Economic trouble ahead ?

[Colin May]

http://www.telegraph.co.uk/finance/e...oats-left.html

One of my favourite columnists. A world view that is well worth considering because what happens beyond our little part of the world eventually impacts us.
And the BDI looks really scary, but that's another story.

"Much now depends on China, where the economy is starting to look "Japanese". Dario Perkins from Lombard Street Research says the Chinese economy is in a much deeper downturn than admitted so far by the authorities. It probably contracted outright in the first quarter.
Electricity use has turned negative. Rail freight has been falling at near double-digit rates. What began as a deliberate move by Beijing to choke off a credit bubble has taken on a life of its own, evolving into a primordial balance-sheet purge.
This matters enormously. Andrew Roberts from RBS says China accounted for 85pc of all global growth in 2012, 54pc in 2013, and 30pc in 2014. This is likely to fall to 24pc this year. “If there is only one statistic that you need to know in the world right now, this is it,” he said.

And this gem " It was inevitable that China's investment bubble would lead to vast inventory of unsold property. The country produced more cement between 2011 and 2013 than the US in the 20th Century "

[Ziobrop]

I read this by chance this Morning: http://t.co/xZtf3E9nMO

China is building vast empty cities for the pending urbanization of the country.
Are they slowing down - Sure, but their growth model doesn't fit with western industrialization, or even the Rapid industrialization that occurred in other parts of Asia. I think looking at these indicators and saying doom probably isn't accurate.

[Colin May]

Originally Posted by Ziobrop

I read this by chance this Morning: http://t.co/xZtf3E9nMO

China is building vast empty cities for the pending urbanization of the country.
Are they slowing down - Sure, but their growth model doesn't fit with western industrialization, or even the Rapid industrialization that occurred in other parts of Asia. I think looking at these indicators and saying doom probably isn't accurate.

AEP in the Telegraph has been writing about Chinese ghosts cities for several years. He is a bit of a doom merchant, regularly attacks the EU austerity policies forced through by the Germans. He has written extensively about the Chinese economy and often includes references to the corruption in cities.
Take a look at BDI charts and draw your own conclusions about world trade.

[MonctonRad]

They don't call economics the "dismal science" for nothing. It's all a mystery.

[someone123]

Originally Posted by Ziobrop

China is building vast empty cities for the pending urbanization of the country.
Are they slowing down - Sure, but their growth model doesn't fit with western industrialization, or even the Rapid industrialization that occurred in other parts of Asia. I think looking at these indicators and saying doom probably isn't accurate.

This is true but I still think there is a bit of a disconnect. Most of the people living in rural China are very poor and cannot afford the new urban housing (or aren't permitted by the government to move to the cities). I have a feeling the high-end market is overbuilt there. They're also approaching "industrialized" urbanization rates so they are going to hit diminishing returns; they used to be maybe 1/3 as urbanized as North America or Western Europe but now they are at 3/4 of the western rates. On top of this, the working age population there is already shrinking.

I think China is going to look a lot different in 2025 than it did in 2005. The change is not necessarily negative but it will be bad if everybody carries on as if nothing has changed and they expect huge returns on things like housing investments.

Here in Vancouver we are much more exposed to China's economy in NS. A lot of the economic activity here is driven by Chinese investment, particularly in real estate. That is one reason why houses here are so expensive (median $1M+ now). 30,000 or more millionaires from China have invested here, and many of the locals who buy get their income from offshore investment. It's a thorny subject, but if the taps are shut off for some reason it's probably going to get interesting here.

Low interest rates have also allowed people in Vancouver to stretch to buy ridiculous properties, while incomes are no higher than Halifax. I have a feeling many households have precarious finances here. If there are global or national economic problems or if interest rates spike those households will be in trouble.

I think Halifax is actually in okay shape. This is part of the problem with the "grass is greener" attitude; it's easy to look at the positive stuff from other places and miss the negatives. Alberta is in recession right now and BC is seriously unaffordable. The overall long-term picture in Western Canada, as one example, isn't actually that rosy.

[DigitalNinja]

I think that China will be a unique example. It's the first country with such a high population and high density to become highly industrialized. I don't think anyone can be sure of what will happen. A state controlled economy also plays another role in all this as well. How quickly and effectively the government can control China's future economy could have profound effects on the world wide economy. I think that there are too many unknowns to produce an accurate forecast of the future economy of China and its effect that it will have on the world. Heck, if India grows at a high rate as China falls it could offset some of the world wide effects.

I do agree with Someone123's assessment that the west's future long term does not look as good as it does right now. Slow and steady growth is best, crazy high levels of growth can often have crazy high levels of loss. Either way, there is no way to know for sure and what ever any "expert" says it's all just speculation with far too many variables to accurately predict.