In this issue:
Drift to Ochlocratic Socialist Dictatorship Confirmed: Realignment with China’s Ideological Flow; Dutertenomics Equals the Broken Window Fallacy
-The Confirmed Ideological Drift to China’s Neo-Maoism
-Dutertenomics Equals the Broken Window Fallacy: 1 (China) MINUS 1 (US) =2 (G-R-O-W-T-H)!!!!
-Broken Window Fallacy: Like the US, Why China’s FDIs Are NO ELIXIRs!
-Broken Window Fallacy: Will These Aggrandized Deals Continue If China Suffers a Crisis?
-Mr. Duterte’s Speech Inflames US-Russian War!
Drift to Ochlocratic Socialist Dictatorship Confirmed: Realignment with China’s Ideological Flow; Dutertenomics Equals the Broken Window Fallacy
We are not just living in interesting times, but we are living in a historical chapter that will be one for the books. A decisive breakthrough history is in the making!
First, inflationism via asset bubbles (credit financed gambling and speculation) has been deeply worshipped by the consensus and portrayed as a sustainable panacea for development and progress.
Next, inflationism’s quintessential outcome of which the great Henry Hazlitt (Economics in One Lesson p 117) presciently admonished as tearing “apart the whole fabric of stable economic outcome” that has driven men to towards “desperate remedies”, particularly “to the attraction of fascism and communism” and to “totalitarian controls” have emerged in full motion in the Philippines. In particular, the Philippine political economy’s crucial drift towards an “ochlocratic” (rule of the mob) socialist/leftist dictatorship.
As far back in December 2016, I have highlighted the risks of strong man bubble. In early May or prior to the elections, I warned that leftist governments had consistent records of ruining currencies which reflected on the economic conditions. At the close of the presidential election, I admonished on how the renegade left will be integrated within the system, first through appointments and later through the election process. (Changing the System is a Time Consuming Process; Duterte’s Backdoor Strategy May 18, 2018)
Then the sustained assault, and subsequent threats, on Western governments, supposedly for raising the human rights issues against the new administration’s war on drugs. After which, while the leadership enthrall and divert the public’s attention with firebrand, profanity laced and brinkmanship-blackmail geopolitics; through peace negotiation, the renegade left has been increasing its political economic leverage or clout on prospective policies (While Brinkmanship Geopolitics Escalate, NDF-NPAs Flex Their Political Muscles October 9 2016).
Next, while the public remains immersed in political histrionics, sustained expansion of prohibitions and regulatory controls are being implemented over various parts of the economy such war on shopping malls [Wow! War on Everything Spreads to War on Shopping Malls! October 10, 2016], prospective smoking ban and liquor bans and etc…
Now for the confirmation of the transformation…
In a keynote address at the Philippines-China Trade and Investment Forum held at the Great Hall of the People in Beijing China, the Philippine president Rodrigo Duterte made this stunning revelation [FULL TEXT: Duterte's keynote address at the Philippines-China Trade and Investment Forum Philstar October 21]
And in this shifting of political and cultural thing, America has lost it. I mean, I realigned myself in your ideological flow and maybe I will also go to Russia to talk to Putin and tell him that there are three of us against the world: China, Philippines and Russia. [applause]
So with that I in this venue…Your honors, in this venue, I announce my separation from the United States [applause] both in military, so --- not in the social [garbled] both the military but economics also.
So please we have another problem of economics in my country.[laughter] I have separated from them so I will be dependent on you for all times. But do not worry, we will also help as you help us. [applause]
The Confirmed Ideological Drift to China’s Neo-Maoism
Chinese Vice Premier Zhang Gaoli and more than 200 business people from China and the Philippines comprised the attendees in the forum (Reuters October 20).
Mr. Duterte pronouncements set a firestorm here and abroad.
Immediately after the speech, the leadership’s economic cabinet members went into damage control. They announced that these “did not mean that the country will break off ties with the West, where according to them, “We will maintain relations with the West but we desire stronger integration with our neighbors”. (GMA7, October 21)
Japan’s Nikkei Asia even published a notice from the Philippine government that “urged the public to wait for guidelines before interpreting President Rodrigo Duterte's announcement in Beijing that Manila will separate from the United States” (Nikkei Asia October 21). This reeks of a sense of panic from Duterte’s cabinet.
The Japanese government even signaled apprehensiveness over the geopolitical move towards an alliance with China. According to Nikkei Asian Review (October 21): The Philippines' newly found affection for Chinahas sparked concern in Japan that it would embolden the Asian giant to expand more aggressively in the South China Sea. Japan has worked with the U.S. and others to pressure China to accept an international arbitration ruling in July that rejected Beijing's claims in the South China Sea. The ruling involved a case brought by the Philippines, but Manila has downplayed the decision in its favor. "The South China Sea is an extremely important issue that directly affects the peace and prosperity of the region," Japanese Chief Cabinet Secretary Yoshihide Suga told reporters Thursday in response to the China-Philippines summit held that day. "We want to work with other countries, including the Philippines, in order to formulate a strong response."
Mr. Duterte has been slated to meet with the Japanese government in the coming week.
Because polls have indicated that the Philippine denizens had a net 66% trust rating for the US as against China with a NEGATIVE 33 (Philstar October 18), Mr. Duterte have been reported to have backpedaled (From ABS-CBN October 22): “Duterte later clarified in a press conference in Davao City after his arrival in China that his "separation" statement refers to foreign policy and not diplomatic ties. "You know, you have to take my words in the context of what I've been saying all along. It's not severance of ties.... because in severance of ties, you have to cut diplomatic relations. I cannot do that. Why? It's for the best of our country to maintain that relationship. Why? Because there are many Filipinos in the United States," he said. "People of my country (are) not ready to accept," he added. "What i'm really saying is a separation of foreign policy."
I’ve always stated here that those flip-flops have not been about impulsive statements or mere outbursts, but instead have signified part of the PR campaign to “transform the consciousness of a society”.
Notice that Mr. Duterte deftly shifts his demagoguery depending on the audience. The goal is not to confront inveterate beliefs, but as I have stated here, to subordinate these with signals of devotion or steadfastness in commitments, sincerity and moral uprightness in pursuing a cause (war on drugs).
In short, mind control through language manipulation or Orwellian “doublespeak” is a time consuming process too.
It’s why Mr. Duterte ingratiates himself with the Chinese government through assimilation: (from the speech): “You know I have a Chinese blood. I have a Moro blood. I have a Visayan blood. I've studied the nuances of our characters. I have come to the conclusion that we are Orientals a very courteous race… my grandfather on the mother side was a Chinese.”
Seen in the context of “aid”, while Mr. Duterte has threatened to reject US and European aid (RapplerOctober 6), he goes on “begging on hands and knees” to the Chinese.
Now, with the plans to development, we are really short of the cashflow…So I come here and say, I am not asking for free but if I could --- China would find in his heart to help us in our needs, then we will remember you for all time… So please we have another problem of economics in my country.[laughter] I have separated from them so I will be dependent on you for all times. But do not worry, we will also help as you help us.
Recall that Bureau of Treasury just published last week, that Philippine government have suddenly become cash flow rich in August! (After Weeks of Deferred Publication, August Government Revenues Soars 18% which Balloons Surplus by 116%!!! October 21) Really? Has this been intended to show the US that the Philippines don’t need “aid” and “economics”? As well as to show the world that the fall in the peso has hardly been justified?
Yet Mr. Duterte desires the Philippines to become a vassal to the Chinese. Why? Because the governing ideology of the Chinese government remain a communist? Albeit, of course modern day communism embraced by China, since Deng Xiao Peng’s pirouette towards capitalism (State capitalism) via “Socialism with Chinese Characteristics” or socialism with a market economy.
In the same speech he goes on to condemn US aid and commerce “they have poured millions on us, on our economy nothing has happened”.
Mr. Duterte even implicitly accused the US of brain drain “iI you think they’re liberal with the Filipinos, it’s because they have the brains and you get most of the best and the brightest of the Filipinos for your country.”
Mr. Duterte doesn’t provide the cause of US recruitment of “the best and the brightest of the Filipinos”. First, it hasn’t just been the US. 12-15 million (ABS-CBN, December 19, 2015) “the best and the brightest of the Filipinos” have spread around the world. Second, politics always have been devoid of cause and effect. What caused the diaspora? Has it not been due to the ill-fated peso which manifested the dearth of economic opportunities? What has caused the boiling frog collapse of the peso? If economic opportunities have been sufficient then mass migration would hardly be a factor. Problem is what has constrained economic opportunities, and subsequently, job creation? Has it not been the same political shenanigans being adapted today but this time veering on the left?
Yet there is NO such thing as brain drain. But there is such a thing as policy failures that cause worker exodus.
Chinese support is being earnestly supplicated by Mr. Duterte because of the coming moves to CLOSE the political economy (ala Venezuela, Cuba and North Korea)
Dutertenomics Equals the Broken Window Fallacy: 1 (China) MINUS 1 (US) =2 (G-R-O-W-T-H)!!!!
I announce my separation from the United States [applause] both in military, so --- not in the social [garbled] both the military but economics also.
So please we have another problem of economics in my country.[laughter] I have separated from them so I will be dependent on you for all times
This should be a splendid example of the Broken Window Fallacy
Introduced by the great French economist Frederic Bastiat, it’s a theory that focuses on opportunity costs and unintended consequences.
In a parable, Mr. Bastiat wrote about the Broken Window Fallacy (That Which is Seen, and That Which is Not Seen 1850)
Have you ever witnessed the anger of the good shopkeeper, James B., when his careless son happened to break a square of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact, that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation - "It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?"
Stated differently, the consensus will focus on the “broken window” and thereby attribute ‘economic’ benefits from it. Or money spent on the broken window will mean income for the glass supplier. Period. That is—which is seen.
But how about that is—which is unseen?
How about the same money that COULD have been spent to increase inventories or to purchase machinery in order to INCREASE income, and thereby EXPAND consumption of the shopkeeper overtime?
How about the same money that could have been used to spend on jewelry to SATISFY the good shopkeeper’s wife for their coming anniversary? Or how about clothes/toys for the shopkeeper’s son on his coming birthday?
The broken window merely REPLACED what had been lost. Neither did it add to the shopkeeper’s income nor did increase satisfaction (utility) to the shopkeeper’s family. The window replacement would have been a priority of a very much lesser significance, had there been no accident.
So when Mr. Duterte posited to end to the US-Philippine economic relations, it represented the BROKEN WINDOW theory in action!
Mr. Duterte sees “plenty of happiness for my country” (GMA7, October 19) with investment and funding deals and promises worth $24 billion (Bloomberg, October 21) but he had been entirely BLIND to costs.
And so was 3.53% weekly pump on the Phisix!
He does not see the direct and indirect costs or risks from the severance of economic ties.
The direct impact could be for the US government (and allies) to expel illegal immigrants from the Philippines, or a pullout by western investors that may affect both asset prices and access to credit, as well as, dislocation to the economy. Some senators have cited a portion of the above. (Inquirer, October 21).
Of course, the indirect (unseen) costs would likewise mean LOSS of investment opportunities (would have been investments may be written off), REDUCED access to credit (would have been financers may back off), and this would not only cause credit downgrades (increase in credit costs) but would likely raise trade, capital and labor protectionism, and the risks of economic embargoes or sanctions against the Philippines.
And that’s just the simplistic economic dimension which doesn’t include politics (which again is entwined to the economy) and geopolitics
Broken window as expressed in math is 1-1=2.
Therefore, Dutertenomics extrapolates to 1 (China) MINUS 1 (US) =2 (G-R-O-W-T-H)!!!!
Of course, Dutertenomics equals the stockmarket’s logic as well.
Broken Window Fallacy: Like the US, Why China’s FDIs Are NO ELIXIRs!
It’s not just opportunity costs and unintended consequences the shopkeeper’s damage, the broken window can also be seen from perspective of the shopkeeper’s glass supplier.
Or applied to current events, the alleged wonders from China’s investments.
The Broken Window fallacy is supposed to satisfy the shopkeeper through the replacement of the broken window.
But what if the substituted window has been inferior or of poor quality to one that was broken? What if the supplier of the window doesn’t deliver on his promised goods?
As example let me cite again China’s massive investments in, or implicit “aid” to Africa.
While there are definitely advantages from Chinese FDIs, there have also been disadvantages. And disadvantages are substantial.
Harvard University professor of business and economics Mark Esposito and associate professor of finance and head of competitiveness studies at i7 Institute for Innovation and Competitiveness at ESCP Europe Terence Tse wrote at Fortune.com (November 20, 2015)*:
“But despite the substantial investments, most of the them have been routinely cast as detrimental to Africa’s overall competitiveness. The projects are dependent on deals made at the highest political levels. They lack competitive and transparent bidding processes, and most of the work force employed at these ventures has been Chinese. Promises of job creation have not been fulfilled. Further, when Africans are hired, local rules and regulations are often flouted, leading at times to poor safety”
“The projects are dependent on deals made at the highest political levels.” Remember, I wrote last week that the much ballyhooed deals are, in fact, political investments rather than market investments? And that
“political investments are undertaken with publicly unseen or unstated political goals and quid pro quo conditions. Servicing the consumers or the markets operate as subordinate objectives. The (cost benefit) distributional effects of the former would starkly be different than the latter.” (Another MEGA “Pump” Bubble Based on The China Philippines MEGA Deals! (October 19, 2016)
So the above provides us empirical clues on why these political investments are unlikely to benefit the general economy, except for the distributional flows to the “connected” few.
A simple smell test for the political investments: Would these investments arise without political privileges? If the answer is no, then political privileges would serve as key motivation for investments (not market dictated profits and losses). The benefits from which will flow mostly to politicians, bureaucrats, and their private sector wards, as well as, their foreign sponsors. (Hitler’s economic fascism/ modified version China’s state enterprises and their private sector vehicles)
And given how Mr. Duterte has recently opened a war on the oligarchy, specifically an oligarch Mr. Roberto Ongpin (Rappler August 3), then why wouldn’t 1,000 traders flock with him (Inquirer October 18)?
These traders understand that Mr. Duterte ARBITRARILY sets the terms for commercial engagement.
If they don’t help support Mr. Duterte’s agenda, then they risk the wrath of the BIR, and or the bureaucracy breathing down on their necks, and or of the accommodation of Chinese competitors at their expense, and or from Mr. Duterte’s fulminations or outbursts as seen against Mr. Ongpin. Who would want to be publicly lynched (and life threatened) not only by the leadership but by the zealots??? Who would want to have his property appropriated by compulsion?
Yet it would appear that media treats 1,000 traders as entirely about C-O-N-F-I-D-E-N-C-E?
While it may be true that part of it may be confidence, wouldn’t these traders also want to be a head of a state enterprise should political economic system shift?
Last week, the Chinese president Xi Jinping announced, according to the New York Times (October 16) that the Chinese Communist Party had the ultimate say over state companies: “Party leadership and building the role of the party are the root and soul for state-owned enterprises…The party’s leadership in state-owned enterprises is a major political principle, and that principle must be insisted on.”
A blueprint for these 1,000 traders?
And here’s more.
Yet it’s easy to surmise why Chinese workers have been sent to political projects in host countries. It’s about China’s domestic economy too. Given the material economic slowdown in China, the government would rather export their people along with their FDIs to stave off political turmoil at home.
Besides, because of the one-child policy, a demographic crisis from a huge gender imbalance looms. Reuters reported in January 2015 that there were 118 male for every 100 female, or 33 million more males according to Radio Free Asia also January 2015. This should be an explosive vent should social tensions occur. So perhaps part of these FDI-packaged Chinese labor exports means, to again, diffuse societal strains by having to match males with foreign females.
Oh boy, they’d love it here! Will escorts be the new industry?
*Mark Esposito and Terence Tse China's Growing Footprint in Africa is Potentially Damaging Fortune.com, November 20, 2015
Yet allegations of neo-colonialism again from Mssrs. Esposito and Tse: “Perhaps making matter worse, the kinds of goods that the two partners trade with each other have done little to change such perception. Whereas China buys from Africa mainly natural resources—minerals and metals—African countries import primarily the finished results, ranging from machinery and electrical goods to plastics and rubber. Such an arrangement could benefit both parties, but it’s more often seen as China exploiting Africa’s natural resources to feed its need for industrial output. At the same time, by exporting cheap—and often shoddy—manufactured goods to African countries, local companies not only become less competitive but they also grow increasingly dependent on China.”
With Chinese labor partaking of political projects, skills enhancement becomes a question: “Recent research has also suggested that the Chinese presence has failed to bring significant skill developments, adequate technological transfer or any measurable upgrade to the productivity levels to this part of the world.”
But because of political pressures, “China has become more tactful in its approach to Africa”, and in order “to mitigate the broad criticisms of its “mercantilist” approach toward Africa by, among other things, offering more access to capital for local companies” they have also been altering trend in investments that “are not concentrated in natural resources: Services are the most common sector, with significant investments in manufacturing as well.”
It doesn’t stop here. Shortcomings from the legal and institutional perspective on Chinese FDI’s on Africa, as noted by Catherine Elkemann, candidate legal practitioner at law firm Hogan Lovells International LLP in Hamburg, and Oliver C. Ruppel Professor of Law, Faculty of Law, University of Stellenbosch and Director of the Development and Rule of Law Programme (DROP), South Africa**:
it is not certain that Africa profits from Chinese investments. As shown above, the Chinese investments on the continent can also lead to negative side effects such as negative implications for human rights, labour law, and for the environment, as well as detriments for the local economies. From an economic perspective, the sustainability of Chinese investments is very questionable. Most Chinese investments still go into the natural resource sector with the result that many countries are becoming more and more dependent on these resources. If African countries want to make their investment relations with China more sustainable, it is essential that they attract investment in other areas as well. With regards to existing investment, African countries should place more emphasis on performance requirements, for example the participation of local workers in these investment projects, technology transfers, and training of local workers, and should also try to keep the labour-intensive down-stream activities in their respective home countries
**Catherine Elkemann & Oliver C. Ruppel CHINESE FOREIGN DIRECT INVESTMENT INTO AFRICA IN THE CONTEXT OF BRICS AND SINO-AFRICAN BILATERAL INVESTMENT TREATIES, Richmond Journal of Global Law & Business, Volume 13 Issue 4 Article 3 2015 P 621
You see, if there has been no panacea from the US, there will be no elixir from the Chinese either!
But politics operate on its own reality away from economics.
Broken Window Fallacy: Will These Aggrandized Deals Continue If China Suffers a Crisis?
This brings us back to the “seen” effects.
Data from John Hopkin’s China-Africa Research Initiative tells us how China’s economic performance has affected bilateral trade with Africa.
True, Chinese FDIs have been rising, but those investments have hardly translated to external trade. Again, that’s because of China’s slowing economy.
This brings back again to the broken window fallacy from the supplier perspective.
As I noted above, what if financial problems eventually impact the supplier’s capacity to deliver? How would a pending replacement satisfy the shopkeeper’s immediate requirements for a new window? Or how would unfulfilled promises bridge dislocations caused by the accident?
You see there is no such thing as a free lunch.
Applied today, what happens if a financial crisis hits China? Would these FDI flows continue, or will they end up as funds to bailout domestic enterprises instead?
What happens to those China-Philippine $24 billion deal?
Clues to China’s imbalances seem ripe for implosion.
China’s new loans reportedly exploded again by 30% last September. From ChannelNewsAsia (October 18): (bold mine) “New loans by Chinese banks in September surgednearly 30 per cent from the previous month, official data showed on Tuesday (Oct 18), deepening concern about risky credit expansion in the world's second largest economy. New loans extended by banks jumped to 1.22 trillion yuan (US$181.3 billion) last month from 948.7 billion yuan in August, said the People's Bank of China, the central bank.”
And much of those loan growths have spilled over to mortgage financing, which has spurred a housing price race to the sky!
From the Wall Street Journal (October 19): (bold mine) “China bans borrowing for down payments. A surge in such financing offered by nonbank lenders earlier this year led to a regulatory clampdown. But as banks increasingly turn to mortgage lending, there are new signs of risky practices. In some instances, banks offer credit lines to borrowers buying apartments with few questions asked. In others, banks work with independent loan brokers or property agents to funnel money into down-payment financing. Data released Tuesday showed medium- and long-term household loans, almost all of which are mortgages, made up 60% of all new loans created in the third quarter, up from 47% in the second quarter and 23% in the first. Easy credit has fanned a property-buying craze in many Chinese cities this year, helping shore up an otherwise weak economy. Government data on Wednesday showed gross domestic product expanded by 6.7% from a year earlier in the third quarter, matching expectations, largely on the strength of the hot property market and loose monetary policies. In the past two weeks, two dozen cities have asked banks to tighten home-lending standards. Financial regulators are seeking to rein in the relatively new practice of banks working with brokers and others, such as developers, to help home buyers come up with down payments.
As one can see Chinese mortgage growth has zoomed similar to BW-SSO vertical runup, not only in scale of volume, but likewise reflected in Chinese home prices!
Property prices in China’s main cities have suddenly topped the previously most expensive cities in the world (such as London, Tokyo, New York and Sydney)!
And as great example of the apparently ongoing failure of the central bank’s macroprudential policies, or of how China’s central bank, PBOC’s addiction to credit has pushed its banking system to circumvent regulations, here’s more from the same article: (bold mine) The Chinese government has flooded banks with capital and pushed interest to record lows to jump-start the economy. But with a murky economic outlook, businesses have failed to line up for loans, with many struggling to pay existing debt. As a result, many banks are shifting their focus toward individual borrowers. In some cases, banks have turned a blind eye to borrowers who don’t meet regulatory requirements on down payments. In August, the Suzhou branch of the Industrial & Commercial Bank of China Ltd., the nation’s largest bank by assets, was fined 250,000 yuan ($37,100) by the local banking regulator, which said the ICBC branch failed to catch that portions of the down payments on the mortgages it made had been provided by developers. ICBC’s press office didn’t respond to requests for comment.
Strains in China’s economy continue to mount. Despite the seemingly placid surface, volatility have been surfacing in various places. It’s like the spreading of cracks on a dam. And the Chinese government seem as playing a losing whack-a-mole game.
Shibor remains untamed. Overnight Shibor surged again to 2.22% last Friday while 1 week Shibor at 2.401% (Reuters October 21)
Moreover, the yuan fell to another six-year low. From Fortune.com (October 21): (bold mine) “China’s yuan dipped to a fresh six-year low against the dollar on Friday, crossing the 6.76 level before paring losses as strong dollar purchases by companies continued to pile pressure on the Chinese currency, traders said. With the dollar climbing to seven-month highs against a basket of currencies, spot yuan hit a low of 6.7606 per dollar level on Friday afternoon, touching the weakest level since September 2010.”
In addition, China’s holdings of US treasuries continue to ebb. From Bloomberg (October 19, 2016): (bold mine) “China’s holdings of U.S. Treasuries fell to the lowest level since November 2012, as the world’s second-largest economy draws down its foreign reserves to prop up the yuan. The biggest foreign holder of U.S. government debt had $1.19 trillion in bonds, notes and bills in August, down $33.7 billion from the prior month, the biggest drop since 2013, according to U.S. Treasury Department data released Tuesday in Washington and previous figures compiled by Bloomberg. The portfolio of Japan, the largest holder after China, fell for the first time in three months, down $10.6 billion to $1.14 trillion. Saudi Arabia’s holdings of Treasuries declined for a seventh straight month, to $93 billion.
Selling on US treasuries has likewise been reflected on the China’s vaunted foreign exchange reserve: From Bloomberg (October 7, 2016): (bold mine) China’s foreign-exchange reserves declined more than expected in September, amid speculation the central bank resumed selling dollars to support the yuan. The stockpile shrank to $3.17 trillion last month, the People’s Bank of China said in a statement Friday. That’s the lowest since April 2011 and below the median estimate of $3.18 trillion in a Bloomberg survey of economists. The decline is a reflection of both currency intervention and capital outflows, according to Zhao Yang, Nomura Holdings Inc.’s chief China economist. Declines in the world’s biggest currency stockpile have slowed this year after falling from a record $4 trillion in June 2014 amid speculation the yuan would continue to depreciate and the Federal Reserve would raise borrowing costs. Investors are pricing in a 63 percent probability that the Fed will raise interest rates by year-end, according to Fed funds futures prices tracked by Bloomberg. (see upper right chart)
I remember in taper tantrum days of 2013. Then, mainstream experts saw foreign currency reserves as foolproof talismans against the occurrence of crises. Today, two nations with the world’s biggest foreign exchange reserve holders have been under sustained financial pressure, aside from China, Saudi Arabia!
Maybe more cheering is needed: Forex reserve! Forex reserve! Forex reserve!
Moreover, Goldman Sachs estimated that capital outflows may have been understated by the government (deliberately perhaps?), from Bloomberg (October 11, 2016): China’s currency outflows may be bigger than they look, with Goldman Sachs Group Inc. warning that a rising amount of capital is exiting the country in yuan rather than in dollars. While the nation’s foreign-exchange reserves have stabilized and lenders’ net foreign-exchange purchases for clients have fallen close to a one-year low, official data show that $27.7 billion in yuan payments left China in August. That’s compared with a monthly average of $4.4 billion in the five years through 2014. Such large cross-border moves can’t be explained by market-driven factors and need to be taken into account when measuring currency outflows, according to MK Tang, Hong Kong-based senior China economist at Goldman Sachs.
So dollar conversion may be done outside of China.
Additionally, aside from pushing a tidal wave of credit into the system, the Chinese government has launched a huge fiscal spending program (see lower chart).
The Chinese government has been so desperate to plug all these escalating cracks!
So perhaps Mr. Duterte and his stock market fanatics may be overestimating their patron’s potential capacity to deliver. He and his flock may be in shock to know that China is constrained (surprise!) by economics too!
And because economics is interdependent and entwined with politics, especially in the current heavily politicized environment, any time financial stresses rears its ugly head, the political priorities of Chinese authorities may just radically shift.
Perhaps Mr. Xi Jinping and premier Mr. Li Keqiang may focus on domestic rather than external concerns.
Under such conditions, what would happen to “I have separated from them so I will be dependent on you for all times”????
History is truly in the making!
Mr. Duterte’s Speech Inflames US-Russian War!
Remember, I propounded about a black swan where instead of China, it would be the US whom Mr. Duterte would be in a shooting war with?
Could it be entirely ruled out that instead of China, the US may wage a shooting war with the Duterte administration? That my friends would be THE black swan! Duterte’s Affiliation with Hitler Confirms the Path to Ochlocratic Dictatorship; Didn’t You Know: Hitler was Not only an alleged Drug Addict but a Drug Pusher as well!!! October 2, 2016
As mentioned above, Japan’s government has already voiced concerns over Mr. Duterte’s cozying with China’s government.
Here is the portion of the speech which was strangely ignored by media.
It is a country which is affected by paranoia. [crowd says US] ‘Yung United States of America, it’s afflicted with paranoia.
They are deathly afraid of Putin because Putin is even afraid of himself. He might not restraint himself and go to war and...And then they have this EU in shambles.
Here Mr. Duterte appears to reveal of his megalomanic (abnormal tendency towards grandiose behavior) and polemomanic (mania for war) tendencies. He seems to instigate the US into a war with Russia…by accusing the US government of being pusillanimous of Mr. Putin.
And from this perception his appeal to form a military axis with Russia and China emerged.
I realigned myself in your ideological flow and maybe I will also go to Russia to talk to Putin and tell him that there are three of us against the world: China, Philippines and Russia.
So Russia responded by asking Mr. Duterte to provide his wish list (RT, October 21)
Mr. Duterte seems to have been uninformed that China and Russia have already a NATO-like body—the Shanghai Cooperation Organization (SCO)
The Chinese and Russians have not gone to the extent of actually provoking DIRECTLY the US to war.
Yet, Mr. Duterte believes that the Philippines have reached global power status to actually match the US by forging an alliance with Russia and China!
Wow! Just fabulous!
This mindset has clearly been encapsulated in the whetting of his appetite to join the war games with China and Russia (GMA7, October 17)
You see, my black swan won’t likely be a black swan anymore.
What if the Chinese government will test Duterte’s sincerity or goodwill by asking him to stop the US navy from sailing on Philippine and South China seas waters claimed by the Philippines at all costs? Will Mr. Duterte abide or comply?
US navy ships sailed near islands claimed by the Chinese last week (Reuters October 21)
And what happens if he doesn’t conform? What will the Chinese government do? How will they treat their bootlicker?
Interesting developments, don’t you think?
