The Party is already having convulsions.

Oct. 6 (Bloomberg) — Two Chinese dissidents are among this year’s Nobel Peace Prize contenders, prompting moves by leaders in Beijing to pre-emptively counter possible negative attention on their human rights record.

Gao Zhisheng and Hu Jia are deemed top candidates by Oslo’s International Peace Research Institute, which handicaps competition for the award that will be announced Oct. 10. It’s preceded by Nobel prizes for medicine today, physics tomorrow, chemistry on Oct. 8 and literature on Oct. 9.

A decision by the Norwegian Nobel Committee in Oslo to honor Hu or Gao may increase tensions between the West and the government of the world’s most populous nation.

“I hope the committee will make the right decision and not challenge the original purpose of the Nobel Peace Prize or hurt Chinese people’s feelings,” said Liu Jianchao, spokesman for China’s Foreign Ministry, on Sept. 25. The prize should go to those who “truly contributed” to world peace, he said.

We certainly wouldn’t want anyone to have his feelings hurt. But if these two guys didn’t contribute to the betterment of humanity and to world peace, no one did.

The reasoning behind this is just so tortured:

The US government is cutting its funding for the supply of contraceptives to family planning clinics run by Marie Stopes International in Africa, alleging that it condones forced abortions in China.

MSI has categorically denied that it supports forced abortions or coercive sterilisation in China or anywhere else in the world, and says that the actions of the Bush government will result in more abortions in Africa, as women will be unable to get contraceptives and will end up with unwanted pregnancies.

One of George Bush’s first acts after becoming president was to stop all US funds to foreign organisations that helped women in any way to get an abortion, including providing advice. The UN Population Fund (UNFPA) lost $34m that Congress had appropriated for it in 2002.

…”At a time when governments have pledged to increase their commitment to improving the health of women, only the Bush administration could find logic in the idea that they can reduce abortion and promote choice for women in China by causing more abortion,” said [MSI CEO] Hovig.

I think the nation will breathe a collective sigh of relief after we’ve sworn in Obama and Biden. A pity they’ll face the near-impossible task of cleaning up all the crap Bush & Co. will leave behind, like numerous wars, a battered global reputation, a broken economy and a whole lot more. But at least it will put an end to nonsense like this.

A rare spoof about China.

A final link for the night, and it’s a good one. Artists in China have to go to great lengths to get their works approved, often to no avail. An interesting and unusual look at what the Propaganda Department does, how the censors operate, how artists seek to second-guess them, and the effects of their efforts on Chinese talent.

A tiny snip, and then the computer goes off.

About the intellectuals, Mao Zedong often remarked, “If they don’t listen to us, we won’t give them food.” This kind of dependence on the state for one’s physical existence has handicapped Chinese writers and artists and intensified their self-censorship. Worse, China’s literary apparatus automatically excludes and isolates writers who are determined to exist outside it. Every now and then, some young writers raise a war cry against the Writers’ Union, but the truth is that most writers, old and young, are eager to join it.

Is it that hard to figure out why?

Wait. That is not my theory, but that of the author of an article written more than four years ago that a reader pointed me to and that I recommend you read. Not because it’s necessarily right, but because it’s fascinating to see where we actually stand four years after the writer’s prediction.

Today, the currency and export policy of China is anchored around its peg to the dollar. The main reason for this is that by artificially undervaluing its own currency, and therefore overvaluing the dollar, China artificially stimulates its manufacturing exports. The second reason is that by buying the excess U.S. dollars and reinvesting them in U.S. government bonds, it acts as a foreign lender to the United States. The third reason is that this foreign lending stimulates American demand for Chinese manufacturing exports and allows the Chinese government to relieve its current unemployment problems… No doubt, most of these loans will turn out to be very expensive because they will be repaid with greatly depreciated dollars, which in turn will exacerbate down the road the growing financial distress of the banking sector in China.

Therefore, it is clear that China travels today the road to Depression. How severe this depression will be, will critically depend on two developments. First, how much longer the Chinese government will pursue the inflationary policy, and second how doggedly it will fight the bust. The longer it expands and the more its fights the bust, the more likely it is that the Chinese Depression will turn into a Great Depression. Also, it is important to realize that just like America’s Great Depression in the 1930s triggered a worldwide Depression, similarly a Chinese Depression will trigger a bust in the U.S., and therefore a recession in the rest of the world.

Unless there is an unforeseen banking, currency, or a derivative crisis spreading throughout the world, it is my belief that the Chinese bust will occur sometime in 2008-2009, since the Chinese government will surely pursue expansionary policies until the 2008 Summer Olympic Games in China. By then, inflation will be most likely out of control, probably already in runaway mode, and the government will have no choice but to slam the brakes and induce contraction. In 1929 the expansion stopped in July, the stock market broke in October, and the economy collapsed in early 1930. Thus, providing for a latency period of approximately half a year between credit contraction and economic collapse, based on my Olympic Games timing, I would pinpoint the bust for 2009. Admittedly, this is a pure speculation on my part; naturally, the bust could occur sooner or later.

Of course, macro-economic predictions like this usually prove to be far off the mark (except those made by me), the most (in)famous perhaps being Gordon Chang’s prediction of “The Coming Collapse of China.” In the case of the article above, the story seems to have occurred almost in reverse – a US (and increasingly European) crisis is what is plunging the world into a recesion, not government-generated inflation in China. America’s economic crisis, not China’s, was the catalyst for the tailspin, and if China is be plunged into a depression, it will be for reasons very different from what the author envisaged. (He was shrewd enough to say that his theory might be offset by “an unforeseen banking, currency, or a derivative crisis spreading throughout the world.” And what we are seeing today was certainly unseen by most in 2004.)

However…however… I honestly believe China is going to be one of the few players that emerges from the current crisis relatively unscathed (and “relatively” is a key word.). Simply because of the size of its own domestic markets and the trade it carries out in Africa and Asia. It will suffer, lots of factories will continue to close and lots of dreams will be erased and jobs lost. But it won’t be depression. What it will be, more than anything else, is a test for the CCP. Running a country the size of China with the staggering problems is hard (to say the least), but it sure helps when the economy is roaring year after year.

One of the most frequently repeated motifs is that as long as the economy is kicking, most Chinese don’t give a damn about human rights and censorship and corruption. Once things slow down and people have more time (and more fear), as they see their opportunities dimming, as they realize the joy ride they were counting on was finite while the ruling classes are doing just fine – will they lose some of that Zhongguo jia you spirit and begin to demand their government do better? Will they look at they way America ousted the Republicans, and demand that same freedom? Short answer: probably not; at least not yet. China is better positioned to weather the current storm without enough rampant misery in the cards to get people thinking about revolution. The government can still spend its way out of this mess they way it usually does. One day China will face an economic moment of truth, the way America is facing one now. I’m pretty sure this isn’t it. Yet.

I swore I wouldn’t post anything today, that I’d focus only on my homework. The Internet is such a monumental distraction. And that will be the subject of an upcoming new post.

How did Palin do in the debate, in which the bar was set lower than ever before?

Who won the debate, based on the polls?

How bad is the economy looking compared to two weeks ago?

If you’ve never heard of him, please check on his track record before branding him an alarmist. He is no radical. In his bi-weekly column for Forbes he wrote yesterday:

When investors don’t trust even venerable institutions like Morgan Stanley and Goldman Sachs, you know that the financial crisis is as severe as ever. When a nuclear option of a monster $700 billion rescue plan is not even able to rally stock markets, you know this is a global crisis of confidence in the financial system.

The next step of this panic could be the mother of all bank runs, i.e. a run on the trillion dollar-plus of the cross-border short-term interbank liabilities of the U.S. banking and financial system, as foreign banks start to worry about the safety of their liquid exposures to U.S. financial institutions. A silent cross-border bank run has already started, as foreign banks are worried about the solvency of U.S. banks and are starting to reduce their exposure. And if this run accelerates–as it may now–a total meltdown of the U.S. financial system could occur.

Make of it what you will. He has been almost preternaturally right in predicting each phase of the calamity, but maybe he’s wrong this time. The IMF yesterday admitted we are seeing a “full-blown crisis” and Europe is now scrambling to brace for the shockwaves. Is Weimar around the corner?

Off to a class. If things melt down over the next few hours feel free to send me a text message.

Sorry, it will continue to be slower than usual over here until my classes end on Saturday afternoon. Feel free to talk amongst yourselves.