What To Make of China Car Sales Numbers ?

GM sold more cars in China last month than the U.S. Is this the result of increases in private consumption, or state-backed 'investment'.

Gordon C Chang says the later:

While optimistic analysts point to astounding car sales–up 70.5% in July, 94.7% in August and 83.6% in September–there are reports that central government officials have ordered state enterprises to buy fleets of vehicles and that these businesses are storing them in parking lots across the country. These stories are as yet unconfirmed, but they are consistent with statistics showing that gasoline sales have been flat this year–up only 6.4% in August, for instance, and sliding since then from all indications.

This is a somewhat crucial question, it seems to me.

Fed Balance Sheet Hit 2.2 Trillion A Few Weeks Ago

Looking at the pretty chart, over half of these 'assets' are MBS purchases - in other words, mortgage backed securities not dissimilar from those which precipitated the beginnings of the financial crash. They are garbage if sold on the open market now; the Fed will hold them until they can be sold for something.

While the wall of de facto money printing is being sucked up in the West to pay down debt, it is inevitably going to cause bubbles in the developing world.

Surviving Banks Are Swelling Even Larger

BNP Paribas has assets at 125 % of French GDP, and Barclay's 108 % of British GDP, according to Bloomberg.

Finance remains mostly in the hands of the West. But production continues to shift to emerging Asia, and at least for now, it seems that consumption slowly is as well.

U.S. Public Education is in Crisis !

Kennedy said it's so:

"That public education is in a state of crisis today is well known. There is less agreement on the cause and on the cure. I can only hope that those who recognize the urgent need of improving public education in this country will not exhaust their efforts in looking for a scapegoat, but will join in attacking the problem at its very roots."

Science and math education sucks :

"The teaching of the physical sciences and mathematics in our secondary schools has declined; about half of those with talents in these fields who graduate from high school are either unable or uninterested in going to college; and of the half who enter college, scarcely 40 percent graduate. The task of reversing these disturbing trends is in large measure up to our public schools and their teachers. It is up to our teachers' colleges and their graduates."

and, the Soviet Union will bury "us" (substitute China and India, as Thomas Friedman would):

"The Soviet Union already has available for this work more engineers and scientists than we presently have in any capacity in this country, and very nearly as many as this country and Western Europe combined. In recent years, the output of new engineers and scientists in the U.S.S.R. has surpassed that of the total United States and Western Europe graduating classes in these fields - their current enrollment of such students in institutions of higher education exceeds our own - and we are already falling short of even our current needs. Their lead may become even more serious, and in the most critical areas of technical knowledge within the next decade, according to Allen Dulles of the CIA, "unless we quickly take new measures to increase our facilities for scientific education."

From: 1960.

China Banks to Raise Capital

Lending out money to projects that do not generate revenue means you will go broke...how close is China to being broke ? As impossible as that seems.

CNN: "China's banks are preparing to raise tens of billions of dollars in additional capital to meet regulatory requirements following an unprecedented expansion of new loans this year, according to people familiar with the matter."

1"Capital crunch for Chinese banks" - CNN; Anderlini
2"China Banks Said to Submit Capital Raising Plans" - Bloomberg

Protests on California Campuses

Will increased tuition really make the UC system 'less diverse' and is it really an attack on 'immigrants', as claimed in the attached article ? Well, not exactly. The UC system is substantially funded by overseas East Asians who pay full fees. They aren't going anywhere.

It's really an attack on poor people or working class people, but class warfare is not in the vocabulary of most young people now, even those who are politicized. Until it gets to be, there can only be minimal improvements made in the system. It's quite easy to divide and rule using identity politics.

1 UCLA Students 'Riot' Over Tuition Hikes - You Tube
2"Rage at UC fee hike in L.A., Berkeley protests" - SF Gate; Tucker, Asimov

U.S. Banks Will Use Unlimited Fed Liquidity to "Buy the World" ?

Get ready for a lot more of this: "Blue-blooded City broker Cazenove bought by US bank in £1bn deal"

U.S. banks are sitting on trillions of dollars and are poised to buy distressed financial firms, particularly in Europe, that were not given access to unlimited liquidity. Whether they meet strong resistance or not, only time will tell.

Toyota Going the Way of GM ?

Well, at any rate, they have already given up the world #1 ranking to Volkswagon, after the latter's acquisition of Porsche and big gains in the China market.

And there have been insinuations that the root of Toyota's Sudden-Acceleration-Syndrome has nothing to do with seat mats, but with dud electronics. Modern cars accelerate through the medium of a computer. Whether true or not, I can't say, but this rumor is definitely something I've heard from so-called Joe and Josephine 6P.

1"Report: Volkswagen passes Toyota as world’s largest manufacturer"- Car Tech
2"Toyota Gets Stuck in a Pair of Ruts" - Business Week; Welch and Rowley

"Europe is Bigger than the U.S."...

"it's richer than the United States, it gives more to the developing world than the United States by far." (1)

But Europe doesn't have a military, which means much of its international power comes on the coattails of Washington. Oh, the power struggles within the international ruling class.

1"Leaders meet to elect EU president" - Al Jazeera

Confrontation With China Is Likely

Martin Wolf, a high-level spokesman for Western finance capital, tosses a few logs on the fire:

"We have spent long enough discussing China’s exchange rate policies. It is time for action."

Krugman joins in:

"The problem of international trade imbalances is about to get substantially worse. And there’s a potentially ugly confrontation looming unless China mends its ways."(2)

IMF Managing Director Dominique Strauss-Kahn, as well:

"We do believe firmly in the IMF that the renminbi is undervalued, and that it is not only in the interests of the global economy but also in the interests of China to have revaluation of the currency."

It's doubtful this will come to a happy ending for all sides. Overcapacity in capitalism is resolved through the liquidation of competitors (war or mass bankruptcy) or expansion of markets (the end of communism, for one). There is a problem with overcapacity - a very typical Marxian crisis of overproduction - that has been fermenting for decades. As Justin Lin of the World Bank said in July: "Significant excess capacity has been built up and unless this issue is addressed, we will face a deflationary spiral and the crisis will become protracted".

China needs a trade surplus to recycle money back into its banking system, which has quite a lot of bad loans, and many more coming. You can't built unoccupied cities without having vast amounts of non-performing loans. And, as is often mentioned, export-industry employment is maintained through a devalued currency. This is why Beijing will do what it wants with the yuan. The Western financial elite considered the destruction of its working class a loss-leader to open up China and crack its banking system. This has not happened, and the dream is gone now that the West is riddled with its own banking crisis.

Meanwhile, China has used the crisis to bolster its dominance in world markets, and this is not going to go unchallenged. It could lead to military confrontation.

For all the talk of democracy and rights, the Western ruling class is not far removed from World War, slavery, imperialism and nuclear attacks. China's government was rather naive to buy billions in worthless paper from the US government, and they should not be so naive to forgot history.

1"Grim truths Obama should have told Hu" - Financial Times; Wolf
2"World Out of Balance" - NYT; Krugman
3"IMF chief urges China to let yuan rise" - AP
4"World Bank warns of deflation spiral" - UK Telegraph; Ambrose-Pritchard
5"Cracking China's Banking System" - previous post

Where to Get Jobs ?

There seems to be a growing clamor for a jobs program. For large swaths of the American population, steady employment is dream of yesteryear. Wages are 'too high' here, and interestingly, the class struggle has played out to the point where long-term private sector growth can only come through technology driven productivity gains.

Labor in 'Asia' is cheap and plentiful. So while the West still has the capital, there is little reason to invest it here when profit rates are much greater elsewhere.

Capitalism can be defined as a system in which private capital controls the chief modes of production in society. Small-letter capitalism has existed for much longer than Capitalism. One can see a scenario in which the private sector is unable to fulfill a dominant production role in OCED countries, and where government takes over entire developed industries that have reached a stage of zero profitability. In this scenario, Capitalism might fade once again into capitalism. But this is just a scenario.

Silence on China

It's interesting how little the Left talks about China. Are 'they' the merciless bosses of the New World order ? Stalinists ? Socialists ? etc.

One could probably find twice the articles on Venezuela, as compared with China, in any leading Leftist organ. Despite the fact that China will soon be the second largest economy in the world.

It seems that few people know what to make of the country's rapid economic growth. But as the U.S. and China head for geo-political collision, it seems important to develop a more sophisticated understanding of this large, factionalized, and class-riven country. Rather than just talking about 'The Chinese'.