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Russia/Crimea - China

 
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PostPosted: Sat Jul 26, 2014 7:00 pm    Post subject: Russia/Crimea - China Reply with quote

PeakTrader:

Obama limited his options. He didn’t want a military confrontation after Syria crossed his “red line,” and took military options off the table in Iraq.

Putin knew he could get away with taking Crimea, causing many deaths, including about 300 innocent people on that flight.

Putin should take Ukraine and other former Soviet bloc countries, because more sanctions will hurt Western Europe more than Russia.

A new Soviet Union, with the help of China, can better deal with the weakened U.S. and E.U..

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What makes a credible deterrent is your adversaries know you’ll do what you say.

We lost that recently.

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Russia annexing its former Soviet bloc countries will raise its GDP.

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Did the U.S. care about per capita GDP when it made Arizona and New Mexico states?

What about the E.U.?

Russia’s per capita real GDP has done well under Putin:

Economically, Russia Is Roughly Where the United States Was In The 1950′s
Forbes
4/26/2013

“This chart shows US GDP per capita from 1948-58 and Russian GDP per capita from 1998-2008 (the last year available in the dataset).

http://b-i.forbesimg.com/markadomanis/files/2013/04/USRussiaGDPPerCapita1.png

The Russian economy grew much more rapidly than the American economy did in the decade from 1948. But…in 2008, at the peak of the energy boom and after a decade of run-away growth, Russia’s GDP per capita was still lower than the United States had been back in 1950.”

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“The “Budapest Memorandum on Security Assurances” is a diplomatic memorandum that was signed in December 1994 by Ukraine, Russia, the United States, and the United Kingdom.

Under the memorandum, Ukraine promised to remove all Soviet-era nuclear weapons from its territory, send them to disarmament facilities in Russia, and sign the Nuclear Nonproliferation Treaty.

Ukraine kept these promises.

In return, Russia and the Western signatory countries essentially consecrated the sovereignty and territorial integrity of Ukraine as an independent state…promised that none of them would ever threaten or use force against the territorial integrity or political independence of Ukraine…(and) pledged that none of them would ever use economic coercion to subordinate Ukraine to their own interest.”

http://www.rferl.org/content/ukraine-explainer-budapest-memorandum/25280502.html

My comment: The U.S. and U.K., along with the E.U. should’ve made it clear, early on, to Russia, in addition to sanctions, because of Crimea, they will neutralize all military assistance from Russia with their military assistance.

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2slugbaits. why should it be a bluff?

And, economic sanctions will have an effect on Western Europe too.

Why give up any ground at all, including Crimea, to a “gangster government?”

The killing and hardship of innocent and peaceful people and the destruction of economies are unnecessary.

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Also, I may add, I said nothing about training Ukrainians in U.S. military systems.

Western intelligence and drones, for example, may be enough to stop Russian weapons flowing into Ukraine.

And, I agree, Russia either can’t or won’t take all former Soviet bloc countries.

However, Russia can take Ukraine and other former Soviet bloc countries, to create a new Russian “empire.”

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Menzie Chinn, yes, however, the flow of Russian arms continue, which allowed the separatists to take Ukrainian weapon stockpiles.

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baffling, it may take a battle to deter other battles.

And, I’d fight for what’s right.

You sound like a coward.

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Western powers are still in a weak position. What if sanctions are maximized and Russia then decides to annex Ukraine? Western powers will throw their hands up in the air and say “we lost,” and conclude what’s the point of continuing the sanctions, which are also hurting us?

Western powers should’ve taken a hard line, e.g. when Russia decided to vote to annex Crimea, NATO should’ve decided to vote on making Ukraine a full member of NATO. If Russia voted to annex Crimea, then NATO would’ve voted to make Ukraine a NATO member, send tens of thousands of troops to Ukraine, and build bases, including air bases around Crimea.

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PeakTrader:

It’s not surprising given China’s “growth-at-any-cost” policy.

I stated before: What the Chinese do best is corruption, crony capitalism, misallocate resources, cause negative externalities, prevent creativity, create inefficiency, and export much of its GDP.

China’s recent bond default is interesting:

“China experienced its first bond default in over 15 years when Chaori Solar, a small privately owned solar panelmaker, failed to pay the interest on Rmb1billion (US$163 million) worth of bonds issued two years ago.”

http://www.blogcastalia.com/chinese-shadow-banking-market-recognition-of-systemic-risk-and-a-real-impact-on-the-shipping-markets/

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The U.S. didn’t keep building more empty buildings, vast excess industrial capacity (e.g. in factories, steel, cement, etc.), and exceedingly too much infrastructure (including shipyards, airports, and even entire cities).

The U.S. capitalist system, and banking system, was based on normal returns on investment rather than credit expansion making up for diminishing returns on investment.

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World’s biggest mall a China ‘ghost town’
March 10, 2013

They built it, but the shoppers didn’t come.

New South China Mall in Guangdong Province opened in 2005. With 5 million square feet of shopping area, the mall can accommodate 2,350 stores, making it the largest shopping center in the world in terms of leasable space — more than twice the size of Mall of America.

Only problem is, the mall is virtually deserted. Despite the bombastic design and grand plans, only a handful of stores are occupied. “Most of it empty, with little consumer traffic and a high vacancy rate,”

Part of the problem is location. Dongguan is a factory town and most of its almost 10 million inhabitants are migrant workers struggling to make ends meet. “People coming here to work in factories don’t have the time or the money for shopping or the rollercoaster.”

“To me, many of these projects are a result of easy access to capital and a combination of wishful thinking and speculative behavior rather than rational business calculations,” said Victor Teo, assistant professor at the University of Hong Kong.

“This mall is not the only one that is like that. Elsewhere in China there is the phenomenon of ‘Ghost Towns’, that is to say infrastructure projects, both residential and commercial, with no takers.”

The credit boom of post-financial crisis stimulus has resulted in a proliferation of empty commercial developments and apartments built on rampant speculation.

“What China did in the stimulus credit boom is create a lot of `ghost cities’: projects without a strong commercial foundation, and projects that didn’t get done,” wrote Jonathan Anderson in a research note.

For all intents and purposes you just took the money and poured it down a black hole,” Anderson wrote. And the Chinese banking system “has surprisingly little trouble absorbing that bad debt.”

In a 2007 relaunch, the mall changed name from “South China Mall” to “New South China Mall, Living City” and a revitalization plan was drawn up. But after the relaunch, neither shoppers nor tenants came.

http://edition.cnn.com/2013/03/03/business/china-worlds-largest-mall/index.html

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http://econbrowser.com/archives/2014/07/chinas-financial-risk#comments

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Not Posted:

A very clear explanation of China’s economic woes
July 16, 2013

If China's export model was already faltering back in 2008, how did the country manage to keep growing so strongly over the last five years?

China had lost external demand, so the country doubled down on investment. China had essentially been keeping GDP growth high by creating new infrastructure, housing, and factories. The problem is that, in order for this all to be real, there has to be an end-user. In the past, demand from overseas could make up the difference.

In a healthy banking system, the bank will lend money out to you, and you eventually pay the bank back the principal plus interest. The bank gets that capital back and lends it out to the next person.

But now let's look at an economy that's mainly driven by investment, where that's half of GDP. Every year the investment budget has to get bigger and bigger. China has to build more roads, bridges, and highways and so on this year than it did last year in order for investment to contribute to GDP growth.

So now I'm a bank, and I have to finance that. If the investments I'm making aren't generating a return, if they're not being utilized, then I'm not getting paid back. That means the only way I can make new loans is through credit expansion. So credit keeps growing in the banking system. But so does the burden of bad debt.

What people don't realize is that since October of last year, China has had a huge burst of stimulus, a massive expansion in lending. In the fourth quarter of 2012, credit expanded by around $600 billion. In the first quarter of this year it was about $1 trillion.

About half of that lending is coming through "shadow" investment vehicles, which promise high returns and where it's not clear who bears the risk.

The top securities regulator in China wrote an op-ed when he was the head of the Bank of China likening these vehicles to Ponzi schemes. They're now paying out from money coming in rather than from the return on their assets. It's a dangerous type of financing.

And the important thing to realize is that for all this credit expansion, the returns are rapidly declining. So the old model of trying to pump in money and boost investment, it's not working anymore. It's not going to things that create growth.

Trying to rein in the rate of credit expansion leaves banks exposed. The banks have become addicted to these rates of credit expansion — not just to finance a continued investment boom, but to paper over their losses.

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/07/16/a-simple-clear-explanation-of-chinas-economic-woes/

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BP: Are there good examples of boondoggles that have been created through this investment boom?

PC: There are some obvious examples, things like an Olympic-sized stadium in a fourth-tier city without a team. A lot of the high-speed rail lines China built won't make economic sense, although some will. There are also a lot of airports that receive a flight or two per day. But a lot of the over-investment isn't always obvious on the face.

I've visited ports where you take the tour, see the presentation, and think, okay, this makes sense, it will help unlock growth in the region. But then you drive an hour down the road, and there's another port with exactly the same business model. And it turns out there are five ports in the same province. Back before 2008, these projects would have been vetted and maybe only one would have been approved. But during the investment boom all five were approved. And they cannibalize each other.

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/07/16/a-simple-clear-explanation-of-chinas-economic-woes/

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PeakTrader:

It was a dumb idea to impose sanctions on Russia, because they also hurt the E.U..

Our ally the Saudis reducing oil prices was a smart move, which helps the E.U., and also hurts Iran and Venezuela.

I still think the U.S. and E.U. should’ve built air bases around Crimea after it was annexed, to protect the rest of Ukraine.

Then, we would’ve had a valuable bargaining chip.

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So, your solution is to give up more ground.

The reality is Russia gained Crimea, and the West lost credibility under the Budapest Memorandum.

We responded to Russia’s bold move with a weak move.

Russia has beaten the U.S. and E.U..

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Of course, Putin took Crimea, because he knew there’d be a weak response, after Obama’s “line-in-the-sand” was crossed in Syria.

It was an unnecessary crisis, like the crises in the Middle East (including the refugee crisis).

Moreover, Afghanistan is starting to spin out of control, and China has become more aggressive.

A lot of people are suffering.

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