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View Full Version : Ka-Poom Theory Update Two – Preamble: Theory of a Sudden Adjustment - Eric Janszen



EJ
03-27-12, 05:37 PM
Ka-Poom Theory Update Two – Preamble: Theory of a Sudden Adjustment


http://www.itulip.com/images2/unexpectedweather1.jpg
A main road near iTulip offices the day after a once in 100 years October 2011 snowstorm
knocked down trees and cut power to homes for several weeks.


CE: After reading your Ka-Poom Theory update outline… oh, boy. Huge project. Okay, we eat this elephant one bite at a time. I want to start by getting the chronology down. Readers may be either new and they don’t know the history or they are old farts like me who can’t remember. Those of us who started to read your work in 1998 think first of your tech bubble tracking start-to-bust. You famously told us to get out of stocks in March 2000. Then in 2001 you went off to run a couple of VC-backed companies. You started to track the housing bubble in 2002 while you were still doing that. Where did you find the time?
EJ: I only updated iTulip two or three times a year to note turning points in the housing bubble as it developed, such as the start in 2002 and the peak between 2005 and 2006 depending on the market segment, and to lay out my model for the rate and duration of the decline, which I determined to be 10 to 15 years from 2005, depending on the form and extent of government interference in the market's mean reversion process. I still expect a price correction to reach inflation-adjusted year 2000 price levels before the housing correction is over.

CE: You restarted iTulip full time in March 2006. You laid it all out – the coming crash of the securitized mortgage market, the global financial crisis, the mega recession, but you also said “no” to deflation and go that right, too. You were probably the first to identify the threat posed by the bubble in mortgage-backed securities. Your December 2007 timing on the stock market was epic. You said to look out for a 40% decline in the S&P500 in 2008. We got 38%. Nice. And you noted in March 2009 that the crash was over and a bounce started.
EJ: Let me interrupt you there because subsequent to all of that I was wrong about the duration of that bounce off the March 2009 lows. Except for a minor correction in April 2010 the stock market has recovered much of the loss in nominal terms.

CE: Heavy on the “nominal.”
EJ: Right, as I note in this analysis, and you saw in the outline, the S&P500 is still 31% below its March 2000 peak in inflation-adjusted terms. Of the two chances readers got to dodge the “Buy and Hold” stocks bullet, either in March 2000 and December 2007, March 2000 was the better of the two.

CE: That’s when you “sold everything” and went into 10-year Treasury bonds and cash, back when the yield on the 10-year was 6%?
EJ: 6.5%.

CE: A year later you took a 15% portfolio slug in gold at $270?
EJ: Average buy-in price was $270. And never sold it.

CE: That’s all on the record and verified. CNBC and all that. Your friends at Twin Focus Capital Partners validated your bond plus gold portfolio performance up to 2010. Okay, then in the middle of 2010 you started to fret about the Treasury bond slug of your portfolio, and look for stuff to divest into from bonds. You and some itulipers invested in Eastham Capital in 2010 based on your “rising rents” theory. How’s that doing?
EJ: Better than a 10-Year Treasury bond; over 12% cash-on-cash so far. Unfortunately it’s not something that the all of our members could invest in. The group is always looking for ways to invest in the trends we identify through our research and analysis.

CE: Then you and members put money into a start-up called TruTouch Technologies in line with your theory that tech entrepreneurs are the last great hope for the U.S. economy. How’s that going?
EJ: Too soon to say, but promising so far.

CE: I’ve always wanted to ask, you made piles of money getting out of the tech bubble at the top and shorting it, buying gold in 2001 at $270 and never selling it, shorting stocks in 2007… what do your friends and family make of you? Are they pessimistic like you?
EJ: I prefer to think of myself as a skeptical realist. On the one hand, I’m optimistic enough to invest in start-up companies like TruTouch Technologies and others, but on the other I’ve learned to listen to the data and endeavor to understand the underlying processes that drive the markets and economy. I don’t put much stock in the theories of anyone who has anything to sell, and certainly not in the policy makers who are making it up as they go along. The data telling me that we are well along in a self-limiting process that started more than 30 years ago. It’s going to be quite a shock when it ends some day.

CE: Now you’re telling us that the two big crises that defined the 2000 to 2011 period and you made your timing and investment decisions around since you started iTulip in 1998, were no big deal?
EJ: The two crises that defined the 2000 to 2011 era, while traumatic, were side-shows to the main event, spin-offs of a larger systemic problem. The models that drove our decisions to get out of stocks and into Treasury bonds and gold when we did were trivial compared to this latest update to Ka-Poom Theory. Ka-Poom Theory Update Two represents the current state of progress of 15 years of work. We are much closer to the finale now than in 1999 when the first version of Ka-Poom Theory was published after working on it for two years.

CE: The time scale is huge!
EJ: It’s hard to get your head around processes that go on for decades particularly for an event driven media and readers who are conditioned to think in terms of what is happening this week, today, this hour, and this minute.

CE: And you’re going to give it all away here?
EJ: No. I’m going to explain the thought process, the rules-based analytical frame work, so that readers can judge the quality of theory and how actionable it is without publishing the trades that the rules lead to. We haven’t decided exactly how to do that but will have figured that out by the time I finish with the argument. Simply giving the background will take several articles. A short book, in reality.

CE: Start by telling us about this mega systemic problem you referred to, the one that spun off the tech bubble and American Financial Crisis.
EJ: We have lived these past 30 years through a large-scale transformation of the U.S. economy. The world economy has been transformed, too, but for now we’ll focus on the U.S. because for most of the period that I’m talking about the world economy has revolved around the U.S. and to a large extent still does, even though the U.S. is a much smaller part of the world economy than it was 30 years ago, and that is part of the problem.

This transformation occurred so gradually as to give the result the aspect of normalcy, like that yellowing wallpaper in your pantry that you grow used to because it’s in your field of vision every day. If you go on an extended trip you may then might you notice when you return, “I have to do something about that wallpaper. It’s pealing off the walls.” That’s one of the key challenges to developing a macro theory like Ka-Poom Theory. You are living inside the system with everyone else and have for your whole life. That extraordinary appears ordinary because we have adapted to it. It’s a downside of a very useful ability of humans to adapt to almost anything. Visit a country where the people live in terrible economic and political conditions. You ask, How can anyone live like this? But to them it’s home.

To see the macro-economic mess I am living inside with everyone else I have to “leave it” from a perceptual standpoint then come back to it, over and over again. This is done by abstracting it via the data and repeatedly re-analyzing the data.

CE: Isn’t there an emotional challenge?
EJ: There is always an emotional challenge to any economic analysis that leads to an unhappy conclusion but more so to Ka-Poom Theory than for my tech bubble and mortgage security bubble forecasts. The implications of a reversion to sustainable debt levels and growth rates that Ka-Poom Theory predicts range from highly disruptive to dire depending on the policy response scenario. It’s not like my family and I will somehow be immune to it. Looking out the window on this beautiful spring day, it’s hard to imagine. And, frankly, who wants to? It’s a bummer. So it’s important that I abstract myself from the analysis and do it as if I were analyzing and event outside my world. I have to pretend that it will not effect me personally, my family and friends, else it’s too hard.

CE: How do you do that? We all personalize things.
EJ: I have the benefit of years of experience as CEO of companies to help. As CEO of a company you have to abstract yourself from the equation. Your role is to look after this entity, this person, the company. You have to be able to decide to do things that may not be beneficial to you personally that are good for the company. In fact every decision you make is made on the basis of what’s the good of the company to the point where you have to willing to go to your board and say, “I’m not the right person to run this company anymore. The company had grown to outstrip my skill set,” if that is your belief. It’s quite unlike any other job in that respect. The experience provides an intellectual foundation for taking a self-abstracted approach to analyzing an event with a potential for negative personal impact.

CE: You talk in the outline about needing two brains to think about Ka-Poom Theory. Is that what you mean?
EJ: That’s an additional and even more vexing challenge. You need to think with two minds at once to understand and act on Ka-Poom Theory. You need one that thinks of the world continuing for many years just as it has and acting on that basis because an object in motion tends to remain in motion. In that scenario Ka-Poom event is put off via a series of creative crisis response policies no less radical and invasive to markets than the Fed’s anti-deflation measures and asset price inflation measures since 2009.

CE: I remember. You argued with the deflationists that the Fed was going to buy mortgage-backed securities. They didn’t believe you!
EJ: I don’t blame them. It takes a strong stomach for anyone who believes in the power of markets to countenance a horrifically bad idea like as “yield curve shaping” that the Fed had on the table in 2006 in preparation for the crash they knew was coming but were politically unable to prevent. While you are thinking about investing and behaving on the theory that the economy will continue to improve and the stock market will rise, at the same time you need to be aware that a Ka-Poom event may happen virtually at any time, triggered by a geopolitical event. In that scenario monetary authorities fail and the world is thrown into disarray for several years.

CE: Your timing of this update is peculiar to say the least. The front page is NASDAQ 3000. Jobless claims are down! The crisis is over! Bull market away! Not buying it?
EJ: The NASDAQ 3000 milestone has special significance for iTulip. We started out in 1998 warning readers about the tech bubble. I urged them to sell tech stocks in March 2000, as I was doing when running Osborn Capital. I forecast at the time an 80% crash and for the NASDAQ and for the index to remain 50% below peak for a decade. In order to reach its previous March 2000 average inflation-adjusted monthly peak level 12 years ago this month, the NASDAQ needs to be at 6270. I was optimistic when I forecast the NASDAQ to remain 50% off peak for 10 years. Here we are 12 years later and it’s off 52% from peak.


http://www.itulip.com/images2/RealNASDAQFeb1971-Mar2012vsProjectedwtmk.png
The NASDAQ deflated by the CPI in red is shown on a log scale on the left hand axis to accurately depict
the price level over a multi-decade timeline. The 10-Year Treasury bond constant maturity rate
in blue with a scale in percent on the right will feature in nearly every graph in
this analysis for reasons that will be explained. The green line depicts the NASDAQ
at a theoretical 6250 today to equal the year 2000 peak in real terms.


But I do not expect the NASDAQ to return to its 2000 peak any time soon. That’s not how bubbles operate. A more realistic hope is to reach the level where the NASDAQ might be today if the tech bubble, the housing bubble, and the American Financial Crisis (AFC) never occurred. Note that the NASDAQ powered through The Great Inflation of the late 1970s, the 1980 to 1983 recessions, the 1987 crash, and the 1990 recession all with relatively minor corrections, at least when taken in the long run view of a semi-log scale. It took the NASDAQ bubble and the AFC to derail the marvelous NASDAQ machine. The derailing was a predictable tragedy and why in 1999 I was writing angry articles for Bankrate.com and others while Greenspan prattled on about bubbles being discernible only after the fact. That said, it appears that the NASDAQ has finally gotten back on track if we follow the price trend growth rate since 1974. In fact we’re 3% below a sans-bubbles target level.


http://www.itulip.com/images2/RealNASDAQFeb1971-Mar2012vsTrendwtmk.png


CE: That’s encouraging. Are you saying the NASDAQ is 3% under-priced?
EJ: Yes and no. The difficulty, as we shall see, is in the structure of the economy itself that produced not only the bubbles but also the trend growth rate sans bubbles since the early 1970s.

CE: Explain why most of the graphs used in this analysis compare market and economic data to bond yields?
EJ: Because the era of transformation we are talking about here is about falling interest rates and rising debt levels, and how the entire economy organized itself around this over a period of 30 years, and then how the Fed and the Treasury Dept. extended the era beyond its natural terminus in an effort to maintain the faulty structure. They have done it by purchasing debt and selling it to an expanding pool of foreign lenders. During the recession when yields got blown out, the market was trying to correct for the excessive debt levels by re-pricing debt to reflect actual default risk. But the Fed interfered, necessarily at first to prevent a debt deflation spiral, but is still at it because the economy is geared to low interest rates. One of our venerable members, Finster, put it brilliantly. It’s like taking a blown fuse out of the fuse box and replacing it with a quarter to keep all the lights on instead of reducing the load on the circuit and replacing the fuse.

CE: And then add a refrigerator and toaster and microwave oven…
EJ: Exactly. Instead, the markets have followed the Fed’s signal and increased the load on circuit. Now, the reason the fuse blew in the first place was because of the excessive load, that is, too much debt in aggregate for the economy. The market indicated, by blowing the fuse, that there is not enough cash flow from the incomes of firms and households to pay principle and interest on all of the debt and also finance production and consumption. With a quarter shorting out the circuit – with the Fed and Treasury holding down interest rates – the wires heat up inside the walls where you can’t see them. Likewise the credit risk is building up out of sight from the short-circuiting of the credit market risk pricing mechanisms. The Fed is not allowing interest rates to rise.

CE: The end result?
EJ: Sooner or later the house catches on fire. And that’s what we’re going to get, the bond and currency market version of a house fire. Ka-Poom Theory describes how the fire starts, how it is likely to burn, and what the authorities may try to do to put it out.

CE: What about credit derivatives? Shouldn’t they be flashing red if credit risk is rising?
EJ: No, because the government is the effective counterparty. Instead you will see risk exhibited in the currency markets. The currency market is where the fire is going to start. You can already see the wires are hot but not yet glowing.

CE: Where?
EJ: At the end of this multi-part series we’ll talk about imminent indicators, but there is one indicator hidden in plain site that most analysts miss.

CE: Gold?
EJ: Correct. Gold has been called a bubble and over-priced and so forth since 2006. By focusing on the price rather than how it got there, most market analysts miss what the gold price is telling us. First of all, they don’t understand what happened last time gold prices went up. I put some time into explaining the history in this series. After reading through hundreds of newspaper stories from the 1960s through the 1980s I can tell you that it didn’t happen the way I remembered.


http://www.itulip.com/images2/GoldvsBubble1978-2012wtmk.png

CE: This month you’ve posted several samples of newspaper stories you dug up. Looking forward to seeing more of that. Explain the chart above.
EJ: The gold panic of 1978 to 1980 was all about investors losing confidence in the Fed. At first there were high hopes when Paul Volcker took over from Arthur Burns, but markets didn’t understand that Volcker’s approach wasn’t going to work right away and investors panicked into gold. Volcker’s approach looked very much like the one that Burns had taken for the previous six years but to no avail. Volcker raised short-term rates well above the inflation rate just as Burns had. It took market participants until 1982 to understand that unlike Burns who backed off at the first sign of recession, Volcker had it in mind to drive the economy into a deep recession and kill off the inflation spiral by taking the pricing power out of labor, which occurred once unemployment reached about 10%. I call it the Monetary Sledgehammer. Crude but effective. We’ll get into the specifics later next because the event is the foundation of the FIRE Economy.

CE: The world after Ka-Poom. What’s it like?
EJ: The world didn’t end after the tech bubble, but that world ended, the world of over-priced tech stocks and all that went with it – the venture capital boom, the boom in corporate law, accounting, and so on. All gone. Five years after the boom in housing that employed one out of 100 people in California at its peak the world of real estate is likewise a shadow of its bubble era self. So, what I’m saying is, after Ka-Poom happens, the world doesn't end, but much of what we think of as normal in our world will no longer exist. Our economy will become something else – smaller, slower, poorer, but still quite wealthy by the standards of the world – but with islands of economic prosperity.

CE: After Ka-Poom happens, what will the Fed and mainstream economists say this time?
EJ: The same as after the tech bubble and housing bubbles we forecast to the month and profited on by avoiding the crash: “Who could have known?”

Ka-Poom Theory Update Two – Introduction: A Theory of a Sudden Adjustment ($ubscription) (http://www.itulip.com/forums/showthread.php/22121-Ka-Poom-Theory-Update-Two-%C2%96-Introduction-Theory-of-a-Sudden-Adjustment?p=224937#post224937)


http://www.itulip.com/images2/unexpectedweather2.jpg
A second main road near iTulip offices is closed the day after a once in 100 years
October 2011 snowstorm knocked down trees and cut power to homes for several weeks.
There was only one road out of four as the other three roads were blocked by fallen trees.

What happens when the world’s largest economy develops an increasingly over-leveraged, foreign debt dependent growth model over two decades, then goes through two successive self-indulgent market bubble parties and busts in ten years, which cause recessions that demand monetary and fiscal stimulus to keep the indulgent population compliant yet weaken the nation’s fiscal position to near the breaking point, and then said nation experiences a final existential fiscal shock?

Well. We’re going to find out.

In this update we explain the terminus of a sequence of unintended consequences of monetary policy decisions made starting in the 1960s:



The immediate unintended consequence of leaving the international gold standard and allowing the dollar to float in 1971 was rapid depreciation of the dollar against major currencies.


The consequence of rapid depreciation of the dollar was the same as it has always been for any country throughout history: a surge of cost-push inflation. Combined with war spending and other government spending, cost-push inflation met credit expansion to launch a wage-price spiral. Development of inflation into hyperinflation was averted by application of the Monetary Sledgehammer starting in 1979.


A four decade long bear market in bonds starting in 1946 suppressed debt growth. Then The Great Inflation of the 1970s deflated debt against wages and incomes. The Monetary Sledgehammer was applied to an U.S. economy with very low aggregate debt levels.


As long-term government securities interest rates fell from as high as 14.43% in 1982, debt across the entire economy was re-financed over and over for 20 years.


The unintended consequence of falling interest rates was aggregate over-indebtedness and structural dependence on debt expansion for economic growth, i.e., financialization of the economy.


The unintended consequence of over-indebtedness, dependence on debt expansion for economic growth, and financialization is dependence on low interest rates.


The unintended consequence of dependence on low interest rates is reliance on an ever-increasing the pool of foreign and domestic purchasers and direct purchases by the Fed to absorb new Treasury bond issuance.


A crisis begins when the the Fed is no longer able to buy Treasury bonds and the Treasury is no longer able to expand the pool of foreign and domestic purchasers to absorb new debt issuance.


This series adds to 15 years of work to develop a theory of an eventual U.S. currency and bond crisis.

It’s called Ka-Poom Theory.

I first published Ka-Poom Theory in 1999 shortly after starting iTulip and updated it once since then in 2006. This is a second update and, I hope for all of our sakes, not the last, for the event that it models will change the world forever if it comes to pass, and not in a way that anyone will experience favorably.

The term Ka-Poom arises from the characteristic trajectory of inflation, bond prices, and exchange rates immediately before and after a currency and bond crisis experienced sooner or later by every nation throughout history that has made the following fatal error.

Starting from sound economic policies and fiscal prudence, the country is able to borrow from foreign credit and currency markets both to finance trade and a portion of public expenditure. Over the years the borrower country, and it creditors, become a victim of the debtor nation’s success.

We will build our Ka-Poom rules list as we continue through our analysis starting with Rule #1.


Ka-Poom Rule #1: The uneconomical buildup of aggregate private and public domestic debt and external debt that precede a Ka-Poom currency and debt crisis is a geopolitical not a market phenomenon.




http://www.itulip.com/images2/ChinaReservesandHoldings1980-2012wtmk.png
The red line is China’s total currency reserves that have accumulated since the early 1990s
as China balanced its current account surplus via purchases of U.S. Treasury bonds.
The green line are holdings of U.S. Treasury bonds purchased to help finance
U.S. budget deficits starting in 2001.


As credit expands the purchasing power of households, firms, and the government itself, the debtor nation’s apparent wealth grows. The political leadership begins to suffer delusions of grandeur. They convince themselves and their constituents, and attempt to convince creditors, that the country’s budget deficits and outsized public promises are sustainable. Creditors go along with the ruse for a while because they have no choice. In the process of lending so much to the debtor country and holding so much of that nation’s currency they become beholden. On and on it goes until a revelation is produced by an election or an epiphany by an unforeseen event. Then years or even decades of pent up risk produce a quick unwind.

Could this really happen to the world’s largest economy? To the nation that issues and owes its foreign debt in the world’s primary reserve currency?

No say proponents of Modern Monetary Theory one of several theories to appear recently to explain an absence of the popularly expected symptom of risk of a sovereign debt crisis: rising interest rates. Ka-Poom Theory is an alternative explanation.

Illusion of American Immunity

Is the sovereign that owes its foreign debt in its own currency immune to a catastrophic currency and bond crisis? Owing reparations debts in domestic Papiermarks that only Germany could issue didn’t protect Germany from hyperinflation in 1923. Another challenge to this argument is the fact that the U.S. has already had a currency and bond crisis. With very little external debt and all of it owed in dollars, when The Great Inflation occurred in the 1970s bond yields soared and the dollar tanked. MMT proponents claim that the central bank and Treasury intended this outcome. Did the Treasury then make the choice to issue Carter bonds, U.S. Treasury bonds denominated in West German Deutschmarks and Swiss Francs in 1978, for any reason other than to prevent the dollar from falling further? We will look into this question in greater detail later in this Ka-Poom update series. more... $ubscription (http://www.itulip.com/forums/showthread.php/22121-Ka-Poom-Theory-Update-Two-%C2%96-Introduction-Theory-of-a-Sudden-Adjustment?p=224937#post224937)

iTulip Select (http://www.itulip.com/forums/showthread.php?t=1032): The Investment Thesis for the Next Cycle™
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ddn3f
03-27-12, 09:10 PM
"I still expect a price correction to reach inflation-adjusted 2006 price levels before the housing correction is over."

Is that correct? Reach inflation-adjusted 2006 price levels?

davidstvz
03-28-12, 03:29 PM
I saw that as well. Looks like it was corrected to year-2000 price levels

RTQ
03-28-12, 07:51 PM
I really like the electrical fuse analogy, complete with warm wires until wires melt. A very effective analogy to help people understand how an overload can go on and grow, until a limit is reached and the house goes dark.

touchring
03-30-12, 01:24 AM
This is a world of relativity. The US is in bad shape, but Europe is worst. Europe is terrible, but China is even worst.

Owing to the decades old single child policy, China is starting to shrink by 2015. Not to mention the looming catastrophic health disaster after a decade of breathing in smog filled air, eating antibiotic and growth hormone and pesticide laden fruits, fish, meats and milk!

Techdread
03-30-12, 04:09 AM
This is a world of relativity. The US is in bad shape, but Europe is worst. Europe is terrible, but China is even worst.

Owing to the decades old single child policy, China is starting to shrink by 2015. Not to mention the looming catastrophic health disaster after a decade of breathing in smog filled air, eating antibiotic and growth hormone and pesticide laden fruits, fish, meats and milk!

I know it sounds callous, but is that not one of the big problems of western societies namely their citizens not dying early/before retirement.

jk
03-30-12, 07:38 AM
I know it sounds callous, but is that not one of the big problems of western societies namely their citizens not dying early/before retirement.
the cigarette companies made the same argument re social security and medicare when there were hearings on the health costs of tobacco.

Chris Coles
03-30-12, 07:52 AM
I really like the electrical fuse analogy, complete with warm wires until wires melt. A very effective analogy to help people understand how an overload can go on and grow, until a limit is reached and the house goes dark.

Personally, it was the images of fallen trees from excessive snow. Last year we had the coldest winter on record; this year we are experiencing summer temperatures mid March. I remain convinced that the weather may become the "trigger" for the wires melting in the house.

bungee
03-30-12, 09:18 AM
This is a world of relativity. The US is in bad shape, but Europe is worst. Europe is terrible, but China is even worst.

Owing to the decades old single child policy, China is starting to shrink by 2015. Not to mention the looming catastrophic health disaster after a decade of breathing in smog filled air, eating antibiotic and growth hormone and pesticide laden fruits, fish, meats and milk!

Perhaps the Chinese population will shrink but isn't China still about 80% rural peasant farmers? That is an awful lot of people that can be brought into the cities and economic use and benefit from the increase in living standards. However bad you think life is working in a Chinese factory clearly it must be better than being a peasant farmer living off the land and hoping your crops will provide enough food for the year probably with minimal access to even basic healthcare.

I don’t see any way for western counties to avoid their population fall other than the current solution of sucking in more immigrants which only seems to displace their own young from jobs which they end up paying benefits to not work. As mad as paying half your farmers not to plant anything and subsidising the other half to spray the crops with pesticides and fertilisers to grow twice as much.

The reality of people dying young in China after a decade of breathing in smog filled air, eating antibiotic and growth hormone and pesticide laden fruits, fish, meats and milk is not a health disaster. China does not have a Western socialist health care system or America halfway Medicare system. There is no cost to state of losing these ‘old’, likely manual labourers, after they have worked their best years. There are no years of expensive drugs to extend life to pay for for 10, 20, 30+ years. No OAP retirement homes to fund. No taxes extracted from its citizens and promises of future payments made that somehow have to be met. Be it good or bad China does not need to bribe its citizens to vote for it by borrowing money and handing it out.

My way of thinking about countries is to imagine they are people. Do you want to be the person with increasing life expectancy, savings in the bank, world class education but living in a low class neighbourhood that is moving upwards or the person who life expectancy has plateaued and trails others (and is maybe even falling), who’s schools are stuck between creationism or Darwinism and Maths and Science play second to Celebrity and Media, has enormous credit card debts and who neighbourhood is declining?

To me China has the can do will do attitude while the West has the life is comfortable thank you, I don’t need to bother attitude.

Chomsky
03-30-12, 09:33 AM
Perhaps the Chinese population will shrink but isn't China still about 80% rural peasant farmers?


Not even close:


Urbanization in the People's Republic of China increased in speed following the initiation of the reform and opening (http://en.wikipedia.org/wiki/Reform_and_opening) policy. By the end of 2011, the mainland of the People's Republic of China (http://en.wikipedia.org/wiki/People%27s_Republic_of_China) had a total urban population of 691 million or 51.3% of the total population, rising from 26% in 1990.

http://en.wikipedia.org/wiki/Urbanization_in_China

touchring
03-30-12, 11:39 AM
The reality of people dying young in China after a decade of breathing in smog filled air, eating antibiotic and growth hormone and pesticide laden fruits, fish, meats and milk is not a health disaster. China does not have a Western socialist health care system or America halfway Medicare system. There is no cost to state of losing these ‘old’, likely manual labourers, after they have worked their best years. There are no years of expensive drugs to extend life to pay for for 10, 20, 30+ years. No OAP retirement homes to fund. No taxes extracted from its citizens and promises of future payments made that somehow have to be met. Be it good or bad China does not need to bribe its citizens to vote for it by borrowing money and handing it out.


I wanted to reply Techdread on this, but the problem is that pollution makes you sick, unable to breathe properly and unable to work, but you will still live quite long. To prove the point, many smokers live till their 80s and some even to their 90s.

touchring
03-30-12, 11:47 AM
Not even close:

[/B]


I've seen reports saying that young Chinese today do not work as farmers. Which is quite reasonable, would you expect single childs to work as farmer? They don't even wash their own cups at home! The US isn't the biggest food exporter and China is the biggest food importer for no good reason.

metalman
03-30-12, 01:34 PM
I've seen reports saying that young Chinese today do not work as farmers. Which is quite reasonable, would you expect single childs to work as farmer? They don't even wash their own cups at home! The US isn't the biggest food exporter and China is the biggest food importer for no good reason.

to your point...

AGRICULTURE IN CHINA

http://factsanddetails.com/media/2/20080316-1014_differentagr columba33.jpghttp://factsanddetails.com/skins/country/images/pmark.gif

Only about 10 to 15 percent of the land in China is good for agriculture (compared to 1 percent in Saudi Arabia, 50 percent in India, 20 percent in the United States, and 32 percent in France). There is 545,960 square kilometers of irrigated land in China. Forty percent of China’s crop land is irrigated, compared to 23 percent in India. The average yield per acre in China is double that of India.

http://factsanddetails.com/skins/country/images/pmark.gif China feeds 22 percent of the world population with only 10 percent of the planet's arable land. Land is heavily utilized for agriculture. Vegetables are planted on road embankments, in traffic triangles and right up the walls of many buildings. Even so since 1949 China has lost one fifth of its arable land.

http://factsanddetails.com/skins/country/images/pmark.gif China is the world’s top consumer of meat and grain. As it becomes more affluent people consume more meat and cooking oil and this has lead to increased demand for soybeans as an oil source and feed for livestock. China also uses more fertilizer that any other country.

http://factsanddetails.com/skins/country/images/pmark.gif David Pierson wrote in the Los Angeles Times, “In contrast to large, highly mechanized American farms, a typical Chinese farm is less than an acre in size and worked by hand. It's a legacy of communist reform, when the state seized control of China's farmland and subdivided it into tiny plots. Although this system has kept rural dwellers employed, it has slowed China's ability to boost their incomes.

http://factsanddetails.com/skins/country/images/pmark.gif The autumn harvest typically accounts for three quarters of total grain production. China has had strong grain harvests from 2005 to 2010. Grain harvests in 2009 were a record 530.82 million tons.China The harvest was about 510 million tons in 2007. Grain production dropped from 512 million tons in 1998 to 430 million tons in 2003 and increased to 470 million tons in 2004 and 484 million tons in 2005 thanks to favorable weather and incentive to farmers. In 1993 China produced 440 million tons of wheat, rice and other grains.

http://factsanddetails.com/skins/country/images/pmark.gif Improved farming policies and technologies have given China a high level of self-sufficiency and growth. But the country's top economic planning body warned that this would be hard to maintain. The lack of farm subsidies and expropriation of farmland for urban construction has crippled agriculture. As more farmers move to the cities, lured by better housing, education and other incentives, maintaining the food supply becomes more tenuous. One Chine agriculture expert told The Guardian, “‘We cannot be complacent. We know supply-and-demand is vulnerable. We have a forced balance now that requires strong intervention by the government. This is a tense balance that can be easily broken.’

http://factsanddetails.com/china.php?itemid=348&catid=9&subcatid=63

necron99
03-30-12, 08:00 PM
EJ:

I have the benefit of years of experience as CEO of companies to help. As CEO of a company you have to abstract yourself from the equation. Your role is to look after this entity, this person, the company. You have to be able to decide to do things that may not be beneficial to you personally that are good for the company. In fact every decision you make is made on the basis of what’s the good of the company to the point where you have to willing to go to your board and say, “I’m not the right person to run this company anymore. The company had grown to outstrip my skill set,” if that is your belief. It’s quite unlike any other job in that respect.

Oh dear, it's taken me 45 minutes to stop laughing so hard that I couldn't type. Yes, EJ, that's the theory, but ...[present company excepted] I'm hard pressed to name many modern examples. Although I'm sure there are a few out there somewhere.

Contrast with:

"When I was an activist in the seventies, I thought the main thing wrong with corporate capitalism was its excessive preoccupation with profit. Now I go to companies and say, 'Losing this fight would be enormously more profitable for you than winning it.' Yet they continue to fight. Usually it’s corporate executives protecting their ego.

For example, I worked on a case where activists were demanding a company install a $60 million piece of equipment ... but the law was on the activists’ side. I tried to sell the management on giving the environmental group a different win, ...but less expensive and better for the environment. But the executive I was working with didn’t want to lose any fights. At one point I said, 'If you keep doing this, you’re going to wind up installing the $60 million piece of equipment.' And he said, 'I would rather waste $60 million than hand these sons of bitches victory on a silver platter.'

This sort of thing was surprising to me the first twenty times it happened. Now I find it almost reassuring. The kind of human frailties we come to expect in each other, we ought to expect in CEOs." -- Peter Sandman, corporate negotiator (http://www.psandman.com/articles/kendall1.htm)
.

Verrocchio
03-30-12, 08:07 PM
Only about 10 to 15 percent of the land in China is good for agriculture (compared to 1 percent in Saudi Arabia, 50 percent in India, 20 percent in the United States, and 32 percent in France).

The percentage of agricultural land for the US is way off, throwing doubt on the accuracy of the other statistics. From a more reliable source, land used for grazing and croplands (agriculture) in the United States exceeds 45 percent.

Major Uses of Land in the United States, 2002

http://www.ers.usda.gov/Publications/EIB14/EIB14.jpg
By Ruben N. Lubowski, Marlow Vesterby, Shawn Bucholtz, Alba Baez, and Michael J. Roberts
Economic Information Bulletin No. (EIB-14) 54 pp, May 2006
This publication presents the results of the latest (2002) inventory of U.S. major land uses, drawing on data from the Census, public land management and conservation agencies, and other sources. The data are synthesized by State to calculate the use of several broad classes and subclasses of agricultural and nonagricultural land over time. The United States has a total land area of nearly 2.3 billion acres. Major uses in 2002 were forest-use land, 651 million acres (28.8 percent); grassland pasture and range land, 587 million acres (25.9 percent); cropland, 442 million acres (19.5 percent); special uses (primarily parks and wildlife areas), 297 million acres (13.1 percent); miscellaneous other uses, 228 million acres (10.1 percent); and urban land, 60 million acres (2.6 percent). National and regional trends in land use are discussed in comparison with earlier major land-use estimates.

thriftyandboringinohio
03-30-12, 08:23 PM
... From a more reliable source, land used for grazing and croplands (agriculture) in the United States exceeds 45 percent.



That makes sense intuitively. The true sandy deserts won't graze or grow (awfully dry scrub land will support light grazing), same with the steepest and stoniest mountains. Most of the rest of the US is good for agriculture, except the portion we've paved.

I would believe the lower figure (20%) if they mean "currently in use", rather than "suitable for use".

touchring
03-31-12, 01:20 AM
http://factsanddetails.com/skins/country/images/pmark.gif David Pierson wrote in the Los Angeles Times, “In contrast to large, highly mechanized American farms, a typical Chinese farm is less than an acre in size and worked by hand. It's a legacy of communist reform, when the state seized control of China's farmland and subdivided it into tiny plots. Although this system has kept rural dwellers employed, it has slowed China's ability to boost their incomes.


I know, 4 out of 5 chinese are working in the fields. Who are the 5?

Grandpa and Grandma in their 60s working the fields.
Dad and Mommy in their late 40s working the fields.
21 year old son -> enjoying life in the city and his iphone.


Almost everything about China is distorted, not just economics or finance.

The population makeup is distorted. There are more boys and girls. The kids are spoilt.

Morals are non-existent - remember the hit-and-run incident with the baby girl?

The environment is scrwed.

There are too many unoccupied buildings and underutilized infrastructure. Municipal governments borrow money without the need to return. Debt is rolled over forever.

China is a disaster in the making. Not just finance or economic like less potato chips for poorer Americans or delayed retirement for the Greeks, but real disaster, famine of the 60s type of disaster. People dying by the millions.

doom&gloom
03-31-12, 04:22 AM
cropland, 442 million acres (19.5 percent);.

People tend to think when they see "cropland" it is all soy or corn or wheat or similar. Not true. Crops are as diverse as hops for beer, walnuts, apples, and similar. You can probably also toss in there all the wineries we now have. Not everything grows everywhere. And we cannot forget such cash crops as cotton and tobacco, neither of which anyone would want to eat.

In the end, when we are talking about what I refer to as "industrial ag" of grains, you are much better off looking at actual harvest tonnage each year than potential acres.

pianodoctor
03-31-12, 11:18 AM
CE: And you’re going to give it all away here?
EJ: No. I’m going to explain the thought process, the rules-based analytical frame work, so that readers can judge the quality of theory and how actionable it is without publishing the trades that the rules lead to. We haven’t decided exactly how to do that but will have figured that out by the time I finish with the argument. Simply giving the background will take several articles. A short book, in reality.

EJ, I am a little bit bothered here. I am a blue-collar person with no background in economics. I can appreciate this approach as a teaching tool, since you are essentially assigning us to read and understand everything about the theory if we want to deduce what the trade is. But if I take your paragraph above at face value, it's also implied that if we fail to understand it as well as you understand it, we may fail to ascertain the trade correctly. With your approach coupled with my lack of background, I may misapprehend things and make a disastrous investing mistake.

Am I assessing your words correctly, and will there be some way to determine if we are comprehending your theory well enough to make the correct type of trade?

photon555
04-05-12, 11:52 PM
Hungry young men make motivated soldiers. An economic disaster in China could easily become a military disaster for the world.

oboy
04-06-12, 01:42 AM
+1

EJ, I am a little bit bothered here. I am a blue-collar person with no background in economics. I can appreciate this approach as a teaching tool, since you are essentially assigning us to read and understand everything about the theory if we want to deduce what the trade is. But if I take your paragraph above at face value, it's also implied that if we fail to understand it as well as you understand it, we may fail to ascertain the trade correctly. With your approach coupled with my lack of background, I may misapprehend things and make a disastrous investing mistake.

Am I assessing your words correctly, and will there be some way to determine if we are comprehending your theory well enough to make the correct type of trade?

jpatter666
04-06-12, 07:19 AM
Hungry young men make motivated soldiers. An economic disaster in China could easily become a military disaster for the world.

Hungry *unmarried* young men with no families to lose are going to make it a lot worse. Female infanticide in China could backfire very badly.

jk
04-06-12, 07:31 AM
Hungry young men make motivated soldiers. An economic disaster in China could easily become a military disaster for the world.
the commodities squeeze, chinese exports and the cold war "solution" (http://www.itulip.com/forums/showthread.php/17554-the-commodities-squeeze-chinese-exports-and-the-cold-war-solution)

c1ue
04-06-12, 11:38 AM
Hungry young men make motivated soldiers. An economic disaster in China could easily become a military disaster for the world.


the commodities squeeze, chinese exports and the cold war "solution" (http://www.itulip.com/forums/showthread.php/17554-the-commodities-squeeze-chinese-exports-and-the-cold-war-solution)

The problem with the "Cold War solution" is that China isn't Communist. How exactly do you tax the entire 'free world' as the US did in the Cold War era in order to fight...a market economy?

I do agree the nationalism flag is likely to get played if China seriously falters in their economic growth, but there are plenty of small players around China which excess energy can be bled off to: Vietnam, the Philippines, other parts of SE Asia and the South China Sea, plus machinations in/around Afghanistan/Pakistan.

A purely economic overview of the (first?) US involvement in Vietnam shows that the massive budget deficits engendered by the 500K American troops in Vietnam was directly offset by the US' Western allies funding (and depleting the US gold reserve).

Who will play that role in the "Cold War solution"?

Europe and Japan both have their own severe economic issues; the former with PIIGS, the latter with the aftermath of Fukushima plus 2 decades of deflation.

jk
04-06-12, 12:15 PM
The problem with the "Cold War solution" is that China isn't Communist. How exactly do you tax the entire 'free world' as the US did in the Cold War era in order to fight...a market economy?

I do agree the nationalism flag is likely to get played if China seriously falters in their economic growth, but there are plenty of small players around China which excess energy can be bled off to: Vietnam, the Philippines, other parts of SE Asia and the South China Sea, plus machinations in/around Afghanistan/Pakistan.

A purely economic overview of the (first?) US involvement in Vietnam shows that the massive budget deficits engendered by the 500K American troops in Vietnam was directly offset by the US' Western allies funding (and depleting the US gold reserve).

Who will play that role in the "Cold War solution"?

Europe and Japan both have their own severe economic issues; the former with PIIGS, the latter with the aftermath of Fukushima plus 2 decades of deflation.
c1ue, i'm not sure i understand your response. i don't think the u.s. needs outside funding for a military build up. instead the u.s. will print the money in some fashion, using inflation to indirectly tax savers for the resources required.

Alvaro Spain
04-06-12, 02:36 PM
+1

I am just an average guy with no kwnoledge of economics, nor any special desire to become an expert in this field. I subscribe to iTulip mainly because I expect to obtain some information about potentially good investments. For example: investing in gold in 2001, selling my stocks in 2007 and so on.

I suppose that this clear flow of information from iTulip to its subscribers is not going to change and that EJ will keep telling us clearly what his current investments are. If I was forced to deduce them based on any set of rules I guess that my interest in iTulip would disappear.

vt
04-06-12, 03:53 PM
If you are looking for a trading letter, Itulip is not it. My reading it it was meant to be an ongoing discussion and research forum where EJ told us what he thought was happening and updated us with changes as event occurred. He had only two major investment calls in the last 12 years: But 10 year treasuries in 2000n and 15% of that money to gold in 2001. He did not tell us he had invested in silver until April of 2011, and said he was selling with silver near 50.

You can't get anywhere near those results in any investment letters or wall street research I've seen, especially on a risk adjusted basis. For my own investment purposes, which are far more active, Itulip gives me a much richer framework to understand what is happening in the global community.

Of course there is the added benefit of every other contributor in this remarkable community for which I am thankful.

lakedaemonian
04-06-12, 07:48 PM
The problem with the "Cold War solution" is that China isn't Communist. How exactly do you tax the entire 'free world' as the US did in the Cold War era in order to fight...a market economy?

I do agree the nationalism flag is likely to get played if China seriously falters in their economic growth, but there are plenty of small players around China which excess energy can be bled off to: Vietnam, the Philippines, other parts of SE Asia and the South China Sea, plus machinations in/around Afghanistan/Pakistan.

A purely economic overview of the (first?) US involvement in Vietnam shows that the massive budget deficits engendered by the 500K American troops in Vietnam was directly offset by the US' Western allies funding (and depleting the US gold reserve).

Who will play that role in the "Cold War solution"?

Europe and Japan both have their own severe economic issues; the former with PIIGS, the latter with the aftermath of Fukushima plus 2 decades of deflation.

The last few weeks in Cambodia was a bit of an eye opener.

With the ASEAN meeting and visit by China's President the news was centered on basically two things:

*China pressuring Cambodia to kowtow to China regarding the Philippines/Spratley Islands issue.

*Concern that the diplomatic sea change by the US towards Myanmar/Burma could take the shine off of Cambodia for foreign investment.

While I'm biased by a just completed trip with lots of shiny and interesting stuff to look at......South East Asia looks like it has considerable potential to be the "new black" in geopolitics....economy/military/diplomacy.

Whether it be from the US perspective to attempt to contain China a la Cold War 2.0, Chinese efforts to solidify it's influence/control over the region as it's power grows and expands, or whether it's regional nations like Myanmar, Cambodia, Vietnam, and Philippines working hard to ride the fence between the two. Some very interesting developments when you add some of the puzzle pieces together.

Indonesia from the 50's onwards might be a decent regional example of how a nation attempted to play one major power off of another with a reasonable degree of success, rather than crystal clean political/economic/military alignment...I think we will see more of that or attempts at that.

While there were quite a few government billboards promoting the friendship between Cambodia and China(China is THE foreign investment power in Cambodia), at the coalface amongst the Cambodian people there seemed to be considerable concern about excessive Chinese influence over Cambodia.....as well as the usual concern about Thailand and Vietnam...and a desire to see increased investment/support from the US/West.

I certainly hope to be able to return on a regularish basis to see how things go.

touchring
04-07-12, 12:43 AM
The last few weeks in Cambodia was a bit of an eye opener.

With the ASEAN meeting and visit by China's President the news was centered on basically two things:

*China pressuring Cambodia to kowtow to China regarding the Philippines/Spratley Islands issue.

*Concern that the diplomatic sea change by the US towards Myanmar/Burma could take the shine off of Cambodia for foreign investment.

While I'm biased by a just completed trip with lots of shiny and interesting stuff to look at......South East Asia looks like it has considerable potential to be the "new black" in geopolitics....economy/military/diplomacy.

Whether it be from the US perspective to attempt to contain China a la Cold War 2.0, Chinese efforts to solidify it's influence/control over the region as it's power grows and expands, or whether it's regional nations like Myanmar, Cambodia, Vietnam, and Philippines working hard to ride the fence between the two. Some very interesting developments when you add some of the puzzle pieces together.

Indonesia from the 50's onwards might be a decent regional example of how a nation attempted to play one major power off of another with a reasonable degree of success, rather than crystal clean political/economic/military alignment...I think we will see more of that or attempts at that.

While there were quite a few government billboards promoting the friendship between Cambodia and China(China is THE foreign investment power in Cambodia), at the coalface amongst the Cambodian people there seemed to be considerable concern about excessive Chinese influence over Cambodia.....as well as the usual concern about Thailand and Vietnam...and a desire to see increased investment/support from the US/West.

I certainly hope to be able to return on a regularish basis to see how things go.


China was the colonial power in south east asia in the past, so it is reasonable that the countries are wary.

c1ue
04-07-12, 11:39 AM
c1ue, i'm not sure i understand your response. i don't think the u.s. needs outside funding for a military build up. instead the u.s. will print the money in some fashion, using inflation to indirectly tax savers for the resources required.

My view is different.

Dr. Michael Hudson has noted many times in the past that the entire US foreign deficit in the '70s was equal to the spending on Vietnam. While you might not agree that this link is direct, I do think it is clear that Vietnam spending was a major factor behind the US going off the gold standard.

Fast forwarding to today: it can be argued that US "Defense" spending is again paid for by foreigners buying Treasury bonds - and Dr. Michael Hudson has said so.

If in fact the US attempts to implement a "Cold War" solution by taxing its domestic population - don't you think there will be pushback? Particularly as the US economy is far from healthy and has much less excess to tax outside of the 1%?

My view is unless there is a Pearl Harbor equivalent, it will be impossible to impose sufficient taxation to pay for a "Cold War' solution. To be explicitly clear: China would have to directly attack and kill a large number of US soldiers in order for the US to be able to start a patriotic campaign of significant economic extraction.

China is well aware of this, and there has been extensive study in the CAS regarding how to avoid providing this form of provocation to the US while still achieving China's foreign policy goals.


Whether it be from the US perspective to attempt to contain China a la Cold War 2.0, Chinese efforts to solidify it's influence/control over the region as it's power grows and expands, or whether it's regional nations like Myanmar, Cambodia, Vietnam, and Philippines working hard to ride the fence between the two. Some very interesting developments when you add some of the puzzle pieces together.

Even in the Cold War era, China had land conflicts with a number of its neighbors. In the modern era, an extension into water borders is completely unsurprising, and even less so given potential oil and natural gas deposits.

However, there are one large difference between China's tool box in its neighbors and the US' tool box in the same area: the bamboo network. There are literally tens and perhaps hundreds of millions of ethnic Chinese outside of China's borders in East Asia. In the past, many of them were antithetical to mainland China as these ethnic Chinese were in many cases refugees, or had extended family trapped/mistreated on the mainland.

Today, however, the bamboo network is mostly positive for China, because so much of the historical trade volume has picked back up with China's 'controlled market' economic strategy. Much as Taiwan businesses opening factories in mainland China has significantly split the business interests in Taiwan from the politicals, so too is this same dynamic at work in the rest of East Asia.

jk
04-07-12, 12:39 PM
c1ue, you didn't seem to notice that the "tax" will not be a tax. it will come as inflation. by printing and spending dollars, the gov't will expropriate resources. the costs will be imposed invisibly via higher costs to consumers and lost purchasing power for savers. that's how it worked for vietnam, when johnsons imposed a guns AND butter policy, yes leading to the need to close the gold window.

c1ue
04-07-12, 04:30 PM
c1ue, you didn't seem to notice that the "tax" will not be a tax. it will come as inflation. by printing and spending dollars, the gov't will expropriate resources. the costs will be imposed invisibly via higher costs to consumers and lost purchasing power for savers. that's how it worked for vietnam, when johnsons imposed a guns AND butter policy, yes leading to the need to close the gold window.

jk, do you seriously think at this point that a further acceleration of inflation without accompanying wage increases is going to go by without reaction?

Yes, I know J6P is stupid and ignorant, but they aren't congenitally so.

I hear more and more among working class people that there is something very wrong with what is happening in America right now; not just that they're working harder and getting less than ever before but that the premise of working hard to get ahead doesn't seem to be true any longer. From this simmering discontent to something more vocal and active is purely education.

From my view, I actually agree that a 'stealth tax' will be/is being employed, but my view all along is that this is exactly the medicine which brings forth an American tyrant just as Weimar's acts laid the ground for Hitler's rise.

lakedaemonian
04-07-12, 05:14 PM
Even in the Cold War era, China had land conflicts with a number of its neighbors. In the modern era, an extension into water borders is completely unsurprising, and even less so given potential oil and natural gas deposits.

However, there are one large difference between China's tool box in its neighbors and the US' tool box in the same area: the bamboo network. There are literally tens and perhaps hundreds of millions of ethnic Chinese outside of China's borders in East Asia. In the past, many of them were antithetical to mainland China as these ethnic Chinese were in many cases refugees, or had extended family trapped/mistreated on the mainland.

Today, however, the bamboo network is mostly positive for China, because so much of the historical trade volume has picked back up with China's 'controlled market' economic strategy. Much as Taiwan businesses opening factories in mainland China has significantly split the business interests in Taiwan from the politicals, so too is this same dynamic at work in the rest of East Asia.

While having large communities of ethnic Chinese throughout Asia Pacific has some benefits for China, particularly in terms of coalface intelligence collection, there are some significant downsides.

I've seen with my own two eyes Chinese communities being burned to the ground by indigenous folks as it's actually happening.

Just as you mention J6P coming to grips with inflation destroying their purchasing power.......folks in the developing world are grasping the "bait and switch" of Chinese foreign investment being conditional and often including large numbers of Chinese workers being imported to do much more of the work than expected with the deployment of Chinese foreign investment capital.

I just saw a new bridge being constructed in Phnom Penh that the locals were quite upset about......the Chinese loaned the money for it....and provided most of the workers according to all the local tuk tuk drivers. Workers the tuk tuk drivers believe will never leave.

To me there was a distinct disdain and distaste for Thais, Vietnamese, and especially Chinese by quite a few of the Cambodian people that I met.....although culturally the Cambodians I met seemed reluctant to talk about such things so early in relationships, quite a few opened up fairly quickly and shared their feelings on the topic quite openly after a bit of reluctance.

I'm not convinced the bamboo network is always net positive in having seen it's smoldering ashes approximately 6 years ago with my own eyes.

Anecdotally, it was an eye opener......even with China being the leading foreign capital investor in Cambodia(and the US the leading export market)....the average Cambodian's desire isn't to visit, live, or be educated in, China....it's still the US led west.

The Cambodian Riel is a distant 2nd in cash transaction(nearly everything is a cash transaction) to the US Dollar......Euros are accepted by a few(the few folks we were working with from the EU were particularly disappointed by this inconvenience) and Chinese Yuan wasn't an option.

Maybe distance makes the heart grow fonder, because close proximity certainly doesn't seem to when it relates to Cambodians and other ethnicities.

I'm quite keen to return over time to see how things develop there.

doom&gloom
04-08-12, 03:39 AM
jk, do you seriously think at this point that a further acceleration of inflation without accompanying wage increases is going to go by without reaction?

Yes, I know J6P is stupid and ignorant, but they aren't congenitally so.

I hear more and more among working class people that there is something very wrong with what is happening in America right now; not just that they're working harder and getting less than ever before but that the premise of working hard to get ahead doesn't seem to be true any longer. From this simmering discontent to something more vocal and active is purely education.

From my view, I actually agree that a 'stealth tax' will be/is being employed, but my view all along is that this is exactly the medicine which brings forth an American tyrant just as Weimar's acts laid the ground for Hitler's rise.

1) interestingly, their education will be via the net, and it is the net thay government is now trying to "shut down" in various ways. While SOPA died, there is something coming up right in it's place between the ISP's and content providers that didn;t seem to need the CONgress. And of course the President now has his internet "kill switch" in the waiting.

2) Interestingly, all the laws Hitler needed were mostly already in place during his rise. the people had given him most ofhis powers, and by the time he had real power, they were too cowed or partisan to question them. You can see some of the same in the US today between the Patriot Act, NDAA, whatever that bill is that allows you to be arrested for demostrating near someone with Secret Service protection, etc. Our rights are being "given away" by a CONgress desperate to maintain their own power in the case of an emergency. In the end, they may one day find those same laws first used against them.

jpatter666
04-08-12, 07:38 AM
Just as you mention J6P coming to grips with inflation destroying their purchasing power.......folks in the developing world are grasping the "bait and switch" of Chinese foreign investment being conditional and often including large numbers of Chinese workers being imported to do much more of the work than expected with the deployment of Chinese foreign investment capital.

I just saw a new bridge being constructed in Phnom Penh that the locals were quite upset about......the Chinese loaned the money for it....and provided most of the workers according to all the local tuk tuk drivers. Workers the tuk tuk drivers believe will never leave.

To me there was a distinct disdain and distaste for Thais, Vietnamese, and especially Chinese by quite a few of the Cambodian people that I met.....although culturally the Cambodians I met seemed reluctant to talk about such things so early in relationships, quite a few opened up fairly quickly and shared their feelings on the topic quite openly after a bit of reluctance.


In Myanmar there was a dam being built that would have exported most of its electricity to China. That has stopped due to protests both environmental and anti-Chinese. In Vietnam many of the locals we spoke to were strongly anti-Chinese and even stranger highly pro-American (as an American couple traveling in Vietnam for the first time this struck us at first as highly bizarre but in time we understood it).

c1ue
04-08-12, 11:16 AM
While having large communities of ethnic Chinese throughout Asia Pacific has some benefits for China, particularly in terms of coalface intelligence collection, there are some significant downsides.

I've seen with my own two eyes Chinese communities being burned to the ground by indigenous folks as it's actually happening.

You say potatoe, I say potatoh.

Yes, there is absolutely all sorts of resentment by the locals to ethnic Chinese minorities. In Asia, the Chinese occupy a sort of combination Jewish/(educated moneylender tax collector) and high reproduction/high immigration foreigner niche.

However, this is a good thing for China.

Large minorities in other nations give China exactly a perfectly legitimate excuse for intervention in order to "R2P".

Large minorities with money in other nations also exert a far more powerful influence on these other governments; they're not limited to rioting but can exert the more traditional soft power capabilities of economic coercion/co-option.

Were a repeat of the Burma uprising to occur today, the results would likely be very different were China to take an interest.


I'm not convinced the bamboo network is always net positive in having seen it's smoldering ashes approximately 6 years ago with my own eyes.

Really? So you're trying to say that intra-Asia trade involving China has fallen in the past 6 years? The data would say otherwise.

lakedaemonian
04-08-12, 05:11 PM
You say potatoe, I say potatoh.

Yes, there is absolutely all sorts of resentment by the locals to ethnic Chinese minorities. In Asia, the Chinese occupy a sort of combination Jewish/(educated moneylender tax collector) and high reproduction/high immigration foreigner niche.

However, this is a good thing for China.

Large minorities in other nations give China exactly a perfectly legitimate excuse for intervention in order to "R2P".

Large minorities with money in other nations also exert a far more powerful influence on these other governments; they're not limited to rioting but can exert the more traditional soft power capabilities of economic coercion/co-option.

Were a repeat of the Burma uprising to occur today, the results would likely be very different were China to take an interest.

And this is where my concern about China lies.......while we often read about the failings of US foreign policy here....ad infinitum....we rarely hear about China's....they have considerable culpability that is often overlooked in all the noise about the failings of the US.....Cambodia/Philippines/Myanmar/Sri Lanka...etc. Just because they are clever enough to avoid getting their own personnel killed doesn't reduce their national culpability in what could reasonably be described as genocide and the direct support of it.

Really? So you're trying to say that intra-Asia trade involving China has fallen in the past 6 years? The data would say otherwise.

No, what I'm trying to say is that I've seen with my own eyes and smelled with my own nose the smoldering ruins of Chinese communities burned to the ground in the developing world when things come to a head.....I've also heard with my own ears the seeds of anger/mistrust planted in the minds of indigenous folks directed at Chinese/China.

I think of it along the lines of JPatter666's post......it's quite surprising the positive reaction America/Americans receive from indigenous folks.....one could easily perceive otherwise.....not just one anecdotal incident, but many. I put it down to many considering the US a lesser of two evils compared with China.

After seeing first hand the complete rape/destruction of teak forests and fisheries in the developing world by Chinese interests I can see why folks might feel/act the way they do.

doom&gloom
04-08-12, 05:16 PM
No, what I'm trying to say is that I've seen with my own eyes and smelled with my own nose the smoldering ruins of Chinese communities burned to the ground in the developing world when things come to a head.....I've also heard with my own ears the seeds of anger/mistrust planted in the minds of indigenous folks directed at Chinese/China.

I think of it along the lines of JPatter666's post......it's quite surprising the positive reaction America/Americans receive from indigenous folks.....one could easily perceive otherwise.....not just one anecdotal incident, but many. I put it down to many considering the US a lesser of two evils compared with China.

After seeing first hand the complete rape/destruction of teak forests and fisheries in the developing world by Chinese interests I can see why folks might feel/act the way they do.

People hate Americans until they need us to save or protect their asses -- then they love us.


I encourage you all to listen ot the last Russell Napier I put up or go to the McAlvany site, it is very china focused...

lakedaemonian
04-08-12, 06:21 PM
People hate Americans until they need us to save or protect their asses -- then they love us.



I'm not sure what to make of it myself.......

Ultimately, many of the Cambodians I met share the same desires that Americans do.....a desire to have a fair chance at providing sufficiently for the needs of their families....and a strong willingness/hunger(often literal, not just proverbial) to survive/succeed.

While Cambodia is falling squarely into the Chinese sphere of influence and control as exemplified by it's overwhelming foreign capital investment and China's influence/control over Cambodia's foreign policy to support China's Spratley Island claim in the recent Phnom Penh ASEAN meeting, the preferred currency is the US Dollar(for now) and the preferred language besides Khmer is English.

And I think Cambodians kind of look at Americans like some sort of strange alien species.....they clearly differentiate Americans from Europeans....and I think it comes down to individual and small group behavior/dynamics....I didn't see any "ugly American" episodes while there( not to say it doesn't happen) but I did see some "ugly European Colonialists" while there......

One thing that is quite noticeable in Cambodia(as well as elsewhere in SEA) is Farang(European) with local women.

Getting beyond the obvious prostitution problem, it is quite common to see European males with indigenous females.

From talking to locals and trying to improve our English/Khmer it was fascinating to learn THEIR perspective about these many Farang/Cambodian relationships.

I was quite surprised to hear from both Khmer men and women that they thought Farang/Khmer relationships to be perfectly fine.....I perceived no animosity towards Farang for "stealing their women", far from it actually....they all seemed to see opportunity in it.

But I think the answer lies in how we respectively define our relationships......Farang tend to define relationships on an emotional level while the locals tend to define them in terms of security/stability/safety.

Coming from different perspectives it makes sense......Farang/Americans are generally generations beyond malnutrition and the foundation levels of Maslow's hierarchy of needs...so their needs are more ethereal..whereas the locals needs are far more tangible and immediate.

So when described to me in that fashion I couldn't help but think that while the Farang are looking for love, the locals are looking for a stable sponsor/patron for lack of a better term.

A rough hierarchy was also described to me with Americans and English speaking Europeans at the top of the Farang hierarchy as most suitable to partner with....then non English speaking Europeans and finally some sort of a battle between Chinese and Indians.

And it makes me wonder if that same relationship can apply between nation states in a way?

Cambodia has a Chinese boyfriend.......but used to have an American boyfriend a long time ago who beat her...maybe this American is different?

Don't know if it's relevant to the conversation of why other countries love/hate America/Americans.....but I'm pretty sure their definition of love differs from ours in some key respects.

I blame Maslow and his hierarchy. :)

touchring
04-09-12, 12:07 PM
Don't know if it's relevant to the conversation of why other countries love/hate America/Americans.....but I'm pretty sure their definition of love differs from ours in some key respects.



You may not realize it, but a white American is a big catch in many Asian societies, especially China, although not Japan I believe. Having a white American husband is a symbol of prestige even if he is just a plumber back in America.

lakedaemonian
04-09-12, 03:28 PM
You may not realize it, but a white American is a big catch in many Asian societies, especially China, although not Japan I believe. Having a white American husband is a symbol of prestige even if he is just a plumber back in America.

Absolutely agree and it's quite noticeable......but what I found fascinating is how each side of the relationship view and define the relationship.

The white guys "win" by getting to "punch above their weight" by pulling girls most couldn't in their home countries.......and locals win because they just hit "Lotto" relatively speaking.....it seems to raise the prestige/station of the girl/family in question.

Like stories of wealthy families partnering and aligning their interests through intermarriage of their children, it would appeal the same long-term thinking and machinations are quite common amongst the poor seeking a farang to join their family.

And it seems like folks from the US are particularly sought after for some reason.....maybe Cambodia itself is looking for a farang? :)

Not meant to be offensive.....I did find Anghor Wat quite breathtaking and humbling....and a sledgehammer to the guts in terms of cultural longevity and fallen empire.

The west is economically, politically, militarily, and culturally dominant......but are we built to last?

I look forward to going back to the region as much as possible....I think it's going to be a real centre of gravity in the long period ahead....and it's a region where I truly have a lot of respect for the people I've met....which unfortunately I can't honestly say about every place I've visited.

bart
04-09-12, 03:55 PM
You may not realize it, but a white American is a big catch in many Asian societies, especially China, although not Japan I believe. Having a white American husband is a symbol of prestige even if he is just a plumber back in America.

It applies to many white American women too.

During the years she spent in China since 2006 on her Fulbright etc. (mostly in Beijing), she could have eaten dinner out every night if she had accepted all the invitations from most "social classes". Some of the invitations from the "political or military classes" were quite... ummm, "colorful" too.

doom&gloom
04-09-12, 04:43 PM
When I was in Estonia a few years back, I went to a local bar with a friend. There were all these STUNNING women ther, I mean truly beautiful, and very few guys with them. When I asked my friened about it, he told me that they were not interested in local men unless they had money. they wanted men from other european countries or the US who had money and a means to take them away. At the time the avge Estonian was earling like $24k US equiv. while a dcent house (in the northern housing bubble) was running around $500k US.

You see this all over the world. You can get nice looking women from Russia, the Ukraine, Columbia, venezula, you name it. There is nothing unique in "marrying up", and it happens all over the US among white people as well. One couple I know (not too well) has a wife who came from "dirt poor" quite literally, and now with a successful husband she thinks her shyte don't stink and her kids should only hang out with kids from rich households. It is just the way of the world I guess.

lakedaemonian
04-09-12, 08:45 PM
When I was in Estonia a few years back, I went to a local bar with a friend. There were all these STUNNING women ther, I mean truly beautiful, and very few guys with them. When I asked my friened about it, he told me that they were not interested in local men unless they had money. they wanted men from other european countries or the US who had money and a means to take them away. At the time the avge Estonian was earling like $24k US equiv. while a dcent house (in the northern housing bubble) was running around $500k US.

You see this all over the world. You can get nice looking women from Russia, the Ukraine, Columbia, venezula, you name it. There is nothing unique in "marrying up", and it happens all over the US among white people as well. One couple I know (not too well) has a wife who came from "dirt poor" quite literally, and now with a successful husband she thinks her shyte don't stink and her kids should only hang out with kids from rich households. It is just the way of the world I guess.

Too true......but on a happier note a friend who spent some time in Poland recently ran into a number of stunning Polish ladies who wanted nothing to do with flash tourists.....he said they were unanimous in their preference for their local fellas over the wealthier(relatively speaking) visitors/tourists......explained by them when asked because the local fellas treated them with dignity/respect, didn't beat them, didn't cheat on them, and worked hard to build happy families, even if they didn't have much of a shot an material wealth....after a few of the girls had been burned by foreigners just looking for a laugh.......so win one for the local fellas doing it right. :)

c1ue
04-12-12, 09:30 AM
People hate Americans until they need us to save or protect their asses -- then they love us.

I'd say that the well of WWII & WWI gratefulness is just about dry.

The MSM slant is also not to be underestimated. If we in the US have difficulty discerning the signal from the noise, it is 1000 times harder for a foreigner to do so since they literally only see the top level mainstream output.


You may not realize it, but a white American is a big catch in many Asian societies

This isn't a surprise, and is due to many factors:

1) Demographics: there are a lot more Asians than white people. period. If scarcity = value, then the 'catch' is obvious. Unfortunately many of these Asians discover that most of the white people in Asia are there because they couldn't hack it in their own societies.

2) American economic primacy: The top dog nation's people are always 'punching above their weight'. Witness Brits during the Pax Britanica.

3) Social factors: Women in highly male dominated Asian societies find the relative gender equality of Westerners to be very nice. Why be suppressed by Asian men/Asian society if you have a choice

4) MSM plus racial unfamiliarity. You know how some whities say Asians all look alike? Well, in Japan when I lived there, the same applied but with different results.

Everyone looked like either Tom Cruise or some other movie star, depending on the salient feature (big nose, hair style, shape of head/face, etc etc).

touchring
04-12-12, 10:23 PM
4) MSM plus racial unfamiliarity. You know how some whities say Asians all look alike? Well, in Japan when I lived there, the same applied but with different results.

Everyone looked like either Tom Cruise or some other movie star, depending on the salient feature (big nose, hair style, shape of head/face, etc etc).


I guess this was what happened when the Homo Sapien women from Africa met the muscular Neathethals men in Europe?