asia/china-blocks-we...
- prewett 11y ago
  "divine right of nature": I think I finally figured out how the Communist Party deals with information control. They simply state whatever they wish were actually true as if it were true, and then bully, punish, jail, block or otherwise try to stamp out any other perspective. So, they say "Taiwan is part of China" when it manifestly is not part of China, and they encourage an angry response to anyone who says it is not true. But other than national messaging, it seems like the State media actually does their own stories, because you often see it run a story which then gets deleted off the web site a couple hours or a day later, after the government decides what the message should be.
  - wilsynet 11y ago
    But Taiwan refers to itself as "The Republic of China" while China refers to itself as "The People's Republic of China". From the outside looking in, China and Taiwan are merely part of a long running civil Cold War.
    - umanwizard 11y ago
      North Korea and South Korea are obviously different countries but they are both called the "Republic of Korea" (one with various adjectives tacked on). I don't think you should read too much into names. Taiwan is neither internationally recognized as part of China nor does it function as part of China in any way.
robszumski 11y ago
I honestly don't get why they let it get so crazy? In what world would a gain at that rate be sustainable without a huge crash? The worst part is they executed the public awareness campaign which convinced the middle/lower class to fund this bump, Then, take significant loses during the correction. Why not take some action before it came to this if it was artificial?
- ausjke 11y ago
  this dangerous move could lead to instability, which is the worst thing the party expected to see, the only explanation, as once mentioned by a radio host, is most likely the current leaders have no idea what to do. In the past 20~ years the leaders in China are graduated from the best engineer school in China, the current one is far from that, somehow he became overly confident and to some extent reckless, I feel that's one way to explain what are happening there nowadays, including this busted stock cycle.
- adventured 11y ago
  It was a mistake of desperation. They had previously inflated a massive property bubble, both residential and commercial, that was in the process of exploding and severely damaging the economy. The stock market bubble they intentionally created, was meant to offset that event (perhaps both economically and psychologically). As the stock market bubble began, people shifted their capital from housing to stocks - many were relying on the perpetual upward movement to keep themselves solvent vs the losses in their real estate assets. China is still a heavy-handed command economy in many ways. The Communist Party's reputation and 'people authority' is directly tied to the economy delivering continual material progress gains (which the party then takes a lot of credit for, with the downside being the implied responsibility if things go badly). The desperation stems from 2007-2009, when the global economy crashed, and ended their over-boom (some of it was fake, backed by highly leveraged consumers and a slightly cheap currency that had been pegged to an artificially cheap dollar). At that point, China made a decision to inflate bubbles rather than accept much slower growth. The real estate bubble bought them a couple of years before it turned back against them. China is now eating through their capital reserves rapidly, while trying to prop up the most over-valued stock market on earth, and simultaneously dealing with a manufacturing sector that has been shrinking for five straight months (to go with the big bust in several specific segments like steel). They're trying to fight reality, when they should have instead learned from Japan's similar past mistakes in trying to prop up fake growth with bubbles (China is even making the same zombie corporation mistakes that Japan did).
tim333 11y ago
The government pushing the stock market up seems a new thing under the present leadership (since 2012?) and kind of dumb like they don't understand markets. Having the stock market priced high doesn't make people richer in real assets although they may imagine their bits of paper worth more. On the other hand it can lead to real assets being misallocated to doomed but overpriced dot coms for example.
- dnautics 11y ago
  I mean isn't that what the US does?
  - simonh 11y ago
    No, they do exactly the opposite. They act to moderate the market. When markets are down they drop interest rates to stimulate investment, but when markets are booming they raise interest rates and limit the money supply to try and calm them down. Western economists and central bank leaders are very well aware of how damaging over inflated markets can be and one of their primary goals is to moderate the boom and bust cycle.
    - dnautics 11y ago
      That's the narrative, yes, but given that the market has been bull for six+ years and the Fed only recently raised rates, and not by much (real rates may still be negative)... The evidence does not support your assertion
      - nbouscal 11y ago
        The Fed's mandate is inflation and unemployment, so judging whether they should act based on stock prices reflects a misunderstanding of their goals.
      - sleeping_pills 11y ago
        You provide zero evidence that the US stocks are overvalued (I'm not saying they aren't) so you should refrain from demanding evidence from others. Furthermore, why do you think the FED should've raised raters earlier? Supporting the stock market is not their mandate and it is thus not directly relevant whether and how long has the current bull market lasted. A big market crash just a few years after 2008 (and 2011) would've certainly had a dampening effect on recovery so they might have felt justified in increasing the money supply. Inflation is running low, economic growth and labor markets were very weak for many years after the 2008 crash. They had pretty good reasons to be supportive.
TeMPOraL 11y ago
So in other words - in the US, bankers fuck up and the government has to pay for it. In China, the government fucks up and bankers have to pay for it. A strange world we live in. I guess I'll be moving to Iceland.
- nolok 11y ago
  Why Iceland ? There the government fucked up as much as the bankers, and then used their power to make the bankers alone pay for it ... Lots of people consider what happened there good because with our western view bankers never pay for their mistake and they do in iceland, blissfully ignoring the action from their government that triggered them and helped them get there.
  - TeMPOraL 11y ago
    Probably because it seems that I was misinformed about Iceland, believing what you say lots of people believe. Then again, it still looks like they're better. They at least jailed half of the responsible parties.
    - nolok 11y ago
      It is not my area of expertise and I wouldn't want to go much into it at the risk of misinforming (although there is a detailed wikipedia page which could be a decent starting point), but at the very least should be considered the fact that when Icelandic banks started being too big and other countries warned Iceland and refused to allow some acquisitions, their government went out of their way to guarantee all deposits in Icelandic banks, even of non Icelandic citizen. When things went wrong, they then went back of that promise, paid deposits to their citizen and ignored the others. At their height, the Icelandic banks possessions was worth eleven times the GDP of Iceland, and were in part fueled by promise of their government to other countries, promise that they went back on the moment things went south. Imagine if another country did that to yours, say a Chinese bank buy a bank where your country's citizens have deposits and then the chinese govenment reneg their promise and let creditors in your country either lose their money or be repaid by your own government, would you consider the chinese government "the good guys who stood up to bankers" ? > On 6 October, the Icelandic legislature instituted an emergency law which enabled the Financial Supervisory Authority to take control over financial institutions and made domestic deposits in the banks priority claims. In the following days, new banks were founded to take over the domestic operations of Kaupthing, Landsbanki and Glitnir. The old banks were put into receivership and liquidation, resulting in losses for their shareholders and foreign creditors. Outside Iceland, more than half a million depositors lost access to their accounts in foreign branches of Icelandic banks. This led to the 2008–2013 Icesave dispute, that ended with a ESA ruling that Iceland was not obliged to repay Dutch and British depositors minimum deposit guarantees. > In 2001, banks were deregulated in Iceland. This set the stage for banks to upload debts when foreign companies were accumulated. > his inflation was exacerbated by the practice of the Central Bank of Iceland issuing liquidity loans to banks on the basis of newly issued, uncovered bonds effectively, printing money on demand. > In response to the rise in prices – 14% in the twelve months to September 2008, compared with a target of 2.5% – the Central Bank of Iceland held interest rates high (15.5%). Such high interest rates, compared with 5.5% in the United Kingdom or 4% in the eurozone for example, encouraged overseas investors to hold deposits in Icelandic krónur, leading to monetary inflation: the Icelandic money supply (M3) grew 56.5% in the twelve months to September 2008, compared with 5.0% GDP growth Again, not saying the bankers weren't responsible. They were. But I don't like the praise to how the icelandic government handled it because they were just as responsible and then turned around and beat their accomplice while trying to make themselves appear the good guys.

x5n1 11y ago

Who has a long history of any understanding of the voodoo that's economics. The whole idea of a Caplitalist economy is 500 years old. American leadership is what like 70 years old, since WWI. No one know what they are doing, they just have money and so that have the ability to coerce people to do work to generate more money. As long as people work and money is generated through sales, you can make any rules to keep the game in play.

deleted 11y ago
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meric 11y ago
Yes exactly. If the Federal Reserve knew what it's doing, it would have seen the Dotcom bubble, or the 2008 Financial Crisis coming.
sirkneeland 11y ago
As long as people work and money is generated through sales, you can make any rules to keep the game in play I hope you would make this into a paper and dub it "The Calvinball Principle" (ahh, memories: https://en.wikipedia.org/wiki/Calvin_and_Hobbes#Calvinball https://en.wikipedia.org/wiki/Calvin_and_Hobbes#Calvinball )

lvs 11y ago

Western countries have a long history of economic mistakes that we continue to perpetrate as a matter of course.

adventured 11y ago
All countries have a long history of economic mistakes, in fact. There's absolutely nothing special as it applies to the West. See: Japan's recent 25 year rolling disaster. China had hundreds of years of economic mistakes prior to the last 40 years or so. Asia is littered with demonstrations in very bad economic governance over the last 50 years.
- marincounty 11y ago
  Japan and China are very different. I trust Japan. I know it's politically correct to think we're all alike, or well meaning. It just seems like every Chinese company, I have looked into, is beyond crooked. I would still love to know what NQ Mobile Inc. does? As a kid, we had a Japanese exchange student. I would trust her with my life. Japanese, and Chinese cultures are vastly different. I know your talking about economic mistakes, but in my eyes, it's more than mistakes. If you have a horrid foundation, you can't expect a structure to rise, or hold it's own weight. Let the strapping begin--hopefully from a recent college graduate.

FreedomToCreate 11y ago

"inexperienced leading the less experienced." hmm sounds about right when describing Wall Street and the Fed as well. There are definitely extremely knowledgable people running the show, but around them are people who when they see an easy way for a short term gain, they think economic policies can be bent.

sirkneeland 11y ago

just "gaining experience" in damaging the global economy through our own bad policy? I'd argue we've been doing that since Smoot-Hawley, or in the dying days of Bretton Woods ("the dollar is our currency, but your problem")... Isn't there that old saying, "when the US sneezes, the world catches a cold"?

devbug 11y ago
Canada definitely is! :'(

jcyw 11y ago

They are not lacking experience. Communist believe in centralized control, not free market.

um_ya 11y ago
Same with the Bernie Sander folks.
- beedogs 11y ago
  breitbart is that way -->
pczzy 11y ago
Stopped trading about 30 minutes. China's stock market is a super large casino, childish, speculation, ignorance. https://medium.com/@Mfrbee/china-stock-trading-halted-early-after-7-plunge-447c4301010e#.sji1oy49h https://medium.com/@Mfrbee/china-stock-trading-halted-early-...
adventured 11y ago
They are entirely lacking experience. China's capital markets are very new. Most of it is still so new it's considered embryonic and barely functional. Mass population speculation on and ownership of stocks is entirely new. Large scale real estate ownership by the Chinese people is relatively new. 30 years ago none of this existed. That's the very definition of inexperienced in the fields we're talking about.
- aerioux 11y ago
  I mean for a new market it's going pretty well :) - their trading and exchange systems don't seem to be having issues
umanwizard 11y ago
The Chinese "Communist" party is not in fact communist in the classical sense. They are mostly technocratic and pragmatic, and modern China has a market economy. Don't read too much into names.

doxcf434 11y ago

This resonates with what a good Taiwannese friend explains to me, that the population is very immature compared to the rest of the world, hence the censorshipe issues being nesscary for example. The cultural revolution for example being complete immature and setting the entire country back 50s years, not to mention the destruction of heritage that took place. Quite insightful, and I'm sure it applies economically as well.

TeMPOraL 11y ago
In what way are Chinese "immature"? I suppose you don't mean they're all bunch of children who hadn't adapted to the reality yet, because that is factually untrue. Could you elaboate on your intended meaning?

zappo2938 11y ago

>contagion Remember that the US has a huge trade deficit with China. That means we were that dependent on them purchasing our goods and services, upper management and tech, than they are on us. That means a collapsing Chinese economy will not effect the US as bad as some might think. The worst case scenario is the property values in the Bay Area will drop some which honestly won't be a bad thing.

rrggrr 11y ago
We remain dependent on China for most manufactured goods, for the purchase of our debt, for workmanlike stewardship of its nuclear arsenal, for its mangement of North Korea, and to stave off a deflationary spiral. Our fates are intertwined.

flexie 11y ago

The US has had many generations of freee market economy with lots of both good and bad experiences. Still, the Great Depression and the Great Recession happened. I believe we have seen plenty of spectacular stock market crashes in the US as well.

rrggrr 11y ago
The standard is not the absence of volatility, or black swan events. The standard is what steps are taken afterward. The US leads the world in financial transparency at the corporate and state levels. We have many mechanisms that imperfectly reinforce transparency and accountability. These are the lessons China must learn if prosperity and harmony are to be achieved.

collatz 11y ago

> China lacked the long history of economic mistakes, and economic success necessary to successfully manage complex economic systems at scale. Are there ANY complex economic systems that have been successfully "managed" at scale?

rrggrr 11y ago
Depends on what you mean by 'managed'. We know centally managed economies spectacularly fail given enough time. We know that opaque financial entities implode. We din't yet know what the future holds for moderately regulated, mostly free market capitalism, except that the entire global economy has relied on it at great benefit the past 100 years or so. The fat lady has not yet sung.