China's Pension Woes

[JS80]

Originally posted by: LegendKiller
The bad bank debt thing is pretty true. They have been writing loans with no underwriting for decades. A loan is a loan to them and they haven't been writing them off their balance sheets since they'd take a revenue hit, something which wouldn't project the perfect picture they are looking for.

Now they are pulling an "enron" by taking all of the bad debt and placing them into entities designed to remove the "assets" (bad debt) off of the balance sheet. Secretly hiding it until such a time as they can dispose of it easily, or never. Since China doesn't have the accounting regulations (FAS 140, 133, 155, 150...etc) we do nor the transparency in the market through regulatory bodies and laws like we do (SEC, FASB, OCC, OTS, Reg AB, Securities Act...etc), they are really socking this stuff away.

They are really a paper tiger that is trying to sucker as much money as possible from the world for their leader's benefit as quickly as they can.

why do i have the feeling i am the only person here that understands what you just said?

 

[LegendKiller]

Originally posted by: K1052

Originally posted by: LegendKiller
I think one thing that people forget is that while US debt isn't callable, it does have to be rolled. So while China can't call it, stopping their purchases would cost us. If the world stopped we'd eventually go into default since we couldn't repay maturing debt quickly enough.

A default would be just as catastrophic to those countries as us. Suddenly all that outstanding debt becomes worthless and the big holders (Japan, China, Germany, Saudi, Russa and a host of smaller Eruo countries) take huge losses. US exchanges crash and imports slow to a trickle in the panic (hitting Canada, Mexico, Japan, and severl EU nations hardest). It would ripple across the world making the Great Depression look like a cakewalk.

I never said we'd let it happen or that the world would, I just merely said that while there isnt an explicit call option built into debt issuance, there is one once you factor in issuances used to pay for the maturities of the debt (rolling your paper...unfortunately not good rolling). These "rolls" are essential for our government's debt and is really a synthetic call option, once you get a bit abstract in thinking.

As far as just printing more dollars to pay for maturing debt, the Post-WW1 Germany found out what happened when you did that, since they paid for reparations with newly minted marks. We wouldn't let that happen.

The simple answer to both of the above situations is simply one of spread. In order to chase scarce buyers you have to "pay up" to get into their desired financial habitat. Of course this results in higher spreads over "risk free" bonds, and would further shackle us to our debtors, but it would still result in rolls, which would be essential.

Of course, this is all theory and conjecture.

 

[LegendKiller]

Originally posted by: JS80

Originally posted by: LegendKiller
The bad bank debt thing is pretty true. They have been writing loans with no underwriting for decades. A loan is a loan to them and they haven't been writing them off their balance sheets since they'd take a revenue hit, something which wouldn't project the perfect picture they are looking for.

Now they are pulling an "enron" by taking all of the bad debt and placing them into entities designed to remove the "assets" (bad debt) off of the balance sheet. Secretly hiding it until such a time as they can dispose of it easily, or never. Since China doesn't have the accounting regulations (FAS 140, 133, 155, 150...etc) we do nor the transparency in the market through regulatory bodies and laws like we do (SEC, FASB, OCC, OTS, Reg AB, Securities Act...etc), they are really socking this stuff away.

They are really a paper tiger that is trying to sucker as much money as possible from the world for their leader's benefit as quickly as they can.

why do i have the feeling i am the only person here that understands what you just said?

lol, I really think that people are either blissfully ignorant or completely oblivious to the financial strength of this country. It is why we are the biggest investment pot in the world, because our markets are transparent, regulated, and getting more so to help investors. While there are bad apples, they are few compared to the many, and really give us a massive advantage that China, nor any other country in the world has.

 

[JS80]

Originally posted by: LegendKiller

Originally posted by: JS80

Originally posted by: LegendKiller
The bad bank debt thing is pretty true. They have been writing loans with no underwriting for decades. A loan is a loan to them and they haven't been writing them off their balance sheets since they'd take a revenue hit, something which wouldn't project the perfect picture they are looking for.

Now they are pulling an "enron" by taking all of the bad debt and placing them into entities designed to remove the "assets" (bad debt) off of the balance sheet. Secretly hiding it until such a time as they can dispose of it easily, or never. Since China doesn't have the accounting regulations (FAS 140, 133, 155, 150...etc) we do nor the transparency in the market through regulatory bodies and laws like we do (SEC, FASB, OCC, OTS, Reg AB, Securities Act...etc), they are really socking this stuff away.

They are really a paper tiger that is trying to sucker as much money as possible from the world for their leader's benefit as quickly as they can.

why do i have the feeling i am the only person here that understands what you just said?

lol, I really think that people are either blissfully ignorant or completely oblivious to the financial strength of this country. It is why we are the biggest investment pot in the world, because our markets are transparent, regulated, and getting more so to help investors. While there are bad apples, they are few compared to the many, and really give us a massive advantage that China, nor any other country in the world has.

Amen to that.

 

[imported_Lothar]

Originally posted by: Fern

Originally posted by: LegendKiller
I think one thing that people forget is that while US debt isn't callable, it does have to be rolled. So while China can't call it, stopping their purchases would cost us. If the world stopped we'd eventually go into default since we couldn't repay maturing debt quickly enough.

I really dounbt default would occur. I'd expect inflation, the Treasury may just print up as much money as it takes.

Printing more money won't solve any problems.
Neither would changing your currency.

If either of those strategies worked, Zimbabwe wouldn't have a monthly inflation rate of 1200%

 

[Fern]

Originally posted by: Lothar

Originally posted by: Fern

Originally posted by: LegendKiller
I think one thing that people forget is that while US debt isn't callable, it does have to be rolled. So while China can't call it, stopping their purchases would cost us. If the world stopped we'd eventually go into default since we couldn't repay maturing debt quickly enough.

I really dounbt default would occur. I'd expect inflation, the Treasury may just print up as much money as it takes.

Printing more money won't solve any problems.
Neither would changing your currency.

If either of those strategies worked, Zimbabwe wouldn't have a monthly inflation rate of 1200%

Sure it works, Germany did it to pay off their "debt", WWI IIRC.

The result of "just" printing extra currency to pay such debt is (high) inflation. Maybe that's what Zimbabwe is doing?

And 1200% indicates pretty strongly that they are.

Fern

 

[Thump553]

Thank you yllus and LegendKiller for the very informative and insightful posts in this thread.

I would have never guessed China's banking system was in such horrible shape, as I thought they had to reform it to become a member of the WTO. I guess reform is a relative term and a trading partner the size of China can get away with a lot more than the usual resource poor third world country.

 

[brandonbull]

Originally posted by: JS80

a favourite ambition is to emigrate to an affluent Western country with a stronger pension system. For many, the most popular target is Canada, a country with a generous pension program and an attractive immigration system.

HAHAHHAHAHAHHAHA

Haha. Those Cannucks are going to get robbed blind by a bunch of old Chinese people.

 

[Looney]

Originally posted by: LegendKiller
They are really a paper tiger that is trying to sucker as much money as possible from the world for their leader's benefit as quickly as they can.

I don't know about that. China today looks much better than China 10 years ago. Certainly better than the progress Russia has made.

As for China's elderly problem... well, all industrialized nations will eventually face that. You can't blame China 1 child per family for that. If they hadn't instituted that, we'd see a China with 2 billion people. It was either overpopulation and starvation now, or hope that technology and economical progress can solve the problem.

If there's going to be a huge civil or economic disruption in China, i doubt it's going to be either due to default on loans or an unsustainable elderly population... it's going to be a growing middleclass that will see issues like these, as well as wanting more freedom, and we're going to see a Tiananmen Square but 10x in size (probably not all in Tiananment Square, but all over the country simultaneously).

 

[LegendKiller]

Originally posted by: Looney

Originally posted by: LegendKiller
They are really a paper tiger that is trying to sucker as much money as possible from the world for their leader's benefit as quickly as they can.

I don't know about that. China today looks much better than China 10 years ago. Certainly better than the progress Russia has made.

As for China's elderly problem... well, all industrialized nations will eventually face that. You can't blame China 1 child per family for that. If they hadn't instituted that, we'd see a China with 2 billion people. It was either overpopulation and starvation now, or hope that technology and economical progress can solve the problem.

If there's going to be a huge civil or economic disruption in China, i doubt it's going to be either due to default on loans or an unsustainable elderly population... it's going to be a growing middleclass that will see issues like these, as well as wanting more freedom, and we're going to see a Tiananmen Square but 10x in size (probably not all in Tiananment Square, but all over the country simultaneously).

Sure, China today is better than 10 years ago, but that's mainly because they are still an industrializing nation whose leaders bend rather than break, as the soviets did. Keeping the Yuan very low has helped them more than anything as they can flood the markets with cheap goods. Add to that a massive supply of cheap labor it's a big combo win. Compared to Russia, where the population is one the decline and there is rampant corruption (China has it's own though).

However, that doesn't counter the fact that without banking reform, a write-off of bad debt, and a massive realignment of their "one child" policy, the country is heading for decline. Candles can burn very brightly, but those often burn very quickly.

 

[Looney]

Originally posted by: LegendKiller

Originally posted by: Looney

Originally posted by: LegendKiller
They are really a paper tiger that is trying to sucker as much money as possible from the world for their leader's benefit as quickly as they can.

I don't know about that. China today looks much better than China 10 years ago. Certainly better than the progress Russia has made.

As for China's elderly problem... well, all industrialized nations will eventually face that. You can't blame China 1 child per family for that. If they hadn't instituted that, we'd see a China with 2 billion people. It was either overpopulation and starvation now, or hope that technology and economical progress can solve the problem.

If there's going to be a huge civil or economic disruption in China, i doubt it's going to be either due to default on loans or an unsustainable elderly population... it's going to be a growing middleclass that will see issues like these, as well as wanting more freedom, and we're going to see a Tiananmen Square but 10x in size (probably not all in Tiananment Square, but all over the country simultaneously).

Sure, China today is better than 10 years ago, but that's mainly because they are still an industrializing nation whose leaders bend rather than break, as the soviets did. Keeping the Yuan very low has helped them more than anything as they can flood the markets with cheap goods. Add to that a massive supply of cheap labor it's a big combo win.

If that's such an easy explanation then why aren't other nations like Russia, India, Mexico, and other industrializing nations growing as fast as China?

If they didn't institute the one child per family policy, you'd all be here saying China should have attempted to take care of their overpopluation issue when they had a chance. Like i said, ALL developed nations will eventually face the same skewed population China will. China will just do it sooner... in fact, i think Japan might beat them to it. Differences are, the Japanese, even the elderly, are more spoiled to a higher standard of living (and living longer than the average Chinese).

Very nice analogy. Just too bad analogies doesn't translate to facts.

 

[Jhhnn]

Maybe the Chinese are counting on cashing in their US Treasury securities to tide them over when they need it...

Sadly, they just slipped into line ahead of the SS Trust...

 

[LegendKiller]

Originally posted by: Looney

Originally posted by: LegendKiller

Originally posted by: Looney

Originally posted by: LegendKiller
They are really a paper tiger that is trying to sucker as much money as possible from the world for their leader's benefit as quickly as they can.

I don't know about that. China today looks much better than China 10 years ago. Certainly better than the progress Russia has made.

As for China's elderly problem... well, all industrialized nations will eventually face that. You can't blame China 1 child per family for that. If they hadn't instituted that, we'd see a China with 2 billion people. It was either overpopulation and starvation now, or hope that technology and economical progress can solve the problem.

If there's going to be a huge civil or economic disruption in China, i doubt it's going to be either due to default on loans or an unsustainable elderly population... it's going to be a growing middleclass that will see issues like these, as well as wanting more freedom, and we're going to see a Tiananmen Square but 10x in size (probably not all in Tiananment Square, but all over the country simultaneously).

Sure, China today is better than 10 years ago, but that's mainly because they are still an industrializing nation whose leaders bend rather than break, as the soviets did. Keeping the Yuan very low has helped them more than anything as they can flood the markets with cheap goods. Add to that a massive supply of cheap labor it's a big combo win.

If that's such an easy explanation then why aren't other nations like Russia, India, Mexico, and other industrializing nations growing as fast as China?

If they didn't institute the one child per family policy, you'd all be here saying China should have attempted to take care of their overpopluation issue when they had a chance. Like i said, ALL developed nations will eventually face the same skewed population China will. China will just do it sooner... in fact, i think Japan might beat them to it. Differences are, the Japanese, even the elderly, are more spoiled to a higher standard of living (and living longer than the average Chinese).

Very nice analogy. Just too bad analogies doesn't translate to facts.

As I said, China has a lot going for it. The biggest is the tethered Yuan keeping their exports cheap and the fact that people think it's such a huge place to invest and grow that they forget the other factors.

It's only natural for all societies to decline a bit. The biggest difference is how fast the decline happens.