Comments on: China Considering Stimulus Package, Oh My!

By: Anonymous

Anonymous — Wed, 27 Aug 2008 00:01:00 +0000

Apparently no economy can be satisfied with nominal growth after the get rich schemes of over-leverage if you are not growing you are shrinking, savings is meaningless in these modern day economies. The commoners will suffer as countries try to grow themselves to superpower status.

Look at Iran, can’t refine enough oil from their wells to meet homeland needs and now have to buy wheat from the US to feed their own but wants superpower status. The only outside threat from the world is their own perceptions.

By: FairEconomist

FairEconomist — Tue, 26 Aug 2008 23:24:00 +0000

Are they still restraining growth by requiring banks to have massive reserves? I thought they were requiring reserves in the high teens. Pretty schizophrenic policy if they are.

By: Anonymous

Anonymous — Tue, 26 Aug 2008 21:27:00 +0000

What % of GDP was the US stimulus package? (ie cf china of 1.5% as reported above)

By: CrocodileChuck

CrocodileChuck — Tue, 26 Aug 2008 20:03:00 +0000

We have read that 80% of the loans in China’s state owned banks are non-performing. For a peek at THIS movie, see Indonesia ten years ago after the ‘97 Asian economic crisis. It’s taken them years to recapitalise-and they’re still not back to where they were in the mid-nineties

CrocodileChuck

By: Anonymous

Anonymous — Tue, 26 Aug 2008 19:55:00 +0000

This is news? haha The GDP data coming out of China was too smooth to be believed anyway.

By: doc holiday

doc holiday — Tue, 26 Aug 2008 19:20:00 +0000

Off topic, but worth a look IMHO: FDIC Boosts Number of ‘Problem’ Banks, May Raise Premiums
http://blogs.wsj.com/economics/2…raise-premiums/

he number of “problem” institutions grew from 90 at the end of March to 117 at the end of June. Total assets of troubled banks jumped from $26 billion to $78 billion in that time (though $32 billion of that was accounted for by IndyMac Bank, which failed July 11).
In October, the FDIC is going to propose raising assessment premiums on potentially all banks to replenish its deposit insurance fund. The FDIC said its deposit insurance fund fell to 1.01% of all insured deposits at the end of the second quarter, a very low level that doesn’t even take into account all potential losses from IndyMac in the third quarter. Such a low level forces the FDIC to come up with an action plan in 90 days.
Banks continued to set aside huge levels of loan loss reserves. At the end of June, banks had $50.2 billion in these reserves, compared with $11.4 set aside at the end of June 2007.
The banking industry’s net income was $5.0 billion in the second quarter, the second lowest tally since the fourth quarter of 1991.
At the end of June, 2.04% of all the banking industry’s loans and leases were noncurrent, the highest level for the industry since 1993.

By: Anonymous

Anonymous — Tue, 26 Aug 2008 18:47:00 +0000

Great, idiots on both sides of the pacific.

Free money for everyone!

By: Dean

Dean — Tue, 26 Aug 2008 18:08:00 +0000

I hate to be repetitive. It is widely understood that we are in a crisis; the signs are unmistakable. Question is what is the crisis antidote if one exists? Truth is neither accommodating nor convenient.

Sticking with the crowd is no guarantee for survival:

http://www.youtube.com/watch?v=qfvCjLgbpy0

By: mxq

mxq — Tue, 26 Aug 2008 15:59:00 +0000

A huge problem, that will compound any slowdown in China, is the inefficient allocation of capital.

For example, the largest mall in the world is the South China Mall. "With space for 1500 stores, only a dozen stores open for business." It's been open for a few years now.

This type of government-led, poor investment decision-making will only serve to exacerbate a slowdown, as it is fixed in nature and, i would imagine, does not respond to fiscal stimulus very well.

By: Alfred

Alfred — Tue, 26 Aug 2008 15:28:00 +0000

Mr Pettis argues that in many ways the current US experience is not relevant for China. Fixed asset investment (FAI) in China was up a stunning 27% in Jan-Jul period compared to a year ago. FAI is surging which according to Mr. Pettis suggests “a future surge in industrial production”.
One could speculate that this surge in FAI was at least partially responsible for the stabilisation of commodity prices.

Michael Pettis: Anniversary of Nixon’s price controls
http://piaohaoreport.sampasite.com/china-financial-markets/blog/Anniversary-of-Nixon2019s-price.htm