Jim Rickards Dissects China Following Visit

June 12, 2012


“In the years leading up to 1991, virtually no western expert, scholar, official, or politician foresaw the impending collapse of the Soviet Union it, and with it one-part dictatorship, the state-owned economy, and the Kremlin’s control over its domestic and Easter European peers.” ~ Leon Aaron in Foreign Policy Magazine

Jim Rickards captures the essence of China’s situation in this Bloomberg interview with Diedra Bolton; notably, the dubious finances backing China’s train system, overall misallocation of capital, corruption, the unstable dual class system, risk of violence, and insiders selling.

Rickard’s managed to speak with a Princeling, who said the Polturbo’s primary concerns are factors that threaten its iron fist control. The party is concerned about the 200 million that have migrated to the cities (for an inflated number of construction jobs), and the government’s inability to effectively censor mobile communications.


In the Predictive Societal Indicators of Radicalism Model of Domestic Political Violence Forecast, the ability to mobilize is one of the three primary factors that escalate the probability of social unrest. Measures of oppression and the government’s geographic coverage are the others. It would be interesting to see if Rickhards has also taken a bearish stance on the Chinese currency as I have.

The next step in China’s denouement is for a bankruptcy to exacerbate capital outflows.
In other news:

  • The Macroeconomics of Chinese Kleptocracy ~ Bronte Capital or here historysquared
  • Business insider slideshow on China’s troubles ~ businessinsider
  • World Bank estimates that 49 million rural migrant workers in China lost their jobs between October 2008 and April 2009, with 24 million regained since then. They fear another downturn would create massive unemployment (and angry dudes)
  • China: A Mixed Bag Turns Very Ugly: auto industry drowns in overproduction, bubble pops ~ testosterone pit

Further Reading:

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