Is China The Biggest Malinvestment Case Of All Time?
....This phenomenon is dangerously present in modern markets - and particularly in China, where the miracle of +8% growth has been artificially sustained at all costs, stretching to greater and greater heights of danger.
For more on the subject of Austrian economics prophecies, false trends, and stimulus-driven booms and busts, see the following pieces:
The Von Mises Prophecy
Inflationary Boom-Bust Cycle Redux
Soros on False Trends
Keynesian Psychology With Austrian Tails
Which brings us back to China. We are beginning to wonder if China is perhaps the biggest, grandest, most absolutely stunning case of malinvestment in the history of mankind.
Thanks to central bank stimulus, the West certainly has its own malinvestment problems. But at least a quasi-free market acts as a brake.
In China, the authoritarian structure in which the commanding heights are run from Beijing makes for capital misallocation (malinvestment) on a scale of the Great Wall.
For example: China bulls have long feted the country's top down authoritarian structure as being able to "get things done."
And this is very true. If you want, say, a highway or a dam built in China, then boy howdy, it will get done, regardless of whether five thousand or five hundred thousand people need to be forcibly displaced from their homes.
What this means is that Beijing can approve mass infrastructure projects at the snap of a finger.
What it also means is that, within the context of a rigid and opaque governing system, China has greater ability to do economic damage to itself (through epic malinvestment) than perhaps any Western democracy that has ever existed.
Quite frankly, we are mystified how staunch free market advocates (ahem, Jim Rogers, cough cough) can talk fire and brimstone regarding Western Central banks on one hand, and yet speak of China glowingly on the other hand...
more
http://seekingalpha.com/article/877121-is-china-the-biggest-malinvestment-case-of-all-time
....This phenomenon is dangerously present in modern markets - and particularly in China, where the miracle of +8% growth has been artificially sustained at all costs, stretching to greater and greater heights of danger.
For more on the subject of Austrian economics prophecies, false trends, and stimulus-driven booms and busts, see the following pieces:
The Von Mises Prophecy
Inflationary Boom-Bust Cycle Redux
Soros on False Trends
Keynesian Psychology With Austrian Tails
Which brings us back to China. We are beginning to wonder if China is perhaps the biggest, grandest, most absolutely stunning case of malinvestment in the history of mankind.
Thanks to central bank stimulus, the West certainly has its own malinvestment problems. But at least a quasi-free market acts as a brake.
In China, the authoritarian structure in which the commanding heights are run from Beijing makes for capital misallocation (malinvestment) on a scale of the Great Wall.
For example: China bulls have long feted the country's top down authoritarian structure as being able to "get things done."
And this is very true. If you want, say, a highway or a dam built in China, then boy howdy, it will get done, regardless of whether five thousand or five hundred thousand people need to be forcibly displaced from their homes.
What this means is that Beijing can approve mass infrastructure projects at the snap of a finger.
What it also means is that, within the context of a rigid and opaque governing system, China has greater ability to do economic damage to itself (through epic malinvestment) than perhaps any Western democracy that has ever existed.
Quite frankly, we are mystified how staunch free market advocates (ahem, Jim Rogers, cough cough) can talk fire and brimstone regarding Western Central banks on one hand, and yet speak of China glowingly on the other hand...
more
http://seekingalpha.com/article/877121-is-china-the-biggest-malinvestment-case-of-all-time