I have to say, this episode of RT America was probably my favorite so far, not because they were right, but because they just wrong enough and may ultimately have blind-sided winnie who has been in a bubble of his own.
Ahh, where to begin. Well for starters, the their first claim was actually correct. There have been signals all across the global economy of a recession on the horizon. So they launched into a tirade about how china bought US debt in 2008, which is true, although when he says “keeping the American economy afloat”, what he means is “keeping wall st. liquid”. They will conflate wall st with the US government several more times during this episode.
Another reminder, That was all to bail out private banks, not the US govt. The US govt was fine during the 2008 crisis, and the fact that bailing out the private sector banks and passing the lost gambles on to the US tax payer is very different from bailing out the US government, though that is an easy mistake to make since big money has been playing such an active role in US politics.
What they fail to realize is, a very significant number of US citizens, did not want to bail out the banks, which was not bailing out the US government. They just have a lot of lobbyists that make it appear as if they are the government, that is what unlimited campaign contributions are for.
This same relationship between big banks and the US government is also precisely why there were no attempts to fix any of the major financial mistakes, and the trump administration actually rolled back the vert few regulations that were designed to prevent that type of crisis from re-occurring. So yes, the next crash will be bigger, because it’s still carrying the debt from the last crash and fixed NOTHING.
Funny thing about that though, the American people are aware of this, and given how the recent elections have gone, things are not looking good for the neo-cons who are responsible. Buying those US securities is also what is responsible for much of china’s economic boom money. However, the primary reason china won’t do that again, is because they don’t have that kind of money anymore. As Sourabh Gupta said “That well is dry” but also as he said “That primarily benefited their (The Chinese) economy” see, because US govt debt is not “non performing”. I will explain what that means later in this article. However Mr. Gupta was very wrong on one of his assertions, that china has not been providing stimulus internally. The opposite is actually true, because their growth model is heavily dependent on investment, they have actually been addicted to economic stimulus packages, which is the mechanism by which they devalue their currency.
But more importantly:
The Chinese also have found novel ways to obfuscate their local debts with what are called “Local Government Financial Vehicles” which also happen to be where the Chinese people primarily invest their own money. This video explains the situation nicely https://www.youtube.com/watch?v=f5SE47Xjx2Q basically, china has had a vast real estate bubble, which is where they store the debt of not only the population, but also most of the local governments, this bubble has been building since before 2008, which is the basis for almost all Chinese debt, which is used to fund their foreign spending sprees. However, there is a catch. Empty homes do not generate revenue.
So those vast number of home loans, are called “non performing debt” because they don’t produce excess value. Which has lead to a slew of bankruptcies. That’s right, even chinese state owned corporations can go bankrupt, so hurry and swap debt! if you want some useless debt that only looks good on paper because the party has been pumping them full of finance to keep them afloat, which means they are profitable! On paper at least, since the state has 51% stake in the companies, so any money the party pumps in gets counted as revenu. And because of the peculiarities of the Chinese system, which is the land under the homes are leased and not owned by the private owners, the property technical depreciates in value instead of appreciating in value, as real estate in the west appreciates in value because they do not anticipate the homes being destroyed. This is why homes are different than cars, which depreciate rapidly, because cars have a “shelf life” which the Chinese system inadvertently creates for Chinese real estate. So china has been sitting on a steadily growing debt bomb of their own. So a credit default swap with the chinese would actually be worse than what happened in the US, because at least those bad loans get underwritten instead of evaporating. Which is how buying that debt paid off for the chineese and gave their economy the investment needed to fuel their rapid development since 2008.
But WAIT! There’s more, the faltering of the Chinese engine ( https://youtu.be/7gH-V3J2EuM?t=146 ) has already had wide ranging repercussions such as:
Africa, which has been china’s primary engine of growth in recent years, more because of the resources they provide than products they buy, has been hit hard due to chinese speculation, so much so that the world bank downgraded the credit ratings in south africa and several other countries have seen a drop in currency values, as they are tied to china who has been devaluing it’s currency as a tactic in the trade war.
This was some seriously bad news for Germany, which has significant investments in China. The situation became so bad, that Germany had to enact negative interest rates.
Given Germany’s leadership of much of EU decision making as one of the strongest economies, this does not bode well for the rest of Europe. I do wonder if this is a part of china’s Divide and Conquer stratagy.
I shudder to even imagine what this means for Italy, which earlier this year joined china’s belt and road initiative and started selling some 650 million Euro in “panda bonds” allowing Chinese investors to invest in Italian companies. This also allowed chinese investors to pile onto Italian bonds, which resulted in a temporary rally. The chinese seem to have been the winners in that as well. However Italy seems to be having second thoughts.
So now we get to the really, to me, funny part. This is where the RT broadcaster starts conflating Russia “rich uncle” which is indeed china, with the size of the American economy.
First, lets take into account the massive amount of money the US spends on it’s military, this money basically is being wasted, blown up with every 1.3 million dollar drone bomb, into tiny pieces that float away in the wind. Which is officially listed as 650 billion, but in reality is even larger than that. Now a look at the hard numbers according to https://countryeconomy.com/countries/compare/china/usa
China has a GDP of $1.3 trillion or $13,368,073M and the US has a GDP of more than 2 trillion or $20,580,200. That is by GDP alone and does not include the vast sums that US corporations have in over seas tax havens, like Ireland. Given the vast amounts of US debt is a result of tax cuts for corporations brought on by the Trump regime, and the next president is unlikely to be a neo-con like trump during a financial crisis, a lot of that debt is easy to solve with small tax increases. So the major difference between the US and Chinese economies is that, the US economy has a lot of tax revenues that it can access fairly easily with the right administration, however china does not have that kind of financial maneuverability because they already have high taxes and the government is 51% partner in all the companies. In china the companies are half of the governement and its revenues, in the US the private and public sectors are seperated, so that the public sector (The government) is insulated from private sector crises.
So I ask you, how in the actual hell can a country with an economy almost half the size of the US economy, be the rich uncle to the US ? The US only has 1 rich uncle, and his name is Sam, not Mao. But hey, that is what happens when you conflate the big banks with the US Gov. while simultaneously mixing up Russia’s rich uncle with Americas. Working at RT America must be confusing.
So while the US has lowered interest rates, that is true. Those rates are still not in negative territory, as is becoming popular in Europe. However the complaints about manufacturing job losses seems to fail to take into account the falling output of Chinese manufacturing. But even here, the devil is in the details. The primary reason the chinese have been able to undercut manufacturing in most developed countries is 2 fold, first and obviously a combination of economies of scale and industrial espionage (theft of intellectual property) but one thing people rarely think about is, shipping costs from china are very significant. However they have also been obscured because the Chinese government has been footing the bill for Chinese corporations for getting their products to western markets.
This is why they have been so eager to buy up various deep water ports all over the world (which incidentally are also a great way to smuggle in goods and drugs, hello new
opium fentanyl war you know they are serious because they coerced a confession out of a respected head of interpol for getting too close.) But this is also what allows so many under performing Chinese companies to continue to be profitable.
In essence the policy of paying for shipping for their own corporations has enabled many under performing companies to remain competitive at great cost to the CCP. So the policy has cost the party vast sums of money. So Gupta is correct on another thing, that many countries will start being more protectionist and making strategic investments in advanced manufacturing.
The impact of 5G however, is fairly minimal, at least in the EU, where data caps of 6 – 10gb are common. What does it matter if you can download at 1gigabit speeds if you can only download 10gb ? So you can very quickly run over your data limit and be overcharged out the ass ? (my personal gripe after having toured Europe for 4 months) I mean, you could get cell service from “Three” which has the highest data caps of any carrier in the EU, but incidentally is also a Chinese owned teclo which not only does censorship, in the EU via a telco provider. But a vetted source has also revealed that “three” has been actively used for espionage against activists. So sure, you can have data, so long as you are willing to let the Chinese intercept all your communications, in Europe. Good job catching that European regulators, who would be lucky if they could get their head up their ass in the first place.
And then there is the pièce de résistance ( wait for it …)
Trump says not only is he going to leave the troops in syria which he had promised to pull out, but that they would be protecting the oil infrastructure in eastern Syrian region known informally as “Rojava” what is funny here, is that RT continually refers to this action as “Taking syrias oil” when in actuality, they are only securing the oil fields, in the same way US soldiers are securing the oil fields in Saudi Arabia. This is creating the stability to enable their allies in the region, the SDF (Syrian Democratic Forces) to then rebuild that infrastructure and sell that oil, possibly to the US, but I am sure some European powers will be equally interested. If the Syrians in the autonomous region which are re-purposing what was previously ISIS infrastructure, to not only rebuild Syria but also deny those resources to the remnants of ISIS,
That is not “Taking” the resources. Those resources will be legitimately sold by the individuals who have been occupying that land for over 100 years, and lets not forget the US military is there BECAUSE ASSAD WAS GASSING THE KURDS, like several times. which is not only a human rights violation, but also an international war crime. This behavior strikes at the very heart of the legitimacy of the Assad government, which the people in this region were rebelling against in the first place, before ISIS took over. Which was also a result of the many failures of the Assad government. So the US forces are there as guarantors of peace and also to stem the tide of immigrants into Europe, while also providing support for reconstruction efforts which will enable many who fled and/or are being re-housed in the DMZ in the 30km corridor between Turkey and Syra, to have a place to return to. So the SDF may be the only people with legitimate claims to those oil fields. And Rojava has the only functioning democracy in all of Syria. You really expect the west to not defend a fledgling democracy which has a chance of solving their own migrant crisis ?
Psh they will probably try to find some way to blame this on AI. It’s full spectrum y’all.
Finally, an explanation!