NationStates Jolt Archive

Over recent years there've been reeadted prediction that China will be facing an economic crisis soon.

Example: http://www.businessweek.com/bwdaily/dnflash/oct2004/nf20041025_5442_db084.htm
2005:

And now:

Crash and Burn by Joshua Kurlantzick
How the global economic crisis could bring down the Chinese government
Post Date Tuesday, November 18, 2008

Normally, the Pearl River Delta, a manufacturing hub in southern China, whirs with the sound of commerce. Alongside massive new highways, clusters of factories churn out toys, electronics, and other consumer products for the world; in Pearl River cities like Guangzhou, nouveau riche businesspeople cut deals at swank hotels.

But in recent months, the Delta has started to seem more like Allentown, circa 1980s. As the global financial crisis hits Western consumers' wallets, orders for the Delta's products have dried up. And angry factory workers, many owed back pay, have taken to the streets. In one recent incident, some 300 suppliers and creditors "descended on the River Dragon complex [a factory where the owners vanished] looting warehouses in the hopes of salvaging something," As USA Today reported.

This unrest is likely to spiral. As the Chinese economy sours for the first time in years, the government this week announced a $586 billion stimulus package. But in some ways, much more is at stake: While, in the U.S., a financial failure would simply mean another dent in George W. Bush's reputation, in China it could mean the breakdown of the entire political order.

For years, the Beijing regime has stayed in power using a basic bargain with its citizens: Tolerate our authoritarian rule and we'll make you rich. And for years, this seemed to work, leading many China-watchers (myself included) to conclude that Beijing was rising into great-power status. But as the financial crisis shows, that bargain rests on weak foundations. And if Beijing breaks its end of the deal, its people, already holding rising numbers of protests, may well break theirs.
continues here (http://www.tnr.com/politics/story.html?id=8beb6bb5-123c-4d73-9a49-2aa1e82922a8)

So, is the PRC headed for the dustbin? One of China's periodic episodes of chaos and warlordism? Fascism "with Chinese characteristics?

Nah, this won't collapse the republic. The middle class in china is so young, and rich because of the government, and huge, they'll be in total support of putting down the working class and maintaining order even though some of the middle is suffering.

I read a Time article about the middle class in china about a half year ago, and they don't care about much except money. Now if ALL of them didn't get theirs, there would be trouble, but right now it just seems that some aren't getting theirs. The middle class is GIGANTIC from what I recall.

The writer of the article really doesn't understand Chinese politics. Yes, the growth bargain is real, but his references to Tienanmen are inaccurate. The Middle Class is so thoroughly co-opted and controlled that the chance of a political movement in the middle class is microscopic. If you're looking for a great threat to the CCP, it come from the unemployed and the migrant population. There will be no flood of intellectuals into the streets. They're a wholly-owned apparatus of the Party-State.

Also, the resiliency of the party-state is much greater than the author assumes. Yes, an economic downturn could cause a drop in the number of positions opening up, causing dismay in the working class, causing a protest movement, but keep in mind that China has a growth rate of 10% over the last few years. They don't need to be afraid!

I read a Time article about the middle class in china about a half year ago, and they don't care about much except money. Now if ALL of them didn't get theirs, there would be trouble, but right now it just seems that some aren't getting theirs. The middle class is GIGANTIC from what I recall.

We're also only in the third month or so of what promises to be an extended financial downturn for, most likely, the entire planet. What's happening now is merely the beginning of financial woes for the PRC, not the worst of it by a stretch. The middle class may still feel like they're in the clear, and they may feel like they can weather this financial crisis. But as weeks turn to months turn to years, and more and more of the middle class lose the standard of living ground they have traversed in the past ten years, there will be more and more civil unrest.

Nah, this won't collapse the republic. The middle class in china is so young, and rich because of the government, and huge, they'll be in total support of putting down the working class and maintaining order even though some of the middle is suffering.

I read a Time article about the middle class in china about a half year ago, and they don't care about much except money. Now if ALL of them didn't get theirs, there would be trouble, but right now it just seems that some aren't getting theirs. The middle class is GIGANTIC from what I recall.

70% of the people in China are still poor farmers.
id say of the 30% urban population half are poor.
15% can not control 85%, if the 85% are of a mind of tearing things up.

when you have 1.3 billion people every group within china is large in raw numbers.

We're also only in the third month or so of what promises to be an extended financial downturn for, most likely, the entire planet. What's happening now is merely the beginning of financial woes for the PRC, not the worst of it by a stretch. The middle class may still feel like they're in the clear, and they may feel like they can weather this financial crisis. But as weeks turn to months turn to years, and more and more of the middle class lose the standard of living ground they have traversed in the past ten years, there will be more and more civil unrest.

I wouldn't look to the middle class for this. They're well and truly co-opted, and unlikely to lose money over this. Remember, China's growth rate has been over 10% over the last few years. For the middle class to start hurting, it'll have to fall way, way down.

No, look to the lower classes, particularly migrant workers and the "new poor" for any civil disturbance. They are the ones living on the margins of this economy, and they'll be the ones to suffer if the growth rate falls below 8% or 6%, depending on whose numbers you buy.

15% can not control 85%, if the 85% are of a mind of tearing things up.


They've done a surprisingly good job thus far.

70% of the people in China are still poor farmers.
id say of the 30% urban population half are poor.
15% can not control 85%, if the 85% are of a mind of tearing things up.

when you have 1.3 billion people every group within china is large in raw numbers.

The fact that most are poor farmers though, how would they even be able to organize against the government? They don't have access to technology like the poor in the US or any other 1st world country does. I'll admit I don't know much about Chinese economics, or much of China for that matter, but I'm working off of logic here.

Wasn't it one of the romans that said "Why don't we put bands on the arms of all the slaves?" and one replied "Because if they see how many of them there are, they'll revolt." I would think it would be the same in China. If the poor can't get organized, they government would easily be able to put them down and a large group would be in support of that.

They've done a surprisingly good job thus far.

because the 85% have been happy.
Remember Mao was part of the poor farming classes, and that's the class he favored.
let production cease and the value of agricultural products drop.
your looking at a billion poor are hungry upset and likely seeking another revolution.

People predict the death of the PRC every couple of weeks.

It's wishful thinking.

because the 85% have been happy.
Remember Mao was part of the poor farming classes, and that's the class he favored.
let production cease and the value of agricultural products drop.
your looking at a billion poor are hungry upset and likely seeking another revolution.

I hate to tell you this, but the rural poor have been being shat upon since the late 70's. The only people left in rural China are grandparents and children. The young adults and middle-aged crowd are in the cities, as "illegal" migrants, working away from their hukou. Rural China has been being stomped upon for centuries beyond count. If the famine of the Great Leap Forward didn't lead to a revolution, then an economic downturn certainly wont.

Mao wasn't a farmer. Mao was the son of a landlord who masqueraded as a peasant for cult of personality purpose.

People predict the death of the PRC every couple of weeks.

It's wishful thinking.

Ayup.

When democracy comes to the PRC, it'll come with the Party's seal and the Party's sword. And, surprisingly, it may not be that far off.

I wouldn't look to the middle class for this. They're well and truly co-opted, and unlikely to lose money over this. Remember, China's growth rate has been over 10% over the last few years. For the middle class to start hurting, it'll have to fall way, way down.

No, look to the lower classes, particularly migrant workers and the "new poor" for any civil disturbance. They are the ones living on the margins of this economy, and they'll be the ones to suffer if the growth rate falls below 8% or 6%, depending on whose numbers you buy.

If we're heading for the kind of global recession that economists are forecasting, then everyone will be losing money. And the middle class won't have to lose all the ground they've gained in order to be upset. Not only are they used to a more comfortable standard of living, but they're used to that comfortable standard of living getting exponentially more comfortable every year for a while now. Things won't have to plummet back to earth for there to be unrest.

The middle class of China has not been truly okay with the stifling government for years now, but they've been happy to ignore it as long as the government continued to make them money hand over fist. Once the Chinese government isn't able to hold up their end of the bargain, why would the middle class continue to tolerate their oppression?

People predict the death of the PRC every couple of weeks.

It's wishful thinking.

It's an interesting academic debate, though. Lighten up.

If we're heading for the kind of global recession that economists are forecasting, then everyone will be losing money. And the middle class won't have to lose all the ground they've gained in order to be upset. Not only are they used to a more comfortable standard of living, but they're used to that comfortable standard of living getting exponentially more comfortable every year for a while now. Things won't have to plummet back to earth for there to be unrest.

The middle class of China has not been truly okay with the stifling government for years now, but they've been happy to ignore it as long as the government continued to make them money hand over fist. Once the Chinese government isn't able to hold up their end of the bargain, why would the middle class continue to tolerate their oppression?

The middle class is relatively comfortable. Even during a nasty recession (which won't be as nasty in China as it is here, because of their Command and Control techniques with banks and because they have 2 trillion dollars at their fingertips if they need it), the middle class won't have its comfort drastically affected.

Again, look to the urban poor and the migrants for those who will suffer most in this recession. Middle Class democratization thinking has been one of the West's great errors in dealing with China.

It's an interesting academic debate, though. Lighten up.

I'm not 'un-light'.

If the economy in China goes to shit, they can do what the US did in the Great Depression... they can do public works projects, put people to work on farms, etc... change the nature of the internal economy to a survival mode. And that's something that might not be a direction the average Chinese favours, personally... but it's something they DO understand, and something they DO know.

China's economy isn't likely to implode under economic pressure, it will just shift the balance in its equilibrium... and they'll get by, as they pretty much have for millennia.

I hate to tell you this, but the rural poor have been being shat upon since the late 70's. The only people left in rural China are grandparents and children. The young adults and middle-aged crowd are in the cities, as "illegal" migrants, working away from their hukou. Rural China has been being stomped upon for centuries beyond count. If the famine of the Great Leap Forward didn't lead to a revolution, then an economic downturn certainly wont.

Mao wasn't a farmer. Mao was the son of a landlord who masqueraded as a peasant for cult of personality purpose.

according to the Chinese census 2007. 60% of the population is rural.
only 10% of the population is over 55
and only 20% of the population is under 15.
that means if every single elderly and child in china lived in the countryside there would still have to be and equal number of working age. you also have a very high likelihood of there being at least as many working aged adults in the country as in the city.
So sir the facts the facts dictate you are wrong.
and i doubt the number of people working away from their 户口 are significant percentage wise. Otherwise you give credence to other unnumbered statements like OMG all the Chinese are killing/ abandoning their daughters.

There was a revolution, just Mao was able to convince none of the bad stuff before was his fault and he then sent the students and poor on the educated members of his party.

I'm not 'un-light'.

If the economy in China goes to shit, they can do what the US did in the Great Depression... they can do public works projects, put people to work on farms, etc... change the nature of the internal economy to a survival mode. And that's something that might not be a direction the average Chinese favours, personally... but it's something they DO understand, and something they DO know.

China's economy isn't likely to implode under economic pressure, it will just shift the balance in its equilibrium... and they'll get by, as they pretty much have for millennia.

The question isn't whether the nation of China will collapse. It will most certainly continue as a political entity. It takes a whole lot more than an economic crisis to destroy a nation.

The question is whether the current regime in China, the PRC and the Communist Party of China, will be able to maintain control over the nation if the nation suffers an extended recession. Will the populace continue to tolerate an oppressive government if it is perceived that the government is not making their lives better?

according to the Chinese census 2007. 60% of the population is rural.
only 10% of the population is over 55
and only 20% of the population is under 15.
that means if every single elderly and child in china lived in the countryside there would still have to be and equal number of working age. you also have a very high likelihood of there being at least as many working aged adults in the country as in the city.
So sir the facts the facts dictate you are wrong.
and i doubt the number of people working away from their 户口 are significant percentage wise. Otherwise you give credence to other unnumbered statements like OMG all the Chinese are killing/ abandoning their daughters.

There was a revolution, just Mao was able to convince none of the bad stuff before was his fault and he then sent the students and poor on the educated members of his party.

1. The Chinese Census is about as reliable as a fortune teller. Less so, perhaps, because fortune tellers tend to make more believable things up

2. Yes, the number of people in China's migrant population is huge. Estimates put it at over 100 million Chinese. If you are not aware of the problems created by the hukou system and the resulting illegal migration, then you have no place discussing Chinese government until you have done your research.

3. Um... Yeah... No. Great Leap Forward, not Cultural Revolution (which wasn't a revolution so much as a mass campaign of assault and slaughter). There was no revolution. Do your homework, please.

The question isn't whether the nation of China will collapse. It will most certainly continue as a political entity. It takes a whole lot more than an economic crisis to destroy a nation.

The question is whether the current regime in China, the PRC and the Communist Party of China, will be able to maintain control over the nation if the nation suffers an extended recession. Will the populace continue to tolerate an oppressive government if it is perceived that the government is not making their lives better?

That's the point, though - the Chinese government actually has a huge advantage because of it's authoritarian stance. They can react quickly, if they need to, to fall back on mechanisms that are already ingrained. 'Making your life better' is a relative thing. To be honest, I'd imagine there are a lot of people in China right now, looking at how the US, Japan, and the EU are faring... and hoping it will 'not get that bad' in their neck of the woods.

This (http://www.nytimes.com/2008/11/19/world/asia/19china.html?ref=asia) article might have some revelance to this topic. Not sure if it helps anyone any. :)

That's the point, though - the Chinese government actually has a huge advantage because of it's authoritarian stance. They can react quickly, if they need to, to fall back on mechanisms that are already ingrained. 'Making your life better' is a relative thing. To be honest, I'd imagine there are a lot of people in China right now, looking at how the US, Japan, and the EU are faring... and hoping it will 'not get that bad' in their neck of the woods.
Well, a Chinese recession would turn out to be particularly nasty, because it's been such a frothy economy for the past few years, especially in big fixed capital investments like factories. There has been talk about overcapacity for a while now, and if you ask me, that's what the Chinese are most concerned about - those factories were built with money that came from state-controlled banks with basically no strings attached in order to promote manufacturing growth. Chinese banks are in as bad a shape as any of them before the Asian financial crisis.

The educated urban classes will then turn away from the current administration (though perhaps not the system itself). That will be bad PR, but it won't bring down the party.

The poor peasants have been pissed off with the government for years. Their land gets confiscated to be given to developers with government connections, their water and soil end up toxic and nobody gives a shit. But they can't do much except riot occasionally. And they certainly don't know how things are in other parts of the world.

I think the biggest threat comes from the migrant workers. They're sick of being poor peasants, so they travel thousands of kilometres to work in these factories which would shut down in a crisis. I can't see these guys being happy about going back to the fields. There's a lot of those, with the grievances of the poor, but the political wherewithal of the rich. They know how stuff works, they've lived in the cities, watched the news, and all the rest of it.

Anyways, the government knows all this, hence why they announced the stimulus package.

Anyways, the government knows all this, hence why they announced the stimulus package.

I'm trying to work out if that's bad logic, or no logic.

Why did the US government approve an economic stimulus package?

I'd love to see a new era of the RoC, but as Grave_n_Idle said: wishful thinking.

I'm trying to work out if that's bad logic, or no logic.

Why did the US government approve an economic stimulus package?
Because letting the economy slide is bad for the government? People expect it to get everything possible in motion to make sure people can find jobs and improve their living conditions.

Same idea as in the PRC really. If the US government didn't put through a stimulus, they'd get voted out in an election. If the Chinese government didn't, there'd be a breach of that "harmony" it is so keen about.

Because letting the economy slide is bad for the government? People expect it to get everything possible in motion to make sure people can find jobs and improve their living conditions.

Same idea as in the PRC really.

Ah. Bad logic, then.

I'm trying to work out if that's bad logic, or no logic.

Why did the US government approve an economic stimulus package?

The Chinese stimulus package dwarfs the US stimulus package. Especially when compares as size of GDP. Also note you haven't heard about Bailouts because the governments owns its banks and it may very well just simply be government loses and expenditures.
If the US were to conduct a stimulus package equal to 20% of the US GDP
It would be the equivalent of giving everyone in the US 100,000 dollars.
This is an insanely desperate move by the Chinese. Makes my 300 dollar check seem paltry.

I am also leaning to cooked books in GDP growth last year. their stock crash started in October 2007. And they are down 50% in stock exchange value but GDP still grows at 10% per year. Something seems fishy about those numbers.

Perhaps the current crisis wasn't US deregulation so much as it was China running their country like Enron.

Ah. Bad logic, then.
Why? What's bad logic about a stimulus package?

Why? What's bad logic about a stimulus package?

Way too big a question to get involved in, here... but also not the point I was making.

Your "if... then..." argument applies to China (apparently) but not to the US (apparently), thus - I don't buy it as a logical argument. Bad logic.

Your "if... then..." argument applies to China (apparently) but not to the US (apparently), thus - I don't buy it as a logical argument. Bad logic.
Well, the two have very different systems of government. But the argument is essentially the same: economy tanks, people are unhappy, they voice their displeasure with the government and ask for its removal. In the US they can do it with an election, as they did just a short while ago. In China they can't and so they'll have to protest and riot instead.

The governments in both countries are keen to avoid this, hence they try to keep the economy ticking over. The Chinese aren't held back by an organised political opposition or a massive deficit, hence they did in on a much bigger scale - but the motivation is the same.

Well, the two have very different systems of government. But the argument is essentially the same: economy tanks, people are unhappy, they voice their displeasure with the government and ask for its removal. In the US they can do it with an election, as they did just a short while ago. In China they can't and so they'll have to protest and riot instead.

The governments in both countries are keen to avoid this, hence they try to keep the economy ticking over. The Chinese aren't held back by an organised political opposition or a massive deficit, hence they did in on a much bigger scale - but the motivation is the same.

In the US, the populace didn't get an economic stimulus to avoid asking for the removal of the government. They got an economic stimulus to stimulate the economy. I'm sure each politician was keen to be seen being involved because it looks good, but the motivation was stopping the economy sliding into the shitter.

You attribute (semi) benevolent meaning to the US effort, but portray the Chinese effort as a cynical ploy. You're basically pleading special exception for China.

You attribute (semi) benevolent meaning to the US effort, but portray the Chinese effort as a cynical ploy. You're basically pleading special exception for China.
I really don't know what you mean. The day I attribute benevolence to American politicians has yet to come.

The purpose of all policies of a government is to remain in power. The theory is that this is the same or close to the policies that actually make people better off. I'm applying that theory to the policies both in the US and in China. Any economic logic in there is a means to an end for both of them, as is illustrated by the talk about a bailout for car manufacturers - economically pointless, but politically popular, especially with the unions and management of those firms.

Don't get yourself reported for flaming. It's a mild word, but it's still a personal attack.



Carry on, you're doing well otherwise. :)

Fixed. You're correct. My bad.

I'd love to see a new era of the RoC, but as Grave_n_Idle said: wishful thinking.

No you wouldn't. The Guomindang were corrupt, authoritarian, inept, and far less concerned with the wellbeing of the people than the current CCP is (which is saying something). The RoC fell because Chiang Kaishek's government was as great a failure as the dynasties that predated it.

It's one thing to want a democratized China, it's a whole other thing to want China to return to those dark days. Mao's 2 great crises were worse, but China today is by far preferable.

No you wouldn't. The Guomindang were corrupt, authoritarian, inept, and far less concerned with the wellbeing of the people than the current CCP is (which is saying something). The RoC fell because Chiang Kaishek's government was as great a failure as the dynasties that predated it.

It's one thing to want a democratized China, it's a whole other thing to want China to return to those dark days. Mao's 2 great crises were worse, but China today is by far preferable.
Umm, I wasn't talking about Chiang Kai-Shek, but something along the lines of the current RoC. Definately better than the present communist party-rule.

Umm, I wasn't talking about Chiang Kai-Shek, but something along the lines of the current RoC. Definately better than the present communist party-rule.

Oh. Taiwan. Yeah. I guess. I'd rather see a peaceful transition to an independent constitutional democracy that allowed Han-Chinese to return from Taiwan and gave the natives their own choice about what government to belong to, but I'm just picky that way.

In the US, the populace didn't get an economic stimulus to avoid asking for the removal of the government. They got an economic stimulus to stimulate the economy. I'm sure each politician was keen to be seen being involved because it looks good, but the motivation was stopping the economy sliding into the shitter.

You attribute (semi) benevolent meaning to the US effort, but portray the Chinese effort as a cynical ploy. You're basically pleading special exception for China.

i think a large part of the difference comes in size. The Chinese stimulus package is 20% of the GDP of China. the same as giving every man woman and child 100,000 dollars in the US. That sort of cash giveaway is normally seen as a bribe. Only other places that come to mine giving away that much money would be some of the Middle east oil states.

which are considered to be bribes to keep the population happy.

i think a large part of the difference comes in size. The Chinese stimulus package is 20% of the GDP of China. the same as giving every man woman and child 100,000 dollars in the US. That sort of cash giveaway is normally seen as a bribe. Only other places that come to mine giving away that much money would be some of the Middle east oil states.

which are considered to be bribes to keep the population happy.

The Chinese stimulus package largely consists of infrastructure, disaster relief, and programs to help cut taxes and facilitate easier credit. It is also more than a hundred billion dollars LESS that the US bailout for banks, and is aimed at a much broader market.

586 billion dollars, from a GDP of about 3 trillion dollars. Spread over the market, and focusing on public works. So - yeah, a little under 20%.

On the other hand, the US GDP is about 13 trillion dollars, and our government has given about 5 and a half percent of it... to one industry.

586 billion dollars, from a GDP of about 3 trillion dollars. Spread over the market, and focusing on public works. So - yeah, a little under 20%.Edit: Wait, are you talking about the official exchange rate? If so, sorry. Don't listen to me. :p

The Chinese stimulus package largely consists of infrastructure, disaster relief, and programs to help cut taxes and facilitate easier credit. It is also more than a hundred billion dollars LESS that the US bailout for banks, and is aimed at a much broader market.

586 billion dollars, from a GDP of about 3 trillion dollars. Spread over the market, and focusing on public works. So - yeah, a little under 20%.

On the other hand, the US GDP is about 13 trillion dollars, and our government has given about 5 and a half percent of it... to one industry.

The form of stimulus that the two economies needed were completely different. The US doesn't need to support its export industries through this crisis and the Chinese banks don't have toxic assets to off load. Can you really compare them?

The form of stimulus that the two economies needed were completely different. The US doesn't need to support its export industries through this crisis and the Chinese banks don't have toxic assets to off load. Can you really compare them?

Chinese banks are government owned. Bad loans, are automatically paid by the tax payer there. No need for an official bailout.

On the other hand, the US GDP is about 13 trillion dollars, and our government has given about 5 and a half percent of it... to one industry.
Oh, that's where the confusion is.

Stimulus package =/= bank bail-out. The latter is like medicine trying to fix a broken kidney, the former is the dialysis.

Edit: Wait, are you talking about the official exchange rate? If so, sorry. Don't listen to me. :p
Alternatively you could just take the yuan-denominated value of GDP and the stimulus package. Also comes to roughly 20% IIRC.

Oh, that's where the confusion is.

Stimulus package =/= bank bail-out. The latter is like medicine trying to fix a broken kidney, the former is the dialysis.


So, we had the 'tax rebate' economic stimulus in the US, where individuals were wuite literally sent money... and we had the 'let's pay the banks' economic stimulus.

And we had the Chinese infrastructure economic stimulus.

The difference seems to be - China is trying to get people working and is spending money on benefits for the nation as a whole... and the US seems to be... well, giving banks money.

well, giving banks money.

Are you seriously going to side with the super strict ultra free-marketers here, and say that the government shouldn't be doing this? Otherwise, what point does this irrelevant whining have?

So, we had the 'tax rebate' economic stimulus in the US, where individuals were quite literally sent money... and we had the 'let's pay the banks' economic stimulus.
The latter not being a stimulus, never having been called a stimulus and not having been intended to act as a stimulus.

And we had the Chinese infrastructure economic stimulus.
Which also included tax breaks.

The difference seems to be - China is trying to get people working and is spending money on benefits for the nation as a whole... and the US seems to be... well, giving banks money.
I don't think we were really arguing about which plan is better. Though the answer is obvious to just about anyone - Krugman (http://www.nytimes.com/2008/02/08/opinion/08krugman.html?_r=2&ex=1360213200&en=5082158471c1f28d&ei=5090&partner=rssuserland&emc=rss&oref=slogin), someone called Samwick (http://www.washingtonpost.com/wp-dyn/content/article/2008/01/25/AR2008012502593.html) and CEOs (http://www.forexyard.com/reuters/popup_reuters.php?action=2008-11-18T235147Z_01_N18297576_RTRIDST_0_USA-ECONOMY). What is important is that you realise that the TARP and the stimuli are two different animals, intended to do two different things, and that comparing TARP to the Chinese plan just won't fly.

Are you seriously going to side with the super strict ultra free-marketers here, and say that the government shouldn't be doing this? Otherwise, what point does this irrelevant whining have?

I already argued, a considerable time back (when the whole 'bail-out' excitement was going on) that the bail-out was a fundamentally bad idea.

I argued for government involvement, and increase of government involvement, but it was for a path other than throwing cash at stuff.

The latter not being a stimulus, never having been called a stimulus and not having been intended to act as a stimulus.


The unfortunate fact that you seem to not know what 'stimulus' means, is not the problem here.


Which also included tax breaks.


And? I already said that, earlier.


I don't think we were really arguing about which plan is better. Though the answer is obvious to just about anyone - Krugman (http://www.nytimes.com/2008/02/08/opinion/08krugman.html?_r=2&ex=1360213200&en=5082158471c1f28d&ei=5090&partner=rssuserland&emc=rss&oref=slogin), someone called Samwick (http://www.washingtonpost.com/wp-dyn/content/article/2008/01/25/AR2008012502593.html) and CEOs (http://www.forexyard.com/reuters/popup_reuters.php?action=2008-11-18T235147Z_01_N18297576_RTRIDST_0_USA-ECONOMY). What is important is that you realise that the TARP and the stimuli are two different animals, intended to do two different things, and that comparing TARP to the Chinese plan just won't fly.

WHenever you have nothing worth saying, you appeal to authority. It's a logical fallacy, and it's boring.

I already argued, a considerable time back (when the whole 'bail-out' excitement was going on) that the bail-out was a fundamentally bad idea.

I argued for government involvement, and increase of government involvement, but it was for a path other than throwing cash at stuff.

Too vague, why should the government let the banks go bust, and do something else? And what should this something else be, and how will it be able to fix the economy if the banks are going bust?

The unfortunate fact that you seem to not know what 'stimulus' means, is not the problem here.
Well, "stimulus" in the context of economic policy means a Keynesian expenditure policy aimed at increasing aggregate demand, hopefully leading to job creation. You can either cut taxes, hoping that will increase private consumption, or you increase government spending, hoping that greater public consumption will feed through and take the rest of the economy with it. There's not a whole lot to understand.

The US has approved at least one such package with the recent tax rebates. There's talk about another one, and hopefully that one will include some infrastructure spending, because it's necessary.

The TARP meanwhile was not aimed at increasing consumption whatsoever. It was meant to free up the financial system so it could start facilitating the movement of money in the economy again. It wasn't a Keynesian aggregate demand policy, which is why it should be considered seperately.

WHenever you have nothing worth saying, you appeal to authority. It's a logical fallacy, and it's boring.
It wasn't intended as such, it was intended to give you something of interest to read. Most of my links are used in that way. What I meant to get across is that basically everyone except the politicians actually making the decisions thinks infrastructure spending is better or at least as good as tax rebates, and I assumed you actually agree with that. Which brings me back to the original presumption, namely that politicians make policy not because of any benevolence or an appreciation for economics, but because they try to do what is popular at any given point. They're presumably hoping that Average Joe reacts more positively to money in the mail than main street getting fixed. If that wasn't their logic, I don't really know what is.

So are you in a bad mood today or something?

Too vague, why should the government let the banks go bust, and do something else? And what should this something else be, and how will it be able to fix the economy if the banks are going bust?

Ah. I was being vague, here, because it's not on topic.

I actually believe that the government should have facilitated the sale of assets (including, obviously, distressed assets) held by banks. (I say 'facilitated' but I mean that aggressively). Forcing the debt into other hands does mean the banks would take a hit (probably massive) on the value of the assets... but it also means it would be economically viable for the new debt-holders to massively renegotiate the repayments of those assets. The banks would get their relief 'after the fact', by no longer holding distressed debt or incurring costs.

I never mentioned letting the banks 'go bust'. That's where I differ from some of the 'free market' ideas.

Money moving beats money not moving.

Well, "stimulus" in the context of economic policy means a Keynesian expenditure policy aimed at increasing aggregate demand, hopefully leading to job creation. You can either cut taxes, hoping that will increase private consumption, or you increase government spending, hoping that greater public consumption will feed through and take the rest of the economy with it. There's not a whole lot to understand.

The US has approved at least one such package with the recent tax rebates. There's talk about another one, and hopefully that one will include some infrastructure spending, because it's necessary.

The TARP meanwhile was not aimed at increasing consumption whatsoever. It was meant to free up the financial system so it could start facilitating the movement of money in the economy again. It wasn't a Keynesian aggregate demand policy, which is why it should be considered seperately.


The (ultimate) aim was to open credit, which would increase spending, which would increase demand versus supply. Hence, job creation and increased private consumption.


It wasn't intended as such, it was intended to give you something of interest to read. Most of my links are used in that way. What I meant to get across is that basically everyone except the politicians actually making the decisions thinks infrastructure spending is better or at least as good as tax rebates, and I assumed you actually agree with that.


Actually, I would agree with that.

You caught me, I didn't even check what the experts were being quoted on, I immediately assumed it was an appeal to authority.

Mea culpa.

Which brings me back to the original presumption, namely that politicians make policy not because of any benevolence or an appreciation for economics, but because they try to do what is popular at any given point. They're presumably hoping that Average Joe reacts more positively to money in the mail than main street getting fixed. If that wasn't their logic, I don't really know what is.

So are you in a bad mood today or something?

I din't see any reason to buy the original assertion, though - that China thinks there will be revolution unless they stimulate the economy. It seems more likely that they just don't want the economy to go tits up.

I actually believe that the government should have facilitated the sale of assets (including, obviously, distressed assets) held by banks. (I say 'facilitated' but I mean that aggressively). Forcing the debt into other hands does mean the banks would take a hit (probably massive) on the value of the assets... but it also means it would be economically viable for the new debt-holders to massively renegotiate the repayments of those assets. The banks would get their relief 'after the fact', by no longer holding distressed debt or incurring costs.
But who would buy it? If it ends up being a subsidy to the debt buyers rather than the current debt holders, you don't really change much - you still socialise the losses and the eventual gains are private. But if you're interested in this stuff, I recommend this blog: http://www.informationarbitrage.com/

The guy knows what he's talking about and he doesn't really hold back.

The (ultimate) aim was to open credit, which would increase spending, which would increase demand versus supply. Hence, job creation and increased private consumption.
Well, yeah, but any economic policy ultimately tries to achieve that, just like any medical procedure would ultimately hope to optimise the patient's health. But the way you do it is important, and different methods can be differentiated by these categories.

I din't see any reason to buy the original assertion, though - that China thinks there will be revolution unless they stimulate the economy. It seems more likely that they just don't want the economy to go tits up.
Well, they have said repeatedly in the past that they consider the sorts of high growth rates vital to securing harmony, meaning in their language a content populace that doesn't ask for more democracy. They bring that up whenever people ask them to sacrifice a bit of growth for a bit more environmental protection.

But that's probably not their only motivation, you're right. They are nationalists, and they want China to be strong and rich, for one thing.