4 ms·

I can't help but think while reading this that the writer is looking at bubbles from the point of view of someone without a coherent theory to explain the origi

I can't help but think while reading this that the writer is looking at bubbles from the point of view of someone without a coherent theory to explain the origin of bubbles and why busts happen. The Chinese economy has been based on saving and investment not inflation and malinvestment like the United States has been for the better part of almost 20 years now. The Chinese economy will suffer as a result of the business cycle in the United States but they've resisted calls to borrow and spend recklessly as those in Washington would have them do. The notion that bubbles are caused by growth on its own is a terribly flawed notion. Even the Federal Reserve admits that their own loose monetary policy contributed to our present woes. The Chinese for now are committed to the dollar but when they aren't that spells bad news for us and good news for them. When they realize that they can spend that money at home on the goods they make at home I feel like the party is going to be over for the United States. We're seeing the beginning of the end of the American empire now and the ascent of China and for now at least the ascent of China is based on sound fiscal policy just as the United States during its formative years was. I see a good but maybe rocky future for China in the short term and a good future for China in the medium and long term.

Retric 17y ago
Bubbles are driven by poor investments. Which is obvious in the dot com days, but you see the same thing with other bubbles. EX: The real source of the US housing bubble was people buying up all those overvalued loans which let banks make even more of them. Which drives people to build and buy more houses than people actually need. The problem with bubbles is the economy recovers to a more efficient system where the greatist fool is now broke, which is less comfortable than the mid bubble / pre burst days. China like Japan is going to over invest in infrastructure / housing and have the same issues.
- ibsulon 17y ago
  There's one fundamental difference between China and Japan: Japan doesn't have more land upon which to build, which is what drove much of their housing craze (even our hottest markets were never even close to the Japan bubble) China is much closer to the US when it comes to infrastructure: they need a lot for such a big country. Whether they spend it wisely will be the issue.
  - gaius 17y ago
    Population density is the number one factor for infrastructure. Witness the US cell phone industry compared to Japan.
  - cturner 17y ago
    China's population density is far higher in key regions: http://www.demographia.com/db-intlua-area2000.htm http://www.demographia.com/db-intlua-area2000.htm That was more than three years ago - it will be slightly lower in Japan now, and higher in those Chinese regions. > There's one fundamental difference between China and Japan Another that people seem to keep forgetting is that the Japanese people are largely a single people and had something approaching a functional parliamentary system during their rise. The Chinese are trying to maintain centralised planning for the largest show on earth, and their social systems are unhealthy.
    - jhancock 17y ago
      From afar it may seem like central planning is the name of the game in China. On the ground, its highly regional; whith districts inside regions doing their own thing. There are high level "mandates" of sorts and a few central programs that reach deep but its hard for any program to keep control for any length of time. Mostly China is regionally run and managed.
tokenadult 17y ago
The Chinese economy has been based on saving and investment not inflation and malinvestment The article says, and gives examples, that China has been malinvesting for quite a while, a fact confirmed by other observers, http://www.rgemonitor.com/asia-monitor/257180/chinas_present_growth_story_is_built_on_malinvestment http://www.rgemonitor.com/asia-monitor/257180/chinas_present... and that current international conditions basically force China to "invest" thoughtlessly for domestic political reasons, in disregard of economic reality.

Retric 17y ago

Bubbles are driven by poor investments. Which is obvious in the dot com days, but you see the same thing with other bubbles. EX: The real source of the US housing bubble was people buying up all those overvalued loans which let banks make even more of them. Which drives people to build and buy more houses than people actually need. The problem with bubbles is the economy recovers to a more efficient system where the greatist fool is now broke, which is less comfortable than the mid bubble / pre burst days. China like Japan is going to over invest in infrastructure / housing and have the same issues.

ibsulon 17y ago
There's one fundamental difference between China and Japan: Japan doesn't have more land upon which to build, which is what drove much of their housing craze (even our hottest markets were never even close to the Japan bubble) China is much closer to the US when it comes to infrastructure: they need a lot for such a big country. Whether they spend it wisely will be the issue.
- gaius 17y ago
  Population density is the number one factor for infrastructure. Witness the US cell phone industry compared to Japan.
- cturner 17y ago
  China's population density is far higher in key regions: http://www.demographia.com/db-intlua-area2000.htm http://www.demographia.com/db-intlua-area2000.htm That was more than three years ago - it will be slightly lower in Japan now, and higher in those Chinese regions. > There's one fundamental difference between China and Japan Another that people seem to keep forgetting is that the Japanese people are largely a single people and had something approaching a functional parliamentary system during their rise. The Chinese are trying to maintain centralised planning for the largest show on earth, and their social systems are unhealthy.
  - jhancock 17y ago
    From afar it may seem like central planning is the name of the game in China. On the ground, its highly regional; whith districts inside regions doing their own thing. There are high level "mandates" of sorts and a few central programs that reach deep but its hard for any program to keep control for any length of time. Mostly China is regionally run and managed.

tokenadult 17y ago

The Chinese economy has been based on saving and investment not inflation and malinvestment The article says, and gives examples, that China has been malinvesting for quite a while, a fact confirmed by other observers, http://www.rgemonitor.com/asia-monitor/257180/chinas_present_growth_story_is_built_on_malinvestment http://www.rgemonitor.com/asia-monitor/257180/chinas_present... and that current international conditions basically force China to "invest" thoughtlessly for domestic political reasons, in disregard of economic reality.