2017-08-21

Here Comes the Top: American Establishment Launches Cultural Revolution

The rally in stocks has masked the underlying deterioration in social mood since the year 2000. Extreme positive social mood carried into 2017 though, with nations such as Germany implementing the most extreme immigration policies since the Romans allowed the Visigoths (being destroyed by an invading Hun army) across the border around the year 372. Less than 40 years later, they would sack Rome. Germany is like the vampire of Europe though, the misery in the rest of Europe is good news for the Germany economy.

In the rest of Europe, the mood is souring on tourism.

In the United States, a cultural revolution has begun. Back in November, Chinese saw the election of Trump as a sign of popular revolt: Chinese citizens warn of China-style Cultural Revolution in US
Donald Trump's stunning victory over Hillary Clinton, a veteran politician, is a sign that many underestimated the amount of anger there was directed towards the elite in the United States, China's state media and citizens are saying.

Some warn of similarities between what is happening in the US and the conditions before China's Cultural Revolution, which started 50 years ago when Chairman Mao Zedong mobilized young people to stamp out "bourgeois" elements he claimed had infiltrated government and society.
The mistake Chinese make is thinking Trump is in charge. The public may dislike their government, but the permanent government or Deep State has vast powers that allow it to oppose the President. The threat of Cultural Revolution was never from Trump, but from the media, academy, and permanent government. Mao launched the Cultural Revolution to remove his enemies and cement his power. After the "Russia hacking" and then "Russia collusion" narratives failed, the elite decided to act as if Hillary won and move on to Cultural Revolution.

Breitbart: Chinese Communists Salute America’s ‘Cultural Revolution’: the Charlottesville Aftermath. Not all the Chinese are cheering on social media though. Some are disturbed by it, others are only happy about it because it will destroy America and allow China to become the world superpower without a fight.

Steemit: Chinese Style Cultural Revolution Declared in America
If we are bullied into accepting the destruction of traditions, common sense and history, insanity will intensify. It will not stop at Confederate statues. America is in a slow motion but still radical cultural revolution. I want to end with George Orwell's quote from 1984 (the book).

"Every record has been destroyed or falsified, every book rewritten, every picture has been repainted, every statue and street building has been renamed, every date has been altered. And the process is continuing day by day and minute by minute. History has stopped. Nothing exists except an endless present in which the Party is always right."
This isn't a sign of the peak though, rather it's a sign that mood is already moving into the negative phase. As for signs of the top:

Bloomberg: Your Credit Score Could Make or Break Your Love Life
Now comes a survey from Discover Financial Services and Match Media Group, parent of Tinder and other dating sites, that shows just how appealing a good credit score can be. Financial responsibility was ranked as a very or extremely important quality in a potential mate by 69 percent of the 2,000 online daters surveyed. That placed it ahead of sense of humor (67 percent), attractiveness (51 percent), ambition (50 percent), courage (42 percent), and modesty (39 percent). A good credit score was associated with being responsible, trustworthy, and smart.

That’s right. These amorous respondents effectively put credit score 18 points ahead of cute.
Valuation are stretched in the market.

ZeroHedge: Real Vision's "Killer Charts" For Q3 2017

We are in the "boy who cried wolf" phase of bearish calls. Anyone coming out with a bearish call or sticking with a long-term forecast (Hussman) is mocked.

The divergence between mood and markets in 2017 was a result of Trump's surprise election. The left would be as angry with Hillary as President. A witch hunt for Nazis, removal of statues and first amendment restrictions would be more intense because of official support from the White House. Trump's win cause a jump in mood on the right and among independents. Now it is clear the agenda will be downsized. The Republican Party opposes Trump along with the Democrats. Steve Bannon has left the White House to carry on the battle from the trenches.

I'm not selling all my stocks today, but I am now offsetting most of my bullish positions with bearish ones, and all my new speculative positions are on the bearish side except for long-USD.

2017-08-17

More Logic of Strategy

American Prospect: Steve Bannon, Unrepentant
Far from dressing me down for comparing Trump to Kim, he began, “It’s a great honor to finally track you down. I’ve followed your writing for years and I think you and I are in the same boat when it comes to China. You absolutely nailed it.”

“We’re at economic war with China,” he added. “It’s in all their literature. They’re not shy about saying what they’re doing. One of us is going to be a hegemon in 25 or 30 years and it’s gonna be them if we go down this path. On Korea, they’re just tapping us along. It’s just a sideshow.”

Bannon said he might consider a deal in which China got North Korea to freeze its nuclear buildup with verifiable inspections and the United States removed its troops from the peninsula, but such a deal seemed remote. Given that China is not likely to do much more on North Korea, and that the logic of mutually assured destruction was its own source of restraint, Bannon saw no reason not to proceed with tough trade sanctions against China.

Contrary to Trump’s threat of fire and fury, Bannon said: “There’s no military solution [to North Korea’s nuclear threats], forget it. Until somebody solves the part of the equation that shows me that ten million people in Seoul don’t die in the first 30 minutes from conventional weapons, I don’t know what you’re talking about, there’s no military solution here, they got us.” Bannon went on to describe his battle inside the administration to take a harder line on China trade, and not to fall into a trap of wishful thinking in which complaints against China’s trade practices now had to take a backseat to the hope that China, as honest broker, would help restrain Kim.

“To me,” Bannon said, “the economic war with China is everything. And we have to be maniacally focused on that. If we continue to lose it, we're five years away, I think, ten years at the most, of hitting an inflection point from which we'll never be able to recover.”

Bannon’s plan of attack includes: a complaint under Section 301 of the 1974 Trade Act against Chinese coercion of technology transfers from American corporations doing business there, and follow-up complaints against steel and aluminum dumping. “We’re going to run the tables on these guys. We’ve come to the conclusion that they’re in an economic war and they’re crushing us.”

But what about his internal adversaries, at the departments of State and Defense, who think the United States can enlist Beijing’s aid on the North Korean standoff, and at Treasury and the National Economic Council who don’t want to mess with the trading system?

“Oh, they’re wetting themselves,” he said, explaining that the Section 301 complaint, which was put on hold when the war of threats with North Korea broke out, was shelved only temporarily, and will be revived in three weeks. As for other cabinet departments, Bannon has big plans to marginalize their influence.

“I’m changing out people at East Asian Defense; I’m getting hawks in. I’m getting Susan Thornton [acting head of East Asian and Pacific Affairs] out at State.”

But can Bannon really win that fight internally?

“That’s a fight I fight every day here,” he said. “We’re still fighting. There’s Treasury and [National Economic Council chair] Gary Cohn and Goldman Sachs lobbying.”

“We gotta do this. The president’s default position is to do it, but the apparatus is going crazy. Don’t get me wrong. It’s like, every day.”
More than three years ago I wrote The Logic of Strategy: Yuan Devaluation and the Road to Trade War
The protectionists are ever so slowly gaining the upper hand thanks in part to negative social mood. 2008-2009 will probably mark the peak moment for Wall Street and the Treasury Department, even though there is as yet no sign of it in Washington. Changes can be seen in the form of issues such as immigration, which has turned the grassroots of the conservative movement against the Chamber of Commerce and large corporations (due to an attack initiated by the latter against the former). This has pushed the Overton window of acceptable debate among conservatives who can now take shots at big business. There is also the growing libertarian faction pulled together by Ron Paul that supports his son, Rand Paul, that consistently attacks the Federal Reserve and Wall Street. Put it together and it is not hard to envision an anti-Wall Street, pro-manufacturing political consensus emerging. This will cut across party lines, with manufacturing unions pulling in Democratic support if there are specific bills to vote on.
I also wrote:
Whichever path is chosen, the economic and geostrategic paths will line up. An economic crisis in China will add the economic component to the emerging geostrategic China policy. A geostrategic decision to confront China economically would set in motion an economic crisis that would propel the strategy forward since China would respond in kind.
Escalating tensions over North Korea is one way to increase support for Chinese sanctions.

2017-08-15

M2 Falls in July

M2 fell 0.14 percent in July, reducing the 12-month growth rate to 9.2 percent.

The 3-month annualized rate of M2 growth rose to 8.4 percent. The downtrend is clear.

Reuters: China's July new loans fall to 8-month low as curbs bite
"This shows that banks are giving more support to the real economy as loans go back to the normal channel - in line with the direction of financial regulations", said Wen Bin, senior analyst at Minsheng Bank in Beijing.

July lending is traditionally weak but last month's level was still 49 billion yuan higher than the average of July figures between 2014 and 2016, according to Reuters calculations based on central bank data.

Broad M2 money supply (M2) in July grew 9.2 percent from a year earlier - the slowest since records began in 1996, central bank data showed, missing forecasts for an expansion of 9.4 percent and compared with June's 9.4 percent.

China's central bank has said that the slowing M2 growth could be a "new normal" due to the stepped-up crackdown on risky shadow lending activities.

Household loans, mostly mortgages, fell to 561.6 billion yuan in July from 738.4 billion yuan in June, according to Reuters calculations based on the central bank's data.

Household loans accounted for 68 percent of total new loans last month, up from 48 percent in June.
An improvement from last year's more than 100 percent.

2017-08-14

Want a Mortgage? Prepare to Wait

iFeng: 房贷额度紧张排队放款蔓延至全国 利率未集中调整
21st century economic reporter Reporters also found that the recent tight line lending has been gradually spread from the purchase of the city to the country, and waiting time is also getting longer.

...In addition to interest rates go up, the number of banks loan account managers for the 21st century Business Herald reporter said that the loan queuing time the basic needs of more than three months. China Merchants Bank, a branch account manager, told reporters that the current situation to see if the formalities are now ready to start by the end do not necessarily get loans.
The loan process can take up to four months at some banks. It will go a little quicker if the borrower accepts a higher interest rate.
"I have paid a deposit of 1 million, can not get a loan if before the end, which one million will be spoiled. In order to be able to get loans on time, I intend to take the initiative to floating interest rates, as soon as possible to get a loan." A home buyers Wei Ms. told reporters in the 21st century Business Herald.

FAI Breakdown

SOEs still propping up fixed asset investment. Private investment growth in the industrial sector slowed sharply to 1.9 percent in July.

Private Fixed Asset Investment Slows to 5.2pc in July

Private FAI growth was 6.9 percent YTD in July, down from 7.2 percent in June. July growth was 5.2 percent.

Fixed Asset Investment Slows to 6.7pc in July

Fixed asset investment up 8.3 percent YTD down from 8.6 percent in June. FAI increased 6.7 percent in July.

Real Estate Investment Slows to 4.8pc Growth in July

Real estate investment growth 7.9 percent YTD in July, down from 8.5 percent in June. One month growth was 4.8 percent.

2017-08-13

Mortgage Rates Rising as Sales Fall

iFeng: 热点城市房贷价升量跌料延续 刚需忧心被误伤
Experts believe that policies to curb housing prices still tight, especially on larger personal loans policy on the market. The central bank in the second quarter monetary policy report makes clear, strict implementation of differentiated credit policy, credit flows to limit speculative investment.

Chinese Speculators Trade 6 Months of Steel Production in 1 Day

iFeng: 螺纹钢疯了!一天成交量超过上半年全国产量
August 11, is a rebar futures crazy day, this day, turnover of 10.73 million hand, the transaction volume has reached 417.785 billion yuan. According to a hand 10 tons conversion, turnover of about 100 million tons, more than the first half of this year's national rebar production (99.59 million tons).

...It is understood that since June 14 to August 11, rebar main contract RB1801 cumulative up 30.82%, hot volume main contract HC1801 rose more than rebar, the same period rose 33.78%.

Rebar futures prices rose sharply, but also attracted the attention of regulators. Following the China Steel Association made a clear statement, the last time again on the rebar fees, margin to make adjustments, the intention is very clear to the current hot steel city cooling.

...Rebar futures prices rose rapidly, not only caused the concern of the market, but also caused the Development and Reform Commission, Ministry of Industry and China Steel Association of the high degree of concern.

Recently, China Steel Association said that the current sharp rise in steel futures prices is not driven by market demand or reduced supply of the market due to the recent steel prices is a speculation. Due to the excessive interpretation of the expected reduction in production, not the demand to promote the price rise.

...A number of steel price monitoring platform data show that the current steel prices since May 2012 the highest level, steel prices hit a five-year high. To the country's largest steel production base in Tangshan, for example, the August 8 rebar price of 4060 yuan per ton, compared with the beginning of the level of 3100 yuan per ton, up about 35%. Billet prices than the beginning of 2700 yuan per ton, up 36%.

With the iron and steel prices continued to rise rapidly, the industry said that the high risk of operation is gradually accumulating. Wang Guoqing said that in late August not callback, it is expected in September will callback.

In the current market conditions, not only the China Steel Association and industry experts repeatedly prompted the risk, steel listed companies have begun to prompt the risk.
Where do they get all the money for this rampant speculation?

Car Sharing Comes to China

This article talks about it in the context of shared parking spaces as well, recommending home buyers not pay a lot of money for a space.

iFeng: 别买停车位!又一场巨变已经来临
2016-2017, sharing rapid economic rise, the rapid expansion of coverage. Today, shared bicycles, sharing an umbrella, share charge treasure, sharing basketball and other shared economic settled, greatly convenient in our daily lives.

Car sharing refers to a person or persons using the car, while driving a vehicle only has the right to use and share the car can be booked directly through the telephone or mobile phone APP, very convenient.

Recently, there has been a large number of shared luxury car near the Beijing CBD.

This is a car-sharing company's new models, the company said: "This year there will be 2000-3000 Audi market use."

Focus: What are the charges?

Users need to pay 1,000 yuan deposit fee when the length of the vehicle, the first 30 minutes $ 15, after more than 30 minutes 0.5 yuan / minute.

For example: If you drive 50 minutes, the fees charged is 15 + 0.5x20 = 25 yuan, much lower than the cost of an ordinary taxi.

Car-sharing appears to change the way we travel, which for traditional car rental industry, and even drops a taxi company, will form a very, very big impact! Car sharing have come to share parking spaces still far away?

2017-08-11

PBoC Reiterates M2 Growth Will Slow

iFeng: 央行:需全面客观认识当前 M2 增速低于过往
The central bank said that the current M2 growth rate lower than in the past, the need for comprehensive and objective understanding. First, the growth rate of M2 in the past is higher than the nominal GDP growth more closely related to housing and other monetization, and the current housing commercialization rate has been high, the corresponding increase in demand for money. Second, in recent years, the rapid growth of M2 is also related to financial deepening, mainly for the same industry, financial and other business development faster, but the financial deepening process is not linear, in order to benefit from the disadvantages will have a certain ups and downs, the recent M2 growth Reduce is to strengthen financial regulation, shorten the chain of funds, reduce the nest of a reasonable reflection. It is expected that with the deepening of leverage and the further return of finance to the real economy, the M2 growth rate lower than in the past may become a new norm. At the same time, with the deepening of the market and financial innovation, the factors influencing the money supply are more complicated. The measurability, controllability and economic relevance of M2 are also declining, and the change can not be overly concerned.

BGI Genomics Limit Down on Friday

华大基因 (300676)

2017-08-10

Beijing Lifts Unspoken Price Limit Sparking Talk of Easing

Beijing has an unspoken rule that a development with a starting price above 80,000 yuan per sqm will not receive pre-sale permits. This week a property with a 95,000 yuan price was approved, sparking speculation that real estate controls are easing. However, this property is located in an area where the average prices is around 100,000 yuan per sqm. The article goes through several other reasons why controls are not being lifted.
It is said that this year Beijing issued a pre-sale permit, there is an unwritten rule, commodity residential pre-sale price of not more than 80,000 yuan per square meter, higher than this price will not send pre-sale permit.

And now Beijing Construction Committee issued three more than 80,000 projects, specifically for Fengtai China Xi residential pre-sale price of up to 96023 yuan / ㎡, Jinmao House residential pre-sale price of 95,000 yuan / ㎡, Kunlun domain residential pre-sale price Up to 95,705 yuan / ㎡.

Because of this, resulting in a lot of people panic, that the government to relax regulation, housing prices have to rise, and then follow the other cities with the help of the same straw, hype local regulation is about to relax.

Cherry small house worried that we were misled, so just like the real estate circles in Beijing to understand the situation, to listen to.
iFeng: 北京8万以上楼盘放行取消限价?圈内人说出了真实内幕

Developers Say Silver Age Over, Copper Age of Real Estate Begins

Caijing: 地产商们的展望:中国楼市进“铜铁”时代 大象起舞
With the full depth of the lever, there are real estate developers even think that the real estate industry, "gold" and "silver" era have passed, and into the "copper and iron" era.

When the real estate dividend period gradually subsided, "copper and iron era" showing a new industry characteristics: real estate for more than ten years of play and logic is broken, purchase, limit and so become normal; real estate business development business survival space Difficult, profit margins have been repeatedly squeezed; market concentration continued to strengthen, elephants dance, mergers and acquisitions frequently. In addition to the traditional development of business, to seek innovative breakthrough, as many small and medium-sized developers forced to choose.

Socionomics Alert: Europeans Hate Tourists, Let Alone Migrants

Euro rally? Stock market rally? Establishment political wins? All temporary as social mood remains in a negative trend.

Guardian: First Venice and Barcelona: now anti-tourism marches spread across Europe
With the continent sweltering under a heatwave nicknamed Lucifer, tempers have been boiling over, too, as a wave of anti-tourism protests take place in some of Europe’s most popular destinations. Yet, as “tourism-phobia” becomes a feature of the summer, the World Tourism Organisation (UNWTO) has defended the sector, calling on local authorities to do more to manage growth in a sustainable manner.

...Arran, the youth wing of the radical CUP (Popular Unity Candidacy), have been filmed slashing the tyres of rental bicycles and a tour bus. An Arran spokesperson told the BBC: “Today’s model of tourism expels people from their neighbourhoods and harms the environment.”

...Last month in Venice – which sees more than 20 million visitors a year and has just 55,000 residents – 2,000 locals marched through the city, voicing anger at rising rents and the impact of huge cruise ships and the pollution they cause to the city’s delicate environment.

...Italy has also been cracking down on anti-social behaviour in other tourist hotspots. In Rome, this means a ban on people eating or paddling in the city’s fountains and drinking on the street at night. Similar measures have been put into place in Milan – which introduced a summer ban on everything from food trucks to selfie sticks in the Darsena neighbourhood.

In Dubrovnik, another city where cruise ships unload thousands of visitors at a time, the mayor has introduced cameras to monitor the number of visitors in its Unesco-listed old town, so that the flow of people entering can be slowed – or even stopped – once a certain number is reached. Meanwhile, the mayor ofpopular Croatian party island Hvar has pledged to put an end to debauchery by mostly British tourists by slapping them with huge fines.
One of the themes here is the end of globalization simply due to the amount of capital and population interested in visiting or residing in the West. To some extent, the 2008 financial crisis was the result of China and other nations hold too much capital in the United States. This is also why I believe the U.S. dollar will lose its sole status as reserve currency: it cannot support the next major growth wave in China and India. Or if it tries, the end of that wave will break the dollar.

Most countries also cannot allow the rising middle classes in China, India and other emerging markets into their nations. They cannot handle the influx of visitors, to say nothing of immigrants. Europe's people are marching for tourism cuts and instead, their governments are flooding their nations with migrants! Total insanity.

Many of the West's wealthy and political leaders live in gated communities, but they treat their nations like empty lots. They tore down protections such as strict immigration and border walls that were the gates for the poor and middle class. Very few seem to be waking up to reality, most double-down and attack their own citizens as evil (racist, xenophobic, etc.) for wanting the state to provide similar protections. (Think of Trump's wall like Medicaid. The poor cannot afford to live in a gated community, just as they cannot afford healthcare.)

The very existence of the nation depends on its people. Italy filled with Germans is Germany, not Italy. Those who continue to treat their nations as empty lots, who tear down all the protections for their people, will eventually find themselves on the wrong end of a populist mob. Nations such as Poland and Hungary will coast smoothly through the coming turmoil. Those who end up with a populist leader such as a Trump or a result such as Brexit should mitigate or even reverse the problem. In nations where there is no brake, such as Germany, parts of Scandinavia and possibly Southern Europe, political volatility will eventually go off the charts.

Prior articles on the topic:

How Globalization Ends in the West
The Anglosphere Tightens Visa Rules (the U.S. recently announced a reform similar to Canada and Australia's point system for immigration)
Migration to New Zealand Drives Homes Prices
Palau Moves to Limit Chinese Tourism

2017-08-09

BGI Genomics Limit Up Streak Ends

BGI Genomics didn't open limit up today. Shares are up 0.5 percent at the moment. Volume was 27 million on Wednesday. Current volume is 10 million shares. Shares could rally and finish limit up today, but it looks like the streak ends at an impressive 18 days, not counting the IPO day which saw shares jump more than 10 percent.

Chinese PPI Up 0.2pc on Commodity Bounce

CPI could fall below 1 percent yoy by September as September 2016 jump drops out of calculations. PPI bounced with commodities in July.
NBS: 2017年7月份工业生产者出厂价格同比上涨5.5%

NBS: 2017年7月份居民消费价格同比上涨1.4%

2017-08-07

Marginal Borrower's Household Debt to Income Exceeds 100pc

Balding's World: Reconciling Chinese Household Debt Statistics
So after my Bloomberg View piece came out citing a self generated statistic that Chinese household debt to household income was above 100%, I had a number of eagle eyed reader send me a piece from the South China Morning Post from the same day. In the SCMP piece, they present a graph that shows Chinese household debt to household disposable income at just above 50%. Readers were wondering how could I explain the enormous discrepancy between my self generated number and the number that was cited in the SCMP.
The Bloomberg piece he references: China Shuffles Its Debt Around. The heart of the issue:
In other words, China is spreading the debt burden from corporations to households. Although this might forestall a domino effect should one of China's big companies start teetering, it's far from a long-term solution.
But which households? SCMP: How China’s young people became addicted to debt

Think about Chinese household debt in terms of demographics and the marginal borrower. Aunties aren't loading up on debt in their 50s. Retired people aren't borrowing to buy new cars. It's the Chinese Millennials (80后,90后) who are loading up on debt. If you're looking at debt in terms of the Chinese population and comparing it to a developed market, it's not apples to apples because the older generations in China have far less debt. Thus, while it would be statistically correct in the aggregate to say,
The consumer market has the capacity to service higher debt. Household debt-to-disposable income is 56 per cent, which is also among the lowest in the world. For context, the US peaked at 123 per cent, and Australia is now at a worrying 168 per cent.

China could double its household debt ratios and still be “average” in a global context. Admittedly, this is a multi-year process, but with an US$11 trillion economy, this implies an additional US$4 trillion in purchasing power in today’s terms.
the marginal borrower will exhaust themselves long before this peak is achieved.

A day ago I posted another SCMP article showing the deflationary impact of high debt levels is already hitting some consumers: Housing Bubble Turns Chinese Into Debtors
Cao and her husband are rich on paper: their flat is now worth more than 5 million yuan, but they still live in a frugal life. They’ve let the flat out 6,000 yuan a month and she lived with her husband at his army quarters. To make sure they can repay their debts and make ends meet, she has minimised discretionary spending on restaurant meals, clothing and travel.
Finally, from that article is this key point:
total outstanding deposits minus total outstanding loans, have stagnated or even begun to fall
The marginal borrower is exhausted. Deflationary/disinflationary forces are building.

Bear Take: Reserve and Currency Rebound Weak

Reuters: China July FX reserves unexpectedly hit 9-month high on boost from weak dollar
ZH: China's Reserves Continue To Decline As Capital Outflows Accelerate, "Outbound Travel Spending" Surges
using a separate gauge compiled by China's SAFE which tracks onshore FX settlement as well as cross-border RMB flows, shows something vastly different: as calculated by Goldman, China has not had a single month of FX inflows since its mid-2015 Yuan devaluation
The U.S. Dollar fell 10 percent from its recent high in December 2016, it fell for 5 consecutive months into July. Chinese FX reserves have rebounded 3 percent from the January low, CNYUSD rebounded 3 percent from its December 2016 low. The yuan exhibits very mild strength amid a very weak period for the U.S. dollar. If I am correct and the U.S. Dollar Index still has a new high ahead of it, the past seven months of yuan appreciation and reserve growth will offset one month of losses during the next bear move.

People's Daily Discusses Decline of Western Democracy, It's All About Credit

Global Times: Democratic rights and freedoms in West on decline
A commentary in the People's Daily, the flagship newspaper of the Communist Party of China, said that the democratic rights and citizens' freedom in Western countries have witnessed a continuous declination, in a bid to prove the superiority of socialism over capitalism.

Luo Wendong, a scholar from the Chinese Academy of Social Sciences, wrote in the People's Daily on Sunday that the political dilemma and retrogression of democracy in Western countries are no coincidence but a sign that the crises of modern capitalism have spread from economic fields to politics.

Luo wrote in the article that the co-existence of both manipulation and rejection of populism has brought democracy in Western nations to a dead end. He noted that the multi-party system - with rotation in power, their fights over benefits and their attacks on one another - has caused continuous political instability.

"From the perspective of the system of government, party competition often leads to political infighting. The separation of powers has transformed into a system of political impediments. 'Veto politics' repeatedly takes center stage, hampering governments' ability to respond to major economic and social problems in a timely manner, or even causing government dysfunction," Luo wrote.

He further stated that the principle of "all men are equal before the law" has become a castle in the air, and that the despotism and rule of men with big capital in Western countries is dominating the democratic systems.

"The chaos in the West strongly contrasts the order in China. The socialist system has revealed great advantages in comparison with capitalism," he wrote.
The more detailed piece is in Chinese at the People's Daily: 西方国家民主权利和公民自由连续退步(人民观察)

There are a lot of criticisms to level at Western governments and Western elites. Their "operating system" is in the midst of a critical failure and they refuse to change course, doubling down on their failed policies. However, the difference between China and the West in regard to the current economic and political situation is much simpler at heart. China is still experiencing rapid credit growth. Thanks to a high savings rate, China could force feed trillions of dollars of credit into its economy. The long-term trend in Western credit growth ended in 2008. Depending on your measure, the Western/developed global financial system has been in deflation since 2011 at the latest, 2007 at the earliest.

Any system looks good when credit growth is high and or rising.

2017-08-06

Housing Bubble Turns Chinese Into Debtors

No worries though, because mainstream economists say debt doesn't matter! It's someone else's asset. Besides, home price appreciation offsets the debt.

SCMP: How China’s billion savers embarked on a household debt binge
The studio flat in downtown Beijing emptied the couple’s 400,000 yuan (US$59,000) life savings and they also incurred a debt of 1.35 million yuan to parents, colleagues and classmates to muster the remainder of the 35 per cent down payment. The rest of the purchase was financed by bank loans, with monthly mortgage repayments of about 20,000 yuan for 30 years.

“Home prices rose so scarily in the past year that we are afraid we could never afford a unit in Beijing,” the 30-year-old said, explaining their decision to take on so much debt.

...The net savings of Chinese households, defined as total outstanding deposits minus total outstanding loans, have stagnated or even begun to fall, showing that Chinese people are saving less and borrowing more.
High debt creates deflationary forces:
Cao and her husband are rich on paper: their flat is now worth more than 5 million yuan, but they still live in a frugal life. They’ve let the flat out 6,000 yuan a month and she lived with her husband at his army quarters. To make sure they can repay their debts and make ends meet, she has minimised discretionary spending on restaurant meals, clothing and travel.

2017-08-04

Pop Culture Turns Dark

Update: I forgot the remake of 1974's Death Wish.

Super Dark Times takes the cake with its title.

Marketwatch: ‘The Sinner’ signals USA Network’s move to the dark side
Sub header: USA now emphasizes dark clouds rather than blue skies

Hollywood Reporter: 'Detroit' Marketing Leans Into Horror

Beijing Existing Housing Market Cools, Tongzhou Down 13pc from April

Average transaction prices at real estate brokers are down 9 percent in Haidian, 11 percent in Xicheng, 13 percent in Tongzhou. These data points always tend to be more volatile than the NBS 70 city survey, but the 70 city survey for July should come in much weaker.
According to the Beijing Municipal Housing Construction Committee website data show that in July this year, the city's second-hand housing in Beijing signed a total of 7158 sets of residential. The figure fell 19.7 percent from June, down 68 percent from last July. Throughout the data is not difficult to find, since the "3.17" after the introduction of the New Deal, this is already Beijing second - hand housing network for four consecutive months down.

Volume decline has changed the market supply and demand and market expectations, the impact is directly reflected in the average transaction price. Chain home research institute data show that since the implementation of the New Deal from April to July in four months, the Beijing administrative region of the chain stores the average price of housing prices have declined in varying degrees. Among them, compared to April, July Tongzhou District second - hand housing transaction price to 12.68% decline in the first place. In addition, Xicheng, Haidian, Daxing, respectively, 11.45%, 9.01%, 8.92% decline in the subsequent.
iFeng: 北京二手房大范围降温:7月通州跌12.68%居首位
Caijing: 最严调控下北京房价降2万 银行说房贷利率还会上调

Never Go Full Socialist

2017-08-03

Housing Market Sentiment Turns Bearish

Home sales fell broadly in July according to initial reports. The top 100 developers saw sales drop 39 percent from June.

iFeng: 7月份房企销售业绩普遍下降

Guangzhou sales rise 10 percent

iFeng: 7月网贷成交量环比上涨超10%

29 first-, second- and third-tier cities see sales fall 26 percent yoy. Sales area fell 9 percent, almost 60 percent of cities declined.

iFeng: 7月中国29城楼市成交同比降26% 一二三线城市均下滑

E-House warns real estate valuation distortions at 70 percent of Japanese 1990 peak

iFeng: 易居报告:一线房产泡沫相当于1990年日本都市圈的70%

House flippers start dumping property, eating 500,000 yuan losses as focus becomes return OF capital

iFeng: 房价真的会跌回一年前?部分炒房者亏50万抛售

2017-08-02

First Mortgage Yields Rising, Home Prices Will Tumble in Q1 2018

iFeng: 逾20城首套房贷利率上浮 放款时间普遍延长(名单)
The 21st century economic report survey shows that the current hot city mortgage is not only the lend time is generally extended, the mortgage interest rate, especially the first set of mortgage interest rates are also significantly floating, many cities not only cancel the mortgage interest rate concessions, but also in the benchmark interest rate of 4.9% has risen.

Behind changes in mortgage rates, the property market regulation and monetary and credit policies together results.

...According to the reporter incomplete statistics, in July the first mortgage interest rates above benchmark phenomenon of the city a total of 20, including four first-tier cities and some second-tier cities, such as Hefei, Xiamen, Nanjing, Hangzhou, Wuhan, Suzhou and so on. Wuhu, Lianyungang, Huizhou, Zhongshan and other third-tier cities also have the first set of mortgage interest rates on the basis of the base to enhance the 5% -10% range.

...jing Normal University, director of the Center for Financial Research Zhong Wei judge, when the M2 increase of less than 10%, usually 2-3 quarters later, that is, around the time of Spring Festival new house prices will have a significant decline.

Shanghai Housing Market "Dormant" In Last Two Week of July

Caijing: 上海楼市新盘陷“休眠”状态 连续两周无楼可售
Strict introduction of regulatory policy, so that the original market has cooled down almost dormant. Shanghai Municipal Housing Construction Commission official website shows that since July 18, Shanghai has two consecutive weeks without a new house to obtain residential pre - sale permit. In the case of shrinking supply, Shanghai new commercial housing inventory has fallen below 6 million square meters. Online real estate data show that as of August 1 at 16 o'clock, Shanghai can sell a total area of ​​585.5 million square meters of residential area, according to June new house transaction area of ​​686,000 square meters to calculate, probably can sell 8 months.

In the price approval, pre-sale permit issued under the policy of control, this year's new housing supply in Shanghai shrunk significantly. In the first half of the year, the number of newly built commercial residential buildings decreased by more than 40% year on year. Even the largest supply of goods in June, compared with the same period last year also decreased by nearly 10%.

Guangzhou Severely Restricts Properties Not Conforming to Govt Price Rules

iFeng: 广州楼市调控加码:不接受政府价格指导一律不办网签
From the specific policy content, the policy is clear if the real estate project does not accept the government price guide, then do not allow the issuance of pre-sale permit or for web signature, this provision also reflects the severity of such market control. In general, the pre-sale permit is not issued by the policy deterrent force is relatively small, and net sign given restrictions, it will make a lot of housing prices in the capital return pressure. So similar to the follow-up policy for the regulation of housing prices is a positive role.