8 ms·

It seems like smart people have been predicting that China's growth is unsustainable on a regular basis for at least 15 years... it's tough for an average HNer

by drcode 9y ago

It seems like smart people have been predicting that China's growth is unsustainable on a regular basis for at least 15 years... it's tough for an average HNer like myself to take the time to tell which "expert" is just blowing smoke and which expert truly has a handle on the salient facts- Guess all I can really do is simply wait and see who ends up being right...

hackuser 9y ago
Agreed, to an extent (though not every 'expert' is equally reliable). Two ways I look at it: 1) Generally, the nature of a bubble is that nobody knows when it will pop. People knew about the U.S. asset bubble in the mid-2000s for years, but even those not caught up in the bubble mass psychology couldn't accurately predict when it would collapse. The same was true of the dot-com bubble around 2000. You can be right that there is a bubble, but be far wrong about when it ends. 2) There was a stock broker looking for new business. He cold called 512 people (he must have been a quant); half he told to sell X stock, half he told to buy. The next week he called the 256 for whom he'd made the right prediction and did the same again: Half he told to sell, half to buy ... several weeks later he was down to 16 people. He called all of them and said, 'look, I was right 5 times in a row ...'.
- zeusk 9y ago
  > There was a stock broker looking for new business. He cold called 512 people (he must have been a quant); half he told to sell X stock, half he told to buy. The next week he called the 256 for whom he'd made the right prediction and did the same again: Half he told to sell, half to buy ... several weeks later he was down to 16 people. He called all of them and said, 'look, I was right 5 times in a row ...'. Except, what you just described is a scam and not something a registered broker can do.
  - llukas 9y ago
    At least not something that registered broker can do more than once. FTFY
  - ars 9y ago
    It sounds more like a parable, not an actual story. The point is that if enough people make prediction, some of them will right over and over and over - even though it's all random.
    - usefulcat 9y ago
      Or if one person makes enough predictions..
    - hackuser 9y ago
      > a parable Ha, that's a great observation; I hadn't thought of it. On one hand, I'm very uncomfortable with any implied comparison to the most well known practitioner of parables. On the other, many others have used the form. Maybe I'll write all my HN posts in parable form - 'those who have ears to hear' will understand; the others I won't have to deal with. I could use it for business emails too. Coming up with that many parables might be challenging.
      - scandox 9y ago
        Gotta say (as a non Christian) nothing wrong with Jesus' reasoning and storytelling skills. Just a case of one bad axiom I guess.
        hackuser 9y ago
        To be clear, I wasn't uncomfortable with the implied comparison because I have something against Jesus or the Gospels. I was uncomfortable because I don't want anyone to think for a moment that I am comparing myself to him. (I'm not.)
        ars 9y ago
        If it helps, when I said "parable" I had no idea that Jesus would in any way be implied. I had never even heard of his parables before your reply. I actually replied to you ask who you were referring to, since I had no idea, but then another comment said who it was so I deleted my reply. I clearly am never going to be able to use the word "parable" again. I'll say fable from now on, even though fables have animals in them, not humans.
- sopooneo 9y ago
  I believe this was actually the plot of an episode of the kids educational show "MathNet"* in the early 90's. I've often wondered if people just do this over email now, but automated. And why write to just 512 people about who's going to win tonight's football game, when you can have your script write to 1,048,576? Or does this happen? * Actually a show within the actual show "Square One TV"
- pfarnsworth 9y ago
  I think this was in The Wolf of Wall Street or some other stock market related movie.
VintageCool 9y ago
To quote Keynes: The market can stay irrational longer than you can stay solvent.
- draw_down 9y ago
  Good rule of thumb if you're an individual investor. If you're China, well...
  - ethbro 9y ago
    I would also assume that a majority of the options to "call an irrational market's bluff" aren't freely available vis China. So it would be less exposed to international market driven deleveraging? (Actually asking, I know they've been loosening their financial walls but am not sure what the current controls are)
    - ryandamm 9y ago
      To the extent people are trying to trade on this model, they look for liquid marketplaces that are exposed to China's economy. Australian metals and mining stocks, for instance, or currency fluctuations in closely-pegged economies (forex being pretty darned liquid with a very deep futures market). Chinese equities are something else entirely, closer to a derivative class. And hard to trade in directly (not that I have tried or would ever try -- I'm in index funds). And the truth is, the banking system is less liquid, and the equities market much smaller, than developed economies. Oh, also, short-selling is illegal, I believe. So no, there aren't any natural, market-driven checks on this stuff.
- busyant 9y ago
  Or...economists have successfully predicted 7 of the last 5 recessions.
  - mowenz 9y ago
    Keynes took previously unacceptable ideas and made them gospel, and he also was critical of economics when others thought they had everything figured out. Before an econ degree I thought it could all be understood the way we understand, say, a chemical reaction, or some process with rules, laws and order. But afteran econ degree the thing I realized is that money and economics, it's all about people. Money and debt has no intrinsic value (especially in 2017)--it's just promises and credits people made to each other. But people are prone to irrationality, cheating, and frankly, their own bullshit. The global financial system in 2017 has not done everything it can to minimize this, either. If anything, they take advantage of it where it profits them.
b88d80170 9y ago
Well, time and funding are constrained for the research, surely they must produce something, and China wouldn't mind at all.
viraptor 9y ago
Reminds me of the wage growth forecasts picture: https://twitter.com/rpy/status/861877936952967168 https://twitter.com/rpy/status/861877936952967168
- dredmorbius 9y ago
  "Sorry, you're not authorised to view those tweets."
  - viraptor 9y ago
    Can't edit original now. Image is at https://imgur.com/N6dOFMS https://imgur.com/N6dOFMS Source pdf (page 1): https://www.rba.gov.au/publications/bulletin/2017/mar/pdf/bu-0317-2-insights-into-low-wage-growth-in-australia.pdf https://www.rba.gov.au/publications/bulletin/2017/mar/pdf/bu...
    - dredmorbius 9y ago
      Thanks. Ah yes, the "let's rebase our optimistic forecast to the current values, but otherwise leave the model unchanged" concept. US DOE and IEA oil forecasts are similar.
cm2187 9y ago
It's funny because these massive debt accumulations invariably end up either in financial collapses or period of very high inflation, both of which can have dramatic impacts on a large part of the population (particularly savers and pensioners). But they are the most predictable thing in the world. Yet no one seems to be worried about them, whether in Europe or in the US. When the collapse will happen, people will be outraged and will pretend like in Greece that they were betrayed by their politicians, lied to. But this accumulation of debt happens in plain sight, it is just that no one seems to care. Hard to predict the timig, like it is hard to predict the timing of a market crash. I have heard people calling the end of the current economic cycle for the past 5 years. Some say Trump has delayed a correction that should have happened this year by 2-3 years (if his economic package goes through). Well it's the same with the accumulation of debt. You can live on the credit card as long as your creditors are not concerned about your credit. At one point the sentiment turns and your credit lines get cut. Then it is the end. Greece is there. Italy is close. France and Japan a little further. The US will get there eventually.
- jdavis703 9y ago
  China is a bit more of a complex situation since they are a republic, the citizens have no direct say in government matters. Now of course the Chinese government knows they have to continue providing growth, otherwise citizens will question the system and revolution could happen. But let's say a majority of voting eligible citizens decided their country needs to dial down debt-fueled growth? Well there's almost nothing they can do, even though popular opinion has changed. In Greece, even with the fraud that went on voters still had to know bad financial choices were being made. Heck, I live in the U.S. and know when politicians are using financialeering to make the books balance better...
  - deleted 9y ago
    [deleted]
  - gunnyguy121 9y ago
    I think China may be more on the brink than people realize. Right now there are about 30 million men in China who can't get married,not wont, can't. There simply aren't enough women in China for the men to find a bride. That's 30 million men who may be left jobless, and without a relationship. That is a recipe for disaster, maybe even a revolution
georgeecollins 9y ago
You don't need to decide which is expert is right. You need to know -- if it concerns you-- that there is a chance there will be a contraction in the Chinese economy. Economists predict this sometimes, and it gets news because when it is presented as a certainty it seems like news. The truth is it is always a risk, and probably more of a risk than it was ten years ago. As an average HNer it probably doesn't matter much either way, unless you are planning on investing in China or counting on no recessions in the US in the next ten years.
ryandamm 9y ago
Everything exponential is ultimately unsustainable. The value of these analyses is they try to plumb the limits of the model; there was a substantial sea change in how China's economy operates ~2008-9, with a shift towards massive debt growth. That's inherently less sustainable, particularly because the rate of debt growth is climbing.
woodandsteel 9y ago
>It seems like smart people have been predicting that China's growth is unsustainable on a regular basis for at least 15 years If you mean sound growth, they were right. That has ended and growth is increasingly based on financial tricks that will make things worse in the long term, so I would say the experts turned out to be correct. Also, even with all the debt, yearly GDP growth is down from the previous 10% to something like 6%, so again the experts were right.

by drcode 9y ago

hackuser 9y ago

Agreed, to an extent (though not every 'expert' is equally reliable). Two ways I look at it: 1) Generally, the nature of a bubble is that nobody knows when it will pop. People knew about the U.S. asset bubble in the mid-2000s for years, but even those not caught up in the bubble mass psychology couldn't accurately predict when it would collapse. The same was true of the dot-com bubble around 2000. You can be right that there is a bubble, but be far wrong about when it ends. 2) There was a stock broker looking for new business. He cold called 512 people (he must have been a quant); half he told to sell X stock, half he told to buy. The next week he called the 256 for whom he'd made the right prediction and did the same again: Half he told to sell, half to buy ... several weeks later he was down to 16 people. He called all of them and said, 'look, I was right 5 times in a row ...'.

zeusk 9y ago
> There was a stock broker looking for new business. He cold called 512 people (he must have been a quant); half he told to sell X stock, half he told to buy. The next week he called the 256 for whom he'd made the right prediction and did the same again: Half he told to sell, half to buy ... several weeks later he was down to 16 people. He called all of them and said, 'look, I was right 5 times in a row ...'. Except, what you just described is a scam and not something a registered broker can do.
- llukas 9y ago
  At least not something that registered broker can do more than once. FTFY
- ars 9y ago
  It sounds more like a parable, not an actual story. The point is that if enough people make prediction, some of them will right over and over and over - even though it's all random.
  - usefulcat 9y ago
    Or if one person makes enough predictions..
  - hackuser 9y ago
    > a parable Ha, that's a great observation; I hadn't thought of it. On one hand, I'm very uncomfortable with any implied comparison to the most well known practitioner of parables. On the other, many others have used the form. Maybe I'll write all my HN posts in parable form - 'those who have ears to hear' will understand; the others I won't have to deal with. I could use it for business emails too. Coming up with that many parables might be challenging.
    - scandox 9y ago
      Gotta say (as a non Christian) nothing wrong with Jesus' reasoning and storytelling skills. Just a case of one bad axiom I guess.
      - hackuser 9y ago
        To be clear, I wasn't uncomfortable with the implied comparison because I have something against Jesus or the Gospels. I was uncomfortable because I don't want anyone to think for a moment that I am comparing myself to him. (I'm not.)
        ars 9y ago
        If it helps, when I said "parable" I had no idea that Jesus would in any way be implied. I had never even heard of his parables before your reply. I actually replied to you ask who you were referring to, since I had no idea, but then another comment said who it was so I deleted my reply. I clearly am never going to be able to use the word "parable" again. I'll say fable from now on, even though fables have animals in them, not humans.
sopooneo 9y ago
I believe this was actually the plot of an episode of the kids educational show "MathNet"* in the early 90's. I've often wondered if people just do this over email now, but automated. And why write to just 512 people about who's going to win tonight's football game, when you can have your script write to 1,048,576? Or does this happen? * Actually a show within the actual show "Square One TV"
pfarnsworth 9y ago
I think this was in The Wolf of Wall Street or some other stock market related movie.

VintageCool 9y ago

To quote Keynes: The market can stay irrational longer than you can stay solvent.

draw_down 9y ago
Good rule of thumb if you're an individual investor. If you're China, well...
- ethbro 9y ago
  I would also assume that a majority of the options to "call an irrational market's bluff" aren't freely available vis China. So it would be less exposed to international market driven deleveraging? (Actually asking, I know they've been loosening their financial walls but am not sure what the current controls are)
  - ryandamm 9y ago
    To the extent people are trying to trade on this model, they look for liquid marketplaces that are exposed to China's economy. Australian metals and mining stocks, for instance, or currency fluctuations in closely-pegged economies (forex being pretty darned liquid with a very deep futures market). Chinese equities are something else entirely, closer to a derivative class. And hard to trade in directly (not that I have tried or would ever try -- I'm in index funds). And the truth is, the banking system is less liquid, and the equities market much smaller, than developed economies. Oh, also, short-selling is illegal, I believe. So no, there aren't any natural, market-driven checks on this stuff.
busyant 9y ago
Or...economists have successfully predicted 7 of the last 5 recessions.
- mowenz 9y ago
  Keynes took previously unacceptable ideas and made them gospel, and he also was critical of economics when others thought they had everything figured out. Before an econ degree I thought it could all be understood the way we understand, say, a chemical reaction, or some process with rules, laws and order. But afteran econ degree the thing I realized is that money and economics, it's all about people. Money and debt has no intrinsic value (especially in 2017)--it's just promises and credits people made to each other. But people are prone to irrationality, cheating, and frankly, their own bullshit. The global financial system in 2017 has not done everything it can to minimize this, either. If anything, they take advantage of it where it profits them.

b88d80170 9y ago

Well, time and funding are constrained for the research, surely they must produce something, and China wouldn't mind at all.

viraptor 9y ago

Reminds me of the wage growth forecasts picture: https://twitter.com/rpy/status/861877936952967168 https://twitter.com/rpy/status/861877936952967168

dredmorbius 9y ago
"Sorry, you're not authorised to view those tweets."
- viraptor 9y ago
  Can't edit original now. Image is at https://imgur.com/N6dOFMS https://imgur.com/N6dOFMS Source pdf (page 1): https://www.rba.gov.au/publications/bulletin/2017/mar/pdf/bu-0317-2-insights-into-low-wage-growth-in-australia.pdf https://www.rba.gov.au/publications/bulletin/2017/mar/pdf/bu...
  - dredmorbius 9y ago
    Thanks. Ah yes, the "let's rebase our optimistic forecast to the current values, but otherwise leave the model unchanged" concept. US DOE and IEA oil forecasts are similar.

cm2187 9y ago

It's funny because these massive debt accumulations invariably end up either in financial collapses or period of very high inflation, both of which can have dramatic impacts on a large part of the population (particularly savers and pensioners). But they are the most predictable thing in the world. Yet no one seems to be worried about them, whether in Europe or in the US. When the collapse will happen, people will be outraged and will pretend like in Greece that they were betrayed by their politicians, lied to. But this accumulation of debt happens in plain sight, it is just that no one seems to care. Hard to predict the timig, like it is hard to predict the timing of a market crash. I have heard people calling the end of the current economic cycle for the past 5 years. Some say Trump has delayed a correction that should have happened this year by 2-3 years (if his economic package goes through). Well it's the same with the accumulation of debt. You can live on the credit card as long as your creditors are not concerned about your credit. At one point the sentiment turns and your credit lines get cut. Then it is the end. Greece is there. Italy is close. France and Japan a little further. The US will get there eventually.

jdavis703 9y ago
China is a bit more of a complex situation since they are a republic, the citizens have no direct say in government matters. Now of course the Chinese government knows they have to continue providing growth, otherwise citizens will question the system and revolution could happen. But let's say a majority of voting eligible citizens decided their country needs to dial down debt-fueled growth? Well there's almost nothing they can do, even though popular opinion has changed. In Greece, even with the fraud that went on voters still had to know bad financial choices were being made. Heck, I live in the U.S. and know when politicians are using financialeering to make the books balance better...
- deleted 9y ago
  [deleted]
- gunnyguy121 9y ago
  I think China may be more on the brink than people realize. Right now there are about 30 million men in China who can't get married,not wont, can't. There simply aren't enough women in China for the men to find a bride. That's 30 million men who may be left jobless, and without a relationship. That is a recipe for disaster, maybe even a revolution

georgeecollins 9y ago

You don't need to decide which is expert is right. You need to know -- if it concerns you-- that there is a chance there will be a contraction in the Chinese economy. Economists predict this sometimes, and it gets news because when it is presented as a certainty it seems like news. The truth is it is always a risk, and probably more of a risk than it was ten years ago. As an average HNer it probably doesn't matter much either way, unless you are planning on investing in China or counting on no recessions in the US in the next ten years.

ryandamm 9y ago

Everything exponential is ultimately unsustainable. The value of these analyses is they try to plumb the limits of the model; there was a substantial sea change in how China's economy operates ~2008-9, with a shift towards massive debt growth. That's inherently less sustainable, particularly because the rate of debt growth is climbing.

woodandsteel 9y ago

>It seems like smart people have been predicting that China's growth is unsustainable on a regular basis for at least 15 years If you mean sound growth, they were right. That has ended and growth is increasingly based on financial tricks that will make things worse in the long term, so I would say the experts turned out to be correct. Also, even with all the debt, yearly GDP growth is down from the previous 10% to something like 6%, so again the experts were right.