It's 1974 for the U.S., but 1929 for China 16 comments
-
Font Size:
-
Print
- TweetThis
For the Chinese, the global financial crisis is fast morphing into a depression, with factory orders falling faster than the US in the Great Depression and train stations crowded with former workers heading home for a life with their relatives.
In the US things are bad but they are not that bad. It is 1974 all over again, not 1929. That was also a terrible year for stocks, and yes a Chrysler bailout was the topic of the day.
Indeed, the 1974 financial crisis was still being discussed by brokers in 1982 when I went for an interview in the city for a job as a stock broker. That was also a nasty moment for real estate after several years of boom, and it took five years for prices to recover, largely thanks to inflation and not in real terms.
Rural China
So spare a thought for an emerging market like China if you are a financial big shot in the West who feels very down on their luck at the moment. You are not facing the rural retreat of the Chinese in a remake of John Steinbeck’s The Grapes of Wrath.
The difference is in the level of absolute wealth in the different societies. In the US people still have access to wealth and debt levels on average homes are not so huge.
For the Chinese the wealth was very nouveau and fleeting. Car ownership had soared in the past few years in the People’s Republic; now those same drivers will struggle to fill their tanks.
That means that far from avoiding or being disconnected from the global financial crisis, the Chinese will feel it hardest. It also means that the solution to the crisis will have to come from the leadership of the US and president elect Obama who is making the right noises while playing down expectations.
Necessary stimulus
However, the 14 per cent of GDP Chinese stimulus package does at least show that China is not locked in Hooverian policy mode like the US of the early 30s. Yet given that the scale of the challenge is arguably bigger, that is just as well.
If we look back to the 70s, that reflation and inflation and devaluation saw the States emerge from its economic black hole by the end of the Carter years, admittedly only in a shape sufficiently strong to take the cold turkey of Reagan and Paul Volcker, now back chairing Obama’s crisis committee.
This is not going to be an easy period for anybody in the developed world, but let us all remember that it is going to be a darn sight worse in the Third World. We should also take care to make sure future enemies are not created out of these hard times, and look upon cries for help with a certain self-interest.
Perhaps we should all be looking at serious infrastructure investments rather than concentrating on scattering money to boost consumption - the very thing that got us into a mess in the first place. In that, the Chinese priorities are presently ahead of those of the USA.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
TraderMark
-
2
Don Dion
-
3
Cliff Wachtel
-
4
Mike Havrilla
-
5
James Quinn
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 16 comments:
For those with actual experience and knowledge about the "real deal" in China, please enlighten us about your point of view regarding what is "really going on." And please give us all some data to support your opinions of error in the original article.
From my point of view, China is facing a recessionary/depressio... environment. But with a still positive GDP. That is sort of an oxymoronic statement, but the Chinese Gov needs GDP growth probably over 6.5%, or so, to keep the society stable. The real question is how long it will take for a recovery in GDP (faster GDP growth) and how fast the commensurate broad corporate profits increases, that should coincide with faster GDP growth, will take.
Inquiring minds want to know.
The insulting comments do nothing to improve the discussion dialog of Seeking Alpha and little to help you critique what you have written in any meaningful way.
That being said, the comparison of the Chinese socio-economic situation in 2008-09 to the U.S. in 1929-30 is very apt. Also, your discussion of how the Chinese government position on stimulus is positive compared to the Washington response (actually, lack of response) in 1929-30.
On the weak side, you do not make a very good case in comparing the U.S. 1974 to the U.S. 2008. The biggest difference is the difference in deflationary/inflation... pressures. Also, the U.S. government response appears to be much different. The comparison of 1974 to 2008 deserves much more thorough discussion.
And, as Matt Blackman pointed out, you made a little boo-boo on the timing of the Chrysler bailout. Such errors, although quite secondary to you thesis, detract from your credibilty. For example, I had my teeth handed to me by a couple of commenters when a typo in a data table said "2029" instead of the correct "1929". The typo occurred in a chronological listing, so was very obviously a typo. However, readers indicated that they feared trusting the rest of my data because of the typo.
So Matt, pick up your teeth and try to do better next time. I did find some worth while thoughts in your article.
you appeared from nowhere in early nov 2008[i reviewed your respons file]. where have you been prviously with your opinions on China? please advise on experience base/credibility. you give me a feeling that you are a spokesperson/lobbyist for PR of C. am i wrong?
On Dec 09 09:47 AM fawnpass wrote:
> I am in China. It is obvious this author is not. I, too, along with
> other posters are curious about how this article got published here,
> and it questions the credibility of this site.
see my comment to FAWNPASS. i sense the same about your postings. what's up?
On Dec 09 09:01 AM WebWatcher wrote:
> There is NOTHING in this silly article. Damn stupid, can't believe
> this kind of article is published here.
bravo for your position. i have a suspicious mind. see my comment to FAWNPASS and WEBWATCHER. clarifying comments from them?
On Dec 09 02:01 PM jlounsbury59 wrote:
> Peter Cooper - - -
>
> The insulting comments do nothing to improve the discussion dialog
> of Seeking Alpha and little to help you critique what you have written
> in any meaningful way.
>
> That being said, the comparison of the Chinese socio-economic situation
> in 2008-09 to the U.S. in 1929-30 is very apt. Also, your discussion
> of how the Chinese government position on stimulus is positive compared
> to the Washington response (actually, lack of response) in 1929-30.
>
>
> On the weak side, you do not make a very good case in comparing the
> U.S. 1974 to the U.S. 2008. The biggest difference is the difference
> in deflationary/inflation... pressures. Also, the U.S. government
> response appears to be much different. The comparison of 1974 to
> 2008 deserves much more thorough discussion.
>
> And, as Matt Blackman pointed out, you made a little boo-boo on the
> timing of the Chrysler bailout. Such errors, although quite secondary
> to you thesis, detract from your credibilty. For example, I had my
> teeth handed to me by a couple of commenters when a typo in a data
> table said "2029" instead of the correct "1929". The typo occurred
> in a chronological listing, so was very obviously a typo. However,
> readers indicated that they feared trusting the rest of my data because
> of the typo.
>
> So Matt, pick up your teeth and try to do better next time. I did
> find some worth while thoughts in your article.
Thanks
Tom Wagner CFP
Quantitative Advisors Inc
planneronline.com
if your comments are correct, you must have much knowledge[first hand] with which to counter mr. cooper. where is YOUR material? i anxiously wait to read detail.
i don't comprehend your claim to all time spent on china while supporting your website claims at baruck. clarify please.
please provide feedback on conditions of people/infrastructure/... of earthquale ravished sichuan area.
On Dec 09 08:43 PM Thomas E Wagner wrote:
> Hello Peter; I am a fellow blogger on this site. I have spent a great
> deal of time in china, mostly in Chengdu Sichuan. I have developed
> contacts in 37 cities in china and have frequent contact with them.
> There have been bankrupt companies in Guangzhou particularly in the
> toy and low end fashion industries, however the rest of the economy
> seems to be pretty vibrant. Can you provide us with some source material
> or references about your observations about what is going on in china
> ????. Do you have contacts within china or is your article based
> on second hand information?? In short the best argument would be
> to disclose you sources and your outstanding trading postions if
> any
> Thanks
> Tom Wagner CFP
> Quantitative Advisors Inc
> planneronline.com