The latest development out of China was a classic case of good news/bad news. On Thursday their central bank, the People's Bank of China (PBoC), unexpectedly cut interest rates for the first time since 2008. The good news is that the PBoC is reacting aggressively to their slowdown. The bad news is that their slowdown warrants such an aggressive reaction by the PBoC.
Actually, it might warrant far more. Or it might not. China is so opaque, it's almost impossible to say. You might be wondering how a country that announced 8.1 percent GDP growth in the first quarter of 2012 might be in such trouble. The answer: Those numbers are reported year-over-year, not quarter-over-quarter. In other words, even if we can trust them -- which is far from certain -- high growth figures don't necessarily mean that China has high growth right now.
When the financial crisis hit in 2008, China responded with a massive stimulus program. Except it wasn't "stimulus" in the way we usually think about it. The Chinese government didn't cut taxes or spend more. Instead, the Chinese government told their state-owned banks to lend more. A lot more. The chart below shows the percentage growth of China's high-powered (red) and broader (blue) money supply since 2005. Notice the post-Lehman surge in 2009.
This lending boom fueled an investment boom that made up for lost exports. But it also fueled a frothy housing sector. China's officials certainly noticed. Over the past year they have introduced a number of measures to rein in rising prices. Careful what you wish for. China in 2012 is starting to look a bit like the U.S. in 2006.
Something strange is happening now. It looks like a combination of too loose credit and too tight credit at the same time. Credit might be too loose for big state-owned enterprises (SOEs), but too tight for small-and-medium enterprises (SMEs). We can get an inkling of that in the chart above. Bank money (red) is barely growing recently, but broader money (blue) is accelerating. China's state-owned banks have said they might miss their 2012 lending targets, so this broader money growth is likely a story about China's shadow banks -- unregulated lenders who are banks in all but name. Shadow banks are happy to lend SOEs that enjoy explicit government backing, but less so for SMEs.
WHAT'S CHINESE FOR 'PONZI'?
What are big companies doing with shadow bank money?
When prices are falling, developers don't want to develop, and steel companies don't want to sell steel. They'd rather wait until the economy turns up and their scarce resources -- land or metal -- will make them more money. In the meantime, they're happy to play the role of hedge funds. Rather than borrow money to invest in their own businesses, many of them are borrowing money to speculate.
We have a word for this. It starts with a "p" and ends with "onzi".
Steel companies have been particularly bad (so much so that China's banking regulator recently issued a warning). They have taken out multiple loans with the same collateral, and then thrown this borrowed money into land and stocks. Even with housing prices retreating.
Then there's Zoomlion, a construction machinery company that just happens to be the most shorted company in Hong Kong. Zoomlion has managed this thanks to supercharging its sales by lending customers the money to buy their products.
Smaller companies are missing out on this credit boom. They're left asking banks if they can spare a dime. Well, maybe not anymore. Now they're turning to another U.S.-in-2006 standby: collateralized debt obligations (CDOs). In plainish English, a handful of small companies with bad credit ratings get together, issue debt, and then put all of their bond payments into a security. The idea is that pooling the risk reduces risk for investors -- and lets banks get the risk off their balance sheets. It can work out. But the very fact that it's happening should concern you. Also worrying: Local governments are guaranteeing these debts.
But maybe things aren't that bad. It's easy to fall into the trap of availability bias. When you've just been slapped by a housing bubble, every bad piece of evidence starts to look like a housing bubble. Still, it's undeniable that both credit and housing prices increased substantially since 2009 -- and that the latter are now falling. It's also undeniable that the behavior of China's shadow banks and big companies are reminiscent of our own circa 2006. And it's certainly undeniable that China's government is worried about growth if they're slashing interest rates for the first time in four years.
Maybe China's leaders will engineer a so-called "soft landing". They certainly have room to cut interest rates and reserve requirements. Or the government can spend money on infrastructure itself. But with Europe teetering and the U.S. slowing down itself, the last thing the world economy needs is for its biggest engine to break down too. Let's hope this is just a hiccup.
King's famous "Letter from Birmingham Jail," published in The Atlantic as "The Negro Is Your Brother" and excerpted below, was written in response to a public statement of concern and caution issued by eight white religious leaders of the South. It stands as one of the classic documents of the civil-rights movement.
While confined here in the Birmingham city jail, I came across your recent statement calling our present activities "unwise and untimely." Seldom, if ever, do I pause to answer criticism of my work and ideas. If I sought to answer all of the criticisms that cross my desk, my secretaries would be engaged in little else in the course of the day, and I would have no time for constructive work. But since I feel that you are men of genuine good will and your criticisms are sincerely set forth, I would like to answer your statement in what I hope will be patient and reasonable terms.
I think I should give the reason for my being in Birmingham, since you have been influenced by the argument of "outsiders coming in"
The president-elect described NATO as “obsolete,” called the EU “basically a vehicle for Germany,” and said other countries would follow the UK's lead and leave the bloc.
President-elect Donald Trump hasn’t been shy about sharing his views about the world, in general, and Europe, in particular. He was criticized during the presidential campaign for questioning the value of NATO, praising the U.K.’s decision to leave the EU, and linking terrorist attacks to the million or so asylum-seekers who have arrived in Europe since 2015. Trump’s supporters and political analysts attributed those comments to campaign-season rhetoric, and said he would pivot on these and other issues before the general election. But with less than a week before the inauguration at which he’ll be sworn in as the 45th president of the United States, Trump gave a joint interview to The Times (of London) and Bild, the mass-circulation German tabloid, during which he described NATO as “obsolete,” called the EU “basically a vehicle for Germany,” and said other countries would follow the U.K.’s lead and leave the bloc.
Is there room in the movement for people who morally object to abortion?
Updated on Monday, January 16 at 4:05 p.m.
Pro-life women are headed to D.C. Yes, they’ll turn out for the annual March for Life, which is coming up on January 27. But one week earlier, as many as a few hundred pro-lifers are planning to attend the Women’s March on Washington, which has been billed as feminist counterprogramming to the inauguration.
With organizations like Planned Parenthood and NARAL Pro-Choice America co-sponsoring the event, pro-life marchers have found themselves in a somewhat awkward position. What’s their place at an event that claims to speak for all women, but has aligned itself with pro-choice groups? With roughly a week to go before the march, organizers also released a set of “unity principles,” and one of them is “open access to safe, legal, affordable abortion and birth control for all people.”
A history of the first African American White House—and of what came next
In the waning days of President Barack Obama’s administration, he and his wife, Michelle, hosted a farewell party, the full import of which no one could then grasp. It was late October, Friday the 21st, and the president had spent many of the previous weeks, as he would spend the two subsequent weeks, campaigning for the Democratic presidential nominee, Hillary Clinton. Things were looking up. Polls in the crucial states of Virginia and Pennsylvania showed Clinton with solid advantages. The formidable GOP strongholds of Georgia and Texas were said to be under threat. The moment seemed to buoy Obama. He had been light on his feet in these last few weeks, cracking jokes at the expense of Republican opponents and laughing off hecklers. At a rally in Orlando on October 28, he greeted a student who would be introducing him by dancing toward her and then noting that the song playing over the loudspeakers—the Gap Band’s “Outstanding”—was older than she was.
Why some people are withdrawing from mainstream society into “intentional communities”—and what the rest of the country can learn from them
VIRGINIA— For the last eight years, Nicolas and Rachel Sarah have been slowly weaning themselves off fossil fuels. They don’t own a refrigerator or a car; their year-old baby and four-year-old toddler play by candlelight rather than electricity at night. They identify as Christian anarchists, and have given an official name to their search for an alternative to consumption-heavy American life: the Downstream Project, with the motto to “do unto those downstream as you would have those upstream do unto you.”
As it turns out, exiting the system is a challenging, time-consuming, and surprisingly technical process. Here in the Shenandoahs and central Virginia, a handful of tiny communities are experimenting with what it means to reject the norms of contemporary life and exist in a radically different way. They seem to share Americans’ pervasive sense of political alienation, which arguably reached an apotheosis with the election of Donald Trump: a sense of division from their peers, a distrust of government. The challenges of modern politics—dealing with issues like climate change, poverty, mass migration, and war on a global scale—are so vast and abstract that it’s difficult not to find them overwhelming. But instead of continuing in passive despair, as many Americans seem to do, the people in these communities decided to overhaul their lives.
A new study shows that the disproportionate imprisonment rates faced by people of color contribute to race-based inequalities in educational attainment.
In the summer of 1963, Martin Luther King Jr. delivered the closing remarks at the March on Washington. More than 200,000 people gathered to cast a national spotlight on and mobilize resistance to Jim Crow, racist laws and policies that disenfranchised black Americans and mandated segregated housing, schools, and employment. Today, more than 50 years later, remnants of Jim Crow segregation persist in the form of mass incarceration—the imprisonment of millions of Americans, overwhelmingly and disproportionately black adults, in local, state, and federal prisons.
The U.S. incarceration rate is more than five times higher than that in most of the world’s nations, despite a crime rate that’s comparable to other politically stable, industrialized countries. And among the swelling number of incarcerated men and women is a vast number of parents. In 2015, The Atlantic’s Alia Wong highlighted a study from Child Trends that found that one in nine black children has had a parent in jail or prison, about twice as high as that for white children. For black adolescents ages 12 through 17, it’s nearly one in seven. Predictably, this has implications for America’s classrooms.
Narcissism, disagreeableness, grandiosity—a psychologist investigates how Trump’s extraordinary personality might shape his possible presidency.
In 2006, Donald Trump made plans to purchase the Menie Estate, near Aberdeen, Scotland, aiming to convert the dunes and grassland into a luxury golf resort. He and the estate’s owner, Tom Griffin, sat down to discuss the transaction at the Cock & Bull restaurant. Griffin recalls that Trump was a hard-nosed negotiator, reluctant to give in on even the tiniest details. But, as Michael D’Antonio writes in his recent biography of Trump, Never Enough, Griffin’s most vivid recollection of the evening pertains to the theatrics. It was as if the golden-haired guest sitting across the table were an actor playing a part on the London stage.
“It was Donald Trump playing Donald Trump,” Griffin observed. There was something unreal about it.
When it comes to basic policy questions such as the minimum wage, introductory economics can be more misleading than it is helpful.
In a rich, post-industrial society, where most people walk around with supercomputers in their pockets and a person can have virtually anything delivered to his or her doorstep overnight, it seems wrong that people who work should have to live in poverty. Yet in America, there are more than ten million members of the working poor: people in the workforce whose household income is below the poverty line. Looking around, it isn’t hard to understand why. The two most common occupations in the United States are retail salesperson and cashier. Eight million people have one of those two jobs, which typically pay about $9–$10 per hour. It’s hard to make ends meet on such meager wages. A few years ago, McDonald’s was embarrassed by the revelation that its internal help line was recommending that even a full-time restaurant employee apply for various forms of public assistance.
Today in shoesplaining: Until your career is at its height, ladies, maybe you should stick to flats.
It went like this. At a reverse-demo event in New York last night, Jorge Cortell, the CEO of the healthcare startup Kanteron Systems, noticed a female attendee wearing shoes. He snapped a picture of the shoes. He then tweeted the picture of the shoes. This is what he said:
Sexist! the people cried. No, it's not! Cortell responded. His #brainsnotrequired musings were merely protective, he explained, of the health of the shoe-wearer. And, by extension, of the health of us all. Heels are dangerous. Heels are dumb. High-heeled shoes are not, as it were, "sensible shoes."
But forget about technology and trade for a moment. There is a more human story to tell about middle class woes. It's a story about marriage.
Imagine the Typical American Family: Married, living together, with at least one kid under 18. That family earned a median income of $81,000 last year, as Ben Casselman showed with new Census data. That's a fine income, and it's growing, if slowly, even after you adjust for inflation.