Loved it all.

But Brad, we may have an imminent problem at hand. I've been looking at a lot of the price categories (consumer, producer and wages, annual % changes or year-on-year % change). The best of consumer price are advancing at a sub-1%-2% rate, more of them at sub-1% than sub-2% (exception: tourism and traditional Chinese medicine (go figure!)). The headline consumer price index is deflating. Most producer prices, by industry category, are deflating too (exception: non-ferrous metals i.e., mainly precious metals and rare earth elements, liquor, refined tea and tobacco). Urban employment has stalled or is falling. Wage growth has slowed markedly, though still positive. The dreadful sense I'm getting is that of a burgeoning downdraft in most all prices.

Question: Do policymakers in China know the meaning of a General Glut?

They're tinkering around with interest rates, mortgage rates and with little-bitty changes to this that or the other.

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There is a lot of room between bail out everyone and allow deflation. Maybe they should aim for FAIT of 2% p.a. :)

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China has the typical problems of a middle income nation, plus demography, plus authoritarian roots, plus oddly aggressive international relations. Most are tough to solve; at best some are half-solved and some they live with. In which case, China slows, but still functions pretty well.

The biggest and most unusual problem is that I can't tell that Xi cares about solving any of these problems. His only interest appears to be personal power, not national, economic, or social. The rumors I hear are of huge layoffs in provincial governments, gone are the large bonuses that were expected in public, private, and SOE sectors, base wages that are not sticky like in the US, and electronic bank transaction sizes are severely throttled. Even if these are mere rumors, the result in confidence is there will be little private investment or discretionary consumption, and this is independent of the crises in real estate and infrastructure. Which is why I think China's economy threatens to seize up faster (in years rather than decades) than any large peacetime economy I can think of. China is the worlds biggest builder and manufacturer, and they consume half of the world's industrial commodities, so this must have contagion. Commodity exporting nations often have high debt and weak currencies, so I expect we'll see problems there in the next couple of years. Then the question will be, who holds those debts? Another contagion is to other manufacturing export nations who struggle to compete with a China that cuts both its currency and its domestic wages.

The tragedy is what China and the world could have been with a different leader.

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Structural Imbalances, Real Estate Boom-Bust, Soft Budget Constraints are all just different ways of saying poor investment decisions, in activities with low long run rates of return (possibly negative depreciation and need for upkeep, the White Elephant" problem). In a way it's an Austrian macro critique with CPP policy taking the place of irresponsible monetary policy.

That is the story. Whether it is true or not is TBD.

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Anyone familiar with Chinese history was probably wondering when outward looking China was going to close in on itself again. I know I was. China keeps doing this which is a big reason China has remained China for two millennia. The sheer continuity is impressive but it comes with a cost. If it helps, think of the CCP as yet another Chinese dynasty and Mao and Adam Smith as the new Confucius.

It isn't just China. The world goes through cycles of globalization and localization. There are a lot of good things about globalization, but it can have heavy costs. In the 14th century, it was the plague. In the 20th century, it was the destruction of the American heartland. Globalization can produce countervailing forces.

There are less dramatic costs as well. Globalization spreads ideas, goods and technologies, but its homogenization squeezes out places to innovate. In a truly globalized world, there is no place for a counterculture to develop new art, new science, new businesses, new technologies or new ways of living. Maybe polycrisis is just about a way to revive those spaces.

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This is probably half baked, but I've been trying to make sense of China for a long time. I haven't come up with much.

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