The CCP's Olympic Backsliding

We Need To Discuss This China Economic News

In the 1980s I read that the USSR's rate of capital investment was growing yearly and way higher than in the USA, and I thought "Uh-oh for us." Then I read that all that capital investment was producing a negative return -- that they weren't just running on a treadmill to get ahead, but running on a treadmill and falling behind -- and I thought "Uh-oh for them." As regards Communist China, have we transitioned from the "Uh-Oh for us" stage and into "Uh-Oh for them?"

The Chinese leadership blamed political reform in the USSR for the collapse of the communist regime and vowed not to make that mistake. This is like blaming the cancer on the desperate remedies used to slow its spread. Now they've tossed that politically convenient "two systems" pledge (allowing limited political and economic freedom) onto the Ashheap of Chinese History. What desperate measures will Xi Jinping use to avoid that same fate?

Does Credit Expansion lead to Waist Expansion or Waste Expansion?

Jeff Snider at EuroDollar Univesity discusses the Chinese Stimulant that ain't fentanyl -- increased availability of Bank Credit.

Back in the 1980's I read that the Soviet Union had the highest rate of capital investment in the world and on the whole (or rather, "hole"), that investment produced a negative return -- requiring more investment. I read that and thought, "Gee, that can't be good." I had the picture of being on a treadmill and running to stay in place but the treadmill speeds up so, in the end, you're running so you'll fall behind slower. In such a scenario, collapsing from exhaustion seems the logical outcome.

In "The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities," Mancur Olson didn't discuss the credit markets so much as the "credit to" markets. In his view, the growth of self-dealing special interest groups in an otherwise growing economy produces economic sclerosis that leads to failure. The CCP is a collection of self-dealing special interest groups. Its near collapse during Mao's Cultural Revolution allowed a multi-decade spurt in economic development. Its reemergence as society's "guiding force" will likely herald its decline.

We face a similar danger in the good ol' USA. It's not the dealings of the Fed that will determine our economic future so much as the self-dealing of a web of special interests and influence peddlers I call "The Crony Class." Are they anti-climate change or pro their control of the nation's resources -- and do they see a difference? Crony class interests require a lot of lying-and-believing at the same time. ESG, anyone?

Blackrock of Ages, Cleave Ukraine?

War, Good Lord! What is it good for? Well, that depends on the meaning of the word "good."

The Stoic over at Stoic Finance discusses the involvement of Blackrock in Ukraine. He provides a compact overview of both the Ukraine war and Blackrock. He claims he doesn't think Blackrock's overall intentions are good or evil but his presentation leans -- evil.

We should be careful not to credit malevolence to actions that can be explained by incompetence. Early on, the Biden administration canceled the "lethal" aid to Ukraine that the Trump administration approved, which was like ringing the dinner bell for Vlad the Invader. However, I don't believe they were sending an engraved invitation to war. They thought they were "lowering the threat level." Likewise, I don't think the administration or Blackrock wants to prolong Ukraine's agony. They're just doing a botched job.

I've no doubt Ukrainians remember the genocidal policies pursued by Moscow in the 1930s, so it's no surprise they decided to fight. By now the war has become a source of gainful employment for the non-refugee population, whose previous pursuits and careers were crushed. Russia's attempts to destroy civilian morale by attacking the infrastructure may increase their commitment to their current means of employment, which is war. Hopefully, that can soon be replaced with rebuilding.

Before the war, Ukraine was known for its corruption, not its scenic beaches or Alpine ski resorts. Under these circumstances, postwar aid would be confined to NGO soup kitchens. By partnering with Blackrock, they can provide some assurance that the thievery will be kept to a more reasonable level and economic aid may provide benefit to Europe and the wider world. Blackrock would not be my choice to run it but I'm not the one choosing.

Nevermind the Gap

There's a gap in the chart! Jeff Snider at Eurodollar University has a video where he discusses "real personal income excluding transfer receipts" (think government handouts), which fell "off trend" in 2020 and hasn't recovered. Transfer payments backfilled the gap for a time. Here's his chart:

I fear the "off-trend" has become the new trend. Perhaps people in 2020 were rioting for the wrong reason.

I blame "Cronny Class Consciousness" and the governing philosophy of "Feudalism with the Right People in Charge" for the developing economic malaise.

At its center, the Crony Class consists of politicians, hacks, bureaucrats, and those who acquire power through their ability to influence government action -- the lawyer, lobbyist, and dark-money crowd. This group took to heart the advice of Scarface, "first you get the power, then you get the money, then you get the girl." Confusingly, we now have to add the lawyer/lobbyist girls who want to be "the man" while still blaming "the man" when the man is actually, you know, a man.

The outer ring includes those who benefit from government action, such as corporations that fear bureaucratic overreach or seek government favor or the education establishment which devours government resources while avoiding societal accountability. To this add the legions of minions whose livelihoods depend on promoting Crony Class Interests, such as MSM Journalists (not to be confused with reporters), aspiring academics (not to be confused with actual scientists), and "house experts" (not to be confused with people who know what the hell they are talking about). The tentacles of this class reach far and wide, and gives the appearance of "Nerds working for Sociopaths."

"Crony Class Consciousness" allows them to act as a unit to protect class interest with a minimum of actual coordination. They framed Donal Trump (a minor threat) as a Russian agent for three years, knowing it was bunkum from day one. When it no longer played, the media Emily Litellas said, "never mind," and moved on to the next set of feeble accusations class members are required to promote. Objectively, these are the actions of horrible people. Subjectively, they have their reasons. This beast is hungry and needs to be fed. Those gaps in the charts are just the start.

"Feudalism with the Right People in Charge," says the rulers should come from an accredited, pseudo-intellectual caste (the true nobility of the mind), not a military one. The philosophy provides the justification for the rule of the Crony Class (i.e. Climate Change requires their control of resources) and the rationale for keeping their "expert" descendants in charge (having a lot of kids -- which will expand family contacts in an influence-peddling system -- is frowned upon). Diversity-Equity-Inclusion is sold as the ability to include but is actually the power to exclude. Everyone should get in their place and stay there. Mind the Queue.