China Is Headed for the Pits in 2013

A few days ago, I gave

a call and got some ideas about a different perspective on my comments last week. Specifically she told me that I was painting too nice a picture and wasn’t being critical enough in my views. So without further ado, here are the same points told from a slightly different perspective.

More Outbound Investment / M&A

While not exactly a merger or an acquisition, the failed attempt by COVEC, a unit of state-owned China Railway Construction Company, to complete the construction of a highway section in Poland illustrates that there is still a steep learning curve ahead for Chinese firms, especially state-owned firms.

Huawei and ZTE are currently in the spotlight for their government and military connections, but they aren’t the only companies that enjoy such arrangements. There have already been and there will continue to be other Chinese companies looking to expand outward that don’t have the savvy to navigate the politics of cross-border acquisitions. Just like how many foreign companies that tried to set up shop in China in the past years have failed in doing so, Chinese companies will have a similarly difficult time expanding abroad.

So while there will be more attempts by Chinese companies to go out, it won’t be very pretty.

Slight Strengthening of the RMB

The Chinese government is keeping the RMB artificially undervalued. Cut and dry. If it weren’t for this, China wouldn’t be nearly the world’s factory that it is. The reason the exchange rate isn’t going to drastically change anytime soon is that the people at the top know they can keep riding this export-led gravy train a little longer. Never mind that this policy is also hindering needed domestic consumption of imported goods and destroying buying power via inflation.

Bottom line, the question is not ‘if’ but ‘when’ the RMB will begin to appreciate again. The more the government kicks the can down the road, the harder it will be to adequately address the issues when they have no choice but to do so.

New Leadership Won’t Rock the Boat

In reality a more accurate headline might read: “New Leadership Will Bumble Around Rather Than Act in Their Own Self-Preservation”

Rather than doing something, anything, to counteract any of the number of shit blizzards that are fast approaching, the new leadership will twiddle their thumbs, as not to upset the outgoing batch of chaps. Those who hold opposing opinions are often quick to make vague rebuttals along the lines of “the time will come when it is right for China to change.”

So it’s okay to voice opinions about what to do about the Euro, or gun policy in the United States, but as soon as we start talking about China and it’s something critical of the leadership (or lack thereof), it's not okay?

I don’t say these things because I want China to become more like the western economies, that doing so would somehow be automatically better for the country and its people. I say this because if the country continues down the path it is on, the Chinese people are going to be screwed even worse than they already are.

These aren’t minor nitpicky problems; these are fundamental problems that are an existential threat to the entire system. Problems such as the pending demographic crisis or the whole bank lending mess (on and off balance sheet) can’t be solved overnight.

Merry Christmas, especially to all the fiddy-centers out there.

 

Chinese states have been racking up tons and tons of money in debt for making "great strides in infrastructure", (i.e. Building an impressive super-fast train which goes nowhere, and is ridiculously expensive). The massive amounts of wasteful spending that China's been doing, lavishly spending on bridges to nowhere, is going to cause their economy to blow up in their face, maybe not as dramatically as I described, but eventually, China's economy will take a hit. "In fact, if one were to add the combined debt of state owned enterprises in China to that of the central and local governments, it would comprise some 150 percent of Chinese GDP" http://www.bu.edu/asian/2011/12/08/awash-in-debt-chinese-state-liabilit….

 
olafenizer:
So it’s okay to voice opinions about what to do about the Euro, or gun policy in the United States, but as soon as we start talking about China and it’s something critical of the leadership (or lack thereof), it's not okay?

Well, the fundamentals of the West (ranging from public and private debt, fiscal and monetary policy, education, culture, etc.) are so much worse than China's that, in my opinion, nitpicking China's issues doesn't seem appropriate or constructive.

 
Amphipathic:
olafenizer:
So it’s okay to voice opinions about what to do about the Euro, or gun policy in the United States, but as soon as we start talking about China and it’s something critical of the leadership (or lack thereof), it's not okay?

Well, the fundamentals of the West (ranging from public and private debt, fiscal and monetary policy, education, culture, etc.) are so much worse than China's that, in my opinion, nitpicking China's issues doesn't seem appropriate or constructive.

What world are you living in? Chinese education, culture are better than the west since when? And their fiscal and monetary policy is incomparable to the west's because of how short the time span has been to see the effects of it.

 
neomanxllp:
Amphipathic:
olafenizer:
So it’s okay to voice opinions about what to do about the Euro, or gun policy in the United States, but as soon as we start talking about China and it’s something critical of the leadership (or lack thereof), it's not okay?

Well, the fundamentals of the West (ranging from public and private debt, fiscal and monetary policy, education, culture, etc.) are so much worse than China's that, in my opinion, nitpicking China's issues doesn't seem appropriate or constructive.

What world are you living in? Chinese education, culture are better than the west since when? And their fiscal and monetary policy is incomparable to the west's because of how short the time span has been to see the effects of it.

I should have been more specific with regards to "culture", but what I was thinking of was the horrible sense of entitlement that has taken hold in America and many parts of Europe, which directly how educated the citizenry is as well as the size of their government. I think you guys are living in the bubble of your target schools/workplaces, and thinking that everyone has the same motivation and personal responsibility as you do, when in fact the majority of folks here think they are special and unique snowflakes who should spend all their time on facebook instead of studying/working and still deserve their Ipads/phones (this feeling goes hand in hand with the metastasis of cradle-to-the-grave big gov’t that nobody wants to pay for). Our country spends insane amounts of $ on education, yet number of hours studied per week and test scores keep falling every year. I am always struck by the work ethic and personal responsibility of individuals from Asia and Eastern Europe (both foreigners and first generation kids), and how we (westerners) used to be like them. If you don't want to go on anecdotal evidence just look at the scores: http://www.oecd.org/pisa/46643496.pdf

 
FeelingMean:
Our culture is "much worse" than China's? You might have to elaborate on that one brah

Culture is all relative; anyone can and should have a preference, but no one can actually judge.

That behind said, we do have teenage girls worshiping Justin Beiber and hippies that want to take away our guns

 
vitaminc:
FeelingMean:
Our culture is "much worse" than China's? You might have to elaborate on that one brah

Culture is all relative; anyone can and should have a preference, but no one can actually judge.

That behind said, we do have teenage girls worshiping Justin Beiber and hippies that want to take away our guns

I agree. Now that Amphipathic has clarified, I must say that I agree with a point or two. I just thought it was a broad stroke to make... Some of the generalizations are comical though.

"That dude is so haole, he don't even have any breath left."
 
  1. It was not very pretty for the Chinese para-SOE firms to export for the past decades and it won't be very pretty for them going forward. So what's your point? JP/KR exported enough crappy Hondas and junk Hyundais decades ago and now they are all over the world.
  2. Last thing you should worry is about RMB being 'undervalued' when US is running QEternity+QE4ever and JP is raising 'inflation' target from 1% to 2%. China is pretty passive in this competitive currency debasing competition.
  3. Only the ignorant expects a sweeping reform. Xi's dad fought beside Mao for god's sake. He won't rock the boat, he will just clip his enemies' wings. Be very afraid of the privatization wave incoming; its a golden opportunity for bankers and investors. Go kiss some princeling's ass now.
 
vitaminc:
1. It was not very pretty for the Chinese para-SOE firms to export for the past decades and it won't be very pretty for them going forward. So what's your point? JP/KR exported enough crappy Hondas and junk Hyundais decades ago and now they are all over the world. 2. Last thing you should worry is about RMB being 'undervalued' when US is running QEternity+QE4ever and JP is raising 'inflation' target from 1% to 2%. China is pretty passive in this competitive currency debasing competition. 3. Only the ignorant expects a sweeping reform. Xi's dad fought beside Mao for god's sake. He won't rock the boat, he will just clip his enemies' wings. Be very afraid of the privatization wave incoming; its a golden opportunity for bankers and investors. Go kiss some princeling's ass now.

Some great and constructive points here.

The Auto Show
 
vitaminc:
Be very afraid of the privatization wave incoming; its a golden opportunity for bankers and investors.
Can you elaborate on this? Which area do you see the wave of privatization coming in from? Sure the SASAC has been disposing of stated owned enterprises and assets for some time now, at a rather uneven pace too. Do you expect SASAC to pick up the pace of asset sales or do you see the AMCs more aggressively selling the NPLs?
Too late for second-guessing Too late to go back to sleep.
 
brandon st randy:
vitaminc:
Be very afraid of the privatization wave incoming; its a golden opportunity for bankers and investors.
Can you elaborate on this? Which area do you see the wave of privatization coming in from? Sure the SASAC has been disposing of stated owned enterprises and assets for some time now, at a rather uneven pace too. Do you expect SASAC to pick up the pace of asset sales or do you see the AMCs more aggressively selling the NPLs?

SASAC conducting privatization as a policy tool.

p.s., accounting opacity will make selling NPL pretty difficult except in the case of bribery.

 
olafenizer:
I say this because if the country continues down the path it is on, the Chinese people are going to be screwed even worse than they already are.

Want to get your idea across to more people? Follow my friendly advice:

  1. On New Year's Eve, go to Sanlitun, hook up with hot chicks, drink a few shots and do a threesome, etc., leaving NO REGRETS;
  2. Shower yourself with a couple of bottles of liquor or even better, gasoline, just right before the flag-raising ceremony, set yourself on fire at Tiananmen Square and LET IT BURN... Oh, and don't forget to rant: "Had enough of being screwed by YOU PARTY PEOPLE~~~!!!"

You will become the New Year's first and biggest SENSATION, guaranteed.

The Auto Show
 
Best Response
huanleshalemei:
olafenizer:
I say this because if the country continues down the path it is on, the Chinese people are going to be screwed even worse than they already are.

Want to get your idea across to more people? Follow my friendly advice:

  1. On New Year's Eve, go to Sanlitun, hook up with hot chicks, drink a few shots and do a threesome, etc., leaving NO REGRETS;
  2. Shower yourself with a couple of bottles of liquor or even better, gasoline, just right before the flag-raising ceremony, set yourself on fire at Tiananmen Square and LET IT BURN... Oh, and don't forget to rant: "Had enough of being screwed by YOU PARTY PEOPLE~~~!!!"

You will become the New Year's first and biggest SENSATION, guaranteed.

Funny you say it because last year I did this almost exactly as you describe it, and you are absolutely right-- I was indeed a MFing SENSATION.

 
olafenizer:
Funny you say it because last year I did this almost exactly as you describe it, and you are absolutely right-- I was indeed a MFing SENSATION.

Cool, pics or you don't exist, panda.

The Auto Show
 

Chinese equities underperformed massively for most of 2012...I dont think anyone really argues that the chinese economy faces some serious problems, but given the relative market moves i cant help but think this post would have been better timed one year ago and you are doing last year's trade but trying to epress this idea now. The problem with the 2008 experience is that it conditions younger people who havent been thru multiple cycles to think a trade hasnt happened until we have seen a a total meltdown.

 
Bondarb:
Chinese equities underperformed massively for most of 2012...I dont think anyone really argues that the chinese economy faces some serious problems, but given the relative market moves i cant help but think this post would have been better timed one year ago and you are doing last year's trade but trying to epress this idea now. The problem with the 2008 experience is that it conditions younger people who havent been thru multiple cycles to think a trade hasnt happened until we have seen a a total meltdown.

I recall someone sent you a trade idea based on that very theme last Feb to review prior to a few interviews. Worked out well, but turned out to be a very low sharpe bet. As someone who only became aware of markets after the revelations of 2008, I totally agree- a disproportionate number of us anticipate that 10 sigma events would happen every 3 months and Nassim Taleb has only provoked this mindset. Or maybe I just have my glass half empty far too often.

 
Macro <span class=keyword_link><a href=/resources/skills/trading-investing/arbitrage target=_blank>Arbitrage</a></span>:
Bondarb:
Chinese equities underperformed massively for most of 2012...I dont think anyone really argues that the chinese economy faces some serious problems, but given the relative market moves i cant help but think this post would have been better timed one year ago and you are doing last year's trade but trying to epress this idea now. The problem with the 2008 experience is that it conditions younger people who havent been thru multiple cycles to think a trade hasnt happened until we have seen a a total meltdown.

I recall someone sent you a trade idea based on that very theme last Feb to review prior to a few interviews. Worked out well, but turned out to be a very low sharpe bet. As someone who only became aware of markets after the revelations of 2008, I totally agree- a disproportionate number of us anticipate that 10 sigma events would happen every 3 months and Nassim Taleb has only provoked this mindset. Or maybe I just have my glass half empty far too often.

I actually like some of the short china-type trades such as short NZDCAD but the trade is likely to only work if the US bond market finally comes off. I dont like short china equities outright as mentioned above but I do think that if we get passed the cliff and we get some favorable US economic data in Q1 (likely IMO) then CAD and MXN may be able to resume outperformance vs the more China-tied NZD and AUD...CAD rates have been held down by the FOMC/US bond market and i do believe the US bond market will respond if the economy continues to improve in Q1. I also like the trade because if we go aggresively "risk-off" NZD is just higher beta and will likely underperform. Risk to the trade is if we get an improving economy but fed buying continues to hold down north american rates...then the yield grab in NZD and AUD will continue and CAD will be the low-beta currency.

 

I haven't read any of the comments yet so sorry if I repost:

  1. This is last year's trade. Shanghai has been trading pretty well lately alongside A50 + Hang Seng, The data in nja also doing a lot better and beating expectations at a surprising clip, like taiwan export data. even the g10 derivatives of this like AUD rates are pretty well priced at this point and this is probably now the wrong place to play the china meltdown trade from.

  2. The state can remain inefficient far longer than you can stay solvent. considering the rising role of govt's and central banks, I feel like this is the 21st century rendition of that famous Keynes quote. in a world where usdjpy can rise ~12% in a months time, N225s hit highs for the year, and 10y JGBs barely move 10 bps higher, trading with the goal of that state finally eating its actions isn't really effective. I learned this the hard way trading in college and for many of us it is something you need to experience before really understanding how painful this can be. Yes the party is extremely corrupt and has led the rise of some very inefficient yet connected SOEs, but this has been the case for over a decade and for the last decade this has been a losing trade.

  3. While we are on the subject of 2013 ideas and things taking a bath, XAUEUR looks prime for some bad times. As long as depo's don't go negative, which is starting to seem more likely, and local bank stocks continue to outperform, this one looks good to me. Gold is off despite US rates not moving, and I eventually think they will both in OIS and US Treasuries, so this cross looks primed for continued lows. That and of course the continued JPY weakness trade, but as i said earlier this is not the same as a JGB meltdown.

 
Unfortunately that is too much made in US kool-aid but we can all just live and observe for the next few decades.

Just remember the fact that China modernized itself in less than 30 years after the cultural revolution reset and caught up with most of the developed nations in certain technologies.

Sure. Through the magic of authoritarian government and pseudocapitalism, China has built a lot of stuff in the past 30 years.

Unfortunately, nobody has the guts to tell the (still) central planners that they need to stop building stuff and start developing a consumer economy. Or that China needs to pursue innovation. Or that pollution is a big issue for the middle class.

Bottom line is that China has cancer. And that the chemotherapy is going to be tough for a few years.

 
IlliniProgrammer:
Unfortunately that is too much made in US kool-aid but we can all just live and observe for the next few decades.

Just remember the fact that China modernized itself in less than 30 years after the cultural revolution reset and caught up with most of the developed nations in certain technologies.

Sure. Through the magic of authoritarian government and pseudocapitalism, China has built a lot of stuff in the past 30 years.

Unfortunately, nobody has the guts to tell the (still) central planners that they need to stop building stuff and start developing a consumer economy. Or that China needs to pursue innovation. Or that pollution is a big issue for the middle class.

Bottom line is that China has cancer. And that the chemotherapy is going to be tough for a few years.

If China has cancer what does the US have?

 
Amphipathic:

If China has cancer what does the US have?

Bulimia. The US savings rate is now positive and once we start using the threat of cutting off grain exports- the US is the biggest exporter and China is the biggest importer- you guys are desperately addicted to food imports- China will stop manipulating its currency and subsidizing industry.

And then we can have more economic balance. China can produce stuff, the US can produce stuff, and everybody can be happy.

China has 1.3 Billion people, 15% of the world's coal, a handful of rare earth elements, and few other resources. When the resources stop flowing into China, and when automation and capital replace labor, China will have very few options.

 

I'm not sure that's the same argument and I don't think that discussion really settled anything other than the fact that above $5/bushel, farmland ownership is merely a means to collect economic rent that the government can probably get away with taxing fairly heavily. Moreover I think your prior views regarding free trade are convincing you that this is a bad idea. You guys haven't really put forward any facts or solid arguments; in fact, I have been the one who has had to twice provide links refuting Bondarb's contentions.

But here is some more data to throw on the heap:

http://www.nationmaster.com/graph/agr_gra_whe_exp-agriculture-grains-wh… http://www.nationmaster.com/graph/agr_gra_cor_exp-agriculture-grains-co…

Actually you can look at everything and see that the US pretty much owns the export market for just about every grain, that we consume less than we produce, and that China is a net importer on most grains.

That's really all I need to show to prove that the US can threaten to make Chinese workers a little thinner and their industry a lot less competitive if China won't play ball on Rare Earths or currency. If I may ask, where do you disagree when it comes to Nationmaster's data or this fairly basic analysis?

Look, just because a bunch of people who are all conditioned to believe that free trade is smart think it can't work doesn't mean they're right. In the economic war China is waging against US industry and workers, food is the nuclear weapon and we're refusing to bring it out in the name of "free trade".

 

^^^I have no problem with talking about pie in the sky ideas about the US using grain exports as a weapon or the state trying to engage in insider trading schemes to try to make money, my only problem is that IP talks about this stuff like it might actually happen and gets irritated when people mention how unrealistic his ideas are. Cutting grain exports (ie imposing sanctions) to punish china for not devaluing their currency would violate many treaties that we are signatories to (WTO, etc) and would basically be starting a trade war (and possibly a military conflict) over an issue for which their are many less extreme alternative avenues of redress....it is just not going to happen and nobody on any part of the actual political spectrum is even discussing it. We have a hard time creating consensous about restricting trade with countries like Iran, let alone an ally who has in the past helped finance a signifigant portion of our debt. Its not quite as unrealistic as the state of illinois setting up a trading desk to trade on inside info, but its close...on the IP fantasy-World scale I'd rate it about a 7.

 
Bondarb:
^^^I have no problem with talking about pie in the sky ideas about the US using grain exports as a weapon or the state trying to engage in insider trading schemes to try to make money, my only problem is that IP talks about this stuff like it might actually happen and gets irritated when people mention how unrealistic his ideas are. Cutting grain exports (ie imposing sanctions) to punish china for not devaluing their currency would violate many treaties that we are signatories to (WTO, etc) and would basically be starting a trade war (and possibly a military conflict) over an issue for which their are many less extreme alternative avenues of redress....it is just not going to happen and nobody on any part of the actual political spectrum is even discussing it. We have a hard time creating consensous about restricting trade with countries like Iran, let alone an ally who has in the past helped finance a signifigant portion of our debt.
We have a hard time getting support for stuff because nobody talks about it.

You guys all thought I was crazy when I suggested that agricultural farmland would do fairly well and that the Great Lakes states had some of the best access to water in the face of drought.

Look what happened.

Nobody is talking about mercantilism because it is some sort of economic taboo. The beauty of doing it on exports- rather than imports- is that we raise the spectre of the fact that we can retaliate against import tariffs with import tariffs on top of our taxes on the export of resources. We're the biggest exporter of the world's most important resource; we're the biggest consumer market; we can hurt them a lot more than they can hurt us. And the average worker may be much better off in an economy where the US is self-sufficient than competing in a global market.

Basically, we can charge an export tax on resources and then say "Go ahead! Raise your import tariffs on us if you dare! We'll retaliate with tariffs on imports from your country!" I'm pretty sure there's a fairly stable Nash equilibrium with resource-producing countries just hiking tariffs on resource exports.

Loosening tight trade policy was a good idea certainly 80 years ago and probably up to about 25 years ago. But free trade on everything doesn't make sense for the labor supply (read: average voter) when we export our resources and import finished products and run up these trade deficits because other countries subsidize industry.

 
IlliniProgrammer:
Bondarb:
^^^I have no problem with talking about pie in the sky ideas about the US using grain exports as a weapon or the state trying to engage in insider trading schemes to try to make money, my only problem is that IP talks about this stuff like it might actually happen and gets irritated when people mention how unrealistic his ideas are. Cutting grain exports (ie imposing sanctions) to punish china for not devaluing their currency would violate many treaties that we are signatories to (WTO, etc) and would basically be starting a trade war (and possibly a military conflict) over an issue for which their are many less extreme alternative avenues of redress....it is just not going to happen and nobody on any part of the actual political spectrum is even discussing it. We have a hard time creating consensous about restricting trade with countries like Iran, let alone an ally who has in the past helped finance a signifigant portion of our debt.
We have a hard time getting support for stuff because nobody talks about it.

You guys all thought I was crazy when I suggested that agricultural farmland would do fairly well and that the Great Lakes states had some of the best access to water in the face of drought.

Look what happened.

Nobody is talking about mercantilism because it is some sort of economic taboo. The beauty of doing it on exports- rather than imports- is that we raise the spectre of the fact that we can retaliate against import tariffs with import tariffs on top of our taxes on the export of resources. We're the biggest exporter of the world's most important resource; we're the biggest consumer market; we can hurt them a lot more than they can hurt us. And the average worker may be much better off in an economy where the US is self-sufficient than competing in a global market.

Basically, we can charge an export tax on resources and then say "Go ahead! Raise your import tariffs on us if you dare! We'll retaliate with tariffs on imports from your country!"

Loosening tight trade policy was a good idea certainly 80 years ago and probably up to about 25 years ago. But free trade on everything doesn't make sense for the labor supply (read: average voter) when we export our resources and import finished products and run up these trade deficits because other countries subsidize industry.

Thats all fine and good and i actually agree to some extent that protectionism can sometimes work...but that strain of American politics basically died in the early 90s when Pat Buchanan was driven from the Republican party and Bill Clinton crushed the protectionist wing of the democratic party to get NAFTA passed. there is no real protectionist wing in either party at this time and there doesnt appear to be one on the rise...just the opposite in fact as the labor movement is ever-shrinking and playing defense against issues like "right to work". I also think you underestimate what a major provocation it would be to use our food machine in this way...many many wars have been fought over less and we would instantly become a (even bigger) pariah in the international community. On top of all that, it is hard to see what group even would benefit...food prices would rise for everyone which hits the poor especially hard, farmers themselves are doing quite well and have no interest in a trade war, all of our allies would be furious, and the risks to a debtor nation slapping their creditors across the face for no real reason are massive....to me it sounds like a pretty horrible idea that benefits no one and that no one is seriously considering...so why do we keep discussing it every thread?

 
Thats all fine and good and i actually agree to some extent that protectionism can sometimes work...but that strain of American politics basically died in the early 90s when Pat Buchanan was driven from the Republican party and Bill Clinton crushed the protectionist wing of the democratic party to get NAFTA passed. there is no real protectionist wing in either party at this time and there doesnt appear to be one on the rise...just the opposite in fact as the labor movement is ever-shrinking and playing defense against issues like "right to work".
Maybe. They said similar things about Democrats in 2004 and about Republicans in 2008. What I think most people do know is that free trade isn't working as well as we had figured it would.
I also think you underestimate what a major provocation it would be to use our food machine in this way...many many wars have been fought over less and we would instantly become a (even bigger) pariah in the international community.
Again, that's why we have MAD, and that's why, even barring MAD, China has millions and millions of acres of grain to their north and west. Incidentally, Russia has already cut off their grain exports.

There may be wars fought over this, but China is most likely not going to pick a fight with the world's biggest naval power. And the good news is that in the extremely unlikely event it really comes to it (less than 1 in 1000), it will all be over in 25 minutes for just about everyone if it comes to war with another nuclear power.

But yes, there is probably going to be a bit of a cold war over this. And I think the pariahdom will be limited among resource exporters, who also want to believe in sovereignty over their trade borders, which is what the US really needs to worry about. It's still preferable to just laying down and letting China continue its mercantilist policy.

But yes, people will go hungry over this and it will cause civil unrest elsewhere. The US is a fairly self-sufficient economy- or at least the most self-sufficient it's been on resources since OPEC was founded, and it's better than ultimately letting Americans go hungry and having civil unrest here.

But I mean it does seem like you agree here that this is ultimately a more stable equilibrium for the US than what is currently going on with Chinese (and to some extent Indian and Singaporean) mercantilism.

 
IlliniProgrammer:
Thats all fine and good and i actually agree to some extent that protectionism can sometimes work...but that strain of American politics basically died in the early 90s when Pat Buchanan was driven from the Republican party and Bill Clinton crushed the protectionist wing of the democratic party to get NAFTA passed. there is no real protectionist wing in either party at this time and there doesnt appear to be one on the rise...just the opposite in fact as the labor movement is ever-shrinking and playing defense against issues like "right to work".
Maybe. They said similar things about Democrats in 2004 and about Republicans in 2008. What I think most people do know is that free trade isn't working as well as we had figured it would.
I also think you underestimate what a major provocation it would be to use our food machine in this way...many many wars have been fought over less and we would instantly become a (even bigger) pariah in the international community.
Again, that's why we have MAD, and that's why, even barring MAD, China has millions and millions of acres of grain to their north and west. Incidentally, Russia has already cut off their grain exports.

There may be wars fought over this, but China is most likely not going to pick a fight with the world's biggest naval power. And the good news is that in the extremely unlikely event it really comes to it (less than 1 in 1000), it will all be over in 25 minutes for just about everyone if it comes to war with another nuclear power.

But yes, there is probably going to be a bit of a cold war over this. And I think the pariahdom will be limited among resource exporters, who also want to believe in sovereignty over their trade borders, which is what the US really needs to worry about. It's still preferable to just laying down and letting China continue its mercantilist policy.

But yes, people will go hungry over this and it will cause civil unrest elsewhere. The US is a fairly self-sufficient economy- or at least the most self-sufficient it's been on resources since OPEC was founded, and it's better than ultimately letting Americans go hungry and having civil unrest here.

But I mean it does seem like you agree here that this is ultimately a more stable equilibrium for the US than what is currently going on with Chinese (and to some extent Indian and Singaporean) mercantilism.

Again I see no beneficiary to this policy and massive risks...and prctically its just not going to happen. Why did a thread that began as a rational discusion about a trade idea for 2013 devolve into an absurd argument about something that is about as likely as a meteor striking earth? Why does this happen a large percentage of the time you enter the fray?

 

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  • Harris Williams & Co. (++) 98.3%
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  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (85) $262
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (65) $168
  • 1st Year Analyst (198) $159
  • Intern/Summer Analyst (143) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

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From 10 rejections to 1 dream investment banking internship

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