Money is Fleeing the Ultimate Crony Capitalist State, China, and it is Destabilizing

“Even I keep my money in Switzerland these days.”

China is not such a good place to keep money medium to long term as it turns out. The wealthy in China are “deeply distrustful” of policy makers. As such many are getting out of China if they can. Beijing is concerned, probably panicking in light of all of the money which is flowing out of the country. And as China is in many respects a black box (perhaps a grey box) people with money can only assume that things are bad and so that compounds the Chinese “problem.”

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China just published a nasty warning to traders around the world

Perhaps traders should thank Beijing for the warning. Perhaps they should see it as desperation from the Chinese government. Either way trading the yuan (the Chinese currency) is a pretty crazy way to place a bet these days. The state can (and has in the past as the attached article points out) just completely intervene to counter market forces in the short term. This hammers anyone who is betting that the Chinese currency is going down over the short term.

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George Soros: Chinese economy in for hard landing

As we have said before here, we do not particularly like Mr. Soros but he is someone who is worth listening to.

Word is that many people at Davos (the superconvention of financiers, economists, world leaders, and celebrities going on right now in Switzerland) have been trying to convince themselves that China is still going to be OK, that a “soft landing” can in fact be engineered in the Ultimate Crony Capitalist State. But there is a growing list of pretty smart people who think that a Chinese “soft landing”

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“Old dog” of Wall Street: “It is very similar to what you get before you slip into a crisis”

I am speaking of Art Cashin, UBS guy, and CNBC talking head. And when I say “old dog” it is meant as a compliment. As in the old dog who has seen lots of young dogs come and go. I find his analysis valuable often. Some do not. (Or say they don’t.) I guess I just have a soft spot in my heart from reading his column back when I was first introduced to the world of finance. He always wrote about the “old days”

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CNBC: A recession worse than 2008 is coming

Today
Image: CNBC

For the record, we have been calling this for a good while now. We warned of slowing in the Ultimate Crony Capitalist State, China. We warned that the great neo-Keynesian experiment was destined for an ugly end (and we are by no means the only ones who said this).

Is this THE turn? It looks increasingly so but the next few months will show us for sure. Will it be worse than 2008?

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Societe General economist: S&P will plunge 75% on China deflation

That’s a bold statement. So bold that if Mr. Edwards turns out to be right it will be one of the greatest calls ever.

The underpinnings of his analysis are sound. Financial assets have been inflated artificially since March of 2009 and we are now (according to Edwards) going to see the deflation of that bubble back to more or less where we were around the time of the Crash.

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Thousands in Hong Kong have rallied against the disappearance of five booksellers from a shop known for selling works critical of China

The dungeon is a scary place. Officials in places like China know it and the people who push the envelope for freedom in places like China know it. It continually amazes me the bravery exhibited by champions of information in parts of the world where the sun can be turned out forever on someone just on the whim of a mid level bureaucrat. China, Saudi Arabia, Iran, Cuba, other places.

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“Zhao Family” How to say “crony capitalism” in China without getting into trouble (to date)

We focus quite a bit of attention on China for a number of reasons. 1. Because it is such a thoroughly crony system of economics and politics. 2. Because we love the country. Americans have long loved the country. In fact, in my particular case my grandfather was one of the first westerners let into the place post Cultural Revolution. He went all over the provinces (as I remember) as an electrical engineering consultant. (I believe.) A beautiful statue of a lion,

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Bank Of America Says China (the Ultimate Crony Capitalist State) Has Passed The ‘Point Of No Return’

Anyone who has read us for very long knows that we’ve long been skeptical of the “Chinese Dream.” Back in 2011-2012 when union leaders and others were explaining to us that “state capitalism,” that is crony capitalism, worked because it was in China we urged caution. We argued that the economic data which came out of China was of poor quality. We argued that an economy based on patronage and centralized decree was destined for trouble. We argued that since prices weren’t free in China it was just a matter of time before real pain was felt.

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China’s horrible pollution, yet another failure of central planning, like smoking 40 cigs a day in Beijing

Image: The Economist

The free market is often blamed for pollution. The the unbridled greed of capitalists is the reason rivers flow red, forests are felled, and air is made hard to breathe. And historically speaking there is some truth to this. However what is often left out of this critique is the degree to which governments encourage environmentally damaging actions.

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Chinese investment bankers missing

The Communist Party of China has lost some credibility, at home and abroad. The recent crash in Chinese stocks was ugly and exposed the tenuous underpinnings of the Ultimate Crony Capitalist State. China’s unstoppable rise to the top of the global economy suddenly didn’t look as unstoppable as it had. Economic issues which critics had raised for years (particularly the real estate bubble) and which had been glossed over by international analysts and Chinese leadership alike suddenly became of serious concern.

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Billionaire Paul Singer on Chinese downturn, could cause “Global central bank panic.”

Are we too pessimistic with regard to China? Perhaps, but who really knows. Seriously, who really knows. The data out of the Ultimate Crony Capitalist State is poor. It is politically manipulated. No one really has a hard sense of what’s actually going on, including probably the Chinese government to a large extent.

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China welcomes IMF backing to make yuan world reserve currency

We have said in the past that the real economic “run for the hills” moment is the moment the dollar loses world reserve currency status. If that were to ever happen all sorts of things would cascade. Interest rates would shoot up. Our debt would become unmanageable. All sorts of dollar denominated assets would decrease in relative value. It would be a colossal mess.

This is unlikely to happen anytime soon. Though “dollar hegemony” has eroded somewhat since the 2008 Crash,

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