Tibet and China: clash of cultures

I’d long been interested in Tibet and had a romantic vision of the Land of Snows, but I’d never been there. Now I learned that the Tibetans have a different way of seeing the world. My classmates were Buddhist and had a strong faith, which inspired me to reflect on my own views about the meaning of life. I had been a materialist, as all Chinese are taught to be, but now I could see that there’s something more, that there’s a spiritual side to life.

[...]

The Chinese protesters thought that, being Chinese, I should be on their side. The participants on the Tibet side were mostly Americans, who really don’t have a good understanding of how complex the situation is. Truthfully, both sides were being quite closed-minded and refusing to consider the other’s perspective. I thought I could help try to turn a shouting match into an exchange of ideas. So I stood in the middle and urged both sides to come together in peace and mutual respect. I believe that they have a lot in common and many more similarities than differences.

But the Chinese protesters — who were much more numerous, maybe 100 or more — got increasingly emotional and vocal and wouldn’t let the other side speak. They pushed the small Tibetan group of just a dozen or so up against the Duke Chapel doors, yelling “Liars, liars, liars!” This upset me. It was so aggressive, and all Chinese know the moral injunction: Junzi dongkou, bu dongshou (The wise person uses his tongue, not his fists).

Read the rest of Grace Wang's Washington Post article here.

GloomBoomZoom vs. GloomBoomDoom

Not only do we have the Great Debate about 'flation (In- vs. De-), but selective quotation can make the same expert give evidence for both sides.

Here it looks as though Dr Marc Faber is expecting inflation:

Dr Marc Faber has argued that even in the United States, where property prices are in decline, in an environment of high inflation he would rather own a US$1 million home than hold the same amount of cash or bonds, because the house would better preserve value.

... but here, its extreme opposite:

The view Marc is putting forward is the opposite one - that deflation will be the clear winner, dragging the whole world economy into a slump, with lower prices for commodities as well as stocks and property...

...In a real downturn, the United States (and other developed nations) would stop importing so much oil...and so much merchandise from China, which would have the consequence of reducing energy consumption by China too. Result: lower energy prices and a worldwide recession...maybe even the worst worldwide depression in history.

I think the giveaway in the first, is in the qualifying phrase "in an environment of high inflation". All I've read so far about Marc Faber indicates that his real position is represented by the second.

In my (amateur?) view, we're heading for a bust, and unless it can be avoided (which would be wonderful news), then the sooner, the better. Ideally, it would have happened in 2000 - in fact, it did, but we then got the reckless monetary reflation of 2003-2007.

Why soon? Because the longer it goes on, the more the transfer of productive capacity to the Far East, so that when recovery comes, we in the West won't be equipped to restart.

Empathy test - infallible

Off topic

Cure, effect, cause

A paper from the Levy Economics Institute is arguing (at least theoretically) for an extra US fiscal stimulus of 4% of GDP. That's $600 billion.

The authors say that the effect would be better if this reflation came in the form of additional direct government spending, though they acknowledge that it still wouldn't immediately halt the economic decline:

It is somewhat discouraging to see that even a relatively large stimulus plan will fail to prevent a substantial loss of output. But over the medium term, as the devaluation of the dollar and reduced spending begin to exert a moderating effect on the current account deficit, foreign trade will boost output and employment, providing the impetus for renewed growth.

Karl Denninger begs to differ (though in his case, he's still talking about transfers of money, rather than direct government expenditure):

But now we have reached the point where we need $5 in debt to create $1 worth of GDP. As debt levels rise this ratio goes parabolic and ultimately becomes impossible to sustain. That we have reached a 5:1 ratio means that the game is basically up, and the rapidly rising rate of defaults across all areas of consumer debt mean that this "engine" to fuel "growth" simply can't find any more fuel, despite the desires of the bankers and merchants to "make it so."

The Levy paper has echoes of FDR's 30s rescue, but Denninger is more concerned to compare the present mortgage bubble with the one that led to the Crash of '29:

...we've done this before... We saw, in fact, nearly the exact same pattern of practice, fraud and theft that were featured in the housing bubble during the years just before The Depression, and those "standards" in fact were a primary causative factor OF The Depression!

So maybe both parties are correct.




It's also possible that the Uk has got it wrong even worse than Uncle Sam. $600 bn is about £300 bn sterling, but adjusted for relative population size that's only equivalent to £60 bn pumped into the UK economy. We're already talking about a possible £100 bn-worth of mortgage garbage being swapped by HMG for government bonds - and our current fussing over Gordon Brown's crumbling reputation suggests that Prudence wouldn't dare try to reflate with even more direct government spending.

Besides, we are starting with a higher debt-to-GDP ratio than the USA, a State that consumes a bigger proportion of the economy, and a populace that suffers a significantly lower level of personal income on a Purchasing Power Parity basis.

Maybe that's why the pound is matching the dollar in its downward trajectory, and may even overtake it.

I've been wondering recently whether the ordinary investor of the future will be more interested to play in the foreign exchange markets, rather than stocks whose value is lied about, manipulated by rumour and sovereign wealth funds, and nibbled half to death by fees, commissions, taxes and inflation.

UPDATE - Karl Denninger is emphatic that it can't work:

Sack, no.

You can't spend $600 billion in deficits without it coming back SOMEWHERE.

Government spending is not a net positive. You can't only get to a net positive via growth in GDP.

Debt-initiated spending only returns $1 for every $5 taken on in debt.

Mortgage bond re-rating: reversing the rescue?

Karl Denninger notes that Moody's have re-rated previously "AAA" packaged mortgage products, and points out that since the Federal Reserve only accepts AAA, it may be forced to send much of this stuff back and demand better collateral. The banks' headache returns.

Second blow

TV ad tonight: Woolworths children's jeans £2. I said, you wouldn't have got a zip for £2 a few years ago. (So many Birmingham kids I used to teach years ago thought school didn't matter, they'd be getting a job at Tucker Fasteners anyway. That or Lucas' - now joining the list of nostalgia subjects.)

Then a thought: when the recession really bites, the price war will be unrestrained. I don't know what is still manufactured in Britain, but in the second phase, when the poor become acutely cost-conscious, I can't see domestic manufacturers staying in business.

Of course, with social benefits still generous, we're not there yet (they're still buying their kids Xboxes and Lacoste trainers, while SoSecurity lay on taxis to take the tearaways to school-for-the-expelled); but wait for the tax and benefit reviews when public finances finally unravel.

And if I ever do get another new car (the Fiat Brava is kept going on a radiator refill every Saturday), maybe it's the Tata Nano for me.

I'm looking at checkmate and trying not to believe it. But that's my problem; the difference between Western waster education and Chinese school is too clear. And we'll be a sort of nationwide museum of once-were-workers. But I don't want to live in the past.