For anyone who has the time and fortitude, there’s a very long, detailed and brutal post up on Zero Hedge about China’s insane (in the author’s eye) purchase of US debt and its long term implications, all of which, he says, are terrible.
Not being an economist or a prophet, I can’t say whether he’s onto something or not, but it sure makes for some interesting reading. I’m just going to quote the opening and closing grafs for their sheer evocativeness:
Some people in Asia burn joss paper, also called ghost money, on the Lunar New Year, to give their deceased ancestors something to spend in the afterlife. Because ghost money doesn’t represent a claim on any actual goods or services in this world, there is no reason for its issuers to exercise any particular restraint, and in Singapore it is possible to find notes issued by the First Bank of Hell, with the mythical Jade Emperor’s picture on the front, in denominations ranging into the millions and billions of dollars. Perhaps we’re counting on this charming tradition to make Asian investors comfortable with the prospect of continuing to add to their holdings of European and American sovereign debt, despite the obvious fact that the money they’ve already lent us is money they’ll never get a chance to spend in this life….
In fact, despite its façade of capitalism and modernity, the Party is still making Mao’s mistake of acting first and thinking later. Lending a lot of money to people who will never pay you back is only a symptom of the underlying folly – you have to believe in something that isn’t true to believe that such an insane project is going to work out in the way you want it to, and any fixed untrue belief will eventually injure you somehow….
So modern China is a sort of suicide machine, a train to nowhere with no emergency brake. It is deliberately designed to prevent the passengers from being able to avoid a crash. Not only does the Party espouse false beliefs, it seeks to prevent Chinese people from forming their own, true beliefs in the light of all the available information. Now it turns out it has had them all working long days these last many years just to pile up credit with the Jade Emperor. And who’s down there in Hell, spending it all, no doubt on dancing girls and lavish banquets, and laughing uproariously at your present difficulties? Perhaps the Great Helmsman himself, with Jiang Qing pouring out the wine
In order to see how/why he arrives at this extreme conclusion you need to wade through the whole thing.
Let me say straightaway that I have serious issues with this article, which has a decidedly ethnocentric anti-China slant (though it’s none too kind to the US either). Despite the author’s being a post-doctoral fellow at Princeton, the piece is riddled with ridiculous assertions (anyone who disagrees with the CCP’s policies gets sent off to work camps) and asinine references to Tiananmen Square and Chinese history. But his core point about the danger of China’s strategy-free purchase of US debt and where it might lead is quite interesting, and it’s definitely a fun read (as are the comments).
Richard Burger is the author of Behind the Red Door: Sex in China, an exploration of China's sexual revolution and its clash with traditional Chinese values.