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Author Topic: This Will Finish Obama Off Next Year  (Read 576 times)
Wonkish1
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« on: September 30, 2011, 02:53:04 am »
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I've been reading and writing about this topic now for just over a year. But what will ultimately do in Obama next year isn't going to be a small double dip caused by anything in the US. Nor is it even going to be a Greek default. The real answer is what is going to happen in China that is going to really hurt.

Residential property sales in China are expected to slow considerably next year. It will cause a cascading effect as at least half the largest property developers in China can't pay their debt. Municipalities will stop being able to pay their debt. New construction will halt on a dime. Chinese demand for steel and other commodities will fall driving down world commodity prices. The problems in their property markets will tip over their manufacturing markets as well which are equally over indebted and over producing.

Watch the footage below. These "ghost cities" will scare the living hell out of you.

<iframe width="640" height="360" src="http://www.youtube.com/embed/rPILhiTJv7E" frameborder="0" allowfullscreen></iframe>

Folks this is what happens when you have a runaway central bank. This whole problem was caused by People' Bank of China, just like the Fed caused our crisis, and is in the process of doing again.
« Last Edit: September 30, 2011, 03:20:22 am by Wonkish1 »Logged
Reaganfan
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« Reply #1 on: September 30, 2011, 02:56:09 am »
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My guess is a gaffe that he will make. He had a few poison pills during the 2008 campaign, but the economy situation in late September allowed them to slip. I feel that this year, it will hurt him more.
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Wonkish1
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« Reply #2 on: September 30, 2011, 02:57:21 am »
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Curious how to embed, anyone??
« Last Edit: September 30, 2011, 03:13:18 am by Wonkish1 »Logged
Politico
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« Reply #3 on: September 30, 2011, 06:26:17 am »
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Things work great in command economies until they do not work, and then they REALLY do not work. We will wait and see what happens with China, but I suspect it is not going to be pretty.
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"Government is the great fiction through which everybody endeavors to live at the expense of everybody else."

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hcallega
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« Reply #4 on: September 30, 2011, 08:13:58 am »
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Well obviously the collapse of the world's second largest economy would make a big impact. But let's remember that there is never just one "silver-bullet" that finishes off a President. The Republicans need to nominate a competent candidate to win, as was the case in 1980. Even then, Carter pulled even in the polls until Reagan went HAM during the debates.
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"There is nothing wrong with America that cannot be cured by what is right with America."-President William Jefferson Clinton
"There is not a liberal America and a conservative America there is the United States of America."-Senator Barack Obama
Mynheer Peeperkorn
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« Reply #5 on: September 30, 2011, 08:19:37 am »
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I don't see it happening in the near future.
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anvi
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« Reply #6 on: September 30, 2011, 09:11:57 am »
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Makes for very fun writing, I'd say. 
"American Housing Collapse Fails to Bring Down Obama---
But China's Housing Downturn Succeeds!"

There has been an unmistakable swelling in the Chinese housing market in the course of the past decade, and it is causing worries both among Chinese economists and at S&P and the World Bank. Actually, it's provincial and municipal banks in China that have been relying on real estate investment and fueling more demand for construction in recent years.  But measures have been taken to tighten that up in order to mitigate the possibility of a crisis in the past several years.  The national government has responded to World Bank calls to raise interest rates, which they've done three times in the past year (so now the World Bank is worried about to too-precipitous planned downturn--go figure).  They've shut down home buying deductions and raised deposit requirements for second-home buyers, and even introduced property taxes in some cities. They've raised bank-reserve requirements to slow down lending.  Plus, lending practices in China require substantially larger deposits from buyers than the often do here.  Even in the event that construction experiences a slowdown, we don't seem to be looking at a scenario that will cause massive defaults in home ownership.  In addition, the growth in construction may very well prove to be a boon in the coming years, as recent reports forecast dramatic increases to urban populations as well as rising income levels during the next decade.  In any event, I don't see cause for that much worry yet; in the past year, the Chinese economy has slowed from 10% annual growth to 9% annual growth; construction slowdowns might create a drag in the near-term, but that economy still has a lot of game.

If it's Obama's presidency coming to an end next year we're worried about, domestic economic conditions are already bad enough to accomplish that, provided the GOP nominates a decent candidate.   
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Paul Kemp
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« Reply #7 on: September 30, 2011, 09:26:00 am »
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My guess is a gaffe that he will make. He had a few poison pills during the 2008 campaign, but the economy situation in late September allowed them to slip. I feel that this year, it will hurt him more.

What are these "poison pills" you speak of?
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Link
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« Reply #8 on: September 30, 2011, 09:27:02 am »
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Things work great in command economies until they do not work, and then they REALLY do not work. We will wait and see what happens with China, but I suspect it is not going to be pretty.

Everyone giving advice to China to just let market forces take over and see where things go is naive and reckless.  Bush Sr was over in Russia crowing about how much they embraced capitalism after the fall of communism.  He was advising everyone to invest in the worlds latest free market.  How did that work out?  Learn some history.
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Insane quote of the year-

"Every aspect of life in America is worse than when he [Obama] took over" -Marco Rubio
Wonkish1
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« Reply #9 on: September 30, 2011, 05:59:45 pm »
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Makes for very fun writing, I'd say. 
"American Housing Collapse Fails to Bring Down Obama---
But China's Housing Downturn Succeeds!"

There has been an unmistakable swelling in the Chinese housing market in the course of the past decade, and it is causing worries both among Chinese economists and at S&P and the World Bank. Actually, it's provincial and municipal banks in China that have been relying on real estate investment and fueling more demand for construction in recent years.  But measures have been taken to tighten that up in order to mitigate the possibility of a crisis in the past several years.  The national government has responded to World Bank calls to raise interest rates, which they've done three times in the past year (so now the World Bank is worried about to too-precipitous planned downturn--go figure).  They've shut down home buying deductions and raised deposit requirements for second-home buyers, and even introduced property taxes in some cities. They've raised bank-reserve requirements to slow down lending.  Plus, lending practices in China require substantially larger deposits from buyers than the often do here.  Even in the event that construction experiences a slowdown, we don't seem to be looking at a scenario that will cause massive defaults in home ownership.  In addition, the growth in construction may very well prove to be a boon in the coming years, as recent reports forecast dramatic increases to urban populations as well as rising income levels during the next decade.  In any event, I don't see cause for that much worry yet; in the past year, the Chinese economy has slowed from 10% annual growth to 9% annual growth; construction slowdowns might create a drag in the near-term, but that economy still has a lot of game.

If it's Obama's presidency coming to an end next year we're worried about, domestic economic conditions are already bad enough to accomplish that, provided the GOP nominates a decent candidate.   

Trust me those moves by the Chinese government slowed down new development a little bit, but it still continued because a central bank rate still way to low given its current inflation rate. The Chinese government didn't ease the economy off of this mess, a huge crash is coming and its coming soon. These development companies have gone from prime bank lending, to subprime bank lending, to the international bond market, to trust companies, and now to underground banks. Interest rates from some of these trust companies are usually 36-90% a year. Underground banks charge at least 10% a month. Apparently even these crazy sources of funding are disappearing.

Over the last week several of China's largest property developers had their bonds fall to only 70 cents on the dollar, essentially pricing in likely default. Real estate sales fell flat this summer according to many sources. For the first time discounting properties is becoming widespread and we are looking at a large fall off in sales starting next year.

You're talking about an industry that together with its inputs of cement, steel, construction, banking, etc. represents almost 50% of all fixed investment in China. And you're talking about a country that more than 60% of all of GDP is fixed investment. So under a moderate assumption of a 1/3 of those developer inputs going bankrupt then you're looking at about at least 10% of the Chinese economy being obliterated because of this crash. And that discounts the fact that their is a similar bubble in Chinese manufacturing.

Also keep in mind that China has huge amounts of implicit government debt just like Dubai was. In the case of Dubai, the Emirate just said that Dubai World wasn't technically the government and let it default even though Dubai World is owned by the government. In the case of China the Chinese government has near 0% debt on their balance sheet, but they have implicitly backed up the banks(state owned enterprises), the provincial municipalities, state owned cement, etc. All of these businesses are hugely in debt. It is now estimated that the Chinese government has potentially 200% of GDP in implicit government debt laying around. Now they'll choose what to rescue and what to allow to default, but the fact is that the Chinese government is not in a position to sweep this crisis under the mattress and bail it out. China's going down and we're going to take a hit from hit.
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