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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsWhat Greek Problem? China's Markets Just Entered Meltdown Mode
This is a much bigger problem than Greece at the moment...
The country's market watchdog has warned of a "mood of panic." And some say the crash might have graver implications for the world economy than the crisis in Greece... The People's Bank of China has cut interest rates to a record low, brokerages have committed to buy billions worth of stocks, and regulators have announced a de facto suspension of new share listings.
Dong Tao, chief economist for Asia excluding Japan at investment house Credit Suisse, said Beijing fears that the stock rout could undermine consumption, as people nursing losses are unlikely to go to the mall and spend.
"That creates all kinds of risks for the economy and for the financial system and this is why Beijing is worried," he said... http://www.cnn.com/2015/07/08/asia/china-stocks-explainer/index.html
chillfactor
(7,576 posts)my liaison there said that people are committing suicide..her neighbor lost millions of dollars..lots going on in China with its people that we are not hearing about in our "news" coverage....
abelenkpe
(9,933 posts)After the economic crash here in 2008 there were many as well. It's very sad. Hope your students are ok!
dixiegrrrrl
(60,010 posts)I would appreciate any info you get about how people over there are handling this crash.
This very very so predicted crash, btw.
Erich Bloodaxe BSN
(14,733 posts)To the rich who aren't in China markets already, it's simply another opportunity to buy in and make money off the shattered dreams and lives of others.
geek tragedy
(68,868 posts)JCMach1
(27,559 posts)next week...
LondonReign2
(5,213 posts)By doing so, it makes the government looked frightened and increases the panic selling.
It will be painful and frightening, but they need to let the market find its own equilibrium. Lest we forget, the S&P500 lost 55% of its value in the financial crisis.
fasttense
(17,301 posts)I really think China thought it was immune from the systemic crashes that Capitalism always results in. Maybe they will go back to real communism
JCMach1
(27,559 posts)The only question is whether the Chinese government can throw enough money at the problem to prevent a full-blown China Syndrome meltdown...
The2ndWheel
(7,947 posts)Why? Because all those numbers are made up in the human mind, and we're not good with dealing with any of the inevitable downsides of anything we do.
From there, we try and do the mixed economy. A little of this, a little of that. The good part of one should cancel out the bad part of the other. But then we forget about the bad part of the first one, canceling out the good part of the second one.
fasttense
(17,301 posts)To say every economy will crash.
No country has tried a socialist economy where the means of production are not in the hands of capitalist or politicians.
I think we should try them all before making such a blanket statement.
sendero
(28,552 posts).... if they didn't have a ridiculous boom bubble first.
B2G
(9,766 posts)TIA!
A HERETIC I AM
(24,370 posts)GO FUCK YOURSELVES! You'll get your money when the bonds mature and not a second sooner, just like everybody else! Have a nice day"
Signed,
The United States Treasury.
leveymg
(36,418 posts)Interesting and plausible scenario. We'll see soon enough.
stevenleser
(32,886 posts)Owners of U.S. Debt
The largest owner of U.S. debt is Social Security. Since the Social Security system is a government entity, how can the government own its own debt? Good question. This is where the house of cards theory resides. Some believe the federal government is merely moving the IOUs from one shell to another, hoping to escape the watchful eye of its citizens. In any event, Social Security owns about 16% of the debt followed by other federal government entities (13%), and the Federal Reserve (12%). How much is owned by foreign governments? The following chart contains the answer.
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According to the U.S. Treasury Department, at the end of August 2014, more than a third of the debt was owned by foreign countries (34.4%). The largest foreign holders of U.S. debt were Mainland China (7.2%) and Japan (7.0%). What is the consequence of having such a large percentage of debt held by foreign nations? It depends. It depends on the relationship between the U.S. and the specific foreign country. It also depends on the global interest rate environment. Finally, it depends on the geo-political climate and the degree of fear around the globe. This is the case because when fear rises money flows into U.S. Treasuries which is viewed as a safe place to invest. The percentage of debt owned by countries that are less friendly to America is about 10%. This includes China, several oil exporters (Ecuador, Venezuela, Iran, Iraq, Libya, etc.), and a few others. The worst case would materialize if the largest holders decided to sell their Treasury securities at the same time. This could potentially decrease demand which would push yields higher. If yields rose, the federal government would find it more difficult to service the debt, pushing the deficit higher. If the deficit rose, the total debt burden would accelerate and, unless demand for U.S. debt were to increase, it could get ugly. Will this transpire? Its not too likely. At least not for the foreseeable future anyway.
Enthusiast
(50,983 posts)I see.
stevenleser
(32,886 posts)I dont think that is in what I posted.
brentspeak
(18,290 posts)this would be a good opportunity for us to negotiate a significant debt reduction with China.
But I don't expect this administration or any later administration which isn't headed by a Bernie Sanders or otherwise non-bought-off president to actually do that, however.
tjwash
(8,219 posts)stevenleser
(32,886 posts)throwing paper money at the situation, but their economy is slowing and they have some real issues.
One of the big issues is that in most situations their labor costs have come up to the point where they are no longer competitive. I saw a stat that said when you add their labor costs with productivity and the cost of shipping, etc., it is no longer particularly attractive to offshore production there versus the US.
This is one such article but I have seen others: http://www.bloomberg.com/bw/articles/2014-04-25/china-vs-dot-the-u-dot-s-dot-its-just-as-cheap-to-make-goods-in-the-u-dot-s-dot-a
This is one of the slow moving benefits of Free trade, which is why although I have criticized it in the past, I have not jumped into the TPP discussions. Over time, the places where it is cheaper to produce have their labor costs come up in price with free trade. I don't know if it is worth it, which is why I have not defended TPP, but I am not as anti-Free trade as I was 2-3 years ago.
davidpdx
(22,000 posts)the companies just move on to the next poor countries. I have to wonder how many of them have already jumped to Africa for production (although there still are plenty of countries in Asia where they can produce shit cheaply).
stevenleser
(32,886 posts)If your entire motive for offshoring is cost, and what other motive could there be in most cases, China is not where you would go anymore.
davidpdx
(22,000 posts)Last I heard they were still using the contractors in southern China.
JCMach1
(27,559 posts)later...
jeff47
(26,549 posts)The problem is there is always somewhere cheaper with more slave labor. We haven't even begun to exploit the horrible economic conditions in many parts of Africa.
stevenleser
(32,886 posts)leap into the TPP discussions in favor of it, but it does make me question whether free trade is bad in the long term. I simply have not participated in those discussions either way.
Nitram
(22,813 posts)A much smaller proportion of China's economy is in the stock market than in the west. Small investors make up a far larger proportion of the investors than here. The value of their stock market is still very high compared to last year.
That said, it could cause some serious unrest among the masses that China tries to keep down and pacified. And since the government runs the economy, it will lose the confidence of the people if there is a real crash. That is something the leadership wants to avoid at all cost. I just hope China doesn't launch a war in the South China Sea to distract the populace from their mismanagement of the economy.
B Calm
(28,762 posts)magical thyme
(14,881 posts)Anonymous tweeted something very suspicious Tuesday evening.
merrily
(45,251 posts)underpants
(182,829 posts)libdem4life
(13,877 posts)KamaAina
(78,249 posts)JCMach1
(27,559 posts)that are hitting the fan..