More insights on the China bubble; Harper finds his austerity mojo; A quick musing on impliactions of social inequalities

More on China

I know I’ve been discussing this at length lately, but I do think that the potential of a hard landing in China has major repercussions for Canada.  And so, I highlight the plight of the People’s Bank of China in their quest to tap the brakes on a $5 trillion economy without swerving off the road. 

We anxiously await news of an interest rate decision from the PBoC.  I’ll update you when the news is out.

In the meantime I’ll highlight a must-watch CNBC clip from Friday, December 10 where Jim Chanos was interviewed about his position on China.  You may recall that Chanos has made a pile of money calling several speculative bubbles and then shorting them appropriately.

Here’s that video in two parts:

Some key quotes/facts:

Construction accounts for 60% of GDP.  Exports, which we commonly associate as China’s strength, accounts for only 5% of GDP.  That’s scary stuff.

More about the empty cities in China.  Adjusted for population, China is now building more residential homes than the US was at the height of their housing bubble.  And you may recall that there are already enough empty homes to house half the US population.  We’ve discussed both of these phenomena here before.

Harper finds his austerity mojo

You may recall that a few weeks ago I highlighted Jim Flaherty’s remarks about the tough budgets to come.  I applauded the move back towards an actual conservative platform and made the following observation:

“If they can hold to this, and if attitudes continue to shift as I think they will, the rise of a truly conservative party in Ottawa will spell big trouble for liberals everywhere.”

Total we find this out:

Tories closer to majority poll says

“Prime Minister Stephen Harper’s Conservatives have lunged ahead of their political rivals in public favour and would be returned to power easily if an election occurred now, a new poll finds.”

“According to the survey, conducted this week, the Conservatives are supported by 39 per cent of decided voters, up four points from a month ago. By comparison, Michael Ignatieff’s Liberals remain at 29 per cent.”

Coincidence?  Perhaps.  I can’t help but think that people are starting to awaken to the ugly truth about our current fiscal position here in Canada.  If the Rob Ford story is any indication, people are looking for leaders who are willing to make to tough decisions for the long-term health of the economy.

I have not been a fan of Stephen Harper.  Perhaps I have been unduly critical.  As one respected commenter from Ottawa has noted, this minority conservative government has largely had their hands forced with regards to the massive stimulus spending.  But they’re not entirely off the hook.  Bone-headed moves like loosening mortgage requirements have happened under their watch.

Though I despise Harper’s version of a ‘conservative’ government, I would be greatly interested to see what they would do differently if presented with a majority mandate.  If he can stick to with his newly-found austerity mojo, we just may get to see.

The social implications of wealth inequalities 

This is not a prediction, but simply a quick observation.  I’ll leave you with a famous quote and a neat video clip.  You can connect the dots from there:

“An imbalance between rich and poor is the oldest and most fatal ailment of all Republics.” -Plutarch


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11 Responses to More insights on the China bubble; Harper finds his austerity mojo; A quick musing on impliactions of social inequalities

  1. Fish10 says:

    There problem is there are no fiscal conservatives left out there. the worst pork-barrel spenders and tax cutters and war-mongers in the US are the Republicans – like you can have all three at the same time!

    I think most of us on the bearish blogosphere are fiscal conservatives but social liberals. IE make government keep good books, like any business but keep it out of our bedrooms and directing our beliefs.

    I fear you give Harper too much credit, I think he is an opportunist, plain and simple. He smells the change in the air and shifts his policy to match it. The Liberals have no chance with Ignatieff, who while a very intelligent fellow, went to the Joe Clark school of charm and charisma.

  2. Village Whisperer says:

    Isn’t it interesting, Fish, how China is being built up as the next economic superpower exactly as Japan was in the 1980s?

    I suspect China is a paper tiger. Peering across the gossamer waves, I those with an open mind can see the hazy visions of a Chinese implosion.

    I see America ultimately doing what it did under Abraham Lincoln and disbanding the central bank (why pay interest every time you create a dollar – it makes no sense). I see this happening anytime between the presidency term of 2016-2024 and the Federal Reserve note will be replaced by the Constitutional Dollar.

    America will undergo significant upheaval and strife but emerge after 2040/50 into another era of strengh similar to the post 1940-2000 period.

    The question for us, of course, is how to benefit during our particular time.

    For those who understood the trend, they should be liquidating real estate holdings and investing the capital gains to maximize opportunity.

    For those who weren’t part of the real estate elevator, they must focus on the opportunities that are forming.

    We are in a period of changing economic relationships. The trick is to understand the temporary conditions which confine our activities and change as the conditions change.

  3. jesse says:

    Conservatives: austere spenders in theory but horrible at it in practice. I am eagerly, and still, waiting to be pleasantly surprised. We better hope Harper and the PMO are God-like in their managerial abilities because I don’t see much decision-making happening without their nod.

  4. breezer1 says:

    take a look at the 3 party history in this country and you will realize that we are screwed. there hasn’t been an independent thought in many years. our political process is controlled by the international banking cartel presently headquartered in washington dc.
    the latest bubble in real estate will hurt a lot of good people who blindly followed the propaganda spewed by the main stream news whores.
    the liberal leader is an american, the prime minister wants to be an american and the other guy hasn’t been invited to the picnic. if my family didn’t have unbreakable ties here i would move tomorrow to a less governed and less taxed country.

  5. Nick says:

    The Tories had no choice but to launch the stimulus funding. That was politics, pure and simple.

    However, the cutting of the GST (although I disagree with it, IMHO consumption taxes in a consumption based society makes far more sense than penalty income taxes) has and will limit the growth of federal revenues for all future governments. Cuts are inevitable. I have no doubt that the 2% cut will show up again on the Ontario side of the HST equation within 5 years. A very slick transfer of wealth and power to provinces who harmonised.

    Keep up the good work, Ben. Fascinating read about China.


  6. PhilBest says:

    On inequality: with all the factors at work due to leftwing politics and state distortions of free markets, it is a wonder that inequality is not HIGHER than it is: read this:

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