5 ms·

So let me get it, China, the biggest producer in the world and with a culture of saving a lot of money by it's citizens get a downgrade to A+. While at the save

by wdn 9y ago

So let me get it, China, the biggest producer in the world and with a culture of saving a lot of money by it's citizens get a downgrade to A+. While at the save time, the US government's debt passed 20 trillions and American in debt with no savings got AAA rating. Yea, it makes a lot sense

ceejayoz 9y ago
It's the surge in private debt that's concerning. http://tsi-blog.com/wp-content/uploads/2015/08/chinadebt_gdp_240815.jpg http://tsi-blog.com/wp-content/uploads/2015/08/chinadebt_gdp...
gthtjtkt 9y ago
True, if you ignore most of the relevant details it makes no sense. That's basically the case with anything in life.
kirse 9y ago
You're right, it does make sense, given that the USA also experienced similar credit downgrades over the past decade when it went through its own credit crisis: https://en.wikipedia.org/wiki/United_States_federal_government_credit-rating_downgrades https://en.wikipedia.org/wiki/United_States_federal_governme... While we're being snarky, let's not forget that China also regularly steals, copies, hacks, and sources much of their "production" innovation from the USA while simultaneously impeding the United States' ability to enter Chinese markets in just about every category of good or service. So we'll just call this one even and leave it at that.
alexanderstears 9y ago
China, the biggest producer in the world Of what? Sneakers? Its GDP is smaller than America's (though maybe not with PPP corrections). a culture of saving a lot of money by it's citizens Too bad the savings go to malinvestments. Good luck securing ROI from ghost cities: https://www.wired.com/2016/02/kai-caemmerer-unborn-cities/ https://www.wired.com/2016/02/kai-caemmerer-unborn-cities/ And Sri Lankan airports: https://www.forbes.com/sites/wadeshepard/2016/07/31/china-to-sri-lanka-we-want-our-money-not-your-empty-airport/#633074ba1beb https://www.forbes.com/sites/wadeshepard/2016/07/31/china-to... American in debt with no savings got AAA rating The Federal Government has tremendous assets: http://business.time.com/2013/02/05/the-federal-governments-128-trillion-stockpile-the-answer-to-our-debt-problems/ http://business.time.com/2013/02/05/the-federal-governments-... We could pay off the debt with a land and spectrum auction tomorrow and people would clamor for more. I'd rather hold dollars than yuan and that's not just because I speak English.
- wdn 9y ago
  GDP does not measure production and should not use as a measuring stick of how productive a country is. US government spending is 1/3 of the US GDP. If you accounting for state and local government, the number is much higher. This level of spending is unsustainable. No, the US government cannot just auction it's assets to the public to pay off debt. If it is that easy, the Federal Reserves can just print 20 trillions and pay it off
  - alexanderstears 9y ago
    GDP does not measure production Debatable. GDP probably measured production better in 1920s America than 2017 America. and should not use as a measuring stick of how productive a country is. If you have to compare the relative size of two economies on a single dimension, GDP is probably your best KPI. US government spending is 1/3 of the US GDP. If you accounting for state and local government, the number is much higher. This level of spending is unsustainable. But most of that money isn't ultimately spent by the government. The money goes to Boeing, hospitals, the elderly, etc. A lot of our GDP is ultimately spent by consumers. I have serious concerns about America spending too much on its military and healthcare but I'd think we spend our money better than China. No, the US government cannot just auction it's assets to the public to pay off debt. Why not? It holds the assets, it can write titles to the assets, it can conduct auctions. If it is that easy, the Federal Reserves can just print 20 trillions and pay it off If you don't see the difference between printing 20 trillion dollars and exchanging valuable things for mutually agreeable prices, then I'm sure you're set in your way of defending the wise policy decisions of the Chinese Communist Party.
  - b1daly 9y ago
    Government spending is just another way that the productive resources of society are funded, and that people receive the benefit of those resources. As a thought experiment, we could lower taxes, and have the services provided by government instead paid for through private transactions. Why is this more sustainable?
- raverbashing 9y ago
  > American in debt with no savings got AAA rating > The Federal Government has tremendous assets That's interesting, because if the crap hits the rotating blades and if the US has to sell even 10% of those assets the effects on the global economy are anything but obvious Who can pay 10trillion dollars? What's the economical effect of such a big transaction? What if there's not enough liquidity in dollars for the purchaser? Would the US accept GBP/CNY/EUR?
grecy 9y ago
Of Course! When you make the labels, they are obviously going to favor you! 1st world Countries? America! and her allies! (yay!) Highest standard of living? America! (consumption! yay!) America! /s
ringaroundthetx 9y ago
Credit ratings for countries are only about the government's borrowings. And these are also proportional, so China's debt to GDP is higher than the US's debt to GDP regardless of the $ (or yuan) amount involved
RamshackleJ 9y ago
I think S&P gives the US a AA+ rating. I don't know much about "a culture of saving" but I'm pretty sure economies don't grow forever
ryandamm 9y ago
I don't think your analysis is sophisticated enough to capture the actual underlying dynamics. Rating of debt is largely a question of future ability to repay. The concerns of the rating agency, I imagine, is that much of the debt in China is being created for non-economic investment, that ultimately won't be able to pay for itself. And someone will have to foot the bill, whether it's the lender (via a write-down or write-off of nonperforming loans) or someone else (the central government, by assuming the loans directly or some other mechanism). Yes, the Chinese central government has a lot of capital to play with, due to a very high household savings rate and positive trade imbalance. But the magnitude of the internal debt, and the degree to which it's likely misallocated and ultimately nonperforming, should concern anyone who's paying attention.
adventured 9y ago
> Yea, it makes a lot sense In fact it does make sense. China has undergone the greatest debt binge in world history in the last 10 years. In fact, there has never been a debt accumulation even remotely close to what they've done. Tens of trillions in publicly known and shadow debt has been taken on by the Chinese economy. Compare their GDP to debt growth: https://i.imgur.com/J2u9qFz.jpg https://i.imgur.com/J2u9qFz.jpg It's obvious what's coming, sooner rather than later. To make matters worse, Chinese consumers are now aggressively loading up on debt: https://www.bloomberg.com/view/articles/2017-07-21/china-s-overextended-consumers-can-t-stop-adding-debt https://www.bloomberg.com/view/articles/2017-07-21/china-s-o... https://www.cnbc.com/2017/08/06/how-chinas-billion-savers-embarked-on-a-household-debt-binge.html https://www.cnbc.com/2017/08/06/how-chinas-billion-savers-em...
- noway421 9y ago
  Comparing rate of change and a cumulative quantity is some special kind of evil

by wdn 9y ago

ceejayoz 9y ago

It's the surge in private debt that's concerning. http://tsi-blog.com/wp-content/uploads/2015/08/chinadebt_gdp_240815.jpg http://tsi-blog.com/wp-content/uploads/2015/08/chinadebt_gdp...

gthtjtkt 9y ago

True, if you ignore most of the relevant details it makes no sense. That's basically the case with anything in life.

kirse 9y ago

You're right, it does make sense, given that the USA also experienced similar credit downgrades over the past decade when it went through its own credit crisis: https://en.wikipedia.org/wiki/United_States_federal_government_credit-rating_downgrades https://en.wikipedia.org/wiki/United_States_federal_governme... While we're being snarky, let's not forget that China also regularly steals, copies, hacks, and sources much of their "production" innovation from the USA while simultaneously impeding the United States' ability to enter Chinese markets in just about every category of good or service. So we'll just call this one even and leave it at that.

alexanderstears 9y ago

China, the biggest producer in the world Of what? Sneakers? Its GDP is smaller than America's (though maybe not with PPP corrections). a culture of saving a lot of money by it's citizens Too bad the savings go to malinvestments. Good luck securing ROI from ghost cities: https://www.wired.com/2016/02/kai-caemmerer-unborn-cities/ https://www.wired.com/2016/02/kai-caemmerer-unborn-cities/ And Sri Lankan airports: https://www.forbes.com/sites/wadeshepard/2016/07/31/china-to-sri-lanka-we-want-our-money-not-your-empty-airport/#633074ba1beb https://www.forbes.com/sites/wadeshepard/2016/07/31/china-to... American in debt with no savings got AAA rating The Federal Government has tremendous assets: http://business.time.com/2013/02/05/the-federal-governments-128-trillion-stockpile-the-answer-to-our-debt-problems/ http://business.time.com/2013/02/05/the-federal-governments-... We could pay off the debt with a land and spectrum auction tomorrow and people would clamor for more. I'd rather hold dollars than yuan and that's not just because I speak English.

wdn 9y ago
GDP does not measure production and should not use as a measuring stick of how productive a country is. US government spending is 1/3 of the US GDP. If you accounting for state and local government, the number is much higher. This level of spending is unsustainable. No, the US government cannot just auction it's assets to the public to pay off debt. If it is that easy, the Federal Reserves can just print 20 trillions and pay it off
- alexanderstears 9y ago
  GDP does not measure production Debatable. GDP probably measured production better in 1920s America than 2017 America. and should not use as a measuring stick of how productive a country is. If you have to compare the relative size of two economies on a single dimension, GDP is probably your best KPI. US government spending is 1/3 of the US GDP. If you accounting for state and local government, the number is much higher. This level of spending is unsustainable. But most of that money isn't ultimately spent by the government. The money goes to Boeing, hospitals, the elderly, etc. A lot of our GDP is ultimately spent by consumers. I have serious concerns about America spending too much on its military and healthcare but I'd think we spend our money better than China. No, the US government cannot just auction it's assets to the public to pay off debt. Why not? It holds the assets, it can write titles to the assets, it can conduct auctions. If it is that easy, the Federal Reserves can just print 20 trillions and pay it off If you don't see the difference between printing 20 trillion dollars and exchanging valuable things for mutually agreeable prices, then I'm sure you're set in your way of defending the wise policy decisions of the Chinese Communist Party.
- b1daly 9y ago
  Government spending is just another way that the productive resources of society are funded, and that people receive the benefit of those resources. As a thought experiment, we could lower taxes, and have the services provided by government instead paid for through private transactions. Why is this more sustainable?
raverbashing 9y ago
> American in debt with no savings got AAA rating > The Federal Government has tremendous assets That's interesting, because if the crap hits the rotating blades and if the US has to sell even 10% of those assets the effects on the global economy are anything but obvious Who can pay 10trillion dollars? What's the economical effect of such a big transaction? What if there's not enough liquidity in dollars for the purchaser? Would the US accept GBP/CNY/EUR?

grecy 9y ago

Of Course! When you make the labels, they are obviously going to favor you! 1st world Countries? America! and her allies! (yay!) Highest standard of living? America! (consumption! yay!) America! /s

ringaroundthetx 9y ago

Credit ratings for countries are only about the government's borrowings. And these are also proportional, so China's debt to GDP is higher than the US's debt to GDP regardless of the $ (or yuan) amount involved

RamshackleJ 9y ago

I think S&P gives the US a AA+ rating. I don't know much about "a culture of saving" but I'm pretty sure economies don't grow forever

ryandamm 9y ago

I don't think your analysis is sophisticated enough to capture the actual underlying dynamics. Rating of debt is largely a question of future ability to repay. The concerns of the rating agency, I imagine, is that much of the debt in China is being created for non-economic investment, that ultimately won't be able to pay for itself. And someone will have to foot the bill, whether it's the lender (via a write-down or write-off of nonperforming loans) or someone else (the central government, by assuming the loans directly or some other mechanism). Yes, the Chinese central government has a lot of capital to play with, due to a very high household savings rate and positive trade imbalance. But the magnitude of the internal debt, and the degree to which it's likely misallocated and ultimately nonperforming, should concern anyone who's paying attention.

adventured 9y ago

> Yea, it makes a lot sense In fact it does make sense. China has undergone the greatest debt binge in world history in the last 10 years. In fact, there has never been a debt accumulation even remotely close to what they've done. Tens of trillions in publicly known and shadow debt has been taken on by the Chinese economy. Compare their GDP to debt growth: https://i.imgur.com/J2u9qFz.jpg https://i.imgur.com/J2u9qFz.jpg It's obvious what's coming, sooner rather than later. To make matters worse, Chinese consumers are now aggressively loading up on debt: https://www.bloomberg.com/view/articles/2017-07-21/china-s-overextended-consumers-can-t-stop-adding-debt https://www.bloomberg.com/view/articles/2017-07-21/china-s-o... https://www.cnbc.com/2017/08/06/how-chinas-billion-savers-embarked-on-a-household-debt-binge.html https://www.cnbc.com/2017/08/06/how-chinas-billion-savers-em...

noway421 9y ago
Comparing rate of change and a cumulative quantity is some special kind of evil