Fri, Jul 27, 2012 - Page 8 News List

[ LETTER ]

Dominoes in the forecast

Henrique Schneider, a Swiss researching China’s economy, had a nice opinion piece recently (“How bad is China’s downturn?” July 23, page 8), and I’ll buy him a beer at any bar in Ordos.

That said, I question his Alan Greenspan quote that “the best definition of a bubble” is “irrational exuberance.”

It seems he ignores the influence of the complicit media, who get paid by advertisers and corporate sponsors to control the news.

News Corp chief executive Rupert Murdoch has controlled his media on several continents in service of his private agenda. Mainstream news in the US is dominated by charlatans with neither intellect nor education. Only comedians Steven Colbert and Jon Stewart and their correspondents are doing journalism that Walter Cronkite would be proud of.

In the Want Daily, da lu, for “mainland,” is more common than zhongguo for “China.” Hmm. Would that be considered advertising, or propaganda? And why does that paper show a picture of people surrounding an architectural model nearly every day? That looks awfully bubbilicious to me.

With the state controlling all newspapers and TV in China, the press can blow a bubble anywhere. Look at commodity hoarding. When a person is earning a negative rate of return on their bank savings, they’ll turn elsewhere. Millions of Chinese have been ripped off by scams, and they’re angry.

Asymmetrical information is rampant across our global economy. In China, entrenched interests from the government mobsters to the peasant farmer have widely varying stakes in the near future. The disparity between truth and what’s reported by the media has never been wider, as one learns when reading quality statistics and on-the-ground anecdotes.

Irrational exuberance from the media often leads to bubbles, and Schneider ignores that 95 percent of popular news sources worldwide are worthless at reporting facts and trends. In China, where media are controlled by the state, the Chinese Communist Party-run model is driving “malinvestment” everywhere, and to ordinary citizens, it’s called “growth” and sometimes “jobs.”

However, recent events have shown that China investors are concerned about return — not on, but of investment. The group Victims of Investment in China likely agree that even “the Pirate Code” is not being honored over there. How is that for irony?

Schneider shared a lot of great insights. He points out reasons for hope for China’s economy, and reasons to fear, a fair balance. However, “black swans” have been circling the global economy since 2008. In China, cash is fleeing investments as fat cats flee overseas, while central command is losing its control. This will not end well.

Japan, the eurozone, the US, Egypt, Iran and Syria are all examples of nearly non-functioning economies. In my view, the blow-up of only one single ongoing crisis could lead to all the debt-based dominoes coming down.

Climate-wise, we are rapidly nearing catastrophe. Ignoring this in economic forecasts will cause embarrassment for any prognosticator who gets it wrong. Inform yourselves wisely, fellow investors. And if you’re in Switzerland, good luck with that peg to the euro.

Torch Pratt

New Taipei City

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