The Early Days of a Better Nation

Sunday, September 21, 2008

Now, here's the plan ...

The US Government takes on
one trillion dollars of toxic debt, which it will finance by borrowing from
the People's Bank of China which will in turn take it out of the hide of an increasingly militant working class whose formative political experience was
the Cultural Revolution.

Nothing could possibly go wrong.


Ken, I burst out laughing when I saw this less than two minutes ago, even though I am angry at the External World for not letting me engage in pure, abstract thought for about 20 hours a day. Keep up the good work.

... Were I China, I'd be asking for something in return... Taiwan, Japan, the Straights of Malacca, and Indonesia, for instance.

(Not that the US honors its agreements...)

Clearly, this plan has a lot of charming failure modes.

I am looking forward to it! No. Really.

(thank you for the morning's laugh)

From the looks of the stats, the UK will be a creditor to a large extent as well. In fact the debt will be spread around the world in both private and state hands - the People's Bank of China will only take on a small proportion of the $1 trillion, and what's more it shall do so voluntarily. Remember that US debt as a proportion of GDP is about average for OECD countries and is not nearly as bad as say japan, Italy, Greece, Belgium, and not as bad as the Euro Area as a whole, so everybody should really shelve the doomsaying, nomatter how eager they are for the destruction of the nasty US and the untold suffering and cleansing of the rapture, I mean, revolution.

There's a lot of advocacy fallacy on the topic of the US economy.

LOL! You made my day, Ken. I wonder if a stand-up act consisting of showing the right pictures in the right sequence would be a hit.

That's unfair! I was drinking soup!!

The Chinese are already a step ahead of you on the Taiwan thing...

Loved the Dr evil connection. He does seem to have more executive ability than Bush.

I don't think the Chinese peasants will be revolting so long as their economy keeps growing at 10%. Since they aren't adopting all the Luddite restrictions we do & are run by engineers rather than lawyers, I think it will.

Since they aren't adopting all the Luddite restrictions we do


vavatch: Government debt will be at the level of 70%, which is not about average. True it will be less than Italy (if that's your measure of doing well...), and Japan (whose high debt is largely due to their own version of the same crisis many years ago). Government debt usually rises during downturns, as tax revenue goes down (and given how much of US tax base is based upon real estate, the amount lost could be huge at a local level). So unless there are big revenue cuts (and its not a good time for that economically - it would certainly make any recession/depression deeper and longer), that debt is going to get worse.

If you add to this problem US private debt (household and company), then the US is very heavily indebted to the rest of the world. There's only so much appetite for debt that the world's going to be willing to have, especially given much of the recent debt is now worthless.

We are supposed to be spending £100 billion to get windmills to (very optimisticaly) provide 15% of our power while so reastricting those who want to build nuclear generators without any public subsidy that the building time goes up from 4 years to 10 & running costs at least proportionately. The same but moreso applies to GM.

You are prefectly free Ejh to approve of such things but you cannot seriously deny that they & many others, are Ludite restrictions or that our economy would be growing at closer to the Chines rate if we didn't have them.

Neil, re the non-revolting of Chinese peasants: google on "mass group incidents" or follow the fine blog Blood and Treasure for a while ...

Much of the Chinese capital is their dollar mountain accumulated by selling cheap electronics and other consumer (and business) goods to the USA. While they are understandably cautious about putting too much of it into Wall Street's black hole (hence the investment bank passing on taking over Morgan Stanley), a complete collapse of the US would not be good news for China's rulers. So they will try to make the rescue plan work. They will, of course, extract the maximum political advantage in the process - expect to hear rather less about Tibet in the US press, for example.

Another good source for the things the Chinese government would rather you didn't read about is China Digital Times, which offers a daily e-mail feed.

You are prefectly free Ejh to approve of such things but you cannot seriously deny that they & many others, are Ludite restrictions or that our economy would be growing at closer to the Chines rate if we didn't have them.

I don't actually recall making any comment on "such things" but they don't appear to me to have much to do with Luddism, a term I am not sure you understand whether used in its historical or its contemporary sense.

Moreover, I would have thought your assumption that GM + nuclear power = Chinese growth rates would perhaps be considered less than proven by most reputable economists. Hence I think it may be possible to deny it - even, perhaps, a little "seriously".

Uh ... it's a fun metaphor ... but the problem is that the U.S. won't borrow anything from China for the bailout under the Dodd-Frank bill that went down two days ago.

The federal government will give T-bills to financial institutions in return for the sludge on their balance sheets. No money borrowed from China.

The government will then sell the sludge for cash.

If the government sells the money for less than it paid for it, then the financial institution that sold it the sludge will have to give the federal government shares in itself worth 125% of the government's loss.

The government then pays off the T-bills by selling the shares in the financial institutions.

Balance sheets repaired, taxpayers protected, no money from China. Of course, the plan could still prove insufficient for other reasons. The losses on the sludge could be greater than the financial institution's total capital. The financial institutions could fail for other reasons in the interim.

But the essential premise of this thread, unfortunately, is incorrect.

Anyway, it might all be moot. We'll see what Congress does. The U.S. could wind up, after the election, passing what the Democrats prefer on a party-line vote: namely, Swedish-style nationalizations combined with a rejiggering of the bankruptcy code to allow debtors to renegotiate their mortgages.

Or we could do nothing and, well, Christ, it's just not really that funny.

My only point is that further indebtedness to China isn't an issue.

Whoops! "Sells the sludge," not "sells the money." Apologies!

but you cannot seriously deny that they & many others, are Ludite restrictions or that our economy would be growing at closer to the Chines rate if we didn't have them.

You are completely wrong on both counts.

1) They are not Luddite restrictions. The Luddites opposed new technology because it would drive skilled artisans out of work, replacing them with a combination of semi-skilled and unskilled labour and mechanisation. The incentives around wind power, nuclear power and GM come from completely different motives.

2) UK GDP hasn't grown at anywhere near current Chinese rates since 1800. If being the workshop of the world and pioneering the technologies of the entire modern age failed to produce 10% GDP growth, I fail to see why tweaking planning restrictions around the electricity generating sector would do so.

I should add that Ken's post is completely wrong. The Cultural Revolution was a very long time ago. No one currently under the age of forty was even alive during the Cultural Revolution. No one under 45 - that is to say, 70% of Chinese people - will have any coherent memory of it. Even the youngest Red Guards will now be getting close to retirement age.

To put it another way: only a quarter of the Chinese working-age population are old enough to remember anything at all about any part of the Cultural Revolution. Saying that it was the "formative political experience" of the Chinese working class is therefore deeply misleading. Their formative political experience has been one of increasing economic liberalisation accompanied by massive economic growth.

Yes! Neil Craig of the bampot 9% growth party makes an appearance.
I think my bingo card must be nearly full.

"Moreover, I would have thought your assumption that GM + nuclear power = Chinese growth rates would perhaps be considered less than proven by most reputable economists."

By me too Ejh since I said that is what WE should be doing to stay ahead of them. They are in a slightly different situation & though they will in the fairly close future develop the capacity to do nuclear in a big way they are currently on coal & hydro. On the other hand, by these less advanced technologies they produce more electric power than the entire EU now & I think you would have to search hard to find a "reputable economist" willing to say that was irelevant to their growth.

Ajay (1) the restrictions are of the same sort which is the point. (2) Britain didn't achieve 10% growth in 1800 either. It achieved 2%. The difference is that then the world average was about zero.

Technology is rising asymptotically which is why it is possible for the world average to now be 5%. I dispute there is any reason whatsoever to believe it is impossible for us the beat the average. At both periods & in between. faster growth has been achieved by those already most technologically advanced which is what we should expect.

Guthrie your response is as well argued, as deeply intellectual & as pointless as previously. It is not merely your card that is full of it.

ajay, I don't think the formative political experience of a class is necessarily one that has to be lived through that of the majority of current members of that class. The older generation can influence the younger, there are elements in public memory that can be harked back to, etc. To take a less fraught example, the formative political experience of the British working class was the 1945 Labour government for a very long time (though it now no longer is).

(I'll admit to a stretch for the sake of a cheap laugh, but at the same time I'm willing to be stubborn about this one.)

Ahh neil, if our host will excuse me for a second- you harp on about 9% growth but completely ignore the realities of the situation. Therefore, everything you say is mince. I don't need to write a huge intellectual screed, after all I've dissected your unscientific arguments on the Scotsman many times, and your economic ones don't look any different.

Oh, and we are already ahead of the Chinese- as a mature economy with everyone living above a standard that your average Chinese would be jealous of, we do not need to stay ahead of them- they need to catch up.

"To take a less fraught example, the formative political experience of the British working class was the 1945 Labour government for a very long time...".

When I was at Cambridge in the early '70s I spoke to a college servant who still bore a grudge about the role students had played in defeating the 1926 General Strike. Aside: it's pretty clear that the people who carried out the measures used had taken warning from what was sketched out in William Morris's News From Nowhere, to avoid the communications paralysis and agenda setting it describes.

Also, people around here should know how long the consciousness and influence of the Highland Clearances endured - and still does.

Guthrie laying out your own ignorance for all to see is not the same as dissecting other's agrguments - something you have never done before & which you admit to not even attempting to do now. If you have some arguments of fact or "intellectual screeds" I would be interested to see them, even once.

You are, of course, entitled to your opinion that we should never attempt to improve this country until China's per capita wealth has passed ours but that is merely an assertion of your opinion & not of fact.

Improve? Who said economic growth was the same as improvement?
Thus, we see neils problem- he equates economic growth with the be all and end all, and tries to change the subject by accusing me of not being for improving this country, when in fact my actual point is that the growth rates he champions are simply not possible due to the differing stages of our economy.
You see I have quite a number of ways of improving this country, from better education to improved regulations in housebuilding for energy efficiency, a bit more in the way of local and direct democracy etc. But Neil wouldn't like my proposals i am sure.

The big problem is that the bankers are so incompetent that they not only bought the toxic sludge, they don't know where it is now.

I think most people would agree that richer is an improvement over poorer. I have even seen the Green Party claiming they are actually in favour of growth, though obviously, as Guthrie shows, they are lying. If he is in any way honest he will, of course, be able to link to places where he has denounced them for saying this.

I believe we are entitled to hold that view as he is entitled to hold the view that the country would be improved by more pointless regulations & presumably more government nannies paid to enforce them.

His statement that it is impossible for Britain to achieve even something closer to world average growth is not actually a point of argument but an assertion without, indeed contrary to evidence.

I like the idea of those Chinese peasants forming class consciousness, but, unfortunately, that's all gone. I've been to enough Chinese peasant villages to see that the collective economy is dead, as is the collective itself. I've met many people educated during the cultural revolution who are now successful businessman with no observable retention of their maoist education. I have not seen anything close to opposition to capitalism. There are riots and protests all the time, but the gospel of greed is still dominant. I've met communist part members, but nothing close to communists, it's old rhetoric to Chinese people.

I know that's not your main point, but anyone who travels around here, especially if your fluent in CHinese, will find that the cultural rev image is, at best, a shameful mistake.

expandingtohigherrealms: This is a very fair comment, and I don't want to belabour the point. However, I notice that the (very few) revolutionary/democratic socialists who try to organise in China do find that they have to argue against illusions in Maoism among younger people who are otherwise close to their views. (Some interesting material here.)

ken, i dont doubt it. I would also like to see more advocates of ideologies which don't include the aspiration to be a boss, which is the new Chinese dream, (it's like a fashion that refuses to go out of style.) In my neighborhood, in Shanghai, there is a mosque, where ethnic minorities go, and three churches. There's even a house church in my apartment complex. I hope that the next dominant ideology is something better than a combination of American style protestantism and authoritarian capitalism (without even the 'socialist' welfare policies of we Americans) In the early 1900's, Lin Yu Tang said that the chinese have no social conscience or nationalism, but only loyalty to their own group/kin. Now, after the collectives are dead, that is ever more the case. Thanks for the link. The other night me and my chinese wife were talking about how consistently the history of china has been determined by peasants. I hope that it is presently determined in such a way as to produce something new, rather than repeating the past. Thanks for the link. I'll keep hope alive.

you do realise you're just airing your misinformed, bigoted thoughts dont you?

It seems things might be on the verge of going a bit pear-shaped in the Middle Kingdom now.

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